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American Crystal Sugar gave the U.S. government 195 million pounds of sugar to pay back $46.6 million in federal loans.

Glen Stubbe, Star Tribune

Sugar subsidies are sweet, but not for the taxpayer

  • Article by: Andy Brehm
  • October 6, 2013 - 11:07 PM

Last month, U.S. House Minority Leader Nancy Pelosi, D-Calif., claimed that efforts to rein in government spending are pointless. “There’s no more cuts to make,” she said, “The cupboard is bare.” In fact, with a nearly $4 trillion federal budget, there is plenty in the “cupboard” Washington could clearly do without — starting with its jar of sugar subsidies.

The federal government’s antiquated sugar price support system — designed during the Great Depression of the 1930s, and to be temporary — made troubling news recently. American Crystal Sugar Co., Minnesota’s largest sugar beet cooperative, decided to default on a $71 million government loan. Instead of repayment, the government is to receive sugar, which it will be forced to sell at a loss of tens of millions of taxpayer dollars. This news came just a day after the U.S. Department of Agriculture announced that similar transactions with sugar producers across the country cost the U.S. Treasury $53.3 million.

And despite American Crystal’s display of poor creditworthiness this year, if next year it wants another sugar collateralized loan from Uncle Sam, the law requires him to grant it.

The fiscal freebies Washington hands out to sugar producers are expensive indeed, but its protectionist policies that shield the industry from global competition are even costlier.

As a result, prices in the past four years have ranged from 64 to 92 percent higher than on the international market and cost U.S. consumers $3.7 billion per year.

Jobs are also being lost. As a result of America’s artificially sweet sugar prices, manufacturing operations for sweetened products, such as candy and colas, are moving overseas, where they have access to sugar priced by the free market. Between 1997 and 2011, nearly 127,000 jobs were lost in sugar-utilizing industries alone.

American Crystal Sugar’s lobbyist defended his company’s sweetheart deal, stating that it was necessary because the country is “terribly oversupplied with sugar.” It’s no wonder why. In most industries, demand governs supply. But in the sugar industry, government does, and thus the dramatic and irrational ups and downs in sugar prices. When prices are high, producers rake in record profits. When they fall, the federal government comes to the rescue.

There’s no question that sugar production is an important part of the U.S. economy. It consists of some 6,000 proud farms that employ around 61,000 hardworking Americans nationwide. But like any other industry, it should function without expensive subsidies and protections that cost the country jobs. We expect American businesses to operate in exceedingly competitive domestic and global free markets, a system that has made our country one of the most prosperous on earth. Sugar producers must be required to do the same.

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Andy Brehm, Wayzata, is a Republican and an attorney.

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