Senator Mike Crapo (R-ID) and the US Sugar Program

In the interest of keeping tabs on one of the senators representing my neck of the woods, I am one of the 187 people who subscribe to the youtube channel of Senator Mike Crapo (R-ID).  In general, he's a pretty free market type.  He's consistently rated as one of the more conservative (although not anywhere near the most conservative) US Senators, and he is easily the most conservative US Senator from "Cascadia" (loosely defined as WA, OR, ID, and BC Canada).  He's a frequent guest on CNBC and the other financial networks since he holds a lot of sway in some very important financial committees.

I usually wish he'd go much further than he does, but I generally like what I hear from him when it comes to the budget and the economy.  So imagine my surprise on Wednesday afternoon when I checked my youtube subscriptions and found this atrocity waiting for me:

Senator Crapo has never been someone I would describe as one of my "political heroes," but I was reasonably confident I could at least trust him to have a rudimentary grasp of economics and tow the free market line at least when it came to Washington DC's most egregious debacles.  Apparently I was wrong.

So what, you ask, is the US Sugar Program, and why is Senator Crapo's support of it so disappointing?

The US Sugar Program was one of the programs started by FDR during the Great Depression to elevate the price of sugar.  The theory then was that farm prices were collapsing, and elevating them above the market price would "fix" the economy.  Of course that didn't work (for reasons you can discover for yourself in Henry Hazlitt's classic book "Economics in One Lesson" if you don't understand them already), and most of the programs eventually expired.  For example, we somehow realized that slaughtering pigs as a "cure" for low pork prices was utterly counterproductive.  But the US Sugar Program has remained a fixture.

The program works to inflate US sugar prices by restricting imports of sugar and setting a floor under sugar prices by buying surplus sugar production.  According to the Heritage Foundation US sugar prices have been elevated by 49% over the world price, as of May 2012, because of the restrictions on imports.  These elevated prices are undoubtedly good for sugar producers, but what about the food processing industries that use sugar?  Not so much.  In fact, it's the main reason that the US candy industry has been on the decline.  Economist Dan Griswold, of the Cato Institute, has documented in his book "Mad About Trade" that candy companies like Hershey's, Brachs and Kraft have closed dozens of candy manufacturing plants in the US over the past decade or two and moved production to countries like Canada and Mexico because the sugar price in those countries is much closer to the world price.  So, in essence, Senators like the "Honorable" Mr. Crapo have decided that the US would rather have jobs producing and stockpiling sugar nobody wants (12 pounds of surplus sugar per American each year according to Mr. Crapo himself!) than high wage jobs manufacturing candy products that the market is actually demanding.  And he has been willing to take your money and pay more than $2 billion over the past 10 years just to warehouse all of this excess sugar.

Incidentally, the US should probably not even be producing sugar at all.  Brazil can produce a pound of sugar for roughly 1/3 the price it costs US farmers to produce it.  So it's no wonder sugar producers pay for more than 34% of US farm lobbying, and 54% of it's Political Action Committee donations, despite producing less than 2% of the value of  all US crops.  I think every American should be outraged that these people are ripping you off and Senator Crapo is helping them do it.  Morally it's as if the US sugar producers paid Mr. Crapo to kidnap and beat up sugar consumers that refused to pay the elevated prices or bought from foreign sellers.  The only difference is that we call him an "Honorable" Senator instead of a gangster, and he uses the police instead of mob soldiers.

But what really irritates me is not that he's complicit in ripping us off, but that he's using completely backwards economic reasoning to do it.  It wouldn't be so bad if Mr. Crapo were on a committee overseeing some tiny corner of the economy or focusing on foreign policy or something like that, but this guy is on the committees overseeing banking and the financial sector.  He's even the ranking member on the "Subcommittee on Securities, Insurance, and Investment!"  It is unbelievable that a person in his position would tell us with a straight face that price floors theoretically create shortages, and act like it's a great vindication of this particular price floor that it has instead created a massive surplus (just as Econ 101 predicts it should).

One last unintended consequence of this boneheaded policy (combined with the ridiculous US corn subsidies), that the Libertarian Party presidential nominee Gov. Gary Johnson sometimes talks about, is that US food processing companies end up putting high-fructose corn syrup into their products instead of using sugar.  Now I'm not an expert on the health ramifications of this, but apparently that's not the greatest thing for Americans' health.  Some have argued it's a major contributor to obesity in the US.

So basically, this policy is leaving Americans fat, broke, and unemployed.  We've known how bad these policies are at least since the days of Fredrick Bastiat and Adam Smith, and yet they still continue to pop up and even thrive because of the support of economically illiterate politicians like Mr. Crapo.  Here's to hoping American/Cascadian politicians eventually come to their senses.  I won't hold my breath in anticipation.