Political cash sweetens federal sugar boondoggle

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In America's panoply of pork, corporate welfare and special-interest boondoggles, perhaps few programs are less defensible than the federal sugar program. So it was dispiriting, but no surprise, that the Senate voted last week to preserve it.

The sugar program drives up prices for American consumers, kills U.S. jobs, distorts markets and enriches a few well-connected companies. Here's how it works:

First, the U.S. Department of Agriculture guarantees a minimum price for sugar growers through a special loan program. The USDA lends money to growers, with sugar as collateral -- about 18 cents per pound for cane sugar and about 23 cents per pound for beet sugar. The easy financing is sweet, and it gets even sweeter: Sugar growers can surrender their collateral and welch on their loan from taxpayers, at no penalty.

In effect, the USDA is always willing to buy the sugar from growers at 18 or 23 cents a pound if prices fall too low.

But the second aspect of the sugar program guarantees that U.S. prices rarely fall that low.

Washington artificially keeps the U.S. sugar price high by limiting how much sugar can be imported. Crimping supply boosts the price, hurting consumers -- including candy and soda makers -- and helping producers.

"Over the last 25 years," the Department of Commerce reported in 2004, "the U.S. price of wholesale refined sugar has on average been two to three times the world price." A 2009 spike in world sugar prices has closed the gap, and in May, Americans paid only a 13 percent premium -- $30.20 for a pound of raw sugar in the United States, compared to a $26.64 world price, according to USDA data.

A Government Accountability Office study in 2000, when the price gap was larger than it is today, found the sugar program cost consumers nearly $2 billion in some years. If world prices fall again -- and the Organisation of Economic Co-operation and Development forecasts that they will -- U.S. prices will stay high, thanks to the import quotas. American consumers will again be paying a billion or two in hidden taxes that go straight to the bottom of line of big sugar growers.

The biggest victims are the food producers who use sugar. If you sucked on Lemonheads, Atomic Fireballs or Red Hots as a kid, chances are they were made just outside Chicago. These days, the producer -- Ferrara Pan Candy Co. -- makes them mostly in Mexico and Canada because sugar prices are so much lower there.

Sugar program defenders, like Debbie Stabenow, D-Mich., chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry, are correct that the sugar program creates sugar-growing jobs here in the U.S., but the Commerce Department estimated that for every sugar-grower job gained, three other jobs are lost.

The case against the program is clear. It would save consumers money. It would save American jobs. It would end unfair corporate welfare. It would reduce unnecessary federal bureaucracy. That was the argument of Sen. Jeanne Shaheen, a New Hampshire Democrat, who brought an amendment to the Senate floor last week to end the sugar program. It's why her co-sponsors include conservatives like Sen. Pat Toomey, moderates like Richard Lugar and liberals like Dick Durbin.

But the lobby for the sugar program is strong. Most famously, the Fanjul family in Florida, owner of Florida Crystals, are deeply embedded in Washington politics. Over the last three elections, the Fanjuls have given more than $1.8 million to federal candidates and political action committees, according to data from the Center for Responsive Politics.

Alfie Fanjul is a longtime Democratic fundraiser (Bill Clinton once interrupted a liaison with Monica Lewinsky to take a call from Alfie). His brother Pepe is a Republican booster. In January, Pepe and his wife hosted a $2,500-a-head Palm Beach fundraiser for Mitt Romney.

Last week, when the Senate voted 50-46 to kill Shaheen's amendment, Marco Rubio, R-Fla., voted with big sugar -- and he has credibility with the Tea Party and is mentioned as a possible running mate for Mitt Romney.

Early in Rubio's 2010 long-shot run for Senate, Pepe put his name on the invitation for a June 2009 Rubio fundraiser in Coral Gables. In February 2010, Pepe and Pepe Jr. hosted a fundraiser for Rubio. The Fanjuls have kept up their fundraisers, most recently hosting a $5,000-a-head luncheon in April to fund Rubio's Reclaim America PAC.

Given all these fundraisers, maybe Stabenow should point out how the sugar program also creates jobs in South Florida's catering industry -- even if it amounts to stealing from the rest of us.

Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on washingtonexaminer.com.

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