Walter E. Williams bio photo

Walter E. Williams

Bradley Prize Winner 2017

Professor of Economics.
(703) 993-1148
D158 Buchanan Hall
Department of Economics
George Mason University

Related Sites:
The homepage of George Mason University.
Homepage of the Department of Economics at GMU.

Democrat Mary Landrieu’s successful Louisiana senatorial race against Republican challenger Suzanne Haik Terrell highlights some of the less appreciated and uglier aspects of American politics. America’s sugar producers contributed heavily to both candidates. In fact, the sugar lobby gives millions of dollars to both parties of the House of Representatives and the Senate. Why? Might it be the sugar businesses’ civic interest in free elections and good government? Believing that would make you a prime candidate for a brain transplant.

Both Louisiana candidates criticized the rumored Bush administration trade agreement that would allow for greater imports of Mexican sugar. They said this would devastate the sugar industry. Congress’ sugar program already in force guarantees a minimum price to domestic sugar producers by restricting imports, and buying and storing excess production that would otherwise depress market prices. As a result, Americans pay two and three times the world price for sugar.

A report by the U.S. General Accounting Office estimated that Americans pay an extra $2 billion dollars a year because of the sugar program. Plus, taxpayers will pay $2 billion over the next 10 years to buy and store excess sugar.

Other losers are sugar-using industries such as confectioners, who see their production costs driven up by Congress’ sugar program. Since countries in Canada and Europe have no sugar industry, and little lobby pressure to drive up sugar prices, their confectioners become relatively more competitive. Then there’s lost export earnings by poor nations in the Caribbean and elsewhere because of our import restrictions.

You might wonder how this consumer rip-off sustains itself. After all, the sugar industry beneficiaries are tiny in number, while victims number in the tens of millions. The answer’s simple. It’s a classic example of an economic phenomenon know as “narrow, well-defined, large benefits and widely dispersed, small costs.” Here’s how it works. It pays workers and owners in the sugar industry to come up with millions of lobby dollars to pay congressmen to impose tariffs and quotas on foreign sugar. It means higher sugar prices and hence higher wages and profits. Plus, it’s easy to organize the small number of people in the sugar industry.

That’s the benefit side, but as sure as day follows night there’s a cost side. Tens of millions of American families are forced to pay a little bit more, maybe $20, for the sugar we use every year. Since sugar is just a tiny fraction of our lives, we rightly conclude it’s not worth the cost of trying to unseat a legislator whose vote cost us $20.

There’s a more insidious side of this story. In the past, some sugar-using companies have found out they can import products like ice tea, distill out its sugar content and still beat the high prices caused by Congress’ protectionist sugar policy. To do so was made illegal.

Then there’s the pot calling the kettle black side of the issue. During Mary Landrieu’s campaign, she criticized President Bush’s tariffs on foreign steel for costing thousands of jobs in steel-using industries. The heck with whether sugar tariffs cost jobs in the confectionery and other sugar-using industries.

You might say: “What’s the beef Williams? I don’t mind paying $20 more for the sugar I use!” It’s not just the sugar industry that uses Congress to extract higher wages and profits. According to the Institute for International Economics, trade barriers cost American consumers $80 billion a year or more than $1,200 per family.