The Cato Institute

Happy Thanksgiving from the Cato Institute!

We have so much to be grateful for…

This Thanksgiving, it is worth remembering that, beyond the headlines, things are actually pretty darn good. There is more than enough to be thankful for.

Contemporary Americans live longer, healthier, richer and safer lives than at any other period in history. In fact, an ordinary person today lives better than most kings of yesteryear.

Of the original 102 Pilgrims who arrived in North America aboard the Mayflower in the fall of 1620, only about half survived to celebrate the first Thanksgiving, in November 1621. The rest perished through starvation and lack of shelter. The survivors gave thanks for a plentiful harvest. And good local harvests were vital, for in a world without global commodity markets or effective transport and communications, food shortages often meant starvation.

Today, most Americans are concerned with eating too much rather than too little. In fact, the inflation-adjusted cost of a Thanksgiving dinner has declined for three years in a row and Thanksgiving dinner is now the most affordable that it has been in more than a decade — 26% cheaper to prepare than it was in 1986.

More often than not, we tend to overlook our truly spectacular rise from grinding poverty to previously unimaginable abundance. And so, during this Thanksgiving holiday, let us give thanks for accountable government, market economy and scientific progress that make a king out of each of us.

U.S. Sugar’s Dangerous Addiction to Protectionist Policies

The federal government is, in essence, the leader of a nationwide sugar cartel…

The history of the federal government’s sugar program is a prime example of economic central planning in action. Best understood as an involuntary wealth transfer from consumers to producers, the sugar program’s economic cost reaches into the billions of dollars.

For decades, the federal government has been operating a program to control the production and importation of sugar. One of the program’s main purposes is to ensure minimum price levels for sugar that are typically significantly higher than those found on international markets, leading to higher costs for U.S. consumers.

The program’s overriding goals are the provision of a minimum income to sugar producers and a higher price for the product than would otherwise be the case through the use of various measures that restrict supply. This clear gain to producers, however, comes at a notable economic cost both to U.S. consumers and to businesses that use sugar as an ingredient in their products.

The Agriculture and Food Act of 1981  — a series of government imposed mechanisms that sugar prices above those of the international market — is comprised of four key pillars, including price support loans from the U.S. Department of Agriculture, marketing allotments (a limit of how much sugar can be sold), and the Feedstock Flexibility program, which allows the USDA to purchase sugar out of the market. Lastly, and arguably most disruptive, are tariff rate quotas, which limit the amount of raw and refined sugar that is allowed to be imported duty free through preference programs.

These federally mandated rules ensure U.S. businesses that use sugar remain less competitive and U.S. consumers pay more for food products made with domestic sugar.

U.S. sugar policy thus justifiably furthers suspicions among the citizenry that the federal government is more concerned with advancing the narrow interests of well-connected groups such as sugar producers than promoting the country’s general welfare. After all, government market manipulation results in domestic sugar prices twice those of the world sugar market — not to speak of the downstream costs of all the American-made products that rely on sugar.

The U.S. International Trade Commission finds that the removal of import restrictions would produce average annual welfare gains of $342.7 million. Other research indicates that the artificially high cost of U.S. sugar imposes an average burden on consumers of $3.4 billion to $4 billion, and the annual loss of 17,000 to 20,000 jobs in the food industries.

All this raises the question of why such a costly and counterproductive program is kept in place. 

Claims that the program’s demise would result in catastrophic consequences for the industry are to be overstated at best. 

The most common justification is an alleged need for price stability to avoid the boom-and-bust cycle of past years. Additionally, the sugar industry warns that unilaterally disarming sugar supports would result in the U.S. becoming dependent on subsidized foreign suppliers and would prove devastating to the domestic sugar industry. Yet the experience of sugar industries in countries with much more free market approaches like Australia, one of the world’s largest sugar exporters, makes these warnings likely overwrought.

A sane sugar policy by the United States would be no sugar program at all. Sadly, that’s not currently on offer. What is available, however, is legislation that takes a notable step toward a sugar policy oriented to consumers and markets rather than lobbyists and politicians. While not ideal, it is a very real opportunity to pare down a particularly insidious symbol of narrow self-interest triumphing over the common good.

A bipartisan group of lawmakers have begun to notice the sugar program’s myriad pitfalls and have introduced legislation which would be a significant step towards reducing the size and scope of this harmful policy. However, it falls short of dismantling the nationwide sugar cartel for good.

The Sugar Modernization Act of 2017 proposes the sugar program operate on a zero net cost basis to the federal government, the repeal of both marketing allotments and the Feedstock Flexibility program, and to loosen tariff quota rates—a change that would translate into increased imports and lower sugar prices.

While imperfect, the recently introduced legislation would likely curb some of the program’s worst excesses, and could hold the best promise for genuine reform of the deeply flawed and costly U.S. sugar program. Although it falls short of ideal by failing to abolish the program wholesale, this legislation is perhaps the best option for reform in recent memory.

It’s (well past) time to end the U.S. government’s protectionist sugar program. 

Learn more…

Let’s Talk Turkey

Originally posted by gameraboy

Thanksgiving is upon us and time has come for that most sacred of American traditions: bemoaning the rising cost of living. Per this Bloomberg headline last Thursday, “Thanksgiving Meal Costs Most Ever as Bird Flu Hits Turkeys.”

Well, that’s complete and utter nonsense.

The headline grabbing data comes from the American Farm Bureau Federation, which faithfully records the cost of 12 items (e.g., turkey, pumpkin pie mix, sweet potatoes, etc.) that go into a preparation of a Thanksgiving meal for 10 people.

On the face of it, the nominal cost has risen by $0.70 from $49.41 in 2014 to $50.11 in 2015. Using a BLS calculator, I have inflated $49.41 in 2014 dollars to $49.64 in 2015 dollars. So, the real increase amounts to mere $0.47.

Now let us see what happens when we adjust the nominal cost of Thanksgiving dinners by the rise in nominal wages…