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How free are sugar quotas?

May 8, 2007

Tags Big GovernmentTaxes and SpendingInterventionism

For years, domestic sugar producers have benefited from import quotas that limit competition from foreign suppliers of sugar. As with all protectionism beneficiaries, they roll out all manner of bogus arguments to defend it (aptly characterized by William Graham Sumner's description that "A wants protection; that is, he wants B's money. A talks sentiment and metaphysics finely, and, after all, all there is in it is that he wants B's money"). But one justification is particularly noteworthy for its blatant illogic.

That justification is that the program is free, because it costs taxpayers nothing. In one highly misleading sense, they are right. Sugar producers are assessed to cover the cost of running the sugar quota program, so that there is no direct tax cost to the regulatory apparatus. However, to assert that makes the program free should set off everyone's "there ain't no such thing as a free lunch" alarm. As with other regulatory restrictions whose administration costs are funded by assessments on those regulated, the "free" sugar program claim ignores the higher costs that are imposed on consumers by the restriction on imports. Given that it forces Americans to pay sugar prices far greater than what it could be imported for, this cost dwarfs the cost of running the program. The magnitude of the increased sugar costs is indicated by the number of candy producers, including the makers of Life Savers, Red Hots and Jaw Breakers, who have shifted production out of America to avoid what amounts to a steep sugar tax, whose proceeds are paid to domestic sugar producers through higher prices.

In fact, claiming that the sugar program is free is no different than claiming that allowing domestic sugar producers to finance attacks to sink ships carrying sugar to America would be free. Both restrict available supplies, raising sugar prices, which act as a subsidy to domestic producers. As Henry George observed long ago, protectionist policies "are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; [protectionism] to prevent their own people from trading. What protection teaches us is to do to ourselves in time of peace what enemies seek to do to us in time of war."

The "free" sugar program has many analogues in other restrictive regulatory policies. But that does not exhaust government abuses characterized as free.

All manner of income redistribution programs are promoted as free to the recipient. But since government has only the resources it takes from others, it is far from free to Americans. Taking private property through regulation is a free (to the government) alternative having to pay for it, since courts have ruled that compensation need not be paid as long owners are left any productive use of property. Government projects have treated resources it already owns, particularly land, as free, ignoring the value of the assets' other productive uses that must be foregone. For years the Army Corps of Engineers justified projects by using a zero interest rate to discount future benefits, as if the use of financial resources was free.

In these and other cases, when the government or those who benefit from controlling its ability to coerce others use the word free, it is never as sweet a deal as it appears. "Free" then really means "someone else will get stiffed, so why worry about whether a program really makes sense or about the violations of others' rights involved?"

Ronald Reagan once said "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'" But when "and its free" gets added, it can make a dirty dozen that are even more terrifying to the rest of us.

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