Payment Limitations and U.S. Farm Policy

Date
2015-08-10
Authors
Babcock, Bruce
Babcock, Bruce
Hart, Chad
Hart, Chad
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Center for Agricultural and Rural Development
Abstract

To an industry lobbyist, the role of government is to adopt programs and regulations that increase profits for the firms in the industry. Steel and timber lobbyists argue for higher taxes on imports; lobbyists for power generators argue for lower air quality standards; and farm lobbyists argue for higher support prices and stronger protection from imports. When government responds to lobbying pressure and adopts a new program or regulation, all firms in the industry typically have access to the benefits. And because the benefits often are in proportion to the level of production, the largest firms obtain the greatest benefit. Thus, President Bush’s import taxes on steel benefit the largest steel companies the most. In agriculture, the best example of this principle is the sugar program. The program limits U.S. imports of sugar, thus costing U.S. consumers approximately $1.4 billion per year through higher prices. According to a recent Heritage Foundation study, Alfonso and Jose Fanjul, owners of Flo-Sun, Inc., in Palm Beach, Florida, benefit by approximately $65 million per year from producing sugar in Central Florida. Furthermore, they obtain an additional $60 million per year because they are given a portion of the U.S. import quota, which allows them to import inexpensive Dominican sugar into the high-priced U.S. market.

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