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Sugar Bailout Is Govt. Policy at Its Worst: Hypocritical and Stupid

Aaron Task
Editor in Chief
Daily Ticker

In one of the dumbest, most counter-productive, anti-free market moves in recent history (which is saying a lot), the U.S. government is considering a bailout of the sugar industry.

In an effort to prop up sugar prices, which have fallen 18% since October, the USDA is considering buying 400,000 tons of sugar -- or enough to make 142 billion Hersey’s Kisses -- The WSJ reports.

Of course, there’s nothing new about government support for the sugar industry: The government has been lending money to sugar producers since the 1934 Sugar Act.

But reports of this latest bailout are particularly galling considering the backdrop of a debate in Washington over how to address the nation’s long-term deficit and the ongoing “War on Obesity” being waged by policymakers.

Related: Obesity to Cost Taxpayers ‘Billions of Dollars’: Weight Watchers CEO

As Lauren Lyster and I discuss in the accompanying video, there’s a lot to be outraged about when it comes to the sugar bailout. Consider the following…

Rising health care costs are the number one driver of America’s long-term deficit: Health care spending has risen from about 7% of GDP in 1970 to over 18% today and about half of that spending is publicly financed, mostly through Medicare and Medicaid, according to The Altarum Institute.

“The current rate of growth for these programs is not sustainable as it crowds out other priorities, such as infrastructure needs or education,” says the Institute, which is directed by health care economist Dr. Charles Roehrig.

The good news is the pace of health care spending has fallen for the past four years. The CBO recently reduced its 2020 projection for Medicare and Medicaid spending by 15% vs. its prior estimate.

Some of the decline in health-care spending is being attributed to a sluggish economy as well as changes to the delivery of health services, The NY Times reports.

Related: How Food Companies Trick Consumers Into Eating Their Unhealthy Products

Still, with an aging population and health care costs continuing to rise far above overall inflation, what Peter Orzag, then director of the White House Office of Management and Budget, wrote in The WSJ in 2009, still roughly applies: “If costs per enrollee in Medicare and Medicaid grow at the same rate over the next four decades as they have over the past four, those two programs will increase from 5% of GDP today to 20% by 2050.”

Indeed, this looming threat of rising health care costs swamping the U.S. economy was one of the primary rationales the White House used to justify the Affordable Care Act.

Meanwhile, rising obesity rates are the biggest contributor to the overall rise in health care spending. If adult obesity rates were to fall back to 2007 levels of 28%, the CBO estimated in 2010 that per capita spending on health care for adults would rise by 65% -- from $4,550 in 2007 to $7,500 in 2020.

Of course, obesity rates have risen since 2007 and there’s also the growing threat of childhood obesity, which can lead to a lifetime of medical problems – and higher per capital costs.

Thus, it boggles the mind why the White House would even consider, must less support, further bailouts of the sugar industry.

I get that jobs are at stake – 142,000 according to the American Sugar Alliance – and that government subsidies help keep the cost of sugar down, reducing costs to strapped U.S. consumers.

But that’s kind of the point isn’t it? If sugar weren't so cheap, maybe we all wouldn't be so freakin’ fat.

Related: Marion Nestle: Americans Aren’t Just Fat, They’re Hungry Too

Whatever you think about Obamacare, my hope is that if we’re going to have more government involvement in the health care that the same government would be do everything to keep costs down. This “sugar bailout” strikes me as the opposite of that; if it’s not hypocritical, it sure is stupid.

Finally, I have to wonder what the First Lady, who has her “Let’s Move” campaign and has written a book about the White House garden in her effort to promote healthy eating/healthier lifestyles thinks about all this. My guess is "not too happy" and it might be a little chilly in the Lincoln Bedroom tonight.

Update: Yes, I'm aware the government is currently try to raise, not lower, the price of sugar. "High prices discourage consumption, which is what we want," Marion Nestle, NYU Food Studies professor and author of the blog FoodPolitics writes via email. "If the government stopped supporting high prices, sugar prices would fall and that would encourage more consumption."

While sugar prices would likely fall in the short-term if the government pulled its subsidies, basic economics suggests that would lead to inefficient producers going out of business, resulting in less competition, less supply and higher prices in the long run -- assuming demand remains static.

I'm also aware, as many readers have observed, that high fructose corn syrup is a bigger contributor to obesity than cane and beet sugars, and that the Farm Bill is much bigger than the sugar subsidy. And then there's the matter of the naked politics at work here: "The current system is about revenues to a few heavy campaign contributors in Louisiana and Florida, and a lot of sugar beet farmers throughout the country," Nestle writes.

All true and all good fodder for future rants...err, discussion.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com