Taxpayers will have to fork out more than $1 billion to prop up a wasteful and failing U.S. sugar program, according to statements last week by government economists.

Speaking before the Senate Agriculture Committee, U.S. Department of Agriculture (USDA) economists disclosed that it will cost taxpayers $1 billion through 2005 to bail out the sugar industry, which has been plagued by low prices.

Recent events indicate that the sugar program is becoming increasingly unmanageable and that reforms are urgently needed.  A combination of a massive U.S. sugar surplus and low prices have prompted the government to spend $54 million to purchase 132,000 tons in order to combat the sugar glut.

But the purchase failed to solve the problem. The USDA estimates it will spend at least $86 million more this year to bail out the sugar industry.  Subsequent payments through 2005 will total more than $1 billion.

The sugar program is partly comprised of government-backed loans and trade initiatives that impose fees on imported sugar and limit the amount of foreign sugar that can enter the U.S.  The domestic sugar program also includes price supports.

Under the program, farmers are loaned 18 cents per pound for cane sugar and 22.9 cents per pound for beet sugar.  During the nine-month period they have to repay the loans, farmers usually sell the sugar for about the loan price.

Ordinarily, the government does not have to take ownership of the sugar that’s pledged as collateral for the loans.  This means there’s generally a small direct taxpayer subsidy, and the cost of the sugar price-support program is borne by consumers who buy sugar or products containing sugar.

The program artificially creates a price for sugar that is substantially higher than other countries — about three times the price of sugar sold on the world market.

As a result, U.S. consumers already pay $2 billion a year too much for sugar-rich foods, according to a recent report by the U.S. General Accounting Office (GAO).

Furthermore, most of the program’s beneficiaries are not small farmers.  The GAO estimates that 42 percent of all sugar subsidies go to only one percent of farmers, benefiting mainly large corporations.

Domestic sugar producers have further burdened the government program by increasing sugar cane and sugar beet acreage in recent years.  So the government’s piles of sugar could be growing and the taxpayer liability increasing.

It is time to end big sugar’s corporate welfare program.