Tariffs

Posted by PITHOCRATES - September 9th, 2013

Economics 101

The Proponents of Tariffs say they will Protect Infant Industries and Domestic Jobs

Tariffs.  What are they?  And what are they for?  A tariff is a tax.  Or a duty.  The government applies tariffs to imported goods.  Making them more expensive.  So people have to spend more money for them.  Leaving them less money to spend on other things.  Which seems counterintuitive to trying to increase economic activity.  Increasing prices the consumers pay, leaving them less money to buy other stuff.  So why do they do it?

The argument for tariffs is typically to protect ‘infant’ industries.  To give them a chance to get off the ground and establish themselves.  So they can later compete with this more developed and less costly foreign competition.  Which they couldn’t do if those foreign competitors can sell goods just as good if not better at lower prices.

Another argument is that tariffs protect domestic jobs.  A lot of imported goods are less costly than the same domestically produced goods.  Because of less costly labor in these other countries.  Often developing economies.  Unlike the developed economies who pay their people more.  And give them more benefits.  All paid for with the higher prices the people pay for their goods.  Tariffs raise the prices of foreign goods so they are not less costly than the domestically produced goods.  To get people to buy domestic goods.  Thereby saving domestic jobs.

Americans have to Pay about $1.25 more for a Bag of Sugar than the Rest of the World

These arguments make tariffs sound noble and good.  For they’re helping the little guy.  And protecting middle class jobs from cheap labor in foreign countries.  But they also hurt the little guy.  And poor families.  Because tariffs raise the price of the things they have to buy.  For example, tariffs on sugar imports raise the price Americans pay for sugar higher than people can buy sugar outside of the United States.  So the sugar they buy, and anything that contains sugar as an ingredient that they buy, is higher than it would be if the sugar tariffs weren’t there.

The US population in 2012 was 313,914,040.  Let’s assume the adult population is approximately 250 million.  And that half of them buy sugar.  How many sugar producers are there in the United States?  Far, far fewer than 125 million.  The Washington Post noted in 2007 that there were only about 6,000 sugar farmers.  About 0.002% of the population.  While the sugar buyers are closer to 40% of the population.  Or more if you include the things we buy that have sugar in them.  The numbers are approximate but the point is clear.  The people helped by tariffs are an infinitesimally small number while the people hurt by tariffs are a much, much larger number.

Let’s crunch some numbers.  While people outside of the United States can buy a bag a sugar for $1 Americans have to pay $2.25.  Or $1.25 more.  To protect American jobs in the sugar industry.  The 6,000 sugar farmers.  Let’s triple this number for the corn farmers (for high fructose corn syrup) and the sugar companies.  Rounding it out to an even 20,000 jobs that sugar tariffs protect.  If half of all adults buy a bag of sugar that’s $156 million pulled out of the economy that goes to, for lack of a better term, Big Sugar.  Let’s say these adults buy two bags a year.  Bringing the transfer from the 125 million (sugar consumers) to the 20,000 (Big Sugar) to $312.5 million.  Let’s double that number to include everything we buy that includes sugar as an ingredient.  And then double that number to account for all the sugar and corn subsidies.  Bringing the total annual wealth transfer from consumers to Big Sugar to approximately $1.25 billion.

Tariffs transfer Wealth from the Many to the Few and Reduce Economic Activity

That’s an enormous amount of wealth transferred from less rich people to richer people.  From consumers to Big Sugar.  But is it accurate?  Well, according to an article published in the Washington Post, yes.  The article states:

The Government Accountability Office has estimated that the sugar program costs consumers and food processors between $1 billion and $2 billion annually in higher prices for sugar and a vast array of products that contain it. Meanwhile, the new sugar subsidy would cost taxpayers tens of millions of dollars a year, according to economists and U.S. officials.

So our crude calculation may be on the light side.  This is a lot of money taken out of the pockets of hundreds of millions of consumers to protect 20,000 or so well-paying jobs.  Nearly half of the US population supporting less than 0.02% of the population.  And those tariffs paid that 0.02% very well.  Because Big Sugar is very profitable.  And can pay their people very well.  As they have tariffs to increase their selling prices and subsidies to lower their costs.  Which greatly fattens the bottom line.

In the United States the price of sugar is so high that businesses have turned to high fructose corn syrup for their sweetener.  Which our tax dollars also subsidize.  Making it a very profitable industry.  And as an added bonus for Big Sugar, some studies have indicated that high fructose corn syrup doesn’t satiate your appetite like regular sugar.  Causing us to overeat.  Which lets the soda pop industry sell more soda pop.  The (sweetened) food industry sell more food.  And, of course, Big Sugar sell more sweetener.  Making them richer.  And the people poorer.  As well as obese.  All of this to protect a very few jobs in some very old industries.  Transferring wealth from the many to the few.  And reducing economic activity.  Pretty much the exact opposite of what the proponents of tariffs say tariffs will do.  But what they in fact do.  Help the few.  At the expense of the many.

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The Government made us Obese by making us Eat and Drink High-Fructose Corn Syrup

Posted by PITHOCRATES - January 5th, 2013

Week in Review

The study of sweeteners can be confusing.  Once upon a time people used sugar made from sugar cane grown in tropical climates.  Then we found we could make sugar from sugar beets grown in cooler climates.  These are pretty much pure sucrose.  Then there is high-fructose corn syrup (HFCS) which is a combination of glucose and fructose, heavy on the fructose.  Made from, of course, corn.  Today this is the dominant sweetener in the United States.  Because of intensive lobbying by the HFCS lobby.  Who had their friends in government place a quota on domestic sugar production, subsidize U.S. corn producers and slapped an import tariff on foreign produced sugar.  Artificially raising the price of sugar in the U.S.  To force those buying sweeteners to buy the higher priced HFCS.  Create great profits for the HFCS business.  And their friends in government.  While increasing the cost of the sugar millions of Americans add to their coffee.  And water else they like to sweeten.

As bad as this manipulation of the market economy is it gets even worse.  Due to the greed of those in government this rise in HFCS use may have caused another problem.  Our obesity epidemic (see Fructose makes people think they’re still hungry: Study by QMI Agency posted 1/3/2013 on the Toronto Sun).

A new study may provide a clue to North America’s obesity problem.

Fructose — a very cheap and sweet sugar found in North American staples — may be tricking people’s brains into thinking they’re hungry when they’re actually full.

The study, published in the Journal of the American Medical Association, used magnetic resonance imaging (MRI) to track the blood flow in the brains of 20 young men of normal weight before and after they drank beverages with fructose or glucose, another type of sugar.

They found glucose suppressed activity in the areas of the brain that control reward and a desire for food. Not so with fructose…

The study’s authors acknowledge the study is small and doesn’t prove a link between fructose and obesity. But the journal’s editors, Dr. Jonathan Purnell and Dr. Damien Fair, note the findings mirror those from previous studies on animals.

What’s more, the study’s participants also reported feeling less full after consuming the fructose drinks, lending credibility to the MRI results.

Of course, the only reason why HFCS is ‘cheap’ is because the government artificially increased the cost of the competition.  Sugar.

While the food purists on the Left are telling our parents they’re making their kids fat because they don’t make them watercress sandwiches for lunch they’re surprisingly silent on the chemically produced HFCS.  They don’t attack those in government that have put HFCS in so many of our food products.  Giving us our obesity problem.

HFCS started entering our foods from 1975 to 1985.  And it was following this period that we started jumbo-sizing everything.  Because we just didn’t feel full like we did when we ate and drank food products made with sugar.  So we overate.  And became obese.  Apparently.

Perhaps we should look at the government as the cause for our obesity problem.  Not the 32 ounce soda.  For we used to feel full when drinking a 12 ounce soda before the government forced us to start drinking and eating HFCS.

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