June 28, 2009
High-Fructose Corn Syrup is becoming more and more common these days as it is appearing on the ingredient labels of more and more foods. A few people have questioned the possible health effects of this ingredient and this has caused the industry to respond with a series of TV and print ads promoting the benefits of high-fructose corn syrup.

High-fructose corn syrup is a type of sugar that is produced from corn and it is being increasingly used as a substitute for cane and beet sugar as a sweetener. Like cane and beet sugar, high-fructose corn syrup provides energy for the body to burn, will not help dieters lose weight and has the same effect on the body as regular sugar as far as people with diabetes are concerned. High-fructose corn syrup is not to be confused with artificial sweeteners which are designed to provide the sweet taste of sugar without the other effects of sugar described in the previous sentence.

This Hub is not about the health effects of high-fructose corn syrup. I am not an expert on this topic and, from what little I have read, high-fructose corn syrup appears to me to be a simple substitute for cane or beet sugar and its consumption should be regarded as the same as regular sugar.

The question that I am addressing in this Hub is, since high-fructose corn syrup is basically the same as regular sugar from sugar cane or sugar beets why are we suddenly using this corn product in place of the traditional sugar our society has used for the past 500 years?

The simple economic answer is price. High-fructose corn syrup costs less than regular sugar. Not only does it cost less but it is also more readily available due to increasing demand for sweeteners and shrinking supply of cane and beet sugar as sweeteners.

If the switch to high-fructose corn syrup was just about economics, this Hub would have ended with the paragraph above. However, while the forces of supply and demand are the economic reason why high-fructose corn syrup is less expensive than cane sugar we are not talking about the invisible hand of the market guiding the price but rather the price being guided by the greedy hand of Congress paying off special interests in the sweeter market.

In the case of both regular sugar and high-fructose corn syrup this is more than Congress's favoring one group at the expense of another. Here they are helping to channel money to both groups at the expense of American taxpayers and consumers.

As I discussed in the section entitled The Politics of Sugar, in my previous Hub on Political Rent Seeking, as far back as the early years of the Twentieth Century, Congress began protecting American sugar producers with tariffs on imported sugar.

Tariffs have historically been a key revenue source for governments since ancient times. However, their are two types of tariffs. The first is known as a revenue tariff and this type of tariff is simply a tax, like a sales tax, that is designed to produce revenue for the government. The second is known as a protective tariff and this type of tariff is designed to make it unprofitable to import and sell the product being taxed. While the importer is forced to pay the tariff when the goods enter the United States, the importer adds the cost of the tariff to the product thereby making the consumer the ultimate payer of the tax. Like most taxes on business, tariffs, both revenue and protective, are a means by which Congress can extract money from citizens without taking responsibility for taxing them directly.

Ironically, while liberal politicians refuse to acknowledge that high income taxes can discourage work they readily use high protective tariffs to discourage the importation of products that compete with the products of their special interest supporters.

Both revenue and protective tariffs have played a major role in American history. Prior to the passage of the Sixteenth Amendment to the Constitution which allowed the Federal Government to tax people's incomes, revenue tariffs were the major source of revenue for the Federal Government. Protective tariffs have been used from the early years of the Republic down to the present and it was outrageously high protective tariffs which led to the Civil War in the mid-Nineteenth Century.

In addition to high protective tariffs, Congress has also enacted various import quotas on sugar. Unlike tariffs, quotas don't generate revenue for the government (however, like tariffs, they do require the government to spend considerable amounts of taxpayer money to pay bureaucrats to manage and enforce them as well as higher lawyers to write the complex laws and regulations). Instead, quotas put an absolute limit on the amount of the product that can be imported so that, even if people want to pay the high cost that results from the addition of the tariff, they can't. Quotas are thus a more direct way to drive up the price of an imported product thereby making it uncompetitive with those produced by special interests who support Congressmen backing such legislation.

As I stated in my recent Hub about Treasury Secretary Geitner and his income tax problems the Federal Tax Code consumes over 100,000 of highly complex legalese and is growing daily. Sugar quotas and tariffs have added their share to this mess as well as adding to the ever growing body of federal regulations. All of these cost citizens, in their capacity as taxpayers, money to support and manage this as well as, in their capacity as consumers, money to pay the additional cost not only of sugar but of every product that contains sugar.

Then we come to high-fructose corn syrup which is less expensive than sugar solely because we, as taxpayers, have been paying farmers growing corn to grow more. In other words, high-fructose corn syrup is less expensive than sugar ONLY because we have been forced to pre-pay the difference with our tax dollars in advance.

And, it doesn't stop here as, in addition to subsidies for growing corn, we also have our tax dollars subsidizing the production of corn based ethanol  in order to make it affordable at the gas pump and then are forced, by law, to purchase the subsidized ethanol in order to run our vehicles. Of course, this additional subsidy and legally mandated artificial demand for corn based ethanol drives up the price of high-fructose corn syrup thereby making us spend more at the grocery checkout. Don't worry, if high-fructose corn syrup, despite its numerous taxpayer supplied subsidies, begins to become more expensive than sugar you can be sure that both the sugar and corn special interests will see to it that their friends in Congress increase the tariffs and quotas on imported sugar.

Former President Ronald Regan was fond of pointing out that the government doesn't solve problems, rather IT IS THE PROBLEM.  And, the story of the politics of high-fructose corn syrup is but one tiny illustration of how politicians in Washington work tirelessly to make sure that we, as a nation, never run out of problems.