Letter to Agriculture Secretary Vilsack - Sugar Bailout

Letter

Sen. Toomey Questions Agriculture Secretary On Pending Sugar Bailout

Taxpayer subsidies for sugar producers increase the price of most groceries for all Americans, hurt Pennsylvania's confectioners, and increase the deficit. U.S. Senator Pat Toomey (R-Pa.) is raising alarms about this outrageous corporate welfare as the U.S. Department of Agriculture weighs whether or not to buy 400,000 tons of sugar to boost the earnings of sugar processors across the country.

Sen. Toomey joined Sens. Jeanne Shaheen (D-N.H.), Mark Kirk (R-Ill.), and John McCain (R-Ariz.) in signing a letter to U.S. Agriculture Secretary Tom Vilsack asking which entities received loans under the sugar program, has the program exceeded cost projections, and has the administration considered the effects of higher prices for products made with sugar?

The text of Sen. Toomey's letter to Agriculture Secretary Vilsack is below.

March 14, 2013

Dear Secretary Vilsack:

According to a recent article in the Wall Street Journal (Big Sugar is Set for a Sweet Bailout) on March 13, 2013, that the U.S. Department of Agriculture (USDA) is planning to subsidize domestic sugar processors who are likely to default on USDA non-recourse loans. We request that you explain and justify the potential $80 million cost to the American taxpayer that's been reported.

Special interests groups supporting the USDA sugar program have long touted the argument that the sugar program is statutorily obligated to operate at "no cost" to the American taxpayer (7 U.SC. 7272). This claim appears to hold true only when the loan program, which is really a price-support program, operates under favorable economic conditions and if USDA doesn't sell excess sugar at an unmanageable loss to ethanol producers using the USDA Feedstock Flexibility Program (FFP). This year, sugar processors borrowed $862 million from the government under the price-support program. Should the FFP be implemented this year, press reports say that tumbling sugar futures combined with a 10-cent loss on every pound of sugar sold to ethanol producers will cost the Treasury about $80 million. The last time the USDA intervened in the sugar market in the early 2000s, taxpayers were fleeced for nearly a half billion dollars.

Eighty-million dollars ($80,000,000.00) does not mean "no cost" to any hardworking, taxpaying American family.

We respectfully request answers to the following questions:

Please identify each corporation or other entity currently receiving operating loans under the sugar program, and of those entities, which have outstanding loan balances, are at-risk for defaulting on some or all of their loans as of the date of this letter, and the pound/weight and value of sugar from each entity that would be transferred under the FFP. Since these organizations may be the beneficiary of USDA's decision to purchase sugar through the FFP, taxpayers have a right to know about who they may be subsidizing. Reports that this information is not available are unacceptable.

According to the Congressional Budget Office's February 2013 baseline, the FFP is estimated to cost taxpayers $228 million by 2023. However, FFP purchases were not expected to be needed until 2016. Considering that these purchases are reportedly going to happen much earlier, is it your opinion that this program will cost more than CBO estimates?

Is the USDA considering the potentially harmful impacts of a FFP intervention on consumers and job creators - whether it be higher prices for consumers at the supermarket or job losses in the confectionary industries or other industries that purchase sugar? As you may know, the Government Accountability Office has found that the sugar program costs consumers billions of dollars each year and the Department of Commerce has found that for each job protected by the sugar program, three are lost in other industries.

Thank you for your prompt response to this request.

Sincerely

U.S. Senator Pat Toomey