Why Is Halloween Candy So Expensive? Sugar Protectionism.
A new report from the GAO highlights how America's system of sugar subsidies and tariffs costs consumers about $3.5 billion every year.
There ain't no such thing as free candy, not even on Halloween—as anyone who has stocked up in advance of Tuesday's holiday can attest.
Candy prices have jumped over 7 percent since last year and are up over 21 percent since October 2021, according to inflation data from the Bureau of Labor Statistics. Even in an environment where everything is getting more expensive, candy prices have climbed even faster than the overall rate of inflation for groceries and other home goods.
The main culprit is rising prices within the supply chains for America's candy makers—and, specifically, rising sugar prices. Much of America's supply of the sweet stuff comes from Mexico, where a dryer-than-normal summer meant a below-average sugar crop, Barron's reports. The New York Times spreads the blame a bit wider: Everything from high fertilizer prices (thanks to the Russian invasion of Ukraine) to hotter, dryer weather all around the world that affected sugar crops in Asia, Central America, and West Africa.
There is, however, one major factor that the Times ignores entirely: America's sugar policies.
The series of subsidies and tariffs that the federal government uses to artificially inflate sugar prices in the United States cost consumers between $2.5 billion and $3.5 billion every year, according to a timely Government Accountability Office (GAO) report released today. Those protectionist policies aren't the cause of the recent spike in sugar or candy prices, of course, but prices would absolutely be lower without them.
The so-called "sugar program" administrated by the federal Department of Agriculture "creates higher sugar prices, which cost consumers more than producers benefit, at an annual cost to the economy of around $1 billion per year," the GAO concludes. No matter what happens to cause global sugar prices to fluctuate, Americans have consistently paid higher prices over the past 20 years:
Those higher prices get baked—quite literally—into the cost of everything from Milky Ways to Sour Patch Kids. And, as the GAO also points out, this is a classic case of concentrated benefits for a special interest that results in huge, but very diffused, costs for everyone else: "Because the program guarantees relatively high prices for domestic sugar, sugar farmers benefit significantly, and sugar farms are substantially more profitable per acre than other U.S. farms."
The U.S. sugar program is an industrial policy of the type that is increasingly being sought on both the political right and left as a supposed solution to America's perceived economic problems—whether to boost manufacturing jobs or on-shore supply chains of critical equipment like semiconductors. Its history suggests many of the possible flaws with those new plans.
That includes not only higher costs for consumers but also the government's own inability to effectively run these types of schemes. In the case of sugar, the GAO points to the complicated and overlapping tariff rate quotas that are used to artificially restrict imports from many foreign countries. Those tariff quotas are based on 40-year-old data and the U.S. Trade Representative and USDA have shown no interest in updating them, according to the GAO.
"In practice, this has led to fewer sugar imports than planned and delays in obtaining sugar," the report concludes.
Global trade and supply chains look a lot different today than they did four decades ago, but when the government is granted broad powers over markets, it usually struggles to keep up. And that means higher prices for candy and lots of other goodies—regardless of how droughts or wars might affect those supply chains—on Halloween and throughout the rest of the year.
