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A problem we can all agree on….

March 24, 2010 3 comments

My two readers are telling me I seem a little too angry about this health care bill. I am not that angry, at the end of the day I like the way Mankiw puts it. One of those readers being my mother asked me on the phone whether I started smoking cigarettes. (How she saw my link through facebook, I don’t know…..but I suppose Parents on Facebook is a another problem we can definitely all agree on. I beg all my friends who are couples: Please, once a kid pops out before you do anything else, please close your account on facebook. This really should be federal law.)

But back to the main point.

Megan McArdle’s been writing some interesting stuff lately, one of them on HFCS or High Fructose Corn Syrup.

I am not sure I am on the camp that this stuff should be demonized for being as bad as it. Sure it makes us fat, but so does sugar. Perhaps it is a bit more “addictive” but to what extent? Its not like we see Americans smuggling Coke (not that coke) when they travel to countries that have sugar-based sodas.

For instance, after a lonely day of work, school, playing Madden 10, whether it has sugar or corn syrup, you ain’t gonna stop me from eating that Cinnabon/Ice Cream/Cookie etc. Then, I’ll self-flagellate and chastise myself for a lack of moderation before I cry myself to sleep. But I digress. My main point is, a calorie is a calorie. Twinkie in BDK ceterus paribus = Marginally wider BDK.  (BTW anyone ever play the Wii Fit game. That thing is such bulls#!t. I know I am not Michael Jordan. But when I played it at my friends place, it had my Wii Fit age at Methusulah and my avatar transformed into E. Honda all from a stupid balancing test.)

I think an economist’s eye is a good way to see the underlying problem here. Megan mentions sugar tariffs because they artificially keep sugar prices high, thus forcing producers and hence consumers to switch over to HFCS.

I think a bigger problem though is corn subsidies. I commented:

But on the flipside you’ve got to also see when we subsidize corn in this country to the point where companies like Archer Daniels Midland find an incentive to produce boatloads of the sweet stuff. While maybe all things being equal HFCS is worse than straight sugar, our subsidization of corn has an indirect effect of making sugary goods cheaper which is obviously not good. Its gotten to the point though where farmers aren’t just begging for these subsidies, but you see companies like ADM doing the same with their lobbying year in and year out (to both Dems and Republicans). You can look at how ethanol conveniently became an “alternative fuel” even though without subsidies it cost more, it pollutes just as badly in many cases and is not really a more efficient fuel. At least in Brazil, they extract their ethanol much more easily from sugar cane. Our perspective on HFCS and ethanol become distorted both literally and economically because of these subsidies.

The Cato institute reports, “Moreover, every $1 of profits earned by ADM’s corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30.”

The big story to me is why we even subsidize corn in the first place, I hate thinking the government knows better in handling other people’s money. It becomes more infuriating when you realize this very money finds itself at some big corporate corn farm or a company like ADM.

If you wanna see how government intervention distorts the economy. Look at this right here: there is no free lunch; in efforts to help out fledgling corn farmers we are also lining the pockets of companies like ADM. Next time you see  grant for “alternative energy” in the form of ethanol, know it is just as likely Park Avenue Joe rather than Pitchfork Joe who was asking for said subsidy.

Per the NYTimes:

the Clinton (my cross out) Administration’s policy on emission-reducing renewable fuels — in essence, ethanol made from corn — is little more than a politically inspired gift to farmers and corn processors, especially the Archer Daniels Midland Company

I crossed that out because realistically every administration bows to the corn farmers; this is definitely not a Rep/Dem issue. Unless you work for fledgling corn farm, I cannot sympathize with you here if you support these subsidies/tariffs. Even then, I just think we would be wasting a lot of money propping up an industry that other people do so much better than us.  As for attacking fatfcukitis americanus, I’d rank HFCS as the 5673th problem on the list;  we just aren’t active and eat a lot of other unhealthy stuff. But main point, governments think they might be doing good pulling that one lever; know that there are a lot of unintended consequences that come along with this.

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