The last two Halloweens looked very different amidst the COVID-19 pandemic as people wore very different types of masks. Unfortunately, this Halloween will continue to be filled with more tricks as candy prices are up 13.1 percent since September last year—Hershey and Nestle reported raising prices 14 percent and 6.5 percent, respectively.

While inflation is haunting many food products, candyflation could be lower if the U.S. government did not cartelize sugar. The United States Department of Agriculture (USDA) provides a sugar program to purposefully keep the price of sugar high. Figure 1 illustrates the stark difference in the U.S. the price for sugar and the world price. In August, the U.S. sugar price was 35.48 cents per pound compared to 18.06 cents per pound at the world price.

To implement the supply restrictions (and incentivize loan repayment), the USDA determines an annual limit on how much sugar can be sold domestically, reserving 85 percent of the U.S. sugar market to domestic producers (divided among sugarcane and sugar beet producers), and by buying U.S. sugar to keep it off the consumer market (most often selling it to U.S. ethanol producers at a huge loss).

The last mechanism the government uses to restrict supply is the imposition of strict tariff-rate quotas on imports of sugar—very low quantities can be imported duty-free but any excess is subject to an exorbitant tariff that reaches close to 100 percent!

These tools help sugar producers but hurt U.S. manufacturers and consumers.

In fact, the exorbitant prices of U.S. sugar contributed to the shutdown of the Necco candy factory (pictured below) in my colleague’s hometown, Thibodaux, Louisiana. (And the factory was located between two sugar refineries!)

This story is not uncommon, and while the shutdown of this factory only caused 30 job losses, the sugar program “induces… job losses (in the range of 17,000 to 20,000 jobs) in US food processing sectors that are sugar intensive because these processors import more intermediate products containing sugar to mitigate the impact of the domestic sugar program.” (Not to mention the opportunity costs associated with protecting these jobs.)

This Halloween, spending is expected to reach a new high of $10.6 billion but given the high prices, consumers will get more boo for their buck. The ubiquity of sugar means that other food products are also impacted by the expense created by the sugar program, extending harm beyond consumers’ wallets.

As producers look for cheaper alternatives to sugar—mainly high fructose corn syrup—Americans are exposed to greater health costs and the sugar industry itself has long lobbied to downplay the potential health risks associated with high sugar consumption.

The sugar program also has implications for foreign policy. Poorer neighboring countries could develop through trade liberalization in the U.S. sugar market. Countries in the Caribbean and Central American regions are better suited to produce sugar but have been shut out of the U.S. market, leading to stunted economic growth as these countries have stopped producing sugar in favor of illegal narcotics to be smuggled into the United States. This undermines U.S. foreign policy as resources are moved to tackle illegal immigration (as drug trade creates instability in the migrants’ home countries) and drug trafficking.

Sugarcane farming in Florida provides an example of harm to the environment and more health costs. Beaches were closed as a result of massive toxic algae blooms fed by a buildup of phosphorus from sugarcane farming. Further, sugarcane farmers in Florida clear their fields with (cost-effective) fire, increasing air pollution, affecting residents’ breathing.

Finally, in order to prevent liberalization of the U.S. sugar industry, domestic trade negotiators frequently make concessions on non-sugar issues in trade agreements. For example, in the U.S.-Australia free trade agreement, the United States tempered its demands for Australia to liberalize trade in pharmaceuticals, wheat, and media services in exchange for maintaining the U.S. sugar program. Permitting Australia to maintain its protectionism in these industries harms U.S. exporters (and Australian consumers).

The U.S. sugar program is yet another example of cronyism and protectionism. There is an opportunity here for Congress to take action as the sugar program falls under the farm bill, which expires in 2023. Congress should repeal the sugar program entirely. Doing so could save consumers between $2.4 and $4 billion, providing necessary relief during this period of higher inflation. However, at the very least, Congress should remove the tariff-rate quotas on imports of sugar.

The importance of Halloween candy to Americans means they will likely buy it in spite of price spikes. This trend will continue through the rest of the holidays when demand for sugar-dense products is strong. While spooky season comes to an end, this terrifying program will continue to haunt American food and confectionary.