Ethanol Follies

There are few better examples today of special interest pork than the government's ethanol policies. Born out of a desire to raise the price of corn for Midwestern farmers by subsidizing the growing of the commodity specifically for ethanol,, the fuel itself has been overhyped, oversold, and hasn't contributed to a reduction of our dependence on foreign oil or in pollutants being spewed into the atmosphere.

Rich Lowry explains:
Ethanol is to Iowans what marijuana is to Rastafarians: a substance that is considered quasi-holy, but only because it delivers really good times. Presidential candidates become fanatical supporters of the corn-based fuel as soon as they begin to compete in the Iowa caucuses. Before it's over, Mitt Romney might have to promise to use ethanol as pomade and Mike Huckabee - in a naked play for the religious right - to baptize people in the stuff.

We will produce 6 billion gallons of corn ethanol this year, on the way to meeting a mandate of 7.5 billion gallons by 2012. The Senate has passed a mandate for 36 billion gallons of ethanol by 2022, although the additional fuel is supposed to come from sources other than corn - so-called cellulosic ethanol, made from switchback grass and the like. When the agricultural firm Archer Daniels Midland first coaxed ($$$) Congress into subsidizing ethanol a few decades ago, it was just a perversely amusing example of rank corporate welfare. Now, with ethanol distorting markets in America and around the world, it's not so amusing anymore.
And Lowry points up the problems with removing so much corn from the feed market:
We will plant 90 million acres of it this year, up 15 percent from last year. Still, the price of a bushel of corn jumped from $2 to $3 in the past year, thanks to the demand for more ethanol. This is increasing the price of corn-based foods - tortillas have become as much as twice as expensive in Mexico - and meat, poultry and dairy products, since livestock traditionally has been fed corn. "In some parts of the country," Jeff Goodell writes in Rolling Stone, "hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars."

The higher cost of raising livestock is naturally passed along to consumers. So, with its ethanol mandate, Congress has effectively passed an indirect tax on food. The big winners are agricultural firms that have locked up lots of land, since the price of cropland has gone up 14 percent in the past year. (If your local real estate is slumping, it's only because you can't plant corn on it.)
Agricultural subsidies are as American as applie pie and earmarks. This is one subsidy we can do without.

Hat Tip: Ed Lasky

Update: Bob Teeter adds:

Ethanol is just wrong at every turn. Subsidized at every step of production and then again at the pump where the road tax is less, no net production of energy, poorer mileage for the consumer, tough on cars, arguably no improvement in air quality

Ethanol fuel is a market created by fiat.

But ethanol is a political juggernaut and I don't see it going away.  

There are few better examples today of special interest pork than the government's ethanol policies. Born out of a desire to raise the price of corn for Midwestern farmers by subsidizing the growing of the commodity specifically for ethanol,, the fuel itself has been overhyped, oversold, and hasn't contributed to a reduction of our dependence on foreign oil or in pollutants being spewed into the atmosphere.

Rich Lowry explains:
Ethanol is to Iowans what marijuana is to Rastafarians: a substance that is considered quasi-holy, but only because it delivers really good times. Presidential candidates become fanatical supporters of the corn-based fuel as soon as they begin to compete in the Iowa caucuses. Before it's over, Mitt Romney might have to promise to use ethanol as pomade and Mike Huckabee - in a naked play for the religious right - to baptize people in the stuff.

We will produce 6 billion gallons of corn ethanol this year, on the way to meeting a mandate of 7.5 billion gallons by 2012. The Senate has passed a mandate for 36 billion gallons of ethanol by 2022, although the additional fuel is supposed to come from sources other than corn - so-called cellulosic ethanol, made from switchback grass and the like. When the agricultural firm Archer Daniels Midland first coaxed ($$$) Congress into subsidizing ethanol a few decades ago, it was just a perversely amusing example of rank corporate welfare. Now, with ethanol distorting markets in America and around the world, it's not so amusing anymore.
And Lowry points up the problems with removing so much corn from the feed market:
We will plant 90 million acres of it this year, up 15 percent from last year. Still, the price of a bushel of corn jumped from $2 to $3 in the past year, thanks to the demand for more ethanol. This is increasing the price of corn-based foods - tortillas have become as much as twice as expensive in Mexico - and meat, poultry and dairy products, since livestock traditionally has been fed corn. "In some parts of the country," Jeff Goodell writes in Rolling Stone, "hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars."

The higher cost of raising livestock is naturally passed along to consumers. So, with its ethanol mandate, Congress has effectively passed an indirect tax on food. The big winners are agricultural firms that have locked up lots of land, since the price of cropland has gone up 14 percent in the past year. (If your local real estate is slumping, it's only because you can't plant corn on it.)
Agricultural subsidies are as American as applie pie and earmarks. This is one subsidy we can do without.

Hat Tip: Ed Lasky

Update: Bob Teeter adds:

Ethanol is just wrong at every turn. Subsidized at every step of production and then again at the pump where the road tax is less, no net production of energy, poorer mileage for the consumer, tough on cars, arguably no improvement in air quality

Ethanol fuel is a market created by fiat.

But ethanol is a political juggernaut and I don't see it going away.