December 14 2010
Scrap the Whole Darn Ethanol Subsidy
Politicians seem to think that no bill is complete without its fair share of "pork." Though when applied to the contentious tax deal, it would be more accurate to say that both parties seem to think this bill needs its fair share of corn.
Ethanol subsidies set to expire by December 31st will almost certainly be extended as a part of any deal coming through this Congress, regardless of the negative impacts that those subsidies have on American families' finances.
While most political pundits focus on issues such as whether extending unemployment benefits in order to reach an extension of Bush tax cuts is a fair compromise, politicians and lobbyists are busily developing more hand-outs to favored industries. In an attempt to preempt potential public outrage over the extension of ethanol subsidies, Senate Finance Chairman Max Baucus (D-Mont.) is proposing to trim the ethanol subsidy from 45 cents to 36 cents per gallon.
Trimming the destructive and unnecessary subsidy isn't enough. It's time to scrap the whole darn thing. Ethanol production wastes energy, creates more carbon emissions than it saves, raises the cost of fuel, and raises the prices of nearly all food products a typical American family consumes every single day.
Ethanol was touted as the green fuel of the future which would decrease America's reliance on foreign oil. While our oil consumption keeps rising, government barriers to oil exploration and extraction are preventing domestic oil production from keeping pace. We currently meet 51 percent of our oil demand by buying oil from abroad at a cost of about $300 billion every year. Our foreign oil dependence is responsible for a major portion of the U.S. trade deficit and reminds us of all the jobs and economic prosperity we fail to create at home.
Yet ethanol subsidies have had no discernible impact on increasing America's energy security.
Every gallon of ethanol created wastes energy. David Pimentel at Cornell University and Tad Patzek at the University of California, Berkeley estimate that making ethanol from corn requires twenty-nine percent more fossil energy than the ethanol fuel itself actually contains. Additionally, ethanol contains only about two-thirds of the energy contained in gas. That means that a gallon of ethanol-blended gas won't allow you to drive as far as if you bought straight up gas.
Ethanol subsidies also raise the prices for almost all the foods a typical American family eats every single day. Forty-one percent of U.S. corn production was devoted to ethanol in 2009. Corn used for ethanol cannot be used for animal feed, which raises the prices of meats and dairy at the grocery store. Corn is also contained in most sugared products in the form of high-fructose corn syrup. Because ethanol makes corn more scarce and expensive, the prices for many processed foods, from staples such as bread and cereal to soups and condiments, are higher than they need to be. Moreover, as more and more fields are devoted to growing corn for ethanol, fewer fields are available for growing other grains, fruits, and vegetables, increasing prices for nearly any imaginable food product.
In addition to raising Americans' cost of living, ethanol subsidies contribute to the already raging government deficit. Recent estimates show the current federal deficit to be over 1.3 trillion, while the total national debt comprises a stunning $13.8 trillion. Ethanol subsidies unnecessarily add $5 to $7 billion per year to government spending.
Even if the subsidies got scrapped completely, American families would still be forced to indirectly subsidize ethanol by consuming at least the government ethanol mandate of 12.6 billion gallons next year.
Ethanol subsidies and usage mandates are a perfect example of the kind of pork barrel spending that sustains industries that would fail in a free market, but who succeed by influencing our supposed representatives. Al Gore's recent confession, that he supported ethanol subsidies because appeasing big-corn states such as Iowa and Tennessee was an instrumental strategy in the pursuit of his ambitions to become President of the United States, is a case in point.
In addition to representing bad economic and environmental policy, ethanol subsidies hurt American families' finances by increasing the costs of foods and fuel, and by adding to our tax liability. It is time that big-corn get off taxpayers' backs and either stand on its own, or fails.