Friday, December 23, 2011

Shocker! Stabenow and Levin Wrong Again

Could it be that sound economic principles are now driving our energy policy? How about our policy on agriculture? Well, either would be a stretch, but every little bit helps.

The United States has ended a 30-year tax subsidy for corn-based ethanol that cost taxpayers $6 billion annually, and ended a tariff on imported Brazilian ethanol.

Congress adjourned for the year on Friday, failing to extend the tax break that's drawn a wide variety of critics on Capitol Hill, including Sens. Tom Coburn, R-Okla., and Dianne Feinstein, D-Calif. Critics also have included environmentalists, frozen food producers, ranchers and others.

The policies have helped shift millions of tons of corn from feedlots, dinner tables and other products into gas tanks.

Environmental group Friends of the Earth praised the move.

"The end of this giant subsidy for dirty corn ethanol is a win for taxpayers, the environment and people struggling to put food on their tables," biofuels policy campaigner Michal Rosenoer said Friday. "Given corn ethanol's downsides, it's outrageous that taxpayers have been subsidizing the industry to the tune of $6 billion a year. The industry's inability to get this tax credit extended signals that it no longer has carte blanche in Washington: Corn ethanol is no longer a sacred cow."
Clearly ethanol had no business being considered a vital portion of America's energy solution to begin with. Its harms were legion and its benefits dubious.

The corn ethanol industry was largely the brainchild of environmental activists and benevolent politicians who joined forces to not only save the planet from the evils of pollution and to save America from the evils of foreign oil, but it also served as a grand vehicle for politicians to bring home the bacon to voter districts rich in corn production--an act not considered nearly so evil.

They could save the family farm, could save the environment and, as an added bonus, could also tell the Middle East to stick it where the sun don't shine. Of course, that was before those pesky unintended consequences started popping up as thick as corn in a flat southern Michigan field. Buoyed with redirected tax dollars, the ethanol industry boomed.

Corn was diverted from food production into an inefficient energy source whose manufacture and distribution actually consumed as much energy as it produced. Millions of acres of arable land were diverted from other grains and vegetable production to that of producing corn; corn that was to be burned in my sleek '95 Buick.

Prices rose for corn as demand rose. Prices also skyrocketed for those products that had their production acreage slashed in favor of corn. Beef and poultry prices also rose as feed grains hit the roof. Meanwhile, the UN and NGOs began issuing warnings of impending starvation in the third world as food supplies waned and costs rose.

But, there was even more trouble. Many ethanol producers declared bankruptcy outright or managed to stay afloat merely through the taxpayer funded leverage supplied to them by vote seeking bureaucrats.

Ethanol producers in turn lamented that they had entered the industry at the behest of government but that the government had not done enough to actuate demand. So, a gullible congress bowed again and again to lobbying pressure by continuing to subsidize corn and ethanol production and also by changing fuel mix standards to heighten demand. Billions more dollars (and meals) went down the drain annually.

There were other ethanol alternatives, of course, the most viable being cane ethanol from Brazil. However, stodgy bureaucrats could not allow efficient ethanol to enter this country when they had activist voting constituencies that needed their inefficient products protected. So, tariffs levied upon imported ethanol made what would be a sensible alternative a no-go.

Farmers were given taxpayer money to grow corn. Ethanol manufacturers were given taxpayer money to start up and continue operations. The industry was guaranteed increasing demand for its products through manipulation of fuel blends. The industry was granted protection from truly efficient foreign ethanol.

Despite the billions poured annually into the industry and stacking the deck heavily in its favor, it simply could not support itself on its own merits regardless of the motives behind its launching. Economics is funny that way.

In recent years even many former ethanol supporters have jumped ship, among them most notably the Nobel Prize recipient Albert Gore who admitted he was merely taken in by the hype and that he is a hopeless moron. Other groups are now off the ethanol bandwagon too, apparently feeling some guilt over the millions their favored regulations helped starve over the past few decades.

However, despite Al Gore's two brain cells hesitantly sparking to life, some enlightened politicians still exist that favor the disaster that is corn ethanol, with Michigan's two brainy senators sharing top billing. Senators Stabenow and Levin voted against suspending the subsidy, apparently still is support of the idea that a bankrupt nation should be able to force its recessed citizens to pay billions in tax dollars for the simple pleasures of being able to pay billions more on food, to use less efficient fuels, and as an added bonus, to severely restrict the caloric intake of millions of people in the third world.

In Michigan we call that representation. In Ethiopia they simply call it hunger.

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