Now that the Iowa caucuses are over, can we finally have a sensible discussion about the federal governments obsession with ethanol?
The Democrats in Iowa were promising anything to anybody who might help them get back into power. Nothing new there. But weirdness seems to be taking over the minds of normally sane people when candidates including Rudy Giuliani and Mitt Romney claim to believe that agricultural subsidies are necessary for food security. Are markets so wildly inefficient that unless government pays the farmers, they will quit producing food and well all go hungry?
Agricultural subsidies began in the 1930s as part of a package of government reforms which transformed a necessary market correction into the Great Depression. Farm subsidies have resulted in chronic overproduction of crops, market-wrecking surpluses and damage to the land. A small number of large farming enterprises receive the majority of the subsidies.
Naturally, the congressional reaction to this economic nightmare is to ratchet it up. By moving into ethanol, they're relieved to avoid the politically hard path of shutting down a popular welfare program. The politicians now have a product that can absorb more subsidies than ever. Meanwhile, they claim the environment will benefit from the alternative to gasoline. Oil prices will come down. National security will be enhanced by less dependence on foreign fuel. Life is good.
Washington politicians are so enthused, they not only subsidize ethanol 51 cents a gallon, they impose a 54 cents per gallon tariff on imported ethanol and a mandate to burn 7.5 billion gallons per year by 2012, with a near-term goal of 15 billion. Theres more. Ethanol refiners get tax credits, investors in ethanol plants can have their loans guaranteed and some producers get direct subsidies.
But virtually every claimed benefit (except the political ones) for ethanol is bogus. First, Steven Spruiell of National Review cites good evidence that it requires more petroleum to manufacture and transport a gallon of ethanol than it does for a gallon of gasoline. The environmentalists are beginning to realize they've been had. Whether you're a believer or denier of the Great Global Warming Panic, wasting resources on a product with no net benefit to the environment doesn't make sense.
Some politicians claim the high price of oil justifies ethanol support. But since ethanol production is so oil intensive, the logical response to more expensive oil would be to produce less ethanol, not more. Other alternatives, such as nuclear fuel, have more promise.
What about the national security argument? According to Robert Hahn, the former co-chair of the U.S. Alternative Fuels Council, if all the corn produced in the U.S. were devoted to distilling ethanol, the fuel produced would supply just 12 percent of todays gasoline demand. Corn cant possibly be the answer to energy independence.
Hahn also co-authored a cost-benefit analysis of ethanol subsidies showing foolishness isn't free. The annual drag on our economy is in the $1 billion to $2 billion dollar range. But that's not all. The National Research Council recently reported that water supplies are being disrupted, erosion and runoff are increasing and waterways are becoming polluted as farmers grow corn on land formerly uncultivated or used for less water-intensive crops. Furthermore, diverting corn to fuel production is raising the price not only of corn, but of many related foods. Beef producers are feeling the pinch, as are people struggling to afford the higher costs of staples.
Each dollar spent pandering to farm mega-corporations and millionaires is a dollar unavailable to help secure our energy future. Research on converting biomass to energy, on safe disposal of nuclear waste or on more cost-effective solar energy would all make more sense.
Discussion in Washington centers around the wisdom of restricting the ethanol subsidy to those with incomes under, say, $500,000. But why don't we just go back to giving welfare only to the elderly and poor who are unable to provide for themselves?
The next Iowa caucuses are four years away. This is a window of opportunity in the election cycle. Lets ax the whole ethanol mess. Even Iowa would be better off.
East Valley resident Tom Patterson (firstname.lastname@example.org) is a retired emergency room physician and former state senator.