Children of the Corn Subsidies

The Washington Examiner’s Timothy Carney takes note of America’s pinched corn supply—the corn to use ratio is at a fifty year low—and offers this reminder of why federal policy is to blame:

Of course, the federal government is driving this demand for ethanol. The 2005 and 2007 energy bills mandate U.S. blenders sell a certain amount of ethanol. The effect: we're running low on corn, which is bad news for ranchers, and anyone else who uses corn, beef, or anything that competes with corn for land—that is, bad news for everyone except for a few folks getting rich off ethanol.

It’s also arguably bad news for environmentalists who want less land clearing worldwide: As The New York Times noted in a 2008 report on the side effects of bioful subsidies, research shows that “the purchase of biofuels in Europe and the United States leads indirectly to the destruction of natural habitats far afield.” That, in turn, has significant negative effects on the world food supply. Rather than growing food to eat, many farmers end up growing fuel to burn.

Nor, according to the Times, do those biofuels provide other alleged environmental benefits:

These plant-based fuels were originally promoted as better than fossil fuels because the carbon released when they were burned was balanced by the carbon absorbed when the plants grew. But even that equation proved overly simplistic because the process of turning plants into fuels causes its own emissions—for refining and transportation, for example.

Most of this has been well established for years. Even former vice-president Al Gore, who once defended the subsidies, finally  admitted not long that they are “not good policy,” and that they are largely driven by political pandering. Sadly, Congress has yet to ditch this corny idea.

Read Reason’s Ron Bailey on why ethanol subsidies must die.

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  • ||

    If the mandate isn't struck down, the next coerced purchase program will be for each of us to start using corn cobs in lieu of toilet paper. One cob per week per person. It's green, and it helps American farmers.

  • ||

    Wait 'til we have to start using corn as construction material. The road to Hell is paved with corn.

  • Sovereign Immunity||

    Remember those awful popcorn ceilings?

  • ||

    Remember them? I'm embracing them! My house built in the 80s. Popcorn ceilings are everywhere! That shit's gonna pay for my retirement! GOLD MINE, BITCHES!

  • ||

    What, you're going to get rich from your mesothelioma suit?

  • South Dakota||

    "Wait 'til we have to start using corn as construction material."

    We're way ahead of you:

    http://www.ronsaari.com/stockI.....Palace.jpg

  • ||

    If they bioengineer a corn cob that works better than my 3 sea shells, then we'll talk. Until then, I'm sticking with what works.

  • ||

    Demolition Man reference = +1

  • Ska||

    OUTLANDERS!!!

  • ||

    Don't ever show up in my emergency room, buddy!

  • Corduroy||

    I think it makes more sense to starting naming names on ethanol. Who's voting for it? Make the assholes justify it in public.

  • Sovereign Immunity||

    Well, Sen. Charles Grassley for one. Plus anyone who wishes to get elected to office in Iowa, and not to mention those who have the "ear" (heh heh) of these people, such as Newt and Gen. Wesley Clarke.

  • ||

    "ear" of these people

    You deserve to be stalked for that.

  • Neu Mejican||

    shucks.

  • ||

    You are a terrible, terrible person.

  • Rich||

    Some appropriate music.

    (Props to Warty.)

  • Neu Mejican||

    Their best album. Nice.

  • Other Derp||

    Fuck all of you..

  • Sovereign Immunity||

    No thanks, I don't like niblets.

  • cynical||

    Someone ought to pop you for that.

  • ||

    cornhole him!!

  • Neu Mejican||

    Is that where cream corn comes from?

  • ||

    I bet no one saw this coming.

  • ||

    The whole corn subsidy racket is locked in by the Iowa caucuses, where a minority (rich, large scale farmers) of a minority (farmers) of a minority (registered members of political parties who turn out to vote) drive a policy that is harmful to everyone else.

  • ||

    It is, however, helped by the fact that, as Bryan Caplan has shown, the policy (like farm subsidies in general) is far more popular among the "everyone else" that is harmed by it than it has any right to be.

  • Steve Chaos||

    Gore has plugged ethanol and dissed nuclear energy. Yeah, I think he's 0 for 2 on sound environmental policy, by my count.

    Why is it exactly that anyone pays him any regard?

  • ||

    Same reason people actually listen to and take into consideration what Pauly Krugnuts says:
    He has a Nobel Prize

  • GroundTruth||

    So does Obuma.

    Proving that the Nobel committee, like the SCOTUS, can make some pretty lousy mistakes when going along with current fads.

  • Neu Mejican||

    Even former vice-president Al Gore, who once defended the subsidies, finally admitted not long that they are “not good policy,”

    Admitted?
    Or recognized?
    I mean, I'm not sure, even based on that quote, that he recognized it as bad policy when he was pushing it. He "admitted" to being easily manipulated by special interests, but I am not sure he admitted to knowingly pushing bad policy.

  • DADIODADDY||

    Al Gore, what did he know and when did he know it? Knew nothing, knows nothing and will know nothing. The space between Al Gore's ears...the universe's perfect vacuum.

  • Neu Mejican||

    http://www.grist.org/article/2.....-subsidies

    The research demonstrates that the federal government provided substantially larger subsidies to fossil fuels than to renewables. Fossil fuels benefited from approximately $72 billion over the seven-year period, while subsidies for renewable fuels totaled only $29 billion. More than half the subsidies for renewables—$16.8 billion—are attributable to corn-based ethanol, the climate effects of which are hotly disputed. Of the fossil fuel subsidies, $70.2 billion went to traditional sources—such as coal and oil—and $2.3 billion went to carbon capture and storage, which is designed to reduce greenhouse gas emissions from coal-fired power plants. Thus, energy subsidies highly favored energy sources that emit high levels of greenhouse gases over sources that would decrease our climate footprint.

    http://www.eli.org/pressdetail.cfm?ID=205

  • ||

    To save me the tedium of linky-clicky, NM, could you enoghten us as to what is considered a "subsidy" in that article?

  • Neu Mejican||

    It turns out that the hardest part of the project was defining what a subsidy is. We wanted to be objective and clear, and to err on the side of being overly conservative. And while the "You know it when you see it" standard would have been much easier to apply, we came up with a working definition that defined a subsidy as a deliberate decision, action, or failure to act taken by the federal government that conferred some economic benefit on industry participants that directly and negatively impacted the federal budget. We measured the subsidy as the size of the budget impact (as opposed to the value conferred on the industry).
  • ||

    And while the "You know it when you see it" standard would have been much easier to apply, we came up with a working definition that defined a subsidy as a deliberate decision, action, or failure to act taken by the federal government that conferred some economic benefit on industry participants that directly and negatively impacted the federal budget.

    That's still pretty much "you know it when you see it." The vast majority of the "subsidies" to fossil fuels are tax breaks, and the vast majority of that has to do with allowing them to count royalty payments to foreign governments as taxes paid for purposes of counting that against taxes owed to the US.

    Considering that in the case of nationalized oil fields it's very difficult to distinguish between the government-set monopoly royalty levels and a government-set tax on extraction, that's really quite reasonable.

  • ||

    Once you get into that whole subsidy thingie, you get into the twilight zone. For example, gasoline is pretty inelastic - get rid of the tax subsidy (I would agree it is a subsidy) and gas prices would rise.
    So who is being subsidized - it seems to me its more automibile drivers than the oil companies - the oil companies would merely pass the price on to consumers of overseas taxes - sure, there would be some lower demand some lessening of oil company profits.
    Who's paying the subsidy? I would say non-drivers.
    thats the thing about subsidies...who is really being subsidized? Who's really paying?

    How many leftists oppose gas subsidies with all there heart, but the same belief in government intervention actually prevents less automobile driving because the same impulse to manage the market - the left concerned about the poor drivers would not want gas prices to rise. And most politicians would never antagonize the middle class drivers.
    Ironic...

  • Neu Mejican||

    How many leftists oppose gas subsidies with all there heart, but the same belief in government intervention actually prevents less automobile driving because the same impulse to manage the market - the left concerned about the poor drivers would not want gas prices to rise.

    I am not sure who this left your are describing is...but most environmentalists are very open about the idea that gas prices should rise in order to reduce driving. I tend to see the argument made in terms of using market forces (e.g., price) to change behavior. Of course, once you add additional pain on the driver beyond the removal of subsidies, you are using direct government action to change that behavior, but we are far from penalizing driving via current policy, much the opposite.

  • Steve Chaos||

    From the article:

    It turns out that the hardest part of the project was defining what a subsidy is. We wanted to be objective and clear, and to err on the side of being overly conservative. And while the "You know it when you see it" standard would have been much easier to apply, we came up with a working definition that defined a subsidy as a deliberate decision, action, or failure to act taken by the federal government that conferred some economic benefit on industry participants that directly and negatively impacted the federal budget. We measured the subsidy as the size of the budget impact (as opposed to the value conferred on the industry).
  • Steve Chaos||

    Dagnabbit.

  • Neu Mejican||

    At least you found the right kernal. ;^)

  • Steve Chaos||

    I would like to stab myself in the eyes with two corn cob holders now, thanks.

  • DADIODADDY||

    Wait, let me do that for you...

  • ||

    Interesting. So, when they say "Fossil fuels benefited from approximately $72 billion over the seven-year period", they are not saying that the federal government wrote checks in that amount to fossil fuel playas. What they're saying is that the federal government spent (or gave a tax deduction/credit) worth $72 billion, and who knows what it was worth to the industry.

    Could be more, could be less.

  • ||

    What they're saying is that the federal government spent (or gave a tax deduction/credit) worth $72 billion, and who knows what it was worth to the industry.

    And about $30-40 billion of that was the ability to deduct royalties paid to foreign governments that own oil fields, etc. as taxes just as we would let them do so if the governments imposed the same fees but called them taxes instead of royalties.

    If all we did was move to a "territorial" tax system where we only taxed people on money made in the US, then the problem would be solved. That's what the rest of the world does, incidentally.

  • Steve Chaos||

    I'd actually recommend reading the article. One of the implicit subsidies considered for oil has to do with tax treatment of royalty payments to governments like Saudi Arabia - i.e., classification of royalty payments as "income taxes paid" rather than "expenses."

  • ||

    Yes, but it is really hard to distinguish between that. After all, the government of Saudi Arabia has a monopoly on the oil fields. They can completely determine whether to call the fees that they charge "royalties" or "taxes."

    Note that non-US oil companies don't have to pay taxes on their foreign operations at all, since they have a territorial system, so the likely result of eliminating that "implicit subsidy" would simply be Exxon et al. moving their headquarters to some other country.

    Even aside from that, comparing the raw dollar of subsidies is still pretty stupid when you don't compare it to outputs, whether here or in transportation.

  • Neu Mejican||

    Even aside from that, comparing the raw dollar of subsidies is still pretty stupid when you don't compare it to outputs,

    A good point, of course, since the scale of the fossil fuel industry is so much larger. But given that, the need to subsidize those activities seems to make even less sense. No?

  • cynical||

    The thing is, "subsidy" is a question of intent. If you do something because you think it is the fair way to treat someone, then you don't consider it a "subsidy" so much as you consider failure to do it a "penalty".

    Writing a check to a company is clear, but the issue of royalties versus taxes above is less so -- unless other industries don't get to count royalties in the same way, it's hard to say whether it's a helping hand, or an attempt at equal treatment.

  • ||

    Other industries do get to count royalties paid to foreign governments similarly, but outside of minerals and fossil fuels, there just aren't a lot of US multinationals that pay foreign governments royalties to extract natural resources from nationalized fields.

    Why exactly should a US multinational's US taxes change dramatically if it pays the same amount of money to Saudi Arabia's government as it did before, but the Saudi government changed the name from "tax" to "royalty?"

    And that one issue is about half the entire "subsidy" to fossil fuels mentioned, so the details are important.

  • DesigNate||

    First off, you've been around longer than I have and I know that most here don't support ANY subsidies so I'm not sure why you're bringing this up. Secondly, the point most of these "corn subsidies bad" articles is that the "$16.8 billion" is fucking up prices for everything that uses corn or eats corn.

  • Neu Mejican||

    DesigNate,

    Not sure how giving people additional related information is a problem. It seemed on topic to me.

    John Thacker
    Note that non-US oil companies don't have to pay taxes on their foreign operations at all, since they have a territorial system, so the likely result of eliminating that "implicit subsidy" would simply be Exxon et al. moving their headquarters to some other country.

    A bit tangential here...since the ethanol thing is just bad policy, but doesn't this same logic work for any industry, whether established or emerging? Wouldn't you use this same logic to keep wind energy or solar energy companies here? Does the validity of that argument change based on how mature the industry in question is?

    Not advocating any position here...just thinking out loud.

  • ||

    A bit tangential here...since the ethanol thing is just bad policy, but doesn't this same logic work for any industry, whether established or emerging?

    Yes, the shift to a territorial based tax system would benefit all companies, established and emerging, wind and solar companies as well. We should shift to a territorial system. It would benefit all those companies equally in one sense-- but under your apparently definition of "subsidy" benefit the oil and gas companies more because they're already multinationals with substantial foreign arms.

    The law about treating royalties charged by a foreign government applies to minerals and anything else; it does happen that fossil fuels are the most popular things to nationalize and the most popular nationalized goods that US companies then extract for fees.

    We have a very dumb corporate tax system that penalizes multinationals very much for locating their headquarters in this country. Judging a hypothetical "loss to the Treasury" from mitigating that very stupid system is difficult, when the same companies could respond to the change in law by simply moving their headquarters-- causing the US Treasury to lose not just the tax break but all the taxes those corporations pay. And Exxon does pay a lot of taxes.

  • ||

    How much of those subsidies are "green energy" related?

    As in "clean coal", scrubbers, clean air initiatives, credits for reducing pollution, etc.

  • ||

    One cob per week per person. It's green, and it helps American farmers.

    And think of all the jobs created or saved in the plumbing industry.

  • Old Codger||

    Corn cobs was good enough for my pappy. Corn cobs was good enough for my grand-pappy. And corn cobs is good enough for me.

  • Off Topic||

    Another illegal Cop Weigeling. This time in NY:

    http://www.foxnews.com/us/2011.....-man-says/

  • Number 2||

    Appropriate to this posting: WOR radio in NYC announced in a news story this morning that NASCAR will be requiring cars to use a 15% ethanol blend fuel in upcoming races.

  • ||

    That's fine for them; their engines only have to last 600 miles or so. I don't have the luxury of replacing my engine every weekend.

  • ||

    I don't have the luxury of replacing my engine every weekend.

    Jobs, jobs, jobs! Creating, saving...

  • ||

    For God's sake, you would think that in this financial extremis that we find ourselves in ethanol subsidies would be first on the chopping block.

    It just shows that spending is determined not by any kind of broad social utility criterion, but by a narrow political utility one.

  • ||

    "Broad social utility criterion."

    Hah! I thought utilitarianism was anathema around here.

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