Corporate Welfare

Rolling Over Ethanol

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Following late in the footsteps of some observations about ethanol made in November 2003, May 2006, and June 2007 by reason's own Ron Bailey, Jeff Goodell at Rolling Stone pisses in Archer Daniels Midland's ethanol bowl (though I'm not saying that Ron necessarily agrees with every element of Goodell's indictment). As Goodell sums it up:

Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption—yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005—twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon—about half of ethanol's wholesale market price.

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  1. Don’t forget the threat that ethanol poses to our supply of precious tequila! What with farmers burning their agave crops and evidence that Mexicans are hoarding tequila, this ethanol silliness must simply end. Either develop cars that run on fusion reactors or don’t. There is no alternative.

  2. raising the threat of hunger in the Third World

    Threat?

    The main pro of ethanol seems to be the fact that it lessens, or makes it look like it lessens, our dependence on middle eastern oil. Still sounds like a bad idea, especially considering the subsidies.

  3. I’ll settle for cars that run on Cuervo. There’s no other real use for it.

  4. These fads do come and go, don’t they?

    It’s always a sure sign of sloppy writing, and probably thinking, when someone describes what “the point” of something is using the passive voice. Was it ever any actual human being’s “point” to generate a boondoggle by promoting ethanol? Of course not, but by putting it this way, the author can lambast the result without seriously considering the cause. No, the cause was not a desire to create a boondoggle, the cause was good intentions gone astray. Oh sure, the corn farmers didn’t exactly raise a ruckus at the prospect of tax monies heading their way, but it was leftist and environmentalist factions that pushed this, out of abhorrence of fossil fuel and a belief that an energy source that comes from something that’s grown must be superior to one that’s excavated. Scientific issues aside (since I’m hardly an expert on them), I just want to look at how this author is acting like creating a boondoggle was “the point” all along. Thus, no soul-searching on the part of the environmental left and do-gooders about how their good intentions went wrong. No, it was just those damn boondoggle-mongerers mucking things up again!! With their greed, that’s it, it was greed all along!

  5. Subsidizing ethanol will also raise the price of beer, since farmers are beginning to switch from barely to corn for ethanol.

  6. Won’t somebody think of the children of the Iowa corn farmers?

  7. I don’t think its an active conspiracy fyodor, but don’t you think the fact that Iowa has the first presidential caucus has something to do with it?

  8. Fyodor, your point is well taken, but I do think the political reason why our dear leaders went along with it was not some sort of naïve but sincere desire to reduce the use of oil. That was merely a convenient causus belli that obscured the massive bribery of Iowa for primary results boondoggle mentioned.

  9. Fyodor:
    I think the author was just making the point that it’s a stupid waste of taxpayer money that won’t do a lick of good for the environment, for U.S. consumers or anyone else.
    “The cause was good intentions gone astray,” you say: Yes, that’s called a boondoggle, and the politicians who propose this handout know it. So don’t give the schmucks too much credit.

  10. I’m leaning more toward the Iowa bribery theory masked as a push for less oil usage as opposed to a program that “just won’t work,” because chances are it will ‘work’, just not in the way those who prefer less government want it to work.

  11. I agree with Rolling Stone and Ron, but think this statement is overstated:

    “yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years”

    Is corn really that inelastic? A 25% increase in demand doubles the price?

  12. Fyodor said:

    It’s always a sure sign of sloppy writing, and probably thinking, when someone describes what “the point” of something is using the passive voice.

    Err.. the sentence in question is

    Because the whole point of corn ethanol is […] to generate one of the great political boondoggles of our time.

    Which is not a passive sentence. It’s a simple copula of the form ‘x is y’
    Now Fyodor may be right that nobody deliberately set out to create a boondoggle on purpose, but to do good, or do their constituents a favor, or both, but let’s not blame grammar for the messed-up results.

    Geoff (the other linguist on this list)

  13. I’ll go out on a big thick generalized-stereotype limb and assume that many or most corn growers in the Mythical Corn Belt are staunch Republicans who would rather screw their own daughters atop a burning Bible than beg for a handout from Evil Washington, and yet I’ll note that when it comes to ethanol subsidies, these overall-clad wheeler-dealers are redder than Stalin himself.
    Is that about right?

  14. I’ll go out on a big thick generalized-stereotype limb and assume that many or most corn growers in the Mythical Corn Belt are staunch Republicans who would rather screw their own daughters atop a burning Bible than beg for a handout from Evil Washington, and yet I’ll note that when it comes to ethanol subsidies, these overall-clad wheeler-dealers are redder than Stalin himself.
    Is that about right?

    My experience with farmers here tells me you are. They rail against “welfare parasites” then gladly accept government subsidies and buyouts.

  15. I’d like to take five years off from subsidies, whether of the direct or indirect kind. Just to see what happens.

  16. let’s not blame grammar for the messed-up results.

    LOL!

    Well, apologies, if I’ve mistakenly taken a “simple copula” and mislabeled it as passive voice, but my point is that the author fails to identify causality, at least in the quoted passage. While I have not RTFA, if the quoted passage is representative, he’s not even really, or at least not directly, blaming the farmers, as other posters here would like to do. As I’ve already acknowledged, I don’t doubt they’ve played a role. But so what? Sure it’s unethical to feed at the public trough, but that’s human nature. If there’s a variable that can be controlled (or is at least interesting to contemplate and discuss!), it’s the ideas that allowed the farmers’ desires for subsidies to be met, which is clearly and obviously environmental concerns mixed with the fallacies of central planning. Blaming the farmers and, worse, saying the point was to create a boondoggle, conveniently sidesteps this. Hey, I love a good boondoggle bashing as much as the next libertarian, but let’s not let the real culprits off the hook!

  17. If them filthydirty dope smokin’ hippies from RollinStonerMaggizeen are badmouthin’ our Ethanol, I reckon it must be a damn good program. Where’s my check?

  18. If the liberals were in charge this would have never happened!

  19. Cesar,

    link WIN

  20. I want my goddamn gigantic duck-boats and AmphiSUVs and SUVmarines !!!

  21. Pandagon: Pro-choice in the bedroom, Anti-Choice just about everywhere else!

  22. We’ll kill all of you if this gets out. We mean it. That goes double for Goodell.

    Dammit, boats don’t just pay for themselves!

  23. My experience with farmers here tells me you are. They rail against “welfare parasites” then gladly accept government subsidies and buyouts.

    That’s pretty much the way it works here in North Dakota. Socially conservative, fiscally liberal. Also, the weather sucks and German-American cuisine is vastly overrated. Aside from that, I suppose it’s a pretty nice place…

  24. What good is a boat for an Iowa farmer?

  25. A talk host here in Bismarck had a great line: “Next time you’re walking down the street and you see a farmer, walk up to him and say, ‘You’re welcome!'”

  26. From Pandagon:

    I think any of the states of the union should be off limits to libertarians. You have the money to pay taxes but won’t? Then make your own paradise, I think they should lobby the Russians to sell them a portion of Siberia.

  27. Cesar,

    Well fire up the SUVMarine and drive over and pick out your lot.I’ll be in the gigantic duck-boat with the Ron Paul bumperstickers.


  28. Well fire up the SUVMarine and drive over and pick out your lot.I’ll be in the gigantic duck-boat with the Ron Paul bumperstickers.

    Yes, and then together we can conspire on how best to exploit the Poor Working Families(tm).

  29. “Corn is already the most subsidized crop in America..”

    Really? I thought sugar.

  30. If you would like to see a whole lot of corn become available for food, just get the the gov’t to drop the price supports on sugar. A substantial percentage of the corn surpluses wrought by the “green revolution” of the ’60s and ’70s were used by soft drink and food manufacturers in the form of corn sweeteners when they became cheaper than sugar.
    Also, corn used for ethanol is not entirely removed from the “food” category as the leftover mash goes into cattle feed to grow your next hamburger.

  31. My iunde3rstanding was that by Law? Sugar prices were supposed to be twice whatever corn sweetner was.

  32. If ethanol were the anwer, it would not require vast government subsidies.

  33. TomHynes

    I agree with Rolling Stone and Ron, but think this statement is overstated:

    “yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years”

    Is corn really that inelastic? A 25% increase in demand doubles the price?

    You’re understating their exaggeration. Corn prices are determined on the WORLD market. So a 20% increase in US demand has only a marginal increase in world demand. I don’t have statistics on this, but I would be surprised if the change in total demand was larger than 2%. For this to double the price, corn would have to be REALLY inelastic, with nearly no substitutes. Of course, there are many substitutes for corn, so this argument is completely unbelievable.

  34. Jose Ortega y Gasset
    If ethanol were the anwer, it would not require vast government subsidies.

    I’m against the subsidies, but just because something is subsidized does not mean it could not succeed without those subsidies. It’s entirely possible that ethanol is the answer, and the existance of subsidies doesn’t disprove that.

  35. If ethanol were the anwer, it would not require vast government subsidies.

    This does not mean, however, that those subsidies would be a bad idea if it were certain that ethanol is the answer. Like it or not government investment in an industry can help speed up its adoption. If it is the right answer, that is a good thing.

    Subsidies to a single sector are more of a problem when you are not sure that sector is the right answer. So the subsidies for ethanol need to be placed in a context of the other ideas that are also being supported. If it is getting a bigger hand than it deserves based on its perceived potential then you have a point.

  36. Yup, you were there first. Tip o’ the cap to Reason.

  37. Corn may be the most subsidized crop in America, but let’s please also reserve special mention for cotton. It’s significantly less subsidized in dollar terms, but total cotton subsidies in the USA are actually larger than revenue to cotton farmers from selling cotton!

  38. What countries other than the US have a significant crop of corn? Mexico?

    I don’t know, but I’d be willing to bet that most of Europe has too cool of a summer and most of Asia at suitable latitudes is either too dry or has monsoons and is too wet. IS corn in any significant quantity grown in Argentina or Australia?

  39. I’ve read many articles and opinions about ethanol and it’s use and impact on economy. I support the idea of filling the tank of my car with less gas and more alcohol, given the actual prices. It’s also true that ethanol production itself it’s not as efficient as it should be. But, here comes the big but, I live in a third world country (Ecuador) and we, or any of our neighbour countries will starve, as a consequence of rising corn prices in the US. We do buy american corn as a country, but we also buy american gas… which one is cheaper?

  40. What I mean is… development of ethanol and any other type of biofuel is good for the world, for the entire planet. Using corn as fuel won’t starve anybody… just the big fat wallets of oil company excutives

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