Tuesday, November 25, 2008

Corn-Based Ethanol: A Terrible Idea Brought to You by Our Government

John Ketzenberger this morning writes about the glut in the ethanol market. For 50 years, corn prices had been steady at $2 a bushel. Farmers were able to weather the stagnant prices by becoming more productive. By this past July though corn prices had risen to $8 a bushel.

Growing up in a farming community in southeastern Indiana, I saw first-hand the poor returns farmers would receive for the hours of hard work they put in to farming. Many had to have second jobs because farming alone would not pay the bills. So when I see farmers getting paid more, my immediate reaction is to say that's a good thing.

But that 400% increase in corn prices was fueled (pardon the pun) by an alternative fuel source - ethanol - that exists almost completely because of large government subsidies, both for the ethanol producers and for the fuel itself. I enjoy reading articles by ethanol defenders who try to use circular arguments to argue that the increase in corn prices has nothing to do with ethanol production. Although the duck looks like a duck and quacks like a duck, etchanol defenders would like people to believe it is actually a cow.

Even if we were to convert every last ear of corn to ethanol we still would not come close to meeting the energy needs of the United States. Additionally, the fuel is not terribly efficient and, according to some sources, requires as much energy to produce as is provided by the fuel source. Because of those reasons and the increase in food costs driven by ethanol, most energy analysts appear to now have concluded that corn-based ethanol was a mistake.

So we can phase out the subsidies and move to a better alternative fuel source, right? Ah, that's not how government works. There is now a whole industry, built up by taxpayers, in place. Farmers and ethanol producers have made a lot of money converting corn to fuel. That industry now has some very powerful defenders, including some Hoosier politicians. Dismantling what should not have been built is not something democratic governments do easily.

As a side note, if you want a classic example of government bureaucracy once established being difficult to eliminate, read the classic story of severals Presidents' attempts to do away with the Board of Tea Tasters.


Citizen Kane said...

I only recently was able to convince one of my liberal, environmental friends that ethanol was a fraud, but she had to read five books before she started spouting off the same thing that I had told her years ago. Some people just really want to believe and are willing to drink the koolaid. Lugar says it is a good idea, so it must be, right. What a load of crock. Ethanol subsidies are just another way to suck money out of the government (taxpayers) and pretend that problems are being solved. But no one will call Lugar or anyone else involved in this obvious fraud. And the money will keep flowing to this "important industry for our energy future."

Government should not pick winners and losers, but it does consistently on the local, state and federal level.

Paul K. Ogden said...

Excellent comment, Citizen. I couldn't agree more.