I am sure most people who will read this know what ethanol is. Basically, it is a biofuel additive for gasoline and it has been touted as an alternative to using full gasoline products to power 
our cars. I am sure some farmers like it because it is made from corn, but there is just something about using a food item for fuel that doesn’t sit well with me. I should mention that ethanol producers received some $7.7 billion in subsidies in 2010 and that those subsidies were extended through 2011 by Congress. Before we go all berserk on the Democrats, we should take note that the majority of Republicans voted for the extension. This is one issue that Democrats and Republicans seem to be fairly united on and on which they couldn’t be more wrong. I have been open with my desire to give the Republicans in Congress a chance to do what they were sent to do, but I have to wonder why their spending cuts did not include cutting ethanol and other farm subsidies. This line of thinking may not sit well with farmers, but I think it is a fact of life in this economic nightmare we are in that some things that seem to be sacred cows should be cut.
I have no desire to make it even harder on farmers to make a living, but the facts and realities of ethanol tell me it is time for a change. Small farms are nearly a thing of the past and according to Michael D. Tanner of the Cato Institute, it seems fairly obvious that cuts should be taking place.
And it is hard to see how anyone can claim to be a fiscal conservative while supporting $15 – 35 billion per year in government spending that largely goes to a group of people with incomes above the national average. Farm income for 2010 exceeded $92.5 billion. That’s a 34 percent increase from 2009, and — even if you subtract payments from the government — 28.8 percent above the previous ten-year average. While conservatives often mythologize small farms, most farm subsidies go to large and corporate farms. In fact, the largest 10 percent of recipients receive 73 percent of all subsidy payments.
I am not in favor of going after big business, but this is something that needs to be addressed. Again, I have to wonder why farm subsidies in general and ethanol subsidies in particular seem to be such a sacred cow? Why would we continue to subsidize something that is clearly not working the way it was touted and is costing billions of taxpayer dollars every year?
There is another reality of ethanol that needs to be addressed and it is one for which I have my own source. One of the older automotive technicians at the repair shop where I work has done extensive research into ethanol and it’s effectiveness. He tells me that in spite of what the ethanol lovers would like us to believe, it takes a larger amount of a higher octane ethanol to produce the same results you can get out of a lesser amount of a lower octane gasoline. In other words, it is simply not as efficient as gasoline, yet it is touted as being equal to or greater than gasoline. That simply is not the truth.
In ethanol, we have a food item that is being sold as a fuel and it does not produce the results they are claiming. It is driving up the cost of food by making it harder to buy corn for food, as it is mainly being used for fuel. That drives up the cost of several food items, including the beef cattle and hogs that do so well on corn. In the midst of all of that, we have a government that seems to be entrenched in the idea that they have to subsidize the product that is used to produce ethanol. Can you see where this is going? I think it is far past the time when ethanol should be examined closely for it’s benefits and the subsidies discontinued. The economic climate in the United States demands it.
Hat tip to Conservatives On Fire.
I think this is an important aspect of the budget that doesn’t get included in the discussion.
Keep this in mind: From Cato
The largest portion of the U.S. Department of Agriculture’s budget consists of food subsidies, not farm subsidies. Food subsidies will cost taxpayers $79 billion in fiscal 2009 and account for about two-thirds of USDA’s budget. The largest food subsidy programs are food stamps; the school breakfast and lunch programs; and the women, infants, and children (WIC) program. The federal government as a whole has about 26 food and nutrition programs operated by six different agencies.
The USDA’s food subsidy programs developed out of the need to dispose of farm production deemed surplus under commodity price support programs. Today, food subsidy programs are supported by farm interests, anti-poverty groups, and organizations of state and local program administrators. Farm and food subsidy programs provide both rural and urban legislators reasons to vote for increased USDA funding
I would agree. These subsidies may not be the biggest portion of the budget, that honor would go to entitlements, but it is certainly something that should be considered in any discussion of cutting spending. You raise some very good points.
I’ve written on the corn ethanol industry before, and I find it disturbing. Subsidies for corn ethanol aren’t just poor fiscal policy, they are also adding to food price inflation, as well as working distortions into the energy sector. I think of it as a miniature version of the housing bubble.
I remember you writing that post, Ted. I think it is far past the time when things like this need to be discussed honestly, not as some sacred cow that can not be touched.
Thanks for the hat tip, Larry. I agree with Coutry Thinker. Ethanol fuel is bad science and bad economics.
You are very welcome, Jim. Your post was the inspiration for me this morning.
Good post Larry. It would be very interesting to hear new Tea Party congressmen from farm states come out against farm supports. These are purely political gifts to important constituents and there is a quiet compact among all the states — we won’t go after your farm support interests if you won’t go after ours. Somebody needs to step in and the budget situation is a perfect opportunity. I’m not optimistic.
If they are to be honest about implementing real spending cuts, I think ethanol subsidies in particular and farm subsidies in general need to be looked at in a serious manner. Scratching each other’s back isn’t going to get the job done.
Ethanol is causing corn prices to rise which is causing everything food related to increase in price because corn is in everything we eat and drink. The farm lobby is very powerful and they spend a lot of money with both parties to maintain their subsidies. It needs to stop.
Indeed, the farm lobby is very powerful and they are often overlooked when we examine special interest groups.
Right on, LD. The whole ethanol thing is just a money pit that doesn’t help anyone but the big farms that get the bulk of the subsidies. I was about 75% done with a post/article on it myself back in December, initially hoping to get it done before the vote to extend. “Stuff” happened. I had a few other facts-n-figures and different emphasis than you, so maybe I should get back to it….
You should finish the post, Sirrahc. Glad to see you back around.
Enjoyed the discussion. Clearly I am opposed to the ethanol subsidies, and others who pin point certain companies for tax advantage as well as subsidies. Look forward to reading more on the topic.
I am suggesting that farming has some unique concerns.
You are right, farmers do face some unique challenges and concerns. I think there should be more written about this, as there is clearly more than what is just on the surface.
I agree Larry, this is another case of “feel good” legislation and the unintended consequesnces of it. We are using food as a means of energy and this creates more demand on corn. While that night be good for farmers it drives up the price of food, so any money that might be saved on energy is simply being spent by consumers on food. We still pay the same in our everyday expenses, the costs are simply being dispersed differently. We are not gaining anything from this.
You raise yet another good point, Steve. To start with, using food for fuel just seems wrong to me, especially with so many people going hungry, both here and abroad. Couple that with the rising cost of food because of the “shortage”, due to using said food for fuel, and we have a never ending cycle that does no good for anyone. The trouble is, so many people buy into the fiction that this is a good idea, if for no other reason that saving the environment. Then you have large agriculture companies jumping on the band wagon and the wheel just keeps turning and turning.
This is a complex issue, but we need to look at the Constitutional implications of these programs. Then, we need to look at their impact. Obviously, the ethanol thing is having some terrible consequences. Not just here, but all over the world. I have no desire to pay subsidies to gigantic agribusinesses. At the same time, I have no desire to harm family owned farms.
The ethanol scam! My cars and I know all about this one.
I didn’t know the following, however:
Ye, gods!