Corn subsidizes for ethanol are one of the most ridiculous examples of government intervention causing unintended consequences. Iowa is the largest producer of corn in the country. It is also where the presidential primary season begins. Of course this is all connected.  According to Steven Rattner:

In a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.

But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.

Corn is hardly some minor agricultural product for breakfast cereal. It’s America’s largest crop, dwarfing wheat and soybeans. . . .

To ease the pain, Congress threw in a 45-cents-a-gallon subsidy ($6 billion a year); to add another layer of protection, it imposed a tariff on imported ethanol of 54 cents a gallon. That successfully shut off cheap imports, produced more efficiently from sugar cane, principally from Brazil.

Here is perhaps the most incredible part: Because of the subsidy, ethanol became cheaper than gasoline, and so we sent 397 million gallons of ethanol overseas last year. America is simultaneously importing costly foreign oil and subsidizing the export of its equivalent.

That’s not all. Ethanol packs less punch than gasoline and uses considerable energy in its production process. All told, each gallon of gasoline that is displaced costs the Treasury $1.78 in subsidies and lost tax revenue.

Read the rest here.

Comments

  • Whodat

    Burning our food.
    Means less food for all
    At much higher prices;
    Makes no sense, y’all.

  • Troy La Mana

    BTW: You can cut another 1/4 inch off the right column.

  • Edgar Harris

    I’m all for sustainable and environmentally friendly sources of energy, but corn ethonal is neither of those. On top of needlessly hogging precious resources such a fresh water, corn ethonal has also led to massive deforestation in Brazil. This is because the U.S. has diverted much our natural resources to the production of ethonal and away from food production. This has provided a huge opportunity in food production for Brazil that can only be seized upon by chopping down rain forests. Any green house benefits that could result from ethonal are more than offset by deforestation; since dead trees emit a lot of carbon dioxide.

  • JE

    And don’t forget, the government has, for many years, paid farmers to take land out of production through CRP programs (decreasing the amount of corn produced). In addition, the government has bought thousands upon thousands of acres of farmland for “conservation”, taking it out of production and out of the tax base, turning it in to refuges and wetlands and spending money to pay for ‘conservation agents’ to watch over and manage it.
    The most frightening words in the english language “We are from the government and we are here to help.”

  • Promise Kept

    One estimate I’ve read went through all the conflicting data, to give ethanol’s cost bottom line at $30.00 for every dollar’s worth produced!

    No wonder most politicians endorse this approach to meeting our energy needs. It matches their efficiency standards predictably well.

    Here’s an analysis that I found helpful at better explaining Iowa and the Midwest’s, fuel vs food politics:

    http://www.cato.org/pubs/pas/pa-241.html

  • Troy La Mana

    Not to mention the fact that corn is one of the poorest crops to use for Ethanol. There should be a major push to grow sugarcane in Hawaii, Louisiana and Florida.