Time To Kill Ethanol Subsidies
Posted 06:48 PM ET
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=569631&p=1
Big Government: If Washington is truly serious about cutting the nation's mounting debt, there's one way to show it: Eliminate the ridiculously expensive and wasteful ethanol subsidy.
There are few products in the U.S. that are as heavily promoted, subsidized and protected by the federal government as ethanol.
First, the feds have since 2005 required the use of ethanol in gasoline — 12 billion gallons of the stuff this year, rising to as much as 36 billion by 2022.
Then, ethanol gets a 45-cents-per-gallon subsidy when blended into gasoline.
And then, to protect the domestic ethanol market, the government slaps a 54-cents-a-gallon tariff on imported ethanol.
According to news accounts, a "growing number" of lawmakers looking for ways to close the yawning budget gap are now looking at one part of this ugly picture: the $6 billion in tax credits given to ethanol producers each year.
That's the least they should do. After all, the tax credit is just the most obvious cost of the federal government's love affair with corn-based fuel.
Force-feeding ethanol also pushes up food costs as demand for corn — and its prices — skyrockets.
Today, nearly a quarter of all the corn grown feeds cars instead of people. A Congressional Budget Office report blamed ethanol for up to 15% of the rise in food prices in 2007 and 2008.
Not only does this hit family budgets, it also raises the cost of government food and nutrition programs by close to $1 billion a year, the CBO found.
The ethanol push also costs drivers, since the fuel delivers fewer miles per gallon than gasoline and causes additional wear and tear on cars.
To make matters worse, the renewable fuel has failed to live up to any of the boasts made about it over the past 30 years.
• It hasn't cut imports. Adding ethanol into the fuel supply chain was supposed to reduce our reliance on foreign oil, which on the surface makes sense since ethanol is literally a homegrown energy source. But as the Manhattan Institute found, this "has no basis in fact." Over the past decade, ethanol production climbed sevenfold and oil imports increased by more than 800,000 barrels per day.
• It hasn't kept gasoline prices down. Just check the nearest gas station if you think ethanol is doing anything to hold down pump prices.
• It doesn't cut air pollution. In fact, a study in Environmental Science & Technology concluded that ethanol can make the nation's smog problem worse and that its expanded use "may be a greater overall public health risk than gasoline."
• It may add to greenhouse gas emissions: A study in Science a few years ago found that widespread use of ethanol "will probably exacerbate global warming" when everything involved in its production is taken into account.
Indeed, just about the only thing the ethanol subsidy has going for it is that it's managed to unite an enormous range of opponents.
As the Competitive Enterprise Institute's Brian McGraw put it, everyone from "academics, environmental organizations, libertarian organizations, editorial boards across the country, and dozens of other groups" now oppose the ethanol tax credits.
Even Al Gore has said the "massive subsidies" for ethanol are "not a good policy."
Which leads to the question: If it's so universally despised, why is the subsidy so impossible to get rid of? Congress had the chance last year to kill the tax credit, but instead renewed it for another year.
The simple answer is money.
A Center for Responsive Politics report out this year found that 15 senators — Republicans and Democrats alike — who signed a letter demanding an extension of the ethanol tax credit had "received notable campaign contributions during the past six years from pro-ethanol companies and interest groups."
At a time when the country faces massive deficits and a looming debt crisis, these lawmakers need to decide whom they serve — the corn lobby or the nation.
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