Death to Ethanol Subsidies

The Iowa caucuses are only a few days away, and interestingly, the tax subsidy for ethanol production steep import tariffs are about to expire about the same time. I have inveighed against the evils of these subsidies for some time. Seeing their expiration is a cause for rejoicing, and evidence that we can win victories against entrenched special interests. Unfortunately, there is still a federal law on the books that requires the use of ethanol in gasoline. H/T WSJ.

It's also great to see that ethanol hasn't become a burning issue in the Iowa caucuses; perhaps because of the near universal condemnation the whole program is receiving. No matter, time to start taking on other formerly sacred cows of government subsidy. Anyone up for removing the home mortgage subsidy next?

Makes more sense than paying to convert it to ethanol.

The End for Ethanol?

Proof that democracy can work:

Senate negotiators on Thursday announced a final deal that would end a 45-cent-per-gallon tax credit for ethanol.

I have railed against ethanol subsidies on this blog for some time, even considering somewhat of a litmus test for Republican Presidential hopefuls. However, the news isn't all good:

[the agreement] uses $668 million to support renewable energy efforts such as blender pumps that distribute ethanol, storage tanks for ethanol, plug-ins for electric cars, natural gas development and efforts to produce ethanol from sources other than corn.

News flash senators, far more efficient ways to produce ethanol include switchgrass and sugar cane. But those forms of production don't benefit farmers in Iowa. However, if this gets into law, and its looking good, this is a great day for democracy, where we start to role back subsidies based solely on political expediency.

The WSJ opined yesterday that the Republicans should cave on "corporate tax breaks" like corporate jets in return for a lower tax on business profits. I happen to agree. A simplified tax code has the following beneficial effects:

• Reduces spending on lobbying efforts.
• Stimulates growth by removing government from directing investment.
• Removes tax attorneys as a profit center in big businesses, increasing profits for real, and again stimulating growth.
• Actually raises more revenue due to fewer loopholes.

The Insanity of Ethanol

Makes more sense than paying to convert it to ethanol.

I am waiting for a Republican candidate to renounce ethanol tax breaks and subsidies. In the meantime, I reiterate the shear insanity of the policy of burning food as a motor vehicle fuel. I have made many of these arguments before. The insanity of our current policy of providing tax incentives to turn corn into ethanol are many:

1. Ethanol yields 30% less energy per gallon than gasoline, so it harms fuel efficiency.
2. It is not clear whether or not the production of ethanol actually produces more energy than it consumes. Regardless, it produces less energy than drilling for oil.
   
3. It is heavily subsidized. That means the free market has determined that ethanol is not an efficient way to produce fuel for vehicles. Subsidies are almost always a waste of taxpayer dollars, ethanol is no exception.
   
4. Ethanol subsidies increase the price of corn, which in turn increases the price of meats. Essentially, we are burning food and driving up its price. World food prices are rising, increasing starvation. Ethanol has been fingered. This is a moral issue as well.
5. Ethanol isn't good for the car engine of the most fuel efficient car in my family. So any purported benefit is mitigated by the damage it does to fuel efficient vehicles.
6. Corn is not the most efficient way to produce ethanol. Switchgrass is more efficient.
7. Drilling for domestic oil reserves would reduce dependency on foreign oil far more effectively than ethanol subsidies. The foreign oil dependency argument is the favorite one advanced by conservatives.
8. And lest we not forget, conversion of farmland to subsidized corn production crowds out barley production, raising the price of beer.
   

More expensive, thanks to Iowans.

The only reasonable explanation for the continuation of the policy is that it favors Iowa, which holds the first test of Presidential electoral strength due to its first in the nation caucuses held in January of each election cycle. Who will be the candidate of principle to announce his or her disdain for ethanol in Des Moines?

Mitch Daniels Fails Ethanol Test

I previously posted with some gusto about Mitch Daniels, endorsing him as a potential candidate. I have also said that ethanol should be a litmus test for Presidential candidates. Sadly, I find that Mitch Daniels has been a big supporter of ethanol.

The production and transportation of ethanol uses more energy than ethanol yields. State and Federal ethanol subsidies cost American taxpayers billions, while increasing the price of fuel at the pump and lowering the mileage of consumers' vehicles.
. . .
Mitch Daniels is a forthright defender; since he became Governor of Indiana, the number of ethanol plants in his state have risen from one to thirteen and he set a goal of producing 1 billion gallons of the stuff.

This is a big problem with litmus tests, because Daniels does so well in other ways. If he were to move against ethanol in a meaningful way before the Iowa caucuses, I could support him. Right now I'm not sure.

Makes more sense than paying to convert it to ethanol.