American Elephants


Michael Ramirez Takes on the “Green” Economy. by The Elephant's Child

Michael Ramirez always has an appropriate comment on the political affairs of the day.  You can see all of his cartoons at Investors.com.  I stand in awe of his talent.



The Budget, The Deficit, Corn, Oil and Elementary Arithmetic. by The Elephant's Child

In his State of the Union speech in January, President Obama said “We can break our dependence on oil with biofuels.” Corn ethanol is not one of your 21st Century innovations.  Henry Ford built his first automobile, the quadricycle, to run on pure ethanol.  It’s been around for a very long time.

The Energy Policy Act of 1992 was passed by Congress to “reduce our nation’s dependence on imported petroleum by requiring certain fleets to acquire alternative fuel vehicles which are capable of operating on nonpetroleum fuels.” Several Acts in the meantime ratcheted it up and in 1995, the EPA began requiring the use of reformulated gasoline year round in metropolitan areas subject to smog.  September 2006, the Renewable Fuel Standard Program was signed, designed to double the use of ethanol and biodiesel by 2012.

Billions in subsidies for corn ethanol haven’t cut our oil imports.  This year 40 percent of the nations corn crop will be consumed for ethanol production.  The quantity of grain — 4.9 billion bushels — is more than twice as much as all the corn produced in Brazil and more than six times as much as is grown in India.  More corn than the output of the European Union, Mexico, Argentina and India combined.  Ethanol producers claim that their sector has a negligible  effect on grain prices, but soaring food prices have led to the violent protests across northern Africa.  There have been food riots in many developing countries. Rising prices for corn always lead to rising prices for wheat as well. The idea that 40% of our corn crop has no effect of food prices is absurd. !

A Rand Corp. study in 2008 warned that diverting corn to ethanol production was bad economics and a security threat.  The OECD projects that global grain prices are likely to be as much as 40 percent higher by 2020 — a disaster for areas where people live on only one or two dollars a day, or less. Bill Clinton said “We have to become energy independent, but we don’t want to do it at the expense of food riots,” to an agricultural conference on Thursday.

The chaos in Libya and unrest in the other oil-producing states has led some analysts to predict unprecedented oil-price spikes.  So right now is a really terrible time for the Obama administration to be discouraging the domestic production of oil and natural gas.  Drilling in the Gulf of Mexico is on hold in spite of the Obama administration being held in contempt of court, and court orders to start drilling within 30 days. The Eastern Gulf, Atlantic , Pacific and Alaskan coasts have all been put out of reach for 7 years.

So the Obama administration wants to stop “subsidizing yesterday’s energy” so that the government can appear to be boosting revenues and cutting back on wasteful expenditures.  The taxpayer’s bill for all “subsidies” is around $4.4 billion.  Studies show that eliminating these deductions could result in an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.

The Congressional Budget Office (CBO) reports that the cost to taxpayers for using corn ethanol to reduce gasoline consumption by one gallon is $1.78.   This year the corn ethanol sector will turn out about 13.8 billion gallons of ethanol — the energy equivalent of about 9.4 billion gallons of gas.  According to the CBO’s numbers, the cost of the ethanol boondoggle will be about $ 16.2 billion — in exchange for cutting $4.4 billion .  According to energy expert Robert Bryce:

So annual ethanol subsidies are nearly four times as great as those provided for oil and gas, even though domestic drilling provides about 36 times as much energy to the U.S. economy.  Per unit of energy produced, the tax preferences given to corn ethanol are 130 times as great as those given to oil and gas.

Do you suppose that this is the reason why President Obama has never released any of his school records?  Did he flunk basic arithmetic?  The evidence that someone in the White House is mathematically illiterate is piling up.




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