American Elephants


Don’t Like Rising Food Prices? End the Ethanol Mandate. by The Elephant's Child
March 4, 2013, 6:57 am
Filed under: Capitalism, Economy, Energy, Environment | Tags: , ,

Your government at work— caused a few problems on January 1. First of all was the expiration of the payroll-tax cut . With the turn of the calendar, the take-home pay of the average American family dropped by $80 per month.

Then the IRS delayed the start of its tax refunds to January 31 from January 17. What is it about this administration? They can’t seem to meet their deadlines at all. The Senate has been unable to produce the budget required by law since April 29, 2009. Long time passing. The president’s budget proposal is also way past it’s legal due date. Secretary Sebelius is behind on due dates. If the people at the top do not believe statutory deadlines are important, then apparently nobody else does either. Don’t count on getting away with that with your income tax. Only works for the administration.

But these things have consequences.  Food prices are rising faster than overall inflation. Inflation is a hidden tax, especially when it hits essentials like food. Core inflation is running around 2%, but the Department of Agriculture predicts that food prices will climb at a 3% to 4% rate in 2013.  You’ve probably noticed all the things that are suddenly in thinner packages, or smaller packages. Items that were packaged by the pound (16 oz.) are now 12 oz.. at the same price.  Gas prices are up 30 cents a gallon so far, long before summer driving raises costs.

There is one step that the government could take that would certainly significantly end the rise in food costs. End the ethanol energy mandate. The ethanol mandate essentially pays farmers to grow fuel instead of food, and corn is integral to all the rest of the food production process. A rise in the price of corn results quickly in a rise in the cost of meat, poultry, dairy and soy products. Some 40 percent of the nation’s annual corn crop is directed into ethanol production.

Congress allowed direct ethanol subsidies to end in 2011, but the renewables standard remains, and it is the bigger factor by far. Even if we just partially relaxed the renewables standard, corn prices could drop by as much as 20 percent.

The idea that ethanol is a “cleaner” fuel has proven false, and it’s use does not reduce carbon dioxide emissions — but then it has become clear that carbon dioxide in the atmosphere is not causing global warming, so there is no reason for the mandate in any case. Carbon dioxide emissions have continued to increase,  but there has been no warming of the climate in 16 years. Another of those governmental “bright ideas” that didn’t prove out. Farmers, however like the higher prices brought from selling their corn for fuel, and farm state politicians like to please the farmers.

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6 Comments so far
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great read and true stop using food for fuel use water or hydrogen

Comment by bessex

but the Department of Agriculture predicts that food prices will climb at a 3% to 4% rate in 2010

Do you mean 2013?

… but then it has become clear that carbon dioxide in the atmosphere is not causing global warming, so there is no reason for the mandate in any case.

I disagree with the first part of your sentence, but in any case the mandate is not really about fighting greenhouse-gas emissions, nor has it really ever been. To Bush’s USDA appointees (with whom I debated the topic) it was about price support for farmers, rural jobs, and — incredibly — about reducing prices at the pump in rural areas. (Any economist, had one been asked, would have put paid to that notion.) To this administration, which appointed the former Governor of Iowa to run the USDA, for cripes sake, it is about Midwest votes, price support for farmers (which is now necessary in order to keep farmland prices at their record hights), and rural jobs.

Comment by Subsidy Eye

Yes, of course. Plain old typo that I didn’t catch. Thanks. You never seem to grasp that there is an underlying notion. Of course the motivating thing is farmers, price supports, and of course votes, but without the underlying international necessity of combating global warming, ending our “dependence on foreign oil” — all those myths that provide the big excuse, it wouldn’t have happened. They are not going to get a mandate to put half the corn crop in gas tanks and wreck everybody’s engines just to win Midwest votes. You need something much more noble.

Comment by The Elephant's Child

but without the underlying international necessity of combating global warming, ending our “dependence on foreign oil” — all those myths that provide the big excuse, it wouldn’t have happened.

No, I think you are missing the point: the federal government (and several states) have been supporting the ethanol industry since the late 1970s. That gave lots of time for a powerful lobby to develop. Yes, for awhile environmental groups supported ethanol because they believed the claims that it yielded cleaner emissions and that its use as a substitute for gasoline reduced GHG emissions. Perhaps that swayed a handful of votes in Congress. But the driving force (of those not only interested in the farm-level benefits) has always been the idea that ethanol could free the United States of dependence on foreign oil and, even beyond that, reduce prices at the pump.

Comment by Subsidy Eye

In any case, we all agree: end the ethanol (and biodiesel) mandate!

Regarding biodiesel, the other biofuel that was promoted by the 2007 EISA, the law of unintended consequences is iron. Basically, as a result of reinstating the US$ 1 per gallon blenders’ tax credit for biodiesel, countries that produce palm oil — mainly Malaysia and Indonesia, at the expense of rainforests — are licking their chops and expecting to export a lot of palm-oil-based biodiesel to the United States this year.

In short: our tax dollars will be helping to destroy the last redoubt of the orangutan.

Comment by Subsidy Eye

More news on the ethanol debacle:

http://www.nytimes.com/2013/09/15/business/wall-st-exploits-ethanol-credits-and-prices-spike.html?_r=0#!

(Congress should be blamed for this, not Wall Street.)

http://www.usatoday.com/story/money/business/2013/09/18/feds-allege-more-than-100m-biofuels-scam/2834487/

Fraud? Associated with a subsidy program? What a surprise!

Comment by Subsidy Eye




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