NPR’s “Morning Edition” has finally caught on to the ethanol boondoggle. It’s doing a three-part series on ethanol that started yesterday. And it gets into some of the real issues, especially relating to corn ethanol. CEI has been pointing out that the ethanol program involves a mandate setting the amount of ethanol that must be blended with gasoline, a tax credit that goes to blenders of ethanol, and a steep tariff on imported ethanol. (See CEI video, “The Insanity of Ethanol Policy.”)
NPR got this issue right:
The question is: Does it deserve a multibillion-dollar tax credit, on top of a tariff, on top of a huge and growing mandate to use it?
NPR’s second installment brought up the food vs. fuel issue, that is, all the incentives to grow corn for ethanol production are decreasing the supply of corn available for food and for feed and driving up those costs.
Here’s what a prominent agricultural economist said to NPR:
“I don’t see why we can really justify subsidies, when all that does is raises cost of producing food,” says economics professor Bruce Babcock, of Iowa State University.
Ethanol policies increase the cost of food at least 1.5 percent, Babcock says. And the impact on meat prices is significantly greater.
It’s economics 101, he says. Ethanol plants increase the demand for corn, driving up the prices for other buyers – like livestock producers. International demand is up, too – and we’re exporting more ethanol than ever before. Many grain farmers are seeing record incomes this year.
Yet how did policymakers deal with ethanol in the lame-duck Congress? In the omnibus tax bill, they voted to extend the ethanol tax credit and the tariff on ethanol imports for one year. Ducks and pork are a tasty treat for politicians.
HT: Iain Murray
What’s one of the easiest things to do in the lame duck session? Why, nothing — in relation to the 45-cents a gallon tax credit for ethanol and the 54-cents a gallon tariff on imported ethanol. Both are due to expire at year-end. It seems, though, that Congress is working its way to doing something, reauthorizing these programs that cost taxpayers $25-$30 billion over five years and hit consumers with higher prices at the gas tanks.
Right now there’s talk that the ethanol industry “would accept” a slightly lower subsidy. And the protectionism tariff on imported ethanol looks like it’s sacrosanct, even though President Obama has been preaching the benefits of trade in the wake of the finally agreed upon Korea-U.S. Free Trade Agreement.
Support for continuing the ethanol subsidy and tariff seems to be the “business as usual” state of affairs just a month after game-changing elections that will bring some avowed government cost-cutters to Congress in the next session. Even saving that $25-$30 billion in new deficit spending over five years doesn’t seem to affect this Congress. Right now, it still looks like special interests may trump the public interest, unless the lame ducks grow some backbone.
Have a listen here.
Myron Ebell, director of CEI’s Center for Energy and Environment, talks about the 2010 midterm election, what will happen in the lame-duck session, and the implications of two years of divided government. He also notes that members who supported policies such as cap-and-trade and the health care bill were walloped — a good sign going forward.
Major newspapers around the country including the Washington Post, the LA Times, and the Wall Street Journal are urging President-elect Barack Obama to pass the U.S.-Colombia Free Trade Agreement in the lame duck session. The Los Angeles Times said it bluntly, “It’s time to stop playing games with a trade pact whose economic and political benefits are good for both nations.”
Some reports of the meeting between the president-elect and President Bush said that the president had pushed for the trade agreement in exchange for support of the auto loan package, but that was denied.
CEI has strongly supported the passage of this agreement based on its own merits — it provides surety for continued liberalized trade for Colombia, it opens up Colombian markets to U.S. goods without high tariffs, and it helps cement the close relationship with a Latin American ally besieged by leftist neighboring governments.
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