Tuesday, December 01, 2015

Ethanol was a bad idea from the start

Ethanol was a terrible idea when the original law was pushed through Congress, and even worse now.

This isn’t some minor market dislocation; there is significant economic impact to the food supply. It isn’t economically viable to produce, and doesn’t make us measurably more oil independent. It isn’t even environmentally sound, as the production process more than offsets any pollution savings when burned in cars.

Yet, since food and energy are not factored into inflation computations, the lobbies will continue to claim, with straight faces, that the concerns regarding ethanol mandates are unfounded.

Let’s face it the idea of burning corn instead of petroleum never will make us independent from foreign oil. Besides we’ve got the oil to become energy independent.

Ethanol is not the panacea that environmentalists sold us on. Here are some important facts that you need to know about ethanol:

1. It’s a powerful solvent with an alcohol base, derived from bio-mass (mainly corn in the U.S.).

2. Requires more energy (and water) to produce it than the energy it delivers in a gasoline engine and is harmful to small engines and marine power plants.

3. Reduces overall mileage because of its lower energy density compared to gasoline.

4. It would have been a better plan to generate bio-fuel for diesel engines from waste rather than steal from the food supply. But we all know how the lobbyists win in Washington — now we’re stuck with it.

Incidentally, you can still get ethanol-free gasoline in the United States, but it’s mostly sold in premium grades and at a premium plus price. For those of you running small gas-powered equipment, it might be better for that equipment to get the ethanol-free gas next time.

Ethanol is one more example of how well meaning programs become monsters once enacted into legislation. The reason is simple: a constituency develops in support of the program, and in support of its enlargement.

This constituency includes the private sector actors who benefit from the program–in this case corn farmers and processors. Legislators who originally backed the program, or who sit on the Congressional committees that defend them, are also part of the conspiracy–especially if they have home state interests who benefit. Bureaucrats are a quiet and unsung part of the cabal; they spend their 9-to-5 waking hours seeking to find every possible beneficiary of the program in all 50 states, inexorably driving program expansion.

Not to be overlooked are the community activists who trumpet the benefits of the program to ________ (special interest constituency here). If that constituency is some disadvantaged group behind which everybody can hide, all the better. Then they can all look noble while lining their pockets–producers, community activists funded by producers and do-gooders, lobbyists, Congresspeople, and bureaucrats with nice salaries and great benefits.

Let’s not forget the media that serves as a mouthpiece for government expansionism. It’s hard to understand why people of mediocre talents, in mediocre careers, with mediocre salaries would so fervently support the perpetual expansion of government. Chalk that one up to envy for their private sector peers who are doing better than they are.

Government spending programs are mostly support by narrow constituencies, not the majority of citizens. A special interest group drums up a problem or a scare–let’s pick global warming. They also drum up answers–let’s pick ethanol to replace gasoline.

Then a constituency lines up behind the solution which merges big city liberals who want to stop industrial progress by reducing carbon energy, and farm belt conservatives whose campaign contributions depend on farmers and agribusiness that benefits to the tune of tens of billions of dollars annually through ethanol mandates and crop subsidies.

This is what you get when you argue for “bipartisanship.” Farm Belt Republicans and big city environmental Democrats work together in Congress, supported by bureaucracies and lobbyists, to increase spending and defeat any attempts at reform.

This alliance of Congresspeople trades with other alliances of Congresspeople on other programs so that everybody gets to bring home some bacon to the folks at home. Defense spending. Green manufacturing. Food stamps. It’s all about trading and buying off opposition.

This is not governing. This is not supported by a majority. This is using taxpayer dollars to buy votes and remain in office. It’s corruption.

Ethanol mandates are one more way that “greens” use the coercive power of the federal government to enforce their ideology, with no scientific backing and much unintended consequence.

Here’s the “logic.” Let’s take a food crop that uses a lot of water, and make expensive fuel for our cars with it. Then let’s force businesses to blend it into gasoline. Let’s also subsidize farmers with federal dollars.

Let’s ignore the unintended consequence of higher food prices, because we need to bribe farm state Congresspeople to get them to go along with our big-city welfare policies.

The American people? Well, a few of them will benefit. What’s the big deal?

The fact that consumers are now being punished for being more fuel-efficient shows that the forced Ethanol blend never really was about saving the world or the climate or whatever else it officially was supposed to do.

We all know the liberals want to raise the price of gasoline, but doing it at the expense of raising the price of food really tells you something.

Progressivism makes the rich richer, the working class poorer, and the government more powerful. Here is just another example.

Another example of a dysfunctional government program. The imposition of ethanol on the American public, supposedly to ween us off foreign petroleum imports is quite misleading. With a 10% blend of ethanol, the average car loses about 25% on itsy mileage since energy density of the blend is less than gasoline. So we pump more fuel at higher cost because our mileage has gone down significantly.

When you factor in the higher food prices due to less corn for feed and other food-chain uses, the ethanol sham only makes everything more expensive.

You know that there’s an ethanol lobby forcing this down our throat while Obama gets tree hugger credits from his base for standing up against the pipeline. And, let us not forget the penchant by Obama to keep petroleum-based products expensive so that electric cars can attempt to compete.

We are being hosed no matter which way we turn.

This should be Exhibit A for those who place great faith in the ability of government to micro-manage commercial activity even if motivated only by good intentions. There is hardly anyone who now believes that corn-based ethanol should have any place in our gasoline supply.

So why does it live on? Worse still, why are there mandates to increase its presence?

The answer of course is commercial interests have captured the political/regulatory process as oftentimes happens. So now, we the people, not just in the U.S. but elsewhere in the world as well, have to bear the cost of an implicit subsidy to a narrow commercial interest. It stinks to high heaven.

So here is a program with little or no popular support that can’t be killed. What chance to do we have to kill any legislation/regulation that makes little economic sense as long as there is some interest, somewhere, that wants it to live on?

Warren Buffet famously has said, “Only buy the shares of a company that any fool can run, because ultimately it will be run by one.” The lesson here is never begin a government program that has the possibility of being corrupted, because ultimately it will be.

No comments:

Post a Comment