Thursday, January 21, 2016

Ethanol in Iowa

I perked up when I heard that the governor of Iowa had come out strongly against Ted Cruz, but then slumped back when I heard the reason: because Cruz opposes the "renewable fuel standard" that forces all of us to buy gasoline mixed with ethanol from corn.

Let me say this for Cruz: he is the first free-market conservative not named Paul who has had the guts to stand up to the pressure exerted in Iowa over ethanol. It has always bugged me that Republicans regularly run as "free-market" conservatives but support this boondoggle. The original idea was to increase American energy independence by using corn instead of imported oil, and also to reduce air pollution. Both of these arguments are nonsense; the ethanol rule does nothing either to reduce reliance on imported oil or to make the air cleaner.

What the ethanol standard does do is put money in the pockets of corn farmers, especially in Iowa.

Ten years ago I scoffed at this subsidy, which I considered special interest profiteering at its worst. But thinking hard about inequality has made me wonder. I do know that these days more and more corn is grown by agribusiness corporations, who are the main beneficiaries of agricultural subsidies. But there are still lots of middle class farmers in the country, and lots of other people in small town America who depend on them. If something like the ethanol rule helps farmers by imposing what amounts to a tiny tax on the rest of us, is that a bad thing?

As I have said before, it now seems to me that a maximally efficient economy dispenses with millions of middle-class jobs. Maybe some sorts of inefficiencies help create the middle class. My job exists only because of a government requirement that libertarians would like to do away with, and this is true of millions of others.

The ethanol subsidy may still be a bad idea. But in my new frame of mind I would have to take a detailed look at how much of the money goes to farmers and how much to corporations before I would accept that conclusion.


G. Verloren said...

If the goal is to give small scale farmers and their small town economies some money, why require them to produce an effectively worthless crop in order to receive it? Why not subsidize something useful instead?

If we're concerned that helping small scale farmers overly benefits corporate megafarms, why not simply restructure the subsidies to only be available for small farmers and disqualify corporate interests?

John said...

Indeed our farm price supports are a foolish way to help farmers. But farmers hate anything that seems like "welfare." They say, "We don't want handouts, we just want a fair price." So what the government does is bid up or otherwise support the price, knowing that this subsidizes agribusiness corporations more than small farmers, because that is acceptable to farmers. It's hugely inefficient but we can afford it, so we do it.

Lots of people would prefer to find some way to help family farmers without subsidizing agribusiness, but that has turned out to be very hard in practice.

G. Verloren said...

Beggars can't be choosers.

If the only thing stopping farmers from taking "welfare" is their stubborn pride, why not let them fail? Once their money gets tight, I imagine those alternative "welfare" options will start to look a lot more attractive.

David said...

I for one would draw some comfort from a conservative who embraced ethanol subsidies. It shows the politician values negotiation and deal-making over intellectual consistency. Cruz, on the other hand, is a dangerous and rather frightening ideologue.

pootrsox said...

Excellent and revealing article about agribusiness and how it's destroying the watersheds and waterways of Iowa-- with some good commentary on ethanol-- in the current issue of Harpers Magazine (no, not Harpars Bazaar!).

leif said...

A cousin of mine in Minnesota happily changed his entire farming regime from a mix of sheep, sunflowers and wheat to straight corn because of the subsidies. He changed in his complaints against Monsanto and now buys their hybrids. He seems satisfied with the rearrangement, but monoculture never promotes healthy ecosystems. Not as if *any* modern farming has promoted healthy ecosystems, but it's even worse with millions of gallons of Roundup being sprayed on Bt corn.

Further, more energy is expended in producing ethanol than we get back from it. It is approximately 65% as energy-dense as gasoline, so one's fuel efficiency is lower with it than with pure gasoline.

Due to corn products being cheap, we also find it in all sorts of products, edible and otherwise, that never had it before the subsidies. It pervades our food- and waste-stream. Midwestern universities have entire programs dedicated to promoting corn -- new and different and more economically dense uses for it.

This simply entrenches us in a scheme that taxes everyone for the benefit of a few. I don't buy it.