The Maryland Public Policy Institute
AUGUST 1, 2012
There’s a drought and corn prices are heading up as a result. However, there’s another reason corn prices are high -- federal ethanol policy. This ethanol policy helps corn farmers but hurts many other agricultural producers. The poultry farmers in Maryland are asking the EPA to waive the policy, and Sen. Ben Cardin has introduced legislation to help alleviate the problems caused by the ethanol programs. The current problem being caused by these ethanol mandates and subsidies is yet another example of why the government needs to get out of the ethanol business and why corporate welfare and government protectionism are bad for our economy.
Bill Satterfield, executive director of the Delmarva Poultry Industry, makes a good point when he says, “The future of farm families that grow chicken and the livelihood of a lot of other people is at risk because of the higher corn prices and in part because of the federal mandate. If ethanol producers want to go to the free market and buy corn to produce ethanol, good for them. But when there is a federal government mandate that creates an unlevel playing field, then the federal government ends up picking winners and losers.”
The ethanol mandate is supposedly about helping the environment. Ethanol, the story goes, is a more environmentally-friendly fuel than oil. In reality, however, ethanol subsidies were always primarily about providing another form of corporate welfare to farmers. It was farm state senators from both parties (many of whom were hardly champions of the environment) who championed ethanol subsidies. Any environmental benefits were secondary to the benefits given to corn growers.
At the time when ethanol subsidies began, there was a plausible case to be made that this fuel helped the environment. However, after years of study it’s clear that ethanol’s environmental benefits are vastly overstated. In fact, it’s likely that ethanol production actually harms the environment. In short, there are no green reasons to support ethanol.
The desire to help farmers is a laudable one. I come from a farm family and I know that we need farmers. But doing so through government programs is bad for taxpayers and bad for our economy. This particular ethanol subsidy is an excellent example of this.
In an attempt to help corn farmers, the government subsidizes ethanol production. This drives up the price of corn, something that corn farmers like but something that hurts chicken and beef farmers. So to help one part of the agricultural sector, the federal government is hurting another part of the agricultural sector.
This is the pattern of most government intervention in the economy. It enacts a policy to help one group of businesses, but then a variety of other businesses are hurt. For instance, in the early 2000s, George W. Bush took steps to boost the ailing U.S. steel industry. This industry benefited, but the American companies that relied on steel were hurt because the price of steel was made artificially high by government fiat. Steel jobs were protected but construction jobs were destroyed.
Ending the various federal programs that prop up the ethanol industry would not only save us tax dollars it would help our economy. Farmers would not be bribed into overproducing corn. Corn prices would be lower, helping out poultry farmers and ranchers. The environment would be cleaner. Food prices would be lower.
Unfortunately, ending federal ethanol supports is unlikely to happen any time soon. The farm lobby is strong and they support these corporate welfare schemes. And because of that, we’ll all suffer.
why is it asking to much to just get people in office that have a little common sense, and that really care about our country!
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