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National ethanol intoxication stays at DWI levels for another year at least

Michael O'Hare, professor of public policy | January 4, 2011

Bob Dineen, chief flack for the US biofuels industry, is delighted with the extension of the ethanol and biodiesel tax credits that ex-Illinois senator Obama didn’t filter out of the tax compromise back in December.  No, the Brazilians aren’t going to be relieved of the import duty that’s preventing us from using the one biofuel (their sugar cane ethanol) that may be genuinely green.  Dineen’s remarks included the following notable admission about the credit: “It is the foundation upon which this industry was built.”  In other words, after twenty years of trying to make it a business, fuel ethanol from corn is a losing proposition that destroys value rather than creating it, and can only be sustained by reaching into the pockets of taxpayers for $6B a year, or about one in every seven dollars of all corn sales.  On top of the $4B in plain old corn subsidies.  It’s payable to those “family farmers” whose average operation in Illinois (for example) is worth $1.5m just for the land, and the nice folks at Archer Daniels Midland, Cargill, and the like. Average farm household income, by the way, is about 15% higher than the US average.

There are losing businesses that should be subsidized with public money, like education, parks, public transit, policing, and the military.  They are called market failures.  But there is no market  failure associated with growing corn and making automotive bourbon out of it, except the negative externalities like the dead zone in the Gulf of Mexico created by fertilizer runoff into the Mississippi, which should occasion a tax, not a credit.  The Investor’s Business Daily deplores the credit extension, but you know what kind of  commie lefty rag IBD is.

Cross-posted from blog site The Reality-Based Community.

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