To drive or to eat – Is that the question?

Ah, the Law of Unintended Consequences. It continues to trip up the federal government, bent on solving economic problems with political strategies. As mentioned in a previous column, the U.S. economy is not currently run on proven economic principles but on the law of politics, a strategy full of potholes.

Consider ethanol ”“ touted as the fuel of the future, (a concept driven by the power of the farm lobby and based on virtually no research), it has now proven to be the biggest boondoggle in recent memory.

We need to step back and look at the long history of the farm bill to understand how easy it was to opt into full-fledged federal support of corn ethanol as a way to free the nation from dependence on foreign oil. A simplistic notion if there ever was one, but included in more than one state-of-the-union address as the way to “kick the Saudis.”

The farm bill, which is renewed every five years, has just been passed by Congress. This was the year Congress was supposed to get a grip on one of the most extravagant and, one could say, ineffective bills ever devised by a political body. It didn”™t happen even though the interest in doing something about it was unusually high. Politics won the day again.

Evolution of the bill
Initially, farm aid was in response to the devastation of the Dust Bowl and the Great Depression. Called at the time a temporary solution to deal with an emergency, the farm bill has grown to include all manner of subsidies, including restoration projects to clean up the environmental messes created by this uncontrolled support.

The strange part about the bill is that it only supports four crops ”“ corn, wheat, soy and rice, only 39 percent of all farms. Farms that grow fresh fruits and vegetables get no support. By the way, the crops that are supported are the very ones that are contributing significantly to the obesity epidemic in the country ”“ an unintended consequence.

Even more disheartening is the fact that the 10 percent of the farmers who receive an average $34,190, walk off with 75 percent of the government largess. The bottom 80 percent of farmers get an average of $704, generally going to the family farms that are supposed to be the reason we have this bill. Bigger farms, in other words, agribusiness, get far bigger subsidies. An example: Rideland Foods Inc., the top recipient of farm subsidies, got $541 million in 1995. The current farm bill is $286 billion, meaning that every man, woman and child in the U.S. is paying $189 per year to support this monstrosity. The fact that all four subsidized crops are enjoying record returns does not stop the government generosity.

The farming industry jumped on the bandwagon when the administration chose corn ethanol as the preferred alternative fuel to achieve energy independence. The number of acres committed to growing corn grew exponentially as well as the number of ethanol plants that would process the crop. Almost immediately the world price of corn began to rise and those countries that depended on that crop as a staple began to feel pain. The famous scream from the tortilla market in Mexico was the first hint that there was a down-side to the ethanol market.

Soon after, feed-stocks for the cattle, hog and poultry market began to creep upward because of its heavy dependence on corn, causing another outcry. Soaring returns on corn and soy are tempting some farmers, eager to get the last dollar out of their land, to abandon their traditional rotation system, a basic farming principle. This is the route to degradation of the arability of the land. Another unintended consequence.

Full-fledged boondoggle
Meanwhile, the downside of the fuel itself has begun to surface. To be sure a gallon of ethanol laced gasoline (mostly 10 percent at this writing) does replace some fossil fuel but that is before you look at what ethanol really does in the tank of your car and how much fuel it takes to produce a gallon of ethanol back on the farm and what it takes to get that product to a refinery where it can be blended into gasoline and how much the U.S. government is subsidizing the oil companies for each gallon of ethanol they use. Add all that together and you have a full-fledged boondoggle, driven by politics, not sound science, technology or economics an all manner of unintended consequences.

Let”™s look at the real costs of the political solution to the nation”™s energy needs. Ethanol is less efficient in its energy potential than gas and therefore one must buy more gas just to go the same distance.

To grow the corn crop to produce a gallon of ethanol requires quantities of fertilizer, thus producing significant greenhouse gases and polluting ground water. Because of the acidity of pure ethanol it cannot be transported in pipes but must be delivered to refineries via trucks and rail cars. Freight capacity is approaching its limit and therefore trucks may well be the default transportation choice, further impacting air quality and congestion on the roads.

Finally the government pays 51 cents to the refineries for every gallon of ethanol they use in gasoline production which totaled $3.5 billion last year alone. This money could have been used for research and development for real solutions to the need to replace fossil fuels. The money could have been used to demand improved fuel efficiency in vehicles as well as used to resurrect our ailing national rail system, the solution global economies are following.

David Pimental, a leading Cornell University agricultural expert, concluded that “abusing our precious croplands to grow corn for an energy-inefficient process that yields low-grade automobile fuels amounts to unsustainable subsidized food burning.” The United Nations even labeled the use of food crops to make bio-fuels as “a crime against humanity.”
Further, the Organization for Economic Cooperation and Development says ethanol is a “cure for oil independence that is worse than the disease.” It is clear the rosy glow of ethanol as a panacea has blown away.

To be continued ”¦