End the Subsidy for Ethanol
Next month, members of a House-Senate conference committee are to review the 1998 federal transportation bill; it’s their last chance to dump some truly indefensible pork-barrel projects. They’ll find no better target than the $700 million a year intended to encourage U.S. corn growers to produce ethanol.
The renewal of the subsidy for ethanol, a form of alcohol distilled from corn and mixed with gasoline as an automobile fuel, sailed through both houses of Congress. It was propelled by support from presidential aspirants, including Vice President Al Gore, who don’t want to lose farm state votes, and by mammoth campaign contributions from ethanol producers like Archer Daniels Midland Corp. Now, however, a backlash against the subsidy is developing, led by House Ways and Means Chairman Bill Archer (R-Texas) and Sen. John McCain (R-Ariz.). They are bolstered by recent reports that demolish arguments used to support ethanol subsidies since they began in 1978:
* It’s good for the environment. The Environmental Protection Agency did once promote ethanol, but now says “the global-warming effects of using ethanol are likely to be no better than, and could be worse than, those of using conventional gasoline.” Similarly, a 1997 Government Accounting Office report says, “ethanol tax incentives have had little effect on the environment.”
* It’s essential to national security. While supporters claim that ethanol reduces U.S. reliance on foreign oil, imports now account for a greater percentage of total U.S. petroleum consumption than in 1978. According to the GAO report, ethanol incentives “have not significantly enhanced U.S. energy security.”
* It will help farmers. Actually, the subsidies discourage the innovation and crop variation that a true market economy requires. For example, the ethanol industry argues that because U.S. corn growers are about to plant their largest crop in 13 years, “huge corn surpluses” will have to be stored “at high cost to the federal government” unless the surpluses are used--you guessed it--to make ethanol. Agribusiness leaders, insulated by decades of subsidies, have lost touch with common sense, like planting to meet expected demand.
The era of protectionist corporate welfare should be over. Former welfare recipients, downsized defense workers and other Americans are dealing with the market economy. Congress should get with the times and end the ethanol subsidy.