Wednesday, January 9, 2008

Goldwater Institute: Subsidies Fuel Ethanol Craze

Policymakers should end ethanol subsidies by the next Iowa Caucus?

By Tom Patterson

Now that the Iowa caucuses are over, can we finally have a sensible discussion about the federal government's obsession with ethanol?

Weirdness seems to be taking over the minds of normally sane people when candidates including Rudy Giuliani and Mitt Romney claim to believe that agricultural subsidies are necessary for "food security." Are markets so wildly inefficient that unless government pays the farmers, they will quit producing food and we'll all go hungry?

Washington politicians are so enthused about ethanol they not only subsidize it 51 cents a gallon, they impose a 54 cents per gallon tariff on imported ethanol and a mandate to burn 7.5 billion gallons per year by 2012, with a near-term goal of 15 billion. Ethanol refiners get tax credits, investors in ethanol plants can have their loans guaranteed and some producers get direct subsidies.

But virtually every claimed benefit (except the political ones) for ethanol is bogus. According to Robert Hahn, the former co-chair of the U.S. Alternative Fuels Council, if all the corn produced in the U.S. were devoted to distilling ethanol, the fuel produced would supply just 12 percent of today's gasoline demand. Corn can't possibly be the answer to energy independence.

The next Iowa caucuses are four years away. This is a window of opportunity in the election cycle. Let's ax the whole ethanol mess. Even Iowa would be better off.

Tom Patterson is chairman of the Goldwater Institute, a former state legislator and emergency room physician. A longer version of this article originally appeared in the East Valley Tribune.

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