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Obama’s EPA Continues Handouts for Rich Ethanol Farmers on the Backs of Consumers

By: Daniel Horowitz (Diary)  |  November 16th, 2012 at 01:32 PM  | 

RESIZE: AAA

Nothing exemplifies the failure of Republicans to communicate more than the exit polling data regarding the public’s perception of the cost of living.  A whopping 37% of voters selected ‘rising prices’ as their most important issue in the election, yet amazingly, they split their votes evenly between Romney and Obama.  Hence, the arsonist behind the high prices for food, fuel, healthcare, and every other vital product and service affected by his tax and regulatory regime, was regarded as the firefighter by half the electorate.

The single most regressive market-distorting policy to ever emanate from Washington is the absurd tendentious treatment of ethanol.  Over the past decade, ethanol has been the poster child for the worst aspects of big-government crony capitalism.  The ethanol industry has used the fist of government to mandate that fuel blenders use their product, to subsidize their production with refundable tax credits, and to impose tariffs on more efficient sugar-based ethanol from Brazil.  These policies have distorted the market for corn to such a degree that 44% of all corn grown in the country is diverted towards motor fuel blends.  If we would literally flush half the corn harvest down the toilet, we would be better off than using it to make our motor fuel less efficient.

Now, consumers are stuck with higher food and fuel prices, while rich farmers enjoy the favors of free legislation forcing people to buy their odious product.  Although the subsidy has expired, the Renewable Fuels Standard (RFS), which requires that 10% of all fuel be mixed with ethanol, is still in effect.  There is no worse tyranny than using the power of the law to coerce citizens into purchasing an ineffectual product that costs more, and in turn, drives up the cost of everything else along the food chain.

Over the summer, the ethanol debate reached a new tipping point when the severe drought in the heartland destroyed much of the corn crop.  At that point, even the obdurate knuckleheads in Washington began to wake up to the reality of the ethanol boondoggle.  A bipartisan group of 156 representatives, 8 governors, and 25 senators petitioned the EPA to temporarily waive the ethanol mandate in the Renewable Fuels Standard until we recover from the drought.  After dragging their feet for months, the EPA announced today that they have no intention on suspending the mandate for even one day.

Folks, this is the regressiveness of the progressives on display for everyone to see.  The same man who rails against tax cuts for those who pay the most in taxes, has no problem forcing all American consumers to subsidize a boondoggle for the rich.  I have a novel idea, Mr. President.  Let’s not steal money from the rich, but let’s not subsidize them either; let’s not subsidize the poor and working class, but let’s not create the need for the subsidy in the first place.

There is a fierce debate taking place about the source of the GOP electoral loss this November.  Many people are questioning how we can win when so many people are offered handouts from the government, irrespective of how eloquently we defend free markets and limited government.  However, the real key to success is to find candidates who will complete their sentences and articulate to the American people how and why the cost of living has gone up.  We need candidates who will harness issues like ethanol and hang them around the necks of the regressive progressives.  This is a teachable moment for the average American, and it is ripe for anyone to come along and seize.  These are the bread and butter issues that edify government interventions at their worst and how they engender the need for subsidization.  We need to tell the American people that we will not subsidize them, but we will eliminate the policies that precipitate the need for those subsidies.

It’s not too late to begin our message of free market populism by hanging crony capitalism around Obama’s neck and passing a full repeal of the ethanol mandate in the House.  That will change the entire trajectory of the debate over poverty, taxes, and the role of government.  It is definitely superior to passing a special interest farm bill that is chock full of handouts for rich farmers.

Challenge your representatives to submit a bill that will repeal the ethanol mandate and begin rehabilitating the image of the Republican Party as the party that stands with individual liberty over Obama cronyism.

Cross-posted from The Madison Project

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  • Pingback: Obama’s EPA Continues Handouts for Rich Ethanol Farmers on the Backs of Consumers

  • http://madisonproject.com/ Daniel Horowitz

    Most farmers are hard workers and actually part of our conservative coalition. But the ethanol lobby is insidious.

  • Pingback: Obama’s EPA Continues Handouts for Rich Ethanol Farmers on the Backs of ConsumersPolitifreak

  • Michael M. Keohane

    Rich & Farmer may be exclusive terms. However, even if the correct terms were Poor & Farmer, the policy is terrible economics but good politics. That is why it is government policy.

  • Jim_Riggs

    Lots of good points and very well written. :)

  • Pingback: » Obama's EPA Continues Handouts for Rich Ethanol … – RedState

  • dsmurf

    its unfortunate that ethanol isn’t seen as counterproductive to improved CAFE standards. Higher ethanol percentages yields the lower the Octane rating the lower the mileage per gallon. Ethanol is a great degreaser, fuel not so much.

  • amdgwalking

    At last a topic to which I can add some information.
    I am in fact a third generation “ditch digger” and can assure you that the US Dept of Agriculture through its Natural Resource Conservation Service arm (formerly the Soil Conservation Service) does offer subsidies of 50%, 75% and up to 90% for the cost of irrigation ditches through its EQIP (I’ve lost track of what this stands for) program. This is in the Arizona and Southern California zones, I’m not familiar with what it does for your ditches in other areas. Basically, in exchange for some erosion protection and other guarantees to Uncle Sam, the farmer receives reimbursement for improvements including concrete lined irrigation ditches. As far as I know, these subsidies are national in extent and so I ASSUME that farmers in other regions receive payments for improvements to their farms, as suited to the geography/environment of the land.
    Unfortunately, feeding from the federal trough may alter one’s political outlook, and most farmers I have spoken to overwhelmingly favor ag subsidies, though on many other issues we share common ground. I would also add that the Contractor’s Association to which I belong is frantically looking for bond and other public money all of the time.
    As for rich farmers, well, who is the farmer? Is it the person working the land or the one owning it? Yes, they are the same person some of the time, but corporations with tight ties to Washington possess the majority of the acreage across our great land. Mr. Horowitz is correct in as far as these “rich farmers” are benefitting from the subsidies, but he could have accused Archer Daniels Midland Co.(the processors making the ethanol) as probably the fattest hog at this particular trough.
    I have no illusion that my business, which has shrunk some 60% since five years ago (we do a lot more than ditches), is in for harder times still. We have robbed the future in many ways, construction projects being only one. It is our job to find common ground with others, but also to shoulder the cuts and economic pain which come from decades of overspending.

  • rbdwiggins

    It depends… Are they family farms, or have they evolved into grain producers.

    The former is back-breaking labor with little to no return, except to provide for their families, and they’re lucky if they can survive the death tax.

    The later are usually big corporations, use large GPS guided auto-track tractors and combines, are not subject to the death tax, can afford to buy crop insurance and receive enormous taxpayer-funded ethanol subsidies.

  • commonsenseobserver

    Yeah, it’s an awful lot of corporate welfare. While we’d prefer to abolish the lot, we must at least reform the system.

    First roadblock: people like Chuck Grassley.

  • greyeagle

    The House should cut a lot of funding for the EPA and stick with it. However, that will not happen as long as Boehner is speaker.

  • rbdwiggins

    Chuck Grassley fears the same people in his state that delivered Iowa for Obama.

    Removing CO2 from the list of airborne polutants is the first step in killing the ethanol subsidies.

  • avgjo

    Oh, lord, here we go.

    Sorry about the high prices of land, but you can thank idiotic tax policy that allows people to buy land, plant a row of beets, and call themselves ‘farmers’, to reap tax breaks. That has resulted in a large amount of land being bought up and driven the prices sky-high. Add to that the idiotic ethanol policies Mr. Horowitz writes about, and the price of corn land is outrageous. These ‘poor’ farmers help cut their own throats by taking these subsidies.

  • creeper

    This post was deceptive from the get-go, starting with your stupid headline.

    You obviously know nothing about farming. Do you think farmers “grow ethanol”? That’s insane. They grow corn…and they have absolutely no say-so in what happens to it after it reaches the processor.

    Evidently you wrote this without even glancing at an electoral map. Farmers are small businessmen and they went overwhelmingly for Romney. Iowa’s rural counties were all Republican. It was the cities that skewed the election for Obama. I would point out here that it is difficult to steal an election in a rural county, where everyone knows everyone else, but it’s very easy to commit massive voter fraud in the cities. That is what happened in this election and any half-sentient human being knows it.

    What you did here was bash one segment of the population with absolutely no basis for doing so. I thought only Democrats did that.

    This is the last time I will read a post on Red State. Any blog that would countenance such blatant lies does not deserve my time.

  • creeper

    rbdwiggins, I rode along on a combine last week. The field we worked is not owned by a big corporation, but by a friend of our family. It was planted using GPS. Even family farmers have embraced this technology.

    The truth is, those “big corporations” in farming that people love to trash are rare. Family farms are still the backbone of our agricultural economy and they are being squeezed every day. The drought this year is going to destroy more than a few of them. One local field was declared a 90% loss earlier this month.

    If people want to place blame for the high price of agricultural products, let them look no further than the EPA.

  • kowalski

    “A whopping 37% of voters selected ‘rising prices’ as their most
    important issue in the election, yet amazingly, they split their votes
    evenly between Romney and Obama.”

    I suspect that has little to do with ethanol and more to do with senior citizens and cost-of-living increases in Social Security, and the skyrocketing dependency on food stamps. Even though the scheduled COLA increase next year is only 1.7%, payroll taxes are going to rise because the payroll tax cut expires if we go over the fiscal cliff, so more people will be paying more money into the system (at least in theory) which sounds good to people who are already receiving the benefits and want to keep doing so. Also, there is an increased earnings limit cooked into the formulae for next year, so seniors will be able to earn more outside income without having their benefits decrease.

    My sense is that the Democrats were able to wage a pretty effective campaign about Social Security and Medicare. It wasn’t enough to win back the House, but it was enough to get a lot of Seniors and current and future food stamp recipients to vote for them. It’d be very interesting to see the exit polling data broken down along those issues: my guess is that the Democrats led the “protect my Social Security and Medicare at any cost” vote.

  • Dave_A

    Let’s be technically correct here:

    Higher ethanol produces HIGHER Octane ratings.

    However, octane has nothing to do with MPG. Octane is ‘pre-ignition (aka ‘Spark Knock’) resistance’.

    You can have very high octane, and very low fuel-energy content… All ‘high octane’ means, is that it is HARDER to ignite the fuel. The reason this is ‘good’ for high-performance cars, is that it means you can let the fuel-air mix get HOTTER while compressing it, and it still won’t ignite (This is why aircraft engines run on 100-octane leaded gas: The engine is air-cooled and even though it’s only 8.xx:1 compression, it is much easier for the cylinders to get hot enough to cause pre-ignition, ergo higher octane)….

    The problem with ethanol is not octane, but rather energy-content!

  • Bill S

    Blaming this problem on farmers is bit much, as is using a sweeping generalization of them as “rich”. After spending 7 years living in central IL, I knew a lot of corn farmers, and I wouldn’t characterize a single one as “rich”. They’re business people. They grow the crops that bring them the highest return, just as you would if you were a farmer. The problem is the government, plain and simple. To try to place part of the blame on farmers is just wrong. Furthermore, rural farm folks are some of THE most reliable voters for our side.

  • rbdwiggins

    There’s a difference between family farms, corporate farms and company farms. Most of the big corporate farms are family owned, and they are grain producers. Was the crop one of the high yield hybrids, or food quality? There’s usually no diversity in the corporate or company farm crop production. They are contracted, and upwards of 40% of their crop goes into ethanol production, if not all of it.

    Regarding your ride-along: Was the combine equipped with a six / eight-row corn header, a twelve-row corn header, or a sixteen / eighteen-row corn header? Was the size of the farm measured in hundreds of acres, or thousands of acres? Most modern farmers use GPS, but the size and expense of the equipment is relative.

  • dsmurf

    higher ethanol percentages yield higher octane levels? Higher octane does increase MPG as far as my anecdotal experiences are concerned- in different decade made cars that we own. The lower the octane used in our cars the lower the mileage we get per tank.

  • dsmurf

    so if we have 15% ethanol mix as proposed/approved by the EPA, then we should have a higher or lower octane grade on our fuel?

  • WmCraig

    Actions speak louder than words. The problem isn’t messaging. In the big blue states, the states we need to win, the Reagan Democrats and Independents that we must reach look for evidence that the Republicans can govern. Yes, it is true that we can argue a good case, but will Republicans govern?

    Don’t “make the case” make the law. Double down on the spending. Create a program equal in cost to the subsidy and give it to working people in the form of refunds or credits. This method serves many purposes.

    - Call it the unintended consequences of government mandate reimbursement bill

    - Sell it as offsetting a small part of the increase in food costs and fuel costs for the middle class who are hurt the worst by government over regulation in the name of questionable science.

    Remember, it is Obama that will be either take the heat for excessive spending or be responsible for killing a refund for excess government regulation that is being paid for by the middle class.

    It puts the Democrats in the position of having to defend increasing the cost of living to grant gifts and buy votes. It says Republicans get it. Just arguing theory or taking a hands off approach does not work for people stuck in the blue states.

  • citizenkh

    The ethanol game goes like this.

    State ethanol subsidies of up to 30 cents per gallon of ethanol produced is available ONLY to individual plants which are majority owned by local farmers. It doesn’t matter what name is on the sign as operator.

    Local farmers have taken out loans to pay for capital investment of building each dry milling ethanol plant and signed contracts with the plants that they control.

    Now to kill the ethanol industry you bankrupt farmers.

  • Dave_A

    “so if we have 15% ethanol mix as proposed/approved by the EPA, then we should have a higher or lower octane grade on our fuel?”

    10% ethanol raises octane 1 to 2 points.

    Eg, 91 used to be Premium, now with ethanol it’s 92 to 93 depending on the blend.

    Another 5% would have a minor effect on octane rating, but a major effect on fuel-system components spec’d for no-ethanol or 10%.

    Ethanol is a very agressive solvent.

  • Dave_A

    Ok…

    Here’s why your anecdotal experience shows a correlation between octane and MPG:

    Today’s cars (and most made since port-fuel-injection became the norm) have an engine management computer that controls every ‘setting’ in the engine including ignition timing.

    One of the ‘sensors’ is something called a ‘knock sensor’. It detects pre-ignition, and pulls back the timing (fires the spark-plug later) when triggered. This protects the engine from damage due to pre-ignition BUT it also reduces efficiency/MPG.

    Remember what I said above, about octane being resistance to pre-ignition? Well, if you put low-octane gasoline into an engine that is tuned/programmed/built for high-octane, then you don’t have enough resistance, pre-ignition will happen, and that sensor will be tripped. BAM! Less MPG!

    HOWEVER:

    There is another way to lose MPG, and that is to use a fuel (like Ethanol) that while harder to ignite than gasoline (higher octane) also has LOWER energy-content (eg BTUs).

    Thus, even though your octane is higher (you can run the engine more aggressively without pre-ignition), the result is worse, because there is less ‘bang’ for your buck when it does ignite….

    P.S.

    Another reason for the MPG difference in SOME AREAS is that Premium is pure-gasoline and the lower grades get the ethanol.

  • citizenkh

    Much of if not most of the corn to dry milling ethanol plants is under contract directly with local farmers who as a group own controlling interest of the local ethanol plant which is operated by a minor partner who is also the designer and builder of it. The marketing and trading of the ethanol and co-product DDGS is usually handled by Cargil, ADM etc…

  • drfredc

    Typical GOP LOSERship silence on countering green nonsense. The ethanol mandate plays a big role in the growing Dead Zone in the Gulf related to excessive fertilizer use — this could win green points. We just don’t have the money for this nonsense anymore — but fiscal responsibility isn’t for the GOP LOSERship, that only works for tea party types.

    The reality is too many of the GOP LOSERship are sucking off the political teat of cornahol as part of their pillar of political power — they are part of the problem, not part of the solution. Hence the LOSERship isn’t going to say or do anything other than have their secretary notch their schedule with couple fund raisers in the Corn Belt.

  • citizenkh

    All depends on what resin and/or lining is in the tank. FRP (fiber reinforced polyester) known as fiberglass, is used in a great many acid and solvent storage systems for industry. Kynar lined FRP is the preferred storage for Hydrochloric acid.

  • citizenkh

    Not for ethanol since the vast majority of dry milling ethanol plants are actually owned by local farmers no matter what the name on the sign says. It’s all about direct subsidies from individual states.

  • Dave_A

    Ethanol does far more damage to the rest of the nation.

    It needs to go.

    Maybe next time the farmers won’t latch themselves onto the govt teat so tightly….

  • Dave_A

    @redstate-a0112227665f336612781949f62176cb:disqus

    The resins (usually epoxy) used in experimental-aircraft & production boat (eg, Bayliner, and similar) fuel-tank construction have been found to be vulnerable to ethanol…

  • citizenkh

    I get that. Resins vary from application to application. The “epoxy” is a polyester. “Fiberglass” is a generic public term. All of it is actually fiber reinforced polyester (FRP) and varies from application to application.

    In steel the problem is that fuel grade ethanol attracts moisture and if not the proper alloy will corrode and pit, thus losing pressure rating.

    It was only a few years ago that many petroleum products pipelines received certification to carry gasoline already blended with ethanol. If 15% is mandated, all of these pipelines will have to be re-certified before being able to transport the fuel blend. Now you are talking about added transport cost. Presently, pipeline terminals adjacent to refineries, along the Gulf Coast, are receiving ethanol by barge/tank car from up north, blending it into the gasoline before it enters the pipeline, and then it is pumped downstream to destination. Until 15% blend is certified, cost of gasoline will go up, even if cost of fuel doesn’t.

  • citizenkh

    My problem is the GOP cannot openly opposed ethanol or it will forever lose the vote in Kansas, Iowa, South Dakota, Nebraska, Missouri, & parts of Wisconsin, Ohio, & Indiana.

  • Dave_A

    Well, we can’t keep the mandate, because it’s overall harmful…

    ‘Let the market decide’ should be the position, in general.

    However, due to the massive number of vehicles NOT certified for over 10%…

    We kind of have to oppose 15%.

  • gizmo

    Here again, LOCAL is better & stronger than FEDERAL. The feds have no business in the farmers’ lives & businesses. A farmer is a businessman & must survive through his own efforts, his own acumen & intelligence & abilities. When crops fail, when other issues pursue the farmer, then it’s to LOCAL not Federal resources he should be able to rely on. Feds & bureaucracy destroy innovation & local integrity while wasting money & time. Local banks, local agencies local intuitions & innovations.

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