10 April 2011 - If We Cut Subsidy, Do it Fairly!

With corn prices hitting record highs this year and global food prices hitting record highs, the makers of ethanol again are under fire from all sides, including cattlemen, dairy farmers, poultry producers, hog producers and those who say "we ought not take food from humans to put into the gas tank".

Let me, first of all, remind those people that after we take the ethanol from a bushel of corn we still get livestock feed in Distilled Dried Grains and human food in the form of corn oil coming from that same bushel.

But on Samuelson Sez over a year ago, I went on record saying it’s time to end the subsidy for ethanol, IF, and it’s a big IF as far as I’m concerned, IF we also take away subsidies from the producers and processors of oil and gas, nuclear and coal, and all of the other energy sources, but oil and gas particularly. Try to research the amount of government subsidy that producers of oil and gas get from the U. S. Treasury. It is a tough number to find. I saw estimates ranging anywhere from$35-billion to $100-billion a year, but the number that came up more often was a $45-billion taxpayer subsidy to the petroleum industry to provide us with energy that’s now costing us well over $4.00 a gallon at the pump.

I have said the time will come when ethanol will have to stand on it’s own merits without that $6-billion subsidy. The producers of ethanol are aware of that. After a difficult fight, they did get a one-year extension on that subsidy. But now, bills have been introduced on Capitol Hill to do away with that legislation and end the subsidy immediately. Leaders in the industry, wanting to avoid another legislative fight, are discussing ways to moderate or change the subsidy to make it more acceptable to its critics.

The subsidy was put in place to help a new industry establish itself and ethanol is still relatively new. So why, some people ask, does the petroleum industry, well over a century old, still deserve an annual $45-billion subsidy? The rest of the energy subsidy list reads like this... $9-billion for nuclear, $8-billion for coal, $6-billion for ethanol and $6-billion for renewable fuels... wind, solar, biomass and geothermal.

So, I’ll say it one more time; I am in favor of doing away with the subsidy for ethanol, IF we also cut back sharply on the subsidy for the petroleum industry.

My thoughts on Samuelson Sez.