Our View - Wednesday

Field of schemes

Ethanol empire is built on subsidies

No doubt about it: the ethanol craze has been a boon to some farmers in Colorado and elsewhere. Government production mandates of the corn-based fuel are pitting food producers against energy producers, driving corn prices to record highs. This is a blessing for farmers, who are rushing to cash in by planting more acres in corn, but a curse for consumers, who will see prices climbing not just on corn flakes but on a host of products, including meat and poultry, connected to corn.

The prices may moderate as farmers meet soaring demand by planting more acres in corn, as a report in last Wednesday’s Gazette indicates. But given the number of subsidized ethanol production plants on the drawing board, and the technical challenges involved in producing non-corn-based ethanol, we’re betting that the inflationary effects will continue.

In time, ethanol will be exposed as a huge boondoggle with illusory benefits for “energy independence” and the environment. But the boom’s beneficiaries will try riding the gravy train as far as they can, using bogus defenses of the fuel. One of them was trotted out in last week’s story.

Colorado Corn Growers Association President Doug Melcher told The Gazette that higher corn prices will make farmers less dependent on government subsidy programs to make a living. We wish it were so. But direct subsidies to farmers represent only the tip of the ethanol iceberg.

We’ve heard no talk about reducing corn subsidies when a five-year farm bill is negotiated by Congress this year — though that’s the least Congress could do, given all the other taxpayer support the ethanol industry receives. Washington is notoriously reluctant to push anyone away from the federal trough: corn farmers won’t be the first.

Not only do taxpayers subsidize farmers, but they shell out 51 cents in tax credits for every gallon of ethanol produced. Although tax credits have fluctuated in value over the years, one estimate puts the revenue losses to government, and the benefits to industry, at as much as $12.6 billion in 2006 dollars. And those numbers will increase thanks to a sizeable boost in federal ethanol mandates included in the 2005 energy bill.

The pump price of ethanol is also kept artificially high due to a 54 cent-a-gallon tariff Washington slaps on ethanol imports, protecting the U.S. industry from competition. Ethanol producers also have received federal loan guarantees, leaving taxpayers holding the bag if projects go bust. Tax credits go to automakers who build vehicles that burn E85, a fuel made up of 85 percent ethanol (as opposed to the usual 10 percent blend). These tax credits help automakers, but they also benefit ethanol producers, by promoting use of their product.

A small ethanol producer’s tax credit of 10 cents a gallon was approved in 1990, applying to the first 15 million gallons a company produces each year. But the rules were changed in the 2005 energy bill, extending the credit to cover the first 60 million gallons produced annually. That many dimes adds up to a lot of dollars. The Department of Energy has funded research and development for the industry. And states offer a host of their own subsidies or tax breaks to ethanol makers.

It’s true that other energy sources are subsidized. But as “Biofuels — at what cost?” a recent report from the International Institute for Sustainable Development shows, the subsidies for ethanol, per BTU of energy produced, are by far the highest. They’re more than 10 times higher than subsidies for oil, even counting the costs of protecting shipping in the Persian Gulf. The second most highly subsidized energy resource, nuclear power, gets only half the subsidies, per unit of energy produced, as ethanol. According to the report, the ethanol craze annually costs taxpayers $8.2 billion in outlays and $7.3 billion in forgone revenues (in 2006 dollars). And that, according to the report, is a conservative estimate.

Thus, it’s dishonest to claim corn farmers will become less dependent on subsidies if direct price supports are eliminated. Without the scaffolding of subsidies that prop up the entire ethanol empire, from top to bottom, at taxpayer and consumer expense, corn farmers wouldn’t be reaping the windfall they are.

Vigilance pays off

Whether or not two Harrison High School students would have carried out an alleged plot to murder their classmates during a pep rally — in an attempt, said one, to break the record set by the gunman who killed 32 students at Virginia Tech — the incident offers a wake-up call to those who think it can’t happen here. Thanks to adroit police work, it didn’t happen here. But the mere fact that local high school students are capable of plotting a recordbreaking massacre, based simply on the fact that people “piss them off,” should prompt some soul searching.

Exactly what breeds such sickness is open to conjecture. Hyperviolent video games and movies; bullying peers; broken homes; absentee parents; lousy role models; a value-free education: your pet theory is as good as ours. We know this, however — the situation can’t be corrected, or sick minds healed, by anything politicians or the state can do.

Until we can address the deeper societal issues — if we can — vigilance and deterrence

must be our focus. And there, too, the state can play only a modest role, since the police are neither ubiquitous nor omniscient.

It’s up to all of us, individually, whether we’re parents or peers, to stay alert for danger signs in the people around us. Paranoia isn’t warranted, but caring, caution and watchfulness are. Just as we must remain vigilant against big-time international terrorists, we also must keep tabs on the potential smalltime terrorists in our schools, our neighborhoods and, yes, even our own homes. These are scary thoughts, we know. But these are scary times, too.