Truth in Ethanol

As I noted the other day, ethanol subsidies are wounded but not yet dead. AS PNR points out, Thune is working the crash cart:

He’s proposed a bill that would go along with ending the ethanol tax credit but spend the money on something else that the ethanol fuel lobby wants. He’s quoted thusly in our local rag…

To get a bill enacted this year is going to require some level of cooperation, and every month that goes by, you’re losing $500 million that would be available to put toward debt reduction or blender pumps or something else.

Moving the money from one type of subsidy to another is helping us do what, again? Definitely not presidential thinking at work here.

It does seem that the thinking about ethanol is changing. If it weren’t, we probably would not be getting articles with reassurances such as the following:

The likely end of a $5 billion-a-year federal subsidy that helped build the ethanol industry will likely mean two things, experts who have followed its development say.

First, it doesn’t guarantee an end to the high prices that corn farmers have enjoyed and livestock producers and other food manufacturers have endured.

That’s because of the second point: the ethanol industry likely would be fine without the subsidy and keep using just about as much corn as it has the past few years.

Everything is just fine. Nothing will change. But if nothing will change, why didn’t we do this a while ago?

And the tax credit isn’t even the primary driver of ethanol demand. That, economists note, has been the federal requirement that the country produce an increasing amount of renewable fuels like ethanol.

Really? But without the subsidies, won’t folks be calling this an unfunded mandate?

“What do you need a tax credit for when you have this built-in huge market in the United States?” asked Bruce Babcock, an economist at Iowa State University. “The U.S. ethanol industry is very competitive; they don’t need the (subsidy).”

The industry is competitive with what? Itself? Am I truly competitive if I need subsidies in order to compete?

Anyway, go read the entire article. I get the general feeling from reading it that people who benefit from ethanol subsidies and current corn prices would prefer that the money train didn’t stop. No space is devoted to the thinking that it is morally wrong for the government to keep spending money it doesn’t have to coerce the market into giving certain products preferential treatment.