Friday, May 25, 2007

Beware of Ye Subsidies

Fire of Liberty

For a long time now, I've been preaching that the only way that the ethanol based energy companies are ever going to think about developing an efficient and affordable fuel then it has got to be centered around a market based model rather than a government subsidised system that rewards the biggest grower and consumer of corn. Unfortunately, the "wiser heads" of the Senate Agricultural Committee decided, with the help of the corn-based ethanol lobby, that the nation seriously needed to be all aboard the bandwagon thus doling out tons of money to companies to produce glorified moonshine. Now while the members of the Ag. Committee might have thought that they were helping the American people by supporting the greater production of this environmentally friendly energy they were in reality creating a large government subsidized monster.

In fact, based on Kimberly A. Strassel's May 18, 2007 "Potomac Watch" column in the Wall Street Journal, the corn-based ethanol subsidy is causing producers to scorer high and low all over the country for all the available corn due to the fact that the bill is being footed by the "deep pockets" of the federal government which in turn is making a large rumbling amongst the meat producers, cola makers and various other industries that use corn to produce these products. As most students of economics know, if you have a limited supply of a commodity and a high demand, you end up seeing the price of the said commodity shot up in the sky. So as these companies have to pay these inflated prices, they have to charge more money to develop their product which in turn is passed onto the consumer. So when you think of it, the consumer payed for the corn once through taxes when the government payed the subsidy and secondly when they go to the store to buy food to feed their family.

Hopefully some of these Senators are discovering the ire and pain that such subsidization of ethanol is having and will force the corn-based ethanol makers to live and die on their own. Even if the corn ethanol lobby is pulling down big "pay days" via these subsidies, these Senators would be best served by reading this column by George Will and Timothy Egan's The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl to discover what happens when this nation heavily subsidizes the growing of wheat.

Now a cutback of such subsidies might not be a popular move amongst the pork-friendly Senators on the Ag Committee but it's the best way to get a true alternative fuel that can be viable to gasoline. Until then, we'll have to depend on the good folks at Pork Busters, Citizens Against Government Waste, Sen. Tom Coburn(R-OK), Sen. Jim Demint(R-SC) as well as keen observers like Kimberley A Strassel to keep these folks partially honest.

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