Nothing gathers a crowd in Washington like the sight of money being handed out. Banks, carmakers and now ethanol? From the Wall Street Journal:
The Renewable Fuels Association, a trade group for the U.S. ethanol industry, has spoken with staff members from Capitol Hill and President-elect Barack Obama’s team and “provided them with some ideas on how to craft the language of” an economic recovery package, said Matt Hartwig, a spokesman for the RFA.
Hartwig said RFA has suggested a number of steps including setting up a $1 billion short-term credit facility so ethanol producers could finance current operations; a $50 billion federal loan guarantee program to finance investment in new renewable fuel production capacity and supporting infrastructure; and a requirement that any auto maker receiving federal aid only produce new vehicles that can run on any blend up to 85% ethanol, beginning with the 2010 model season.”
If you want a slippery slope example, you’re witnessing it. An auto bailout would set a disturbing precedent, resulting in even more private companies clamoring for government sponsorships. A number of companies today could make the case that their respective industry is vital for the economy and begin requesting billions of dollars in bailout subsidies. And if an ethanol bailout follows an auto bailout, who knows who will be next in line.
Ethanol has been receiving preferential treatment for thirty years and has proven to be unsuccessful. Even after decades of special tax breaks and subsidies, ethanol still provides only a small fraction of America’s energy needs. The government’s initial goal to kick start the ethanol business has morphed into the government trying to pick winners and losers among energy sources and has ultimately created a dependence mentality for the ethanol industry. It’s time to let ethanol stand on its own two feet or die.
And to make matters worse, ethanol isn’t doing any of the things it intended to do – ethanol literally is making matters worse. It’s raising fuel costs, it’s raising food costs not only in the United States but also in developing nations, and it’s harming the environment.
Ethanol and Detroit do have something in common; they’ve both been extremely unproductive and inefficient. In essence, we’re handing out taxpayer dollars for things no one wants. And you can guess that the next company or industry at the government’s doorstep will be another unproductive company. And if we have the government subsidizing a whole bunch of products and goods that no one wants, that’s a recipe for economic stagnation.
To paraphrase Grante Bosse, subsidizing Detroit and ethanol is subsidizing failure. And you only subsidize something if you want more of it. It’s been thirty years of failure for ethanol. Enough is enough.