Washington's Love Affair with Ethanol

By Dale Hurd

CBN News

December 18, 2007

CBNNews.com - America grows lots of corn. America needs a reliable domestic fuel source. Well, ethanol is fuel that can be made from American corn. Sound like a great idea? Uncle Sam sure thinks so.

Washington is mandating a five-fold increase in ethanol production over the next 10 years and is encouraging the production of "flex-fuel" vehicles that will run on 85 percent ethanol or "E-85."

Will fields of corn some day be the field of dreams for America's energy needs? The short answer is no. But depending on who you talk to, corn ethanol could be either a good first step in the right direction, or a government boondoggle - a waste of time and money that could mess up our food supply and hit you square in the pocketbook, by raising food prices.

Policy analyst Jerry Taylor at the free market CATO Institute thinks corn ethanol is a dumb idea.

"The only reason any ethanol is being produced today in the United States, given the price, is because of politics," Taylor said. "If you talk to people in the refining industry, they'll tell you that if there weren't a federal gun at their heads they wouldn't touch this stuff. It's wildly expensive. The reason we use ethanol is that the government forces us to use ethanol."

Actually, the government also doles out incentives in the form of three different ethanol subsidies to entice industry to increase production. They amount to corporate handouts that totaled more than $5 billion last year. But Taylor insists the government's fondness for ethanol is not so much about energy security as it is about politics.

Taylor said, "The reason we subsidize ethanol, however, is not because of some economic calculation. It's because politicians are in the business of buying votes. And a set of votes they would dearly love to buy are votes from farm states like Iowa, Ohio, Pennsylvania, Michigan, and Minnesota. These are all battleground states for the presidential election. Iowa is the site of the first presidential caucus, and these are swing voters. They'll vote Democrat or Republican, depending on who gives them the fattest sack of federal loot. And so for these reasons, ethanol is wildly popular with politicians."

Ethanol costs more than gasoline to refine and is less efficient, but it's still American-made fuel.

Jon Doggett of the National Corn Growers Association says, "You don't need the fifth fleet to protect ethanol production."

"It makes sense to invest in a secure American source of energy," Doggett said. And he says the ethanol subsidy is nothing new.

"There's not an energy source being used in the United States today that does not have some incentive for production," he added. "I think we're much better off providing incentives to use a domestically produced, renewable energy source than sending the money to parts of the world where those folks may not have our best interests."

The new demand for ethanol doubled the price for a bushel of corn earlier this year. Virginia farmer Monte Walden used to grow cotton, but switched to corn because of the price.

The increase in corn prices has been a boon for farmers, but it's got meat and poultry producers hopping mad.

The National Cattlemen's Beef Association told Business Week that the "…ethanol binge is insane." And the beef, pork, and poultry industries are begging Congress to end the ethanol subsidy, because they say the rising price of corn feed is driving up the prices of their products. Corn is used in all kinds of human foods, and some say the demand for corn ethanol is why grocery prices have increased. Doggett disputes that.

"Ethanol production does not take away all the food. We're only using the starch in the ethanol process to convert it to alcohol. We're not losing the food component, we're just taking part of the component and making fuel out of it."

Corn ethanol could never replace gasoline entirely. To produce that much ethanol, you'd have to plant corn on just about every square inch of arable land in the United States, including cities, parks, and your backyard.

Ethanol backers like President Bush talk about cellulosic ethanol as the future. That would be made from switchgrass or plant waste. But there are no cellulosic ethanol plants in operation yet, and it's feared that the ethanol they produce will cost 5 times more than corn ethanol.

Taylor contends that if ethanol had economic merit, it wouldn't need a dime of federal subsidy.

Taylor said, "Capital investors will put their money into that technology because they hope to make a profit. Only when a technology can't attract private capital do they come knocking on the taxpayer's door."

But no matter. Washington likes ethanol, whether some think it makes economic sense or not.

What does Pat Robertson think about the use of ethanol as a fuel source? Watch the report above for the full report and Robertson's analysis on the July 24, 2007 edition of The 700 Club.

(Original air date and publish date July 24, 2007)

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