Stop the Ethanol Madness

Ethanol is one of those really bad ideas that just won't seem to go away. It's a crummy fuel additive. It is corrosive in engines and storage facilities and requires special handling for delivery. It knocks a point or so off gas mileage at a time of heavy government pressure on manufactures to produce ever more efficient vehicles. We could get better mileage if, like Europeans, we just switched to diesel. And of course ethanol isn't added to diesel fuel.

It disrupts the nation's food supply with ripple effects felt all over the world. Forty percent of America's corn crop goes into ethanol, and that's in a good year. This year's drought is expected to reduce yields by 15% or more and, with ethanol content levels in gasoline mandated by law, the shortfall will have to be absorbed in food products and animal feed. And it diverts prime crop land from other uses.

We had food riots around the world four years ago. Don't be surprised to see them again. For most Americans a shortage of bacon or rib eye is an inconvenience. For third world paupers subsisting on less than $1.25 a day even a small increase in the price of gruel is a catastrophe. Expect to see more children with distended bellies on the nightly news.

I don't see anything in the news from US Catholic Bishops but the United Nations has called on the US to suspend or reduce the mandates this year, if only temporarily. So have beef, pork, and poultry producers. Don't hold your breath. Iowa is a swing state. Both presidential candidates support continuing mandates to provide stability in the industry. Agriculture Secretary Tom Vilsack says that without ethanol the price of gasoline would be more than $1 higher than it is. Ethanol's critics say that claim is laughable.

Environmentalists turned against ethanol a couple of years ago. Its carbon footprint is higher than the gasoline it replaces and runoff from pesticides and fertilizers pollutes the rivers. Algae bloom from phosphates creates the dead zone at the mouth of the Mississippi. It is questionable whether ethanol even yields more energy than its production consumes.

Probably the strongest argument proponents make is that ethanol reduces dependence on foreign oil. But we don't import as much oil as we did a few years ago and it looks as though the trend may continue, with or without ethanol. The shale boom is still in its infancy and with oil around $100 per barrel there are all sorts of promising technologies on the horizon.

It's time to drop the mandates. We already stopped the subsidies. If Secretary Vilsack is right consumer demand will keep the refiners in business. If he is wrong and the price of ethanol-free gasoline drops they will likely go broke. Isn't that how capitalism is supposed to work? If investors bet on a sound business model they make money. If it turns out it is unsound they lose. Any time government subsidies, or mandates, are used to keep a business afloat it is the taxpayer who pays. Nobody benefits but agribusiness and their hangers on. Add to the list of losers the poor, the environment, the economy, and just about everybody who depends on the automobile for transportation.

These are hard times. One presidential candidate is projecting more social spending with trillion dollar budget deficits and an anemic economy far into the future. The other proposes to get the economy growing again at the cost of draconian cuts in spending that, whatever else we think of them, are going to hurt. Either way there are some boondoggles we just can't afford. Ethanol is one of them. Stop the madness.

The Die is Cast

It seems we have our man with a plan. The Ryan budget doesn't represent the first serious attempt to address the nation's economic woes, the Simpson-Bowles commission was. But the president never endorsed his commission's recommendations. With the selection of Paul Ryan as Mitt Romney's running mate the Republican nominee has placed himself squarely behind something that looks a lot like Simpson-Bowles. If Romney is elected spending reductions and entitlement reforms assumed in the Ryan budget have a serious chance of becoming law. This election is shaping up to be the sharpest choice in my lifetime.

There is a lot to demagogue and more than a little room for serious debate. US Catholic Bishops have already weighed in with letters to congressional leaders arguing for fewer cuts in welfare programs to be paid for with higher taxes and more cuts in defense spending. That's a reasonable argument but defense spending will be cut in any case, deeply. Do we want to mothball the Navy? This is still a dangerous world and, despite our numerous wars, pax-Americana has been a very real factor in global stability since WWII. And surely this is no time to be raising taxes. Ernst & Young estimate President Obamas proposal to have the wealthy pay their fair share will cost about 700,000 jobs. That may or may not be a good estimate but I can't believe tax increases will stimulate growth.

Jim Wallis on his God's Politics blog calls the Republican budget immoral, paying for tax cuts for the wealthy by slashing benefits for the poor. That sounds more like Harry Reid's politics to me. Democrats wasted no time going after Ryan in a big way but I'm not sure that's such a good idea. They really don't want to talk about the economy. They may just be shifting the discussion back to that, giving Republicans a renewed opportunity to remind people of all these trillion dollar deficits, 8%+ unemployment, sluggish growth projections as far as the eye can see, and what to do about them. With no budget of his own President Obama might much rather have his surrogates accusing Governor Romney of not paying taxes, and of killing cancer patients.

I'd be happy to see the conversation change. I sympathize with the Bishops in their concern for the poor, though not so much with Jim Wallis. Poverty in this country is real and it has gone up, though it can be hard to measure. Some of it is chronic. A lot of people are poor through no fault of their own and even if it is their fault nobody wants to see drug addicts dying under bridges. I don't like cutting anti-poverty programs but I really don't think Mr. Ryan is proposing to introduce the sort of grinding desperation represented by the World Bank standard of subsistence on less than $1.25 per day. We'll still have subsidized housing and food stamps.

What most of our poor really need is a job. Both candidates say they are all about getting the economy moving again and creating said jobs. We now have a plan on the table. I hope we can talk about it in a serious way. I don't hold out much hope for that from the mainstream media, and less from the blogosphere. What I see, hear, and read in the MSM is mostly political gamesmanship, who scored points today. The blogs are worse. They are almost entirely consumed with Wallis style demagoguery.

The think tanks can be useful. Some of them even try to be non-partisan.  It would be helpful if the president had a competing plan. The presidential debates should be interesting. We certainly have something to talk about.

Man with a Plan

With the economy stumbling along I've been surprised to see presidential polls as close as they are. It seems many people think we will see slow growth or no growth at all for the foreseeable future regardless of who is president. I'm not sure I've ever seen the atmosphere quite so gloomy. It doesn't have to be that way. Presidents matter. They can put policies in place and advance legislation that do indeed promote or retard prosperity.

It's been a rough four years. We've had a serious recession and an anemic recovery. Gasoline prices are up, home values are down, people are walking away from mortgages. Cities are declaring bankruptcy and laying off even firemen and teachers. Heaven knows where they will find work. Poverty rates have risen, federal deficits are astronomical, and the president wants to raise taxes as a matter of fairness. Most people seem to think it's a good idea, so long as it's somebody else's taxes. Since about half of voters don't pay any income tax it's easier to make that case. It's no wonder people are down but we need to snap out of it.

One thing that would help is a better educated work force. We've got the finest university system in the world but costs have gotten out of control. Too many graduates are getting degrees that aren't worth what they owe on them. That can be fixed if we insist. We should be taking hard looks at technology and asking questions about everything from administration to tenure. There are promising trends in primary and secondary schools with vouchers and charter schools. We can encourage new ideas, accelerate implementation of the ones that work, and tell the obstructionist public school lobby to get out of the way. 

Advances in extractive technology have produced an oil and gas boom. That can stimulate a broad economic revival it we don't strangle it with regulations. Much of the most promising reserves are on federal lands and to date pretty much off limits. They need to be opened up. So called environmentalists will object but they would have us dismantle the industrial revolution. We should clean up our energy sources as best we reasonably can but we will be dependent on fossil fuels for at least the next several decades. We need that oil and gas.

Other technological advances seem to have prompted something of a domestic manufacturing revival. It's high tech manufacturing that discounts lower wages in emerging economies and makes shipping cost and delay bigger factors. These manufacturers are having trouble finding the skilled labor they need. Work force development programs could address that. Community colleges and charter schools have had some some success here. We should be building on it.

One of the bright spots recently has been trade. Exports are up. Our biggest trade partners are Canada and Mexico, though you wouldn't know it from all the NAFTA bashing. Economists say NAFTA can be improved. We've had enough experience with it to know what's worked well and what hasn't. A well integrated North American Economy benefits us all. Let's take a fresh look at that. While we are at it let's do what we can to help Mexico deal with those awful drug cartels before the violence spills over the border, if it hasn't already. And for Pete's sake let's stop supplying the drug lords with guns.

There are lot's of things we can do, and some of them are low hanging fruit. In my view they are especially to be found in education, technology, trade, and energy. There are those who will stop them all if they are allowed to. What we need most is a man with a plan.