I’ve never supported state-run economic development efforts, as they almost always carry loads of unintended consequences. In the case of ethanol subsidies, it is close to criminal what the Federal government is doing to American consumers. I read a report yesterday that stated U.S. corn reserves, according to the USDA, are reaching near critical low levels. Once corn reserves dip beneath a thirty week reserve supply, it is considered a critical shortage. According to the USDA’s own numbers, a record hot summer has decimated many corn crops, driving American reserves to levels that could go as low as nineteen weeks. To make matters worse, Congress has continued to pursue its ineffective, inefficient and wasteful corn subsidy to develop ethanol fuel, exacerbating already devastating corn crop shortages.
For decades, since the presidency of Jimmy Carter, the Federal government has subsidized the development of ethanol for use as a gasoline additive. The intent was to “stretch” a gallon of gas, thus alleviating the nation’s dependency on foreign oil. One of the biggest problems, however, is that to create this gas “stretcher,” the ethanol producers have to use equipment that uses gasoline in the process of converting corn crops to fuel! Thus, the subsidy does absolutely nothing to reduce America’s dependency on foreign fuels; in fact, the primary by-product of the ethanol subsidy is skyrocketing food costs to American consumers.
Since the government decided to subsidize ethanol production, farmers have converted millions of acres of farmland, once used to grow other types of vegetables, into corn fields to get in on the ethanol action. This trend has increased exponentially over the past decade, as Congress decided to throttle-up their ethanol production goals. The conversion of diverse crop lands into corn fields means that other types of vegetables, and other food products not involving corn, have also become dramatically more expensive. All this pain at the register for no real relief at the pump, now that’s a “solution” that could only be cooked-up in Washington, DC.
Price shocks, which will drive inflation, may be the least of our worries if Congress doesn’t back off from this foolish Federal program. The alarming rate at which America is having to import vegetables from other countries, as our farmers are fleeing to corn production, makes us dangerously susceptible to famines and crop shortages in other nations. In the event of a drought in supplier countries, our people will pay exorbitant prices to get fresh vegetables, if they can get them at all. Additionally, our corn crops, a staple for many American food products, are being stressed to the breaking point by the bailout of the ethanol industry. In short, high prices may be the precursor to a government-induced food shortage.
If I remember correctly, the Pharaoh of Egypt hired Joseph in Genesis to stave off a famine. Our Federal “pharaoh” is leading us straight into one.