The Ethanol Gridlock, and Orwellian Obama

The Economist had a good article a few weeks ago highlighting an anomaly: a case of "conservatives" like Grover Norquist (Americans for Tax Reform) defending big government. Every year, the United States spends billions of dollars to prop up the local ethanol industry with subsidies. At the same time, we impose a tariff on imported ethanol. The imported ethanol would mostly come from our Brazilian friends, who produce ethanol from sugarcane. In fact, Brazilian ethanol is at least 4 times more efficient than our corn-based stuff. That is why local ethanol producers need both help, in the form of subsidies, and hindrances on the competition, in the form of tariffs, to stay competitive at all.

These policies make Americans worse off in general, because we have to pay more for our ethanol (although that cost is hidden among government spending as a whole). Furthermore, corn prices are going up to never before seen levels, since we're converting so much of it to ethanol. The consequence has been devastating to people around the world, especially in nations poorer than our own. This is classic big government at its worst, and yet some of its most staunch defenders are conservatives. That such a no-brainer issue has been such a challenge to deal with is a discouraging foreshadowing of the spending battles to come. Big props to Republican Tom Coburn for fighting back against pseudo conservatives like Norquist, and trying to get this wasteful spending eliminated.

Ethanol subsidies are a form of tax expenditure, and eliminating these would save the federal government literally hundreds of billions of dollars. President Obama mentioned this as a goal in his budget speech the other night. Obama used the phrase "spending reductions in the tax code", in other words, reducing tax expenditures. Jon Stewart was making fun of Obama for using what he thought was Orwellian language to mask a call for tax increases in general, but Stewart misinterpreted what Obama was saying. Tax expenditures are just government spending by another name. Faux conservatives will try to obfuscate this point. They will accuse President Obama of trying to raise taxes, but he is really trying to eliminate big government subsidies. He is going to need all the help he can get, especially from honest Republicans like Tom Coburn.