Taking on the ethanol lobby in Iowa …

Ted Cruz is under attack in Iowa because he doesn’t support the ethanol subsidies. Iowa’s Republican governor even came out and told caucus goers to vote for anyone else but Cruz.

Forget for a moment that except for the caucuses and college football, nobody in their right mind outside of Iowa gives a rat’s ass about what happens inside Iowa.

The entire population of the state is just a tad more than three million. More people live in Los Angeles than in the entire state of Iowa.  The largest city in Iowa – Des Moines – only has a population a bit over 200,000.  There’s nobody home. 

Yet here we are again breathlessly awaiting what a miniscule part of that tiny population thinks about the people running for President. That’s after candidates have dropped millions of bucks and spent countless hours trudging from door-to-door or meeting in greasy spoons with people wearing biballs and John Deere gimme caps.  It’s all to generate a “ground game” to convince groups of volunteers to show up at their local caucus station and line up on one side or another.

Yeah, that’s the science involved.  Pretty sophisticated, huh? 

However, somebody somewhere takes this farce seriously. Mainly the media and political consultants. Politicians promise anything to win votes in Iowa, as they do everywhere else.  Except some hot-button issues important to Iowans are hardly what’s important to the rest of the country.  Chief among these are the ethanol subsidies.

You can thank Chuck Grassley and other farm-state politicians for the fact that there are ethanol subsidies in the first place.  You can thank them as well for driving up the cost of food in general, hurting our trade deficit, and forcing oil companies to blend low-performance ethanol into their gasoline making a less efficient fuel. Oh, and also for increasing greenhouse gases; even the Sierra Club and other environmental groups oppose ethanol production. 

Rarely can you find a government-subsidized boondoggle that fails so miserably on so many points, was sold through on laughable reasoning, and rewards so few at the expense of so many. And now that supply and demand has changed the energy landscape, ethanol no longer makes any economic or strategic sense at all. In fact, it never did.      

Everybody in Congress knows this, as does every candidate running in the Iowa caucuses. But they are too nutless to address this fiasco. Then along comes Ted Cruz, never known for his tact. Ted said he opposed the continuation of the ethanol subsidies – a mortal sin in Iowa. Actually, Ted also said he opposes any subsidies for any energy form, including solar/wind, biofuels, and of course oil and natural gas because Washington shouldn’t be picking winners and losers.

Good for Ted; someone needed to say it.

This was immediately seized upon by the other jackals in the race who pledged their undying support for ethanol subsidies. Not to be outdone, Iowa’s governor claimed that ending the subsidies would cost 75,000 Iowans their jobs and set back the state’s growing ethanol production industry.   

To which I say:  so what? Live by the subsidy, die by the subsidy. 

Now after all this reading you may be wondering exactly what the ethanol subsidy is?  There’s not just one subsidy; there are a variety of subsidies tied to ethanol, including tax credits for producers and blenders, tariffs to keep out cheaper foreign ethanol, mandated use, and more.

The one that hits consumers directly in their wallets is requiring oil companies to blend a certain percentage of ethanol into their gasoline. That creates a mandated demand for ethanol – right now estimated at 18 billion gallons a year. That in turn rewards farmers for turning food and cattle-feed crops into ethanol – which now has a guaranteed market. That causes a shortage of grains like corn which forces prices up rewarding those same farmers while raising costs of all related food products for the rest of us.

But that’s not all. By diverting food crops we traditionally exported, into ethanol oil companies are required to use domestically, we hurt our balance of trade.

And by law, the EPA is required to continually up the mandated percentage of ethanol in gasoline which only promises to aggravate the situation further. I also forgot to mention that the same farm-state politicians have effectively blocked the importation of cheaper foreign produced ethanol, such as from Brazil (which more efficiently produces ethanol from sugar).

Meanwhile, it's already estimated to have cost U.S. drivers across the country as much as $83 billion since 2007.    

The original pitch for ethanol subsidies was that it would reduce our dependence on foreign oil.  In reality it actually increased the amount of gasoline we used to drive the same number of miles.  Now the world is awash in oil – it’s below $30 a barrel on the world market and we may soon be an oil exporter – supporters of continuing the ethanol subsidies have an even weaker case. 

But hey, it’s created jobs in Iowa and made farmers – actually agribusiness conglomerates – there richer.  Isn’t that worth it? 

Nope it’s not.  I may not like Ted Cruz all that much, but I have to give him credit for this one.

The ethanol industry wouldn’t exist without government regulations and rules.  It shouldn’t exist at all.  Those theoretical 75,000 people who could lose their jobs will find other work, maybe planting and harvesting food crops again, for example. 

Their loss is a small price to pay for helping the hundreds of millions of other Americans who would benefit.  So kudos to Cruz – we need more politicians with the balls to stop this nonsense.