CBO: Ethanol policies pushed food prices higher
posted at 10:55 am on April 10, 2009 by Ed Morrissey
This won’t surprise anyone at Hot Air, where we’ve covered the starvation model that comes from converting food into fuel, but now we have confirmation from the Congressional Budget Office of the inflationary effect of federal ethanol policies. Not only did those policies create an increase in costs for food, that creates an even more unpleasant consequence at a time when federal revenues will decrease:
Federal ethanol-fuel policies forced consumers to pay an extra 0.5 percent to 0.8 percent in increased food prices in 2008, and the government itself could end up paying nearly $1 billion more this year for food stamps because of ethanol use, according to a new government report.
The report by the Congressional Budget Office helps answer questions raised by Congress last year as food prices shot up, and some lawmakers questioned the effects of government policies, such as the ethanol mandate.
“Producing ethanol for use in motor fuels increases the demand for corn, which ultimately raises the prices that consumers pay for a wide variety of foods at the grocery store, ranging from corn-syrup sweeteners found in soft drinks to meat, dairy and poultry products,” the CBO said.
Also, government-sponsored subsidies and mandates for ethanol to be mixed with gasoline are supposed to help foster U.S. energy independence and to cut down on greenhouse-gas emissions, but only have reduced greenhouse-gas emissions by less than one-third of 1 percent.
Of course, the problem with this price pressure is that it’s inherently regressive. It impacts most the people who can afford it the least. For those who have less disposable income, price increases on staples such as food and energy are more than just an annoyance. They can push families at the margins into full-blown poverty and starvation, where choices have to be made between food and heat.
The Obama administration has a ready answer for that: more food stamps. Rather than just admit that the ethanol program is a flop, both in terms of emissions controls and in replacement power for gasoline, Obama wants to double down by putting more people into government dependency. He has two reasons for this. First, his presidential campaign got powered in large part by ethanol producers, whose political support turns out to have a much higher octane than their product.
Second, a dependent class will tend to vote its pocketbook and keep the government cheese coming. If government policies make food and heat unaffordable but then provides subsidies for the victims of those policies, the food stamps look like a bird in the hand after a while, and policies of economic freedom don’t look immediate enough to cut the tether. These policies will create a larger economic underclass that will support more nationalized services as time goes on.
Ethanol may be an expensive failure that makes the poor less able to feed themselves, but it looks like a political winner for the Left for those very reasons.