It’s all connected folks
by George SeldesJune 8th, 2007 at 08:36:35
One thing that you frequently hear in Oregon is that there is no money: no money for health care, no money for schools, no money for affordable housing, no money to give people real choices in transportation, no money to preserve wilderness from developers, and on and on.
Well, why not?
Primarily because of what Walt Kelly said: We have met the enemy and it is us.
We allow subsidy programs to be created that pay for process rather than results, that create an well-funded business and lobbying constituency intensely devoted to preserving and expanding the subsidy that is their life blood. Business is frequently able to dupe progressives into supporting these programs before anyone notices that they actually help business far more than the community.
I once heard historian Michael Parenti say that “Politics is the rational manipulation of irrational symbols.” Nowhere is that more true than in the biofuels debate—the same family farmer image that the faux conservatives haul out to serve as window dressing for their “end the estate tax (if not all tax)” campaigns is hauled out frequently in support of biofuels … even though there is nothing more likely to lead to a radical shift away from Oregon’s traditionally family based farm model than a big, subsidy-fueled biofuels program that further enshrines Earl Butz’s “Get big or get out” model of corporate agribusiness.
1000 Friends of Oregon says that 98% of Oregon’s farms are still family owned (by individuals or closely held family corporations), and that’s worth fighting to save. But embracing subsidized biofuels here will tend to replicate the conditions in the other subsidy swamp, the Midwest, where fewer and fewer farms are still family operations.
Here’s where the money is going:
Switching To Biofuels Could Cost Lots of Green
As President Bush and congressional leaders rally support for their ambitious biofuel proposals, one ingredient is often left unstated: the cost.
Bush and members of Congress stress energy independence and environmental benefits of federal requirements for a massive increase in the use of biofuels in motor vehicles. But so far they have muted discussion of the prosaic details of how to pay for the subsidies and other incentives seen as crucial for meeting the new biofuels targets.
If the current tax credits, grants and loan guarantees are extended, the package would cost taxpayers $140 billion more over the next 15 years. New proposals under consideration in Congress could raise that tab to $205 billion.
Neither the White House nor Congress has spelled out how they plan to square the costs with other budget priorities. Paying for the incentive programs, which are supported by a bipartisan coalition of lawmakers, could clash with keeping the federal budget deficit under control. Democrats have vowed to abide by so-called pay-as-go rules — offsetting new programs with spending cuts or new tax revenue.
“We aren’t paying enough attention to the green lost to the Treasury . . . in stimulating ethanol to make the environment greener,” said Robert D. Reischauer, president of the Urban Institute and former director of the Congressional Budget Office. “Before we leap to extend subsidies for alternative fuels or ethanol, we need to take a hard look at their impact on future deficits.”
The biggest single expense would be an extension of a 51-cent-a-gallon ethanol tax credit scheduled to expire in 2010. It would cost the federal government an extra $131 billion through 2022 under a fuel mandate that recently cleared the Senate Energy and Natural Resources Committee. (It would cost $18.36 billion in 2022 alone.)
In his State of the Union address in January, Bush proposed mandating the use of 35 billion gallons of renewable and alternative motor fuels by 2017. Some proposals in Congress go even further. The Senate energy committee recently passed a bill that would give industry until 2022 to meet a 36 billion gallon target. Sens. Richard C. Lugar (R-Ind.) and Tom Harkin (D-Iowa) are backing a measure that would push that to 60 billion gallons by 2030.
…Besides the ethanol tax credit, other current incentives include a $1-a-gallon biodiesel tax credit, a subsidy for service stations that install E85 pumps, spending by the Agriculture Department on energy programs, and various other Energy Department grants and loan guarantees.
…Loan guarantees for cellulosic ethanol plants could cost $10.8 billion, Energy Department research and development programs could add $6.5 billion, an extension of the $1-a-gallon biodiesel tax credit (which expires in 2008) would cost $10.2 billion and ethanol-related corn subsidies could total $14 billion, according to estimates by a former Office of Management and Budget expert. Grants to help build infrastructure capable of handling such a large volume of ethanol could cost $3.35 billion.
…
The dilemma over how to pay for ethanol tax breaks and incentives is part of a broader problem for Democrats. They are trying to reduce the deficit while simultaneously extending some of the Bush tax cuts that expire in 2010, easing the bite of the alternate minimum tax and undertaking initiatives such as an expansion of health care for children.
…
The Senate energy bill mandates that ethanol made from materials other than corn, such as prairie grasses, eventually exceed output of corn-based ethanol. But an Iowa State University study was not optimistic about the ability to accomplish that. In corn-producing regions, it noted, subsidies of $270 an acre — in addition to the existing highway fuel tax break and state tax breaks — would be needed to induce farmers to switch from corn to prairie grasses.
Moreover, the technology to produce cellulosic ethanol — made from wood, waste or grasses — at a commercially competitive price does not yet exist. “It’s a pipe dream to think we’re going to get a lot of farmers switching to cellulose without a lot of subsidies,” said Bruce Babcock, an economics professor at Iowa State.
“These first cellulosic plants will not be built without government guarantees,” House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) acknowledged late last month.
Many economists cringe at that thought. “If the aim is to reduce gasoline consumption, the best way is to raise the gasoline tax,” said Ian Parry, economist at Resources for the Future. “That exploits all potential options for saving fuel — driving less, increasing vehicle fuel economy over the longer run, and creating more demand for hybrids and alternative fuels like ethanol. Lowering the price of ethanol only exploits the last of these responses, so it is far less cost-effective than raising gasoline taxes.”
June 9th, 2007 at 8:49 pm
George,
The British have proven that high fuel taxes will reduce consumption, but this has a disproportionate impact on poorer families, who pay out a higher percentage of their income for food and transportation. Reserve some venom for the aggressive expansion of Wal-Mart, financed by taxpayers through economic development subsidies!
June 9th, 2007 at 11:36 pm
What hurts the American poor most is a land use system that treats non-automobile people as pariahs or outcasts and concerns itself mainly with providing amenities for autos, including subsidies for fuel captured by rich and poor alike.
If you want to help the poor, then rescue our rail system from its status as “a system that would shame Bulgaria,” demand that bikes get a higher priority than cars, and insist that transportation planners and officials provide a system that permits anyone inside an urban growth boundary to live without need of car ownership.
Fuel costs are primarily the concern of the wealthy, because they pay very little for the other aspects of ownership of cars; they buy and hold cars, obtained for cash, through tax-deductible home equity loans, or at low/good credit interest rates. They pay the lowest rates for auto insurance, and can afford the highest deductibles so their rates are further lowered. When the insurance industry uses credit scores to set auto rates, they are rewarded yet again.
Meanwhile, the poor operate in a world of HUGE predatory “EZ credit” and “risk pool” insurance industries that prey on them and their need for transportation in our system dominated by and totally subservient to the wishes of the carburban elites.
Even an old beater that only gets 15 mpg only costs 20 cents per mile for fuel, a small part of the cost of ownership when you consider the cost of credit for the poor and the costs of insurance and repairs ( the total cost to the poor can easily approach or even exceed $1/mile because they are trapped in overpriced cars that often won’t last more than a year or two). These people don’t need cheaper fuel—gas is the one cost that varies in proportion to use and doesn’t come with credit charges. The poor need workable alternatives to the car, period.