PolicyGuy

Tuesday, April 25, 2006


Your government at work.
Think that higher gas prices will mean and end to ethanol subsidies?

Right.

Says the Saint Paul Pioneer Press,

"Today ethanol is booming as oil prices soar, yet Minnesota taxpayers still are priming the pump. Taxpayers are billed $26 million a year to subsidize 11 privately owned ethanol plants that are now profitable beyond anyone's dreams.

Purdue University economist Wally Tyner calculates that at today's fuel prices, even an ethanol plant costing $100 million can be fully paid off in less than a year. 'They're hugely profitable; that's why so many of them are being built,' Tyner said."

Reporter Tom Webb points out that the plants were profitable back in 2003, when oil was a mere $30 a barrel--less than half of what it is today.

Here's the cost to consumers:

"Over the years, $274 million in payments have been sent to Minnesota ethanol producers, along with $45 million in IOUs. On every gallon of ethanol, the state pays producers 20 cents -- 13 cents quarterly, and 7 cents more in deferred payments -- up to 15 million gallons per producer."

The article points out that ethanol was unprofitable in the 1980s, which was the (still lousy) rationale for the subsidies. The market wasn't ready. It's ready now. Time to end the subsidies.

"Justice Louis D. Brandeis'?s metaphor of the states as "laboratories" for policy experiments ... had almost nothing to do with federalism and everything to do with his commitment to scientific socialism. .... To this day, it continues to inhibit a truly experimental, federalist politics." -- Michael S. Greve

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