When the Pilgrims gathered for the first Thanksgiving, corn took a prominent place alongside the many meat and fish dishes served. Nearly 400 years later, the holiday menu has changed, but corn is still found on most tables. That’s because corn has been and remains a major food source throughout much of the world. Yet for some reason in the United States, politicians each year would rather gather 40 percent of this valuable crop and burn it on a $6 billion pile of in taxpayer cash.
Powerful agribusiness interests collect a 45-cent-per-gallon tax credit to convert this food crop into ethanol, an unnecessary and sometimes harmful additive to gasoline. Another 54-cent-per-gallon tariff is imposed to keep Brazil’s sugar-cane-based ethanol from entering our shores. Nor does the folly end there. The Food and Energy Security Act of 2007 mandates a massive increase in the production of ethanol by 2022 even though there is no demand. All of this carries a significant economic cost.
The lure of free government money reduces the amount of corn available for other uses, primarily as feed for animals. This has a cascade effect, increasing prices down the food chain and for crops unrelated to corn. Farmers might switch from growing, say, soybeans, to corn to get hold of the extra subsidy. That makes soybeans scarcer and drives up their cost. This year, the price of wheat has increased as farmers have switched to corn to take advantage of high corn prices. In either scenario, the price of food increases, and that’s the last thing we need right now.
With a 9 percent unemployment rate, rising food prices and a $15 trillion federal debt, eliminating these subsidies and tariffs would seem to be a no-brainer. In fact, the Senate voted 73-27 in June to kill the tax credit and tariff, but the House failed to seize the opportunity to save taxpayers $6 billion. The diversion of a huge amount of the world’s supply of corn into the production of ethanol has an impact on food prices not only in this country, but throughout the world.