Corn Con

“Completely Wasteful”: Steven Rattner Slams Government Support for Corn Ethanol

Democrats and Republicans are locked in a death-grip over how to cut the deficit but agree the government must get its financial house in order. So you'd think there'd be bipartisan support to end the $6 billion annual subsidy for corn ethanol, which most experts agree is money poorly spent.

Former Car Czar Steven Rattner calls the corn ethanol subsidy "completely wasteful" and almost entirely about naked politics.

"Almost since Iowa — our biggest corn-producing state — grabbed the lead position in the presidential sweepstakes four decades ago, support for the biofuel has been nearly a prerequisite for politicians seeking the presidency," Rattner writes in a recent NYT op-ed entitled The Great Corn Con.

"Those hopefuls have seen no need for a foolish consistency. John McCain and John Kerry were against ethanol subsidies, then as candidates were for them. Having lost the presidency, Mr. McCain is now against them again. Al Gore was for ethanol before he was against it. This time, one hopeful is experimenting with counter-programming: as governor of corn-producing Minnesota, Tim Pawlenty pushed for subsidies before he embraced a 'straight talk' strategy."

In addition to $6 billion in direct government subsidies, Rattner notes the "real" cost to American consumers is much higher. Thanks to mandates requiring certain amounts of ethanol be blended into gasoline, about 40% of U.S. corn production is diverted toward ethanol. That, in turn, drives up the price of feed for cattle and pig, which puts upward pressure on food prices. In the past year, corn prices have doubled while the price of bacon is up 24%, Rattner notes.

Citing these "hidden costs" of mandates, the government's corn ethanol policies are a "much more pernicious force" then even most critics realize, he says.

All this despite studies suggesting corn ethanol is energy inefficient — meaning making a gallon the fuel consumes more energy than it produces.

"Of all the examples I've come across in my time both in Washington and watching Washington, this is one of the most remarkable, inexplicable, inexcusable [subsidies] I've come across," Rattner tells Dan and I in the accompanying video.

Last month, the Senate voted 73-27 to end the subsidy. But the vote was largely considered symbolic since the White House has basically taken a 'mend it, don't end it' approach, meaning Senators had cover to cast the "tough" vote.

Still, the Senate vote is "a signal of the fact the world is changing," Rattner says, holding out hope the political winds are finally shifting away from corn ethanol.

Ethanol -- Too Corny

Senate Backs Repeal of Ethanol Tax Credit

WASHINGTON—The Senate voted Thursday to repeal a $6 billion tax credit for ethanol producers, a move that could signal the end of some federal subsidies as part of an eventual budget and debt-ceiling compromise.

A bipartisan group of senators—40 Democrats and 33 Republicans—joined together in a 73-27 vote to support an end to the subsidy. The subsidy gives refiners a 45-cent-a-gallon tax credit for blending ethanol into gasoline and has been a factor behind higher corn prices in recent years. Sen. Chuck Grassley (R., Iowa), a longtime supporter of the credit, objected to the measure.

The U.S. ethanol industry is protected by a tariff of 54 cents a gallon on imported ethanol and that, too, would end under the Senate measure.

The ethanol provision was added to unrelated legislation that would renew a program directing federal funding to deprived parts of the country to help local governments attract private investment. Even if approved by the Senate, the legislation isn't expected to be taken up by the House, possibly limiting the vote to symbolic significance.

The vote could prove important in the ongoing budget negotiations. By voting in favor of ending the subsidy, it opens Republicans up to the charge that they are supporting tax increases—ending the subsidy would result in higher taxes on ethanol producers. Republicans have rejected higher taxes as a component in any deal on the budget deficit and accumulated debt.

Democrats, led by Sen. Charles Schumer (D., N.Y.), argued this week that it would be impossible for Republicans to maintain that position after the vote this week. But Sen. Tom Coburn (R., Okla.) said he believed an end or reduction to the subsidy would form part of the final budget deal.

"It should send a good signal—if you had $6 billion that you had as an earmark in an appropriations bill that was going to the [ethanol] blenders and we took it away, nobody would've ever said anything about taxes," Mr. Coburn said.

An earlier vote on ending the ethanol subsidy failed on Tuesday, but that was largely because of Democratic anger at the manner in which the measure was brought to the floor.

The amendment was sponsored by Sen. Dianne Feinstein (D., Calif.) who has long pushed for an end to the tax credit.

Senators are now voting on a separate measure that would prevent federal funds from being used for ethanol storage facilities or blender pumps, another attempt at limiting federal support for production of the fuel alternative. That measure is backed by Sen. John McCain (R., Ariz.).

Cuba -- To Aid Socialism, is trying Capitalism

This is a switch. To save the socialist/marxist experiment that has been failing in the Caribbean for 50 years, Raul Castro is applying some Capitalism.

Could there be a more direct admission that Fidel's revolution is dead? Meanwhile, it seems as though Obama has taken his cues from the early Fidel Castro, the one who believes the government is the source of all things, that believes the government provides jobs and money to all. But even Cuba knows that sharing is not true caring.

Meanwhile, it is one of those sad facts that Cuba needs handouts to meet its internal needs. Why, though, has Cuba failed to give Brazil the opportunity to build ethanol plants on Cuban soil? Between Cuba's sugar crop and its need for fuel, there's no doubt the country would benefit from making a deal with Brazilian ethanol experts.

Cuba eyes more self-employment as massive layoffs loom

President Raul Castro expanded self-employment fields on Sunday, ahead of looming government plans to slash as many as one million jobs -- 20 percent of communist Cuba's work force -- from state payrolls.

The economy, 95 percent of which is currently in state hands, does not have the ability to absorb such vast numbers of jobless. Castro's move aims to try to reduce the socioeconomic fallout, but it will be an uphill battle.

The Council of Ministers "agreed to expand the range of self-employment jobs, and their use as another alternative for workers who lose their jobs," Castro said as he gave a closing address at one of two annual sessions of the National Assembly.

After the crash of the former Soviet bloc, Cuba's cash-strapped government in the 1990s approved a wide range of self-employment. Positions such as beauticians, dog groomers, small restaurant owners and even lighter refillers were legalized as long as workers got licenses and paid taxes.

But social resentment emerged as an issue when some workers, particularly in small private restaurants, achieved dramatic levels of success.

The government began increasing taxation and regulation, and decreasing license-granting, until the self-employed sector was largely rendered paralyzed, like the rest of the economy.

Cuba has no regular access to international funding; it depends heavily on the cut-rate oil it gets from Venezuela in order to keep its fragile economy afloat. Tourism earnings and remittances from emigres also are key pillars of the Cuban economy.

Inefficiency is rampant and wages are woefully low.

Cubans' hopes had been running high that some change was coming to allow some economic opening in the Americas' only one-party communist regime.

By 2009, there were just 148,000 people out of a work force of five million who were legally self-employed.

Raul Castro, 79, said he would launch new wage and salary practices early next year. He did not give details.