Freedom from Farmers.

Back in the 1920s and 1930s almost half of Americans lived in communities of fewer than 2,000 people and a full quarter of them lived in rural areas. Massive over-production of basic crops led to an agricultural depression long before the onset of the Great Depression. The larger collapse of the American economy in 1929 eventually led to an effort to address the agricultural problems. The New Deal’s Agricultural Adjustment Act tried to push up farm incomes. The Act linked desirable prices to their highest recorded level, then combined subsidies with payments to not grow crops as a way to meet desirable incomes for farmers. Generally, it worked. The program had been intended as a temporary “emergency” measure, but Congress made it permanent in 1949.

Since then the program has grown while the number of farmers has been reduced. Until recently, the government made direct payments to farmers and picked up almost two-thirds of the cost of insurance against weather-related problems. All farmers, great and small, have benefitted from this program: the average farmer made $87,000 a year in 2011, largely thanks to federal welfare, compared to the national average income of $67,000. At the same time, the “family farm” has become largely imaginary. American farming has become concentrated in the hands of a few giant “agribusinesses.” Since most of the beneficiaries of these programs are in a minority of “Red” states, Republicans bought off the Democrats by including the food-stamp program in the Farm Bill.[1] Probably not what Thomas Jefferson had in mind. Or maybe it was.

In 1973 and again in 1979 oil supplies from the Middle East were interrupted and gasoline prices soared. People eager to insulate the American economy from such price shocks urged the development of alternative fuels. One of the most prominent alternatives was ethanol—alcohol derived from plants. In particular, Middle Western farm states pushed for the conversion of corn into ethanol. However, other adaptations provided a first response. Not until 1995 did the United States government begin to subsidize the production of corn-based ethanol. This program grew tremendously over the next decade as Congress. In 2007 the United States produced about 5 billion gallons of ethanol from corn. It seems likely to grow even larger: in 2007 Barack Obama told an Iowa audience that he favored raising ethanol production to 65 billion gallons by 2030.

So far, so good. Is there a down-side to this pursuit of ethanol as an alternative fuel? Yes, there are several. First of all, corn-based ethanol is incredibly inefficient compared to other forms of fuel. The “energy balance” of any fuel is the ratio between the amount of energy produced and the energy consumed to produce it. Gasoline produces five times the amount of energy needed to produce it. Sugar cane-based ethanol yields eight times as much energy as is needed to produce it. Corn-based ethanol, however, produces only about 1.3 times as much energy as is needed to produce it. In short, you get virtually no benefit for the energy expenditure. Second, ethanol absorbs water. As a result, it cannot be shipped by existing gasoline pipelines and it cannot be mixed to more than a 1:9 ratio with gasoline because it would corrode engine parts. In turn, this means that ethanol has to be shipped by less energy-efficient tanker trucks and that it can only reduce oil-based gasoline consumption by 10 percent. Third, because the energy balance of corn-based ethanol is so low, it takes huge amounts of corn to produce much ethanol. About one-fifth of the existing corn crop is devoted to ethanol. (To reach President Obama’s goal of 65 billion gallons of ethanol by 2030 would require using thirteen times as much corn as is used currently—or about 250 percent of current total corn production. Since corn is used for many different things, the existing 80 percent devoted to producing corn for those purposes would have to remain in cultivation. This means that the real level of corn production would have to go well above triple the present level.)   Devoting corn to ethanol drives up the price of all other corn-derived products: Mexican tortillas, corn-fed beef, anything sweetened with corn-syrup or fried in corn-oil. Shifting land from producing something else to producing subsidized-corn then drives up the price of other goods.

If the energy balance of ethanol is poor, that of campaign contributions is not. One agribusiness giant made $3 million in campaign contributions between 2000 and 2013, but received subsidies for producing ethanol worth $10 billion.

[1] Although, in 2013, in one of those fits of insanity that have become their hall-mark, Republicans decided to shred the food-stamp program. President Obama threatened to veto any bill that didn’t fund food-stamps. “A welfare program for agribusiness,” The Week, 16-23 August 2013, p. 13.



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