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November 24, 2006
Politics Gives Me Gas
Don Boudreaux
In the hot-off-the-press New Yorker (Nov. 27th issue), James Surowiecki nicely explains how politics prevents the use of economically and environmentally sound approaches to supplying fuel for Americans' automobiles. Here's a free link.
To make a long story short, the political power of U.S. sugar farmers -- power that greedily burdens American consumers with policies that restrict the importation of sugar -- keeps the price of sugar in the U.S. so high that making ethanol from sugar is prohibitively expensive. And this result, according to Surowiecki, is unfortunate: "ethanol distilled from sugarcane is much cheaper to produce and generates far more energy per unit of input—eight times more, by most estimates—than corn does." But Uncle Sam's protection of sugar growers from foreign competition (along with some nefarious doings of the corn-growers' lobby) artificially makes producing ethanol from corn more attractive than producing ethanol from sugar cane.
Here's Surowiecki:
The favors granted to the sugar industry keep the price of domestic sugar so high that it’s not cost-effective to use it for ethanol. And the tariffs and quotas for imported sugar mean that no one can afford to import foreign sugar and turn it into ethanol, the way that oil refiners import crude from the Middle East to make gasoline. Americans now import eighty per cent less sugar than they did thirty years ago. So the prospects for a domestic-sugar ethanol industry are dim at best.
We could, of course, simply import sugar ethanol. But here, too, politics has intervened: Congress has imposed a tariff of fifty-four cents per gallon on sugar-based ethanol in order to protect corn producers from competition. A recent study by Amani Elobeid and Simla Tokgoz, scientists at Iowa State University, projected that if the tariffs were removed prices would fall by fourteen per cent and Americans would use almost three hundred million gallons more of ethanol.
But that isn’t likely to happen anytime soon: the Bush Administration proposed eliminating the ethanol tariff this past spring, but Congress quickly quashed the idea—Barack Obama was among several Midwestern senators who campaigned in support of the tariff—and the sugar quotas appear to be as sacrosanct as ever. Tariffs and quotas are extremely hard to get rid of, once established, because they create a vicious circle of back-scratching—government largesse means that sugar producers get wealthy, giving them lots of cash to toss at members of Congress, who then have an incentive to insure that the largesse continues to flow. More important, protectionist rules flourish because the benefits are concentrated among a small number of easy-to-identify winners, while the costs are spread out across the entire population. It may be annoying to pay a few more cents for sugar or ethanol, but most of us are unlikely to lobby Congress about it.
Note that the newly sainted Barack Obama is no less a scoundrelly politician than is anyone else who succeeds in that profession of predators.
Posted by Don Boudreaux in Energy, Politics, Trade | Permalink
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Comments
I am eagerly waiting for Bruce Hall to post and tell us that Don is wrong at that these subsidies are somehow vital to American interests, American prosperity, American way-of-life, and, most of all, American 'fairness'.
Take it away, Bruce!
Posted by: Lowcountryjoe | Nov 24, 2006 10:57:42 AM
You want us to break free of the dependency of foreign oil simply to be shackled by the equally oppressive dependency of foreign sugar?!
Posted by: Nacim Bouchtia | Nov 24, 2006 12:01:49 PM
It continues to absolutely amaze me that all of these reporters seem to magically believe that the sugar lobby (a relatively small industry with little political clout) manages to impose all of these tariffs while at the same time failing to note that almost every single one of these tariffs also benefits the very large very politically powerful corn industry. Corn products become the substitutes for absolutely EVERYTHING that our sugar tarriffs make to expensive to do with sugar. From high fructose corn syrup to corn based ethanol, the whole game is about creating markets for corn overproduction.
Posted by: quadrupole | Nov 24, 2006 1:47:21 PM
Corn products become the substitutes for absolutely EVERYTHING that our sugar tarriffs make to expensive to do with sugar.
Well, almost everything. Some candies won't work with corn syrup, so instead they're now made in Canada or Mexico instead.
In general, of course, you're absolutely right.
Posted by: John Thacker | Nov 24, 2006 4:00:07 PM
Well, the problem with the Sugar Lobby is that they do have a lot of pull. They spend a lot of money on both parties. You can lump the corn syrup, sugar beet and sugar cane producers into this one category.
Let's not forget our tin foil hats: the Sugar Lobby is also made up of vehemently anti-Castro Cubans.
Posted by: Xmas | Nov 24, 2006 6:55:19 PM
Make peace, not war!
Posted by: Apetemberrutt | Jan 12, 2008 3:29:26 AM
