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Studies

 

Corporate Welfare

 

“Information Distortion and Competitive Remedies in Government Transfer Programs: The Case of Ethanol” by Dr. Ronald Johnson and Dr. Gary Libecap

 

A major study by Dr. Ronald Johnson, Montana State University, and Dr. Gary Libecap, University of Arizona. “Politicians and the affected interest groups have incentives to limit and distort the information that is released to voters and that political competition is unlikely to be an effective counter….The documented efforts to disguise the actual costs and benefits of the (ethanol) program are important for gaining a broader understanding of the functioning and costs of government transfers in the economy.” This study is in pdf and requires the Acrobat Reader. Click here for HTML version.

 

“Archer Daniels Midland: A Case Study in Corporate Welfare,” by James Bovard, The Cato Institute

 

This major study of corporate welfare tells us, among other things, that every $1 of profits earned by ADM’s ethanol operation costs taxpayers $30. The author writes:

Ethanol, as far as it is used for gasoline, is a political concoction--a product that exists and is used solely because of the interference of politicians with the workings of the marketplace. Ethanol producers must heavily bankroll politicians because their product would otherwise vanish overnight from the nation's gas pumps.

An Agriculture Department report observed: “Each gallon of ethanol contains about two-thirds as much energy as does gasoline, resulting in reduced fuel economy. One would expect vehicles using gasohol to show about a 3.3 percent reduction in miles per gallon since ethanol constitutes 10 percent of the ethanol-gasoline blend. In a recent report on the performance of alcohol-gasoline blends, the DOE concluded that gasohol-fueled vehicles averaged 4.7 percent fewer miles per gallon than gasoline-fueled vehicles in automobile fleets.”

The primary effect of ethanol subsidies on agricultural markets, however, is to allow corn farmers to charge hog farmers and cattlemen higher prices. Roughly 60 percent of all the corn produced in the United States is used domestically for feed grain. For example, the USDA estimates that 5.6 billion bushels of the record 1994 corn crop will be used for that purpose. Assuming that ethanol inflates corn prices by 22 cents a bushel, ethanol policies clearly cost cattle, pork, and other livestock producers more than a billion dollars a year.

Welfare for the Well-Off: How Business Subsidies Fleece Taxpayers

 

Author Stephen Moore is director of fiscal policy studies at the Cato Institute. This study refutes common myths about corporate welfare programs: that they create jobs and promote growth; that they “level the playing field” with our foreign competitors; that they help small businesses; and that the payments are provided without regard to political considerations.

 

The author writes: “Politics, not economics, is the principal motivation behind the ethanol subsidies. Archer Daniels Midland (ADM), a $10 billion agribusiness based in Decatur, Illinois, produces 70 percent of the ethanol used in the United States… ADM and its CEO, Dwayne Andreas, have been among the nation's most generous campaign contributors, having given more than $150,000 in lifetime contributions to former Senate majority leader and 1996 GOP presidential nominee Bob Dole alone.”

 

Full Disclosure for Corporate Welfare

Study by Chris Edwards and Tad DeHaven of Cato Institute. Recipients of corporate welfare such as ADM are getting far more tax money than we know.

The CATO handbook for Congress

Congress should:

 

Common Cause study

 

In October 1997, Common Cause released a report, "Return On Investment: The Hidden Story of Soft Money, Corporate Welfare and the 1997 Budget & Tax Deal." The report found that a number of large soft money donors were big winners in the budget and tax deal, reaping substantial benefits worth billions of dollars.

 

Ethanol

 

CU scientist terms corn-based ethanol 'subsidized food burning'

 

Dr. David Pimental of Cornell University undertook the only independent study of ethanol. He found:

 

  1. It takes more energy to make ethanol from grain than the combustion of ethanol produces.
  2. In addition to paying tax dollars for ethanol subsidies, consumers would be paying significantly higher food prices in the marketplace.
  3. It takes as much cropland to fuel one car with ethanol as to feed seven Americans.
  4. Corn should not be considered a renewable resource for ethanol energy production because of its environmental cost.
  5. If all American cars were fueled with ethanol, corn would cover nearly the total land area of the United States.

 

Click here for a shorter summary of the study.

 

The Bill That Industry Bought

 

Chart by the Sierra Club, showing which companied contributed “soft money” to political parties and what they received in return. Among other things, “The Senate bill would also waive the ethanol industry from liability if ethanol turns out to have environmental or health damaging properties.”

 

Ozone-Forming Potential of Reformulated Gasoline

 

This study by the National Academies, funded by the EPA, found in 1999 that ethanol and MTBE do little to reduce pollution, and ethanol can worsen it. “Because ethanol-blended gasoline is more volatile, meaning that more pollutants are evaporated into the atmosphere, it is difficult for such blends to meet EPA's standards unless the ethanol is blended with a more expensive, lower-volatility gasoline that is not readily available in many markets.”

 

Ethanol Programs – Program Evaluation Division, Office of the Legislative Auditor, State of Minnesota

 

The state of Minnesota evaluated its ethanol program and found that “If the producer payments were not made, and instead taxes on middle income households were reduced by an equivalent amount (to the subsidies), the impact would be a $20 million increase in statewide economic output, as shown in the table. In other words, paying the $17 million subsidy costs the state $20 million in consumer expenditure impacts.” Lower fuel economy brings an annual loss of $24 to $36 million in statewide economic impacts, and increased taxes cost more jobs than they create.

 

“Information Distortion and Competitive Remedies in Government Transfer Programs: The Case of Ethanol” by Dr. Ronald Johnson and Dr. Gary Libecap

 

A major study by Dr. Ronald Johnson, Montana State University, and Dr. Gary Libecap, University of Arizona. “Politicians and the affected interest groups have incentives to limit and distort the information that is released to voters and that political competition is unlikely to be an effective counter….The documented efforts to disguise the actual costs and benefits of the (ethanol) program are important for gaining a broader understanding of the functioning and costs of government transfers in the economy.” This study is in pdf and requires the Acrobat Reader. Click here for the HTML version.

 

Ethanol: America’s Political Cash Cow

 

Study by Taxpayers for Common Sense. “Since ethanol was first introduced over two decades ago, the ethanol subsidy – renewed until 2007 two years ago – has cost taxpayers billions. Archer Daniels Midland Co. (ADM), a politically powerful company based in Decatur, Illinois, would benefit most from the new ethanol windfall -- not small family farmers in the Midwest.”

Ethanol in US gasoline should be banned, not expanded.”

This study shows exactly why “Congress should ban, not extend, the use of ethanol in gasoline.” Expanding the use of ethanol in gasoline will harm air quality. (PDF file.)

 

Hijacked Legacy: Ethanol and the Highway Trust

“If we do not mobilize soon to curb this highway robbery, there may not be much left of our roads – or even our heritage and the underlying, old-fashioned values, which engineered them in the first place.” – Nicholas Hollis, Agribusiness Council

“What’s the True Story on Ethanol?”

From “The Straight Dope,” column by Cecil Adams, The Chicago Reader: the truth about ethanol in plain English. Includes an excellent cartoon which sums it up nicely! November 28, 2003.