Editor’s note: Mark D. Friedman is a retired attorney, now practicing political philosophy without a license. His book, Nozick’s Libertarian Project: An Elaboration and Defense (London: Continuum International Publishing), will be released here in May. For a fuller discussion of rights-based libertarianism, please visit his site NaturalRightsLibertarian.com.
HEY, BIG AL, I WANT MY MONEY BACK!!
By Mark D. Friedman
Bernie Madoff’s name shall live forever in infamy for swindling his investors out of some $17 billion (this number excludes the fictitious profits that his victims were told they had made). However, this massive criminal enterprise pales in comparison to another fraud perpetrated by our own government against its own citizens. I am referring here to the massive subsidies and other political favors granted to the corn based ethanol industry, which have already surpassed the size of the Madoff fraud, and are continuing unabated by our corrupt politicians.
The first federal subsidy for ethanol (then called “gasohol”) was passed in 1978 and amounted to four cents-per-gallon reduction in the federal excise tax on that fuel (“E10″). Since that time the amount of the tax credit granted to the fuel blenders has increased dramatically to $.51/gallon, which naturally drives up demand for ethanol and corn. Additionally, our brilliant politicians have mandated that specified percentages of ethanol be blended with all gasoline, banned competing oxygenates (“MBTE”), and enacted prohibitive import tariffs against the far more efficient sugarcane-based ethanol.
Because the favors given this industry at taxpayer expense have taken many forms and because numerous states have joined in, it is difficult to come up with an exact figure for the total pay-off. It appears that to date this party has cost taxpayers about the same amount to date as Madoff stole from his investors, and government support for this fuel is now costing us roughly $7-8 billion a year on an ongoing basis.
Many of us were skeptical of this program from the start, and familiarity has bred nothing but greater and greater contempt. After decades of support or at least acquiescence, the tide of public opinion shows signs of turning. Even many environmentalists have belatedly come to recognize the unintended consequences of this program, i.e. increased food prices, usage of water and pesticides, and now understand the trivial impact that this program has on the release of greenhouse gases.
In fact, late last year one of ethanol’s early and most prominent supporters has recanted. Al Gore, who made his environmental bones on ethanol, acknowledged at a green business conference that “First-generation ethanol, I think, was a mistake. The energy conversion ratios are at best very small.” Why did he initially support and continue to back this dog over many years? His answer: “One of the reasons I made this mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.” And, “It’s hard once such a program is put in place to deal with the lobbies that keep it going.”
Well, gee, thanks for coming clean Big Al, but even Bernie was honest once he got caught. Yeah, he ‘fessed right up. But while Bernie will spend the rest of his life in jail, and those financial institutions that knew or should have known of his scheme will be forced to disgorge, Big Al wins the Nobel prize and makes millions on his credentials as a fearless environmental crusader.
Here is my point. In one very real sense what Gore and his cronies did and continue to do is worse than Madoff’s crime. Nobody put a gun to the head of Madoff’s victims and forced them to give their money to this crook. Had they done reasonable due diligence, they would have realized that what Madoff was offering was far too good to be true. I am not blaming the victim: Madoff deserves to rot in jail, but his dupes at least had the opportunity to avoid this scam.
Not so the unwilling taxpayers financing this great ethanol special interest give away. Our politicians do not hesitate to use the coercive machinery of the state to force this program upon its citizens. As I have argued elsewhere, the state’s power to coerce moral agents to act against their will should be used only when an important public good, such as national defense, can be provided by no other means. No reasonable person could believe that this is the case with ethanol.
First, the fact that the federal government precludes the importation of sugarcane-based ethanol from Brazil belies the claim that our politicians care about anything other than the domestic special interests that have pushed this policy. Second, if the goal of ethanol is to reduce greenhouse gases, and assuming for purposes of this argument only that this is an urgent national priority, there are far more cost-effective ways to spend $7-8 billion a year than converting food to fuel.
But the real tip-off is this. If it were possible to make a fuel substitute for gasoline that was even slightly cheaper, or which was comparably priced, but easier on the environment, this would represent a huge profit-making opportunity. There are very capable and “greedy” (if you prefer) capitalists out there that would love to get involved without the need for a subsidy. The fact that the state has to support the production of ethanol for decades is a dead giveaway that this project is economically unviable and just, well, stupid.
The sorry history of ethanol production in this country also illustrates the futility of “democracy” as a barrier to the impermissible use of coercion by the state. First, politicians from both parties have sold their soul to the ethanol industry. Even more fundamentally, we never get an “up or down” vote on this program, but instead elect representatives to act for us. But when the electorate votes for its senators, congressmen/women, and president, there are other items at the top of its mind, like war and peace, the economy, taxes, and so on. The ethanol boondoggle, as bad as it is, is pretty far down the list. Thus, politicians act with impunity.
The answer is this. The role of the state should as a general rule be limited to its core, legitimate functions like national defense, courts and law-enforcement. If the authorities claim that it is necessary to act outside of these parameters, such as the regulation of pollution or greenhouse gases, we should demand that they provide convincing explanations why voluntary, private sector solutions are impractical. Finally, if the state must act outside of its core responsibilities, we should insist on the most cost-effective answer to the problem at hand. We should be highly suspicious when, as with ethanol, the many are called upon to sacrifice for the benefit of a narrow, politically powerful constituency. And, Big Al, if you’re reading this, I want my damn money back!!!
