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Yawn...yes I've read that tripe over at Center for American Progress, where the lefties hang out and ENJOY putting out policy papers that demand subsidies are for the good of the collective. Jake Caldwell of Center for American Progress makes your argument ALL the time along with Senator Harkin, but he's wants the Taxpayers to prop up Ethanol. The "inconvenient truth" is that you're sounding like a big lefty defending pilfering the American Taxpayer pockets....or better yet...a welfare mom.

http://www.ntu.org/main/press_papers.php?PressID=855&org_name=NTU

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Subsidizing Overproduction

For over two decades, ethanol has been portrayed as the way to save the family farm and rural America. Iowa Senator Tom Harkin believes that ethanol will be "the next place to look for income for farmers."[16] And, it's easy to see why. Ethanol's supporters are quick to point out that a new refinery in an area will typically cause corn prices to rise 5 to 10 cents per bushel. According to the industry, ethanol generated $32 billion in economic activity and created 153,725 jobs in 2005.[17] Almost $6 billion of that $32 billion accrued to more than 300,000 growers and producers as farm income.[18] Writing in The Des Moines Register, Editorial Page Editor Carol Hunter highlights the benefits of these jobs for Iowa – and by extension all of rural America – declaring: "Those jobs help keep communities viable and offer new career opportunities for Iowa's young people – and older Iowans, too."[19]

While these jobs give the appearance of stability and vitality, they are in fact an artificial outgrowth of the subsidies that support the growing of corn and the making of ethanol. There are, in general, only two ways to increase farmers' incomes: (1) engage in labor activities off the farm, or (2) increase yields for every planted acre. The motivation at the farm level to secure additional income through additional output leads to an aggregate level of overproduction. As The Salt Lake Tribune observed, "We don't make ethanol from corn because it is efficient.… We make ethanol mostly out of corn because it is astoundingly plentiful, thanks to decades of heavy federal subsidies."[20] Author Michael Pollan estimates that taxpayers spend $5 billion a year – almost half of net farm income – to subsidize the growing of 10 billion bushels of cheap corn.[21] As a result, the U.S. sits on a two billion-bushel surplus of corn. According to Pollan, "Ecology teaches that whenever an excess of organic matter arises anywhere in nature, creatures large and small inevitably step forward to consume it, sometimes creating whole new food chains in the process."[22] In this instance, the need to deal with all of that excess corn – which results in large part from government subsidies – and in turn raise farm incomes is used as a justification for the creation and maintenance of the ethanol industry. It is reasonable, therefore, to question how much of this should come at taxpayers' expense.

Subsidizing Production

Prior to 2004, producers of E10 received a 5.2-cent-per-gallon exemption from the 18.4-cent federal motor fuels excise tax.[23] But as CRS notes, "Because the exemption applied to blended fuel, of which ethanol comprises only 10%, the exemption provided for an effective subsidy of 52¢ per gallon of pure ethanol."[24] In 1997, the then-General Accounting Office found that the excise tax exemption had the effect of reducing the Highway Trust Fund by $7.5 billion to $11 billion over the period from FY1979 to FY2000.[25] Concerns over ethanol's drain on transportation funds led the 108th Congress to replace the excise tax exemption with an income tax credit. Producers can now receive a 51-cent-a-gallon credit for pure ethanol that is used for blending purposes. This subsidy was troubling when it was originally confined to motorists. It is even more so now that it has become embedded in the general Tax Code. In an interview with the Detroit Free Press, ExxonMobil Chairman and CEO Rex Tillerson expresses the skepticism of many, saying, "What the government has done is stick a filter between the signals of the market and consumers. The fact that the subsidies exist shows it's not a viable alternative."[26] The industry is also receiving support at the state level. Data from the RFA shows that 15 states offer some type of producer incentive program. Table 2 highlights some of these programs. Yet, Pete Geddes of the Foundation for Research on Economics and the Environment questions the efficacy of such programs by pointing out, "Since 1983, Montana taxpayers have provided subsidies for ethanol production. And there is not a single ethanol plant in Montana."[27] Minnesota's taxpayers have the opposite problem: subsidizing 11 privately owned plants to the tune of $26 million a year. The NBC affiliate in Minneapolis-St. Paul obtained financial reports from the state's ethanol plants and found that pre-tax profits had risen 300 percent in the past year, from $31 million in 2004 to $131 million in 2005. The Duluth News Tribune reports that Minnesota Governor Tim Pawlenty tried to terminate the subsidy program in 2003 but backed down in the face of opposition from the farmers who owned the plants.[28] David Strom of the Taxpayers League of Minnesota rightly calls this "a giant taxpayer rip off."[29]

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It has not mattered when each time ethanol had a rationale, that rationale either became invalid or the product could not do what proponents claimed; it still surmounted every obstacle due to gigantic political clout. When oil prices crashed in a glut of oil in the mid-1980s, the tax subsidy kept ethanol in use for lead replacement. Ethanol was there when the feds claimed that oxygenation should be required for RFG [reformulated gasoline]. When its too-high RVP [Reid vapor pressure] hurt air quality goals, it was given a waiver. Now, after nearly three decades, the feds say we do not need oxygenation of RFG, but ethanol has won mandated sales increases that go on infinitum.[sic][35]