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EDITORIAL: Ethanol’s unhappy meal
Food costs to skyrocket under government’s corn fuel mandate
Efforts of lawmakers to buy votes in midwestern states are hitting taxpayers in the wallet. A report by the accounting firm PriceWaterhouseCoopers (PwC) last month calculated the full impact of the congressional directive pouring ethanol into the gas tanks of Americans. This crony capitalist corn scheme drives up prices not just at the pump but at the drive-through as well.
The analysis commissioned by the National Council of Chain Restaurants concluded the federal government's Renewable Fuel Standard would increase the cost of eating out by $3.2 billion every year. Under this mandate adopted in 2005, an arbitrary and increasing amount of ethanol must be sold each year. It's a policy guaranteeing a windfall for suppliers of the corn used to make this unnecessary fuel additive.
For 2015, these agribusiness giants will sell an extra 6 billion gallons of their product, not because Americans want it, but because Uncle Sam says so. To meet the increasing -- and artificial -- demand, farmers must shift production away from crops that put food on the table or feed livestock. This comes at a cost.
The green eyeshades figure that the reallocation of farming resources will drive up the cost of corn by 27 percent, pork 15 percent, potatoes 13 percent, beef 8 percent and eggs 11 percent. This means items on the supermarket shelves become less affordable. The cost of french fries, Big Macs and Egg McMuffins also goes up.
An average fast-food restaurant spends about $180,000 a year on livestock and poultry products. For an industry that, for example, buys 2.3 billion pounds of potatoes each year, even a price shift measured in pennies hits the bottom line hard. Such an increase could prove fatal for family-owned restaurants already struggling in this economy.
The Environmental Protection Agency (EPA) doesn't care. On Nov. 27, the agency, which oversees the ethanol program, rejected a request from governors seeking temporary relief due to the impact of recent weather on crops. As the PwC report explained, "in periods of adverse market conditions, such as the current drought, the mandate requires ethanol production even if there are more highly valued uses for the corn that will be used for the ethanol."
EPA zealots ignore the economic impact of their policies. They'd rather sacrifice jobs and prosperity in the name of reducing carbon-dioxide output, as if a government agency had the power to control the weather. Rep. Bob Goodlatte, Virginia Republican, has a better idea: legislation to repeal the ethanol mandate. Enacting this bill would provide welcome relief at the pump and at the corner diner.
The Washington Times
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About the Author
- EDITORIAL: Free-lunch economics
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