Notes From the Fieldby Martin Weil

December 29, 2011

Congress eliminates ethanol subsidy

The United States has ended a 30-year tax subsidy for corn-based ethanol that cost taxpayers $6 billion annually, and ended a tariff on imported Brazilian ethanol.

Congress adjourned for the year on Friday, failing to extend the tax break that’s drawn a wide variety of critics on Capitol Hill, including Sens. Tom Coburn, R-Okla., and Dianne Feinstein, D-Calif. Critics also have included environmentalists, frozen food producers, ranchers and others.

The policies have helped shift millions of tons of corn from feedlots, dinner tables and other products into gas tanks.

The Detroit News h/t The Big Picture

The ethanol subsidy was widely promoted as a means of promoting energy independence as corn was a domestic product that could replace a meaningful percentage of the oil we purchase from the Middle East. What the subsidy turned into was a crass subsidy of agribusiness that sparked a massive mis-allocation of capital and land use and caused a spike in domestic and global food prices as well, corn being a principal ingredient of both the US and global diets.

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