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Corn Ethanol Who Pays? Who Benefits?. By Ken G. Glozer Former White House OMB, SES Career Official Currently, President, OMB Professionals, Inc. Washington D.C. Consulting Firm kglozer@ombpros.com March 2011. I. Basic Questions About the Book?. Why was it researched and written ?
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Corn Ethanol Who Pays? Who Benefits? By Ken G. Glozer Former White House OMB, SES Career Official Currently, President, OMB Professionals, Inc. Washington D.C. Consulting Firm kglozer@ombpros.com March 2011
I. Basic Questions About the Book? • Why was it researched and written ? • What content does it contain? • Why is the content relevant today? • Who is the intended audience? • How long did it take to complete?
Political History (Part I of Book)Taking Full Advantage of Rising Oil Prices! • Carter Administration; • Reagan Administration; • Bush I Administration; • Clinton Administration; • Bush II Administration; and • Obama Administration
III. Evaluation (Part 2 of book) Of Ethanol Policy Advocates’ Claims! • Is US energy security strengthened; are US petroleum imports reduced? • Is the environment improved? • Are federal budget costs reduced? • Is the US balance of payments deficit improved? and • Is rural employment increased?
III. Evaluation Continued --Energy Security • US petroleum imports are not significantly reduced! • US energy security is not improved; and • Domestic corn/ethanol production is not reliable due to weather uncertainty!
III. Evaluation Continued--Improve the Environment! • GHG emissions compared to gasoline are not reduced; • Vehicle tailpipe emissions both increase and decrease depending on the pollutant; • Corn production and ethanol plants consume enormous amounts of water; • Corn production is a heavy polluter of waterways due to runoff contributing to dead zone (hypoxia) over major area-- Gulf of Mexico; and • Overall, environment is degraded not improved.
III. Evaluation Continued—Are Federal Budget Costs Reduced? • Federal budget costs are estimated to increase substantially under current corn ethanol policy; • Main reasons; corn, soybean producer subsidies were reduced but not as much as claimed in the farm bill; and • The cost of 45 cent per gallon tax credit for the higher mandated ethanol volumes results in the tax subsidy cost tripling as compared to the period 1995-2006.
III. Evaluation Continued--Is BOP Deficit Reduced? • No because petroleum imports are not reduced.
III. Evaluation Continued--Is Rural Employment Increased? • Yes, in the ten Midwestern states that produce over 80% of US corn and ethanol production
IV. Who Pays for the Policy? • Two to three hundred million federal taxpayers and food and gasoline consumers located throughout the U.S.; and • The estimated cost is over one half trillion dollars from 2008-2017. These costs include an estimated $143.0 billion in increased taxpayer costs and an estimated $363.7 in consumers costs.
V. Who Benefits? • Corn and soybean producers; • Owners of corn and soybean farmland; • Ethanol plant owners and workers; and • Petroleum refiners and importers.
VI. Conclusions • Corn ethanol advocate’s claim are not true except for rural employment in the 10 Midwestern states; • Current policy is costly—over one-half trillion $$$ from 2008-2017; and • Current policy is a wealth transfer policy masquerading as an energy policy!
VII. Recommendations • Let the 45 cent per gallon tax credit expire the end of this year---2011. • Let the 54 cent per gallon import fee and 2.5% ad valorem tax expire the end of this year. • Eliminate the quantitative mandate! • Rely on the competitive market!