by James Pate

Created on: January 27, 2008

So far, government support for ethanol has been a disastrous policy. The mandated presence of ethanol in gasoline drives up the prices of both gas and food. The more corn that is used for ethanol, the less there is for food. And because the demand for food continues to increase (with more people being born), its prices go up. It's all a matter of supply and demand. But don't expect the federal government to understand basic economics.

Supporters of alternative energy argue that federal support will create jobs and stimulate the economy. Actually, what federal support creates is a parasitic business. A parasitic business is one that relies on tax subsidies instead of consumer demand. It survives by taking money out of the private sector and offering something that most people don't want. At the present time, there is little consumer demand for alternative energy, since most people use oil. Jobs should be based on offering services that people want, not the government taking money that is better used in the private sector, for investment, saving, consumer spending, and production.

"But oil will run out!" It will eventually, but that is a long way off. There is so much oil that we haven't even begun to tap. The reason is big government, which has hindered drilling in Alaska and off America's shores. When America comes close to running out of oil, then the private sector will do its own research into alternative energy. And it will do so with more speed and motivation than the federal government can ever muster! The feds have been funding research into renewable energy since 1978. Twenty years later, we are still dependent on foreign oil. Research into alternative energy will proceed a lot faster when it is driven by consumer demand and a desire for profits, not government paternalism.

And, contrary to popular belief, ethanol is not necessarily the best thing for the environment. As Ben Lieberman of the Heritage Foundation documents in the March 28, 2007 edition of the Backgrounder, ethanol increases certain kinds of pollutants. Its production encourages the use of pesticides and the clearing of forests to grow more corn. And it only effects modest reductions in carbon dioxide emissions.

Government intervention does not help the economy or meet America's energy needs. In many cases, it's not even the best thing for the environment! By and large, big government serves special interests. And the ethanol business is as special an interest as you can get.

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