Ethanol Subsidies RIP, Ctd

Jan 3 2012 @ 3:10pm

Joining her colleague Matt Steinglass, Erica Grieder lauds the quiet expiration of corn-ethanol subsidies. Tim Carney is less sanguine, pointing to the ethanol mandate, which still requires that 10% of fuel contain ethanol. Doug Mataconis explains

[T]he reason the industry isn’t complaining too much about the end of the tax credit isn’t because they have suddenly gotten religion and realized that they don’t need government help to push a product that nobody seems to want, it’s because they are now benefiting from the most powerful subsidy of all, mandated demand. It’s as if Congress decided that all fast food hamburgers sold in the United States must include a certain quantity of lettuce and then eliminated a tax credit to lettuce farmers. The industry wouldn’t complain because the new mandated demand subsidy is far more valuable to them, and far harder to repeal once it is enacted, than a tax credit.

Reihan zooms out:

Ethanol subsidies, alas, are not the not the most dangerous protection for incumbent firms in U.S. political economy. As a friend recently observed, the “beauty” of ethanol subsidies is that there is a finite amount of arable land, and so there is a theoretical limit to the extent to which firms could exploit ethanol subsidies. The same isn’t true of the implicit and explicit subsidies that have fueled risk-taking in the financial markets.