How Twisted Can It Get?

Column for week of August 18, 2014

     Please buckle your seatbelt before reading this column. 
It will be a wild, twisted ride.

     The US government forces the use of ethanol in vehicle
fuel.  It also subsidizes production of ethanol.   That same
government also placed a hefty tariff on imported ethanol.  The
reason for the tariff is to protect the US producers of expensive
corn based ethanol from less expensive ethanol made from
sugarcane grown in the tropics.  Sugarcane can be grown much
more efficiently in the tropics than in the US.  That tariff also
protects drivers from lower fuel prices.

     The government also uses tariffs and quotas to block the
importing of sugar.  Government actions make sugar cost about
twice as much in the US as in the rest of the world.  This is
purely a ripoff of sugar users for the benefit of the powerful
sugar producers' lobby.  Everything so far is simply government
granting favors to powerful special interests.  In other words,
government doing what it does best.

     Imagine my surprise when I saw a headline about a
Nebraska ethanol plant giving up on corn and producing ethanol
from sugar.  How could it pay to replace corn with expensive
sugar?  Why did the government even allow its favorite
sweetener to replace its favorite grain?

     Confusing matters even more, I discovered that the
ethanol plant was buying its sugar from none other than the
government of the U.S. of A.  Why does the US government
have sugar to sell?

     Obviously I haven't laid out the complete story yet.  The
US government buys sugar to keep the price high.  That can
work.  Should sugar buyers say "Thank you?"

     Won't the government's sale of sugar defeat its purpose
for buying the sugar?  Not necessarily.  Government sells the
sugar for nonhuman consumption.  I am all but certain that most
ethanol plants are nonhuman.  Of course, the limit on the use of
the sugar makes it sell at a lower price.  Apparently that price is
so low that it makes sense, and dollars, to make ethanol from
sugar.

     The government selling food for nonhuman consumption
is nothing new.   While in grade school I read about the
government buying potatoes, dying them blue, and selling them
for nonhuman consumption.  Some things never change.

     Let us consider some of the consequences of all this
intervention in the market. The artificially high price for sugar
motivated sugar users to seek less expensive alternatives.  This
made corn syrup the preferred sweetener for soft drinks and
many other products.

     At least it is preferred by the manufacturers.  Not all
consumers are on board.  The claimed health hazards of high
fructose corn syrup do appear to be over blown.  Consider that
the sweetener in honey is identical to high fructose corn syrup. 
Unscrupulous honey sellers mix corn syrup with honey.  Also,
when the body digests sugar the first step is to break the sugar
down to the molecules that make up corn syrup.

     Now sugar is replacing corn in the manufacture of
ethanol.  Obviously that displaced corn can be used to make
corn syrup.  The corn syrup can replace the sugar displaced from
soft drinks.  Instead of cars powered by corn and people
powered by sugar, we will have cars powered by sugar and
people powered by corn.  I stand in awe of yet another miracle
worked by government.

     The net effect is the taxpayers are paying double the free
market price for their sugar.  Then they are taxed to subsidize
sugar purchases for an ethanol plant.  What a sweet deal.

     Does anyone besides politicians, bureaucrats and
lobbyists benefit from the scheme concocted by government?  I
give government too much credit.  It didn't concoct most of the
scheme.  Many of the results were the accidental byproducts of
politicians and bureaucrats fiddling with things they didn't half
understand.   In other words, It was just a normal day's work in
D.C.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum