Corn-fed pork

Ethanol clouds senators’ judgment

James D Hamilton at Econobrowser notes the bipartisan Senate approval of yet another giveaway to ADM and their other pals.

The urge to be seen as doing something about our energy problems is giving rise to legislation that has the potential for more harm than good. The ethanol amendment approved by the Senate yesterday is a case in point.

Whatever the argument in favor of such a measure, it isn’t to provide a new energy source. David Pimental of Cornell concluded that when you take into account the energy required to plant, grow, harvest, and process the corn, 1.7 Btu of energy inputs get used up to produce 1 Btu equivalent in ethanol; Resource Insights and Energy Outlook have more discussion of this.

Which is not to endorse an energy theory of value, as if energy were the only wasted input that we should be concerned about. When you add up the value of the land, labor, and capital also used to produce that 1 Btu of ethanol, the economic loss is really quite considerable. Even the current use of ethanol for fuel would not remotely survive without huge public subsidies already in place.

There are other studies of other processes that yield a more optimistic energy ratio than 1.7:1, but as Hamilton points out, a small energy surplus (and that’s the best case here) is far from enough to justify this barrel of pork.

What is the justification? No real mystery there; the usual suspects are at this trough.

So what is the point of the amendment? Hard to come up with a good answer other than to throw a new benefit to farmers, not to mention Archer Daniels Midland. It looks to me less like an energy plan and more like the usual pork barrel, in this case, corn-fed pork.

The benefit to farmers, at today’s depressed prices, is nugatory. To ADM, priceless (since we pick up the tab…).

Debt relief: cui bono?

The G8’s debt reduction plan is little better than an extortion racket.

We’ve heard a lot of self-congratulatory talk in the media recently about the G8 announcement of some $40B in “debt relief” for third-world countries. You might have wondered about the motivations behind such a move; what’s in it for the creditors?

George Monbiot reads the fine print and writes in the Guardian,

The idea swallowed by most commentators – that the conditions our governments impose help to prevent corruption – is laughable. To qualify for World Bank funding, our model client Uganda was forced to privatise most of its state-owned companies, before it had any means of regulating their sale. A sell-off which should have raised $500m for the Ugandan exchequer instead raised $2m. The rest was nicked by government officials. Unchastened, the World Bank insisted that – to qualify for the debt relief programme the G8 has now extended – the Ugandan government sell off its water supplies, agricultural services and commercial bank, again with minimal regulation.

Paul Wolfowitz, new president of the World Bank, is satisfied. “I’m really delighted … because I think it’s a very important, successful outcome.”

Cui bono? Follow the money.

Brad DeLong’s “Statement on Social Security Reform”

Everything you need to know about the current state of the Social Security “reform” discussion.

In a longish and somewhat technical open letter to the Democratic Policy Committee, economist Brad DeLong lays out the current state of the Social Security argument. Must reading.

Did nobody inside the White House bother to run the numbers? Did nobody care? This breaks my heart–for in yet another of my hearts-of-hearts, I am a technocrat who believes in administrative competence, and think that the President of the United States should not be sent out to make speeches that only an underbriefed fool would write because of the nonsensical things that they say.

Until the center of policy making and implementation in this administration is moved outside the White House to someplace else where people seriously concerned with the substantive design and implementation of policy, nothing the White House proposes–nothing, no matter how good it sounds at first–can be expected to turn out to be anything other than a large pile of mud.

Remedial economics for the WSJ editorial board

Media Matters:

An April 26 Wall Street Journal editorial argued that “the overall tax burden grew more progressive” in the last 25 years because upper income taxpayers pay a larger share of total taxes than they did in 1979. But the Journal failed to explain why upper income taxpayers pay a larger share today: The wealthiest Americans earn a much larger share of total income than they did in 1979.