Monday, December 10, 2007

Subsidizing Iowa

Subsidizing Iowa
By Jerome Grossman

The political eyes of the nation focus on the farm state of Iowa where voter caucuses will choose delegates to the Democratic and Republican conventions on January 3. The Iowa caucuses are important because they are the first selection of delegates in the country. For many elections Iowa has determined the political trend by giving enormous political publicity to the winner, boosting his/her chances in the New Hampshire primary and beyond.

As in other states, the candidates are evaluated according to personality, electability, endorsements, organization and positions on issues. In this election, the main issues discussed are the Iraq War, immigration policy, and health care.

But the holy issue in Iowa is not discussed because virtually every candidate has pledged to maintain and increase the enormous subsidies for corn and ethanol production given by the federal government. Only one presidential candidate has declared his opposition, Senator John McCain, and the most recent poll gives him 5% in Iowa, far below his national average.

This year, Iowa's farmers and ethanol refiners will receive tax breaks and subsidies amounting to $2 billion. For ethanol this amounts to $.51 per gallon. Iowa gets back from the federal government. $1.10 for every dollar it pays in taxes; the state is not paying its fair share for the military, education, health, etc. and is actually making a profit on the tax system.

Iowa’s representatives in Congress have guarded the state's interests well, particularly their senators, Charles Grassley (Republican) and Tom Harkin (Democrat). They have important seniority as chairs of powerful committees so that it does not make any difference which party is in power. They have it covered.

The corn subsidies were originally installed to protect small farmers from foreign competition and from the big farmers with lower costs. However, as the small farmers disappear, the subsidies enhance the profits of the biggies.

Production of ethanol from corn is controversial. Federal law requires that this biofuel be 10% of all gasoline sold and the industry is trying to get this raised to 20 or 30%. The fundamental purpose of ethanol is to reduce reliance on foreign oil suppliers. However, some experts question the value of ethanol. They point out that the conversion of corn to ethanol requires so much energy that there are no net savings, that the conversion process requires too much water, that ethanol rich blends are corrosive for metals and plastics, could hurt car durability.

These programs have driven up the price of corn and products derived from corn significantly. Corn prices have doubled and diversion to ethanol is raising the overall cost of food as well as diverting grain from poor countries. Today corn syrup is used to sweeten jams, condiments like ketchup, and soft drinks. It is also a favorite ingredient in many so-called health foods. Big increases in the price of foods with corn syrup will affect the diets of millions of American families, and much bigger grocery costs as well.

As ethanol refining plants spring up all over Iowa, conservation of oil and energy is not receiving necessary attention. Subsidization of rational policies for the solution of local or national problems is an appropriate management tool. In this case, the objectives would be national energy independence and efficient use of energy. The technology exists to dramatically cut auto emissions, to reduce automobile consumption of gasoline, to reduce use of electricity, to operate machines with less energy. Let the federal government subsidize these energy-saving installations initially, modernizing our energy system. Simply replacing every old – fashioned electric light bulb in the country with the latest technology is already making a difference. We could do it with a fraction of the trillions of dollars we are spending abroad on oil, on oil related warfare and occupations, on support for client oil-producing states.

The Iowa caucus campaigns would be a prime place to raise these questions. Is there a candidate from either party with the courage to defy conventional Iowa political wisdom, who will demonstrate innovative thinking and the ability to manage the energy problem, by leading the country in a serious discussion of a serious problem? The solution to the energy problem is not in the Middle East but here at home where we can apply our technological skills for the benefit of all 50 states.

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