APRIL 11, 2013 BY
We already know that Congress is on a never-ending quest to meddle in our affairs.
They control everything – all for the sake of their own filthy politics.
And since the free market is no exception, the actions of these madmen often result in higher prices for the consumer (you).
It’s sick, really. And it’s been going on for decades.
Let me explain…
A classic example involves the special tax breaks and mandates for ethanol.
Every few years, Congress has a big fight over ethanol. And the real victims of the battle are our cars’ engines – and our wallets.
This isn’t exactly a new issue, either.
40 Years Dirty Politics Come to Light
It all started in 1973 when OPEC declared an oil embargo against the United States in response to our support of Israel during the Yom Kippur War.
Instantly, oil prices rocketed from $3 to $12 a barrel.
Soon, America’s neighborhood gas stations were saturated with cars waiting to fill up. Gas lines and rationing became the order of the day.
After the embargo ended, Congress set out to cure America’s addiction to fossil fuels – especially gasoline – and ethanol swiftly became the go-to fuel source.
In 1978, Congress passed a tax break for ethanol-blended gasoline. Following this, the 1990 Clean Air Act Amendments mandated the presence of an oxygenized chemical compound in gas – thus giving ethanol a huge boost.
Then in 2005, Congress upped the ethanol mandate through new renewable fuel standards (RFS). At filling stations, we now pump gasoline that is up to 10% ethanol.
The problem is that the existence of such a gigantic program in support of ethanol has distorted the market. And we’re the ones who end up suffering at the pump.
So why do these mandates still exist?
The True Price of These Mandates
Well, there’s one group that’s strongly in support of these mandates: corn farmers.
They’d have you believe that the preferential taxation of ethanol is good for consumers. And it keeps prices down when oil prices are high.
Of course, nearly all of American-made ethanol is derived from corn. So the ethanol mandates elevated the demand for corn.
As a result, corn prices climbed, and farmers benefitted.
And making corn farmers happy is a great way to win elections–it’s why we see near unanimous support for ethanol amongst presidential prospects.
I learned this when I worked on Bob Dole’s presidential campaign in Iowa (which is essentially ground zero for corn politics). I was sent out right away to meet with the president of the National Corn Growers Association to ask for an endorsement. And this ultimately helped Dole win Iowa.
Indeed, the all-important caucuses in Iowa, where Barack Obama got his start, are vital to any presidential campaign.
I know. All of this political back-scratching is infuriating to say the least. Had the government never stuck its nose in and interfered with the free market by supporting ethanol, consumers would’ve been better off.
The good news is, the day of reckoning could be upon us.
I’ve heard rumors recently that the ethanol mandate is in serious trouble. And an abrupt removal of ethanol mandates could lead to a price shock in the gas market.
Take heed, Congress!
Bottom line: How this situation settles remains unclear. But it would be great for consumers – and your wallet – if Congress unleashed the free market by giving these mandates the boot.
This article originally appeared at CapitalHillDaily.com and is reprinted here with permission.
Photo credit: Jessie Owen (Creative Commons)