Kevin Drum - January 2012

Ethanol Subsidies: Not Gone, Just Hidden a Little Better

| Thu Jan. 5, 2012 2:34 PM EST

A few years ago I called subsidies for corn ethanol "catastrophically idiotic." And why not? Corn ethanol, it turns out, is actively worse for the environment than even gasoline, farmers responded to the subsidies by reducing the amount of farmland used for food production, and this drove up the price of staple food worldwide. What's more, back when the subsidies were enacted corn farmers were already doing pretty well. We were shoveling $10 billion in ag welfare to a group of people who were already pretty rich.

In fact, ethanol subsidies are such obviously appalling policy that it's one of the rare areas that both liberals and conservatives agree about. In theory, anyway. But that's never mattered. After all, lots of corn is grown in Iowa, and every four years Iowa holds the first presidential caucuses in the nation. And that has long made ethanol subsidies everyone's favorite pander.

But guess what? At the end of last year, ethanol subsidies quietly expired and no one tried to extend them. On the campaign trail, ethanol subsidies became invisible. It was like a tiny miracle. The Economist's Erica Grieder marshals up several reasons that ethanol subsidies finally died a well-deserved death:

The roaring tea-party movement opposed the subsidies on fiscally conservative grounds, and asked the 2012 Republican candidates to do the same…Then, the budget-cutting frenzy put the subsidies on the table…And concurrently, Midwestern farmers seemed to realise they weren't going to win this one and it might look greedy to keep clamouring…The burgeoning wind and solar industries are increasingly able to produce clean energy without requiring such whopping subsidies or distorting the agricultural markets. The rise of unconventional natural gas has also undercut any excitement around ethanol. And the opposition to ethanol subsidies has gotten more organised.

This is enough to restore your faith in democracy, isn't it? And for that reason, I'd really, really like to end the story right there. But I can't. We're grown-ups, after all. We can handle the truth.

And really, you're probably suspicious of this story anyway. Corn farmers were afraid of looking greedy? (That would be a first.) Tea partiers demanded an end to ethanol subsidies? (I must have missed the anti-corn rallies.) A bunch of politicians decided to stand up to a powerful special interest and do the right thing regardless of the consequences? (Uh-huh.) Maybe there's something we're missing here.

There is. It turns out that corn farmers really don't care about ethanol subsidies all that much anymore, but there's a reason for that. Here is our own Tom Philpott writing in February 2010:

After a flirtation with reason last spring, the Obama EPA has signed off on the absurd, abysmal Renewable Fuel Standard established under Bush a couple of years ago—ensuring that farmers will continue to devote vast swaths of land to GHG-intensive corn, of which huge portion will ultimately be set aflame to power cars—but not before being transformed into liquid fuel in an energy-intensive process.

Tom's a liberal. Here is Aaron Smith, writing a couple of days ago for the conservative American Enterprise Institute:

Deficit hawks, environmentalists, and food processors are celebrating the expiration of the ethanol tax credit. This corporate handout gave $0.45 to ethanol producers for every gallon they produced and cost taxpayers $6 billion in 2011. So why did the powerful corn ethanol lobby let it expire without an apparent fight? The answer lies in legislation known as the Renewable Fuel Standard (RFS), which creates government-guaranteed demand that keeps corn prices high and generates massive farm profits. Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.

The RFS mandates that at least 37 percent of the 2011-12 corn crop be converted to ethanol and blended with the gasoline that powers our cars…[As a result] the current price of corn on the Chicago Mercantile Exchange is about $6.50 per bushel—almost triple the pre-mandate level.

As the Congressional Budget Office wrote back in 2010, "In the future, the scheduled increase in mandated volumes would require biofuels to be produced in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included." [Italics mine.] In other words, the mandates have grown so large that the tax credits barely made a difference anymore. Demand for ethanol is driven by the mandates, not by the tax credit. When you take away the tax credit, nothing happens: Demand stays high because the law says so, corn prices go up accordingly, and corn farmers stay rich. The subsidies were a nice little fillip on top of that, but at this point it's basically chump change.

So there you have it. The fairy tale version of the story was nice, but it turns out that ethanol subsidies didn't go away after all. That's true both literally (most of the subsidy money was redirected to other, smaller-bore ethanol initiatives) and in the bigger picture, where mandates provide the same benefit without being quite so obvious about it. Corn farmers have learned what so many other special interests before them have learned: A nice, quiet subsidy is always better and safer than a garish, noisy one. Now that's what they have.

Front page image: Patrick Fallon/ZUMA

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Planning for Wars That Will Never Happen

| Thu Jan. 5, 2012 12:21 PM EST

The Washington Post reports on the Obama administration's plans to cut back military spending. James Joyner comments:

Oddly, despite having been back benchers during the two hot wars the United States has fought over the last decade, “The Navy and Air Force are expected to fare better because they will play an instrumental role in the administration’s strategy for Asia, where the United States is seeking to counter China’s expanding military power.”

....All of this should remind old hands of the early 1990s. Despite being entangled in a series of peacekeeping/stabilityoperations/operations other than war missions, the Bottom-Up Review and subsequent Quadrennial Defense Reviews planned for a future of major regional conflicts modeled on the wildly unlikely scenario of two nearly-simultaneous wars in Iraq and the Korean peninsula. Yet, the United States military has spent the ensuing two decades fighting brushfire wars.

To be sure, there was the Shock and Awe Lite invasion of Iraq, in which rapid dominance was achieved in three weeks of fighting. But we learned, once again, that a military organized and equipped for major wars wasn’t necessarily one equipped to fight sustained small wars.

I'm always unsure whether to think of this as good news or bad news. The bad news version is the one James talks about: we're busily building a military that's suitable for fighting a war we're never going to fight but unsuitable for fighting the kinds of wars we probably are. If you believe that organizations — even ones whose mission you disagree with — ought to be run efficiently and effectively, then this is purely bad news.

On the other hand, if the Pentagon's old guard is ascendant again, and our newfangled focus on counterinsurgency is being quietly deep-sixed now that the pesky David Petraeus has been kicked upstairs, perhaps that means we'll be a lot less likely to get sucked into brushfire wars in the future. We just won't have the capability most of the time, and that will keep us out of them no matter how loudly the war hawks are whooping it up.

Compared to the alternatives, maybe that's not so bad after all. Unless, of course, it's wrong, and we end up fighting just as many wars as before but fighting them really badly. Take your pick.

The Return of the Cain

| Thu Jan. 5, 2012 11:40 AM EST

I suppose I'm lowering both my IQ and the collective IQ of my readership just by mentioning this, but here is Herman Cain's return to public life:

The former Godfather’s Pizza CEO announced plans to tour the country to raise support for the “9-9-9” plan that was the star of his aborted presidential run, hoping to rally congressional sponsors for his plan to replace the federal Tax Code with a 9 percent corporate tax, 9 percent personal income tax and a 9 percent national sales tax.

....“I started a new movement. The biggest comment I got when I ended my candidacy was to keep 9-9-9 alive. That’s what this is about, and I’m going to keep it alive with what I’m calling Cain’s Solutions Revolution,” Cain said.

What's really going on here? I guess the obvious answer is that Cain is just engaged in the time-honored pursuit of separating fools from their money, but I can't help but wonder if he actually believes this stuff or not. I suppose it doesn't matter, really, but surely Cain isn't so completely divorced from reality that he thinks the Republican Party will ever adopt 9-9-9? Even hardcore conservatives thought it was an idiotic idea.

But I guess he figures he can get a book out of it, and so the clown show continues. Sigh.

The World's Most Annoying Man

| Thu Jan. 5, 2012 10:50 AM EST

The front page of the New York Times piques my interest today with a headline telling me that Tyler Brûlé is my go-to guy if I want to learn about The Next Big Thing. Which I do, naturally. So what is it?

ON a rainy Thursday last month, Tyler Brûlé huddled over a cappuccino at Le Pain Quotidien in Greenwich Village, offering a peek at the future: a Heritage G2 tabletop radio designed for Monocle 24, a new radio station he is starting....“It’s an object with provenance,” said Mr. Brûlé, 43, who looked immaculate in a custom blue flannel blazer, rolled Edwin jeans and Pierre Hardy desert boots that seemed box-fresh, despite dodging puddles all day. “There’s clearly a design language there which hearkens back to the work of the German industrial designer Dieter Rams.”

Um....OK. Anything else? His magazine, of course, but dammit, only if you read it where other suitably hip people can see you:

Mr. Brûlé has no plans for a Monocle magazine app yet: on an iPad, no one can see you reading Monocle.

“So many media companies these days forget the power of the brand, of people actually displaying, and wearing, the media brand,” he said. “In public circumstances where you have to choose a seat, you can look at a person’s shoes, you can look at their luggage, and oftentimes, it’s interesting to see what they’re reading as well. ‘Do I want to be near that person or not?’ ”

Something tells me the answer is "No," and that Brûlé is happy to hear that. So I guess everyone ends up happy.

Onward American Soldiers

| Thu Jan. 5, 2012 12:44 AM EST

Oh for chrissake (if you'll pardon the expression). Here is Rick Santorum early last year:

“The idea that the Crusades and the fight of Christendom against Islam is somehow an aggression on our part is absolutely anti-historical,” Santorum said in Spartanburg on Tuesday. “And that is what the perception is by the American left who hates Christendom.”

....After asserting that Christianity had not shown any “aggression” to the Muslim world, the former Pennsylvania senator — who is considering a 2012 run for the White House — argued that American intervention in the Middle East helps promote “core American values.”

“What I'm talking about is onward American soldiers,” he said. “What we're talking about are core American values. ‘All men are created equal' — that's a Christian value, but it's an American value.”

Every time one of these yahoos surges in the polls, we all take a deep breath and then start cataloging both their past and current tsunami of insane public statements. This time, I'm not sure I have it in me. On a pure policy basis, I can't say that Rick Santorum is really much worse than any of the other GOP candidates this year, but on a purely personal basis I find him by far the creepiest of the lot. I feel like I have to wash my hands whenever I write a post about him.

Via Mark Kleiman, who has more to say about this.

Doing Deregulation Right

| Thu Jan. 5, 2012 12:13 AM EST

Michael Mandel argues that in the complex, modern economy, big companies are essential drivers of innovation. Only companies like Apple and Google are big enough to create the kinds of ecosystems that end up supporting lots of smaller companies and generating lots of jobs. This means that aggressive pursuit of antitrust actions can be a problem:

[Government] regulators are used to thinking in terms of U.S. markets. But most large companies today are global-facing, and concerned with their ability to compete in global markets, to negotiate with suppliers and to find customers. What matters is scale relative to the size of the global economy, not relative to U.S. markets. Scale is not the enemy of American prosperity, when achieved through honest competition.

Ah. "Honest competition." That's the key, and both "honest" and "competition" are equally important components of that. Jim Manzi comments:

I’m glad to see somebody on the left arguing for a modernized view of antitrust, but I think that what is essential if we are to do this is to reduce simultaneously the political power of large companies to stifle competition, as manifest in manipulation of patents, financial regulation, safety rules, and the endless list of regulations, subsidies, and tax breaks that govern the modern economy.

....The market process is imperfect and takes time, but in my view is preferable to one in which we allow large companies (which will always have an advantage in lobbying and compliance) to use the political process to protect their position, which we then counter-balance with antitrust regulation. No real system of political economy is ever pure, so we will always have some amount of political jockeying and counter-jockeying; but in general, the more we get government out of the way of innovation, the better off we will be.

I think that “de-politicizing” the economy could be an important and powerful component of a Republican presidential campaign in 2012.

One of these days, when the Republican Party returns to sanity and Democrats feel like they can safely sit across a table from them again, I suspect that this will be a fruitful area for conversation. Obviously conservatives are always going to have a more expansive view of deregulation than liberals, but if everyone is being honest this is the kind of regulatory reform that can fit the agenda of both sides. For a variety of reasons of political economy, liberals dislike entrenched corporate power and should be eager to dismantle regulations and tax breaks that protect the interests of big corporations and put up barriers to entry that keep smaller companies at bay. Likewise, conservative dedication to the principles of competition and free enterprise should lead them in the same direction. There won't be any Kumbaya moments here, just a lot of grueling political horsetrading, but there's still plenty of scope for agreement here. And it's the only way this stuff will ever happen. Neither party alone will ever be willing or able to stand up to the tsunami of corporate lobbying that stands in the way of this kind of reform.

We're years away from anything like this taking place. Democrats will have to decide that deregulation per se isn't a dirty word, and Republicans will need to edge away from the tea party cliff and agree to genuinely deregulate in the interests of competition, not their corporate masters. Maybe it'll happen someday.

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On Juvenilia

| Wed Jan. 4, 2012 10:55 PM EST

Harold Pollack:

It continually annoys me that Maureen Dowd calls President Obama “Barry.” I find that usage superficial, uncreative, and disrespectful.

In a similar spirit, though, I submit that progressives shouldn’t call Mitt Romney “Willard.” What say others?

Maureen Dowd is a twit, so that explains that. I'm not sure what excuse progs have for the "Willard" nonsense.

Why a Combination Lock is Better Than a Key

| Wed Jan. 4, 2012 6:00 PM EST

This is fascinating. Jeralyn Merritt writes today about a case in which the government got a search warrant to seize a computer that turned out to have its data encrypted. So now the government wants to force the owner to give them the password. Can they do this?

The answer may turn on whether the Judge decides the password should be viewed as a key to a lockbox, in which case there is no 5th Amendment protection, or as a combination to a safe.

While the key is a physical thing and not protected by the Fifth Amendment, the Supreme Court has said, a combination — as the "expression of the contents of an individual's mind" — is.

Now there's the law in its infinite majesty. If you buy a safe with a combination lock, you're golden. If you buy a safe that opens with a key, it's 20-to-life in San Quentin. I'll bet this is the kind of thing that mob lawyers advise their clients about all the time. It also sounds like a great premise for an episode of Law & Order.

Obama Set to Make Yet More Recess Appointments

| Wed Jan. 4, 2012 5:13 PM EST

Apparently President Obama has decided to make three recess appointments to the NLRB in addition to his recess appointment of Richard Cordray to the CFPB. Matt O'Brien tweets:

I'll ask again: if Obama will recess appoint CFPB and NLRB positions, why not also Federal Reserve seats?....CFPB and NLRB draw contrasts with the GOP in a way Obama likes, but the Fed could actually, you know, improve the economy.

Two things. First, I'll bet that Obama doesn't think additional Fed appointments would actually change Fed policy that much. So he doesn't think there's a lot of urgency there.

Second, and more important, if these are the only recess appointmentments he fills, then he's making a very clear, very defensible constitutional point. He's not merely complaining that a Senate minority is blocking his nominees. He's arguing that it's wrong for a Senate minority to shut down entire agencies — agencies that have been duly created by statute — by abusing its confirmation power. Because that's the difference between the CFPB/NLRB and the Fed. The former literally can't function without their appointees, and Republicans have been explicit that preventing them from functioning is their goal. The latter continues to function just fine.

This is a point worth making, even if it's arcane enough that it's unlikely to get much public attention. Because to the extent that it does get public attention, it's nothing but bad news for Republicans. They'll be forced to defend a strategy of using their filibuster power not to stop legislation they don't like, but to unilaterally nullify legislation they don't like even after they've lost the vote and it's been passed and signed into law. That's going to be a hard case to make.

Ron Paul Is Not an Ally Worth Having

| Wed Jan. 4, 2012 3:56 PM EST

A couple of days ago I argued that, if anything, Ron Paul is such a profoundly toxic messenger that his support for a non-interventionist foreign policy probably does the cause more harm than good. Daniel Larison isn't convinced:

The amusing conceit in all of this is that Paul has been or will be bad for non-interventionism. Far fewer people paid any attention to these ideas just five years ago. Non-interventionism has gone from being a more or less marginal position to one that is starting to receive a lot more attention and at least a little serious consideration. It’s impossible to ignore that this wouldn’t have happened had it not been for Paul’s last two presidential campaigns.

Look: I'll concede up front that it's not possible to know for sure what impact Ron Paul is having on public views toward non-interventionism. But come on. It's true that the American public is less enamored of war these days than it used to be, but the obvious reason for this can be summed up in two words: Afghanistan and Iraq. Americans are more skeptical of military adventurism than they were ten years ago because the shock of 9/11 has worn off and we've gone through two spectacularly disastrous foreign wars. Ron Paul has played almost no role in this at all. Hell, even Iraq and Afghanistan themselves probably haven't had much effect. We won't know for sure about this until some kind of serious military action rears its head again, but here's a guess: if Iran makes even the slightest overt military move to block the Strait of Hormuz, the American public will be every bit as keen for blood as they've ever been.1 And frankly, that's probably about as true among Ron Paul's supporters as everyone else. They've always cared mostly about his economic crankery and his opposition to social welfare, not his foreign policy views.

If you're a libertarian, I understand that you won't agree about Ron Paul's general toxicity. That's why my post on Monday was addressed primarily to lefties. For us, even before we learned about his newletters, it should have been crystal clear that he was no cuddly little teddy bear. He's a destructive, insanely-far-right crank, and anything we do to give him a bigger audience is bad for liberalism and bad for the country. After all, let's say that you were, for unimpeachably progressive reasons, really and truly devoted to the cause of federalism. Would you be happy that George Wallace was running for president? Of course not. Because you get the whole package or nothing, and anything that makes George Wallace more popular is bad for the country. Ditto for Ron Paul.

If you want to advance the cause of a less interventionist foreign policy, you need to find a way to persuade the American public to agree with you. Ron Paul doesn't do that. He's never done that. He's such a stone libertarian that he literally doesn't know the language to do it. Because of this, giving him a bigger spotlight does little for the cause of a saner foreign policy. At the same time, it does plenty for less sanity everywhere else because you don't get to control where the spotlight falls. Politics may make for strange bedfellows, but there are limits. There are some allies that aren't worth having.

1I should add that I'm not trying to pretend to be something I'm not here. I'm in favor of a less interventionist foreign policy, a view that has plenty of voices these days not named Ron Paul, but I'm not a hardcore non-interventionist like Paul. If Iran seriously tried to mine the Strait of Hormuz, for example, I'd fully expect the U.S. Navy to put a stop to it, even if that meant sinking a few Iranian vessels.