Skip to comments.Lessons of the rising fuel prices
Posted on 01/10/2012 1:46:13 PM PST by Graybeard58
The end of the federal 45-cent-per-gallon tax credit for U.S. oil companies that buy and blend ethanol with gasoline has boosted pump prices by a nickel, but largely drowned out by consumers' grumbling were two valuable civics lessons.
The feds require fuel blends that are 10 percent ethanol for most vehicles, and going forward, they have guaranteed greater demand for ethanol with their escalating alternative-fuel mandate. Adopted in the 1980s and twinned with a 54-cent-per-gallon tariff on imported ethanol, the tax credit transformed grain markets by encouraging farmers to devote more acres to corn. That reduced the production of other crops and consequently raised grain prices across the board. Agricultural economics say that has hurt poor people, especially those in the Third World who subsist primarily on grains.
Ethanol also was pitched as an ecologically friendlier alternative to chemical additives. But scientists have found ethanol reduces gasoline mileage while producing more smog-forming ozone than gasoline and about the same amount of greenhouse gases.
In a largely political calculation, the feds let the credit and tariff expire Jan. 1. Republicans went along to burnish their reputation as deficit hawks the government borrowed $6 billion annually to finance the tax credit while Democrats took great delight in sticking it to Big Oil with a backdoor tax increase.
Therein lies the first lesson: You pay corporate taxes. The government may tax companies directly or take away their subsidies; companies calculate the resulting cost and add it to the price of their products or services. Or, they reduce labor costs via layoffs, wage cuts or diminished fringe benefits. In this case, the lost subsidy cost the oil companies 5 cents a gallon, and that cost overnight became your cost.
The other lesson is how government mandates become unfunded. In the process of trying to pick winners and losers subvert the free markets governments pair mandates with subsidies to cushion the blow on entrepreneurs. Later, governments deem the subsidies unaffordable or the beneficiary unworthy of their "tax loopholes." So they eliminate the subsidies, but the mandates go on, and their costs become hidden taxes, forever embedded in the prices of products and services.
Politicians will point out the end of the ethanol tax credit will cost the average consumer only $20 a year, but over time, the cumulative effect of trickle-down tax increases and unfunded mandates local, state and federal is enormous.
Every year, the Center for Fiscal Accountability calculates how long Americans must work to pay their share of the government budgets, mandates and regulations. In 2011, "Cost of Government Day" fell on Aug. 12; in Connecticut, it didn't arrive until Sept. 10, almost a month after Taxachusetts got there. Yes, to pay "your fair share" last year, you worked for the government until the Saturday after Labor Day, only without the inflated wages, diamond-encrusted health benefits, ironclad job security and other perks actual government employees get. And now, thanks to electioneering, your "shared sacrifice" in 2012 will be even greater.
Ping to a Republican-American Editorial.
If you want on or off this ping list, let me know.
Good Gosh! I remember when we worked until March for the Government....NOW they say it’s August. SHEESH!
One of the reasons for the end of the ethanol import tariff is that American farmers are making growing investments in South American farmland.
Ethanol is an unmitigated disaster brought about by our political masters. Talk about crony capitalism.
Ethanol is for DRINKING, not auto fuel!!
No more subsidies, no corn farmer votes.