The politicians we elected to rule over us were not satisfied with their lone action taken in 2005. That legislation not only resulted in a tripling of the price of corn but it also increased the price for everything derived from corn. So they issued another ruling for us to obey. In 2007 the US Congress made a law called the "Renewable Fuel Standard Law" that ordered gasoline refiners to use ethanol produced from plant based, or "renewable" sources. The stated intention of the US Congress was to "reduce our dependence upon foreign oil" but, of course, the law really had nothing to do with its stated intention. The purpose of the law was to favor one source of ethanol over another. The goal of the law was to assign political and financial privilege to one group at the expense of another. That is, after all, what government does best.
There is a big problem with the Renewable Fuel Standard Law however. In their self-perceived omniscience the drafters of the law decreed that the use of corn based ethanol for gasoline blending would be capped at 15 billion gallons per year. Biofuels (also known as cellulosic ethanol) would be expected to supply the rest of the ethanol supply. Our omnipotent and ever wise rulers in Congress simply pulled these numbers out of the air and expected that the economy would be obedient to their commandments. The Renewable Fuel Standard Law mandated that 250 million gallons of cellulosic ethanol be produced this year. The problem is nobody is producing cellulosic ethanol. Even with huge government subsidies it is impossible to make this stuff for a profit.
In their desire to purchase votes and pose for photographs, President Bush and President Obama combined to give $1.5 billion in loan guarantees and outright grants to their favored cellulosic ethanol producers. Today most of those companies have gone bankrupt. Very few companies remain and they combined to produce a grand total of 6 million gallons of ethanol last year. 6 million gallons is a long way from the 250 million gallons the government ordered the few remaining companies to produce. Meanwhile, who is paying for all of this? The taxpayers and consumers of course. Taxpayer dollars were dumped into the black hole of cellulosic ethanol production, never to be seen again. At the same time, anybody who has purchased a product that comes from corn has had to pay more than would have been paid if the government had not become involved in the production of ethanol in the first place. The big and splashy display of government grants, accompanied by speeches, baby-kissings, and barbecued beef was good for the politicians. It purchased votes and good will for them. The daily grind we must bear of paying higher prices, spread out over the entire population of the country, is hardly noticeable. Responsibility for the rising prices is never assigned to government. No, we are told, those greedy corporations are responsible for the rising prices. Ignorant citizens then clamor for the government to regulate corn prices. The politicians always win. Business always looks evil. What a system we have established.
The ethanol debacle in this country is a fantastic illustration of how our rulers really believe they are capable of dictating economic production. They believe they can wave their magic wands and, presto, whatever they decree comes to pass. They really do believe that they are able to control all the factors of the US economy and direct them to their wisely appointed ends. They really do believe they are economic gods. Sadly, the majority of the citizens in this country agree with them. The majority of the citizens in this country are more than willing to consider the members of Congress to be their moral and intellectual superiors and turn over their personal liberties to them in exchange for legislation that favors their personal sensibilities. Welcome to the Socialist Democracy of America.
One final note about this colossal failure of government needs to be added. Government became involved in the ethanol business because it was alleged that the free market had failed to produce what was necessary for clean air and energy independence. Despite massive government subsidies, the end result of the governmental action is also a magnificent failure. Government cannot do something that the free market is incapable of doing. One would expect that government would then fess up to its failure and promise to never do it again, right? Not a chance. As Forbes reports, "Amazingly, gasoline refiners are still on the hook. For failing to blend into their mix the mandated quantities of a fuel that does not exist, the refiners have gotten a $10 million bill from the Environmental Protection Agency". Amazing indeed.