Coyote Blog

When the left lambasts a government intervention into the economy and energy policy, you know the program has to be bad.  From Kevin Drum:

Terrific. Let's see: (a) environmentally speaking, corn ethanol is a
pretty dodgy idea, (b) we're subsidizing it anyway to the tune of $3
billion per year, (c) farmers, as you'd expect, are responding to the
subsidies by reducing the amount of farmland used for food production,
(d) this is driving up the price of staple food worldwide, and (e)
we're going to toss another $10 billion in ag welfare to already-rich
corn farmers on top of all that. Jeebus. Can anyone think of any other
single policy that has as many simultaneous baneful effects? Are we
complete morons?

The only quibble I would have with this paragraph is to change environmentally "dodgy" to "provably disastrous in study after study."  Corn ethanol subsidies and regulations raise gas prices, raise food prices,raise taxes, actually increase total energy use (since it takes more energy to make than it provides) and increases CO2 production.  A lose-lose-lose-lose-lose.

Here is an interesting question:  How much of the current government corn ethanol support and regulation would exist if Iowa has the last presidential primary, rather than the first  (yeah, I know, its a caucus, whatever).

Finally, the blinders are coming off and the media is starting to
wake up to the absolute travesty that is the Congress's promotion of
ethanol.  From Rolling Stone(!) emphasis added.

This is not just hype -- it's dangerous, delusional bullshit.  Ethanol doesn't burn cleaner than gasoline, nor is it
cheaper. Our current ethanol production represents only 3.5 percent of
our gasoline consumption -- yet it consumes twenty percent of the
entire U.S. corn crop, causing the price of corn to double in the last
two years and raising the threat of hunger in the Third World. And the
increasing acreage devoted to corn for ethanol means less land for
other staple crops, giving farmers in South America an incentive to
carve fields out of tropical forests that help to cool the planet and
stave off global warming.

So why bother? Because the whole
point of corn ethanol is not to solve America's energy crisis, but to
generate one of the great political boondoggles of our time. Corn is
already the most subsidized crop in America, raking in a total of $51
billion in federal handouts between 1995 and 2005 -- twice as much as
wheat subsidies and four times as much as soybeans. Ethanol itself is
propped up by hefty subsidies, including a fifty-one-cent-per-gallon
tax allowance for refiners. And a study by the International Institute
for Sustainable Development found that ethanol subsidies amount to as
much as $1.38 per gallon -- about half of ethanol's wholesale market
price.

Hurrah!  Unfortunately, I fear we may be waking up too late.  Already, billions of dollars are being invested by politically connected companies
on the promises of subsidies and promotion of ethanol extending out to
the end of the universe.  At this point, ethanol may be as entrenched
as agriculture subsidies, the education department, and depression-era
alcohol regulation.  The government has no problem reneging on contracts with oil companies, but God forbid anyone deny Archer Daniels Midland the right to infinite subsidies.

I don't think that government action on greenhouse gasses is justified.  That's not to say that man is not helping nature warm the planet some, its that the man-made warming, when you strip away the exaggerations, does not justify the cost of preventing it.  Since I wrote 80+ pages on it here, I won't delve much further into it. 

However, if we are going to take action, a carbon tax is way, way better than cap and trade.  I used to think that cap and trade made more sense, but I have changed my mind.  Cap and trade systems have a lot of potential for error and abuse, but there is one issue that is not adequately discussed:  They are also a huge subsidy and protection for current businesses, effectively penalizing new entrants.

Why?  Because most cap and trade systems begin by giving out emissions credits to current industry incumbents.  These are credits that new entrants will have to purchase, tilting the playing field in favor of current industry leaders.  This is the kind of thing Europeans love, because their largest business interests effectively control the government and keep out new competition, causing their economies to stagnate.  Steven Milloy is one of the few folks raising the red flag on this issue:

Under
the LCEA, the federal government would annually issue rights or
"allowances" to emit GHGs. In the first year of the bill, slated as
2012, allowances would be issued for approximately 6.65 billion metric
tons of GHGs. The amount of allowances slightly decreases every year "“
for example, 6.59 billion metric tons in 2013, 6.53 billion metric tons
in 2014, etc. "“ until it finally levels out at 4.82 billion metric tons
in 2030 and beyond.

These allowances have monetary value "“ a lot.

Owners
of allowances can either use them to pay for their GHG emissions or
they can sell them to other emitters who need allowances. Emitters can
also simply pay the federal government directly to emit GHGs at a cost
of $12 per metric ton of carbon dioxide starting in 2012. This price is
slated to increase annually by the inflation rate plus 5 percent. By
2030 "“ and unrealistically assuming that no inflation occurs "“ the
pay-to-emit price would be about $27.50 per metric ton of carbon
dioxide.

Using the pay-to-emit price, the GHG emissions
allowances issued by the federal government in 2012 will have a
potential market value of $80 billion. The annual market value of these
government-issued allowances will rise to over $100 billion by 2018 and
hit $130 billion in 2030. It will only take about 10 years "“ exclusive
of any inflation "“ for value of the allowances issued by the government
to exceed $1 trillion.

And incredible as it sounds, the bulk of
these allowances "“ 76 percent for the first five years, declining to 47
percent by 2030 "“ will be given away at no charge to special interests
including private industry, farmers and states. This global warming
giveaway works out to a total of $1.34 trillion of free money "“ not
adjusted for inflation "“ that would be handed out to global warming
special interests from 2012-2030. After 2030, the annual amount of free
money handed out is about $65 billion, increasing by 5 percent per
year, exclusive of inflation.

Unfortunately, politicians will always favor an indirect tax over a direct tax because they are gutless and entirely free of any nagging principles.  Cap and trade systems would raise consumer prices at least as much as a carbon tax, but the price increase would appear to be made by industry and not due to a visible government tax.  Congress can point the finger at industry and say, it's not our fault, it's those greedy guys in industry driving up prices.

Further, the carbon tax is hard to game.  Everybody pays.  But cap and trade - Oh the beautiful potential to milk various constituencies for donations!  If the government sets up a program where some groups get credits for free, and some have to pay for them, well of course every industry is going to pour millions upon millions into politician's hands trying to make sure they are in the favored group. 

What a mess.  We are already seeing the huge distortions coming from nutty ethanol subsidies, and that is due to the pressure of just one industry (farmers and ADM).  Just think of the distortions form this program.  There may be a good chance that misguided attempts to manage greenhouse gasses may well be the largest threat to the American economy and free marketplace, well, ever.  Which, by the way, is why every Marxist and socialist on the face of the earth are right at the forefront of the global warming movement.

If you suspect that the world may be warming, but not nearly enough to justify such costs in terms of both dollars and lost freedom, you might want to read this.

Though it is nominally called an "energy" bill, the Senate just passed the largest farm-subsidy bill in history:

The legislation would require ethanol production for motor fuels to
grow to at least 36 billion gallons a year by 2022, a sevenfold
increase over the amount of ethanol processed last year. It also calls
for boosting auto fuel economy to a fleet average of 35 miles per
gallon by 2020, a 40 percent increase over current requirements for
cars, SUVs, vans and pickup trucks.

The evidence is absolutely unequivocal that corn-based ethanol doesn't reduce net energy use, since it takes at least as much energy to grow and produce as it provides.  It is even worse as environmental policy, since it almost certainly increases total pollution and CO2 production, particularly as ethanol is produced with Midwestern coal-powered electricity.   In addition, it is going to cause marginal lands and open space to be brought into corn production, reversing a 70-year trend in the US towards increases in wilderness and forested land.  It is going to increase fuel costs to no real purpose.  This is dumb, dumb, dumb.  So stupid that I can't even get the energy to criticize the new CAFE standards.  If they really wanted to meet their goals, a carbon tax would have been cheaper and more effective, but that would have taken political guts.

I understand the environmental logic to tax petroleum -- I don't particularly agree with it, but some sort of carbon-based tax is probably the least-bad way to achieve various environmental goals (I will leave for other posts whether these goals make any sense).

However, the Senate's proposal to tax oil companies directly, rather than the oil or petroleum products themselves, is a gutless chickenshit maneuver that is just so typical of politicians.  A tax on oil companies is less efficient than a direct carbon tax on the fuel (because it is operating less directly on price signals), but it makes sense to our political masters for several reasons:

• Populist Congressman can argue to their constituencies that "we didn't tax you consumers, we taxed those evil bloated oil companies."  Of course, in the end, the money comes from consumers anyway.  That's just basic economics.
• Oil companies, not politicians, get blamed for collecting the tax from consumers.  This is an tried-and-true approach, that has worked well with gasoline taxes embedded in pump prices.
• When oil prices inevitably rise due to the tax, the Congress will use this oil price rise as a rallying cry to...increase taxes more.  It is the classic government win-win of proposing increased regulations to solve problems caused by government regulations.

This part is even worse:

Another measure, pushed by Sen. Jeff Bingaman, D-N.M., was aimed at
collected $10.7 billion in royalties the government has been unable to
collect because of flawed oil leasing contracts issued by the Interior
Department in 1998-99. The government would collect an excise tax on
any oil taken from the Gulf of Mexico, subject to royalties not being
paid.

Here is what happened:  The government wrote offshore lease/royalty contracts in a certain way.  Oil companies read the contract language, and entered into the contract as written, and subsequently invested billions of dollars to develop the leases.  More recently, as oil prices rose, the government thinks it made a bad deal, and should have written the contracts differently.  The solution for private companies who make a bad deal: live with it.  The solution for the government, though, it apparently to use the coercive power of the government to extract the royalties you failed to put in the contract 18 years ago via special excise taxes.

And don't even get me started on this farm subsidy program masquerading as energy policy:

The bill would funnel about $11 billion over 10 years into the
development of renewable fuels such as ethanol, biodiesel and power
from wind turbines in a combination of extensions of existing tax
breaks and new tax benefits. An additional $18 billion in tax breaks "”
from tax credits to clean and renewable energy bonds "” also were
approved.

We are making a mistake of epic proportions pouring money and regulatory breaks into ethanol.  Ethanol, in the form we ar investing in it in this country, does NOTHING to reduce our oil use or improve the environment or reduce CO2 emissions.  Nada.  All it does is increase taxes, increase fuel prices, increase food prices, and, soon, cause environmental problems as marginal lands are brought into corn production.  I made a plea to stop this before it is too late, ie before the industry becomes so entrenched it will be politically impossible to cut it off.  I fear we are rapidly approaching this point of no return.

I have no problem if someone wants to compete out there in the free market producing fuel from corn or switchgrass or whatever.  But we have got to stop the subsidies right now, before it is too late.  Biofuels do absolutely nothing, zero, zippo to change CO2 production, and some studies show they make CO2 output worse when you consider the whole production cycle.  This is not to mention the effect biofuels will have in putting more wild and forest land under the till. 

I can't see any conceivable benefit to the economy from subsidizing biofuels, except some hazy notion of energy independence which has limited economic value and which will never be achieved with biofuels  (we will have jacked up the price of corn so high we can't feed cattle long before biofuels make even a minor dent in oil imports).  My only guess as to true motivation is that people want to spite Exxon and Shell, but if you don't like those companies, you really aren't going to like Archer Daniels Midland. 

Biofuels, given current technology, are a pure product of politics.  They are a massive subsidy of Midwestern farmers that the recipients can claim is not really a subsidy.  If the first presidential primary were in Nevada rather than Iowa, you would never hear a word from politicians about ethanol.

But here is the reason we need to end the subsidies right now.  [emphasis added]

A $400-million integrated biodiesel and ethanol refinery the first
complex of its kind in North America will be built in central Alberta.

Led
by Dominion Energy Services, LLC a Florida-based group with pioneering
ties to Calgary's natural gas marketing sector investors that include
$45-billion US private equity fund The Carlyle Group LLC and affiliate
Riverstone Renewable Energy Infrastructure Fund I, LP said Monday they
have finalized plans for the facility....

Alberta Agriculture Minister Doug Horner noted the "world-class"
Dominion plant follows the provincial government's recent, $239-million
over five years initiative to boost biofuels production. The province
will provide a 14-cent per litre production credit to the facility.  [for those rusty on the metric system, that is 56-cents per gallon or $23.53 per barrel]

Companies are currently building massive subsidy-magnets biofuel plants.  Once these investments are in place, there is going to be a huge entrenched base of investors and workers who are going to wield every bit of political power they can to retain subsidies forever to protect their jobs and their investment.  Biofuel subsidies will be as intractable as peanut and sugar subsidies and protections.

Update:  Radley Balko mentions another great example.  For various post-prohibition reasons that may or may not have made sense at the time, state laws prohibit retailers from buying alcoholic beverages straight from the manufacturer - e.g. Costco cannot buy direct from Anheiser-Busch.  Wholesalers who emerged to fill the legally required middleman role became rich.  Since then, even thought this 3-layered distribution requirement makes zero sense, it has become impossible to change it because the wealthy distributors who owe their fortunes to the requirement block every move to deregulate.

I can't speak to the "future technology" that Bush alluded to in his SOTU address, but the history of ethanol gives me no confidence that there is anything here.  Ethanol is all about rent-seeking, not energy Independence.  Quality studies have consistently shown that the whole life-cycle energy use of ethanol is far higher than what it provides.  In other words, at least with current technologies, every gallon of ethanol used actually INCREASES total petroleum use.  Its hard to find any scientist outside of the ADM boardroom or the state of Iowa that takes ethanol seriously.  If we took the small step of moving the Iowa caucuses out of the first primary position in the presidential race, ethanol might go away.

Right now, I am running out the Phoenix Mardi Gras, where a golf tournament often breaks out mid-party, so I don't have a lot of time.  However, trust me that this USA Today article has bent over backwards to cherry pick scientific studies in favor of ethanol.  The figures mentioned for ethanol providing 26% more energy than it consumes are the absolute most optimistic study, not the consensus average, of scientific studies.  Also, the Berkley study is on "potential" technologies, and even it admits that using current technologies actually deployed ethanol consumes more energy than it provides. But even at 26%, note that this means that more than 4 gallons of ethanol substitute net out only 1 gallon of gasoline, which is pretty pathetic.  Anyway, more later.  I am sure others in the blogosphere will be hacking away at this mess today, and I will try to link some of them tonight.

Update: I am in sports heaven today, at the golf tournament all day and watching the Superbowl tonight, so I still have not gotten back to this topic in depth, but our commenters have taken over for me on this one anyway, so I may just kick back with another beer let y'all do the work for a while.  No one would be happier than me to find that we could grow things cheaply to net increase our supply of clean fuels.  Unfortunately, I am not optimistic about the interaction of the government with any market for things that grow.

For some time, I have secretly harbored the theory, without any scientific knowledge to back it up, that somehow bioengineering might long term lead to the most efficient solar conversion technology.  And in a sense, this is what we are talking about here -- finding a
biological solution to converting sunlight into energy in a usable form.  I suspect we are on the cusp of an exponential growth curve in biology like we experienced with thermodynamics, electromagnetics, and semiconductors over the last two centuries.  But if we are at such an inflection point, it just highlights how hopeless it is for government in general and George Bush in particular to pick winners at this point.  What combustion technology might the government have locked us into in 1800?  What computing technology might we have been locked into in 1950?

More at the Knowlege Problem.

Well, I had a number of emails asking for the specifics of my computer build, so all you non-geeks can move on.  Hopefully I will get a post up on the USA Today putting for-gods-sakes ethanol on the front page of today's paper.  Anyway, here is my computer build components:

• ASUS A8N-SLI Premium motherboard.  This basic motherboard platform is rock-solid.  The premium version mainly brings a quieter heat-pipe design to cool the mobo chipset and a software rather than hardware switch for single to dual SLI.  It is one of the better overclocking platforms, with good BIOS options.  It has a couple of quirks, probably the most important of which is that it tends not to like RAM in 4 sticks -- better to use two.  I chose not to use the newer A8N32-SLI, which is supposed to increase the bandwidth when 2 SLI cards are used.  However, I think the Nvidia chipset for this was rushed (to please Dell) and tests show its not necessarily faster, even with 2 SLI cards, than the one I bought.  Also, I wanted to shy away from bleeding edge for my first build
• AMD 64 Athlon X2 (dual core) 4400+ microprocessor.  This is the 2.2Ghz Toledo core with the larger cache.  As I mentioned yesterday, its a notch or two less fast than the top of the line, which tends to be a better value.  And the consensus opinion is that AMD is dusting Intel right now.  I got the large cache because you can always overclock but you can't overcache.  The dual core is clearly the wave of the future, and more games and programs will support it in the future.  I was a bit worried that I would have some compatibility problems at first, but I have had none, even on Star Wars Battlefront 2, which was reported to have a compatibility issue with dual core
• 2 gigs of memory from Corsair, in 2 1GB sticks.  Corsair is a top company in memory.  I can't tell you how many people struggle to overclock their PC a few percent but have too little memory.  Tests show even going from 1 to 2 gigs shows real results.  I got the Twinx-2048-4000.  I debated between lower speed (ddr 400), lower latency memory and higher speed (ddr 500) higher latency memory.  I went with the latter, hoping that it was better for overclocking, but this is one issue not well addressed online.  The answer is probably here, but I decided it would not matter that much for me.  If you go with 512K sticks rather than 1 Gb sticks there are more options for memory that is both low latency and higher ddr.
• I wanted to try my hand at overclocking, so I wanted a good CPU fan.  Zalman has a lot of great products, so I went with the CNPS9500, which looks cool too.  Its quiet and keeps the cpu ice cold.  It looks huge but it fit fine.
• I may have made a mistake on the case.  I went with an Aspire X-Navigator, which is cool looking and keeps everything cool inside but is loud.  I might next time research for a quieter case.
• I splurged and went with dual SLI, because I love games, and bought two evga 7800GT sli cards.  I never really understood the variations in their 7800GT cards - some variations of memory speed, I think.  The nvidia sli chipset right now blows anything else away - it is the ONLY choice for gaming.  A pair of GTX's would have cost me $400 more.  Again, I find the best price-value point a step or two below top-of-the-line.  I didn't realize until later that DirectX 10 will be a pretty substantial upgrade, which will require new chips to support it.  That means that if you are a gamer, you will probably want a new card in 12-18 months.  Knowing this, I certainly wouldn't pay for GTX right now and might have only gone with one rather than 2 cards.
• I bought a couple of 250Gig Seagate SATA 3gb/s hard drives and put them in a raid 0 configuration.  This makes a 500 gig hard drive that is fast as hell.  This is cheaper than buying a single 500 gig and it is faster, but it will be less reliable since data is "striped" across the two drives, so that if either fails, you lose ALL the data.  Because of this issue, I bought a smaller 160 gig drive that runs separately as a backup for my data.  By the way, this was the one issue I had with my install.  Basically I had to leave this 160 gig drive unplugged until I get windows installed on the raid 0 drives and make them bootable, or else the system would get confused.  Once windows was installed on the raid drives and was bootable, then I plugged in the third drive and partitioned it and all was well.
• Power supplies seem to be a nightmare in terms of failure rates.  I use a 650 watt Silverstone Zeus and it has been fine and it had all the cables I needed.  Note you need at least 500 watt and probably 600 if you are going dual sli.
• Other components include a fast NEC DVD read-write drive (whichever one was highest rated on newegg), a floppy drive (you HAVE to have one to load the drivers for this self build if you are using a raid drive array) and a nifty little drive that accepts all kinds of memory cards on the front panel.  And windows of course.

This article on the Corsair web site provides an outstanding walk-through of how to build and set up your PC, demonstrably sufficient for even the noob since it got me through it.  I actually found this after I bought my components so I was happy to see that the component selection in the article for a high-performance gaming box was very similar to mine.  I also have the logitech cordless keyboard and mouse shown and love those too.

Have fun.

Update:  In response to the question in the comments, this build cost about $2000, which is expensive for a desktop, except that I expect to get much longer life out of this thing with performance that stays top notch for a while and many upgrade paths.  It might have been more but several parts were on weekend sale at newegg and others had cross-promotions (i.e. if you buy the AMD procesor and the evga card you get an extra $30 off).  Also note that this is a very competitive system to gaming rigs (e.g. Alienware) costing over $4000. You could take a few steps to bring this under $1500:  One 6800 GT rather than two 7800GT graphic cards would save almost $400.  One graphics card would let you save about $50 or more in the power supply, and you could easily get a good case for $50-$75 less.  Making these subs would get you a very very good rig for under $1500.  Dropping down a notch on the CPU could save another $200.  Smaller hard drive capacity could save $100-150, though hard drives are so cheap, I think it is short-sighted not to overdo it a bit.  I still remember my first hard drive card for my original IBM PC.  It was 10 meg, and my thought was "I'll never be able to fill that much memory".  LOL.

The build time was probably 8 hours, including windows installation and disk formatting.  This includes three false starts:  one, when I thought the power supply was bad but I had just forgotten to hook up the on/off signal wire; two, when the floppy drive actually was bad and I had to run to compUSA to get a new one; and three, when I struggled, as mentioned above, to get windows installed with the hard drive configuration I had chosen.  If everything had gone smoothly, I could easily have done it in 4-5 hours.

Did I mention I love this rig?  Its like the geek version of showing up to your high school reunion in a Ford GT.

Previously, I asked "why won't ethanol just go away", lamenting what a stupid program ethanol is and how much subsidy money is poured down that drain, not to mention the effect it seems to have on the Iowa primary every 4 years.  Yet another study has shown that ethanol consumes more energy to make than it actually produces. 

Turning plants such as corn, soybeans and sunflowers into fuel uses much more
energy than the resulting ethanol or biodiesel generates, according to a new
Cornell University and University of California-Berkeley study.

"There is just no energy benefit to using plant biomass for liquid fuel,"
says David Pimentel, professor of ecology and agriculture at Cornell. "These
strategies are not sustainable."

Pimentel and Tad W. Patzek, professor of civil and environmental engineering
at Berkeley, conducted a detailed analysis of the energy input-yield ratios of
producing ethanol from corn, switch grass and wood biomass as well as for
producing biodiesel from soybean and sunflower plants. Their report is published
in Natural Resources Research (Vol. 14:1, 65-76).

In terms of energy output compared with energy input for ethanol production,
the study found that:

• corn requires 29 percent more fossil energy than the fuel produced;
• switch grass requires 45 percent more fossil energy than the fuel produced;
  and
• wood biomass requires 57 percent more fossil energy than the fuel produced.

In terms of energy output compared with the energy input for biodiesel
production, the study found that:

• soybean plants requires 27 percent more fossil energy than the fuel
  produced, and
• sunflower plants requires 118 percent more fossil energy than the fuel
  produced.

In assessing inputs, the researchers considered such factors as the energy
used in producing the crop (including production of pesticides and fertilizer,
running farm machinery and irrigating, grinding and transporting the crop) and
in fermenting/distilling the ethanol from the water mix. Although additional
costs are incurred, such as federal and state subsidies that are passed on to
consumers and the costs associated with environmental pollution or degradation,
these figures were not included in the analysis.

Lynne Kiesling points out that, like swallows returning to Capistrano, a new energy bill debate in Congress has brought out the Ethanol advocates.  Lynne takes several good swipes at this stupidity:

I actually just heard John Thune say that ethanol is a clean fuel that will
lessen our dependence on foreign oil. Spare me. Ethanol is neither clean nor a
silver bullet to make us self-sufficient in energy. Ethanol production is
filthy, just as dirty as other manufacturing processes, particularly when you
take into account the appalling effects of fertilizer runoff killing fish in the
Gulf of Mexico when growing the corn for the ethanol. Why don't the Senators
from Louisiana open up a can of whup ass on this one?

Reducing dependence on foreign oil is a specious objective when you recognize
that oil is traded in integrated world markets and we are not low-cost
producers. So even if we reduce our oil consumption the marginal barrel of oil
will still come from somewhere in the Middle East. That won't change. Reducing
our consumption would be likely to reduce oil prices (but only marginally,
because China's demand is the big price driver right now) and would be good from
a conservation perspective, but it won't change the fact that we import oil from
places we don't think we can trust.

What she does not mention, probably because she is tired of repeating the obvious, that most careful studies show that producing ethanol requires as much or more energy than it provides.  In other words, it takes more than a barrel of oil to make the fertilizer, run tractors, harvest the corn, take it to market, and process it into a enough ethanol to replace a barrel of oil. 

To prove this, I would point to a lot of studies from ethanol opponents, but I will instead use data from an ethanol supporter.  From this biofuel support site:

In the US most ethanol is
made from corn (maize). A US Department of Agriculture study concludes
that ethanol contains 34% [sic, see below] more energy than is used to grow and harvest
the corn and distill it into ethanol.

Here are a couple of observations.  First, 34% is incorrect.  The first paragraph of the study they link says 24%, not 34%.  Second, this is the only study I have ever seen that shows the energy balance positive, which may be because it is from the Department of Agriculture and not the Department of Energy.  Third, to get to even this small positive balance, their number is based on the theoretical best number if every single stage of the agriculture and production process uses best known practices.  Using current practices that are actually in place in the production chain, even this study says the energy balance is probably negative.  Fourth and finally, 24% is pathetic.  Supporters imply that one gallon of ethanol replaces one gallon of oil.  It does not -- using these numbers, and factoring the .8 gallon of oil needed to produce that one gallon of ethanol, then one gallon of ethanol replaces at best only .2 gallons of oil.  This means that if we subsidize ethanol 30 cents per gallon (which is probably low) then the effective subsidy per gallon of gasoline replaced, which is what is relevant, is $1.50!  Ouch! And remember, this is based on ethanol's supporters numbers.  Based on most everyone else's numbers, the subsidy per gallon replaced is infinite.

Ethanol subsidies do nothing to add energy to the US market and just pass tax dollars to Archer Daniels Midland and other similar Ag conglomerates.  Stupid, stupid, stupid.  The only thing uglier than these distortions in the energy bill is the scene of Republican and Democratic candidates falling over themselves every four years to support these subsidies in order to compete in the Iowa caucuses.

Frequent readers will know that I have little patience with the argument against private Social Security accounts that goes something like "Americans are too dumb to be trusted with their own retirement funds".  Today, however, I am going to put that aside for perhaps a better question:

Can the government be trusted with our retirement funds?

This is the argument made by Brad DeLong and quoted in Marginal Revolution:

We need to raise our national savings rate. But if we just raise Social Security
taxes, Congress will treat these taxes as general revenue and spend them. Only
by funneling Social Security contributions into some vehicle that Congressional
representatives cannot interpret as a resource available to fund current
spending can we raise the national savings rate. And private accounts are the
best vehicle we can find to (a) accumulate contributions without (b) allowing
Congressional representatives to seize them as resources available to fund
current federal spending.

Congress has taken all the savings surpluses built up by Social Security over the past decades and it has spent them.  Republicans have spent the money.  Democrats have spent the money.  It is gone, spent on cruise missiles and welfare moms and ethanol subsidies and PBS broadcasts and snail darter studies.  No matter what verbal acrobatics people try to engage in to argue that there is a real "trust fund", the fact of the matter is that all that is in the Social Security till are IOU's that can only be redeemed by raising taxes. 

The situation with Social Security is entirely equivalent to having invested your money in a mutual fund and only later finding the directors of the fund spent your money on themeselves rather than investing it in redeemable securities.  The only differences are that:

• The proprietors of that bogus mutual fund may go to jail, but Congress won't
• Congress can raise taxes to get the money to bail themselves out of their malfeasance

Think of it this way: 

• There were more real assets of value remaining in Enron in its bankruptcy to divide up among investors and creditors than remain in the Social Security "trust fund" to divide up among program contributors.
• There were more real assets of value remaining in the Teamsters retirement fund after years of being raped by organized crime than remain in the Social Security "trust fund"

Stop handing over our savings to such unsavory racketeers (ie. Congress).  We certainly can't do a worse job for ourselves.