Putting extra energy into federal mandates.
In a dramatic Rose Garden ceremony at the White House yesterday, President Bush unveiled his plan to combat childhood obesity, proposing new policies designed to dramatically hike prices for agricultural products and foodstuffs across the board.
Oh wait, wrong notes. The president gave a Rose Garden speech on energy Monday. But don't throw away the lede entirely. It turns out the proposals President Bush put forthdesigned to foster greater energy independencewill indeed have the effect of raising prices for food. Whether they do anything to enhance America's energy security is another matter.
With his remarks yesterday, the president put a little meat on the bones of his State-of-the-Union-issued promise to reduce U.S. gasoline consumption by 20 percent over the next ten years. The White House offers two ways to achieve this 20-in-10 goal. The first is to "reform and modernize" (read "increase") Corporate Average Fuel Economy (CAFE) standards for cars. The other policy calls for a nearly fivefold increase in the already-too-high federal mandate that says we must have 7.5 billion gallons of ethanol in our fuel mix. The president is calling for mandating 35 billion gallons of alternative fuels like ethanol be mixed annually into our fuel supply by 2017.
By artificially creating a demand for ethanol where none before existed, the original renewable-fuels standard has already helped drive up food prices. As the Associated Press wrote back in March, "People don't eat the kind of corn that makes ethanol, but cows, pigs and chickens do. And people eat other grains that will become less plentiful as farmers plant more corn. Demand for ethanol is pushing feed prices higher and enticing farmers to switch from other crops." The prices of chicken and eggs have gone up roughly 15 percent since the mandate kicked in last year. The price of corn syrup has jumped, too, meaning higher prices for everything from bread and ketchup and Coca-Cola to infant formula and frozen foods.
It isn't just American consumers paying higher prices. Corn tortillas are a staple in the diet of millions of Mexicans. Our southern neighbor has long relied on imports from the United States to supply the bulk of its corn. But the spike in corn prices since the beginning of last year has had the effect of doubling the price of corn tortillas south of the border, leading to massive protests in Mexico City.
According the U.S. Department of Agriculture, we're using almost 20 percent of our total corn crop for ethanol. In 2008, it will jump to 25 percent. Now imagine what happens if Congress passes a law which quintuples the amount of biofuels required in our fuel mix. One proposal kicking around Congress now would limit the amount of corn-based ethanol to 15 billion of the 35-billion-gallon mandate. The rest would have to be ethanol derived from cellulosic sources, such as switchgrass. But even if we had the capacity to gin up 20 billion gallons of ethanol from these sources (we're not even close), the 15 billion gallons from corn still would amount to twice what we are already committed under the current renewable-fuels standard.
Can anyone doubt that food prices will really start to soar if the proposed new mandate becomes law? The Bush administration claims to. Agriculture secretary Mike Johanns has said he expects food prices the rise two or three percent every year, or roughly in step with inflation.
Not everyone is so circumspect when it comes to describing what such a proposal will do to food prices. Across the political divide, Rep. Collin Peterson (D., Minn.) seemed excited at the prospect when he told a reporter in March that, "frankly, we have been underpricing our food in this country." Peterson continued: "What this fuel thing is going to do is cause us to re-price our food to some extent. So consumers are going to pay more, and in my opinion, they should be."
That's honesty for you. The question is whether those higher prices are worth it. After all of the mandates and artificially increased demand and the government subsidies, will this plan substantially provide for American energy security? Doubtful. A 20-percent reduction in gasoline consumption, even if it could be achieved (a very big "if"), would still leave us looking to oil for the bulk of our transportation fuels. That hardly sounds like directions to fundamentally curb appetites for a product President Bush condemns for its alleged addictiveness. Whether we hit the president's 20-in10 goal or not, we'll be relying on oilfrom the Middle East and elsewherefor as long as anyone can legitimately guess.
Original Source: http://article.nationalreview.com/?q=MWQ3NzczNTA2ODcwYzZkMDgxZDU0MTBlYWJmYTMwODY=