Combest today links to a great piece from KMOV Channel 4 about who gets farm subsidies in St. Louis. I can honestly say that I think our national and state farm subsidy and tax credit programs are the single worst government programs (at any level). The only thing they accomplish is to make us pay more for the food we buy. And ethanol is the single worst use of that worst program, but I digress.

Really, all I want to do here is let you — our beloved readers — know of this excellent database from the Environmental Working Group. Have some fun with it. Check out your own zip code. Put in the names of politicians or former spouses. There is no end to the potential enjoyment! (Finally, I assure you that the David Stokes from Missouri in the database is a different David Stokes.)

Missouri’s Department of Health and Human Services  has estimated that more than one in five Missourians is obese, and that the more than $1.6 billion is spent in Missouri annually on obesity-related expenditures. According to the department, “Obesity is one of the most serious health issues facing society today.”

For people, I guess. For cows, Missouri’s policy is to encourage the bigger-is-better mentality.

The state has a tax credit for Missouri beef producers who raise Missouri-born cows that weigh at least 200 pounds more than the average weight of cows sold during the past three years. Beef producers are awarded $0.10 per pound of the extra weight, up to $3,000.

Regardless of the reason that the Missouri legislature created this tax credit, it is encouraging larger and larger cows by design. If growing larger cows were a more efficient means of beef production, then no tax credit would be needed. But if it’s more difficult to grow cows that weigh at least 200 pounds more than average, why on earth are are we subsidizing this wasteful activity?

I’m sure the cows would appreciate losing the extra baggage.

SEDALIA — I am writing this from the Show-Me Institute booth at the Missouri State Fair! We are talking about individual liberty and limited government with all of the fairgoers.

If you are in Sedalia, stop by the exhibition hall between corn dogs to talk to us about free markets. For those of you who haven’t had a chance to stop by, here is a picture of our booth!

* Title quote: Lenny at the State Fair, from That Thing You Do.

According to a study cited in an article in the Wichita Eagle, obesity rates are increasing in Missouri, and faster than the national average.

The author of the study says that the rising rate is largely attributable to the fact that snack foods and soda are priced lower than healthier foods. He proposes that:

[...] there is more that federal, state and local governments can do to reduce obesity, including taxing sugary drinks, providing incentives to grocery stores that locate in underserved areas and requiring restaurants to clearly label nutritional information on their menus.

Neither the article nor the author of the study discusses the fact that the federal government heavily subsidizes the production of corn, which significantly reduces the market price of starchy and sugary foods to consumers.

Instead of subsidizing the production of a good, and then taxing the consumption of the ensuing unhealthy products, it would be more efficient for the federal government to remove the subsidies entirely. This would cause the price of sugary and starchy foods to increase relative to other foods. Consumers would face a greater natural incentive to eat healthier substitutes like fruits and vegetables because they would be relatively less expensive. This would benefit low-income people in particular, because they pay a greater percentage of their income for food, so eliminating corn subsidies could help to reduce the difference in the rates of obesity across income levels.

As contributors to this blog have argued previously, an individual’s waistline is the responsibility of the individual, not of the government.

I guess the news has finally reached Washington. In a recent post on the Political Fix blog, Bill Lambrecht pointed out that the political heat around subsidies is increasing, and this time it is fueled by ethanol. Almost two years to the date after the Show-Me Institute’s release of its case study of the E-10 ethanol mandate in Missouri, another nonprofit research organization has published a study about the inefficiencies of federal ethanol subsidies. The Environmental Working Group’s analysis of the ethanol subsidies concluded:

Americans have spent $17 billion since 2005 to achieve reductions in gasoline consumption that could have been achieved for free.

Today, proponents of ethanol are attempting to piggyback on the recent oil crisis in the Gulf of Mexico in order to gain support for their most recent push to increase the amount of ethanol in the U.S. gasoline supply and keep their subsidies. In a Post-Dispatch article yesterday, Jeffrey Tomich pointed out:

The ethanol industry is also lobbying Congress to extend a tax credit for blending ethanol with gasoline and maintain a tariff on imported ethanol — measures implemented years ago to help a fledgling industry grow. Both the tax credit and tariff are set to expire at the end of the year.

Letting the tax credits and tariffs expire wouldn’t be such a bad thing. Who knows, besides saving the American taxpayers $17 billion dollars, we might actually come up with an alternative energy idea that works.

A recent article in the Columbia Missourian highlights some of the steps being taken in Missouri to combat childhood obesity. Among the initiatives mentioned are the Walking School Bus and Farm to School programs:

More than 400 students from 10 Columbia public elementary schools participate in this Walking School Bus program, sponsored by the PedNet Coalition. A trained adult walks a set route each morning, picking up kids along the way and guiding them to school.

In addition to cutting costs for buses facing rising fuel expenses, the Walking School Bus is designed to increase physical activity for children in order to combat the country’s growing childhood obesity epidemic.

The difference between the two programs is that the Walking School Bus is grounded in the volunteerism of adults willing to walk with children to school, with the end of incentivizing good habit formation, whereas Farm to School is a government program that encourages the use of local food in school lunches. There are a couple of problems with the latter. As Sarah Brodsky and Caitlin Hartsell have pointed out, it’s incorrect to conflate “local food” with “healthy food”; food produced locally may not always be healthy, and food that is healthy may be imported from outside a given region. Mandating that school food be locally procured is also costly, because price-based competition from a large portion of the potential market for food is left unconsidered, and the increased demand for local food contributes to a rise in its prices.

It can also be a costly mandate for local farmers, who must cope with changes in the types of crops that they grow. A Columbia school district official admitted:

“We’re essentially asking farmers to start to grow what we want them to grow. And that’s a big risk for them.”

It is indeed a risk for Missouri farmers, who must diversify their crops to meet a new form of demand. Modern farmers maintain a delicate balancing act of running up huge debts in acquiring machinery that is geared specifically for the crops they have elected to raise. Mandating that schools provide local food presents an opportunity for local farmers, but also places a burden on them to raise a diversity of crops year-round — for many, a costly and impractical endeavor. Missouri farmers will be taking more than a “big risk” here and now; this involves their whole financial life plans.

Tackling the difficult issue of childhood obesity requires daily diligence in habit formation, because parents ultimately control the health of their children. One or more healthy meals served at school every day can be negated by a pantry full of junk food at home. This is not to say that schools shouldn’t care about serving healthy food — indeed, school lunch programs that focused on meeting nutritional guidelines, whether or not the food is locally procured, would better balance costs with student health.

Similarly, a mandated exercise class during the school day doesn’t affect the inactivity of kids who stay indoors and play video games all day on the weekends and during the summer. Yet initiatives like the Walking School Bus program directly incentivize the most important players on this issue — the parents and children themselves. Children are habituated toward associating activity with involvement with their peers, and parents are given an easy, safe, and inexpensive way of getting their kids to school that may benefit the community (e.g., through reduced traffic congestion near schools) at the same time. Yet again, volunteerism creates a win-win for everyone.

A piece from the Kansas City Star this weekend highlighted current political disagreement over “Know Your Farmer,” a $65 million program run by the U.S. Department of Agriculture designed to educate people about the sources of their food, and something I’ve written about on the blog before. According to the Star, some politicians have taken issue with the program’s slant toward organic farmers over conventional farmers.

When the government promotes one business over another, it chooses economic winners and losers — something that government officials have no special skill for doing well. Some argue, though, that this governmental expenditure hardly rivals the ones for conventional farming:

Bruce Babcock, an economist and director of the Center for Agricultural and Rural Development at Iowa State University, said it was “ironic” that [Sen. Pat] Roberts and others objected to the USDA spending $65 million on Know Your Farmer.

Babcock pointed out that commodity producers received $5 billion over the last two years, and the crop insurance industry received $7 billion.

Just because one group gets a subsidy does not mean that another group should get a subsidy as well. In fact, I would argue, consumers and taxpayers are better off if neither get subsidies.

Agriculture, like all businesses, is best left to the marketplace. Subsidies lower the cost of producing politically favored products; this distorts the market by shifting the supply curve. In the case of agriculture, subsidies have led to an overabundance in the production of certain commodities, like corn and soy, which drives down their prices relative to other products, making them less expensive to purchase and use as ingredients in other foods.

Agricultural subsidies have decreased the price of — and, thus, increased the demand for — products like high fructose corn syrup and corn feed for livestock. Some researchers have suggested that such subsidies have led to poor health outcomes and higher rates of obesity. Some disagree with this claim, although still and other researchers, including the American Medical Association, maintain that the subsidies have led to an increase in unhealthy foods in the United States. At any rate, more corn is being grown and subsequently incorporated into people’s diets than would otherwise happen. The subsidies have also lead to an increase in corn-based ethanol production, which costs taxpayers and may well result in marginal increases in environmental harm.

In real terms, subsidies don’t make food less expensive. Rather, they divert taxpayer funds from the market price of food to the production stages of farming. This influences farmers to grow more of the subsidized crops than people would otherwise demand, and so taxpayers end up paying more for their food than they would in an otherwise free market.

Some may argue that the promotional program discussed by the Star helps organic farmers to gain an advantage similar to that of conventional farmers. If people are interested in organic foods, though, they will purchase organic foods. Indeed, films like Food, Inc. and books like The Omnivore’s Dilemma have convinced many that they should vote with their wallets for organic foods. It’s unnecessary for the government to create an educational program to support organic farming.

Although $65 million is a small expenditure in comparison to the overall budget for agriculture, it still represents a substantial amount of taxpayer funds. Whether it be subsidies or educational programs, the government oversteps its role when it encourages one business over another, or one form of agriculture over another. If government officials truly want people to consume healthier food, the best strategy would be to level the playing field by eliminating subsidies and promotional programs, instead letting market forces work.

The big news in Missouri today is President Barack Obama’s visit to an ethanol plant in Macon, so I thought it would be worth briefly rehashing the airtight case against ethanol subsidies, as we have done here so many times in the past.

Most obviously, ethanol costs more than gasoline, so consumers have to pay more for energy to run their vehicles. However, because ethanol diverts foods like corn from their more traditional use as energy for humans and farm animals, food prices are driven up by greater ethanol use. Ethanol backers like to claim that such costs are justified by the environmental benefits of ethanol, but those benefits appear to be completely illusory. From the abstract of a 2008 study on biofuels:

Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years.

Research has repeatedly confirmed that ethanol subsidies only drive price inflation for both energy and food without cutting greenhouse gas emissions, and it is long past time for politicians to admit that such programs are nothing more than a means for buying favor with voters in agricultural states.

I’ll be appearing on the Mike Ferguson Show on The Eagle, 93.9 FM in Columbia, this afternoon to discuss ethanol. Everyone can listen live online, and I hope you will tune in.

The Columbia Daily Tribune asks school board candidates which improvements they would like to see in school lunches. One candidate mentions local food in his response:

Nutritional Services is working with vendors to provide food and educational opportunities from local food producers and farmers to reduce the impact CPS has on the environment and to educate students about where their food comes from.

The assertion that local food is superior for environmental reasons comes up often in local food debates. To understand why districts should not conflate local food with environmentally friendly food, I recommend reading Caitlin Hartsell’s excellent post about why growing food closer to consumers is not always better.

In addition to in his claim that local food is better for the environment, the candidate says that purchasing food locally will teach students where their food comes from. I don’t know how he expects the food to do that. From the students’ point of view, food from Missouri looks the same as food from Illinois or food from Indiana. Of course, teachers could point out to students where the food originated from, and they could conduct lessons on where the food was cultivated and harvested — but they could do that just as well if the food came from a different state. In fact, if the place where cafeteria food is grown is to become a subject of study, it might be better to buy food from a distance. That way, students can learn about a place with which they wouldn’t otherwise become familiar, instead of focusing their local area, which they already know something about from experience.

This essay on the Huffington Post sees calorie count mandates as the beginning of a “food revolution”:

[T]his could be seen as a historical turning point in the American consciousness about actually having awareness about where food comes from and what goes into how it gets made.

Most advocates for calorie count mandates emphasize the effect they could have on the population’s health. They say that if people read caloric data whenever they order food, they’ll make healthier choices and put less of a strain on the health care system.

The Huffington Post essay is unusual in that it connects calorie counts to the local food movement. At first glance, this seems puzzling, because a calorie count tells you nothing about where your food comes from. Furthermore, a dish that was served up from scratch in your home town might be high in calories, while produce flown in from hundreds of miles away could contain fewer calories. Supposing consumers pay attention to the calorie counts and consequently reduce the calories they consume — there’s evidence that they don’t, but supposing they do — the effect could be to discourage some people from eating local food. For example, think of people who live next to a cattle farm and have access to local hamburgers, but can’t buy vegetables unless they’re shipped in.

However, the Huffington Post writer may be on to something. Once people are comfortable with calorie counts on the menu board of every major chain restaurant, they’ll be less likely to object new national labeling mandates. They’ll take it for granted that the federal government tells restaurants what to write on menus. Proposals to label food as “local” or “organic” will then meet with less opposition.

The St. Joseph News-Press ran an article this past week about the biodiesel industry’s fight for a tax credit extension. Show-Me Institute research analyst Christine Harbin wrote about the negative consequences of corn ethanol subsidies on our blog recently, and provided good analysis about why such subsidies hurt taxpayers. The St. Joe’s article is filled with quotes from people within the industry that exemplify why the tax credits are counterproductive:

“Any further delays will cause additional harm to the industry,” said Michael Frohlich, director of communications for the National Biodiesel Board. “(The expiration has) really been devastating. What you’ve seen is a complete drop in demand.”

Frolich essentially concedes here that the subsidy drives demand, implying that ethanol cannot, on its own, be a profitable endeavor. But the industry leaders interviewed in the article go on to argue that these subsidies will make the industry competitive in the future:

“(The tax credit) is crucial in order for (the biodiesel industry) to keep running,” said Brooks Hurst, a state director for the Missouri Soybean Association. “As we’re starting out, it’s critical to make us cost competitive with petroleum diesel.”

Soybean oil is a feedstock for the production of biodiesel.

If the tax credit were eliminated altogether, the industry would likely “cease production,” Mr. Hurst added.

“The biodiesel industry is an infant industry,” he said. “We’re trying to build demand.”

The nascent or infant industry argument is one used throughout history to protect emerging industries. It suggests that new industries need to be protected temporarily in order to gain the economies of scale that their competitors already enjoy. This is later expanded by Frolich, however, who says:

“Obviously, the long-term goal is for a multi-year (tax credit) extension.”

Ethanol needs the subsidy in order to be profitable, but subsidy proponents argue for more than just economic viability. Some claim that ethanol is better for the environment than standard gasoline, and suggest that it should be subsidized for that reason alone; however, there is a substantial body of research showing that this is not the case. A 2005 study in BioScience debunked that notion by looking at the effects of ethanol use in both Brazil and the United States, concluding that it did not bring net environmental gains. From the study’s conclusion (emphasis added):

The use of ethanol as a substitute for gasoline proved to be neither a sustainable nor an environmentally friendly option, considering ecological footprint values, and both net energy and CO₂ offset considerations seemed relatively unimportant compared to the ecological footprint. As revealed by the ecological footprint approach, the direct and indirect environmental impacts of growing, harvesting, and converting biomass to ethanol far exceed any value in developing this alternative resource on a large scale.
[...]
In the US case, the use of ethanol would require enormous areas of corn agriculture, and the accompanying environmental impacts outweigh its benefits. Ethanol cannot alleviate the United States’ dependence on petroleum.

Other studies have replicated these results, such as another piece from 2005, printed in the Renewable and Sustainable Energy Reviews. The authors reached a similar conclusion about E10, the ethanol mixture used for Missouri gasoline:

The study indicates that E10 is of debatable air pollution merit (and may in fact increase the production of photochemical smog); offers little advantage in terms of greenhouse gas emissions, energy efficiency or environmental sustainability; and will significantly increase both the risk and severity of soil and groundwater contamination.

A 2004 study published in Natural Resources Research concluded that ethanol creation uses more energy than the ethanol itself provides:

Specifically about 29% more energy is used to produce a gallon of ethanol than the energy in a gallon of ethanol. Fossil energy powers corn production and the fermentation/distillation processes. Increasing subsidized ethanol production will take more feed from livestock production, and is estimated to currently cost consumers an additional $1 billion per year. Ethanol production increases environmental degradation. Corn production causes more total soil erosion than any other crop. Also, corn production uses more insecticides, herbicides, and nitrogen fertilizers than any other crop. All these factors degrade the agricultural and natural environment and contribute to water pollution and air pollution.

Missouri is at a disadvantage because the state’s ethanol mandate requires at least 10 percent ethanol in the gasoline sold here. Show-Me Institute policy analysts David Stokes and Justin Hauke published a case study analyzing the effects of the mandate, concluding that it cost the taxpayers much more than it saved — the opposite of the cost-savings argument originally made in favor of the mandate. Requiring ethanol to be used in the state’s gasoline also discourages research toward better and more efficient forms of biofuel by propping up the corn ethanol industry.

The data shows that the ethanol mandate is expensive and does not help the environment. Ethanol may even harm the environment, by discouraging more efficient and environmentally solutions. That being the case, what justification is left to protect the ethanol industry with mandates and subsidies?