Quick Roundup 381

Tuesday, December 02, 2008

The State vs. Sensible Investment

A few days ago, I read about a somewhat amusing unintended consequence of a government effort to help America get over her "addiction" to oil.

Domestic producers of the renewable fuel have been selling huge quantities of biodiesel in Europe and in other foreign markets, where prices are often better, and then receiving a $1-per-gallon tax credit from Uncle Sam.

Biodiesel, made in the U.S. mostly from soybean oil or [used] cooking oil from restaurants, is blended at low levels with petroleum diesel to reduce emissions and reliance on fossil fuels.

Today, American exports of biodiesel represent more than half of domestic output.

Biodiesel's $1-per-gallon subsidy, known as the "blender's tax credit," is available to U.S. companies that blend biodiesel with petroleum diesel and was intended to boost biodiesel production and encourage diesel marketers to buy the fuel. [bold added]
Setting aside the incompetent or deliberate equation of tax credits with subsidies -- stealing less from someone is not the same thing as handing him loot -- it is amusing that our all-knowing central planners failed to see such an obvious business opportunity, and that the Houston Chronicle's Brett Clanton seems to regard this as some sort of swindle by the energy industry: A business is keeping more of its own money is not somehow wrong.

The real crime here is that the government regularly and systematically loots corporations through taxation -- and then uses mild relief from taxation to steer companies into unproductive capital outlays, like biodiesel. The article goes on to note that, despite the tax credit and the ability of American biodiesel producers to export to more profitable markets, "many U.S. plants shut down temporarily this year after soaring vegetable oil prices made production too costly[, while s]ome ... that kept working relied on exports to stay afloat." Clearly, the time for biodiesel, at least for large scale production, has not arrived, if it ever will.

But the reporting is hardly the worst thing about this story. That would be a toss-up between the fact that many businessmen see this government interference in their affairs as a good thing, and the fact that some self-proclaimed opponents see this boondoggle as "financed by the taxpayers".

Our state tramples over our property rights daily (which it should not do) in the name of solving the imaginary crisis of global warming, elevating already high fuel prices it helped cause in the process, and even further hamstrings the energy industry's ability to solve the actual problem (i.e., getting the most economical fuel into our tanks as possible) by meddling further in its resource allocation!

And then Clanton hops on like a flea at the end of this to whine about business practices that actually make some sense -- at least within the limits of the artificial context of biodiesel production!

Christmas Note to Self (and, Possibly, Wife)

For the same reason I inquired about chairs awhile back, I found this product recommendation over at Lifehacker somewhat amusing and worth looking into. (Yeah, I've been down that wallet-free highway before!) The review is about an "All-Ett", an ultra-thin wallet that, despite being made of rip-stop nylon, at least looks like it might be presentable.

A cursory search for a larger image found one in this mixed review. (And I'm leaning towards a leather-clad "executive" version after seeing it.) Has anyone here used one of these, and, if so, have you anything to add to the product review?

Scott Powell Gives Thanks

As I hoped, Scott Powell has put together a very worthwhile Thanksgiving Day post. He begins by saying that, "Thanksgiving, properly conceived, is a time to pay tribute ... to those who have created the values that sustain us." Read the whole thing, especially the ending. I like the way this man thinks!

Nanny State Update

If you have any doubts that the state can and will intrude into every nook and cranny of our lives if we do not reverse the trend towards statism, you need only look across the Atlantic.

Without particularly looking for them, I found the following three news stories:
  • Britain may ban happy hour at its pubs.
  • The police will soon start handing out "free" flip-flops (at right) so drunkards in high heels don't injure themselves on the way home.
  • A taxpayer-subsidized "graffiti wall" (above) was recently "vandalized" by a tax protester who merely used it for its stated purpose!
The last example is doubly ironic: The wall was built in a hare-brained attempt to protect property (from graffiti artists) by means of luring them with a wall built using property (in the form of money) stolen from citizens through taxation! If you violate the principle of property rights, you can not protect the property of all citizens.

-- CAV


Liriodendron said...

""many U.S. plants shut down temporarily this year after soaring vegetable oil prices made production too costly[, while s]ome ... that kept working relied on exports to stay afloat." Clearly, the time for biodiesel, at least for large scale production, has not arrived, if it ever will."

It won't.

Five years ago, I'd say it was a sensible option for a person to use a kit converter to run directly on vegetable oil or to make one's own biodiesel if they can find a cheap local supplier of oil, methanol, and lye. But obviously as demand increases the price goes up, and more and more people are doing this.

Logically, though, there's simply no way the world can grow that much vegetable oil. The supply of vegetable oil is already greatly expanded to what it would ordinarily be due to the Farm Bill. The system we have is completely unsustainable -- not only financially but ecologically. And both the financial AND ecological reasons are part of the reason more and more government money has to be pumped into commodity crops.

Corn and soy, where much of the oil comes from, is going to be about break even this year, even with the massive amount of subsidies thrown at it. And yet the price of oil is skyrocketing? Even with these subsidies? That tells you something.

Wheat? Even worse. It cost $6 per bushel to produce and the farmers will only get $3 per bushel for it this year. 40% of last year's grain is still in storage.

The farmers will do it because a) it is the the only thing they know how to do anymore and b) the government wants them to do it.

We are in for some rough times if people do not start putting 2 and 2 together.

Liriodendron said...

By the way, you can see the direct effect of subsidies on the pump prices. This summer as I drive cross country, in almost every midwestern state the price of midgrade fuel with ethanol was about 20 cents cheaper than low octane.

And it almost goes without saying that we wouldn't even be dealing with this biodiesel tax credit issue if the government hadn't pushed vegetable oils as healthy for the last 40 years and forced almost every farmer in the country to grow them in its war on agriculture.

Gus Van Horn said...

"[I]t was a sensible option for a person to use a kit converter to run directly on vegetable oil or to make one's own biodiesel if they can find a cheap local supplier of oil, methanol, and lye."

You just hit the nail on the head. That's pretty much the only type of situation in which biodiesel makes much sense.

And thanks for bringing up how screwed-up this is making agriculture.

Harold said...

I too am interested in that All-Ett wallet. I like to wear reasonably tight jeans and that can be difficult with a regular wallet, and I usually have to carry it in a jacket or something. I read the review and I don't carry cash, so that's not a problem. The european version also looks good. We'll see.

Liriodendron said...

Yes, it's actually a vicious cycle. The ethanol and biodiesel subsidies and tax credits further perpetuate the system of farm subsidies the government put into place decades ago.

There are a number of insidious things the government has done that are linked in this situation. Here are a few tidbits (more to come in my agriculture and nutrition activist group).

Interference in agriculture mostly started in the US in the 20s and 30s with price supports for grains. The USDA was founded in 1860s but its role was mostly research until the early 1900s. By the 1940s, the USDA was so promoting overproduction in agriculture that it opposed Eleanor Roosevelt's idea of planting home gardens to increase food production for the war effort. They were actually afraid it would hurt the commercial farming industry. And it may have. By the end of WWII, home gardens were producing 40% of America's produce. (This is kind of a side point, but an interesting one. It certainly dispels the Malthusian myths on both sides. Both the environmentalist contentions that we can't grow enough food and the propaganda of biotech that we need their technology to feed everyone.)

In the 60s farm subsidies really took off. But that's not all. Combined with the new Dietary Goals of the United States, outlined in the 70s by the McGovern committee, grains and vegetable oils became heavily pushed. Hydrogenated oils were specifically touted as a healthy alternative to the demonized saturated fats. (The same trans fats government is now banning were the ones promoted by McGovern and the USDA until about 10 years ago.) Since government now recognizes the science that says trans fats are bad (but still believes the pseudoscience that says saturated fats are bad), they are now promoting vegetable oils as an alternative to trans fats in restaurants, rather than a return to idea saturated fats for cooking and baking, such as palm, coconut oils, and lard. Of course, they still won't recognize that even unhydrogenated vegetable oils have trans fats because of the deodorization process. It's not difficult to see why. They are still wedded to the saturated fats propaganda they propagated for decades, the farming industry is not producing animal fats in large enough quantities to meet what would be the current supply, and they can't make changes too quickly in the USDA nutritional guidelines or they will be discredited.

SO.... Farm subsidies and nutrition guidelines are, IMO, the two primary reasons we have so much vegetable oil in this country. There might be others of which I'm unaware.

And beyond the biofuels? It's making Americans fat, too. The USDA food pyramid for humans (an outgrowth of the McGovern committee guidelines) is almost IDENTICAL to the foods fed to cows in the feedlot system to fatten them. (And because the government has promoted feedlots, the USDA now has provide almost $500,000 per feedlot for farmers under "conservation" programs so that they can clean up these point sources of pollution. It is an incredibly inefficient system.)

Here's another thing making Americans fat. Subsidies that make unhealthy stuff cheap and price supports that make healthy stuff more expensive. Consider HFCS, sugar, and milk. Because of previous tariffs on sugar imports, there are price supports for sugar, guaranteeing a minimum price for sugar for the American farmer. (similar to milk). This artifically inflates the prices of milk and beet sugar. (Not to mention the price fixing system for milk supported and enforced by the Feds.) OTOH, because of grain subsidies, the prices of HFCS is artifically lowered from what it should be in a free market. A huge coke sweetened with beet sugar would cost around $5 (probably would be cheaper than this without price supports but still, it'd be expensive). A huge coke sweetened with HFCS costs about $1 right now. (And this definitely be more expensive without subsidies.)

Farming in this country is actually a PERFECT example of socialism -- but few are aware of it. The USDA has basically decided they want to promote certain select farming practices and products, and then they concoct science to "prove" that it's healthy. Then when the inevitable problems arise, even more taxpayer money has to be pumped into the system to "solve" the problems.

Ditto for biofuels. Even environmentalist types realize that biofuels aren't really viable. The government now realizes this in part, too. This is why ethanol subsidies decreased slightly in the latest omnibus farm legislation. But because the govt. has previousy wedded itself to biofuels they cannot now make the changes to eliminate subsidies for ethanol too quickly.

Gus Van Horn said...


I do carry small amounts of cash -- although I'm sure in about a year, I'll need a wheelbarrow to continue that practice, thanks to Alan Greenspan, so maybe it's a non-issue -- and fewer cards than most people do.

Probably, the leather-bound European will do me, but I want to get a plastic insert to slip into it for photos.


On top of all that, I often suspect the science, which is always heavily-skewed towards whatever theory gets the most grant money or attention.

I basically just ignore most government dietary advice and eat a well-rounded diet in moderation.


Anonymous said...

"And then Clanton hops on like a flea at the end of this to whine about business practices that actually make some sense -- at least within the limits of the artificial context of biodiesel production!"

Government intervention does the damage and yet capitalism always takes the blame. This reminds me of what's going on with the mortgage meltdown. Despite the Fed's inflation of the money supply and the existence of Fanny Mae and Freddy Mac along with the CRA and pressure groups like ACORN, Leftists and various anti-capitalists will blame things like derivatives or credit swaps; ie "legitimate business practices" like you said above. Instead of blaming gov't controls they blame individual freedom. Sadly, very few people can see through this.

John Kim

Gus Van Horn said...

I think pragmatism is what's getting in the way. It reminds me of an example Ayn Rand herself (I think) used of some guy who listened attentively to her explain the evils of nationalizing steel, if I recall correctly, only to ask, well, what about coal?

Capitalism is simple to explain to someone who CAN think in terms of principles, but nearly impossible for those who can't to understand.

Bill Brown said...

I have owned an All-Ett for several years now and I can wholeheartedly recommend it. I got the sail cloth version (which was all they sold at the time) and I'm never going back to a conventional wallet.

Gus Van Horn said...

Thanks for the recommendation/testimonial.

Also, coming when it did, it reminded me of these. When you're stretched thin like me, things like possible Christmas gifts tend to get put on the backburner....

Anonymous said...

I have the European wallet. It's great, I love it. However, it's pretty "flimsy"-looking and feeling, because it's so thin, and with time the threads of whatever material it is are starting to fray and I have to cut/tear them away.

The newer/other designs look improved.

I love it for its thinness.

Gus Van Horn said...

Thanks, Anon. It's good to know about the "flimsiness", and tells me that the time to get one of these is before I really need a new wallet so I can judge that for myself.

It's nice to know they'll give you thirty days to return it.