The Candidate: John McCain (R)
The Issue: Ethanol Mandates/Subsidies
The Position: Opposes
The Cost: $15 Billion savings in food prices (Source: Heritage Foundation)
The Media Position: Mandate? What mandate?

The Issue

     The media have failed to connect federal ethanol mandates and subsidies to higher food prices and global hunger crises. But Republican presidential nominee Sen. John McCain, Ariz., along with prominent environmentalists who originally supported ethanol mandates, have turned against it

     Congress mandated in 2005 that 7.5 billion gallons of ethanol – made from corn – be mixed into the nation’s fuel supply by 2012. In 2007, lawmakers upped the goal to 36 billion gallons by 2022.

     Mandated use of ethanol has resulted in $15 billion worth of higher food prices, according to The Heritage Foundation. That amounts to about $130 per U.S. household. It has also contributed to global food shortages. One United Nations official called the use of the crop for fuel a “crime against humanity.”

     “Corn-based ethanol, thanks to the money and influence of lobbyists, has been a case study in the law of unintended consequences,” McCain said in a June 23 speech. “Our government pays to subsidize corn-based ethanol even as it collects tariffs that prevent consumers from benefiting from other kinds of ethanol, such as sugar cane-based ethanol from Brazil.”

     McCain said he opposes the federal mandate requiring ethanol be mixed into the nation’s gasoline supply. He blames the mandate for rising transportation and food prices.

     “The mandates that [Democratic presidential nominee Sen.] Barack Obama helped create required minimum ethanol use and with the tariffs and subsidies in place, more corn was grown to meet the demand and less wheat and soy beans were planted,” McCain’s Web site says. “The result was higher costs for food for people and feed for livestock.”

The Media Position

     The broadcast networks were originally supportive of ethanol as the “wave of the future,” as Katie Couric called it on the NBC “Today” show in May 2006. But over time they’ve connected increased use of ethanol as a gasoline alternative or additive to increased food prices.

     However, in 86 stories mentioning ethanol between Jan. 1, 2008, and Sept. 30, the broadcast networks connected increased consumption of ethanol to government mandates only four times – 4.6 percent.

     Former CBS “Evening News” host Dan Rather promised on the May 7, 2006, “60 Minutes” ethanol would be “cheaper and cleaner” than regular gasoline.

     But as prices at the grocery stores rose, the media started connecting the dots between increased ethanol use and higher food prices.

     Much of the coverage on broadcast networks, however, has suggested that market demand for ethanol led to the increase in corn costs without noting that demand was artificially driven by a government mandate used to advance environmental goals.

     “Because of the demand for ethanol, the price of corn is up nearly 75 percent in the last year,” reporter Scott Cohn said on the “NBC Nightly News” March 31, 2007. “A windfall on the farm at the local co-op where they sell seed and fertilizers.”

     Cohn’s report suggested good news for farmers was good news for the economy, but he ignored the fact that the demand was artificial and the possibility that higher food prices would strain American families’ budgets or exacerbate world hunger problems.

     Economists, politicians such as McCain, and even the environmentalists who once supported ethanol mandates have started calling to repeal them. In a Washington Post column April 22, 2008, left-wing Earth Policy Institute founder Lester Brown and Clean Air Task Force lawyer Jonathan Lewis blamed government-mandated ethanol for problems like higher food prices in the U.S. and food crises in poorer countries.

     The United Nations’ “Special Rapporteur on the Right to Food,” Swiss professor Jean Ziegler, called the use of crops like corn for fuel a “crime against humanity.”

     Yet some in the media still haven’t caught on to the negative effects. The June 12 CBS “Evening News” reported that high corn prices were the result of floods in the Midwest, although demand for corn for ethanol has been a more powerful driving factor.

     Two of the mentions of the mandate for ethanol came from CNBC host Jim Cramer, a critic of the policy because of its effect on food prices. “The mandate has bid up everything,” Cramer said on the April 25 NBC “Today” show. “You drop the mandate, prices plummet.”

Repeal Mandates, Lower Prices

     Repealing the federal mandates for ethanol might eliminate the “windfall” for corn farmers, but it will also help bring rising food costs back down, according to George Mason University economic professor Don Boudreaux, a Business & Media Institute adviser.

      “Politically I don’t think the prospects of getting rid of the ethanol subsidies or ethanol program are very high,” he said. “This is a concentrated interest group and they’re very powerful. But if Congress did get the gumption from somewhere to eliminate the subsidy then I have no doubt that corn prices would fall, food prices would fall and gasoline prices would fall somewhat.”

     Instead of subsidies for ethanol, McCain proposes new federal standards that would mandate the production of “flex-fuel” vehicles capable of running on fuel with higher percentages of alternative additives – such as ethanol or other fuels made from sources besides corn – than most cars produced in the United States today – even if it takes an act of Congress.

     “Whether it takes a meeting with automakers during my first month in office, or my signature on an act of Congress, we will meet the goal of a swift conversion of American vehicles away from oil,” McCain said in the June 23 speech. 

     Experts were wary of his proposals to use government power to mandate higher fuel efficiency standards and “flex-fuel” vehicles.

     “In terms of McCain’s approach to these issues, it is very confused,” Mitchell said. “He’s very good on some issues such as ethanol subsidies, yet on the other hand he wants the government to micromanage and intervene in other areas of the energy industry, so I have no idea how to make sense of all that.”

     Boudreaux said the idea of using government intervention to create “energy independence” – a term both campaigns have used – is futile. “[T]here is absolutely no need, not really even in a theoretical case, for government involvement. If the supplies of oil start to fall relative to the demands for oil, then the price of gasoline and oil products will rise, and that will cause consumers to adjust in however consumers choose to adjust to those products,” including paying higher prices or moving to alternative energy.

     Boudreaux said the other arm of the energy policy debate – environmental concerns – is “a potentially valid basis for government involvement in the economy.” But he cautioned against letting the government run wild with regulation and standards.

     “But again, government is not run by angels,” Boudreaux said. “This is a human institution, massively infected by politics and to look to what economists call a market imperfection – which is what these externalities are – as a justification for political involvement is really just to introduce, substitute one other imperfection for the first imperfection. You substitute a government imperfection for the market imperfection. It’s not clear to me at all that the government imperfection is better.”

    And ethanol doesn’t address the environmental concerns of gasoline use, according to various outlets that have reported on the negative environmental effect of ethanol production.

     “[T]he evidence irrefutably demonstrates that this policy is not delivering on either goal,” Brown and Lewis wrote in their Washington Post column. “In fact, it is causing environmental harm and contributing to a growing global food crisis.”

Obama: Read about the media’s failure to hold supporters of ethanol mandates accountable.

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