- They can subsidize the special interest, often using taxpayer cash.
- They can penalize the competition of the special interest, often through tariffs.
- They can mandate that people do business with the special interest.
Each of these actions is economically harmful as government-backed subsidies, penalties, and mandates all impose unnecessary costs on regular people. Worse, they often lead to predictable, if often unintended, consequences that do serious damage beyond what they do to personal finances.
In the case of ethanol in the United States, the federal government has employed all three measures over the years, frequently with bipartisan political support. Its subsidies keep afloat politically connected businesses that wouldn’t otherwise be able to keep themselves in business. Its tariffs have kept consumers from being able to buy cheaper sources of ethanol on the global market. And its mandate to put an increasing amount of corn-based ethanol into fuel makes food more expensive.
As an example of an unintended-yet-predictable consequence, it turns out that those actions by the U.S. government to push ethanol production and use in the United States are doing serious damage to the environment. The Daily Caller‘s Jason Hopkins reports on a new study from the Environmental Protection Agency:
In a study titled “Biofuels and the Environment: The Second Triennial Report to Congress,” the Environmental Protection Agency (EPA) determined that ethanol derived from corn and soybeans is causing serious harm to the environment. Water, soil and air quality were all found to be adversely affected by biofuel mandates.
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