Corporate Welfare By Job Blackmail

by Robert Oak on Tue, 05/01/2012 - The Economic Populist

You know how States are hurting? How budgets are in the red to the point some towns cannot even hold elections? Adding insult to injury comes the news States are allowing corporations to pocket taxes they take out of your paycheck and pocket the money for themselves. I kid you not.

Nearly $700 million a year in state income taxes withheld from worker paychecks in 16 states is being used to provide lavish subsidies to corporations rather than paying for vital public services. These diversions have gone to more than 2,700 companies, including major firms such as Sears, Goldman Sachs and General Electric. Few if any of the affected workers are aware, because no state requires they be informed on their pay stubs.

David Cay Johnston put together this nifty video overviewing how corporations manage to take state taxes out of your paycheck yet pocket the money.

The problem with these subsidies is the lie they are used to create jobs. Instead, corporations move from state to state, counting the jobs lost from one state as new jobs in another, all to get the tax subsidy. From the Taxes to the Boss report:

Many of the programs analyzed in this study are routinely used in deals that involve interstate job piracy. 

Revealingly, none of the 22 programs examined here has any form of interstate job piracy prohibition. And when counting “new jobs,” none requires a company to distinguish between truly new jobs versus existing jobs that have been merely relocated from another state.

On the Good Jobs First website is a spreadsheet listing the tax subsidy amount and the number of jobs created, or claimed to be created by businesses receiving these state tax subsidies.

General Electric actually had one of the largest job creations, 5,000. Yet their subsidy, from Ohio, was $115.34 million. That is $23,000 per job. In other words, Ohio could simply remove the subsidy and pay 5,000 state residents directly $23,000 and get the same result, particularly in this day and age of permanent employment being an oxymoron phrase and firings happen routinely. This is also assuming the G.E. jobs listed are actually new and not using foreign guest workers or moved from another state. Many of the subsidies list no jobs data at all in the spreadsheet, which one would think would be mandatory to be publicly reported and verified if a business is getting a tax credit to supposedly create jobs.

The spreadsheet list is quite amusing. Arkema Inc., for example, in 2008 received $8 million in subsidies. The number of jobs counted? 10. Thank Kentucky for this lovely use of taxes paid by existing workers as corporate welfare. Not to be outdone, Carbide Industries LLC, also in Kentucky, received $6.5 million in subsidies, to create a whopping 9 jobs. General Aluminum Manufacturing Co. managed to get over $1 million dollars by creating zero, count 'em, jobs.

The title of the tax credit which enabled a free, cool 1 mil to be handed to General Aluminum Manufacturing from Ohio workers is the Job Creation Tax Credit. You might ask yourself, is this a joke? Why, yes it is and the joke's on you, worker bee.

Organizations who clearly are questionable as job creating businesses are on this list. Take Benjamin Zolper, M.D. dba Northeast Pain Management. He received over $45 thousand for creating 9 jobs. Think about a individual MD getting a tax subsidy for 9 jobs and consider his clinic title, pain management. Now think about the pain Ohio goes through to provide basic services to state residents.


David Cay Johnston also went digging further and outlined his additional findings in the below interview.

This isn't by far the only corporate welfare scheme going. Apple just hit the news with an effective 9.8% tax rate, achieved by using the double dutch corporate tax loophole. The moving of assets around the globe in order to pay no taxes is the same trick Google and a host of other corporations use. The only businesses paying a high tax rate in the United States are the ones who cannot afford teams of corporate tax attorneys figuring out how to pay none. That's the little guy folks and squeezing regular people until the stone bleeds dry has become our new national mantra.


Naked Capitalism also covered this latest corporate tax gem. Good jobs first also has an online subsidy tracker so you too can see who the latest corporate welfare recipient is as your roads go unpaved, your water supply is undrinkable and your local police are laid off.

Study proves many U.S. corporations pay zero taxes

By Agence France-Presse
Thursday, November 3, 2011

Dozens of US corporations paid no federal taxes in recent years, and many received government subsidies despite earning healthy profits, a new study showed Thursday.

The report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, which examined 280 US firms, found 78 of them paid no federal income tax in at least one of the last three years.

It found 30 companies enjoyed a negative income tax rate — which in some cases means getting tax rebates — over the three-year period, despite combined pre-tax profits of $160 billion.

“These 280 corporations received a total of nearly $223 billion in tax subsidies,” said the report’s lead author, Robert McIntyre, director at Citizens for Tax Justice.

“This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

The study looked at 280 corporations from the Fortune 500 list, all of which were profitable in each of the last three years and provided sufficient data to analyst profits and taxes.

It found the average effective tax rate for the 280 companies in the study over the three years period was 18.5 percent, well below the statutory rate of 35 percent.

The study concluded that 78 of the companies had at least one year in which their federal income tax was zero or less.

Thirty companies had a negative income tax rate over the entire three year period on their combined pre-tax profits of $160 billion.

The study said banking giant Wells Fargo topped the list of corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks in the last three years.

The report comes as US lawmakers are struggling to find ways to curb a bulging US deficit and are looking at possible revenue sources, despite opposition by conservatives to any tax increases.

Why Americans Can't Afford to Eat Healthy

Friday, July 15, 2011 by Salon.com
The real reason Big Macs are cheaper than more nutritious alternatives? Government subsidies
by David Sirota

The easiest way to explain Gallup's discovery that millions of Americans are eating fewer fruits and vegetables than they ate last year is to simply crack a snarky joke about Whole Foods really being "Whole Paycheck." Rooted in the old limousine liberal iconography, the quip conjures the notion that only Birkenstock-wearing trust-funders can afford to eat right in tough times.

It seems a tidy explanation for a disturbing trend, implying that healthy food is inherently more expensive, and thus can only be for wealthy Endive Elitists when the economy falters. But if the talking point's carefully crafted mix of faux populism and oversimplification seems a bit facile -- if the glib explanation seems almost too perfectly sculpted for your local right-wing radio blowhard -- that's because it dishonestly omits the most important part of the story. The part about how healthy food could easily be more affordable for everyone right now, if not for those ultimate elitists: agribusiness CEOs, their lobbyists and the politicians they own.

As with most issues in this new Gilded Age, the tale of the American diet is a story of the worst form of corporatism -- the kind whereby the government uses public monies to protect private profit.

In this chapter of that larger tragicomedy, lawmakers whose campaigns are underwritten by agribusinesses have used billions of taxpayer dollars to subsidize those agribusinesses' specific commodities (corn, soybeans, wheat, etc.) that are the key ingredients of unhealthy food. Not surprisingly, the subsidies have manufactured a price inequality that helps junk food undersell nutritious-but-unsubsidized foodstuffs like fruits and vegetables. The end result is that recession-battered consumers are increasingly forced by economic circumstance to "choose" the lower-priced junk food that their taxes support.

Corn -- which is processed into the junk-food staple corn syrup and which feeds the livestock that produce meat -- exemplifies the scheme.

"Over the past decade, the federal government has poured more than $50 billion into the corn industry, keeping prices for the crop ... artificially low," reports Time magazine. "That's why McDonald's can sell you a Big Mac, fries and a Coke for around $5 -- a bargain."

Yes, it is a bargain, but one created by deliberate government policy that serves the corn industry titans, not by any genetic advantage that makes corn derivatives automatically more affordable for the budget-strapped commoner.

The aggregate effect of such market manipulation across the agriculture industry, notes Time, is "that a dollar [can] buy 1,200 calories of potato chips or 875 calories of soda but just 250 calories of vegetables or 170 calories of fresh fruit."

So while it may be amusing to use Americans' worsening recession-era diet as another excuse to promote cultural stereotypes, the nutrition crisis costing us billions in unnecessary healthcare costs is more about public policy and powerful special interests than it is about epicurean snobs and affluent tastes. Indeed, this is a problem not of individual proclivities or of agricultural biology that supposedly makes nutrition naturally unaffordable -- it is a problem of rigged economics and corrupt policymaking.

Solving the crisis, then, requires everything from recalibrating our subsidies to halting the low-income school lunch program's support for the pizza and French fry lobby (yes, they have a powerful lobby). It requires, in other words, a new level of maturity, a better appreciation for the nuanced politics of food and a commitment to changing those politics for the future.

Impossible? Hardly. A country that can engineer the seemingly unattainable economics of a $5 McDonald's feast certainly has the capacity to produce a healthy meal for the same price. It's just a matter of will -- or won't.

"This Is The Most GUTLESS Institution!" Congresswoman Marcy Kaptur

(She is awesome! There are still a few representatives (at least 1) who care about the people.--jef)

Fukushima Goes Global

When Will Governments Act to Protect Us From Fukushima's Spreading Radiation?
By ROBERT ROTH

To a limited extent, you can protect yourself and others against cancer from radiation.(1) But such means offer limited protection at best, and meanwhile massive amounts of irreparable damage are being caused ongoingly by the Fukushima disaster. Here are the high points of the latest disclosures and findings:

First, there was a coverup, and that there were one or more meltdowns at the Fukishima site very early on, one of them even before the tsunami hit. Besides confirming the usual about reliability of official sources, a key conclusion to draw from that is that many reactors are even less safe than previously thought. Besides the four on the California Coast plus a number of smaller research reactors in their vicinity, all in line to be damaged by the earthquake and possible tsunami likely to happen sooner or later and possibly any time, there is at least one that was in danger of damage from the Mississippi flooding that just occurred last week.(2)

Second, it becomes clearer all the time that we don't have to wait for one of the reactors in the U.S. to blow to create serious danger and harm. Among nuclear experts not paid by the industry or employed by government sources essentially in league with the industry, one suggests that fuel rods were blown into the air and vaporized by early events at Fukushima, others may or have already melted down through their containment structures and are going who knows where, and massive amounts of radioactive water have been and continue to be released into the ocean. It also appears that far greater harm could yet be done by the Fukushima reactors, and neither TEPCO nor the Japanese Government are up to the task of preventing that. Harvey Wasserman, a longtime activist who edits the nukefree.org website, calls for an international effort to devise and implement a plan to contain the damage to the extent possible.(3)

Third, part of the reason it's so hard to tell exactly what's going on is that the Tokyo Electric Power (TEPCO) and the Japanese Government are being a lot more effective at controlling the flow of information than at containing the disaster at Fukushima. The Japanese Government has refused to let Greenpeace conduct testing inside its territorial waters. Meanwhile, the Nuclear Regulatory [sic: Marketing and Promotional] Commission has stopped monitoring the situation. The U.S. EPA and the Canadian Government have shut down much of their monitoring. And no one in an official position is talking straight. So we have a combination of independent experts saying the situation is grave and worsening, and official sources refusing not only to disclose what they know but declining to find out the truth. So you get people like me trying to figure out and sum things up instead of the systematic disclosure and analysis we should be getting from official sources.(4)

Fourth, there is no such thing as a safe dose of radiation. So the figures about readings in excess of legal limits, while they are disturbing, are also misleading in that they imply there are levels below which radiation would not be harmful. I recently found an article that confirms what I had guessed at myself (although, to be clear, I am not a health professional or formally trained in biology or related sciences): The reason there is no safe dose is that cancer begins at the molecular level: "Several lines of evidence convince most cancer biologists that cancer starts its development from ONE genetically abnormal cell."(5)

The probability of developing cancer is quantitative, that is, the greater the number and volume of exposures to cancer-causing substances or radiation, the greater the probability that cancer will occur. Conversely, it would seem, the greater the number and volume of protective activities or substances we can accumulate, the lower the probability that the carcinogens we encounter will actually cause cancer to develop. But at the same time, the exposure of large populations to carcinogens is likely to cause a large number of cancers. The threat here is that seawater, seafood, soil, air, and rain can all carry radioactive materials, and apparently are doing so increasingly, with the continual release of radiation from Fukushima, and that these cancer-causing material are reaching the United States. So while the meltdown of a reactor located in the U.S. would cause a quantitatively greater exposure to residents here, we are already being exposed as a result of radiation released by Fukushima.

Although it may seem Quixotic to speak of protecting ourselves in the face of the planetary-level onslaught on our health and well being and indeed, on all life forms on the Earth, I return to the fact that the risk of cancer is quantitative, that we are exposed to numerous carcinogens on a daily basis, and it is possible to counteract to some extent their effect, through exercise, nutrition, and by other means. Both red wine (a glass a day) and dark chocolate (an ounce a day) are among the many protective substances available to us.(6)

However, there is a limit to how much red wine, dark chocolate, or even Justice, can heal. It seems clear that massive amounts of irreparable damage are being caused ongoingly by the Fukushima disaster. 

My purpose in sharing this information and analysis is to inform you of the threat to your own health and that of your children and grandchildren, born, unborn or maybe just hoped for, to give you the tools to do as much as can be done to protect yourself and those you love, and to attempt to motivate you and others to become vocal and otherwise active in advocating that the U.S. Government begin behaving responsibly, first, by monitoring and disclosing accurate information about the situation at Fukushima, the ongoing releases of radiation and where the various radioactive elements are traveling; by cutting off (rather than continuing, as President Obama has proposed) the billions of dollars in subsidies, including the limitations of liability, without which nuclear power could not continue to operate; and by seeing to the shutdown and responsible decommissioning of nuclear reactors in the U.S. and the development of replacement sources of power, including conservation, and excluding biomass incineration, as the governments of Japan and Germany are now beginning to do.

NOTES

(1) Colors of the Sun: Getting Some Protection from Ionizing Radiation (May 1, 2011), and Who'll Stop the Rain? Fukushima, Radiation, and What You Can and Can't Do To Protect Yourself and Others (March 31, 2011).

(2) Nuclear Information and Resource Servic:
UPDATE, 2:30 pm, Friday, May 20, 2011 ; Washington's Blog, "Fuel Rods Most Likely Melt[ed] COMPLETELY at Reactors 1, 2 AND 3 in the Early Hours of the Crisis, Raising the Danger of More Catastrophic Releases," May 19, 2011, ; Stephen Lendman, "Fukushima Nuclear Meltdown Confirmed," May 14, 2011.

(3) Harvey Wasserman, "A Nuclear Rapture? Fukushima's Apocalyptic Threat."

(4) Vivian Norris, "Deadly Silence on Fukushima," (Posted: 05/ 9/11 05:05 AM ET); and a good site for ongoing updates (along with NIRS, note 1 above).

(5) John W. Gofman and Egan O'Connor, The Causes of Cancer: Is There "Too Much Emphasis on Genes, and Not Enough on the Environment?" How to Avoid Some Mistakes, April 2001.

(6) Washington's Blog ; see also (1) above.

Tax the Rich: Fair Taxation Requires More Brackets at the Top (2 articles)

Monday, April 4, 2011 by Robert Reich's Blog
Why We Must Raise Taxes on the Rich
by Robert Reich

It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.

Tax the Rich!

The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)

Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It’s just the opposite for super rich.

The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don’t the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here’s the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots – the explosion of income and wealth among America’s super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn’t be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.

Besides, the President has the bully pulpit. But will he use it?

+++++++++++++++++++

Tuesday, April 5, 2011 by OtherWords
Some of the most affluent Americans actually pay lower effective tax rates than many middle class Americans.
by Mazher Ali

So many governors are hammering their budgets with a “we’re broke” message these days that it’s amazing our country hasn’t shattered into a thousand separate islands. More and more, however, rational voices are correctly asserting that we’re not broke.

The problem isn’t that the United States is out of money. It’s that a tiny sliver of households are under-taxed. The richest 10 percent of Americans own almost three-fourths of the country’s total wealth. Astoundingly, the most affluent 1 percent of Americans own more than one-third of our total wealth.

Thankfully, the message that our country isn't broke is making its way closer to the center of the tax and deficit debates. It can’t get there soon enough.

Many Republican lawmakers, along with governors like Wisconsin's Scott Walker and Ohio's John Kasich, bizarrely think that they can erase deficits with tens of billions of dollars in budget cuts and tax breaks for corporations and wealthy people who don’t need them. They’re ignoring the greatest economic returns available, which are provided by public investments, federal aid to states, and even unemployment benefits. Instead of helping save the middle class, they're propelling us toward a busted, plutocratic disaster.

The GOP's deficit obsession isn't just misguided. It turns a blind eye on the struggles of low- and middle-income Americans. In contrast, Rep. Jan Schakowsky’s sensible Fairness in Taxation Act would raise taxes on millionaires and billionaires, which better serves the American majority.

Currently, families earning $374,000 pay the exact same federal income tax rates as families with multi-million-dollar incomes, or even the handful who earn a billion bucks every year, such as the heirs of Walmart's founder. The lifestyles of the ultra-wealthy wouldn’t change in the least if they had to pay moderately higher income taxes. And it would boost our national economy.

The Fairness in Taxation Act calls for establishing five new tax brackets for incomes between $1 million and $1 billion, with rates ranging from 45 percent to 49 percent.

The Illinois Democrat's bill would also address an absurd aspect of our tax system, which wrongly favors wealth over work. Today, money earned through working nine-to-five or the graveyard shift is taxed at a higher rate than money obtained through windfalls. Capital gains, dividends, and other investment income derived from pre-existing wealth shouldn't be taxed at rates lower than income earned through work.

Three-quarters of all stocks and mutual funds owned by U.S. taxpayers belong to the richest 10 percent of American households. Therefore, some of the most affluent Americans actually pay lower effective tax rates than many middle-class Americans.

Take, for example, a weasel like Lloyd Blankfein, CEO of Goldman Sachs. He raked in just over $13 million in 2010 (excluding his bonus of some $12 million worth of shares in his company). Of that $13 million, only his base salary of $600,000 will be taxed according to the federal income tax rates. The remaining $12.4 million will be taxed at a top rate of 15 percent. Unfortunately, Blankfein is just one example of the kind of gross inequity that exists in the current tax system.

A century ago, tax policies adopted during President Teddy Roosevelt's administration were guided by sound principles that stand in direct contrast to those of today’s Republicans.

“No man should receive a dollar unless that dollar has been fairly earned,” explained Roosevelt in a 1910 speech. “Every dollar received should represent a dollar's worth of service rendered--not gambling in stocks…I believe in a graduated income tax on big fortunes."

The Fairness in Taxation Act takes aim at the same inequities Teddy Roosevelt--a Republican--identified long ago. If it were enacted this year, it would generate $78 billion that could fund jobs and social programs that Americans need now more than ever.

Repeat after me: we're not broke. It’s time to mandate that the wealthiest members of our communities share in the sacrifice of the economic recovery and pay their fair share. The Fairness in Taxation Act offers a clear path in that direction.

How Many Senators Does It Take to Screw a Taxpayer

HOW MANY SENATORS DOES IT TAKE TO SCREW A TAXPAYER?

15th January 2011

“Today, the government decides and they misdirect the investment to their friends in the corn industry or the food industry. Think how many taxpayer dollars have been spent on corn [for ethanol], and there’s nobody now really defending that as an efficient way to create diesel fuel or ethanol. The money is spent for political reasons and not for economic reasons. It’s the worst way in the world to try to develop an alternative fuel.” - Ron Paul

When bipartisanship breaks out in Washington DC, check to make sure your wallet is still in your pocket. Every time you fill up your car this winter you are participating in the biggest taxpayer swindle in history. Forcing consumers to use domestically produced ethanol is one of the single biggest boondoggles ever committed by the corrupt brainless twits in Washington DC. Ethanol prices have soared 30% in the last year as the supplies of corn have plunged. Only a policy created in Washington DC could drive up the prices of gasoline and food, with the added benefits of costing the American taxpayer billions in tax subsidies and killing people in 3^rd world countries.

The grand lame duck Congress tax compromise extended a 45-cent incentive to ethanol refiners for each gallon of the fuel blended with gasoline and renewed a 54-cent tariff on Brazilian imports. The extension of these subsidies, besides costing American taxpayers $6 billion per year, has the added benefit of driving up food costs across the globe, causing food riots in Tunisia, and resulting in the starving of poor peasants throughout the world.

This taxpayer boondoggle is a real feather in the cap of that fiscally conservative curmudgeon Senator Charley Grassley. He was joined in this noble effort by another fiscal conservative, presidential hopeful John Thune. It seems these guys hate wasteful spending, except when it benefits their states. The bipartisanship in this effort was truly touching, as Democrats Kent Conrad and Tom Harkin also brought home the pork for their states.

A bipartisan group of 15 senators signed a letter in late November demanding an extension of U.S. ethanol subsidies. I wonder if the fact they have received hundreds of thousands of dollars in campaign contributions during the past six years from pro-ethanol companies and interest groups like ADM, Monsanto, the National Corn Growers Association, and the Iowa Renewable Fuels Association had anything to do with this demand. You can always count on a Senator to do what’s best for his re-election campaign rather than what is best for the country. These symbols of political integrity will always spout the standard talking points:

• Promoting ethanol reduces our dependence on foreign oil

• Ethanol is green renewable energy

• Ethanol is cheaper than gasoline

As we all know when dealing with a politician, “half the truth, is often a great lie.”

Amaizing

Corn is the most widely produced feed grain in the United States, accounting for more than 90% of total U.S. feed grain production. 81.4 million acres of land are utilized to grow corn, with the majority of the crop grown in the Midwest. Although most of the crop is used to feed livestock, corn is also processed into food and industrial products including starch, sweeteners, corn oil, beverage and industrial alcohol, yogurt, latex paint, cosmetics, and last but not least, fuel Ethanol. Of the 10,000 items in your average grocery store, at least 2,500 items use corn in some form during the production or processing. The United States is the major player in the world corn market providing more than 50% of the world’s corn supply. In excess of 20% of our corn crop had been exported to other countries, but the government ethanol mandates have reduced the amount that is available to export.

This year, the US will harvest approximately 12.5 billion bushels of corn. More than 42% will be used to feed livestock in the US, another 40% will be used to produce government mandated ethanol fuel, 2% will be used for food products, and 16% is exported to other countries. Ending stocks are down 963 million bushels from last year. The stocks-to-use ratio is projected at 5.5%, the lowest since 1995/96 when it dropped to 5.0%. As you can see in the chart below, poor developing countries are most dependent on imports of corn from the US. Food as a percentage of income for peasants in developing countries in Africa and Southeast Asia exceeds 50%. When the price of corn rises 75% in one year, poor people starve.

The combination of an asinine ethanol policy and the loosest monetary policy in the history of mankind are combining to kill poor people across the globe. I wonder if Blankfein, Bernanke, and Grassley chuckle about this at their weekly cocktail parties while drinking Macallan scotch whiskey and snacking on mini beef wellington hors d’oeuvres. The Tunisians aren’t chuckling as food riots have brought down the government. This month, the U.N. Food and Agricultural Organization (FAO) reported that its food price index jumped 32% in the second half of 2010 — surpassing the previous record, set in the early summer of 2008, when deadly clashes over food broke out around the world, from Haiti to Somalia.

Let’s Starve a Tunisian

“What is my view on subsidizing ethanol and farmers? Under the constitution, there is no authority to take money from one group of people and give it to another group of people for so called economic benefits. So, no, I don’t think we should do that. Besides, bureaucrats and the politicians don’t know how to invest money.” - Ron Paul

The United States is the big daddy of the world food economy. It is far and away the world’s leading grain exporter, exporting more than Argentina, Australia, Canada, and Russia combined. In a globalized food economy, increased demand for corn, to fuel American vehicles, puts tremendous pressure on world food supplies. Continuing to divert more food to fuel, as is now mandated by the U.S. federal government in its Renewable Fuel Standard, will lead to higher food prices, rising hunger among the world’s poor and to social chaos across the globe. By subsidizing the production of ethanol, now to the tune of $6 billion each year, U.S. taxpayers are subsidizing skyrocketing food bills at home and around the world.

The energy bill signed by that free market capitalist George Bush in 2008 mandates that increasing amounts of corn based ethanol must be used in gasoline sold in the U.S. This energy legislation requires a five-fold increase in ethanol use by 2022. Some 15 billion gallons must come from traditional corn-blended ethanol. Nothing like combining PhD models and political corruption to cause worldwide chaos. Ben Bernanke and Charley Grassley have joined forces to bring down the President of 23 years in Tunisia. People tend to get angry when they are starving. Bringing home the bacon for your constituents has consequences. In the U.S. only about 10% of disposable income is spent on food.  By contrast, in India, about 40% of personal disposable income is spent on food. In the Philippines, it’s about 47.5%.  In some sub-Saharan Africa, consumers spend about 50% of the household budget on food. And according to the U.S.D.A., “In some of the poorest countries in the region such as Madagascar, Tanzania, Sierra Leone, and Zambia, this ratio is more than 60%.”

  

The 107 million tons of grain that went to U.S. ethanol distilleries in 2009 was enough to feed 330 million people for one year at average world consumption levels. More than a quarter of the total U.S. grain crop was turned into ethanol to fuel cars last year. With 200 ethanol distilleries in the country set up to transform food into fuel, the amount of grain processed has tripled since 2004. The government subsidies led to a boom in the building of ethanol plants across the heartland. As usual, when government interferes in the free market, the bust in 2009, when fuel prices collapsed, led to the bankruptcy of almost 20% of the ethanol plants in the U.S.

The amount of grain needed to fill the tank of an SUV with ethanol just once can feed one person for an entire year. The average income of the owners of the world’s 940 million automobiles is at least ten times larger than that of the world’s 2 billion hungriest people. In the competition between cars and hungry people for the world’s harvest, the car is destined to win. In March 2008, a report commissioned by the Coalition for Balanced Food and Fuel Policy  estimated that the bio-fuels mandates passed by Congress cost the U.S. economy more than $100 billion from 2006 to 2009. The report declared that “The policy favoring ethanol and other bio-fuels over food uses of grains and other crops acts as a regressive tax on the poor.” A 2008 Organization for Economic Cooperation and Development (O.E.C.D.) issued its report on bio-fuels that concluded: “Further development and expansion of the bio-fuels sector will contribute to higher food prices over the medium term and to food insecurity for the most vulnerable population groups in developing countries.” These forecasts are coming to fruition today.

It Costs What?

The average American has no clue about the true cost of ethanol. They probably don’t even know there is ethanol mixed in their gasoline. The propaganda spread by the ethanol industry and their mouthpieces in Congress obscures the truth and proclaims the clean energy mistruths and the thousands of jobs created in America. The truth is that producing ethanol uses more energy than is created while driving costs higher. The jobs created in Iowa are offset by the jobs lost because users of energy incur higher costs and hire fewer workers as a result. It takes a lot of Saudi oil to make the fertilizers to grow the corn, to run the tractors, to build the silos, to get the corn to a processing plant, and to run the processing plant. Also, ethanol cannot be moved in pipelines, because it degrades. This means using thousands of big diesel sucking polluting trucks to move the ethanol – first as corn from the fields to the processing plants, and then from the processing plants to the coasts.

The current ethanol subsidy is a flat 45 cents per gallon of ethanol usually paid to the an oil company, that blends ethanol with gasoline. Some States add other incentives, all paid by the taxpayer. On top of this waste of taxpayer funds, the free trade capitalists in Congress slap a 54 cent tariff on all imported ethanol. Ronald R. Cooke, author of Oil, Jihad & Destiny, created the chart below to estimate the true cost for a gallon of corn ethanol. Cooke describes a true taxpayer boondoggle:

It costs money to store, transport and blend ethanol with gasoline. Since ethanol absorbs water, and water is corrosive to pipeline components, it must be transported by tanker to the distribution point where it is blended with gasoline for delivery to your gas station. That’s expensive transportation. It costs more to make a gasoline that can be blended with ethanol. Ethanol is lost through vaporization and contamination during this process. Gasoline/ethanol fuel blends that have been contaminated with water degrade the efficiency of combustion. E-85 ethanol is corrosive to the seals and fuel systems of most of our existing engines (including boats, generators, lawn mowers, hand power tools, etc.), and can not be dispensed through existing gas station pumps. And finally, ethanol has about 30 percent less energy per gallon than gasoline. That means the fuel economy of a vehicle running on E-85 will be about 25% less than a comparable vehicle running on gasoline.

Real Cost For A Gallon Of Corn Ethanol
Corn Ethanol Futures Market quote for January 2011 Delivery	$2.46
Add cost of transporting, storing and blending corn ethanol	$0.28
Added cost of making gasoline that can be blended with corn ethanol	$0.09
Add cost of subsidies paid to blender	$0.45
Total Direct Costs per Gallon	$3.28
Added cost from waste	$0.40
Added cost from damage to infrastructure and user’s engine	$0.06
Total Indirect Costs per Gallon	$0.46
Added cost of lost energy	$1.27
Added cost of food (American family of four)	$1.79
Total Social Costs	$3.06
Total Cost of Corn Ethanol @ 85% Blend	$6.80

Multiple studies by independent non-partisan organizations have concluded that mandating and subsidizing ethanol fuel production is a terrible policy for Americans:

• In May 2007, the Center for Agricultural and Rural Development at Iowa State University released a report saying the ethanol mandates have increased the food bill for every American by about $47 per year due to grain price increases for corn, soybeans, wheat, and others. The Iowa State researchers concluded that American consumers face a “total cost of ethanol of about $14 billion.” And that figure does not include the cost of federal subsidies to corn growers or the $0.51 per gallon tax credit to ethanol producers.

• In May 2008, the Congressional Research Service blamed recent increases in global food prices on two factors: increased grain demand for meat production, and the bio-fuels mandates. The agency said that the recent “rapid, ‘permanent’ increase in corn demand has directly sparked substantially higher corn prices to bid available supplies away from other uses – primarily livestock feed. Higher corn prices, in turn, have forced soybean, wheat, and other grain prices higher in a bidding war for available crop land.”

• Mark W. Rosegrant of the International Food Policy Research Institute, testified before the U.S. Senate on bio-fuels and grain prices. Rosegrant said that the ethanol scam has caused the price of corn to increase by 29 percent, rice to increase by 21 percent and wheat by 22 percent. Rosegrant estimated that if the global bio-fuels mandates were eliminated altogether, corn prices would drop by 20 percent, while sugar and wheat prices would drop by 11 percent and 8 percent, respectively, by 2010. Rosegrant said that “If the current bio-fuel expansion continues, calorie availability in developing countries is expected to grow more slowly; and the number of malnourished children is projected to increase.” He continued, saying “It is therefore important to find ways to keep bio-fuels from worsening the food-price crisis. In the short run, removal of ethanol blending mandates and subsidies and ethanol import tariffs, in the United States—together with removal of policies in Europe promoting bio-fuels—would contribute to lower food prices.”

The true cost of the ethanol boondoggle is hidden from the public. The mandates, subsidies and tariffs take place out of plain view.  The reason blenders (and gas stations) will pay the same for ethanol is because they can sell it at the same price as gasoline to consumers. A consumer will pay the same for ten gallons of E10 as for ten gallons of gasoline even though the E10 contains a gallon of ethanol. Consumers pay the same for the gallon of ethanol for three reasons. (1) They don’t know there’s ethanol in their gasoline. (2) There is often ethanol in all the gasoline because of state requirements, so they have no choice. (3) They never know the ethanol has only 67% the energy of gasoline and gets them only 67% as far. The result is that drivers always pay much more for ethanol energy than for gasoline energy, simply because they pay the same amount per gallon. When gasoline prices are $3.00 per gallon, Joe Six-pack pays $4.50 for the same amount of ethanol energy.

You know a politician, government bureaucrat or central banker is lying when they open their mouths. Whenever evaluating a policy or plan put forth by those in control, always seek out who will benefit and who will suffer. Who benefits from corn based ethanol mandates and subsidies? The beneficiaries are huge corporations like Archer Daniels Midland and Monsanto, along with corporate farming operations (80% of all US farm production), and Big Oil. The mandated ethanol levels are set in law. By providing tax subsidies we are bribing oil companies with taxpayer dollars to do something they are legally required to do, resulting in a $6 billion windfall profit to oil companies.  The other beneficiaries are the Senators and Representatives from the farming states who are bankrolled by the corporate ethanol beneficiaries and their constituents who will re-elect them. The environment does not benefit, as many studies have concluded that it requires more fossil fuel energy (oil & coal) to produce a gallon of ethanol than the energy created. The jobs created in the farm belt at artificially profitable ethanol plants are more than offset by job losses due to the added costs in the rest of the economy. When subsidies are removed or oil prices drop, the ethanol plant jobs disappear, resulting in a massive capital mal-investment.

Our supposedly wise PhD and MBA leaders have created a perfect storm. The unintended consequences of government intervention in the markets are causing havoc, food riots, starvation and intense suffering for the poor and middle class. Brazil produces sugar cane ethanol in vast quantities and can export it to the U.S. much cheaper than we can produce corn ethanol. Fuel prices would be lower without tariffs on Brazilian ethanol imports. 

The average cost of food as a percentage of disposable income for an American is 10%. Averages obscure the truth that the cost is probably .0001% for Lloyd Blankfein, Ben Bernanke and Chuck Grassley, while it is 30% for a poor family in Harlem. America’s horribly misguided ethanol policy combined with Ben Bernanke’s Wall Street banker subsidy program are resulting in soaring fuel and food prices across the globe. Poor people around the world suffer greatly from these policies. Below are two assessments of ethanol.    

 “Everything about ethanol is good, good, good.” – Senator Chuck Grassley, Iowa

“This is not just hype — it’s dangerous, delusional bullshit. Ethanol doesn’t burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption — yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World.” – Jeff Goodell

Who do you believe?

Wall Street Profits, Subsidies and Lobbyists

Wall Street Profits, Subsidies and Lobbyists
Wednesday 05 May 2010
by: Jim Hightower, t r u t h o u t | Op-Ed

Wall Street bankers are strutting around like little banty roosters these days, crowing about the phenomenal profits their banks are raking in.

Citigroup has just announced that its profits for just the first three months of this year totaled an incredible $4.4 billion, Goldman Sachs' haul was $3.5 billion, JPMorgan Chase grabbed $3.3 billion and Bank of America took $3.2 billion. Top bankers are cock-a-doodle-doing over these numbers, claiming that such results prove what geniuses they are, how essential they are to America's financial health and, of course, how deserving they are of their multimillion-dollar bonuses.

Before they choke on their own hubris, however, let's note that a huge chunk of these profits are taken directly from a massive, little-known subsidy slipped to them by Ben Bernanke and other regulatory sweethearts in our country's Federal Reserve system. The Fed has deliberately held short-term interest rates to historic lows - less than one half of a percent. Meanwhile, the Treasury Department is paying almost 4 percent interest on longer-term loans that banks make to the government.

This might sound complicated, but it's really a very simple transfer of public wealth to the giant banks. The Fed loans, let's say, a billion dollars to a bank at a half-percent interest. The bank then turns right around and loans that billion dollars to the Treasury Department, collecting 4 percent interest. In short, boys and girls, the banks take our money and loan it back to us for a sweet 3.5 percent profit. Sheer genius!

One wonders: Do bankers wear ski masks when they make these transactions?

By holding interest rates to nearly zero, the Fed is also allowing bankers to steal directly from us depositors and consumers. How much are you earning on your interest-bearing checking account? Chase banks are paying a whopping 0.01 percent. This means that if you keep a $5,000 balance in that account for a year, Chase will pay you 50 cents. Fifty cents to use your money for a year!

Now, try to get a consumer loan from that same bank, and it'll sock you with about 6 percent in interest. It doesn't take much genius to rack up profits with an interest rate spread of 5.5 percentage points - a spread that our government continues to hold at record levels.

In other words, Washington is holding the door open for Wall Street to rob us. At the same time, Wall Street has been able to stall and dilute even the modest consumer protections proposed by President Obama. How do bankers keep getting away with this ongoing robbery? In part, by using another door - the revolving door between Washington and Wall Street.

What do such former congressional leaders as Dick Armey, Bob Dole, Dick Gephardt, Dennis Hastert and Trent Lott have in common? Each is a lobbyist for Wall Street banks and other financial powerhouses. They are among the 70 former Congress-critters that watchdog group Public Citizen found lobbying for bankers last year.

Also, 56 former staffers on the House or Senate banking committees have spun through that same revolving door to become finance-industry lobbyists. These Washington insiders are now drawing six- or seven-figure annual paychecks for using their congressional connections to stop reform and enable more Wall Street thievery.

Especially cynical is Dick Armey, who was House Republican majority leader back when Congress was so enthusiastically deregulating Wall Street, giving the green light to the explosion of banker greed that has now crashed our economy. Army was subsequently rewarded with a multimillion-dollar career as a lobbyist.

While loyally serving his special-interest clients, Armey also became head of a corporate-funded political front group named FreedomWorks. Wearing this hat, Armey-the-lobbyist financed and organized various tea bag rallies, whipping up a frenzy of anti-government anger, which he has twisted into a lobbing campaign to help kill Wall Street reforms.

So, he uses people who are legitimately angry at Washington's meekness toward Wall Street to create more congressional meekness. Thus, the thievery continues, while public cynicism and anger toward government grows hotter - and the thieves just smile.

Why A Salad Costs More Than A Big Mac

Why A Salad Costs More Than A Big Mac

By Ben Popken on March 4, 2010 11:14 AM

(PCRM)