Ethanol Mandates - the poster child for zombie government prorgrams that never die - regardless of the damage they do

By definition humans are imperfect. Some are more imperfect than others however. Nature has provided us with a mechanism to reduce the most imperfect among us. That mechanism is sometimes chronicled in something called the Darwin Awards. My favorite Darwin award of all time involved a thrill seeking man who strapped a solid rocket booster to his car in an effort to see how fast he could go. He went quite fast, in excess of 300 miles per hour actually… but, shockingly, the brakes for his car eventually disintegrated and he met his end after crashing into the side of a cliff. Thankfully nature’s lessons do not always end so… drastically, usually the only injuries are a few broken bones, a smaller bank account and maybe some wounded pride.

And that is the beauty of humanity. We often learn from our mistakes. We often learn from our experiences in order to make adjustments or better decisions going forward. Unfortunately, although government is made up of humans, it does not share that same skillset.

There is possibly no better example of this than the debacle that is Uncle Sam’s ethanol obsession. Since the Carter administration the government has been diverting your dollars to put ethanol into your gas tank. Initially it was intended to be a tool to help the United States become energy independent, it then morphed into a tool to help increase gas mileage and later it became a critical element in fighting global warming. Now it doesn’t even do any of those dubious, but theoretically positive, things. It’s simply become another failed government wealth transfer program.

The Wall Street Journal states: Corn is also a key ingredient in the combine of political power and corporate welfare that is U.S. alternative energy policy. The food-to-fuel mandate is known as the Renewable Fuels Standard (RFS) and requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year and 36 billion gallons by 2022. These quotas are fulfilled almost entirely by corn ethanol.

Ethanol is an industry that enjoys no natural market. The only reason the ethanol market exists in the first place is because of government mandates. And who are the beneficiaries of this corporate welfare that is funded out of your pocket? Mainly members of the farm / finance / producers cabal in the form of the Renewable Fuels Association. This advocacy organization that is simply trying to save our planet is made up of an array good hearted companies that are just too fragile to survive without Uncle Sam’s largesse with your money. Among these are food processor ADM (Rev = $80 Billion, #28 on the FORTUNE 500), transportation company CSX ($11 Billion, #226) and energy companies Kinder Morgan ($8 Billion, #311) and Noble Group ($80 Billion, #139 on the Global FORTUNE 500). This ethanol boondoggle translates into a $45 billion industry… money that comes out of your pocket and could be spent elsewhere if it were not being, literally, set on fire.

The worst part of the entire ethanol fiasco is the fact that not only does it not achieve any of its stated – and oft changing – objectives; it actually causes a wide array of unintended consequences – none of which are good. Number one is the fact that it drives up the cost of one of the most important foodstuffs in the world, corn, the price for which is up almost 300% over the last decade. That in turn drives up the price of virtually every other thing in the economy, from food to transportation to plastics. Then there’s the fact that ethanol damages engines and that the patchwork of ethanol standards across the country causes unnecessary price spikes and shortages. If all of that weren’t enough, ethanol has even scared off much of – but not all – of the anti-capitalist environmental lobby because – among other things – it drives deforestation on a wide scale around the world.

Finally, and most heartbreakingly, the ethanol mandates have driven the prices of American crops to near record levels, resulting in greater hunger in developing nations. One way they do this is to encourage farmers to switch to more profitable corn, which results in less wheat, oats, etc. to meet demand. This in turn results in less food making it into the stomachs of poor children around the world. In a nutshell, the mandates make everything in our economy more expensive, do little to alleviate our energy conundrum, actually harm the environment and make dollars donated feed the hungry not go as far. That seems like a policy that screams to be abolished.

Which brings us back to the Darwin Awards. If government programs operated the same way that humans do, at some point they would die as a consequence of their abysmal failure. Unfortunately however, they are not. Instead they keep on trudging down the same path and, indeed in this case the EPA keeps setting increasingly high ethanol standards that will double the amount of food wasted over the next decade. Of course like a potential Darwin Award candidate who stands on the roof contemplating jumping off to test his plastic wings, the EPA does have the option of stepping back from the ledge. It has the power to issue waivers to the ethanol mandates in emergency situations. One might imagine that the litany of problems caused by the mandates, when combined with the worst drought since the Great Depression, would qualify as just such an emergency. But of course the EPA is government and thus you’d be wrong.

At the end of the day the tragedy of ethanol clearly demonstrates the folly of big government. More than anything the element of common sense is replaced by catastrophic regulations imposed by greedy politicians and enforced by power hungry bureaucrats. In a sane world the ethanol mandates would have been history two decades ago. In the insane world of government however they are not only surviving, they are thriving. One only wishes you could say the same of the average American taxpayer, or more consequentially, the children in Africa who are going to be hungrier as a result of another reckless government program that lives on like a zombie long after it should have been dead and buried.

Who would you rather call if your child was in danger - Barack Obama or Mitt Romney?

Dinesh D’Souza recently penned a piece called “How I became George Obama's 'brother”. It talks about George Obama calling him (D’Souza) from Kenya seeking $1,000 for badly needed medical care for his hospitalized son. D’Souza, who had met George years ago when he was doing research for “The Roots of Obama's Rage” was happy to send the money, but wondered “Why are you coming to me?” George, the brother of the multi-millionaire President of the United States replied: “I have no one else to ask.”

Now of course, George not feeling like he could call his brother is different from his actually calling his brother and giving him the opportunity to help. That might be a strong argument on the President’s side if he was somehow unaware of George or if his circumstances were unknown. Neither is the case however. Barack Obama actually met his half brother in 1987 when his sibling was 5 years old and then again in 2006 when Barack Obama was a US Senator from Illinois. In addition to that, George Obama’s life situation in a country where the average person lives on less than $3 a day has been chronicled in the American media since Obama announced his run for the presidency in 2008.

D’Souza grants that George Obama is no angel, calling him a “drinker and a skirt chaser”. Nonetheless, George’s brother is the most powerful man on the planet yet when the health of his son was in the balance George didn’t feel as if he could reach out to him.

One might wonder why George felt the need to reach out to D’Souza rather than his big brother, particularly if he had heard President Obama’s speech earlier this year when he compared his values to those of others, saying “I am my brother’s keeper. I am my sister’s keeper. That’s a value.”

Well, it turns out that President Obama didn’t mean that he was literally his brother’s keeper, but rather he was using the biblical reference to suggest that the rich “do a little more”, i.e. pay more taxes.

That one speech gets to the core of the vision of America that voters are faced with in November. Barack Obama wants to take care of everyone, but he wants the government to do it with your money. Contrast that approach with Mitt Romney’s.

In 1996 a Bain Capital employee, Robert Gay, came to Romney and told him that Melissa, Gay’s 14 year old daughter, had snuck out of the house to attend a concert in New York and had been missing for three days. Romney immediately closed down the multibillion dollar Boston operation, set up a temporary headquarters in New York City and mobilized dozens of volunteers to search for the girl. He had Bain’s printing company print 300,000 flyers and had clerks at the firm’s drugstore unit stuff them into bags at checkout. The girl was found a week later recovering from a drug overdose, and, according to doctors, would likely not have survived another day.

To get another perspective on this contrast, one need only compare the tax returns of Romney and Obama. To compare apples to apples, one would compare Mitt Romney’s 2010 and 2011 tax returns to Barack Obama’s 2006 & 2007 returns – the two years before the presidential election.

The numbers are stark. In both 2006 and 2007 Barack Obama donated 6% of his income to charity. Mitt Romney during 2010 and 2011 donated 14% and 19% (respectively) of his income to charity. The goal of this piece is not to suggest that 6% is too low or that 15% is ideal. On the contrary. Everyone gives what they believe is appropriate.

The difference, however, is clear. Barack Obama claims that he is his brother’s keeper but believes it’s your job to actually pay for that upkeep, and he uses his position as President of the United States to compel such. Mitt Romney on the other hand suggests that it’s not the government’s job to take care of everyone, but rather individuals, communities, churches etc. and he puts his money behind those words.

Interestingly, this is not necessarily about greed or keeping money in his own pocket. If you combine Obama’s taxes and his charitable giving, he paid 39% in 2006 and 42% in 2007 while Romney paid 32% in 2010 and 42% in 2011. It’s about a fundamental understanding of the role of government. Barack Obama believes in the almighty government and their ability and responsibility to take care of the poor and the unfortunate and practically everything else in society. Mitt Romney on the other hand believes that while government can play a role in society, including providing a safety net for those in need, the primary responsibility for taking care of citizens lays with individuals, their families and their communities.

On November 6th, voters should not only think about how great a job the nanny state government has done with everything from food stamps to Social Security to Solyndra to Fast and Furious, they should also look to the plights of George Obama and Robert Gay. When citizens subcontract the support and well being of their families, communities or country to a nameless, faceless government bureaucracy there is a disconnect between the warm and fuzzy feeling they get for being caring people with good intentions and the actual results in the lives of the people in need. This holds true for feeding the poor, educating the children or creating jobs and prosperity. If there was an emergency with your child, who would you rather call for help? Barack Obama or Mitt Romney? This election may not involve a child in danger, but it certainly involves a nation in distress. The question is, who will the voters call upon?

The November Choice: An election of historic proportions.

As I think about the election in November, I can’t help but think about Matt Ridley and his outstanding book “The Rational Optimist – How Prosperity Evolves”. In it he chronicles the evolution of human society and demonstrates a perfect understanding of why nations fail:

“Empires, indeed governments generally, tend to be good things at first and bad things the longer they last. First they improve society’s ability to flourish by providing central services and removing impediments to trade and specialization”.

But then “governments gradually employ more and more ambitious elites who capture a greater and greater share of the society’s income by interfering more and more in people’s lives as they give themselves more and more rules to enforce, until they kill the goose that lays the golden eggs.

From Ancient Egypt to the Roman Empire to the Ming Dynasty to the Soviet Union, these and countless other entities collapsed under the weight of their own regulation, either from the state or the church.

One has to wonder where is the tipping point that harkens the descent of a nation into the chaos that inevitably leads to its end… and more importantly, where the United States is on that scale. If you imagine a spectrum with tyranny on the left and anarchy on the right, the Constitution of the United States was crafted so that the government be a fulcrum balancing the state between the two. It worked that way for a while.

For its first 125 years the government of the United States was largely reluctant to take over the lives of its citizens. Over the last century it has become far more enthusiastic in that pursuit, with a particular emphasis in the fifty years. As Ridley points out, this is not particularly unique among nations. The United States is unique however. It is the only nation that was established for the specific purpose of allowing its people to live in freedom. The Declaration of Independence clearly articulates that the rights of men are natural and are not bestowed by any government. The Constitution sought to codify limitations on the government’s ability to infringe on those rights.

As we all know, those Constitutional limits seem to resemble paper tigers more and more each day, from everything from Obamacare to ethanol mandates to eminent domain abuses. The question as it relates to November is, must the United States go the way of the Roman Empire or can it figure out how to save itself from the seemingly inevitable fate of states?

Rarely are voters presented with two so clearly different paths ahead. On the one hand you have Mitt Romney who is an unabashed fan of the markets and market solutions. While Romney may be tin eared in some respects – read RomneyCare – he has become an avowed advocate of government restraint. His selection of Paul Ryan demonstrates his intent to address the growth of government while that’s still possible.

While Romney may not have the libertarian leanings that many of us would like, he stands in stark contrast to the man he faces in November. Romney seeks to move the lever (the board that sits on the fulcrum) rightward to balance the scale of freedom closer towards the center, Barack Obama seeks to slam it to the left where government takes over every aspect of a citizen’s life and freedom and free markets become little more than a distant memory.

Not sure about that? A few points should demonstrate the truth of that statement.

More than one third of the American households receive income based welfare assistance from the United States government – that doesn’t even include Social Security! Barack Obama has actively sought to increase that proportion, including gutting the 1996 welfare reform that reduced welfare rolls by half, and embarking on an advertising campaign to increase food stamp rolls.

At the same time fully half the population pays no income taxes while the President suggests the rich are somehow taking advantage of the system. This despite the fact that the top 1% of income earners pay 37% of all income taxes yet take home only 17% of all income. At what point do the people in that 1% or 5% or 10% decide to take their money and play somewhere else? If just the top 10% of taxpayers emigrated, they would take with them 71% of income tax revenue.

Then there is the notion of success. The President famously told businessmen that “If you've got a business, you didn't build that. Somebody else made that happen." That gets to the core of what Barack Obama counts as success. To hammer the point home, a week later he held up General Motors as a stellar example of success, going so far as to suggest “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.” Of course this success that Obama is so proud of was bought by pouring tens of billions of taxpayer’s dollars into the company.

Then there is the regulation. In his first three years in office Barack Obama issued 106 major regulations that will impact the economy by more than $100 million or more. This compares with 38 (a still too high number) by his predecessor. A President Obama not constrained by another reelection campaign will likely increase that number dramatically.

Whether in the form of the Ming Dynasty, 18th century France or modern Greece, Spain or California, history demonstrates clearly that when government grows to the point that it overwhelms the citizenry’s ability to operate with even the most basic level of freedom, particularly economic freedom, the house collapses. Romney was not my first choice for the next president, but at least he’s mostly committed to the notion of individual liberty and economic freedom. Compare that to the cleptocratic and authoritarian Obama and the choice is simple. One wonders if the Romans had the opportunity in 180 AD would they have been smart enough to put someone other than Commodus on the throne. We are at that same point in 2012. The difference is, we have a choice. The question is, will voters understand what’s at stake when they walk into the booth in November?

Mitt Romney should leverage his tax records to re-educate Americans on the prosperity capitalism can engender.

For months we’ve heard calls from Democrats for Mitt Romney to release his tax records. Last week Harry Reid even claimed he had it from “a number of people” had told him that Mitt Romney had not paid his taxes for a decade and demanded he release them.

I’d like to suggest Mitt Romney actually go ahead and release his tax records. Much like pulling a Band-Aid off a wound, where the fear of the pain is actually worse than the pain itself, I suspect the speculative hay that Democrats will be making over the next three months will be a far more attention grabbing than the actual returns themselves would be.

This is not to suggest that Romney should feel compelled to provide whatever information Democrats seek. On the contrary. I’m suggesting that Romney use his tax returns to do something he has yet to forcefully do: Make a crystal clear argument that capitalism is at the core of American success and it offers virtually every American the opportunity to achieve prosperity. Essentially his argument should be something like: “I’m proud to have earned hundreds of millions of dollars throughout my career. I’ve paid tens of millions of dollars in taxes, I’ve donated tens of millions more to charities and I’ve helped create tens of thousands of jobs and I’ve helped generate billions of dollars in honest income for tens of thousands of American families.”

Such language, when coupled with a telling of his time at Bain demonstrating the impact he and Bain had on companies from Staples, to Gartner Group to Domino's Pizza clearly tell the story of success that capitalism has written in our past and can write for our future.

Staples provides a perfect example. Bain Capital was one of the key early funders of the company in 1986. Not only did Staples itself create over 50,000 jobs within its stores, but it likely created hundreds of thousands more by giving small business people the opportunity to save money on office products, which they could then invest in other areas of their businesses such as marketing, capital and even employees. At the end of the day Bain Capital and Mitt Romney may have made tens of millions of dollars from their Staples investment, but the positive impact on the economy was worth billions.

But of course not all Bain endeavors worked out, and in some cases both money and jobs were lost. But that’s the whole point of capitalism. Mitt Romney’s job at Bain Capital was never to create jobs, nor to destroy them. It was to employ the capital in his care in such a way that it would legally earn the most money possible for his investors. Bain’s capital was simply one – albeit an important one – of the inputs necessary to build, grow or rescue a business. Others include everything from risk taking to janitorial services to manufacturing to R&D and hundreds more. Capitalism works because it harnesses the efforts of millions of producers, each seeking to achieve their own goals to meet the needs of millions or billions of consumers seeking an ever evolving supply of goods and services.

There may be no better demonstration of the power of the mechanism of capitalism than Leonard Read’s seminal 1958 essay “I, Pencil”. Read demonstrates with unparalleled clarity the myriad forces that come into play in order to manufacture one simple pencil. From the lumberjacks in California and Oregon to the graphite miners in Sri Lanka to the workers shipping the pumice from Italy, everyone plays a role in the manufacturing of the pencil, not by adhering to some grand top-down strategy for manufacturing a pencil, but rather by doing what they have chosen to do in response to the needs of the market.

The lessons Read wrote about in I, Pencil are as true today as they were in 1958. Compare the market driven success of the mobile device universe with the iPhone, Google’s Android, Amazon’s Kindle and their hundreds of thousands of apps with the abject failure of government driven endeavors such as solar power, ethanol, education and General Motors.

Mitt Romney should leverage his tax returns and the wealth they reflect to champion the cause of capitalism and clearly demonstrate the role it plays in American prosperity. Indeed he could not have asked for a better foil than Barack Obama in an effort to contrast that success with the abject failure of the progressive top-down statist approach. It’s not often that history gives a politician the opportunity to dovetail their personal story with current events to demonstrate with crystal clarity the superior nature of capitalism vs. statism. By releasing his tax returns and explaining the story behind them Romney will not only take a weapon out of the hands of his opponents, but more importantly, he can remind many Americans that it was capitalism that allowed us to prosper in the first place.