Policy: Economy

Big Chicken takes on Big Ethanol

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Beltway Confidential,Timothy P. Carney,Economy,Farm Bill

One reason corporate welfare is so hard to kill is the problem of "concentrated benefits and diffuse costs." A subsidy program might irk taxpayers, but how much time and money will taxpayers spend to kill a program that costs them each $20 per year? A lot less than the few lucky beneficiaries will spend to save that program.

Even worse, regulations often protect big companies from competition. Sometimes this prevents the competition from ever coming into existence.

It's depressing for advocates of liberty and the little guy.

So how do you beat corporate welfare? Here's the key: Subsidies don't merely cost taxpayers money, they also distort the economy. If the distortion hurts a powerful player, suddenly there's a powerful lobby against the subsidy.

This is exactly what's playing out in the ethanol fight. For years, libertarians, drivers and more recently environmentalists have opposed ethanol subsidies and the ethanol mandate. But up against the corn growers, ADM and ethanol giant Poet, these crusaders have always lost.

But now the fast-food lobby and Big Oil have joined the fight, as has Big Chicken. My colleague Zack Colman reports on the fight.

I explained the restaurants' interest last year: Ethanol subsidies drive up the price of food. The ethanol mandate cuts into oil consumption, thus the American Petroleum Institute's interest. And the ethanol mandate drives up the price of chicken feed.

I've reported similar dynamics regarding mutual funds killing the Transaction Account Guarantee subsidy, natural-gas consuming corporations like Koch Industries blocking T. Boone Pickens' push for natural-gas-car subsidies or Delta lobbying to kill the Export-Import Bank.

Also related: Big Chicken has enjoyed biofuel subsidies in the past, in the curious tale of the chicken-fat car.

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