The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Davis-Bacon for Ethanol Plants: New Ways to Waste Money

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


The federal government’s subsidization of the ethanol industry needlessly depletes the U.S. Treasury.  As if that alone were not enough to upset taxpayers, H.R. 2419, the Farm Bill Extension Act, will only make an already egregious waste of money worse by making it even more expensive to build new ethanol plants.

Made in the United States from corn, ethanol is a gasoline substitute; running cars on ethanol means using less oil.  The federal government heavily subsidizes corn growers and ethanol producers.  Rolling Stone reporter Jeff Goodell observed in the July 24th issue that ethanol receives more than 200 tax breaks and at least $5.5 billion in subsidies per year.  According to Goodell, ethanol production represents only 3.5 percent of the nation’s gasoline consumption, but it consumes twenty percent of the entire U.S. corn crop.  According to the Energy Information Administration, “Ethanol relies heavily on Federal and State subsidies to remain economically viable as a gasoline blending component.”

It is fair to say that many of the 114 ethanol plants that exist across the country would never have been built if not for government subsidies.  Foreign Affairs reports that within a few years these plants will consume half of the nation’s domestic corn supplies, drastically increasing the price of corn and many other foods.  Subsidies for ethanol keep taxes high and have increased the price of corn to its highest level in 10 years.  For the average American, this adds up to both a higher tax bill and a higher grocery bill.

 This is all for a fuel that, according to experts like Dr. David Pimentel of Cornell University, just isn’t very good.  Ethanol is less efficient and pollutes almost as much as the gasoline it is intended to replace.

Worse yet, H.R. 2419 extends the Davis-Bacon Act to ethanol plants constructed using federal loan guarantees.  The Davis-Bacon Act is a 1931 labor law which mandates that contractors receiving federal subsidies pay their workers above-market wages.  According to Associated Builders and Contractors, an organization representing some 24,000 firms in the construction industry and related fields, Davis-Bacon already costs taxpayers approximately $1 billion annually, while making it harder for smaller firms to compete for government contracts.

If the Farm Bill Extension Act is approved, it will increase the cost of building ethanol plants and raise the price of ethanol.  Congress – egged on by clamorous corn lobbyists – will be obliged to increase farm subsidies to keep ethanol competitive.  The benefits will go to a few large companies that produce ethanol, increasing the misery of taxpayers. 

Only members of Congress could find a way to make wasting money more expensive, but in H.R. 2419 that’s just what they have found. For the taxpayers’ sake, the Farm Bill Extension Act should be scrapped.

Terrence C. Watson

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