Shame on Indiana ... but Not Just Indiana

"I am a Hoosier. (Hear me roar!)"

It's been four months to the day since my February rant against the congressmen from Indiana who voted -- unanimously -- in favor of spending billions of dollars we don't have on a jet engine we don't need. Why did they do it? Why fund an "alternate" engine from General Electric (NYSE: GE  ) , when United Technologies (NYSE: UTX  ) was already building a fine engine for Lockheed Martin's (NYSE: LMT  ) F-35 warplane?

Call me a cynic, but I suspect it was because GE planned to do a lot of work on the F136 engine within Indiana. Hoosier legislators put local interest ahead of the good of the nation -- and they're at it again.

More shame on Indiana
Yesterday, the Senate made history with a vote to end the 30-year subsidization of America's ethanol industry. Currently, U.S. taxpayers subsidize fuel blenders like Sunoco (NYSE: SUN  ) and Valero (NYSE: VLO  ) with $0.45-per-gallon tax credits, while imposing $0.54-per-gallon import taxes that favor domestic ethanol producers such as Archer Daniels Midland (NYSE: ADM  ) over foreign producers such as Cosan (NYSE: CZZ  ) .

But subsidizing ethanol makes no economic sense. According to a report in this month's issue of Popular Science that examines the future of global energy consumption, the return on the energy needed to produce ethanol is less than 2-to-1. In contrast, when Exxon Mobil goes drilling in the Mideast, it can get as much as a 30-1 return on its energy investment. And even when forced to drill deep off the coast of Brazil, Exxon can get returns as high as 15-to-1.

Demonstrating bipartisan proficiency in grade-school math, the Senate acknowledged these facts with a 73-27 vote to end ethanol subsidies. But would you like to guess who voted in favor of continuing to spend $6 billion a year on tax breaks for energy wasters? That's right: both senators from Indiana.

Plenty of shame to go around
And not just Indiana. The Senate delegations from South Dakota, Minnesota, Nebraska, and Iowa also voted unanimously for inanity. Not coincidentally, these five states combined produce 52% of America's ethanol. And according to Congress-watchers, an even greater number of economic idiots are expected to rally to ethanol's defense when the bill goes for a vote in the House of Representatives.

I wish I could say I'm surprised. But as the U.S. debt clock ticks inexorably upward to $14.3 trillion and beyond, all I really am is ashamed that we keep letting these fools (small "f") get away with this stuff.

Fool contributor Rich Smith does not own shares of any company named above, but The Fool owns shares of Lockheed Martin. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


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  • Report this Comment On June 17, 2011, at 12:50 PM, JeanDavid wrote:

    "I really am is ashamed that we keep letting these fools (small "f") get away with this stuff."

    There are two ways to look at this.

    1.) The election process, counting the votes, has been criminally hijacked. In this case, there should be some way to prosecute the corrupt election officials, recall the fraudulantly elected politicians, and start over.

    or

    2.) The voters really voted for these morally deficient buffoons now in office, in which case, the voters should be replaced.

  • Report this Comment On June 17, 2011, at 1:46 PM, pmlang37 wrote:

    " the return on the energy needed to produce ethanol is less than 2-to-1. " Not unless you have a Flex-Fuel engine in your car.

    For ordinary engines, it is about 1-to-1; in other words, NO GAIN AT ALL.

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