Ethanol: Fact, Fiction, Reality: Ethanol Economics

With Bush's focus on the economy last night in the State of the Union address and Congress' moves to push through a stimulus package, I am already tired of hearing weak economic news day after day. Although finding a silver lining can be hard these days, it's not all bad right now in the Midwest. This could turn quickly, but Gov. Chet Culver (IA) has mentioned on several occasions that the Iowa economy is strong particularly compared to the rest of the nation. Of course, living in the Midwest, we won't be exposed to the extreme highs and extreme lows of a housing boom such as they experienced in Florida, but Iowa has maintained a relatively low jobless rate compared to several states in the Midwest in the past few years. About five years ago, when farm income was desperately low, rural people from all over flocked to the cities. Suburbs of Des Moines blossomed as small towns all over Iowa grew dark. However, while some states like Michigan have experienced record unemployment around 7%, Iowa has enjoyed relatively low unemployment near 4.8%. So why is Iowa's economy enjoying steady 2.6% growth these past few years?

There are simply too many numbers and factors that go in to the economy to point to one cause and say that is definitely the one factor involved, but a new report out of Nebraska is shedding some light on the possibility -- ethanol. The study, "The Economic Impacts of Ethanol Production," points out that state income taxes and property taxes from ethanol plants reached $2.2 billion in 2007 and are expected to reach $3 billion in 2008. That is for Nebraska alone! With Iowa and South Dakota sharing a sizable stake in the ethanol industry with Nebraska, this equates to a lot of money helping the Midwest economy. United States Senator Ben Nelson, a Democrat from Nebraska and ethanol proponent said that the full economic effects of ethanol are factored in (from increased trucking, rail, and construction jobs), the full benefit to the United States approached $40 billion annually! Furthermore, the ethanol produced is able to displace enough oil imports to reduce the federal trade deficit by $13 billion annually -- a pretty sizable sum.

Finally, the USDA reports that, (through the positive pressure on corn and soybean prices), have been able to reduce federal farm subsidies by $12 billion over the last two years -- from $24 billion in 2005, $16 billion in 2006, to $12 billion in 2007. All of these factors together make a clean, homegrown renewable fuel just that much more appealing. Although there are several hurtles to overcome that our scientists are hard at work on right now, ethanol is benefiting the United States, and it will definitely help the state of Iowa reach a 'soft-landing' in this period of economic uncertainty.

The ethanol world is currently centered around Iowa, but with cellulosic ethanol being developed don't count out the importance of the plants that you see in California, Louisiana, and coming soon -- Florida.