A stimulus program can only work by putting money into the hands of consumers who will actually spend it on domestic product. Money that winds up in the hands of the wealthy does no good at all; they’re already consuming as much as they want. Money that gets hoarded because of deflation or simply because people fear for their jobs does no good either. Money that is spent on imported goods (meaning almost any goods) mostly helps China, not us.

    What happens to the money the Federal misgovernment spends on construction programs? Well, in the first place, most of it will be balanced by cuts in State spending. The States normally pay for construction themselves, and right now almost all of them are in dire financial straits. Federal construction spending will just allow the recipients to cut back their own construction spending – with the taxpayers of other States picking up the tab instead of their own.

    Out of whatever increase is left, a good bit will be siphoned off by the inevitable corruption of the bureaucracies involved, and then the big contractors will get a healthy cut. None of that money goes into consumption; it goes into the hoards of the rich (who, if they’re wise, will invest it overseas). What about the part that goes to the workers? Well, it keeps the citizens off of unemployment, meaning once again that the States can cut their spending further. The construction industry also employs a large number of illegal aliens, who typically send as much money as they can to Mexico (where a U.S. dollar is still worth something). Of the small portion that does turn into higher consumer spending in the U.S., the bulk will probably go straight to Asia.

    Why would Obama pick such an ineffective economic plan? The construction industry is usually considered a leading economic indicator, but only someone as stupid as an economist would think this meant that the housing slump was the cause of the depression. The housing slump was just one of the early symptoms of a deeper cause (which I may get around to explaining someday). The real reason all the money is going into construction is that it’s an easy way to reward not just states, but cities and counties, very selectively. It’s a simple wealth transfer, from Obama’s political enemies to his supporters. That’s Chicago politics – it has crap to do with national economic recovery.

    A real economic plan would address the underlying causes – but failing that, even a makeshift scheme should take some cognizance of reality. This depression is similar to the Great Depression in many ways, but different in others. The so-called “stimulus” not only ignores the differences, but contradicts the similarities. Consider:

    FDR financed the New Deal largely through very heavy taxation of the very wealthy. He borrowed some money, but not more than the country could afford. Taxation of the rich was a necessary remedy at the time, and it is a necessary remedy now. Obama’s plan is to depend entirely on borrowing and allow the wealthy to continue paying very little taxes. Thus the continual drift in the maldistribution of income is not addressed, and surpluses of investment funds will continue to fuel speculative bubbles.

    The U.S.A. entered the first Great Depression with very little debt and could afford considerable borrowing. We have entered the current depression already carrying a crushing debt load. To continue this colossal spending (and it must be sustained, if it is to have any impact) can only be done by borrowing or printing money, since taxation of anyone but the poor has already been ruled out. With the U.S. government insolvent and hyperinflation looming, it’s doubtful whether borrowing can continue much longer. How fast can the government print money before people stop accepting it as payment? We’ll likely find out soon enough.

    Why does the spending have to be sustained? Because, once again, it’s not enough for consumers to spend money; producers must first sell off all the surplus inventory they have accumulated and then be persuaded that the sales increases will continue for long enough to justify the expenses of bringing production back up to speed. It will be a slow process because each of them will be waiting for the economy to take a definite upward turn before proceeding, yet that upturn will not happen until enough of them have gone ahead on faith. This is one reason the Bush “stimulus” package failed to accomplish anything; everyone knew that any sales increase in April 2008 would be temporary, not something to base business plans on until after it worked – which it plainly couldn’t, with such a small time window.

    Another key difference between this depression and the Great Depression is the nature of international trade. Until the Seventies, America was the world’s great exporter, and had large trade surpluses. The notorious Hawley-Smoot protective tariff was a disastrous mistake because it was the rest of the world that needed protection from cheap American goods – which is certainly no longer the case! The modern American economy needs protection from the impoverished labor of Asia and the Caribbean, if we are to maintain a standard of living higher than theirs. Any economic stimulus that allows the money to flow overseas to nations from whence it will not return, can only succeed in boosting those economies.

    First, there is the severe impact on the food supply, which has already caused large increases in U.S. food prices and shortages in countries that we used to feed. This is the inevitable result of the law of supply and demand; when you reduce the supply, the price goes up. There are some brazen liars who try to blame the price increase on increased costs of production, but this is ridiculous when you think about it: farmers have no control over the price of their product and cannot pass their costs on to consumers. This has been their major whine for centuries! Agricultural commodities sell in a competitive market and the seller will get exactly what the market gives, not a penny more or less. If the cost of growing crops is more than their value, the farmer just has to take a loss – unlike a manufacturer, he can’t charger higher prices and sell a little less. In agriculture, you sell at the market price or you sell nothing at all.

    Some of the sneakier “bio” fuels crowd want to start in on alternative crops that would supposedly be grown on “marginal” land and not compete with food production. Here’s a fact of life: any crop that will grow on marginal land will grow better on prime land. If there’s better money in growing switchgrass than in growing wheat, farmers won’t waste money developing low-yield marginal land for a crop that has zero non-subsidized value; first they’ll plant switchgrass in their existing fields for a better yield with no investment or risk.

    What about “bio” diesel? The energy balance is a little better than ethanol, but it’s still pretty shabby and it still destroys badly needed food supplies. What’s more, diesel – of any kind – is an inherently dirty and polluting fuel. This is just the nature of the diesel engine cycle and cannot be changed. Diesel engines require high compression ratios, which gives them their high power-to-weight ratios but also means that they produce more nitrogen oxides (which contribute to smog, acid rain, and global warming). Also, because the Diesel cycle requires a liquid fuel, complete combustion is all but impossible, and thus diesel engines produce soot, especially in cold weather. Diesel engines are sometimes necessary, but they don’t belong on light vehicles like cars.

    Ethanol, though not as bad, is also a dirty fuel – worse than gasoline, though in different ways. Because alcohol burns cooler than gasoline, less nitrogen oxides are formed and less carbon monoxide, but instead you get nasty chemical byproducts like formaldehyde. What’s more, the production of ethanol creates much larger amounts of pollution of all kinds – carbon dioxide from fertilizer manufacture, various pollutants from diesel tractors, nitrogen oxides from fertilizer decay, aldehydes and other processing byproducts, and runoff of fertilizers, pesticides, herbicides, and silt.

    But pollution is just the beginning of the eco-catastrophe being wrought by “bio” fuels. The real damage is in the depletion of our precious land and water resources. Most modern cereal production (and certainly any increased production) requires irrigation. Using up precious water for unnecessary crops that contribute very little net energy is incredibly foolhardy; water shortages are a far more serious problem than energy shortages. Irrigation puts a heavy demand on dwindling water supplies, often using up groundwater that is (for all practical purposes) irreplaceable.

    Irrigation also destroys the soil over the long run by salinating it. Any water that’s been in contact with the ground has some salt in it, and inevitably some of this salt is left behind in the soil. In some places irrigation can also bring up additional salt from subsurface soil layers, which can destroy the soil quite rapidly. More often, it is a very long process as only a trace of salt is added each year, but it does add up and some of the best agricultural land in America is already suffering heavy attrition from salination.

    Needless to say, agriculture also depletes the soil of nutrients. We routinely replace nitrogen in mass quantities (which consumes a lot of energy and creates a lot of pollution), but other nutrients are much more problematic. Calcium has to be replaced by quarrying limestone and grinding it up, which is very expensive if the limestone has to be hauled any distance. Phosphorus is also mined (in the form of phosphates); it is already expensive and supply shortages are expected. Potassium is still more difficult to replace – and these are just the major plant nutrients. Iron, sulfur, magnesium, zinc, boron, copper, manganese, selenium and molybdenum are also gradually used up by cropping (and sometimes washed out by irrigation). Just as importantly, tilling causes rapid decay of the vital organic matter that helps keep soil permeable to air and water and able to retain water and nutrients.

    The biggest source of fertility loss, however, is erosion. Modern farming practices have greatly reduced this, but millions of acres of land are still ruined every year in the U.S. alone. Much of the eroded silt winds up in rivers and lakes, where it wreaks havoc on ecosystems. Silt and fertilizer runoff are responsible for the vast dead zone – thousands of square miles – in the Gulf of Mexico where the Mississippi river delivers the waste from most of North America’s farming.

    Every ninety hours, the combined effects of erosion and salination cost the world as much cropland as the entire Chernobyl exclusion zone – that’s a hundred Chernobyls, every single year, caused mostly by agriculture.

    Of course, most of this is for food production, not “bio” fuels – but we should hardly be planning to make large increases in it without a very good reason! And regarding the prospect of growing switchgrass or the like on marginal land, we should keep in mind that this “marginal” land isn’t just waste – most of it is either pasture (now being naturally and sustainably fertilized!) or part of the last remaining wilderness and wildlife refuge in the world. And much of this “marginal” land is very vulnerable to erosion, being relatively steeply sloped. If we destroy it, we won’t get it back.

    Brazil has already ruined a great deal of its “marginal” land (in this case, rain forest) in its miguided quest for temporary energy independence. The production of ethanol from cane sugar in the tropics has a far better energy balance than any “bio” fuel available to the U.S., yet even with this advantage Brazil had needed to raze most of its forests for crops. Unfortunately, the cleared forest soil is low in nutrients and subject to hardening when exposed to rainfall, and is often useless after just a few years. Then the only option is to burn some more rain forest… but the rain forest is starting to run out. Some of this devastation is due to the demand for cattle, not sugar cane – and isn’t it a bitter irony that the same “environmentalists” who would rather see people starve than see forests cut down, applaud the destruction of those same forests for the purpose of replacing gasoline with ethanol which is dirtier and more expensive?

    One of the side effects of clearing more land for crops is a huge increase in atmospheric CO2. Trees tie up large amounts of carbon, and Brazil has burned so much forest that it now has a larger carbon footprint than the U.S. “Bio” fuels in general cause a major increase in global warming (as compared to fossil fuels). In addition to the CO2 released when they are burned, there is all the CO2 released in the process of growing and making them – it takes a lot of energy, remember? Most of that energy comes from natural gas. There is also a substantial amount of nitrous oxide created as a byproduct of fertilization – and nitrous oxide is 300 times more powerful a greenhouse gas than CO2. And then there’s the CO2 released by clearing land, whether that’s done the quick way by burning vegetation or the slow way by tilling the soil so that the organic content decays.

    On an energy-for-energy basis, the burning of ethanol (by itself, without any of the other contributions) releases the same amount of CO2 as gasoline. Only on a liter-for-liter basis does ethanol release less CO2 – the energy content of ethanol is a third less than that of gasoline. It has also been deceptively claimed that “bio” fuels are carbon-neutral because growing them takes the same amount of carbon out of the atmosphere. This is false, because it doesn’t account for the greenhouses gases emitted in the process of making “bio” fuels – and it should be obvious to anyone that the land used for growing crops would not be totally barren if left uncultivated; some of it will actually sequester less carbon once it has been converted from forest into crops. This is certainly true of the “marginal” land that is temporarily cultivated and then abandoned because it can no longer support crops!

    Anyone who cares about global warming would make it their first priority to put a stop to the use of so-called “bio” fuels. There is no other way of achieving so large a reduction in greenhouse gases so quickly, and there is no advantage whatever to using them. They are catastrophic for the environment, bad for the economy, bad for the poor (who are hurt the most by food shortages), and sometimes bad for your car as well.

    ”Bio” fuels have never had any prospect for making a major contribution to our energy supply. There simply isn’t enough land in the U.S.; even Brazil, with its vastly better conditions, doesn’t have enough land. Because they are expensive, “bio” fuels transfer wealth from taxpayers (who are forced to pay for the subsidies) to the giant agribusinesses that produce them. The artificially high food prices also benefit the owners of factory farms at the expense of everyone else. Smaller farmers benefit too, of course, like remoras clinging to a shark, but less than one percent of Americans work full time at farming – and one hundred percent of Americans have to eat.

    Another beneficiary of the “bio” fuels dementia has been the natural gas industry, because the extra demand for natural gas (used to make fertilizer and drive chemical processes) has forced the price up sharply. Again, it is the poor who are most hurt by the higher cost of home heating. And who benefits – why, the same oil companies who own the natural gas wells, and who also own huge tracts of farmland and have partnership deals with the big manufacturers of ethanol!

    If you don’t smell a rat yet, you should cut off your nose and mail it in for a refund. The oil companies are raping us at both ends – they profit from the ethanol itself, from the higher food prices, and from the waste of natural gas – while at the same time greenwashing their own dirty image and diverting public attention from energy sources that might actually compete with oil. They get around the necessity of finding replacements for gasoline additives like MBTE, and as an added bonus, the presence of ethanol allows gas stations to water your gasoline without detection. (If your mileage goes down by more than 2-3% on 10% gasohol, you should suspect adulteration. On the other hand, you should protect the environment by avoiding gasohol if it all possible.)

    Ethanol is a gigantic swindle perpetrated by Big Oil – along with soy diesel, switchgrass, and any other crop-based “bio” fuels. But what about energy generated from other bio-sources like “cellulosic waste”? Some of these may be acceptable, but remember that everything “bio” is something we take from the living environment – there’s nothing “green” about it; “bio” fuels don’t support life, they burn it. All biological “waste” contains nutrients that could be returned to the soil – nitrogen, phosphorus, trace minerals, organic matter, whatever. Even if we’re presently wasting it, making it into fuel is not necessarily preferable to recycling it. And a certain amount of crop waste should always be left in fields to protect them from erosion – it’s the single most effective defense against the single biggest soil thief.

    The only “bio” fuel that is environmentally positive is “producer gas” – methane generated from the decay of sewage, landfill trash, etc. This gas gets produced anyway, it contains no nutrients, and it’s a very powerful greenhouse gas, so we actually benefit by burning it. However, the available amount is quite small – a well-designed sewage treatment plant might recover enough energy to meet its own needs, but that’s about it. Any other “bio” fuels that are environmentally acceptable will also be strictly limited in quantity. There’s a niche there, but not a very big one.

    Sadly, there’s not much chance of changing the legislative ethanol agenda set by Big Oil. Nor is there much chance of a shift to sustainable agriculture before it’s too late. But most of us still have, at least, the option not to buy their damned moonshine.

-Abgrund-

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