Soccer Dad

Costs of congress

For the first time in awhile a gallon of milk might actually cost less than a gallon of gasoline. (Depending on where you buy either product.) It's not likely to last long.

Nationally, the average cost of a gallon of whole milk rose 19 cents during the past two months, to $3.26 in May, according to the U.S. Department of Labor. In Baltimore, the May average was $3.42 - up from $3.16 in March, according to the U.S. Department of Agriculture. Higher prices have continued this month: One area supermarket priced a gallon of whole milk at $3.99 yesterday.

The rising cost for corn, which dairy cows eat, because of ethanol demand is the biggest driver of higher milk prices this year, dairy analysts said. High oil costs have pushed up the price of gasoline and other energy sources during recent years. That in turn has sparked the growth of ethanol as an alternative fuel. Corn growers are working to fill the demand since the price for that crop has risen.

Charles Krauthammer, today, reminds us that policy decisions often have unintended consequences, one of which is the rising price of corn resulting from legislation meant to clean the air. In The tax free lunch (or here) he writes

You get what you pay for. When you build lighter cars with more fuel efficiency, you know that ultimately -- even with the best (let alone Chinese) technology -- safety is compromised. That happened three decades ago when U.S. mileage efficiency rose dramatically in response to the oil shocks of the '70s. It will probably happen again.

Now we may, as a society, decide that the trade-off is worth it. We may reason that fuel inefficiency leads to dependency on foreign oil which in turn leads us to lives lost in other ways -- such as wars to defend our interests in the oil-rich Middle East and elsewhere. But what we cannot deny is that there are trade-offs. What is fundamentally wrong with the energy bill the Senate passed last week and with the debate leading up to it is the chronic, almost pathological, refusal to recognize that there are such trade-offs.

Further down Krauthammer concludes

I have no objection to paying more to reduce our dependency on foreign energy. But it is hard to conceive of a more politically dishonest and economically inefficient way to do it than with mandates that make private industry do Congress's dirty work, hide the true cost of energy efficiency and perpetuate the fantasy of the tax-free lunch.

Remember how gas prices rose late this spring? (It happened last year too.) Well one of the factors behind that rise was the change in the formulation from a winter mixture to a summer mixture. This change wasn't the result of some oil company conspiracy. It was due to a law calling for different fuels for different season. The transition limits production forcing up prices.

But those who passed the laws needing worry much about shouldering the blame for the higher prices. The law is a hidden way of raising prices. (And as Jeff Jacoby demonstrates Congress does quite well, not only avoiding blame for the rise in gas prices but also profits quite nicely from gax taxes.

Remember, congress can make life more expensive and it doesn't just come from taxes. It also comes from mandates passed with no regard for unintended consequences. So it would be nice if the legislative branch be a bit less ambitious in its goals, and would consider "economic impact statements" before passing laws that will raise prices.

(Maryland Conservatarian has been spending too much time reading the Washington Post's op-ed page, he anticipated this column yesterday.)