Sunday, May 17, 2009

Ethanol, when will we learn?

Ethanol is being squeezed. After years of increased corn acreage, this year’s acreage is reduced, why? It may come as a shock to many, but corn requires rotation. Too many years of corn, ravages the soil. It is time for the soil to take a rest and grow something else. It also does not help that other crops have risen in price (soy beans) and the cost analysis does not support growing corn.

How did ethanol affect the economy? It created a lot of jobs in construction. Hundreds of ethanol plants were built. It boosted the price of corn from $2 to over $7 a bushel. The price is around $4.50 and most likely will head higher. Do to the wet spring farmers have not planted as much of their crop yet compared to last year.

The competitiveness of ethanol is dependant the price of corn, oil and other plants. The demand for corn is still high. Nearly 1/3 of all corn grown is used in ethanol production. Meat prices are still about 25 to 30% higher than normal. Prior to ethanol, 90% of all corn was used for feed. If ethanol were to go away, the price of meat would drop dramatically.

The price of oil is rising, but is still less than half of what it was last summer. For ethanol to be competitive, the price difference between gasoline and ethanol needs to be more than the tax credit given ethanol, or 45 cents. The only way for ethanol to be competitive is for oil to rise and corn prices remain constant. This is nearly impossible when ethanol capacity is over 14 billion gallons. For plants to be profitable, they need to run at design capacity. To run at design capacity they need a lot more corn. Shifting corn to ethanol results in demand outstripping production leading to higher corn prices for all users such as beef, pork and chicken producers and ethanol plants, corn syrup used is soda. This leads to higher inflation.

Ethanol producers are attempting to create demand for their product through government legislation on the national level. They want to raise the ethanol content in gasoline to 15% from 10%. This could effectively double the demand by law, not consumers. The result would be devastating to grocery prices. I would imagine PETA would welcome this as American Families would be able to afford less meat.

Obama has earmarked $787 million under the American Recovery and Reinvestment Act for advanced biofuels research and development (biorefineries). Our own U.S.D.A. is providing $1 billion as well. Our tax dollars being used to compete against us for our food to feed our families. Does not make sense.

Ethanol is advertised as being cleaner burning than gasoline. Some are attempting to asses ethanol production with a carbon type tax. This would be for the lower corn exports to countries that now use it to cut down trees to grow their own food. In all the debate about cleaner energy, there is no talk about the energy used to make the corn, transport the corn, distill the corn or to transport the ethanol. In Indiana 85% of our electricity comes from burning coal. The CO2 from burning coal is many times that of gasoline. The diesel used in farm operations is also dirtier than gasoline. Many will say that natural gas is used to produce ethanol, but then that creates an artificial demand for natural gas, increasing price resulting in a shift from natural gas to coal.

The capital cost of building an Ethanol plant is between $0.80 and $1.50 per gallon of ethanol. With corn at $4.50 a bushel, gasoline at $2.29 it would be darn near impossible to sell ethanol at a profit. This has led many to go bankrupt. These plants were sold to other at a steep discount. Those who bought the bankrupt plants have a new cost basis as low as $0.40. These costs are the private investment costs and do not include the public cost such as roads, tax abatements, direct state and federal tax incentives for construction.

A study commissioned by the Renewable Fuels Association commissioned from John Urbanchuk of LECG LLC found ethanol displaced 321 million barrels of imported crude-oil, and generated $21 billion in revenues. Does this sound good? How much corn was not exported? How much federal revenues were paid directly to ethanol producers for ethanol? The tax credits cost the US taxpayer over $3 Billion and the lost corn export was over $29 Billion. The numbers show that Ethanol is an economically bad deal. It may have reduced the importation of oil, but it eliminated the export of corn.

You would think that ethanol producers have learned their lesson. However, there are nearly 20 plants under construction with over 125 plants planned. Ethanol producers are betting they can convince our elected representatives to increase the national ethanol content in gasoline from 10% to 15%. As Americans need to stop this! We need to just say no to Ethanol from agricultural products. We need to stop all tax subsidies for ethanol production and allow ethanol producers to compete in the open market on their own.

Wednesday, May 13, 2009

Social Security - Trust fund empty by 2037

Social Security reported that the SS-OASI trust fund will be depleted in 2037. What they do not tell you is that a 1984 statute passed by congress to keep Social Security from gobbling up the general budget prohibits any general revenue taxes from being used to pay Social Security benefits. Another part of this legislation specifies that the trust fund cannot be drawn down below 20% of any given years expenses. This mean if SS-OASI’s expenses in 2037 were $2 Trillion, the trust fund minimum must be $200 Billion.

When this happens the trustees are required to promptly submit a report to Congress identifying the necessary changes to maintain the SS-OASI trust fund at a minimum of 20% of projected yearly expenses. In the absence of no changes, across the board cuts take place. The first cut I see is the elimination of COLA sometime in 2032 to 2033 followed by across the board cuts in social security benefits. The cuts will be small at first about 3% a year. By 2045 the initial benefit will be 20% of promised benefits. By 2055 the initial benefit will be 28% of promised benefits. Keep in mind that COLA will have been eliminated some time prior to this.

How many know that when the CPI is less than I think 1%, that COLA’s cease for three years? The CPI for this year could be negative. The expectation is that for the next three years, there will be no COLA for Social Security.

Since the trustees have projected the SS-OASI trust fund balanced to be zero sometime in 2037, where is this prompt report to congress identifying the changes needed?

Monday, May 11, 2009

Senator Lugar, Ethanol and 5th grade math.

Dick Lugar supports Ethanol. In Saturday’s Journal Gazette he is quoted as saying that 9.2 billion gallons of Ethanol last year prevented the outflow of $32 Billion from the US. Ethanol saved us 325 million barrels of imported oil. Is this really true?

Let us kick some numbers around. 9.2 billion gallons of ethanol saved 25 million barrels of oil. This means Ethanol equated to gasoline is 28.3 gallons of gas out of every barrel. The rest of the oil is too thick and is used for other products. The average price of these 325 million barrels was $98.46. The price of corn was just over $6.30 a bushel. The ethanol process gets just over 2 gallons of ethanol from a bushel of corn. This means that 9.2 Billion gallons consumed 4.6 Billion bushels of corn. At $6.30 per bushel, the US lost $29 billion in agricultural exports. The Taxpayer also subsidized 51 cents a gallon for ethanol production costing the taxpayer $4.692 Billion. On top of this the American family saw their grocery bill sore in 2008 due to artificial stimulation of corn, causing a shift from wheat, beans and other agricultural crops to corn.

Senator Lugar says Ethanol prevented $32 Billion from leaving the US, but it increased the deficit by $4.692 billion which was funded by foreign investors (outflow) and prevented $29 billion in exported corn. For a net outflow of $33.692 Billion. I think Senator Lugar needs to go back to school and study 5th grade math again. Many wonder why the last budget surplus was in 1957, well this type of Senatorial math may provide the answer.

Friday, May 08, 2009

Fire Hydrants creating a fire under City Council Seats

The Fort Wayne City Council is now investigating the how the fire hydrant funding is done. Currently it is paid for out of property taxes. Aboite is not on city water and pays Aqua Source who maintains the fire hydrants. Aboite residents are crying paying maintenance of fire hydrants that do not benefit them. The concept is to place it on the water bill as a service fee.

Taxes hide the cost of too many costs. Placing it on the water bill identifies it every month. It also eliminates any future problem for annexations. As soon as you get city water, you pay for up keep of the fire hydrants. This is a great case for fees versus taxes.

Sheriff’s Merit Board votes to screw taxpayers

The sheriff’s department has requested the County Council approve $366,000 for pension increases. Apparently a retired sheriff has filed suit alleging he is entitled to a higher retirement benefit because Allen County pays less than other counties. This lump sum would pay RETROACTIVELY BACK TO 1995 and add a few hundred dollars a month to retirees. First question, are all counties required to pay the same pension? Second question, does the state set the sheriff’s department pensions for employees?

How many would like to bring suit against their employers when the find out their pensions are not as good as others? This sounds like the “equivalent” pay for different occupations where the identify positions that should be paid the same, even though they do totally different tasks, demand for their skills may be totally different, yet they are perceived to be as equally important.

If they want to pay higher pensions, then they need to increase because of legislation. Retroactive means those who received the benefit of the sheriff's department did not pay for their benefits, but left it for a later generation to pay for. Allen County Council needs to vote this down.

Thursday, May 07, 2009


I saw today that Obama wants to tackle healthcare again. The solution to our budget is to reduce healthcare spending. Does this mean that doctors will be reimbursed less shifting the cost to everyone else (we already pay the Medicare tax)? Maybe they are going to cut benefits. We all loved it when we were young playing a game when someone decides to change the rules to benefit them. Medicare started in 1965 and 44 years later after numerous fixes still needs a transplant.

It was also reported that the Fed’s are going after companies defrauding the taxpayer of $60 Billion in Medicare payments a year. Obama wants to cut $17 billion from all departments with half coming from defense. $60 Billion from Medicare is a huge chunk of the Medicare budget each year. I think we need to bring back public punishments.

Louisiana Loves the Bailout for Katrian and more.

This morning on Good Morning America they were interviewing the Governor or maybe it was a mayor in Louisiana. He was saying the state was not accepting some of the bailout money for unemployment. Had the state agreed to the unemployment help, the state would have to change the rules on who could receive benefits. Currently his state denies benefits to those who are not willing to work. The money would have helped pay these costs for three years, but at the end the state would be obligated.

They went on to speak about how well the economy was doing. Lots of construction paid for by Federal and State money. Too bad they did not replace Federal and State with Taxpayers. He stated it was stimulating the economy. What happens when the money needs to be paid back? Oh, they do not plan to pay it back, just continue to roll it over and let future generations forever pay interest on the debt that benefited someone else. I call this artificially stimulating the economy beyond what the economy could do on its own. There is a price, but no one seems to want to recognize this.

Few to no moms read my blog

Well I wrote on what I considered to be a controversial subject two days ago on the value of the mom. I guess I know who my readers are, thanks guys.

Few to no moms read my blog

Well I wrote on what I considered to be a controversial subject two days ago on the value of the mom. I guess I know who my readers are, thanks guys.

Tuesday, May 05, 2009

IRS - Irrational Screwballs Survive

Have you ever had a problem with the IRS? If not consider yourself fortunate. I receive a notice from the IRS each tax year around May or June saying they have changed my tax return. The notice states if I disagree with the change, to call them or write them within 60 days. I have found calling them does little good and there is no record of the communication. Therefore, I write and send is United States Post Office Certified Return Receipt.

It has never failed, but within 30 days they send a notice they have not heard from me. The “within 60 days” must really be within 30 days, but they have not fixed the form letter. I write again sending a copy of the United States Post Office Certified Return Receipt and a copy of the first reply again by United States Post Office Certified Return Receipt.

Then around August I get a third notice again stating I have not responded. I write again sending a copy of the United States Post Office Certified Return Receipt and a copy of the first reply again by United States Post Office Certified Return Receipt.

Then the IRS goes silent. You have no idea what they are doing. Six months go by and you send them an inquiry into your first response. Within a month I receive a notice stating that because of the huge number of inquires, they have not completed their investigation and that I will hear from them in 30 days. It has now been seven years and I have communicated more than 40 times concerning it and they still state I have not responded.

I called the IRS and finally was told the following. The IRS does not keep a copy of the correspondence I send the IRS. If the IRS kept a copy of all correspondences, they would run out of room. If this was not so serious, it would be comical.

In 2005 the IRS made a mistake and went through all the administrative procedures like a broken clock. I do not think they intended to go that far, but they did and it left me no alternative than to take them to court. Within months of filing the IRS tried to get the case dismissed. No longer was the IRS in control of documents, but the Court was. The court was great; they work like a fine clock with deadlines. The IRS filed a motion to dismiss the case because they had found they had used the wrong procedure and had abated any increase in taxes. I tried to keep the case alive, but with no taxes owed, the Court dismissed the case.

The IRS then used what they thought was the correct procedure to access an increase in taxes and we ended back in court. I submitted my pretrial memorandum, legal basis and facts to the Court. On February 11, 2008 in Indianapolis I was ready for bear. I was ready to try my case without an attorney. The judge called the docket, I stepped forward and was prepared, right was right. The first thing out of the IRS’s mouth is that “we conceded.” I was not going to get to present my case, show how the IRS has harassed a US Citizen or get closure. The IRS was pleading a Writ of Mandamus, basically telling the court it did not have authority to order the IRS to do something the IRS was required to do by statute, but was not doing. To this day, I just laugh and cry over this contradiction of words. The IRS is required by statute passed by our elected representatives to do something and they tell the court it does not have authority to order the IRS to comply with law.

The IRS did not want a record of this case for others to use. It was an open and shut case. The IRS was clearly wrong. There was no doubt. The judge asked me if I understood what the IRS was doing and I replied yes. I then asked the judge if I could make a statement for the record. He looked at me and said, yes, I would like to hear it. In ten minutes I presented the facts, legal basis and made the IRS look pretty silly. The judge turned to the IRS and said “I will write an order if I can or letter of opinion.”

You would think that my problems with the IRS would be over. They are starting all over for the same reason. This time I won’t be in Tax Court, but the Federal Court System that does have jurisdiction. The IRS is out of control.

What are stay-at-home moms worth?

Today it was reported that stay-at-home mom’s are worth $100,000 a year for the tasks they perform. The tasks include keeping track of finances, grocery shopping, taking care of the house, driving kids to activities and more. I would like to say that mom’s are great, but who chose to be a mom? Ok, this may have come across as chauvinistic, but come on, $100,000? Who could afford to pay this? Is not the position worth only what the market can pay?

Let’s look at the task of keeping track of the finances. Does this mean I get to blame the mom for the market drop or the in value in my investments? Maybe mom should be working outside the home in the finance world and I stay at home? If mom could make $100,000, I would stay at home and do everything she does.

Let’s take a look at grocery shopping. Oh wait; I already do all the grocery shopping. It takes me less than 2 hours a week. What is my time worth, $50 an hour would be $100 a week and $5,200 a year. But if it was worth $50 an hour, I am sure I could pay some teenager $10 an hour to do my grocery shopping so I could pocket that $40 an hour and keep $4,160 a year. Oh, wait, I this was my time off and I have no billable hours at $50, so it would actually cost me $1,040 to have someone shop for me, or I could save $1,040 by doing the shopping myself.

Taking care of the house could be done by hiring a maid at $15 an hour. I know co-workers who have a person come in three times a week to clean up. They say they are there two hours, three days a week at a cost of $90 a week or $4,680 max a year.

As for being the chauffer taking kids to activities, how much is this worth. A taxi does the same thing and runs about 50 to 75 cents a mile (I am only guessing, it has been a long time since I took a taxi). How far does mom drive a day chauffeuring kids? At 40 miles, you have too many kids and activities, but that comes out to less than $40 a day, it comes to $14,600.

Maybe it is the cooking that is so costly. I eat a lot of leftovers so I just do not see cooking as being that compensatable. The whole purpose of doing something yourself over hiring someone to do it, is you can do it cheaper and save money or you cannot afford to have someone do it.

I agree that mom’s do a lot, but what is dads worth? Dads generally fix things around the house; this had lead to the Honey-Do-List. Dad’s take care of the cars, the lawn and do the heavy lifting. If dads owe moms $100,000 a year then what do moms owe dads? You know what; it comes down to a team effort. Pitching in doing what each is best at and using their skills to get the job done.

Whoever comes up with trash like what are moms worth, do nothing. If being a mom is a chore, then maybe mom should not be a mom to begin with.

NBC-33 Debate poll results from 2002