Jon took me to task for drawing distinctions between Right and Left with respect to energy policy and its role in inflation.

Core inflation -- which measures CPI excluding energy and food, both of which fluctuate to greater degrees -- is a tame 1-2%.

As I pointed out, energy and food are now even more interrelated than before. Prior to a shift in policy that subsidizes corn production for ethanol and other biofuels, the cost of energy from transportation eventually trickled into marginally higher food prices.

Now, though, cropland is being diverted from one use to another. It has a cumulative effect on both food and energy prices because (a) farmers are taking subsidies to grow corn instead of food crops like wheat; (b) the reduced availability of food crops has a snowball effect in animal feeds which drives up prices for meat, eggs, and dairy; and (c) subsidies drive up the net cost of fuel because they require taxes in the first place. This is especially important because yesterday the House Democrats enacted a new tax on oil companies which will be paid (by their own admission) by customers. Senate Democrats are trying to force through the same measure to prevent a filibuster. Whether it passes or not, it will be veoted -- and rightly so -- by President Bush.

Carrie Lukas writes about how present policy hurts the middle class. She writes, "In 2007, twenty percent more acres were used for corn production than in 2006. The greater demand for corn made the price of corn—and products that depend on corn, such as poultry and beef—jump. But since the focus on corn left less land for raising other agricultural products, the price of commodities such as soybeans and wheat also rose to historic highs. If Congress continues to subsidize the production and mandate the use of ethanol, consumer food prices will continue to rise higher."

The EU is also rethinking its biofuels policy. Since the policy was enacted "reports have warned that some biofuels barely cut emissions at all - and others can lead to rainforest destruction, drive up food prices, or prompt rich firms to drive poor people off their land to convert it to fuel crops."

How very progressive!

Yet this is the impetus behind the Democrats singling out and taxing the oil companies. The Left is willing to make taxpayers subsidize "alternative" and renewable energy sources when the middle class is still using petroleum and will be for the foreseeable future -- a point not lost on Steny Hoyer (D-MD) who said the taxes and subsidies won't alleviate pain at the pump: "That may bring down gas prices three years from now, 10 years from now."



They justify this on the grounds that oil companies are profiting from the sale of oil. Yes, they are to the tune of 10%. Compared to other industries, it's a fair and reasonable return. Compared to the government's take, the oil companies are getting shortchanged. On average, state and federal taxes make up 500% more than oil company profits per gallon sold in the US.

Tomorrow, I'll explain why alternative fuel subsidies are a really bad idea and how some alternatives present serious problems for "progressives." And much worse problems for the middle class.