Response to Concerns About Alcohol Fuels Report

GAO responded to congressional concerns regarding its March 1997 report on the effects of alcohol fuels tax incentives.

GAO noted that: (1) its report provides a straightforward and balanced discussion of the benefits and costs of the alcohol fuel incentives for ethanol producers, corn and other farmers, and consumers and producers of food and energy; (2) however, GAO's report is not a cost-benefit analysis of the overall impact of the incentives on the national economy and the text explicitly states the limits of GAO's work; (3) such an analysis would require more information than GAO had, including the effects of oil and gas subsidies on ethanol production; (4) in addition, as the report states, the benefits and costs to particular groups would not necessarily be included in a cost-benefit analysis of the impact on the economy because some benefits to one group, such as higher corn prices for farmers, result in costs to another group, higher food prices to consumers; (5) GAO reviewed its report and its development in light of the congressional concerns and is satisfied that the report was prepared in accordance with generally accepted government auditing standards, its own policies and procedures, and with sound economic principles; (6) for example, the staff involved in preparing the report had expertise in federal farm policy, energy security, and environmental protection as well as in economic analysis; and (7) in addition the draft was subject to GAO's internal review, including its Office of the Chief Economist and review by five executive branch agencies.