The folly that is ethanol

I walked into a small bakery/deli and decided to get a muffin(non-fat and no sugar chocolate if you wanted to know, and as you can imagine it tasted nothing like what I would want it to taste like)
As I was paying, I noticed a sign by the register. It was a notice informing customers of a price increase due in a couple of days. The sign went on to explain that this was because the steepling input costs (sample this tripling of egg prices in 7months).
This brings me to a well known problem we are facing and will probably worsen in the immediate future.
With Iraq not looking particulary good and under fire on other fronts as well. In his state of union address in January 2007, bereft on any other big plans President Bush outlined the need to use ethanol as a part substitute for oil(used as an additive). Ethanol would reduce the use of fossil fuels and thereby reduce green house gasses, so that evolutionary, his ideas were'nt on the surface moronic. (a term one has used in context of the Iraq war)
But here is the catch, in a bid to get his conservative base excited he cast it as an attempt to reduce dependance of "middle eastern oil".
So America is supposed to produce corn based ethanol. So whats the problem you ask?
It requires more energy to produce ethanol from corn than would be produced by useing the ethanol so created.
Also corn happens to be a food crop that ties into the entire food cycle, its used to feed livestock and also feed us directly.
Bush's stress on ethanol without allowing for imports from efficient cane based producers of ethanol like Brazil is one of the major reasons basic food items are a lot more expensive in the US.
Now would'nt a tax on fuel at the pump that would be used to fund research into cleaner and renewable energy sources work better?
What would people preffer? More expensive gas or more expensive everything else,. Admittedly the choise isn't as stark as I make it out to be.
But what astounds me is people responsible for running this great country do not seem to think things through an old failing I might add.