Economics. Gasoline is currently cheaper than Ethanol. Just like Diesel is cheaper than Gasoline. Americans, are very concerned with the economics of everything. All the other issues are secondary.
@ecomodded, Ethanol has 2/3 the energy density of Gasoline. If you're talking about the 10% Ethanol in Gasoline, that only lowers the energy density by 3%. The "10% less MPG mystery" is not due to the lower energy density.
Let me just look through my files, hmm. There it is. Energy density per gallon (use the Lower heating value for an ICE).
http://www.afdc.energy.gov/pdfs/fueltable.pdf
Hope that helps.