Wednesday, June 15, 2011

Senate Votes Overwhelmingly to Continue Subsidizing Ethanol

Call Us When You Are Ready to Get Serious on Deficit Reduction Senators

A number of years ago the United States government, in order to support the nascent industry of ethanol to be blended with gasoline passed legislation subsidizing that industry.  The purposes were in a small way to stem the import of foreign oil, and in a large way to provide a handout to farmers in corn growing Midwestern states.  Senator Tom Coburn, (R, Ok) had rightly decided that this is ridiculous policy, and forced a Senator vote to end the policy.

Now before we talk about the vote, you need to know something about the absurd politics of the issue.  For example, Grover Norquist (remember  him, the person The Dismal Political Economist said was very important, very influential and very unknown) has argued that voting to end these subsidies was a tax increase.  From USA Today we have

As The Hill notes, the vote pitted fiscal conservatives/deficit hawks against corn-producing states and anti-tax conservatives, who wanted the estate tax eliminated to offset what they called the "Coburn tax increase."

Americans for Tax Reform (ATR), the group led by conservative stalwart Grover Norquist, lobbied against the amendment on the grounds that the elimination of any tax break, including those seen as corporate subsidies, should only be eliminated if they are offset with other tax cuts.

Yes, radical conservative, ones most against government involvement in business say you cannot eliminate government subsidies to business.

Anyway, as the Washington Post Reports, the vote was not close.

The 40-59 vote, far short of the 60 needed to advance the measure, reflected regional as well as partisan differences, a split among Republicans — and anything but the final word on the issue.


“With conflicts in the Middle East and crude oil priced at more than $100 a barrel, we should be on the same side. Why would anyone prefer less domestic energy production,” Sen. Chuck Grassley, R-Iowa, said on Monday, when the measure was debated at length.

Grassley’s state leads the nation both in harvesting corn and blending it into alternative fuel. Other leading ethanol-producing states are Nebraska, Illinois, Minnesota, South Dakota and Indiana, and all senators from them opposed an end to the subsidy, regardless of political party.

The pro-ethanol Senators recognize that the program expires at the end of the year and propose alternative,

the alternatives put only a fraction of the savings to deficit reduction. Instead, the rest would go for renewal of different tax breaks, including one for firms that purchase pumps to blend ethanol with gasoline

That’s right, they want to end subsidies for producing ethanol and replace it with subsidies for pumps to blend ethanol. 

Oh yes, and all but 5 Democrats voted to continue the subsidy.  That will burnish their fiscal credentials.

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