Senate Votes To End Ethanol Subsidies, White House Threatens Veto
It’s rare when Congress actually does something I completely agree with, so I will take the time to congratulate the United States Senate on its vote today to end ethanol subsidies:
WASHINGTON (Reuters) – The Senate voted overwhelmingly on Thursday to eliminate billions of dollars in support for the U.S. ethanol industry, sending a strong message that the era of taxpayer support for biofuels is ending.
The Senate in a 73-27 vote approved an amendment to end the 45-cent-a-gallon subsidy the government gives refiners and the 54-cent-per-gallon tariff on imported ethanol, which would be a boon to a major ethanol-producing country such as Brazil that makes ethanol from sugarcane.
The Senate measure still faces a long road to becoming final. The White House issued a statement saying it was against a full repeal of ethanol subsidies, indicating it could use its veto power if the amendment continued to advance in Congress.
“We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach,” said Agriculture Secretary Tom Vilsack.
The strong vote in favor of eliminating the $6 billion a year in ethanol subsidies reflects the push by both parties to rein in the government’s huge deficit.
“The way we get out of trouble as a nation is a couple of billions of dollars at a time,” said Republican Senator Tom Coburn, who co-sponsored the ethanol amendment.
The Senate vote also comes as criticism mounts globally over subsidies for corn-based ethanol, blamed by some for raising food costs.
Last week, the World Bank and other international organizations called on governments to stop their ethanol subsidies because of concerns they were driving up world food prices.
This was somewhat surprising considering a similar measure had failed earlier in the week, and also a potential setback for anti-tax zealot Grover Norquist:
The vote also could have ramifications on future votes to reduce the deficit. Much of the GOP conference supported Feinstein’s bill even though it does not include another tax break to offset the elimination of the ethanol tax credit.
As such, the vote could also represent a setback for influential conservative Grover Norquist, head of Americans for Tax Reform (ATR), who said a vote for the plan would violate the anti-tax pledge most Republicans have signed unless paired with a separate tax-cutting amendment.
Thirty-three Republicans and 38 Democrats supported the measure along with both of the chamber’s Independents, who caucus with Democrats.
Fourteen Republicans and 13 Democrats voted against it.
Sen. Dianne Feinstein’s (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom Coburn (R-Okla.) – was approved despite opposition from Corn Belt lawmakers who are seeing political support for ethanol wane.
Coburn said the vote sends “a good signal” to ongoing talks to raise the nation’s debt ceiling while reducing deficits. He also said he was sure it would be on the table in the deficit-reduction talks led by Vice President Biden.
The fact that the Administration would consider exercising a veto to save a wasteful and inefficient subsidy like this is pretty appalling. As The Washington Post noted nearly a year ago, there is no coherent argument in favor of these subsidies:
WHEN WASHINGTON starts handing out cash, it can be hard to stop. See, for example, the decades of subsidies the government has showered on the corn ethanol industry. The fuel was supposed to free America from its dependence on foreign oil and produce fewer carbon emissions in the process. It’s doing some of the former and little of the latter. But corn ethanol certainly doesn’t need the level of taxpayer support it’s been getting. Lawmakers are considering whether to renew these expensive subsidies; they shouldn’t.
The feds give companies that combine corn ethanol with gasoline a 45-cent tax subsidy for every gallon of corn ethanol added to gasoline. That’s on top of a tariff on imported sugar cane ethanol from Brazil and federal mandates requiring that steadily increasing amounts of these biofuels be produced. The Congressional Budget Office this month estimated that, all told, the costs to taxpayers of replacing a gallon of gasoline with one of corn ethanol add up to $1.78. The tax incentives alone cost the Treasury $6 billion in 2009.
How about the environmental benefits? The CBO calculates that it costs a huge $750 to reduce annual carbon dioxide emissions by one ton using corn ethanol. And that figure relies on assumptions extremely favorable to the industry.
The Senate did the right thing here, and hopefully the House will follow. If the President truly believes what he says about ending wasteful government programs, he will sign this into law rather than setting up a showdown over a program that benefits nobody except special interests in the Great Plains.