A bipartisan group of senators want to end subsidies on ethanol and tariffs that discourage importation of the fuel. Both are “fiscally irresponsible and environmentally unwise” they said in a letter to Sen. Harry Reid, Democrat majority leader, and Sen. Mitch McConnell, Republican minority leader.
The letter was circulated by Dianne Feinstein, Democrat of California, and John Kyl, Republican of Arizona. The 15 co-signers included John McCain of Arizona and Tom Coburn of Oklahoma, both Republicans, and Democrats Barbara Boxer of California and John Reed of Rhode Island.
There is nothing new in their arguments. Turning corn into ethanol has driven up the price of food grains worldwide. The 54 cents a gallon tariff on imported ethanol keeps the price of the fuel artificially high and keeps much cheaper ethanol made from sugar cane in Brazil out of the U.S. market. Importing the fuel could take the place of oil imports from Venezuela and other nations unfriendly to us.
The 45 cents a gallon subsidy for blending ethanol with gasoline is hugely expensive. Combined with a federal law that requires oil companies to buy and blend an ever-increasing amount of ethanol annually, the cost to the federal government will be at least $31 billion to refiners over the next five years if the subsidy is renewed.
The $31 billion will be borrowed and add that much to the deficit.
At the same time, another letter urging an end to the tariff and the subsidy was signed by the conservative organizations Freedomworks and the Heartland Institute as well as the Sierra Club and the liberal activist group, MoveOn.org.
Food and livestock industries have also joined the anti-ethanol lobby: higher corn prices mean higher prices for dozens of food items and, needless to say, higher prices for animal feeds.
The senators’ letter doesn’t mince words. “Eliminating or reducing the ethanol tariff would diversify our fuel supply, replace oil imports from OPEC countries with ethanol from our allies and expand our trade relationships with democratic states,” they told their party leaders.
There is another side to the argument.
Supporters of expanded ethanol production warn that cutting off the subsidies and ending the tariff would put thousands of Americans out of work and devastate the domestic ethanol industry.
Since both the subsidy and the tariff will expire at the end of this year unless renewed, the issue must be resolved within the month. If allowed to expire it will be politically difficult to bring them back to life at a time when budget cutting and deficit reduction are on the nation’s front burner.
IT IS WORTH noting that the senators leading the charge against corn-based ethanol come from states like Arizona and Rhode Island rather than Illinois, Iowa and Kansas. After encouraging the creation of the ethanol industry with federal handouts, pulling the rug out from under it would spark a fierce political backlash.
Not only would ethanol plants such as the one in Garnett go belly-up, area corn farmers would also take a hit.
It is always that way when government spending is cut back. And that’s why true-blue conservatives such as Pat Roberts and Sam Brownback were against government waste, EXCEPT … they voted for ethanol all the way: yes for requiring more ethanol to be used every year; yes for the tariff on ethanol imports, yes for the blending subsidy — and so did majorities in the House and Senate — because it was a way to vote for “clean energy” and put money in thousands of voters’ pockets at the same time.
But the atmosphere has changed. Increased worldwide demand has lifted food prices across the board. Perhaps ending the tariff and the subsidy would not make growing corn unprofitable; maybe farmers can make a living growing corn to eat rather than burn. Free traders would cry hurrah at an end to the tariff. Budget cutters would salute an end to the subsidy as a relatively painless way to cut the deficit by $6 billion or more a year.
And there may be no faster way to move to switch grass and other biomass feedstock for plant-based fuel.
— Emerson Lynn, jr.
