The Senate voted down a bill Monday afternoon that would’ve strip $6 billion in annual ethanol subsidies and get rid of an import tariff on ethanol, particularly from Brazil, coming into the United States. The measure, co-sponsored by Oklahoma Republican Tom Coburn and California Democrat Dianne Feinstein, garnered a surprising amount of support, failing 40-59, consider the leaders of both parties opposed it.
Once upon a time, additives were needed to make gas burn cleaner. In the 1990 Clean Air amendments, refiners were given a choice: ethanol – then a nascent market incapable of mass production, or MTBE, a byproduct of the refining process. Most refiners chose MTBE, though it turned out to be a horrible ground pollutant that was subsequently banned in 2003. By that time, ethanol production had boomed and the mandate switched over to purely ethanol. Corn prices shot up.
Meanwhile, gasoline technology has advanced over the years and it now burns cleaner without any additives. Even Al Gore last year issued a mea culpa for supporting ethanol subsidies. But ethanol supporters argue that producing millions of gallons of ethanol at home helps reduce U.S. dependence on foreign oil. It also helps that the first caucus state in the nation is Iowa – where the ethanol boom has proliferated corn growing in every nook and cranny of the state, even in tree boxes and inside highway exit ramp loops.
It takes a brave presidential wannabe to disavow the ethanol boondoggle – just look at the flack Tim Pawlenty got last month when he came out against it. In fact, Republicans in general tend to come from rural states and are sympathetic to farming needs. At least they were until the advent of the Tea Party.
When House GOPers this spring were trying to figure out where to slash spending, one of the areas considered taboo was ethanol and farm subsidies. But keeping them off the table, provoked a backlash from some fiscal conservatives who argued that it was hypocritical to keep sacred cows for the sake of political expediency. Enter Coburn and his ethanol bill. This is not a new issue for Coburn, who has championed spending cuts since his arrival in the Senate in 2005. But this is the first time Coburn has successfully gotten his bill up for a vote. (And the war on farm subsidies is just beginning, as Politico’s Marin Cogan reports, GOP freshmen are targeting $5 billion in direct subsidies in next year’s farm bill.)
The ethanol issue splits both parties along rural and urban lines, with urban politicians less inclined to support the subsidies. The bill has attracted an odd coterie of supporters from the Sierra Club to the Club for Growth. Adding a twist, there are hardcore fiscal conservatives who oppose the bill from the right, arguing that if you get rid of subsidies you are essentially raising taxes on ethanol producers. Grover Norquist’s group, Americans for Tax Reform, is lobbying against the bill and backing, instead, South Carolina Senator Jim DeMint’s version which also repeals the ethanol mandate and the death tax. “Only the combination of the Coburn and DeMint amendments completely kills the government’s support of ethanol regime,” Norquist wrote in a press release Monday. “The DeMint amendment… is done in a way that prevents additional money from flowing to the appropriations committees.” That’s an argument that Coburn vigorously refutes, saying if you oppose getting rid of all subsidies you are protecting all special interests as the tax code is full of such helping hands.
For Coburn, this first vote is a warning to ethanol boosters. “Using the tax code to pick winners and losers in the market should be anathema to conservatives,” Coburn wrote in an op-ed in the Washington Examiner last month. “Eliminating this shameless expenditure should be a no-brainer, especially on this side of the Iowa caucuses.”