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Posted at 11:51 AM ET, 11/30/2010

Bipartisan group of senators calls for ethanol subsidies to expire

By Greg Sargent

In a clear sign of momentum against ethanol subsidies, a bipartisan group of more than a dozen senators has signed onto a letter urging Senate leaders to let the subsidies expire during this Congress, a move that could put many officials in a tricky political spot and could even have ramifications for the 2012 presidential race.

The letter, which I obtained from a source, was authored by senators Dianne Feinstein and Jon Kyl, and includes a number of Democrats and Republicans, including John McCain, Susan Collins, Richard Burr, and Mike Enzi. This is key, because the question of whether the subsidies should expire is emerging as a key test -- just like earmarks -- of whether Republicans are serious about reining in spending and the deficit.

While this issue could divide Dems along regional lines, it's more directly revelant to the GOP. With leading GOP senators now coming out for letting the subsidies expire, this could up the pressure on Republican senators who backed the subsidies in the past, such as Chuck Grassley and Orrin Hatch, putting them on the wrong side of what may emerge as a key litmus test for the Tea Party and potentially dividing the GOP caucus.

The letter forcefully calls on senators Reid and McConnell to do away with the subsidies this year:

We are writing to make you aware that we do not support an extension of either the 54 cent-per-gallon tariff on ethanol imports or the 45 cent-per-gallon subsidy for blending ethanol into gasoline. These provisions are fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil.

Subsidizing blending ethanol into gasoline is fiscally indefensible. If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use. We cannot afford to pay industry for following the law....

Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on foreign oil. We look forward to working with you on responsible energy tax policy.

This comes after senators Jim DeMint and Tom Coburn told me recently that they were calling on GOP colleagues to support eliminating the subsidies. The issue could also create complications for GOP presidential candidates, who may be forced to choose between catering to key 2012 states by supporting continued subsidies, or winning over the Tea Party by opposing them.

Momentum appears to be building. This could get quite interesting.

By Greg Sargent  | November 30, 2010; 11:51 AM ET
Categories:  2012, Senate Dems, Senate Republicans, Tea Party, energy  
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Comments

Yay! This is a good start. But it is only a start. There are plenty of other corporate and agribusiness subsidies that need to be addressed.

Posted by: Kevin_Willis | November 30, 2010 12:05 PM | Report abuse

End all subsidies.

Create an AMT corporate tax.

Let all the Bush tax cuts expire and blame it on the Republicans.

Across the board 10% cut to all departments in the Govn't.

I noticed all the mid-western, corn growing state Senators on that list too.

Posted by: mikefromArlington | November 30, 2010 12:12 PM | Report abuse

Kevin, I left a comment for you on the last thread. It was actually for other people, too, though the thread is probably dead now.

Posted by: AllButCertain | November 30, 2010 12:23 PM | Report abuse

AllButCertain: And I replied, in a rambling, disorganized fashion. ;)

Posted by: Kevin_Willis | November 30, 2010 12:36 PM | Report abuse

What Kevin said at 12:05!

Posted by: suekzoo1 | November 30, 2010 12:37 PM | Report abuse

Greg, you know, right, that a post on ethanol isn't going to get much traffic unless you maybe include Sarah Palin's opinion in the headline?--e.g., Palin responds as Bipartisan group of Senators . . .

Posted by: AllButCertain | November 30, 2010 12:37 PM | Report abuse

"We cannot afford to pay industry for following the law."

Change We Can Believe In.

Pity Obama didn't adopt this in his original 2009 Budget "A New Era of Responsibility".

Posted by: jnc4p | November 30, 2010 12:46 PM | Report abuse

P.S. I do hope that Grassley counters by also eliminating the oil & gas subsidies to level the playing field. Perhaps someone can also get the sugar ones included so we can get rid of high fructose corn syrup and start having real Coca Cola made in the U.S. again instead of having to import it from Mexico.

Posted by: jnc4p | November 30, 2010 12:49 PM | Report abuse

Perhaps the money saved here could pay for extended unemployment benefits, since that's the only issue holding them up. s/

Posted by: lmsinca | November 30, 2010 12:49 PM | Report abuse

Did Obama wait for the Republican leaders to finish their press questions - before Obama went to the microphone???


This is a problem with Obama - this should have been co-ordinated properly - Obama should not be "stepping" on the media coverage of the Republicans.


Obama did this at least once during the primaries campaign in 2008 - and it was rude.


This is an issue - if Obama wants to work with the Republicans, he is going to have to avoid being rude. Obama gets his say in - however "stepping on" the media of the Republicans is wrong.

Posted by: RainintheForest | November 30, 2010 12:54 PM | Report abuse

Funny how Obama complained about "everyone" plays the "bipartisanship" game -

And yet Obama was basically describing his own behavior over the past two years


Playing the "old Washington game" of trying to "win the press cycle" - instead of actually doing something.


SURE sounds like what Obama has been up to for two years.


Obama looked really unhappy - he played the game and LOST - and now Obama is being FORCED TO COMPROMISE


Obama isn't smarter than anyone else - like Obama thought he was.


Instead, Obama destroyed his own career with this game. And Obama is not going to win re-election


At the end of the press conference - Obama hung his head in shame and walked out without taking questions.


.

Posted by: RainintheForest | November 30, 2010 1:01 PM | Report abuse

"Perhaps the money saved here could pay for extended unemployment benefits, since that's the only issue holding them up."

Excellent idea. This was what Republican Senator Jim Bunning wanted to do originally with his vote to offset the unemployment benefits with ending an environmentally destructive tax subsidy for paper companies.

http://voices.washingtonpost.com/44/2010/03/senate-near-deal-to-end-bunnin.html

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/03/AR2010030300122.html

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=abDjfGgdumh4

It's interesting to note the difference in political approaches here. Senator Bunning was willing to stand alone, be vilified in the press, and ultimately lose the vote on his amendment in order to make his point that the spending should be paid for. Despite losing the battle(s), it appears that as time has gone on more people have come around to his point of view on things.

Meanwhile, Obama and the Democrats don't ever seem to want to take a chance on losing a vote on something they believe in to make a point, i.e. not renewing the tax cuts for couples making more than $250,000 per year.

Note also that certain principled Democrats such as Russ Feingold also supported paying for unemployment benefit extensions with offsets.

http://feingold.senate.gov/issues_ui_facts.html

Posted by: jnc4p | November 30, 2010 1:12 PM | Report abuse

All, more detail about the Pentagon report on DADT repeal, very good news:

http://voices.washingtonpost.com/plum-line/2010/11/pentagon_report_will_leave_opp.html

Posted by: Greg Sargent | November 30, 2010 1:13 PM | Report abuse

Excellent after that start cutting the rest of the farm subsidies.

Posted by: PennyWisetheClown | November 30, 2010 1:56 PM | Report abuse

I don't know of any popular support for these subsidies--only special interest support. They should end the ethanol mandates too.

Those that seek to renew these subsidies are looking out only for the special interest that grease their pockets.

Posted by: IBFreeman | November 30, 2010 2:34 PM | Report abuse

Corn fuel ethanol stinks

Posted by: cappcharlie | November 30, 2010 4:04 PM | Report abuse

Gas prices will increase 7 or 8 cents per gallon. There is still a government mandate that ethanol be used.

Posted by: kitchendragon50 | November 30, 2010 4:58 PM | Report abuse

As much as the conservative loving Corporate Media and Villager clowns likes to pretend otherwise, fact is, Republicans don't give a damn about the deficit. They grow them, while Democratic administrations shrink them. That's the objective and provable reality, no matter what anyone else might think.

However, the Teabagger goons have imposed a new level of party discipline on Republicans. Witness Kay Bailey Hutchison and Olympia Snowe signing on to the Senate GOP's unilateral ban on earmarks. They refused to sign on just a few months ago, but both are slated to face teabagger challenges, and think that these late-minute flip flops will protect them. It won't, they are both goners, but they'll try and pretend otherwise for as long as they can until they realize that their best chances for reelection are to go independent.

Democrats will fall along regional lines on the matter, like they always do. Wasteful spending in Iowa won't seem so wasteful to Iowa's Democratic congressional delegation. And in normal times, the same would apply to the region's Republicans.

But these aren't normal times, with the teabaggers demanding that Republicans pay more than lip service to deficit reduction. And there's no doubt that these subsidies aren't just wasteful, but they're unsound on any possible policy grounds. Subsidizing Big Oil and Big Agribusiness for environmentally unsound ethanol subsidies is madness, and has only persisted as long as it has because of Iowa's presidential clout.

And in a presidential cycle where Republicans will be tripping over themselves to curry favor with the Teabaggers and with Iowans ... well, this topic should prove entertaining to say the least.


.

Posted by: DrainYou | November 30, 2010 5:00 PM | Report abuse

The beginning of the end to Farm Welfare? It's a beginning. End Ethanol subsidies, now!

Posted by: dozas | November 30, 2010 5:38 PM | Report abuse

Demint has no answers. He rails about spending while his own state suffers the neglect of conservative policies.

Read this: http://jimdemints-southcarolina.blogspot.com

Posted by: joel27 | December 1, 2010 7:47 AM | Report abuse

Unless I'm mistaken, letting the subsidy expire would have the effect of passing on the cost of federally mandated use of Ethanol to the drivers.

Federal law mandates the use of Ethanol. But Ethanol is so expensive to produce and blend with gasoline, that the government eased the certainty of "sticker shock" at the gas pump by subsidizing Ethanol behind the curtain where the political sausage is made.

So, as I read the article, the 45 cent per gallon subsidy goes a way, but the mandate to use Ethanol stays. Who, then, picks up the 45 cents per gallon costs that Ethanol adds to gasoline?

My guess is that about 30 seconds after the subsidies expire, the price of gas at the pump will increase 45 cents a gallon.

Can you guess who will be hurt the most?

The only way to avoid that increase at the pump would be to remove the mandate to use Ethanol. That's the right answer because like global warming, Ethanol is a hoax.

But eliminating Ethanol would also eliminate the politically correct Ethanol industry in a blink of an eye, because Ethanol has no value added to justify the increased cost to gasoline.

Ethanol helps farmers, but that's about it, but it has nothing to do with a rational energy policy.

That's the problem with subsidies. By definition, they are payments to individuals and companies to keep them in business when they would otherwise fail in a free competitive market. Subsidies are the government's way of rewarding failure in order to impose politically correct social engineering experiments or to protect politically important votes. They have nothing to do with improving the lives the people who pay the subsidies--the American taxpayers.

The subsidies should be eliminated, but so too should the mandate to use Ethanol. If Ethanol was so good, there would be a natural demand for it. Beware when the government forces you to use a product when there is no demand for it.

Personally, I don't want to pay more for gas when the added costs provides zero benefit to me, the country, or the environment.

Ethanol does not decrease our dependence on foreign energy, because it takes more energy to produce than it delivers in the gas tank. Those who say otherwise are leaving out the costs to grow the corn, the requirement to transport Ethanol by truck instead of pipelines, and other factors typically omitted to make Ethanol appear less costly than it actually is. Include all the direct and indirect costs and you will see that Ethanol does a lot of harm without tangible benefits of any note.

If Ethanol was a good idea, private investors would have brought it to consumers long ago and made a profit.

But, no one ever said that politics is a rational process.

Posted by: fmb501 | December 1, 2010 10:20 AM | Report abuse

If they are going to remove the subsidies they better also eliminate the blending mandate. Let the free market create competition between companes that want to use the blended fuel and those that do not. Let them compete.

Posted by: patchouli42 | December 1, 2010 10:17 PM | Report abuse

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