A vote last week in the U.S. Senate suggests there is finally a broad bipartisan consensus to end taxpayer subsidies to the ethanol industry that have long been unjustified and defended for narrow political purposes. After more than 30 years, it's about time.
Ethanol is a renewable fuel additive for gasoline that is derived mainly from corn. Subsidies for its production started in the late 1970s as a way to reduce America's dependence on foreign oil. But ethanol's promise of cost savings and reductions in greenhouse gas emissions never materialized. Meanwhile, it has diverted corn from livestock feed and food production — last year ethanol production consumed close to 40 percent of all corn grown in the United States — driving up the price of corn, which affects food prices. Despite these obvious shortfalls, Big Agriculture and farm state lawmakers have successfully fought any attempt to rein in ethanol's corporate welfare. Any member of Congress with aspirations for the White House never dares to offend Iowa.
That's why the Senate's 73-27 vote to eliminate a tax credit of 45 cents for every gallon of ethanol is so encouraging. It's a sign that America's ethanol policy might soon shift into rational territory. The measure would save taxpayers $5 billion annually in tax subsidies that went to oil refiners, as well as repeal a tariff of 54 cents a gallon on imported ethanol that restricts imports, primarily from Brazil.
The lopsided bipartisan vote is due to a rare alignment of political interests between liberals, who don't like subsidies to big business and see ethanol as causing a spike in food prices without environmental benefits, and fiscal conservatives who are looking for ways to cut the budget deficit. Both Florida senators, Democrat Bill Nelson and Republican Marco Rubio, voted in favor of the legislation. It was originally sponsored by Sens. Dianne Feinstein, D-Calif., and Tom Coburn, R-Okla.
Unfortunately, prospects for the measure are not promising. The House is expected to reject the repeal because tax bills are supposed to originate there and not in the Senate. And, inexcusably, the Obama administration has indicated its opposition, a stance having more to do with the Farm Belt's influence on presidential politics than a principled objection. On the plus side, the ethanol tax credits will automatically expire at the end of the year if they are not renewed. The strong Senate vote suggests they will be allowed to lapse.
Making ethanol from corn is bad policy. It requires too much tilling, fertilizer and fieldwork to provide much in net energy gains, and it diverts a needed food crop into the nation's gas tanks. Eliminating tax subsidies should be only a first step in unwinding America from the corn ethanol industry's grip.