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Ethanol Tax Subsidy Dies, and the Fight Goes On

Ethanol Tax Subsidy Dies, and the Fight Goes On

The multibillion-dollar tax credit subsidy for corn ethanol production has stood as one of the more depressing proofs of corruption for 30 years. I remember talking with a wealthy acquaintance who was building ethanol production facilities in Iowa. I asked him whether the total energy cost to produce corn ethanol was greater than the energy yield from the finished product. He just smiled, and I could see big dollar signs in his eyes. His real answer, I surmised, was “Even if that’s true, we have the political muscle to get the federal money whether it makes sense to you or not.”

Somewhat miraculously, Congress allowed the ethanol subsidy to die a few days before the Iowa Republican caucuses. Deficit hawks did not like the $5 billion or so that the subsidy cost the U.S. Treasury each year. Other Congressmen saw the tax credits as gifts to large corporate farms. Some even looked at the economic and scientific merits and saw that producing corn ethanol is a net minus to the environment while taking resources away from growing food, the old-fashioned thing farmers still do. But any hopes for a lasting trend favoring the common good are tempered by Congress’s mandate that petroleum refiners blend ethanol into their products.

Economic muscle often equals political strength in our system, and the more powerful oil industry’s existing tax breaks are probably safe. The same Congressmen who say the country is threatened by budget deficits will fight fiercely against any changes in Big Oil’s preferred and unproductive tax treatment, despite the fact that those tax breaks cost the Treasury billions each year. Oil’s sacred tax subsidies are protected by the industry’s generous, reliable campaign contributions to Congressmen and by its army of lobbyists.

Running successfully for Congress takes money, maybe $2 million, and it’s difficult to fault a man for going where the money is. It’s more useful to criticize a system where, as former Congressman Martin Frost told me when I was running, “Without a lot of money, nothing makes any difference.” Public opinion polls show heavy disapproval of Congress, but Joe Public doesn’t fund Congressional campaigns, and Congressional actions opposed by big campaign donors are all too rare. The oil industry is safe, for now.


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