Historically, at this point in the political cycle, it is customary for politicians to pander to farmers. But, despite the attention that has recently been lavished on Iowa, quite the opposite was achieved this past weekend. Ethanol subsidies, long opposed by most free marketeers, went quietly into the night — on Sunday, a sunset clause removed them from the tax code and Congress elected to stand by and watch.
The decision to allow expiration was a bipartisan one — a coalition emerged between budget-cutters and environmentalists — a fact that is all the more remarkable given the provision’s 30-year reign and seeming indestructability. But, as was noted in the New York Times yesterday, the victory does not belong to lawmakers alone, and the Competitive Enterprise Institute’s Marlo Lewis Jr., also a contributor to Planet Gore, played no small part in bringing down this $20 billion boondoggle. His long campaign has finally paid dividends. Congratulations Marlo, and thank you!
The problem is not yet solved. There is still a "private sector" subsidy in the form of the mandate on blending (10%).
This forces refiners to purchase ethanol to mix in with gasoline. There is no market price for ethanol so long as the mandate exists. These subsidies will be paid by consumers.
Reply to this commentLinkReport AbuseProbably why the end of the subsidy had some bipartisan "face." The artificial demand is still there. Maybe the subsidy just helped out the little guys in the biz too much to suit the crony lobby.
Reply to this commentLinkReport AbuseIn the recent past most gas stations in rural areas sold E-10 even when they were not required to. Gasoline without ethanol was a more desirable but higher priced product. Without the tax credit I could see E-10 costing more and disappearing in rural areas as fast as leaded gasoline disappeared when it became more expensive than unleaded. Consumers respond to price. In addition, the end of the punitive tariff on Brazilian ethanol 4 years before the next Iowa caucus might finally kill corn ethanol and the political imperative to mandate it.
Reply to this commentLinkReport AbuseUnlike libertarian fanatics, conservative patriots support limited intervention in the economy when national security is at stake. Even the founding father of free market economics, Adam Smith, supported sail cloth subsidies to prevent Britain becoming dependent on its enemies for that era's source of strategically vital transportation motive power. According to the CIA we have less than 2% of oil reserves (including Arctic and offshore) while OPEC has more than 78%. Oil is jihad juice and it makes eminent sense to encourage post petroleum technology.
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