As the clock struck 12 am January 1, one of the most anti free market government interventions expired without renewal and without fanfare.  In honor of the Iowa Caucuses, we can now declare that the ethanol subsidies and tariffs are finally dead.  However, before we celebrate this rare piece of good news, we must remember that in order to deracinate the ethanol beast from our midst, we must destroy its third leg; the 10% blenders mandate.

Over the past decade, ethanol has been the poster child for the worst aspects of big-government crony capitalism.  The ethanol industry has used the fist of government to mandate that fuel blenders use their product, to subsidize their production with refundable tax credits, and to impose tariffs on more efficient sugar-based ethanol from Brazil.

This onerous mega-intervention on the part of government has had a devastating effect on the price of food and gas and it has forced consumers to purchase inefficient and often damaging fuel.  Yet worst of all, it has enriched an industry that would have otherwise faltered in the natural order of the free-market.  Ethanol production has increased 719% during the past decade, as almost half of all corn grown in the country is diverted for this unnatural and odious use of a product that was traditionally grown for livestock feed.  Government-backed venture socialism is indeed a powerful force.

Ethanol blenders have benefited from the 45-cent per gallon Volumetric Ethanol Excise Tax Credit (VEETC), which may be refundable for those companies that lack any excise tax liability.  The ethanol industry has pocketed over $45 billion in subsidies since 1980, with a $6 billion annual price tag in recent years.  Additionally, all foreign ethanol imports incurred a 54-cent-per-gallon import tariff, which coupled with a mandatory 2.5% ad valorem tax, adds up to an increased cost of about $0.60 per gallon.

These two policies are unlikely to be renewed; however, the most egregious part of the three-legged ethanol beast –the mandate – is still intact.  Industry leaders are employing a rope-a-dope strategy vis-à-vis the subsidies, while launching a counterattack to double down on the mandates.  They must be stopped.

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As the clock struck 12 am January 1, one of the most anti free market government interventions expired without renewal and without fanfare.  In honor of the Iowa Caucuses, we can now declare that the ethanol subsidies and tariffs are finally dead.  However, before we celebrate this rare piece of good news, we must remember that in order to deracinate the ethanol beast from our midst, we must destroy its third leg; the 10% blenders mandate.

Over the past decade, ethanol has been the poster child for the worst aspects of big-government crony capitalism.  The ethanol industry has used the fist of government to mandate that fuel blenders use their product, to subsidize their production with refundable tax credits, and to impose tariffs on more efficient sugar-based ethanol from Brazil.

This onerous mega-intervention on the part of government has had a devastating effect on the price of food and gas and it has forced consumers to purchase inefficient and often damaging fuel.  Yet worst of all, it has enriched an industry that would have otherwise faltered in the natural order of the free-market.  Ethanol production has increased 719% during the past decade, as almost half of all corn grown in the country is diverted for this unnatural and odious use of a product that was traditionally grown for livestock feed.  Government-backed venture socialism is indeed a powerful force.

Ethanol blenders have benefited from the 45-cent per gallon Volumetric Ethanol Excise Tax Credit (VEETC), which may be refundable for those companies that lack any excise tax liability.  The ethanol industry has pocketed over $45 billion in subsidies since 1980, with a $6 billion annual price tag in recent years.  Additionally, all foreign ethanol imports incurred a 54-cent-per-gallon import tariff, which coupled with a mandatory 2.5% ad valorem tax, adds up to an increased cost of about $0.60 per gallon.

These two policies are unlikely to be renewed; however, the most egregious part of the three-legged ethanol beast –the mandate – is still intact.  Industry leaders are employing a rope-a-dope strategy vis-à-vis the subsidies, while launching a counterattack to double down on the mandates.  They must be stopped.

Read More →

Details here and here: the short version is that the Senate back in June kicked off opposition to continued ethanol subsidies via a bipartisan amendment: it didn’t pass, but Congress has just let both the ethanol subsidy and a restrictive foreign tariff (on Brazilian sugar-cane ethanol) lapse. Given that the Iowa caucuses will be finished by the time Congress reconvenes – and given that the House of Representatives is currently chock-heavy with people who spit at the very phrase ‘ethanol subsidy’ – getting back either is going to be a problem for the domestic ethanol industry. Mind you, there are still mandates for using ethanol in place, but note again the ending of the tariff; I’m not a businessman, but effectively lowering the price of Brazilian ethanol by 54 cents/gallon while simultaneously effectively raising the price of domestic ethanol by 45 cents/gallon sounds to me like it would at least raise some intriguing alternatives.

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Details here and here: the short version is that the Senate back in June kicked off opposition to continued ethanol subsidies via a bipartisan amendment: it didn’t pass, but Congress has just let both the ethanol subsidy and a restrictive foreign tariff (on Brazilian sugar-cane ethanol) lapse. Given that the Iowa caucuses will be finished by the time Congress reconvenes – and given that the House of Representatives is currently chock-heavy with people who spit at the very phrase ‘ethanol subsidy’ – getting back either is going to be a problem for the domestic ethanol industry. Mind you, there are still mandates for using ethanol in place, but note again the ending of the tariff; I’m not a businessman, but effectively lowering the price of Brazilian ethanol by 54 cents/gallon while simultaneously effectively raising the price of domestic ethanol by 45 cents/gallon sounds to me like it would at least raise some intriguing alternatives.

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This week’s legislative schedule in both houses of Congress will provide Republicans (and faux moderate Democrats) a unique opportunity to efface farm welfare by eliminating ethanol credits/tariffs and direct farm subsidies.

On the House side, the annual Agriculture Appropriations bill is expected to hit the floor as early as Tuesday.  Earlier this month, the Appropriations Committee passed the FY 2012 Ag bill, cutting $2.6 billion from 2011 spending levels, and most notably, $686 million from the WIC program.  The committee also approved an amendment by Jeff Flake to cut off direct subsidies for farms owned by those with more than $250,000 in gross adjusted income.

The bill is a good start, however, there are still more cuts that need to be introduced during the floor amendment process.  The committee-passed bill appropriates $17.25 billion in discretionary spending, while providing an additional $116.9 billion in “mandatory spending”, for a total of $134.15 billion.  The USDA is one of the most profligate departments, surpassed only by HHS and DOD as the largest recipient of taxpayer dollars.  19% of all federal subsidies and welfare programs are promulgated from the USDA.  Most of the appropriations come from mandatory food subsidies and will need to be cut through welfare reform bills, but there is no reason why we should reauthorize so much spending in this bill.

In addition to the $5 billion in annual direct payments to farmers – predominantly those who grow corn, soybeans, wheat, rice, and cotton – the federal government spends billions more for crop insurance, conservation and export programs, and marketing loans.  The $5 billion in direct subsidizes should be completely eliminated for all income levels, while the other programs should be seriously curtailed.

Ethanol will get its day of judgement in the Senate.

Read More →

This week’s legislative schedule in both houses of Congress will provide Republicans (and faux moderate Democrats) a unique opportunity to efface farm welfare by eliminating ethanol credits/tariffs and direct farm subsidies.

On the House side, the annual Agriculture Appropriations bill is expected to hit the floor as early as Tuesday.  Earlier this month, the Appropriations Committee passed the FY 2012 Ag bill, cutting $2.6 billion from 2011 spending levels, and most notably, $686 million from the WIC program.  The committee also approved an amendment by Jeff Flake to cut off direct subsidies for farms owned by those with more than $250,000 in gross adjusted income.

The bill is a good start, however, there are still more cuts that need to be introduced during the floor amendment process.  The committee-passed bill appropriates $17.25 billion in discretionary spending, while providing an additional $116.9 billion in “mandatory spending”, for a total of $134.15 billion.  The USDA is one of the most profligate departments, surpassed only by HHS and DOD as the largest recipient of taxpayer dollars.  19% of all federal subsidies and welfare programs are promulgated from the USDA.  Most of the appropriations come from mandatory food subsidies and will need to be cut through welfare reform bills, but there is no reason why we should reauthorize so much spending in this bill.

In addition to the $5 billion in annual direct payments to farmers – predominantly those who grow corn, soybeans, wheat, rice, and cotton – the federal government spends billions more for crop insurance, conservation and export programs, and marketing loans.  The $5 billion in direct subsidizes should be completely eliminated for all income levels, while the other programs should be seriously curtailed.

Ethanol will get its day of judgement in the Senate.

Read More →

Senator John Thune took to the Senate floor yesterday to criticize his fellow 2012 presidential contenders for playing politics with the Obama-Kyl tax deal.

“It is easy to stand on the sidelines and criticize this deal,” Thune said. “And it would perhaps be politically expedient to stand on the sideline and criticize this tax deal. But to advocate against this tax deal is to advocate for a tax increase.”

It certainly is not.

None of the conservatives opposed to Obama-Kyl, including myself, want tax rates to go up on January 1. However, we are simply unwilling to accept the party line that the best deal we could get includes a mammoth 13 month extension of unpaid unemployment benefits (thus caving after a year-long fight on the principle of paying for such extensions), an extension of current tax rates that conveniently ignores the resurrection of the death tax, and a package of tax extenders that includes all sorts of giveaways for big business.

One of those giveaways is the renewal of the tax and tariff subsidies for ethanol that Senator Thune is so beholden too. At the end of November, Thune joined over a dozen other Senators in requesting that these extensions be made a priority in any legislative end-game, and inevitably these subsidies made it into the Obama-Kyl package that Thune is now heartily supporting. (Who is playing politics here, Senator?)

But Thune isn’t the only one casting aspersions on the motives of those opposing Obama-Kyl.

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Senator John Thune took to the Senate floor yesterday to criticize his fellow 2012 presidential contenders for playing politics with the Obama-Kyl tax deal.

“It is easy to stand on the sidelines and criticize this deal,” Thune said. “And it would perhaps be politically expedient to stand on the sideline and criticize this tax deal. But to advocate against this tax deal is to advocate for a tax increase.”

It certainly is not.

None of the conservatives opposed to Obama-Kyl, including myself, want tax rates to go up on January 1. However, we are simply unwilling to accept the party line that the best deal we could get includes a mammoth 13 month extension of unpaid unemployment benefits (thus caving after a year-long fight on the principle of paying for such extensions), an extension of current tax rates that conveniently ignores the resurrection of the death tax, and a package of tax extenders that includes all sorts of giveaways for big business.

One of those giveaways is the renewal of the tax and tariff subsidies for ethanol that Senator Thune is so beholden too. At the end of November, Thune joined over a dozen other Senators in requesting that these extensions be made a priority in any legislative end-game, and inevitably these subsidies made it into the Obama-Kyl package that Thune is now heartily supporting. (Who is playing politics here, Senator?)

But Thune isn’t the only one casting aspersions on the motives of those opposing Obama-Kyl.

Read More →

President George W. Bush and his compatriots introduced a new typology of conservatism called “compassionate conservatism”.  They believed in big government, entitlement and transfer programs, market distortions such as ethanol mandates, and special interest handouts.  They felt that it was all fine and dandy to grow government, as long as they advocated for tax reform.

Senate Minority Leader Mitch McConnell has always been a paradigm Bush Republican.  It is therefore not surprising why he so emphatically supports the Obama tax deal.

All of these permanent concessions are being used as bait for temporarily retaining the marginal tax rates and reinstating the death tax.  I’m glad to hear that Rush is categorically rejecting the compromise even if it means that we miss the deadline.  The tax rates for 2011 will not be finalized until the end of the year and we will have the political clout and mandate to repeal them retroactively when we retake the House on January 3.  On the other hand, if we acquiesce to this deal, there will be no way to repeal the destructive entitlements, market-distorting corn welfare and tariffs, and God knows what other special interest handouts will be slipped into this bill before the session is over.

It is surprising to me that the likes of Grover Norquist and some at the Heritage Foundation (although, they appear to be coming around) have come out in support of the deal so soon.  Don’t they realize that the President doesn’t legislate?  By agreeing to “the deal” up front we will wind up supporting a piece of real legislation that is dubbed as “the deal”, but in reality, will be a new monster filled with budget busting special interest handouts and market distorting mandates.

Many Republicans will retort that this is the best deal we could secure in this political dynamic and if we reject the compromise, we will be doomed on January 1st.  However, I have a sneaking suspicion that McConnell and the other Bush Republicans don’t view this deal as a necessary evil.  In fact, this is the type of legislation that they promote all the time.  It cuts taxes, but increases spending and big government regulations.  That’s what compassionate conservatism a.k.a. big government liberalism is all about.  They wouldn’t have it any other way.

We must remind them that “green provisions” in the bill are backdoor tax cuts and are just as destructive as the sun setting of the Bush tax cuts.  Let’s hope that the folks at ATR score this bill and treat it as a violation of its tax pledge.

Cross-posted to Red Meat Conservative

As conservatives, we understand that not everything that is dubbed as a tax cut is a good thing.  Liberals are wrought to describe handouts as tax cuts and tax cuts as handouts.  Thus, the extension of the regressive, job killing, price hiking ethanol subsidies are not good tax cuts and should not be extended.  Yet, through all of the discussion concerning the deal on the Bush tax cuts, there is a total blackout concerning the deal with the ethanol subsidies.  Tim Carney reports at the Washington Examiner, that Chuck Grassley (R-Ethanol) is claiming that a one year extension of these subsidies is part of the deal.  He draws attention to this article from the Quad-City Times:

“A deal to extend the Bush-era tax cuts also includes action on ethanol and biodiesel credits, U.S. Sen. Chuck Grassley, R-Iowa, said Tuesday.
The details aren’t clear yet, but Grassley told reporters that the ethanol and biodiesel tax credits would get a temporary extension, through 2011.
The biodiesel credit of $1 a gallon expired last year, and farm-state lawmakers have blamed the expiration for the idling of biodiesel plants.
The ethanol credit, at 45 cents per gallon, is scheduled to expire at the end of the year.
Grassley said the biodiesel credit extension also included applying it retroactively to 2010.”

Republicans have already agreed to a permanent unemployment welfare system in order to extend the tax cuts for just two years.  They also agreed to bring back the death tax, albeit at a lower rate.  Are we now going to agree to more corn welfare for special interest groups?  Where is this deal anyway?  What else is hidden in this compromise?  Could Senator Kyl provide us with a hard copy?

There is currently a robust debate among conservatives whether the current tax deal is the best we could get from Obama.  But don’t the supporters want to see the full copy of the deal before they sign off on it?  Is there any limit to the number of poison pills that the deal  would contain before Republicans will oppose it?  How can we blindly trust an invisible deal made with the devil that already contains extraneous details that are detrimental to this country?  I guess it is all about compromise for some GOPers.  To hell with the details.

Cross-posted to Red Meat Conservative