Ethanol Tariff and Tax Credit — Let Them Terminate!

This morning’s Pajamas Media.Com carries a column by yours truly entitled, “Ethanol’s Policy Privileges: Heading for History’s Dustbin?” With links to the relevant studies, the piece explains why Congress should let the ethanol tariff and tax credit expire when their statutory authority runs out at midnight, Dec. 31, 2010.

The most fun I had writing the op-ed was in debunking the propaganda that ethanol’s policy privileges ease our pain at the pump. My evidence? None other than www.fueleconomy.gov, a Web site jointly administered by the Environmental Protection Agency and the Department of Transportation. Fueleconomy.Gov shows that if you own any one of 110-plus “flexible fueled” vehicles, you pay hundreds of dollars more per year if you fill the tank with E-85 (motor fuel blended with 85% ethanol) than if you fill it with regular gasoline.

The column also argues that, even if one believes in Al Gore’s “planetary emergency,” the ethanol tariff and tax credit are at best horribly inefficient and at worst counter-productive as climate policy.

Not that I disagree with everything Al Gore says. As noted in the column, Mr. Gore now acknowledges that his previous support for ethanol subsidies was a mistake, noting their contribution to the food price crisis of 2008. Gore says he “had a certain fondness for the [corn] farmers in the state of Iowa because I was about to run for president” in 2000. As comedian Bill Maher  once quipped, “No one asked for corn in their gas tank. . .But I suppose if the first presidential primary was in Vermont, we would all be pouring maple syrup into our gas tanks.”

“Corn is King” has been the statist quo for many years in farm state politics — hence also in Washington, D.C. But the times they are a-changin. A bipartisan group of 17 senators, led by Sens. Dianne Feinstein (D-Calif.) and Jon Kyl (R-Ariz.), say it’s time for the tariff and tax credit to go gently into the night. A broad coalition of environmental, taxpayer, hunger, free market, and food industry organizations are urging House and Senate leaders to let the tax subsidy meet its statutorily appointed fate.

The lame-duck Congress has a rare opportunity to avoid $25-30 billion in new deficit spending over the next five years, ease consumers’ pain at the pump, and scale back political manipulation of energy markets just by letting two special-interest giveaways tumble into history’s dustbin. They can do good just by doing nothing — surely there’s a lesson in that too.