Ethanol Payoffs Survive Again

Senate Majority Leader Harry Reid’s (D-Nev.) version of the tax deal agreed between President Barack Obama and senior House and Senate negotiators reportedly includes a one year renewal of the 45 cents per gallon ethanol tax credit and the 54 cents per gallon ethanol tariff.  Several other giveaways to renewable energy special interests are included in the Senate version of the package.  They include the multi-billion-dollar Section 1603 grant program for renewable energy projects (such as wind turbines), an extension of the bio-diesel tax credit, and a bunch of credits for energy-efficient appliances, energy-efficient new homes, and the 30% credit for installing E-85 pumps at gas stations.  All these boondoggles add up to many billions of dollars of wasted taxpayer dollars lavished on big business special interests.  The result is higher energy prices for consumers.

However, it is not clear that the tax deal is going to be enacted.  House Democrats led by Speaker Nancy Pelosi (D-Calif.) have voted to oppose it. Unless Pelosi schedules a House vote, it won’t come up this year.  It appears the White House was taken by surprise by this House Democratic revolt against their own President, but I expect the White House is twisting a lot of arms to get them to change their minds.  If the tax hikes take effect on January 1st and it’s up to the 112th Congress to repeal them, then I expect the new Republican majority in the House will want a significantly different package.  My advice is not to bet against ethanol subsidies.