Senate strikes at ethanol handout

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In voting to end ethanol subsidies, lawmakers took the first step in undoing a set of supports that have built up over the decades as environmentalists sought a cleaner energy source and U.S. policymakers worried about reliance on foreign oil.

In addition to the tax credit, American ethanol production is protected by a trade tariff, and a market for it is almost assured by a government mandate that requires that billions of gallons of renewable fuels every year be blended with gasoline.

Mrs. Feinstein called it the “triple crown of benefits.”

The tax credit was enacted in 2004, when Republicans controlled the White House and Congress, as a way of consolidating a convoluted set of subsidies going back to the 1970s. The tax initially was set at 51 cents for every gallon of ethanol blended into gasoline, but that was lowered in 2008 to 45 cents.

Killing the subsidy on July 1, as Mrs. Feinstein proposed, would save the government $2.4 billion this year.

To show just how long the battle has gone on, Sen. John McCain, an Arizona Republican and ardent opponent of ethanol supports, read on the Senate floor a statement he made in 1998 during a debate over the U.S. policy.
Thursday’s vote gave public view to a long-running ideological fight behind the scenes within the Republican Party.

That fight pits pro-business Republicans, who say the government has the power and responsibility to boost American companies and jobs, against free-market conservatives who say bureaucrats and members of Congress will never make the most cost-effective decisions.

Mr. Coburn laid out the choice for colleagues on the Senate floor: “Can we trust markets, real markets, to work more effectively than Washington mandating and dictating policies?”

He said the vote wasn’t about whether ethanol should be used as an alternative fuel, but rather whether the government should pick it as a winner over other choices.

“The best way for ethanol to survive is for it to stand on its own two feet,” he said.

A similar fight is being waged in the House over proposals to subsidize conversion of the American truck fleet to natural gas, of which the U.S. has ample supply.

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