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Senate votes to end ethanol subsidies, 73/27

Yesterdays vote failed for procedural reasons but they cleaned it up today and nailed down a remarkably bipartisan consensus. Eyeball the roll: 38 Democrats, 33 Republicans, and both independents voted yes, with no votes coming mainly from plains-states senators eager to keep the campaign cash flowing. When youve got both senators from California and both senators from Oklahoma on the same side of an issue, youre working magic, my friends.

The vote also could have ramifications on future votes to reduce the deficit. Much of the GOP conference supported Feinsteins bill even though it does not include another tax break to offset the elimination of the ethanol tax credit.

As such, the vote could also represent a setback for influential conservative Grover Norquist, head of Americans for Tax Reform (ATR), who said a vote for the plan would violate the anti-tax pledge most Republicans have signed unless paired with a separate tax-cutting amendment

Feinsteins amendment to an economic development bill would quickly end the credit of 45 cents for each gallon of ethanol that fuel blenders mix into gasoline. The credit led to $5.4 billion in foregone revenue last year, according to the Government Accountability Office.

The amendment also ends the 54-cent per gallon import tariff that protects the domestic ethanol industry.  

It was a vote about ethanol but it wasnt really a vote about ethanol. For instance, although this bill would strip away federal subsidies, it does nothing about the federal mandate specifying U.S. consumption of 36 billion gallons in renewable fuels each year until 2022, which means theres plenty of business still to come for ethanol special interests. What the vote is really about, at least to the Norquistians among us, is whether this might signal a new willingness by GOP leaders to strike a grand bargain with Democrats on deficit reduction that would include tax hikes. Tom Coburn, the anti-Norquist, insists that theres no signaling here for the simple reason that lifting a subsidy isnt the same as raising taxes, even if both have the effect of raising revenue. The rebuttal is that Coburn actually did vote for tax hikes when he supported the Bowles/Simpson Deficit Commission plan that ended up failing last winter. Ethanol is the flashpoint, but the wider war is over whether theres room for compromise on taxes in the name of finally solving Americas debt problem which explains why the sniping between Team Coburn and Team Norquist has turned remarkably nasty at times. This dispute isnt going away on the contrary, itll get hotter so watch Coburns floor speech today and then spend five minutes with this excellent backgrounder from Andrew Stiles on the deepening conservative wedge. Itll serve you well down the road if/when a deficit package finally hits the floor.

Interesting to see how this will play out.
Posted by: DarthVader 2011-06-16

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