Ethanol Suffers Rare Loss in Senate

Wasn't it just earlier this week that the Senate rejected the idea of ending subsidies for Ethanol producers? Evidently that rejection wasn't the end of the debate and now by a large bi-partisan majority, the US Senate has by a vote of 73-27 decided that in the name of deficit reduction the country can no longer afford to give away $6 billion a year to an industry that hasn't produced the savings at the gas pump that was expected when the tax breaks went into effect 3 decades ago.

The following excerpt is from a Wall Street Journal report that has just recently been posted online:

A bipartisan majority of the Senate voted Thursday to end more than three decades of federal subsidies for ethanol, signaling that other long-sacrosanct programs could be at risk as Democrats and Republicans negotiate a sweeping deficit-reduction deal.

The tax breaks, which now cost about $6 billion a year, had long been considered untouchable politically because of the power of farm-state voters and lawmakers. Iowa's role as the site of the first presidential caucuses has further elevated the political potency of the biofuel.

The Senate voted to repeal a $6 billion tax credit for ethanol producers, a move that could signal the end of some federal subsidies as part of an eventual budget compromise. Joe White has details.

Presidential hopefuls made a quadrennial ritual of going to Iowa and pledging to support the tax breaks, tariffs and mandates that supported production of ethanol motor fuels from corn. This year, however, some Republican presidential candidates have pointedly refused to endorse ethanol tax breaks.

Thursday's vote doesn't by itself doom federal support for the corn ethanol industry. The House is expected to reject it on the grounds that changes to the tax code, under the Constitution, must originate there, and the White House says an outright repeal is too abrupt. But the 73-27 vote signals that in a time of fiscal challenges, programs that once appeared unassailable now could be vulnerable.

The ethanol vote was driven by a coalition of liberal lawmakers and fiscal conservatives—it was sponsored by Sens. Dianne Feinstein (D., Calif.) and Tom Coburn (R., Okla.)—who want to end subsidies for wealthy interest groups before slashing social welfare programs. They were opposed by a bloc of farm-state lawmakers seeking to fend off the repeal or slow it down.

The Senate action could also open the door to attacks on other tax breaks, such as those benefiting oil companies, in the interest of deficit reduction. Republicans have been wary of doing so, but 33 Republicans joined 40 Democrats and Independents in supporting Thursday's repeal, which has the effect of raising taxes on oil refiners....

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