June 14, 2011
Anyone with an elementary knowledge of market economics knows that subsidizing ethanol made from corn is a terrible waste of public resources that does virtually nothing to enhance U.S. energy security. It also creates all sorts of perverse unintended consequences, such as food riots in Mexico, stemming from the artificial diversion of the staple food commodity into the energy sector. So you would think at a time of fiscal crisis, with rising doubts about the U.S. national debt, that eliminating such subsidies would be a matter of widespread consensus. Sorry, no such luck. Fierce obstructionism from certain anti-tax activists may doom any such reform, raising the specter of default by Uncle Sam.
What has happened is that Sen. Tom Coburn (R-OK) has been pushing to eliminate the special tax breaks for ethanol producers, as part of a compromise with Democrats to reduce the federal budget deficit. His attempts to muster a legislative coalition been thwarted, however, by Grover Norquist, leader of Americans for Tax Reform. (He's the guy who drafted the anti-tax pledge that many Republican legislators and candidates around the country have been bullied into signing, often against their better judgment.) According to Norquist, any elimination of a tax break is the same thing as a tax increase, and in his mind, no tax increase is ever justifiable, no matter what. As a "compromise," he has proposed cutting taxes on other things so that the net effect on revenue would be zero. (The ethanol subsidy costs about $6 billion a year.) In other words, Norquist wants to make sure that there are no increases in revenue to reduce the gargantuan $1.3 trillion deficit. It is, to be perfectly blunt, a stupid and reckless policy position. The vote in the Senate could take place later today, and I hope enough Republicans have the courage to stand up to Norquist and do what's right for this country. See the Washington Post.
It's ironic that an organization devoted to "Tax Reform" would be so adamantly opposed to reforming a provision of the Tax Code that desperately needs to be reformed. A better name for Norquist's group would be "Americans and Others for Permanent Tax Reduction." I say "and Others" because Norquist has raised funds from foreign sources, including wealthy Middle Easterners with connections to Islamic extremist groups. As I wrote on April 15 last year, Norquist was a central figure in the (second) Bush administration's drive to enact radical tax cuts that led to a huge increase in the federal deficit, even before the Obama administration took office. If the government does go into default this summer, you can thank Grover Norquist for the central role he played in this economic crime.
As for Sen. Coburn, who is among the senators I respect the most, he recently left the "Gang of Six" bipartisan group in which Sen. Mark Warner (D-VA) has been playing a keep part. The legislators are trying hard to reduce the federal budget deficit, but anti-tax dogma and lack of leadership in the White House have undercut the initiative. It is a tragic situation when so many politicians in both parties put their own interests and agendas ahead of the nation's financial security.