Norquist Loses in Ethanol Subsidy Fight

June 17th, 2011 at 12:00 am | 21 Comments |

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The media largely framed the debate over ethanol subsidies between Senator Tom Coburn and Americans for Tax Reform president Grover Norquist as a contrast between two approaches to deficit reduction: Coburn’s pragmatic willingness to raise more revenue on the one hand, and Norquist’s ideologically-rigid opposition to tax increases on the other.

That’s one way to look at it.

But there’s a better way to look at it: Tom Coburn is the ideologically-consistent conservative, and Grover Norquist is a fiscal phony.

It’s worth remembering exactly what ethanol subsidies are. As “tax expenditures” they redirect money from the US Treasury to a particular group — in this case corn farmers — to provide financial incentives for that group to engage in a certain behavior.

These subsidies, in their superficial aim, inevitably work. Corn farmers receive billions of dollars a year to produce ethanol. This reduces the money they spend on producing ethanol, and thus directly increases their profits and encourages them to increase output.

The problem is that like every other tax expenditure, ethanol subsidies are a direct wealth transfer.

As Grover Norquist is undoubtedly aware, taxpayer dollars don’t grow on trees. The money that pays for ethanol subsidies is confiscated from the American public at large. So while the farm lobby benefits from the expenditures, the rest of us lose in the form of higher taxes or increased deficit spending.

To be fair, ethanol proponents argue that the subsidies serve a valuable function — reducing our dependence on foreign energy sources, or decreasing carbon emissions. I find the first of these arguments unpersuasive, while the second is laughably unsupported — it takes lots of carbon emissions to grow corn, and more to turn it into a workable fuel — but I’ll leave the wisdom of ethanol to the side.

The question of subsidies is another matter entirely. Those subsides, like all subsidies, inherently distort the market. Consumers direct resources to the goods and services that most satisfy their desires, but ethanol subsidies forcibly transfer resources from consumers to farmers. Maybe those resources would have gone to savings, or to investment in more profitable ventures. But thanks to ethanol subsidies, they go to agribusiness.

To call the end of these subsidies — a government transfer program — a tax increase is possibly the most un-conservative argument that I have ever heard.

The only difference between an ethanol subsidy and a welfare payment is where the subsidy goes (the business or the poor person) and how it gets there (through the IRS or some other agency). Does the fact that ethanol subsidies are filtered through the IRS make them some sort of tax cut? Of course not.

But maybe if Obama had filtered his multi-trillion dollar health care reform through the tax code, he would have found an unlikely ally in Grover Norquist.

A further problem with Norquist’s position is its apparent ignorance of our deficit. Starve-the-beast economics may have made sense in the 1980s, but after three decades of the doctrine’s failure, conservatives should know one thing: government programs are almost always paid for by higher taxes or more deficit spending.

And what is deficit spending? Yep, a future tax on people like me. So while I appreciate Norquist’s fulmination against tax increases, I’d appreciate it if he’d transfer that passion to the tax increases that will most affect me — those that are coming because “conservatives” like him won’t take the rare opportunity to eliminate a government spending program.

It is uplifting that the gross majority of Senate Republicans broke with Norquist and joined the real conservative in this fight, Sen. Tom Coburn.

Those conservatives apparently realize that every dollar the government spends is a dollar that someone has to pay back. I hope they continue to realize that fact — and continue to ignore the demands of fiscal phonies like Grover Norquist.

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21 Comments so far ↓

  • Bunker555

    Beginning of the end for Norquist.

    • valkayec

      We can only hope. However, he has a large share of Americans believing every thing he says. To them, he’s a hero.

  • valkayec

    Personally, this is one issue on which I have some agreement with Libertarians, except to use temporary or short term government subsidies or loans to help defray the extremely high cost of market entry when private capital is unavailable.

    • zephae

      I’d go a little further than that, Valk. I think there are certain activities in which we, as a society, would want to distort the market to a certain extent to encourage more resources to go to things the markets benefit greatly from but under-invest in. Putting money into research and emerging technologies which don’t necessarily plan on entering the market in the very near future would still be a valuable contribution in my book. I also think industries like space need government money because while we do have a growing private sector there, they still need NASA as a customer and for their technical expertise in evaluating new projects. I guess some of these examples would be covered under your definition of “extremely high cost of market entry,” but there’s also cases like green technology where some of the major benefits of the products often don’t have a market value. We definitely subsidize a lot of the wrong things, though, ethanol being a prime example.

  • ottovbvs

    Norquist is a phony? What a surprise.

  • nhthinker

    “The only difference between an ethanol subsidy and a welfare payment is where the subsidy goes (the business or the poor person) and how it gets there (through the IRS or some other agency). ”

    Welfare payments typically do not end up with a long-term positive impact on infrastructure.
    Would continued Ethanol credits help infrastructure? Probably not.

    The journey to US independence from foreign energy is now mostly stalled because of the serious unknowns about how heavy handed the EPA will be on CO2 emissions. The EPA almost single-handedly is keeping money on the sidelines from creating greater natural gas infrastructure.

    • LFC

      “The journey to US independence from foreign energy is now mostly stalled because of the serious unknowns about how heavy handed the EPA will be on CO2 emissions.”

      Factless Assertion Alert!

      • nhthinker

        http://www.ft.com/intl/cms/s/0/b93be716-c981-11de-a071-00144feabdc0.html#axzz1PaogSLTg

        “The watchdog says that environmental policies to limit carbon dioxide emissions to prevent global warming, far from supporting demand for gas, would cause gas demand to peak in the early 2020s. Industry executives have promoted gas as an low-carbon alternative to coal for power generation.”

        Uncertainty regarding CO2 policies are inconsistent with creating major infrastructure to support large conversions to NG.

        —-timewarp—-
        http://www.frumforum.com/the-true-costs-of-getting-america-off-oil#comment-118751

        http://online.wsj.com/article/SB10001424052748703625304575115803113375016.html

        Natural-gas providers are lining up against planned Environmental Protection Agency rules to curb greenhouse-gas emissions, citing concerns that the regulations could make it harder to obtain permits needed to boost supplies.

        The Natural Gas Supply Association announced its opposition Thursday and said it supports a “disapproval resolution” sponsored by Sen. Lisa Murkowski (R., Alaska) that would overturn the EPA’s rules. The opposition adds an irony to the debate, since natural-gas providers would in theory benefit from greenhouse-gas rules since the fuel emits less carbon dioxide than coal, the dominant source of electricity in the U.S.

        “Natural gas producers have significant practical concerns raised by EPA’s proposed rule,” Skip Horvath, the CEO of the trade group, said in a statement. “For example, the rule would burden many natural gas projects with a time-consuming permitting process that would interfere with bringing more natural gas to market, despite its proven ability to serve as an environmental solution.”

        The EPA didn’t immediately respond to an email seeking comment.

        —-
        Still waiting for a rational argument to explain how global GHG is a national security issue that can be impacted greatly by the EPA calling CO2 a pollutant within the confines of the US.

        —-
        Easton, like many liberal idiots, demands things that do not add up, even in the medium term.

  • IntelliWriter

    Now it’s time to go after the oil subsidies.

  • ottovbvs

    Presumably Carney will be observing a day of mourning (and silence) after the ethanol vote in the Senate.

  • Graychin

    Grover Norquist is a boil on the rear end of American politics. It’s good to see his star fading at long last.

  • midcon

    The Allen chicken plant in southern Delaware has just filed for bankruptcy. The reasons? Poultry prices have declined and corn prices have soared due to the diversion of corn into ethanol subsidies which make it more profitable to use corn for ethanol production than as chicken feed. The consequence? 1700 jobs lost.

    Hopefully this is the beginning of the end for people like Norquist who have no clue about economics and the real cost of their “principles” and “pledges.”

  • sinz54

    Where our national security is concerned, Grover Norquist may be a more dangerous phony:

    To begin with, Grover Norquist married a Palestinian Muslim woman. She must have been quite an influence on him, given what happened after that:

    Norquist created something called the “Islamic Free Market Institute” (now called the “Islamic Institute”), a lobby to sell the Federal Government on how Islam has always been supportive of private enterprise. (Ha!)

    And to fund this Institute, Norquist accepted funding from Abdul Rahman al-Amoudi and Dr. Sami Amin Al-Arian–both of whom have since been convicted on terrorism charges.

    In fact, nearly all of the Islamic Institute’s funds since then have come from Middle Eastern Muslim states and their U.S. funding mechanisms, several of which have since been raided by Federal anti-terrorism task forces.

    Norquist has since returned the favor for all this money, lobbying in favor of building that “Islamic cultural center” near Ground Zero in New York City.

    The founding director of Norquist’s Islamic Institute, Khaled Saffuri, is a Muslim Palestinian who recently admitted to personally supporting the families of Islamist suicide-bombers.

    And there’s more, for anyone who cares to do a little google searching in Wikipedia and elsewhere on the Internet.

    Norquist and his “Islamic Free Market Institute” were a respectable-sounding front for Islamist activity in the U.S. The Islamists have learned how to work both sides of the American street:

    Play the victim and wave around the race card (Arabs are “brown people” or “people of color”), to woo the American left-wing; and simultaneously,

    Tout the benefits of private enterprise and the “traditional” nature of Muslim families, to woo the American right-wing.

    With all those Middle Eastern petrodollars, they can afford to do both and more. With the help of dupes like Grover Norquist, of course.

    • Rob_654

      sinz54 – thank you for pointing these items out. I had read a bit about him before and was really amazed to read about the items that you pointed out (including some I had not read about). Imagine what Conservatives would have said and the concerns they would have raised about – let’s say Obama marrying and doing the same things that Norquist has done and perhaps rightly so to raise some questions and yet Norquist has been allowed to go unchallenged on his activities.

  • Rob_654

    Norquist has been an enemy to the sound fiscal running of the United States. His insane view of taxes has made the Republican Party unable to govern in a fiscally prudent sense because they are like a one armed wallpaper hanger.

  • DFL

    It is heartwarming that Grover Norquist is disliked by people across the whole ideological perspective.

    • Graychin

      When, oh when, will a Republican arise to point out that Grover is full of poop and not worthy of anyone’s attention.

  • Rewena

    “Now it’s time to go after the oil subsidies.”

    +1 IntelliWriter

    And I think possibly just as important is how we write the subsidy laws (or regulations etc.) I read that the oil subsidies were passed in the early 1900s. I saw something similar about the cotton industry. If we decide to subsidize something so be it, but put an end date or criteria (like the industry is profitable) on it.

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  • jcm433

    The crowning achievement of the career of Grover Norquist will be a Republican Party reduced to a Southern/white/old rump too hopelessly outnumbered and discredited to matter. By January 20, 2013, the final nail will be driven into the coffin of modern American conservatism.
    Then they will all wonder “How did this happen?” And the answer will be simple: the fatal flaw of all conservative movements throughout history is to oppose ALL change until they are overwhelmed by it. This is the stuff October Revolutions and New Deals are made of.

  • Frumplestiltskin

    DFL, amen to that. I have always liked Coburn even when I disagree with him. The fact that he so publicly took on this war with Norquist is so much to his credit. In the end, who the hell does Norquist think he is believing he can dictate tax policy for a whole political party in America. If some non elected Democrat acted the same and was heeded I would bolt the Democratic party in protest.
    (for example, if NARAL made every Democrat pledge to be pro-choice and it dictated to the party I would not accept that. I want my candidates following their own conscience)