Budget-conscious GOP Senators are pushing to eliminate a $6 billion federal ethanol subsidy that is cherished by farm-state Republicans, exposing an intraparty schism that could muddy the party’s message on fiscal discipline.
The GOP ethanol opponents see an opportunity to use their party’s emphasis on cutting federal spending as leverage to support Sen. Tom Coburn’s amendment that would eliminate a tax credit that oil companies receive for blending ethanol into gasoline. But they face formidable opposition from a band of farm-state lawmakers — led by Sen. Chuck Grassley (R-Iowa) — who have long championed ethanol and say any attempt to limit federal support of the corn-based fuel should be part of a broader debate over national energy policy, rather than an ethanol-specific rifle shot.
Although Coburn’s proposal could cause headaches for some conservative lawmakers on both sides of the aisle, a vote could be particularly difficult for Republican lawmakers who are facing potential primary challenges in 2012.
Coburn has vowed to push for a vote as part of the small-business bill the Senate is currently debating, and supporters of the Oklahoma Republican’s proposal are casting a vote as a litmus test of Republicans’ commitment to fiscal restraint.
“You can’t be too serious about cutting government waste and spending if you don’t want to eliminate ethanol subsidies,” said Sen. John McCain (R-Ariz.), a staunch ethanol subsidy opponent.
A vote on Coburn’s amendment may not be imminent: One senior Democratic aide said Tuesday that a vote was highly unlikely, citing bipartisan objections. But Republicans, especially those who are staring at possible primary challenges from the right, are feeling pressure to re-evaluate their prior support for the contentious subsidy.
Utah Sen. Orrin Hatch, the ranking member on the Finance Committee, said he had supported ethanol subsidies in the past because of his “great friendship” with Grassley. But Hatch, who is viewed as vulnerable after his former GOP colleague Bob Bennett was ousted by more conservative Republican candidates last year, said Tuesday that he was not sure how he would vote on Coburn’s proposal.
“I think we’ve got to do everything we can to cut back,” he said. “I’m not so sure because I’m basically for any kind of restraint that we can find. I think we’re in that kind of trouble, we’re going to have to restrain.”
Ethanol opponents hope that concerns about the soaring deficit, coupled with rising gas and food prices, as well as recent reports of increased earnings by ethanol companies could help them to build support for ending the subsidy.
In a March 27 opinion piece in the Washington Examiner, Coburn described the subsidy as “nothing more than corporate welfare not-so-cleverly disguised as a tax break.” On Tuesday, he threatened to do everything in his power to derail the small-business bill until he was allowed a vote on his amendment.
“This is hard ball,” the Oklahoma Republican said. “They know it. And I’m not going to agree to any unanimous consent on anything, and this is the Senate. So they’re going to vote on it one way or another.”
But even if Coburn manages to force Senators to weigh in on his proposal, he would be hard pressed to muster the 60 votes he almost certainly would need to end the subsidy, which is set to expire at the end of the year. Farm-state Democrats — including North Dakota Sen. Kent Conrad, chairman of the Budget Committee and Illinois Sen. Dick Durbin, the Majority Whip — support the ethanol subsidy, as do Republicans from corn-producing states.
Grassley, who fought to protect ethanol subsidies as the top Republican on the Finance Committee until he was term-limited out of that position at the start of the 112th Congress, said it was wrong to single out ethanol without examining other energy subsidies given to oil and gas and renewables.
“It isn’t a question of whether you ought to have more or less ethanol subsidy at this point,” he said. “This ought to be considered in the context of national energy policy. It ought to be brought up when we are talking about energy, not when you’re talking about a small-business bill.”
Other GOP Senators said they too would fight to keep the subsidy in place, at least for now.
Sen. Mike Johanns, who served as Agriculture secretary under President George W. Bush, said he opposed isolating ethanol.
“Taking one piece out and saying, ‘We’re going to attack this,’ I think is the wrong strategy,” the Nebraska Republican said. “I really believe you have to put it together in one big effort because you pick out these things one at a time, eventually you’ll just get nowhere.”
Freshman Sen. Mark Kirk said eliminating the ethanol subsidy would have “a tremendous impact on the central and southern Illinois economy” and that he could only consider supporting a cut to the federal subsidy if it was part of broader, across-the-board spending cuts.
“All federal accounts should be cut in general to reduce the common danger of the deficit, but some sort of unique singling out should not be done,” the Illinois Republican said.
The proposal even divides members of the GOP leadership, with Minority Whip Jon Kyl (Ariz.) among the supporters of doing away with the subsidy and Republican Policy Committee Chairman John Thune (S.D.) among those who are arguing to keep it in place.
“I think that the issue of economic certainty and — when you put policies in place — at least leaving them there until the end of the year when the current law would expire — makes a lot of sense,” Thune said. “We can’t put businesses in the position of trying to plan and then pulling the rug out from under them as this would do.”