Ethanol subsidies: Do Iowans even care about them anymore?

Who's winning, who's losing, and why.
June 7 2011 7:44 PM

Kernel of Truth

Even Iowans don't care about ethanol subsidies anymore.

(Continued from Page 1)

Romney, meanwhile, is being attacked as a panderer for saying he supports ethanol subsidies, but his position on it is almost indistinguishable from Pawlenty's. In his book No Apology, Romney articulates the Iowa Republican position: Subsidies were necessary for ethanol in its infancy, "but we should acknowledge that subsidies for one form of energy also discourage investment in alternatives that don't receive subsidies, which may undermine innovation. And because taxpayers ultimately have to pick up the tab for government spending, subsidies are in fact a hidden form of energy tax. Once an industry is up and running, the disadvantages of subsidies outweigh their benefits."

Huntsman doesn't have to bother with the complexity. His campaign doesn't want to compete in Iowa. Its higher share of evangelical voters are suspicious of him, and candidates like Romney and Pawlenty have better organizations here. Ethanol offers him a way to write off the state and limit the political damage for doing so.

Republicans in Iowa want him to pay for this. They want every candidate to compete out here; it's good business for the state. They're also insulted. They like to think of themselves as the guardians of democracy, but Huntsman is saying that they're hacks. "He doesn't know the state of Iowa, he obviously doesn't know about ethanol," says Gov. Terry Branstad. "I think he's making a huge mistake. I think he's been in China too long."

The tax credit for blending ethanol isn't the only help ethanol producers receive. The federal government mandates a certain level of ethanol production. There is also a tariff that promotes domestic production and discourages low-cost ethanol imports. Ethanol critics like Sununu say this hits consumers in their wallets, but these measures have no effect on the federal budget. Other conservatives like Paul argue on philosophical grounds that mandates distort the market. Pawlenty, who aspires to ethanol courage on the subsidy, supports mandating the use of ethanol, however. As governor of Minnesota, he signed legislation that mandated that ethanol be used in 20 percent of all gas in the state.

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There are other arguments against the production of ethanol that have nothing to do with the subsidy: It won't lead to energy independence, and it makes it harder to deliver gasoline across the country. No one in the Republican field is making those arguments here. A candidate who did that wouldn't get points for being brave—he'd just be dumb.

Slateintern Peter Fulham provided research and reporting for this article.

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