Kernel of Truth
Even Iowans don't care about ethanol subsidies anymore.
DES MOINES—Iowans think of themselves as particularly discerning voters. They like to tell reporters how they like to meet candidates a few times before coming to an opinion—on this trip I hadn't even gotten to my rental car before someone made this point—and candidates tell this story back to voters at nearly every stop as a way of buttering them up. But Iowa also has another political truth that is supposed to be equally iron-clad: Voters are so wedded to ethanol subsidies that if you oppose them, it won't matter how many times you shake a voter's hand and look him in the eye—he won't support you.
The first truth may be overblown, and the second one is wrong, or at least more complicated than portrayed. The politics of ethanol have changed in Iowa from the days when ethanol was regarded as some kind of newfangled invention. Unwavering support for ethanol tax credit is no longer the secret password required for success in Republican politics.
You wouldn't know this from the Republican candidates running for president. Two weeks ago, Tim Pawlenty came to Iowa to announce his candidacy and call for the phasing out of ethanol subsidies. He said it was a sign of the hard truths he was willing to tell the voters. Ambassador Jon Huntsman said it wasn't even worth campaigning in Iowa because he opposes the subsidy, and as a result voters won't even consider him. "I understand how the politics work there," he said. Mitt Romney said he supported the subsidies and was quickly denounced by former Sen. John Sununu of New Hampshire for "pandering" to voters.
Rush Limbaugh said Pawlenty was "politically gutsy" for his stance on the corn-based fuel. He stood before the voters of the corn-growing state and told them something they didn't want to hear. But how brave was it? It is the mainstream Republican position in Iowa that ethanol subsidies must be phased out. Chuck Grassley, the state's senior senator, has authored legislation that calls for a gradual decrease in the subsidy. The state's Republican governor and the state's agriculture commissioner support the reduction. Even the Iowa Renewable Fuels Association—also known as the ethanol lobby—supports this position. "It used to be if you were for ethanol you were for the VEETC," said Monte Shaw of IRFA, using the shorthand for the main ethanol subsidy. "Today you can be for ethanol and want to see VEETC go away."
Candidate Obama regularly claimed he would tell hard truths on the campaign trail but he never much did it. Pawlenty may be following the same model. But he does win some points for bravery, however. "The truth about federal energy subsidies, including federal subsidies for ethanol, is that they have to be phased out," he said. So Pawlenty wasn't just aiming at the $6 billion-a-year ethanol subsidy but all energy subsidies, including those for oil and solar and wind. Depending on what you define as a subsidy that could total anywhere from $17 billion, the conservative government estimate, to $50 billion, the estimate made by Doug Koplow, a specialist in energy subsides at Earthtrack in Cambridge, Mass.
That's just fine with the Iowa ethanol lobby. "Iowans look forward to Gov. Pawlenty further detailing his plans to 'phase out' petroleum subsidies, perhaps in a speech in Houston, Texas," said Walt Wendland, president of the Iowa Renewable Fuels Association, in a press release.
To figure out Republican candidates' positions on ethanol subsidies requires a familiarity with the federal budget that most Americans simply don't have. Ethanol production receives different kinds of help. The subsidy with the direct effect on the federal budget (and therefore the most political potency in the era of the deficit-obsessed Tea Party) is the 45-cent blender's tax credit. Known formally as the Volumetric Ethanol Excise Tax Credit (VEETC), it costs $6 billion a year and is scheduled to disappear this year.
The bravest position would be to allow the tax credit simply to expire on schedule. That's the position of Rep. Ron Paul. That's Sen. Tom Coburn's position. It's not Pawlenty's position. He said the phase-out "can't be done overnight because companies have invested a lot." His call for a gradual phase-out is in keeping with the spirit of what Grassley and the state's leadership have proposed.