Republicans on the attack against corporate welfare

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Article Highlights

  • Some Republicans are starting to stand up for capitalism more, and not just for the so-called capitalists.

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  • Republicans are even joining Democrats in targeting Wall Street's goodies.

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  • Ethanol is held out as a prime example of special-interest boondoggles and misguided government meddling.

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About two years ago, Republicans started talking about crony capitalism. In the last few months, they've started doing something about it.

Republican Sens. John Barrasso, R-Wyo., and Pat Toomey, R-Pa., together with Arkansas Democrat Mark Pryor, have proposed a bill to end the ethanol mandate, a blatant boondoggle for agribusiness.

The ethanol bill follows a string of other GOP-led attacks on corporate welfare programs. Sugar subsidies, export subsidies, energy tax credits, and too-big-to-fail banks have all been the targets of GOP legislation in the current Congress.

Barrasso's bill would repeal the Renewable Fuel Standard created by the 2005 Energy Bill and expanded by the 2007 bill. In the House, Rep. Bob Goodlatte, R-Va., has a bill doing the same.

The RFS requires refiners to blend a certain quantity of "renewable fuels," such as corn ethanol and cellulosic ethanol, into their gasoline. If you see a gas pump reading "contains 10 percent ethanol," that's not because Exxon wants it there - it's because Exxon is required to blend it with their petroleum.
 
Defenders, like President Obama, point out that ethanol helps U.S. corn farmers. They argue that it's good for the environment and it lessens our dependence on foreign oil. But mandating ethanol has plenty of downside.

Ethanol is much less powerful than gasoline. Ethanol production - from growing to distilling - requires so much water that it has harmed rivers and depleted local water supplies. Corn grown for ethanol displaces other crops, and critics say this drives up the price of food - which is why the fast-food lobby is a leading supporter of the Goodlatte and Barrasso efforts. Most of the petroleum industry also wants repeal.

The biofuel lobby, however, is powerful. It's not Mom & Pop family corn farmers driving this. It's well-connected companies like Growth Energy. Goldman Sachs has invested in and lobbied on cellulosic ethanol. BP and DuPont have a joint venture to create new biofuels, and so they are lobbying to save the mandate.

The RFS, aside from picking winners and losers and possibly driving up food prices, has proven to be simply unworkable legislation - in 2012, refiners were required by the law to buy 500 million gallons in cellulosic ethanol. But ethanol producers only produced 20,000 gallons - that's less than one percent of one percent of the mandated amount.

Ethanol is held out as a prime example of special-interest boondoggles and misguided government meddling. Obama ran in 2008 on support for ethanol, but he doesn't mention it these days. It's a meaty target for conservatives eager to show they actually dislike corporate welfare.

Along those same lines, Sen. Mike Lee, R-Utah, and Rep. Justin Amash, R-Mich., introduced bills this month to abolish the Export-Import Bank, a government agency that subsidizes U.S. exports. Ex-Im dedicates a vast majority of loan-guarantee money to subsidizing Boeing jets. Dan Rather recently found that Ex-Im officials travelled to Australia, first class and business class, on the dime of Australia Pacific LNG, which subsequently got $5 million in taxpayer-backed financing from Ex-Im.

Other corporate welfare has received scrutiny from this Congress. Toomey teamed up with Democratic Sen. Jeanne Shaheen of New Hampshire to craft a farm-bill amendment that would shrink the sugar program - a web of loans and protectionist trade policy that subsidizes sugar producers at the expense of taxpayers and consumers.

Rep. Mike Pompeo, R-Kan., has proposed a bill to end all energy tax credits, most of which benefit green energy, but some of which subsidize fossil fuels. He's also introduced legislation to kill the Economic Development Administration, which funds local pork like the Harry Reid Research and Technology Park.

Republicans are even joining Democrats in targeting Wall Street's goodies. Late last year, Congress refused to renew a special bank-bailout provision called the Transaction Account Guarantee. And conservative Sen. David Vitter, R-La., has signed onto a bill with liberal Sen. Sherrod Brown, D-Ohio, to reign in big banks and discourage them from becoming even bigger.

Whence this newfound GOP antagonism to corporate welfare? One factor is the Tea Party's clash with the K Street wing of the GOP. It matters that Toomey and Lee came to the Senate by defeating K Street in GOP primaries. Until Toomey's primary challenge pushed incumbent Arlen Specter to switch to the Democrats in 2009, Specter was the Republican with the most donations from Wall Street. Business PACs and K Street lobbyists all lined up against Lee in his 2010 primary.

It also helps that in many of the above cases, there are special interests on both sides. Big Oil and the fast-food lobby want to kill the ethanol mandate. Delta Airlines is on a crusade against Ex-Im, which keeps subsidizing its foreign rivals. Candy makers are tired of paying higher prices for sugar. Credit Unions lobbied to kill the TAG.

Whatever the causes, some Republicans these days are starting to stand up for capitalism more, and not just for the so-called capitalists.

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About the Author

 

Timothy P.
Carney
  • Timothy P. Carney helps direct AEI’s Culture of Competition Project, which examines barriers to competition in all areas of American life, from the economy to the world of ideas. Carney has over a decade of experience as a journalist covering the intersection of politics and economics. His work at AEI focuses on how to reinvigorate a competitive culture in America in which all can reap the benefits of a fair economy.


     


    Follow Timothy Carney on Twitter.

  • Email: timothy.carney@aei.org

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