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Deficit Hawks Not Talking Turkey About Ethanol

September 23, 2010


A Bloomberg story today warned that deficit hawks in Congress and potentially those that might be elected this fall are targeting ethanol as an example of wasteful government spending. This a laughable conclusion when you stop to consider that the $5 billion invested in ethanol by the federal government in the form of tax incentives in 2009 was paltry compared to the $1.4 trillion deficit that year. Our government spends $5 billion without blinking an eye (not to mention putting American armed forces potentially in harms way) to protect the free flow of oil from the Middle East and elsewhere. It would seem to me that these hawks are making a fuss about little more than chicken feed, rather than working toward real energy solutions. More importantly, however, is the basic lack of understanding about Americas ethanol industry and the benefits its offers. Consider that tax revenues collected by the Internal Revenue Service from economic activity associated with ethanol production totaled $8.4 billion in 2009. By comparison, the tax incentive invested in ethanol by the federal government was just $5 billion a net revenue gain to the Federal Treasury of $3.4 billion. The net increase in federal tax receipts does not take into account the billions of dollars generated for state, county and municipal governments to hire first responders, build schools, and provide improvements in much needed services. Nor does the position of some of these self-proclaimed deficit hawks reflect what ethanol production means to thousands of small communities and their residents all across the nation. Not only does ethanol production help hundreds of thousands of Americans find work or keep their jobs, it helps increase household incomes by more than $16 billion and provides families a way to put kids through school, pay for health care, and otherwise make ends meet in a very difficult economy. In fact, a 2006 survey of ethanol plant employees found that 75% of employees were making at least $50,000 a year and 99% of employees report receiving health care benefits from their employers. Also conspicuously absent from fiscal arguments against ethanol is the acknowledgement that ethanol is reducing American consumption of foreign oil, and thus, the bill we owe foreign countries to continue feeding our oil habit. In 2009, domestic ethanol use of 10.6 billion gallons of ethanol reduced oil imports by 364 million barrels at a savings of more than $21 billion dollars. That is nothing at which to scoff. 364 million barrels is the equivalent to 10 months of oil imports from Venezuela. If budget hawks want to talk about federal programs that they deem wasteful, it would behoove them to take a holistic look at the issue and not just one line item in the federal budget. And, if they want to hide behind other equally bogus claims such as the food and fuel debate or the impact of ethanol on engines, we would be happy to provide them with more real world information.