Do-Nothing Deficit Reduction

In all the debate on the Deficit Commission, there is much discussion on entitlements and taxes, but another important factor in our economy is energy policy, where scant little is being said. However, there is an important aspect of energy policy that could have an immediate affect on the deficit – and would reduce gas prices to boot! Deficit Commission Report a Sobering Reminder on U.S. Ethanol Policy Reform

The reality is that there are some easy places to start if Congress and the Obama Administration are serious about cutting the deficit and restoring fiscal responsibility. For instance, they simply need to let 30 years of antiquated, ineffective and costly U.S. ethanol subsidies and tariffs expire on December 31. (Interestingly enough, this recommendation was nowhere to be found in the deficit reduction proposal, as Jason Linkins points out in his Huffington Post piece today.)

The fact that members of Congress from both parties have already vowed to move forward together on this issue is not surprising. At a cost of $6 billion per year and a total of $45 billion since 1980, taxpayer-funded subsidies are no longer needed to support a mature industry that will continue to thrive for years to come because Congress mandates gasoline blenders use ever increasing amounts of ethanol. And by ending the ethanol import tariff – which was put in place to offset the cost of the subsidies – Americans would benefit from lower fuel prices, greater energy diversity and access to cleaner alternatives like sugarcane ethanol.

Saving $6 billion a year is nothing to sneeze at, and Congress wouldn’t even have to do anything. They simply need to let these policies expire at the end of the year. And it would help the economy to have reduced fuel prices – as higher fuel prices have been used to justify increasing prices on things such as food and travel. Cheaper gas prices would benefit everyone – young and old, rich and poor – so it would be putting money back in the pockets of those who need it and those who can invest it or otherwise spend it (read: stimulate the economy). Here’s hoping for a $6 billion cheaper New Year.

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