Prepared Floor Statement of U.S. Senator Chuck Grassley
Opposition to Coburn Amendment
Wednesday, March 30, 2011
Mr. President, I’d like to express my strong opposition to amendment #220 offered by Senator Coburn. Senator Coburn’s amendment would raise the tax on domestic energy production by repealing an incentive for the use of homegrown ethanol.
I’m astonished that given our current situation, there are some who would prefer less domestic energy production. With conflicts in the Middle East and crude oil more than $100 a barrel, we should be on the same side. We should all be on the side of more domestically produced energy. The tremendous cost of America’s dependence on foreign oil has never been more clear.
In light of this threat, we should have an energy policy of “all of the above.” I support drilling here, and drilling now. I support renewable energy. I support conservation. And, I support nuclear energy. It’s counterproductive for senators from Big Oil country to single out energy that comes from American agriculture. I didn’t pick this fight. I support energy from all sources. I support traditional oil and gas. And so do American taxpayers with tax incentives, for an industry that’s 100 years old.
So, the attack on homegrown energy is really remarkable. We shouldn’t be fighting each other over domestic energy sources. We should be fighting OPEC and foreign dictators and oil sheiks that hold our economy hostage.
The author of the amendment has argued that the production of clean, homegrown ethanol is fiscally irresponsible. It’s important to remember that the incentive exists to help the producers of ethanol compete with the oil industry. And remember, the oil industry has been well supported by the federal treasury for more than a century. President Obama, in his budget request for 2012, has advocated repealing a dozen or so subsidies to big oil. He’s argued that a century-old industry no longer needs tax breaks. With oil prices at one-hundred dollars a barrel and record profits being made, some could certainly question why this industry needs any taxpayer subsidies at all. President Obama’s proposal would repeal about $44 billion in oil and gas subsidies over 10 years.
I’d like to remind my colleagues of a debate we had last summer on an amendment offered by Senator Sanders. The amendment he offered would have, among other things, repealed about $35 billion in tax subsidies enjoyed by the oil and gas industry. Opponents of the Sanders amendment argued that repealing the oil and gas subsidies would reduce domestic energy production and drive up our dependence on foreign oil. Opponents also argued that it would cost U.S. jobs, and increase prices at the pump for consumers.
I tend to agreed with these arguments. All of my Republican colleagues and more than one-third of Democrats did as well. But, a repeal of the ethanol tax incentive is a tax increase that will surely be passed on to American consumers. Repealing incentives for ethanol would have the same exact result.
I know that removing incentives for oil and gas will have the same impact as removing incentives for ethanol. We’ll get less domestically produced ethanol. It will cost U.S. jobs. It will increase our dependence on foreign oil. It will increase prices at the pump for American consumers. Mr. President, we’re already dependent on foreign sources for more than 60 percent of our oil needs. Why do my colleagues want to increase our foreign energy dependence when we can produce it here a home?
So, I’d like to ask my colleagues who voted against repealing oil and gas subsidies but support repealing incentives for renewable fuels: why the inconsistency? Where are the amendments from fiscal conservatives and deficit hawks to repeal the oil and gas subsidies? The fact is, it’s intellectually inconsistent to say that increasing taxes on ethanol is justified, but that it’s irresponsible to do so on oil and gas production. If tax incentives lead to more domestic energy production and good paying jobs, why are only incentives for oil and gas important?
It’s even more ridiculous to claim that the 30 year-old ethanol industry is mature and thus no longer needs government support, while the century old oil industry still receives $35 billion in taxpayer dollars. Regardless, I don’t believe we should be raising taxes on any type of energy production or on any individual, particularly during this weak economy.
The senator from Oklahoma insists that because the renewable fuel is required to be used, it doesn’t need an incentive. But, with oil prices at $100 a barrel, oil companies are doing everything they can to extract more oil from the ground. There isn’t a mandate to use oil, but it has a 100-year monopoly on our transportation infrastructure. When there is little competition to oil and it’s enormously profitable, wouldn’t he argue that the necessary incentives exist to produce it without additional taxpayer support? Oil essentially has a mandate today. The economics of oil production are clearly in favor of the producers. Why do they need taxpayer support?
It’s also important to understand the hidden cost of our dependence on foreign oil. A peer-reviewed paper published in 2010 concluded that “….$27 to $138 billion dollars is spent annually by the U.S. military for protection of Middle Eastern maritime oil transit routes and oil infrastructure, with an average of $84 billion a year.” Mr. President, this is $84 billion in American treasure spent on the defense of shipping lanes to quench our thirst for foreign oil. It’s not reflected in the price at the pump. It’s a hidden cost.
Milton Copulos, an advisor to President Ronald Reagan and a veteran of the Heritage Foundation, testified before Congress in 2006 on this issue. He testified that the hidden cost of imported oil is equivalent to adding $8.35 to the price of a gallon of gasoline from the Persian Gulf. There is no hidden U.S. military cost attributable to homegrown ethanol.
Let’s have the debate on ethanol. But, let’s debate it in the context of a comprehensive energy plan. This debate should include the subsidies for all energy production. Don’t single out ethanol.
Nearly every type of energy gets some market distorting subsidy from the federal government. An honest energy debate should include ethanol, oil, natural gas, nuclear, hydropower, wind, solar, and biomass. It’s hypocritical to put our economic and national security at risk by targeting ethanol, while disregarding the subsidies for all other energy sources. Repealing the ethanol tax incentive will raise taxes on producers, blenders and ultimately consumers of renewable fuel. This amendment is a gas tax increase of over five cents a gallon at the pump.
I just don’t see the logic in arguing for a gas tax increase when we have so many Americans unemployed or underemployed and struggling just to get by. I know we all agree that we cannot and should not allow job-killing tax hikes during this time of economic uncertainty. Unfortunately, those members who have called for ending the ethanol incentive have directly contradicted this pledge because a lapse in the credit will raise taxes, cost over 100,000 U.S. jobs at a time of near nine-percent unemployment, and increase our dependence on foreign oil.
The taxpayer watchdog group, Americans for Tax Reform, considers a repeal of this incentive to be a tax hike. Americans for Tax Reform states, “Repealing the ethanol credit is a corporate income tax increase.” I agree with them.
Now is not the time to impose a gas tax hike on the American people. Now is not the time to send pink slips to ethanol related jobs. Ethanol currently accounts for 10 percent of our transportation fuel. A study concluded that the ethanol industry contributed $8.4 billion to the federal treasury in 2009 -- $3.4 billion more than the ethanol incentive. Today, the industry supports 400,000 U.S. jobs. That’s why I support a homegrown, renewable fuels industry.
I’d like to conclude by asking my colleagues: If we allow the tax incentive to lapse, from where should we import an additional 10 percent of our oil? Should we rely on Middle Eastern oil sheiks, or Hugo Chavez? I’d prefer we support our renewable fuel producers based right here at home, rather than send them a pink slip. I’d prefer we decrease our dependence on Hugo Chavez, not increase it. And I certainly don’t support raising the tax on gasoline during this weak economy.