Palin: End all federal energy subsidies

posted at 1:33 pm on May 31, 2011 by Ed Morrissey

Whether she’s running or not, Sarah Palin will have a big impact on the presidential race — and she demonstrated why today at a stop on her bus tour in Pennsylvania.  Palin told Scott Conroy of Real Clear Politics that not only should the US end subsidies for ethanol, but should end subsidies on all energy production, mainly because we can no longer afford to pay them:

Asked Tuesday whether she supports the federal subsidy of ethanol, an always critical issue in the presidential nominating cycle, former Alaska Gov. Sarah Palin went one step further and called for the elimination of all energy subsidies.

“I think that all of our energy subsidies need to be relooked at today and eliminated,” Palin told RCP during a quick stop at a coffee shop in this picturesque town tucked into the south-central Pennsylvania countryside. “And we need to make sure that we’re investing and allowing our businesses to invest in reliable energy products right now that aren’t going to necessitate subsidies because, bottom line, we can’t afford it.”

Conroy provides the context for the remarks:

Her emphatic stance against ethanol subsidies may ruffle some feathers in the nation’s first voting state of Iowa, but it will also win her kudos from fiscal conservatives who praised former Minnesota Gov. Tim Pawlenty when, in a speech announcing his candidacy in Des Moines, he called for the phasing out of the federal subsidies that cost taxpayers about $5 billion last year.

Mitt Romney, who will announce his candidacy Thursday and is considered the front-runner in the GOP field, said last week in Iowa that he supports ethanol subsidies.

Palin’s position provides a direct rebuke to Romney, who tried to argue that ethanol deserves federal subsidies because it’s an “important part” of America’s energy future.  The problem with that position is that ethanol isn’t an emerging technology.  It’s been subsidized for decades on the same basis Romney claimed last week.  Subsidies aren’t going to R&D any more; they’re being used to artificially allow ethanol to compete against gasoline on a price basis, which puts government in the position of mandating winners and losers in technology and markets — with predictable results.

There could be some argument for federal subsidies in emerging technologies in order to advance to cleaner and cheaper alternatives to fossil fuels — if we had the money to spend on them.  Simply put, we don’t.  We’re now borrowing 40 cents on every dollar spent at the federal level, pushing the US towards a fiscal collapse if we don’t address the problem of overspending and federal overreach.

It will be interesting to see how Palin defines “subsidies.”  Democrats are arguing that oil companies get subsidies through tax deductions that encourage exploration and development, but the “subsidies” in these cases are specific measures that allow oil companies to write off business costs as most other businesses do.  That allows oil companies to keep more of the money they make rather than cutting checks to artificially lower prices to the consumer.

Perhaps Palin or another GOP candidate will propose a compromise closing out some of those tax deductions in exchange for removing barriers to exploration and extraction off American coasts and in shale formations throughout the country. I’d call that a good trade.

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