Big Government

Ethanol Subsidies Could Trip Up Debt Ceiling Negotiations

Plus: Home equity theft at the Supreme Court, New York shows how not to legalize marijuana, and more...

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dreamstime_xl_133807695 | Photo 133807695 © Job Garcia | Dreamstime.com
(Photo 133807695 © Job Garcia | Dreamstime.com)

What could possibly be more important than avoiding the federal government's first-ever debt default? For some Midwestern Republicans, the answer might be ethanol subsidies.

"A bloc of at least eight corn belt Republicans are a hard 'no' on" House Speaker Kevin McCarthy's (R–Calif.) bill to raise the debt ceiling unless proposed cuts to ethanol tax credits are removed from the package, Axios reported Tuesday. That group reportedly includes all four members of Congress who represent Iowa and at least four other Republican lawmakers from other "corn belt" states.

Because Republicans have a slim 222–213 majority in the House, any group of five lawmakers can hold considerable leverage by threatening to vote against a bill. That's the same dynamic that allowed a small breakaway faction of Republicans to hold up McCarthy's election as speaker in January—but now there are stakes that actually matter, as the Treasury is tipping dangerously close to a possible default if the debt limit is not raised in the coming weeks.

McCarthy's proposal marries a debt limit increase to a series of other policy changes, most importantly a rollback of the omnibus spending bill passed in December by the outgoing Democratic majority. But that 4,100-page bill boosted federal subsidies for biodiesel and other corn-based fuels, and this group of Republican lawmakers seems unwilling to give them up.

McCarthy met with the holdouts on Tuesday night, Politico reports. Reps. Derrick Van Orden (R–Wis.) and Michelle Fischbach (R–Minn.), have reportedly offered amendments to remove the repeal of the biodiesel tax credits, and some other Republican members are discussing a plan to vote in favor of those amendments and then support the final bill even if the amendments fail.

McCarthy and other House Republican leaders face a difficult choice. Without support from these Republicans, the debt ceiling bill could be blocked (unless some Democrats can be persuaded to support it). But giving into the group's demands could cause other small blocs of Republicans to demand their own carve-outs.

At a high level, this is yet another warning about the dangers of creating government subsidies in the first place.

Even though they cost taxpayers billions of dollars every year, federal ethanol subsidies and tax credits are a tiny chunk of the overall federal budget. Yet they are incredibly valuable to the farming communities that reap those benefits—and that vote to elect lawmakers who promise to keep the federal cash flowing. For the members of Congress from Iowa and other Midwestern states, voting to cut those subsidies could be a career-ending move. On the other side, there's no significant voting block demanding the removal of ethanol subsidies—even though biofuels are expensive, ineffective, and bad for the environment—so the lawmakers more intensely committed to their special interests usually get what they want.

ELECTION 2024

President Joe Biden made it official on Tuesday: he's seeking reelection.

Biden is already the oldest president in American history, and will be just a few weeks shy of his 82nd birthday when Election Day rolls around. (It's scheduled for November 5, 2024—a mere 559 days from now.)

At 80 years old, Biden is unlikely to run one of the more dynamic or rigorous campaigns in recent history, though 2024 figures to be a more typical election year than the pandemic-reduced schedule of public appearances Biden made during his successful 2020 run. But the strategy will be a "quiet" one that keeps the president out of unscripted situations, predicts The New York Times' David Leonhardt. And even if Biden isn't the most energetic politician in the country, Democrats are going to stoically line up behind him anyway, writes The Week's Rafi Schwartz.

Even so, Biden faces a dreaded "enthusiasm gap" among some of the progressive activist types that would rather see a younger, more exciting, and further left candidate on top of the ticket, reports Politico. "I think what you're seeing is that we're burnt out," says Nina Smith, a longtime Democratic activist who worked on Pete Buttigieg's campaign in 2020.

Biden's also not that popular—his approval ratings have been underwater for most of the time he's been in the White House—but in our current age of negative partisanship, that might not matter very much, writes The Atlantic's Ronald Brownstein.

FREE MINDS

The U.S. Supreme Court will hear oral arguments today in Tyler v. Hennepin County, a case that challenges the Minnesota county's seizure of a 94-year-old woman's condo over $2,300 in unpaid property taxes.

As Reason's Billy Binion has reported, Hennepin County sold Geraldine Tyler's condo for more than $40,000 and kept the profits of the sale. That's thanks to policies that allow for what the Pacific Legal Foundation, the libertarian legal nonprofit representing Tyler at the Supreme Court, calls "home equity theft," a sort of ugly stepsister to civil asset forfeiture.

Lower courts have upheld the county's seizure of the equity in Tyler's condo, but other courts have looked on similar schemes less favorably. In 2020, for example, the Michigan Supreme Court ruled that a county in that state was wrong to keep more than $25,000 after it seized and sold a man's home to settle a tax debt of less than $9.

A similar ruling in this case could change how Minnesota and about a dozen other states use home equity theft to settle property tax debts.

FREE MARKETS

New York did such a poor job of legalizing marijuana that state lawmakers are now trying to figure out how to crack down on the state's black market for weed. That's what happens when legalization comes with obscenely high and complicated taxes, onerous licensing requirements, and nonsensical regulations.

The Associated Press reports on the latest developments:

Hundreds of unauthorized pot shops have opened in New York City—competing with legal dispensaries whose products are heavily taxed. The illicit stores and trucks have been multiplying even as New York slowly works to get its legal market established.

[New York Gov. Kathy] Hochul said she wants to give state tax officials and the Office of Cannabis Management enforcement tools to shut down or fine illegal pot shops, a proposal outlined in a bill she unveiled last month.

A legal market for any product has many advantages over a black market where consumers might have a hard time finding what they want or establishing trust with sellers. But the black market's big advantage will always be a lack of taxes and regulations—and New York is making it difficult, if not impossible, for the legal market to compete.

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