Ronald Reagan famously quipped that there is nothing quite as immortal as a government program. Why is it relatively easy to start a government program compared to ending it. Although it is not his intention, John Whitehead gives an example with ethanol for why programs achieve near-immortality:
On the ethanol subsidy, critics wanted to eliminate, as of July 1, the 45-cent-per-gallon tax credit offered to refiners for using the corn-based fuel at an estimated cost of nearly $6 billion a year. The 59-to-40 vote on Tuesday to advance the measure was 20 votes short of what was needed.
The tax benefits are set to expire at the end of the year, but their proponents are already working to renew them.
Most Democrats banded together with farm-state Republicans to defeat the effort by Senator Tom Coburn, Republican of Oklahoma, who along with his allies charged that federal ethanol supports are wasteful and unnecessary and are increasing the cost of food by inflating the price being paid for corn.
“Parochialism trumps the best interests of the nation,” Mr. Coburn said after the vote.
Those who opposed him, while acknowledging that the ethanol subsidies are likely to be eased out eventually, said it would be disruptive to the agricultural and fuel markets to make a sudden change.
“We have a lot of folks who made investments, you have people across the country whose livelihoods and jobs depend upon this,” said Senator John Thune of South Dakota, one of 13 Republicans who opposed the Coburn plan. “I think it makes sense, when we put policy in place and we say it is going to be in place for a certain period of time, that that be honored.”
via www.nytimes.com
And Senator Thune could (should) have said "... even bad policy, really bad policy."
I'm a bit sympathetic to Senator Thune's argument. People made investments based on a calculation of the present value of future revenues. Government should work to reduce uncertainty, not increase it. But, presumably, those same people calculated the present value of their investment with a stopping point "at the end of the year," or attached some probability to the extension so that they are not fully capitalized in them (i.e., horizon values close between zero and their current value). It will be interesting to see what the argument for extending subsidies will be then.
I agree with both of John's points. Ethanol subsidies are horrible policies for a variety of reasons, not the least of which is that a major input in ethanol production is also used in food production (land, not to mention corn). But I have some sympathy for those who have made investments in ethanol production based on ethanol policies. However, that sympathy is what leads to it being very difficult in removing the policies.