Bailing out British Booze: Charlie Rangel, Max Baucus, and Diageo

The recent ruling of the House Ethics committee against Charlie Rangel has attracted a tremendous amount of attention and has put substantial pressure on House Democrats, especially Nancy Pelosi. The Atlantic’s Marc Ambinder even reported one Democratic strategist claiming that it “loses us the House.” The basics of the story are that Rangel and his staff failed to disclose a series of facts about corporate sponsored trips about Caribbean policy.

However, there’s another Caribbean scandal that could burn Democrats. In February, Pro Publica’s Marcus Stern reported that Congress and the Virgin Islands will give British alcohol conglomerate Diageo a $3b subsidy if they shift production from Puerto Rico to the US Virgin Islands. Previously, I had written about this issue, including Rangel’s threats against the Puerto Rican health system.

But now an ad, pictured here, is running in Montana asking Senate Finance Committee Chair Max Baucus why he is putting up with this. That’s turning up the heat a little.

Another rum producer told the Billings Gazette that the subsidy “is so large it’s twice the cost of production.”  That is, if Diageo spends $100 making rum in the Virgin Islands, they get $200 from the federal government. Then Diageo gets to sell the rum too! Diageo’s 2008 operating profit was £2.2 billion and 2009 sales were $20 billion.

Now, I understand — disagree but understand — US taxpayers giving struggling American farmers a subsidy to make ethanol. (rum is also ethanol) I don’t understand why US taxpayers are giving billions to an already highly profitable, publicly traded British booze company.

You would think at a time with record deficits, historic unemployment, etc. Congress could find better things to do with $3b than boost profits of a foreign company. Or they could even end the excise tax on rum that funds this boondoggle. But I guess not. As the ad says, the Congressional Democrat are letting the “pirate lobbyists” win.