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Bipartisan Bill to End U.S. Ethanol Credit Faces Uncertain Fate

Congressional opponents of the $6-billion-a-year blenders credit see eliminating it as a no-brainer, while stalwart advocates are likely to put up a fight

By Elizabeth McGowan

Mar 11, 2011
Cornfield with truck

WASHINGTON—It turns out Sens. Ben Cardin and Tom Coburn have more in common than six-letter last names that begin with the letter "C."

The Maryland Democrat and Oklahoma Republican have drawn a substantially higher number of cheers than jeers for introducing bipartisan legislation this week to repeal a tax credit on corn ethanol that could save taxpayers roughly $6 billion per year.

Both senators refer to the blenders tax credit as costly and ineffective in a . What's officially known as the , or VEETC, pays 45 cents for each blended gallon.

Coburn, a conservative long known as a fiscal watchdog, labeled the ethanol tax credit as "bad economic policy, bad energy policy and bad environmental policy."

"The $6 billion we waste every year on corporate welfare should instead stay in taxpayers' pockets where it can be used to spur innovation, stimulate growth and create jobs," the conservative Oklahoman said Wednesday.

"I'm hopeful my colleagues on both sides of the aisle will take a stand against business-as-usual special interest giveaways and eliminate this wasteful and harmful subsidy."

Ending VEETC Not Simple

Last December, Congress had an opportunity to let the then five-year-old tax credit die a natural death when it expired at the end of the month. However, stalwart ethanol-subsidy advocates from agricultural states, such as Iowa Republican Sen. Chuck Grassley, pressured legislators to renew the VEETC during the lame-duck session.

Now that both legislative chambers are duking it out while figuring how to avoid a shutdown and fund the federal government through Sept. 30, VEETC opponents point to eliminating ethanol tax credits as a no-brainer.

Thus far, the Senate has rejected a House package passed in February that cleaves $61 billion from the budget for the remainder of 2011. House Republicans claim a deficit hovering near $1.4 trillion and a national debt looming at $14 trillion as their motivation for such severe chopping.

If so, the anti-VEETC crowd might wonder why ethanol tax credits aren't at the top of the trim list. Mostly it's because of a Capitol Hill aberration that draws a sharp divide between legislating and appropriating.

And that is eternally frustrating to Kate McMahon with the advocacy organization . Congress, she emphasized, could operate more efficiently and thoughtfully if it took less of a piecemeal and more of a holistic approach to policy.

"The hard part is that the budget is in a different world from appropriations and you can't legislate in the appropriations process," McMahon, FOE's biofuels campaign coordinator, told SolveClimate News in an interview.  "We could be doing both of these things at once and not doing them in silos. It's an insane narrative. We need to be having a broader conversation."

The reason that arriving at budget figures for 2011 is so convoluted is because House and Senate leaders failed to pass the 2011 White House budget during December's gridlock when both chambers had Democratic majorities. Instead, they opted to approve a temporary spending bill that operated the government at fiscal 2010 levels through March 4.

A few days before that deadline last week, legislators cobbled together an emergency-spending bill to fund the government through March 18. The stopgap spending measure includes $4 billion in cuts. Now, Vice President Joe Biden, a former senator, is tasked with hammering out a compromise with House and Senate decision-makers that keeps the government functional through the six-plus months remaining of this fiscal year.

One Among Several Ethanol Bills

The Cardin-Coburn bill isn't the initial measure geared at blocking ethanol tax credits but it's believed to be the first bipartisan one. It is also aimed at all conventional ethanol made from corn and sugar sources such as sugar beets.

A less aggressive measure cosponsored by Democratic Sens. Dianne Feinstein of California and Jim Webb of Virginia targets subsidies to corn ethanol.

Big conflict of interest

Big conflict of interest here. Corn used for fuel means more money for farmers. That money in turn, in part, goes to lobbyists who lobby for more subsidies. Meanwhile the massive corn shortage raises food prices. The impact is so big, there is a world wide flow on effect.

Removing the subsidies will drop the price of food,worldwide. It is speculated that this will cut the riots in US allies countries, because people can afford food again.

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