‘We need to let the ethanol subsidies expire’

‘WE NEED TO LET THE ETHANOL SUBSIDIES EXPIRE’…. Following up on an item from two weeks ago, there are two existing ethanol subsidies that are due to expire at the end of the calendar year, which means Congress may have to act during the lame-duck session to save them — if they’re to be saved.

The question is what conservative Republicans are prepared to do about it. Greg Sargent reported today that there may be “a new intra-GOP war brewing” over this issue — by some measures, more intense than the earmark fight — and he talked to a couple of leading far-right senators who’ll likely lead the way.

Senators Jim DeMint and Tom Coburn, two leading conservative Senators who have pushed the GOP to be serious about its anti-spending rhetoric, told me they are calling on fellow Republicans to urge Congress to allow ethanol subsidies to expire — something that could put other leading GOP Senators in an awkward spot, and could put them in the cross-hairs of the Tea Party. […]

With billions in ethanol subsidies set to expire this year, including a 45-cent-a-gallon tax credit for ethanol blenders that heaped nearly $5 billion on to the deficit last year, it appears senators DeMint and Coburn are dead serious about pressing the point.

Neither conservative left much in the way of wiggle room. DeMint said supporters of the subsidies are “just protecting a parochial interest ahead of the national interest.” Coburn added a continuation of the subsidies would be the opposite of what the Tea Party base wants from the GOP.

I continue to think this will be fun to watch. On the one hand, congressional Republicans inclined to do what corporate lobbyists tell them to do, and the lobbyists naturally want the industry subsidies to continue. The American Future Fund is a shadowy right-wing group that raised all kinds of secret money to help Republicans win midterm elections, and it just so happens to have been created in large part by a wealthy executive of an ethanol producer. It’s a safe bet he’ll expect his GOP friends to repay his assistance.

On the other, the subsides are expensive, unnecessary, and ultimately counter-productive, and a prime target for anyone who cares even a little about spending cuts.

Also watch to see the extent to which this divides the GOP caucus. With earmarks, the vast majority of Republicans weren’t willing to stick their necks out and reject the base’s demands. But high-profile senators like Orrin Hatch (R-Utah) and Chuck Grassley (R-Iowa) are in a much tougher spot — they want to prove their fiscal conservatism, but they’ve been strong supporters of subsidies like these for years. Iowans, in particular, expect Grassley to deliver.

I continue to think this could be a carefully-applied wedge, driving divisions between the party’s activists and the party’s corporate benefactors. That is, if Dems play it right.

As for the Democratic strategy on this, as far as I can tell, their attention is elsewhere and there is no game plan in place. One possibility is of Dems to kick the can down the road a bit — extending the subsidies for, say, six months — and letting the next Congress deal with the issue.

Or better yet, Dems can simply allow the subsidies to expire this year, and let the next Congress decide whether to resuscitate them. I’d look forward to seeing how the far-right GOP House majority deals with an issue like this one.