After some high-stakes, high-octane negotiations between the opponents of ethanol subsidies and the agricultural state senators, a deal was announced on Thursday that may be the beginning of the end for the high profile subsidies that have been in place for over thirty years.
The subsidies, which currently cost the taxpayers $400 million per month, will continue under this compromise but at a rate of a mere $200 million per month.
The compromise is being touted as a bi-partisan solution as it was brokered by Senator John Thune (R-SD), Senator Amy Klobuchar (D-MN) and Senator Dianne Feinstein (D-CA).
Under the deal announced. two-thirds of the $2 billion in “savings” would be a deficit reduction and the remaining $668 million would be used for biofuels tax credits.
About 40% of last year’s corn crop went to ethanol production and opponents of the subsidies have argued that a hidden cost to the taxpayers is the increase in food prices as the result of corn being used for ethanol production instead of livestock feed.
Both ethanol supporters and opponents seem to be pleased by the deal with the supporters applauding that it does not eliminate the subsidies completely and the opponents seem pleased with the fact that at least the subsidies have been reduced significantly.
The deal is expected to pass in the Senate but may run into some organized opposition in the House, which has cast some anti-ethanol votes, particularly from the conservative freshman class.
