MN-02 : Should the Ryan Budget Save the Kline Family Farm ?

John Kline (R-MN-02) issued a press release in advance of his vote in favor of the Paul Ryan (R-WI-01) FY 2012 budget :

“ … hundreds of Minnesotans shared with me their thoughts about better ways to encourage job creation and foster long-term economic growth. The overwhelming majority of constituents told me they have no choice but to make the difficult decisions to guide their families and small businesses through difficult economic times, and they expect Washington to do the same.
This week Congress will vote on a responsible, restrained budget that will help America’s job creators put our nation back to work and secure America’s future by stopping Washington from spending money it doesn’t have. Our budget will cut $6.2 trillion in government spending over the next decade compared to the President’s budget, and $5.8 trillion relative to the current baseline. It also preserves benefits for today’s seniors while strengthening the safety net for our children and grandchildren.”

Already many have focused on the cuts that the Kline / Ryan budget will impact on Medicare and other entitlement programs … yet there has been little discussion about the 33% reduction in outlays for Education (Section 500 of the budget) from FY 2012 to FY 2013 … which would be one that Mr. Kline should be most interested as the Chairman of the Education and Workforce Committee.
Heck, Mr. Kline as Chairman of Education Committee is promoting cuts to Head Start (FY 2012 Budget (GOP Budget) that would have a national impact
• 218,000 low-income children and families would be removed from Head Start.
• 16,000 Head Start and Early Head Start classrooms would close.
• 55,000 teachers and related staff would lose their jobs.
• 170,000 families trying to find jobs or stay employed would lose childcare)
In Minnesota, every county would be affected … as Minnesota’s 35 federally designated Head Start grantees served 16,018 families in 2010.
And Head Start has a proven track record exhibited by :
192% Increase in Language Development
362% Increase in Emerging Literacy
288% Increase in Social Emotional Development
173% Increase in Physical Health and Wellbeing

But this commentary, is not about Education funding or any of the other proposed cuts … but instead what Mr. Ryan and Mr. Kline have protected --- Farm Subsidies.

American taxpayers paid roughly $15 billion in total farm subsidies last year, according to government data including $5 billion in direct payments to farmers accounts. With the farm sector booming—the USDA estimates net farm income this year will be the second-highest in 35 years—direct payments should become an easy target. Iowa State University economist Chad Hart noted that the payments go to farmers regardless of crop price or quality. Most of the payments go to the largest farmers in America given the amount of land they own. From 2002, when the program was expanded, through 2010, the top 10% of recipients received 67% of the funds, according to David DeGennaro, an Environmental Working Group legislative analyst. Roger Johnson, president of the National Farmers Union, said the direct subsidies have become indefensible because they don't go to farmers who need them to survive tough times.
Prominent Republicans like Senator Susan Collins (ME) view America’s fiscal problem and offer a solution… “I support the elimination of the ethanol subsidy — that’s worth some $6 billion a year.” Senator Collins added “I think we should cap farm subsidies for wealthy corporate farmers.”
Senator Collins was joined by Chris Coons (D-DE), Jeanne Shaheen (D-VT), Mark Warner (D-VA), Bob Corker (R-TN), Sheldon Whitehouse (D-CT), Tom Coburn (R-OK), Barbara Boxer (D-CA), John McCain (R-AZ), Jim Webb (D-VA), Bob Bennet (R-UT), Benjamin Cardin (D-MD), Mike Enzi (R-ID), Jack Reed (D-RI), Richard Burr (R-NC), Jon Kyl (R-AZ), and Dianne Feinstein (D-CA) in signing a letter to end the Volumetric Ethanol Excise Tax Credit.

Targeting farm subsidies is not new … The CATO Institute lists 10 reasons while The Heritage Foundation complains that it subsidies millionaires. Heck, the New York Times editorialized that cutting farm subsidies was an easy one.

In summary, there are a significant number of elected Republican and Democrat leaders, think tanks and newspapers that all embrace the concept of terminating farm subsidies.

Yet, Republican House Budget Committee Chairman Paul Ryan's (R-WI-01) blueprint for the fiscal 2012 budget contained a paltry $3 billion per year over the next decade— leaving $120 billion in total expected spending on farm subsidies. Compare that to the outlay for Education which will be cut $23 billion in just FY2013 alone.

So, why would Mr. Kline and Mr. Ryan not raise the ante … that’s a great question … the answer is unknown … but what is known is that Mr. Kline’s Family Farm participates in accepting federal subsidies.

Yes, Mr. Kline the taxpayers expect you to make “the difficult decisions” in these “difficult economic times” but when one group is enjoying a banner year, we don’t expect you to continue to participate in receiving federal subsidies … we expect you to stop reckless Washington spending that benefits to a numerically small but highly motivated group who will fight ferociously to safeguard their benefits ... or as they are also known - your family, friends and supporters.

MN-02 : Kline Willing to Risk 3M Jobs to Cut Corporate Welfare ?

Timing is everything in politics.

An issue can be ignored until it’s time to be used to make political hay.

Some would say that the Republican current fixation with deficit spending is an issue whose “timing” will help this November.

So it is that when John Kline posted on his website : Congressman John Kline is inviting Minnesotans to help Washington end its addiction to wasteful spending, that I was not surprised. I expected to see the typical stuff that he likes to talk about … like an earmark added to the 2006 Appropriations Bill (HR 3058) for the Sparta Teapot Museum in North Carolina. But NO, Mr. Kline actually asked about ending a program that is more Corporate Welfare than a Congressman bringing “home the bacon.”

Of the four choices, the biggest dollar program with a projected savings of $2 Billion is : “Eliminate funding for a green government project that the private sector is already leading: The “FreedomCAR” and fuel partnership program is a duplicative program already being implemented by the private sector.”

FreedomCAR ? Hmmmm… I will bet that you never heard of the FreedomCAR, but since Freedom is in the name, somehow you are probably thinking that this is a Republican-themed program. The C-A-R in FreedomCAR is an acronym for Cooperative Automotive Research, but what’s the Freedom … simple … to reduce our dependence on foreign oil and the foreign dictators that reap monies off our dependence. A goal that every American can agree with … and also agree that we have a long way to go to get there.

The program was created during John Kline’s first term in Congress … that’s when the Republicans controlled the House and George Bush announced the program in his 2003 State of the Union address. Funny, how we forgot about that … but now, the “timing” has a Democrat in the White House and Democrats controlling the House.
Yes, “timing” is everything … especially since President Obama just drove Chevrolet Volt during his tour of the Detroit-Hamtramck assembly plant last week.

This program subsidizes research by major automakers for developing their own versions of hybrid, plug-in hybrid (PHEV), and fuel cell vehicles. The subsidies also fund private R&D of light- weight materials, electronic power control, and electric drive motors.

One of the main components in these plug-in hybrid vehicles is the battery … since PHEVs have the potential to displace a large amount of gasoline by delivering up to 40 miles of electric range without recharging— new batteries would have to be developed. The Department of Energy awarded 3M in Saint Paul up to $1.14 million (total DOE/industry cost share: $ 2.28 million) over two years to screen nickel/manganese/cobalt (NMC) cathode materials through building and testing of small-sized cells.

I do not know the status of 3M’s project, nor how many jobs were created or retained, but the objective sure sounds reasonable.

Working with corporate interests is not new … when President Bush gave monies to the auto industry, he said : “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action." The monies for this came from the TARP legislation that John Kline voted for. Ah, “timing” is everything … while President Obama’s so-called bailout of the GM and Chrysler is now getting repaid, the Bush monies will never be returned.


What seems odd though is the “timing” and what project Mr. Kline included in his choices.

Ending Corporate Welfare is fiscally responsible. Yet, this project is one that may take government incentives from our goal of being energy independent.

The question is why did Mr. Kline and the Republicans pick the FreedomCAR project and not some other Corporate Welfare programs.

The term “Corporate Welfare” actually has many components.

How about ethanol subsidies which cost the US Treasury $6 billion in 2009 ?
Ethanol subsidies are just the tip of the money tree. "Farm subsidies are America's largest corporate welfare program," said Brian Riedl, an analyst at the Heritage Foundation. The question is why federal money flows primarily to growers of five crops—corn, soybeans, wheat, cotton and rice—while livestock, poultry and produce farmers get by without subsidy checks? After the media reported that at least 2,702 millionaires received farm payments from 2003 to 2006 (including such hobby-farmers as Scottie Pippin of the NBA fame and a number of family members of Congress including Minnesota’s Michele Bachmann (R-MN-06), the 2008 Farm bill prohibited all subsidies to anyone whose non-farm adjusted gross income exceeds $500,000. The Obama administration said its proposed farm subsidy cuts would save $2.3 billion over 10 years. Its new budget proposal would lower the cap on direct payments from $40,000 per person per year to $30,000. It would also reduce income eligibility limits over three years to $250,000 for non-farm adjusted gross income.

As easy to see Corporate Welfare in the Ag sector, there is a larger sector that is prone to largesse … and that’s is processed by a House Committee that Mr. Kline sits … The House Armed Forces Committee. Interestingly, Mr. Kline makes the argument the FreedomCAR program is a “duplicative program.” Hmmm. Why is Mr. Kline supportive of General Electric’s request for $1.8 - $2.9 billion required for an alternative engine for the F-35 Joint Strike Fighter ? In essence, a “duplicative program.”

GE claims that its alternate engine will enable the government to have cost-saving competitions across the lifetime of the F-35 program, saving taxpayers billions of dollars. What it leaves out of its talking points is that the government would first have to pay for two production lines, two supply chains and two workforces to build the competing engines, and then split the annual buys between two teams in a way that would eliminate any economies of scale. Once fielded, the two engines would require separate sets of spare parts, separate maintenance procedures, and other redundant items that would increase rather than decrease the cost of operating the plane. Senator Tom Harkin (D-IA) during debate about whether to fund the alternate engine expressed concerns about having two redundant engines would increase the complexity of the program, potentially undercutting both affordability and readiness.

Lockheed chairman Robert Stevens has stated that the company expects the actual purchase price of each Air Force F-35 variant will be roughly the same as a current Lockheed F-16 or Boeing F/A-18. That would be about $60 million in today's dollars -- less than half the price of an F-22 Raptor -- and it includes all the necessary mission equipment. Remember that Mr. Kline supported an “earmark” to procure additional F-22 that the Pentagon does not want …. Oh, and the alternate engine was not requested by President Bush or President Obama or the DOD … it’s just Corporate Welfare being funded by Mr. Kline and his friends in Congress.


“Timing” is everything in politics … and this “Timing” reeks of a political stunt.
Cutting Corporate Welfare for the FreedomCAR maybe short-sighted. Developing the technology required to ween ourselves from foreign produced oil, will require decades of trial and error in which a variety of bridge technologies are phased in over time.
Cutting FreedomCAR funding may sound good for political purposes but not be a good strategic decision.

Want Lower Prices ? Reduce the Ethanol Tariff !

Watching the devastation impacting farmlands in Iowa and the surrounding states is a stark foretelling that food prices will increase.

The Bureau of Labor Statistics released CPI data for the first quarter of this year showing food and beverage prices rising at an annualized, seasonally adjusted rate of 5.1 percent.
“Federal food-to-fuel mandates have led to over one quarter of corn to be diverted from food to ethanol production, driving up the price of corn and other commodities to historic highs,” was the immediate reaction from Scott Faber, vice president for Federal Affairs at the Grocery Manufacturers Association. “These rates will only increase following the USDA’s report that farmers will plant less corn in the coming year. Before these effects spread further across our economy and around the world, Congress should take immediate action by revisiting food-to-fuel mandates.”

Faber’s assertions can be debated, but with Congressional mandating the use of ethanol, there is a demand yet the cost of corn is actually delaying the opening of two brand new VeraSun facilities in Welcome MN and Hartley IA. Clark Fredericksen said "I think the ethanol industry, as a whole as some of these new plants come on are going to look at whether the margins are profitable enough to start right now, at the price of corn, or would they be better off, cost effective to delay them, until the price of corn eventually does come back down."
That’s millions of gallons of ethanol that these facilities may not produce this year … as well as jobs.

Congress’ ethanol mandate impacting prices has been a concern since First District Congressman Gil Gutknecht was promoting his 10/10 Act (10% ethanol by 2010). I contacted Gutknecht suggesting that H.R. 4409 The Fuel Choices for American Security Act of 2005 seemed to be a better bill. Included in H.R. 4409 was a 10 % ethanol requirement with a deadline of 2015, but also many more provisions; such as vehicle efficiency improvement, promoting hybrid technology, and requiring a 20% petroleum reduction by 2015 for vehicles used by federal agencies. H.R. 4409 had a broad group of 83 co-sponsors including many fiscal conservative members. Gutknecht wrote me that he has concerns with H.R. 4409 since it would repeal the tariff on imported ethanol. We do not want to be replacing foreign oil with foreign ethanol. I believe we should produce as much ethanol domestically as possible.

Despite all of Congress’ efforts, ethanol domestic production is struggling.

Since Congress has enacted mandates, foreign markets may be part of the answer. Unfortunately, foreign ethanol is subject to a 54-cents-per-gallon tariff and a 2.5 percent duty.

Ben Lieberman of the Heritage Foundation wrote “Consumers would benefit if the market—not special-interest politics—decided how much ethanol to use and where it should come from. ”

May I remind everyone that is advocating drilling in ANWR or the Outer Continental Shelf (OCS) that those projects will take years (maybe decades before meaningful production is achieved) but eliminating the ethanol tariff could impact supply and prices immediately … plus allow more corn to be used in foodstuff.

The efforts to make America “independent of foreign producers” should be a grave concern to all free market advocates and a trend toward an Isolationist Worldview and that is troubling in a global economy.
George Bush warned during his State of the Union address that “America rejects the false comfort of isolationism.
Isolationism would not only tie our hands in fighting enemies, it would keep us from helping our friends in desperate need.
In a dynamic world economy, we are seeing new competitors, like China and India, and this creates uncertainty, which makes it easier to feed people's fears. So we're seeing some old temptations return. Protectionists want to escape competition, pretending that we can keep our high standard of living while walling off our economy. … We hear claims that immigrants are somehow bad for the economy -- even though this economy could not function without them. (Applause.) All these are forms of economic retreat, and they lead in the same direction -- toward a stagnant and second-rate economy.

We need to remember that Canada is America’s leading importer of crude oil. Mexico is number three. With Iraq as number six, the question begs to be asked: Why are American troops in the middle of a civil war to determine the future of Iraq yet some people are advocating that America become "oil independent"? How will the Iraqi economy advance, if America is not an active trading partner?

In the world economy, remember the words of Baron de Montesquieu who wrote in his 1748 work, The Spirit of the Laws, “Peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling: and thus their union is founded on their mutual necessities.”

Closing our ports to foreign trade will hurt America in the long run.

Pawlenty dreams but Minnesotans fear nightmares

Last week, Governor Tim Pawlenty was in the southern Minnesota town of Janesville to participate in “cornbreaking event to mark the beginning of construction on the state’s largest ethanol plant. The plant, being built by US BioEnergy is a half-mile east of the town, will turn area corn into 100 million gallons of ethanol annually, as well as producing 320,000 tons of distillers grains. It will employ 40 people.

Somehow as I read The Free Press story, my mind wandered to the book Shoeless Joe by W. P. Kinsella which many of you may know due to the Kevin Costner's film, Field of Dreams.
The tagline "If you build it, he will come" haunts the main character, Ray Kinsella -- an Iowa farmer who visualizes a ball field in the middle of his field of corn. Digging up his corn to build a ballpark will inspire the return of baseball legend Shoeless Joe Jackson, a man whose reputation was forever tarnished by the scandalous 1919 World Series.
A review of the book relates that baseball is a metaphor, a way to talk about things like innocence, belief and, perhaps above all, America. Shoeless Joe is a parable about one of the most fundamental of American ideals, beginning anew. Ray Kinsella, by plowing up a large section of his farmland, is both building and rebuilding, creating what had never been there and re-creating what had come before. The land was once a place where the sins of the old could be expunged and a new vision realized, and this kind of renewal is what Kinsella's quixotic creation brings about.

So now we come to Minnesota’s Governor … a natural-born cheerleader for business. Optimism is his mantra … not realism. Naturally, every Governor would be happy with a new business that will create jobs … and jobs that cannot be ever outsourced overseas. The news that there may be an oversupply in ethanol production this year was quickly dismissed. The Associated Press reported “Lehman Brothers analysts estimated the surplus at about 1 million gallons per day starting in the second half of 2007. The firm's report attributed part of that to the ethanol plant construction boom, but said transportation bottlenecks are a bigger problem."
Now the Governor may be able to claim that Minnesota will be a top producer … but what about the transporation issues?
"If you build it, they will come."
As Leigh Pomeroy reported on Minnesota Monitor “county and township roads aren't built to handle the heavy truck traffic going to and from ethanol and biodiesel plants."
Once again, we are back to the Governor’s failure to invest in roads. So those of us in southern Minnesota who have complained of Highway 14 for decades, and now finally have a least a good stretch of road in the Janesville area, will see that road deteriorate faster as well as the county roads that feed into Hwy14.

But the Governor loves ethanol and all its federal grants that are available and tax subsidies.
Did you know that Minnesota leads the country in USDA grants received ? The Free Press reported : “ The state has received $18 million in Rural Development Renewable Energy Grants since the program started in 2003. A total of $4 million was issued to Minnesota farmers and small businesses last year alone. "
Pawlenty’s JOBZ program had previously announced that US BioEnergy would recieve a $4.5 million loan and up to $1.2 million in property-tax rebates from Waseca County.
In the fiscal year ending June 30,2006, Minnesota sent $18.1 million to 13 of the state's 16 ethanol plants link plus federal tax credits and local inducements.
When the Governor was challenged on MPR concerning the need to continue tax subsidies for ethanol production, Pawlenty responded that we had to adhere to our commitments. What about the commitments that were made for LGA, gutting the state’s health insurance program, or cutting education funding that have happened during his tenure ? Are those programs subject to adjustment since they are expenditures, but we can never go back on our word to subsidize a start-up industry that is now profitable !

And back to Pawlenty’s personal “Field of Dreams”, there is a scene in the movie, where Ray Kinsella and his father discuss Heaven on Earth :
John Kinsella: Is this heaven?
Ray Kinsella: It's Iowa.
John Kinsella: Iowa? I could have sworn this was heaven.
[John starts to walk away]
Ray Kinsella: Is there a heaven?
John Kinsella: Oh yeah. It's the place where dreams come true.
[Ray looks around, seeing his wife playing with their daughter on the porch]
Ray Kinsella: Maybe this is heaven.

Except when Pawlenty is campaigning for John McCain in Iowa, I bet he thinks Heaven is Minnesota --where subsidies are in the present (which make dreams come true) but consequences are in the future. Taxpayers and motorists will have nightmares.

It’s great to create “a new vision” of a revitalized rural Minnesota, but let’s not focus only on the opportunities without realizing that there are ongoing expenditures that need to be provided.

Remember fellow taxpayer, every dollar that is given as a tax subsidy is a revenue dollar that will have to be paid by us.

Why is John Kline pushing Gutknecht’s agenda ?

The November elections should have sent a message to John Kline, but apparently he does not realize why so many voters turned away from his party’s message. No, I am not talking about Iraq, but instead fiscal discipline.

The Republican Study Group, whose members advocated a fiscal and social conservative agenda and included John Kline as a member, has seen their membership dwindle. What do Chocola (IN), Beuprez(CO), Northrup(KY), Pombo(CA), Hayworth(AZ), Hostettler(IN), Sodrel(IN), Ryan(KS), Taylor(NC) and of course, our own Gil Gutknecht have in common … all defeated Congressmen who were members of the RSG. And on the Senate side, when Mark Kennedy, Rick Santorum(PA), Mike DeWine(OH) and Conrad Burns(WY) were in the House, they also were members of the RSG. These people were not rookies, but candidates that had principally ran campaigns that promised fiscal discipline.

The Republican Party advertised itself as advocating smaller government and market-based responses -- not mandates. The voters see the rising deficit, earmark spending and corruption and realized that accountability belonged to those that promised to address our fiscal future.

Now, Kline has introduced HR 349 [Title: To amend the Clean Air Act to require all gasoline sold for use in motor vehicles to contain 10 percent renewable fuel in the year 2010 and thereafter, and for other purposes.]
To those of us in the First District, we’ve heard of this legislation before … essentially it is the same as H.R.4357 which Gil Gutknecht talked about ad nausea over the past two years. Gutknecht’s bill had 44 co-sponsors (plenty of those Representatives are now longer in Congress) and was issued during a Republican controlled Congress. Kline’s bill has seven cosponsors and will need plenty of support from the Democrats if it has any chance of being turned into law.

So the first question is, is this legislation necessary ? Or, are market-based actions not working such that mandates are required ?

US News and World Reports did a Special Report “Overselling Ethanol” in their February 12 edition.
Consider the following statements from that report.

“Even though the ethanol industry profited handsomely last year, it continued to benefit from billions of dollars in taxpayer subsidies.
… in 2005, when, with gasoline prices ratcheting higher, Congress wrote into its big energy bill a renewable fuel standard, an unprecedented mandate requiring refiners to double the amount of ethanol they blend into the nation's gasoline by 2012.
… ethanol tax breaks—now at 51 cents per gallon—the government sent $2.5 billion last year to the flush oil industry to blend ethanol it would have needed anyway.
Nearly half of the gasoline being sold in the United States now contains 10 percent ethanol. But that leaves half the market open to conquest. Some 76 ethanol refineries are now under construction, including in such unlikely states as New York and Oregon, adding to the 112 already squeezing fuel from corn. By some counts, 200 more have been proposed.
… growth in ethanol gobbled up 20 percent of the U.S. corn crop. That surpasses all the corn Americans consumed last year—whether in cereal, corn-syrup-sweetened soda, or on the cob. And the strain has become severe on the nation's primary use of corn—as feed for dairy and beef cattle, pigs, and chickens. Meat, dairy, and egg producers are reeling from corn prices that have doubled in one year—now trading above $4 a bushel for the first time in more than a decade.
Because of its lower energy content, it takes 1.5 gallons of ethanol to drive as far as 1 gallon of gasoline. Consumer Reports calculates E-85 ended up costing motorists about a dollar extra per gallon last year because of the need to buy more fuel.”


So, in summary, Congress has already mandated a 2012 date, half the goal has already been met, and the industry is building refineries in response to market needs. In the end, consumers may pay more for other corn-based products and yet not realize a reduction in fuel consumed.
For the fiscal conservatives, this appears to be another tax break -- that at one time was a necessary inducement to start the industry -- but now is costing the taxpayers.

So now to the second question, why would Kline offer this legislation? If you read his press release that announced the legislation, there is a picture of Kline with representatives of the Minnesota Corn Growers Association.
Ah, huh … so is it all about campaign donations?
The US News and World Reports also states : “The Renewable Fuels Association have increased its lobbying spending 60 percent in the past seven years. The 10 largest ethanol producers and their trade groups have handed out $4.7 million in federal campaign contributions since 2000, says the Center for Responsive Politics.

Com’n Kline … stand up for responsible government spending that does not require mandates to reward your political cronies with tax breaks.


The US News and World Reports concludes with an assessment from Lee Lynd, Dartmouth College engineering professor and cellulosic pioneer. “Ethanol would make its greatest dent if Americans drove less and highly efficient cars were deployed widely.”

Improving CAFÉ standards and advancing fuel cell technology would do more to address our energy needs than hyping ethanol production.