WASHINGTON - Senator Chuck Grassley today said that firearms data released last week by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) was a selective release of certain statistical data that inaccurately reflects the scope and source of the problem of firearms in Mexico and the drug trafficking organization violence.

Grassley's letter to ATF Acting Director Kenneth Melson cited additional statistical breakdowns and a Department of State cable that dispels myths about the source of weapons trafficked to Mexico.  The unclassified cable includes sections such as: "Myth: An Iron Highway of Weapons Flows from the U.S." and "Myth: The DTOs (Drug Trafficking Organizations) are Mostly Responsible."

Grassley said when looking at a breakdown of the numbers, it's clearly inaccurate to assert that 70 percent of the guns recovered in Mexico can be traced to a United States based gun dealer.

Grassley cited additional statistics in his letter to Melson.  In the letter, Grassley said that by looking at more specific data provided to his office, it was clear that of the 26,813 weapons traced in 2009, only 5,800 actually traced back to Federal Firearms Licensees. 

"The implication made by the ATF and various press reports is that the firearms come directly from U.S. manufacturers or U.S. Federal Firearms Licensees selling guns to drug trafficking organizations.  Not only does this paint a grossly inaccurate picture of the situation, but it appears that the State Department disagrees with this portrayal," Grassley said.

In his letter, Grassley provides a further break down of data of firearms tracing information, including a catchall category called "No Final Sale Dealer" in the ATF's own eTrace system, which means the firearms did not trace back to a Federal Firearms Licensee.  Astonishingly, nearly 78 percent of firearms traced in 2009 and 66 percent of firearms traced in 2010 were not traced to a United States licensed gun dealer.  Grassley points out that these guns instead are likely sold to foreign countries or militaries requiring approval of the State Department and Homeland Security.

To make matters worse, this category includes firearms in the ATF's Suspect Gun Database - a category which would include the nearly 2,000 firearms that are known to be part of the ATF's ill-advised Fast and Furious strategy where the ATF knowingly authorized firearm sales to straw purchasers before the weapons were trafficked to Mexican drug trafficking organizations.

"The ATF needed a distraction before last week's hearing.  Unfortunately, nobody looked closely at the numbers to determine that this was a very selective release of information intended to distract people from the disastrous policy to let guns fall into the hands of straw purchasers, only to be often found on the other side of the border," Grassley said.  

Grassley has led the oversight efforts into the ATF's reckless strategy to allow guns to fall into the hands of straw purchasers.  He began his investigation in January and has yet to receive any substantive information from the Justice Department and the ATF.  Grassley has been joined by Congressman Darrell Issa, the Chairman of the House Oversight and Government Reform Committee, to investigate Operation Fast and Furious.

Q.  What is the Rural America Preservation Act?

A.  The Rural America Preservation Act is legislation I've sponsored to help restore the government farm program to its original intent by making sure program payments are targeted at small- and medium-sized farmers who need assistance getting through tough economic times that are due to circumstances beyond a farmer's control.  I introduced the bill with Senator Tim Johnson of South Dakota.  The legislation would limit the total amount of farm-program payments that a single farmer could receive to $125,000.  The payment-limit breakdown for an individual farmer would be 1) a cap of $20,000 on direct payments, which are based on a farmer's acres and yields, as well as a set payment rate; 2)  a cap of $30,000 on counter-cyclical payments, which are available to farmers when the market price of the commodity they produce is less than a target price set by the federal government; and 3) a cap of $75,000 total on gains a farmer can receive from repaying a marketing assistance loan, loan deficiency payments, and gains realized from the use of a commodity certificate issued by the Commodity Credit Corporation.

Our bipartisan bill also would close a loophole that some non-farmers have exploited to improperly receive farm payments.  It does so by narrowing the guidelines used to define who is considered actively engaged in farming.  The evidence of non-farmers' abusing this loophole is astounding.  Both the Government Accountability Office and the U.S. Department of Agriculture Payment Limit Commission have pinpointed this as a critical area of concern.  Closing this eligibility loophole is important to maintaining support from non-farm state members of Congress for the farm program.  In order to help alleviate this problem, the bill would create a measurable standard of active, personal labor and management for the Department of Agriculture to use in determining if people requesting farm program payments are indeed farmers, or if they are just trying to game the system.

Q.  Why are these changes necessary?  

A.  To ensure that farmers are able to provide a safe, affordable and abundant food supply, it's important to get the farm safety net back to its original intent.  The federal farm programs were meant to help small- and medium-sized farmers weather the bumps associated with farming.  The importance of providing a food supply is clear at every family's dinner table.  Without a reliable and affordable food supply, desperation results.  If a mom or a dad wasn't able to feed their kids for three days, they would do just about anything to feed them.  If we lose the safety net that allows family farmers to weather the storm, then that safe, affordable and abundant food supply might just go away.  To keep this safety net in place, we need to change the way farm program payments are distributed.  Unfortunately, under current policies 10 percent of the biggest farmers in the U.S. receive more than 70 percent of farm payments, and some payments go to non-farmers.  If left as is, the distribution system that pays out the lion's share of federal dollars to the largest and wealthiest farming operations will spell the beginning of the end of the farm safety net.

The trend in farm program payments going to big farmers also has a negative impact on the next generation of farmers.  We need to keep young people in farming, so they're ready to take the lead when the older generation of farmers turn over the reins.  When 70 percent of farm payments go to 10 percent of farmers, it puts upward pressure on land prices and cash-rent arrangements, making it a lot harder for smaller and beginning farmers to buy ground or afford to rent land.  This makes it difficult to get a foothold in farming and leads to big farmers getting even bigger.

It's time to enact legitimate, reasonable farm program payment limits that tighten eligibility requirements and help those that the farm program was created for in the first place.  The Grassley-Johnson bill would go a long way toward getting the farm program refocused on providing needed assistance to small- and medium-sized farmers.

Floor Statement of U.S. Senator Chuck Grassley 
regarding the Coburn amendment to eliminate the ethanol tax incentive
Thursday, June 16, 2011

Mr. President,

I'd like to speak in opposition to the amendments that we'll be voting on at 2 o'clock today.  The first, an amendment by Senator's Feinstein and Coburn would repeal the incentive for domestically-produced ethanol.  The second, offered by Senator McCain, would prohibit the U.S. Department of Agriculture from using funds for the installation of blender pumps.  These amendments won't lower the price of gasoline at the pump.  These amendments won't lessen our dependence on foreign oil.  They won't create a single job.  They'll do exactly the opposite.

Most importantly, these amendments also won't save the taxpayer any money, because they stand little chance of being enacted.  Even if the amendments were to pass today they won't get out of this chamber.  This bill is not likely to be taken up by the House.  If a revenue amendment is attached to this bill, it will be blue-slipped by the House.  The Constitution requires that revenue measures originate in the House.  So, this bill, with these amendments, is dead on arrival.  It's also dead on arrival at the White House.  They indicated in a statement that President Obama opposes repealing the incentives and is open to new approaches that meets today's challenges and saves taxpayers money.  The votes at 2 o'clock today are a fruitless exercise.  This is political theater.  We've already had this vote, and it was defeated 40 to 59.

Oil is hovering near $100 a barrel and unemployment is at 9.1 percent.  Why is the Senate taking a full week and voting twice on the same amendment that will increase prices at the pump, increase dependence on foreign oil, and lead to job losses?  We should be having this debate in the context of a comprehensive energy plan.  This debate should include a review of the subsidies for all energy production.  We shouldn't be singling out ethanol.  Nearly every type of energy gets some market distorting subsidy from the federal government.  An honest energy debate should include ethanol, oil, natural gas, nuclear, hydropower, wind, solar, and biomass.  When the oil and gas subsidies were targeted last month, the president of the National Petrochemical and Refiners Association stated:  "Targeting a specific industry or even a segment of that industry is what we would consider punitive and unfair tax policy, and it is not going to get us increased energy security, increased employment and certainly not going to lower the price of gasoline."  The same is true for the vote we're scheduled to have today.

In December 2010, Congress enacted a one-year extension of the Volumetric Ethanol Excise Tax Credit, or VEETC, also known as the blenders' credit.  This one-year extension has allowed Congress and the domestic biofuels industry to determine the best path forward for federal support for biofuels.  As a result of these discussions, Senator Conrad and I introduced bipartisan legislation on May 4 that is a serious, responsible first step to reducing and redirecting federal tax incentives for ethanol.  Our bill will reduce and phase out VEETC over a period of a few years.  It also would extend, through 2016, the alternative fuel refueling property credit; the cellulosic producers' tax credit; and the special depreciation allowance for cellulosic biofuel plant property.  Earlier this week, I joined Senator Thune and Senator Klobuchar in introducing another bipartisan bill to immediately reduce and reform the ethanol tax incentive.  It includes many of the same features as the bill I introduced last month, but it enacts the reforms this year.  Senator Thune's approach also leads to significant deficit reduction.  The legislation we've introduced is a responsible approach that will reduce the existing blenders' credit and put those valuable resources into investing in alternative fuel infrastructure, including alternative fuel pumps.  It would also make significant investments in advanced and cellulosic ethanol.  It's a forward looking bill that deserves widespread support. The Thune-Klobuchar bill would responsibly and predictably reduce the existing tax incentive, and help get alternative fuel infrastructure in place so consumers can decide which fuel they'd prefer.  We shouldn't pull the rug out from under this industry that has made these enormous investments.  We need to provide a transition.

I know that when American consumers have the choice, they will choose domestically produced, clean, affordable renewable fuel.  They'll choose fuel from America's farmers and ranchers, rather than oil sheiks and foreign dictators.  Both of the ethanol reform bills I mentioned are supported by the ethanol advocacy groups.  In an almost unprecedented move, the ethanol industry is advocating for a reduction in their federal incentives.  No other energy industry has come to the table to reduce their subsidies.  No other energy lobby has come to me with a plan to reduce their federal support.  The best way to get deficit reduction that gets to the President's desk is a responsible transition, like the one offered by Senator Thune.  Otherwise, this exercise today is a waste of time. This vote will simply put many members of this body on the record in support of a $2.4 billion tax increase.  I would encourage those who want to reduce the incentive and save taxpayer money to work with Senator Thune and Senator Klobuchar, and the rest of us on a responsible transition that has a chance of being enacted.  I therefore urge my colleagues to oppose these two amendments and to consider this fact check on statements that the sponsor of the amendment has made on the Senate floor:

Senator Coburn's statement:

"We can save $3 billion if we eliminate the VEETC blending subsidy."

In fact:

There are a lot of numbers thrown around about how much this incentive costs and how much Senator Coburn's amendment would save.  I have a letter from the Joint Committee on Taxation with a score of Senator Coburn's amendment.  The fact is, the amendment, if enacted on July 1, 2011, would increase revenue to the federal treasury by $2.4 billion.  Not $3 billion as the author has stated.  Again, the Coburn amendment, if enacted on July 1, would save $2.4 billion.  That's from the Joint Committee on Taxation.

Senator Coburn's statement:

"All the blenders of gasoline in the United States - all of them - have called and written and said:  We do not want the $3 billion for the rest of the year."

In fact:

I have a letter from the Society of Independent Gasoline Marketers of America or SIGMA, to the Senate Majority and Minority Leaders, opposing efforts to prematurely or abruptly eliminate the blender's credit.  That letter states, "As the leading marketers of ethanol-blended fuel at the retail level, SIGMA's members and customers are the beneficiaries of VEETC.  Simply put, SIGMA opposes recent moves to prematurely or abruptly end the subsidies without any consideration for future fuel and fuel-delivery costs.  To end this incentive immediately would no doubt result in an immediate spike in consumers' fuel costs."

I would also like to point out another fact to the Senator from Oklahoma about the National Petrochemical and Refiners Association, which sent him the letter calling for a targeted tax hike on ethanol production.  This organization, which is lobbying for the repeal of the ethanol incentive, also led the charge against raising taxes on the oil and gas industry just last month.  The president of the National Petrochemical and Refiners Association stated: "Targeting a specific industry or even a segment of that industry is what we would consider punitive and unfair tax policy, and it is not going to get us increased energy security, increased employment and certainly not going to lower the price of gasoline."  He could have just as well been referring to the targeted tax increase on ethanol use.

Senator Coburn's statement:

"According to the U.S. Department of Agriculture, 40 percent of last year's corn crop was utilized, converted to ethanol."

In fact:

One bushel of corn produces nearly 3 gallons of ethanol and 18 pounds of high value animal feed.  In 2010, 4.65 billion bushels of corn were used to produce 13 billion gallons of ethanol.  But, ethanol production uses only the starch from the corn kernel.  More than one-third, or 1.4 billion bushels of dried distiller's grain was available as a high-value livestock feed.  On a net basis, ethanol production used only 23 percent of the U.S. corn crop, far less than the 40 percent that Senator Coburn claims.  According to USDA, feed use consumed 37 percent of the U.S. corn supply, much more than the 23 percent consumed by ethanol production.

Senator Coburn's statement:

"The American people ought to take into consideration when they go buy a gallon of fuel today - you already have $1.72 worth of subsidy in there.  It does not have anything to do with oil and gas drilling."

In fact:

I believe Senator Coburn is referring to a report from the Congressional Budget Office.  For the record, that report relied on the questionable assumption that only a tiny fraction of ethanol consumption is attributable to the ethanol tax credit.  Regardless, I'm glad he raised this point about subsidies and oil and gas drilling.  Our colleagues may be interested to learn of the hidden cost of our dependence on foreign oil.  A peer-reviewed paper published in Environment Magazine in July 2010 concluded that "...$27 to $138 billion dollars is spent annually by the U.S. military for protection of Middle Eastern maritime oil transit routes and oil infrastructure, with an average of $84 billion dollars per year."  Milton Copulos, an advisor to President Ronald Reagan, a veteran of the Heritage Foundation, and head of the National Defense Council Foundation testified before Congress in 2006 on the "hidden costs" of imported oil.  Mr. Copulos stated that by calculating oil supply disruptions and military expenditures, the hidden costs of the U.S. dependence on petroleum would total up to $825 billion per year.  This military expenditure is equivalent to adding $8.35 to the price of a gallon of gasoline refined from Persian Gulf oil.  There is no hidden U.S. military cost attributable to homegrown ethanol.

Senator Coburn's statement regarding oil and gas subsidies:

"There is a big difference between a subsidy that is a tax credit and allowing someone to advance depreciation because they are going to write it off anyhow.  The net effect to the Federal Government's revenue, if you take all of those away, is still zero."

In fact:

A September 2000, report by the Government Accountability Office concluded that the federal government has granted tax incentives, direct subsidies and other support to the petroleum industry.  They describe tax incentives as federal tax provisions that grant special tax relief designed to encourage certain kinds of behavior by taxpayers or to aid taxpayers in special circumstances.  According to the Government Accountability Office, the tax break allowing for the expensing of intangible drilling costs began in 1916.  The percentage depletion allowance was enacted in 1926.  The GAO estimated that these two tax incentives led to a revenue loss of as much as $144 billion from 1968 until 2000.  That's a far cry from the zero revenue affect that Senator Coburn claims.  These are GAO's words and figures.  They refer to them as tax incentives that resulted in the loss of more than $100 billion dollars to the federal treasury over that 32 year period.  I've heard Senator Coburn on the floor on many occasions talking about the dire fiscal situation our country is in.  Yet, on this issue, it sounds like he's arguing about semantics.  One is a "subsidy" yet the other is a "legitimate business expense."  I'm not sure that this argument over terminology will give our children and grandchildren much comfort when they're picking up the trillion dollar tab over the next couple decades.

Senator Coburn's statement:

"Corn prices are at $7.65 a bushel.  They are 2½ times what they were 3½ years ago."  Ethanol "has been, this last year, the significant driver."

In fact:

Grain used for ethanol accounts for approximately 3 percent of the world's course grain.  And, because of increased corn production, the amount of grain available for non-ethanol use is growing.  In 2000, there was 2.4 billion metric tons of grain available for uses other than ethanol.  Even with the growth in the ethanol industry, last year there was 2.6 billion metric tons of grain available for uses other than ethanol.  It's also important to review the cost of corn in retail food prices.  At $7.40 a bushel, the corn cost in a gallon of milk is about 46 cents.  The cost of corn in a pound of chicken is 34 cents.  One pound of beef takes 92 cents worth of corn.  One pound of pork requires 39 cents.

WASHINGTON - Senator Chuck Grassley has offered an amendment designed to prevent fraud, waste and abuse of federal grant programs.  His proposal would amend a bill pending in the Senate which would increase the number of federal grants available for government infrastructure projects administered by state and local governments.

"Federal officials need to make certain due diligence is done on the front end to safeguard tax dollars from grant recipients who are delinquent in paying their taxes.  It's wrong that someone with big unpaid tax bills would be given a federal grant," Grassley said.  "After grants are awarded, federal agencies also need to follow up and make sure recipients of taxpayer dollars meet reporting requirements for how the money is spent."

Grassley was one of four senators who requested a government report that was released in May.  It found that 3,700 contractors and grantees owed $757 million in back taxes, but also received $24 billion in stimulus awards.  The study identified 15 cases of individual contractors or grantees involving "abusive or potentially criminal activity."  One construction firm owed nearly $400,000 in back taxes but received a contract worth more than $1 million.  One non-profit organization owed more than $2 million from years of unpaid payroll taxes, but received more than $1 million in stimulus funds.

Separately, since last fall, Grassley has worked to get the U.S. Department of Housing and Urban Development (HUD) to pay attention to the waste and abuse of tens of millions of tax dollars by the Philadelphia Housing Authority.  The Philadelphia Housing Authority received nearly $370 million in HUD money this year plus an additional $127 million in stimulus funds.  "The mess in Philadelphia shows the worst that can happen when the federal government doles out money, but then doesn't check to make sure that money is used for its intended purpose," Grassley said.

The amendment that Grassley filed to the Public Works and Economic Development Reauthorization bill this week would apply to federal grant programs authorized by the Public Works and Economic Development Act of 1965.

Grassley's amendment would:

1)      Ban government agencies from providing grants to any person or entity that is seriously delinquent with tax debt, including anyone with a lien from the federal government.
2)      Require that at least 10 percent of federal grants be audited annually for compliance with program requirements.
3)      Ban for two years any grantee with an unresolved problem based on an audit.

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