You know the nation’s ideas about spending are changing when Iowa Sen. Charles Grassley supports a reduction in the tax incentives for ethanol.

As Republicans in particular look for ways to cut the nation’s budget, the always-controversial ethanol subsidies began to look like a fatter target than ever. Rather than let the program fall off a cliff, Grassley and North Dakota Sen. Kent Conrad, a Democrat, wrote the Domestic Energy Promotion Act of 2011, which would extend the volumetric ethanol excise tax credit (VEETC) through 2016 – but only at steadily decreasing levels. Iowa Sen. Tom Harkin was a co-sponsor of the original bill, too.

In other words, they give in.

“Under this extension,” Grassley wrote in a press release, “VEETC, also known as the blenders’ credit, would be reduced from 45 cents to a fixed rate of 20 cents in 2012 and 15 cents in 2013, then convert to a variable tax incentive based on the price of crude oil for 2014 through 2016.”

It just might be one of the early signs that the nation is ready to start spending its money more wisely, or at least more cautiously.

Grassley voted against a bill this week that would have simply ended the tax breaks. But he’s willing to adopt a gradual change while calling for similar steps regarding other forms of energy subsidies. “I’ve challenged Congress to make any changes to energy tax incentives as part of a comprehensive review of all energy tax incentives,” he wrote.

Fair enough. But it’s not likely that the oil industry will lose much of its government support. Oil is big-time. Ethanol is still a sidelight, and probably always will be. Especially now that even its staunchest supporters are faltering.

On the left, people think growing corn is environmentally destructive and should be reserved for food uses only. On the right, nobody likes government subsidies. Ethanol has been standing on a small spot in the middle, and it’s shrinking.