President Ethanol

Weekly WastebasketPresident Ethanol

On February 1st, Iowa voters head to the caucuses to pick their favorite for nomination to be President. President Jimmy Carter really put the caucus on the political map and used his win to rise from a relatively obscure Georgia Governor to become President of the United States. Iowa voters, however, are not perfect indicators of who will win nomination. Their top picked Democrat won the nomination eight times out of eleven since the first Democratic caucus in 1972.  Iowa Republicans are even less lock step with the rest of the country—since 1976, just six of ten winners went on to be the eventual nominee, and none since 2004.

Still, winning in Iowa can catapult a campaign to get more cash and coverage, and build momentum for future success. Not surprisingly this can lead to pandering to the particular tastes of Iowans. Not just eating fried whatever at the State Fair, but promising policy positions that don’t make much sense outside the Hawkeye state.

Everyone knows corn is King in Iowa but its Crown Prince is ethanol. According to the Iowa Corn Growers, nearly half of all the corn grown in Iowa goes into ethanol. The state has more than 40 ethanol/biofuel refineries – far more than any other state – and they produce about 25 percent of the country’s ethanol.

You can see why Sen. John McCain (R-AZ) softened his rhetoric for his last electoral bid. In 2000, he straight out opposed ethanol subsidies. He finished fifth in the caucuses. In the run up to 2008, he repeatedly joked “I have a glass of ethanol every morning before breakfast, but I still don’t support the subsidies, and I don’t think we need them.” That earned him a fourth place finish.

These subsidies are at the root of the issue for taxpayers. True, lawmakers finally let the Volumetric Ethanol Excise Tax Credit – which cost more than $6 billion in its last year – expire in 2011, but they left in place other subsidies. Leaving aside the broad based Ag subsidies like crop insurance, there is also the Renewable Fuel Standard (RFS) which mandates blending a certain amount of ethanol with the nation’s gas supply. That certain amount being 14.5 billion gallons of corn ethanol in 2016. There’s also a mandate for blending advanced (not-corn ethanol) biofuels, but there’s very little production of them. Corn ethanol boosters want a piece of that action too. The fact is we don’t need the RFS – as evidenced by Iowa’s extensive production – the industry can stand on its own two feet.

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But corn growers don’t see it that way, nor does Hawkeye State Governor and ethanol booster Terry Branstad (R) who laid into candidate Sen. Ted Cruz (R-TX) this week, telling the Iowa Renewable Fuels Conference that “it would be a big mistake for Iowa to support him.” And that he would be “very damaging to our state.”

Now look, we have had areas of agreement and disagreement with Sen. Cruz, and every other politician running for President, but we never have and never will endorse candidates and we’re not picking anyone now. But Gov. Branstad’s anti-endorsement (he didn’t pick another candidate) in defense of this one wasteful issue is staggering to think about, and it just demonstrates the sway that wasteful subsidies can hold. There are enormous factors that citizens have to consider when they pick their candidate for the next Commander-in-Chief. Like foreign policy and what they are going to do about ISIS. Or the now-rising budget deficit and growing debt. The challenges with the nation’s entitlement programs like Social Security and Medicare. Cleaning up and fixing the tax code with comprehensive reform. And probably a million other things that a President will have to do before basing a vote on continuing a wasteful program that isn’t set to expire until 2022. Governor Branstad should realize that this is going to be a decision made by Congress if it’s going to happen during the next President’s term. The RFS should be a small footnote in the overall debate. Oh, and yes we think policymakers should end the wasteful policy.