The Iowa Imperative: Ethanol

The Iowa Imperative: Ethanol
By Robert Bryce
March 6, 2007
Energy Tribune

When looking for a root cause of the ongoing ethanol scam, look no further than Iowa. Indeed, the dearth of rationality in America’s choice of motor fuels can be blamed on a single fact: the Iowa Caucus is the first presidential primary. That accident of the calendar has led to some of the most egregious examples of flip-flopping, pandering, and groupthink in modern American political history. The Iowa imperative has also allowed the U.S. to continue tariff policies that are blatantly protectionist and anti-consumer. The ethanol madness now underway is largely due to the economic needs of a state with less than 1 percent of the U.S. population – or to be more precise, the economic desires of a tiny subgroup of that 1 percent: Iowa’s corn farmers and ethanol producers.

There’s plenty of evidence of the way the ethanol lobby made Iowa the make-or-break state for presidential contenders. Back in the 1990s, former New Jersey senator Bill Bradley was a leading critic of ethanol, saying the ethanol subsidy meant higher gasoline prices for his New Jersey constituents. But once Bradley began eyeing the White House, he became an ethanol convert. Thus in 1999 and 2000, he campaigned in Iowa claiming he had changed his mind on ethanol, stating that the U.S. had to “help our family farmers get a bigger chunk of the food dollar.” During the 2000 presidential race, every candidate who campaigned in Iowa supported the ethanol subsidy. The only candidate opposing it: Republican John McCain, who refused to campaign in Iowa.

During the 2000 race, the campaign coverage made much of the ethanol issue, with several newspapers taking a dim view of it. The San Diego Union-Tribune, in a January 2000 editorial, wrote that there was “simply no justification” for the continued ethanol subsidies. Esquire magazine lauded Bradley’s opposition to ethanol prior to the Iowa causes, calling the subsidies a “preposterous boondoggle.”As the primaries ended, the late, great Texas columnist Molly Ivins declared the ethanol subsidy was “a useless piece of junk” and a “total failure.”

But now eight years later, with energy independence as key buzzwords in Washington, ethanol subsidies are alive and well, the media is largely prostrate, and old opponents of the corn-based fuel are flip-flopping like a fish on a hook. Why? The numbers explain it: Iowa produces about one-third of all of the ethanol in the U.S. Since 2002, the amount of Iowa corn going into ethanol production has tripled. The state has 21 producing ethanol plants and another 23 plants are planned or under construction. About 2,500 jobs in Iowa are directly related to ethanol production and another 14,000 have jobs – according to IowaCorn.org – that are “affected” by ethanol.

For John McCain, it appears that genuflecting before Iowa’s ethanol interests is now more important than sticking to his long-held belief that ethanol is a bad deal for taxpayers. Back in 2002, the Republican senator from Arizona declared that ethanol is a “giveaway to special interests in corn-growing states at the expense of the rest of the country.” In 2003, McCain declared that ethanol wouldn’t exist if Congress hadn’t “[created] an artificial market for it.” He also said it “does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality.” In 2005, McCain voted against the big energy bill that passed Congress because its ethanol mandates would “result in higher gasoline costs for states, like Arizona, that do not have an abundant in-state supply” of ethanol.

That was the old McCain. The new McCain, who has his eyes on the Oval Office, loves the stuff. In August 2006 during a speech in Grinnell, Iowa, he said ethanol is “a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.”

The same flipping and flopping is afflicting Hillary Clinton, who as senator from New York voted against ethanol some 17 times. In 2002, she signed a letter saying that the ethanol subsidies were “equivalent to a new tax” on gasoline and that there is “no sound public policy reason for mandating the use of ethanol.” But in January, during a visit to Des Moines, Clinton said that the U.S. needs to work on “limiting our dependence on foreign oil. And we have a perfect example right here in Iowa about how it can work with all of the ethanol that’s being produced here.”

Then there are the protectionists, a group that includes another presidential contender, Barack Obama. Last year the Democrat from Illinois, along with four other farm-state senators, sent a letter to President Bush asking him to ignore calls to reduce tariffs on Brazilian sugarcane-based ethanol. Lowering the tariff, they said, would make the U.S. dependent on foreign ethanol. “Our focus must be on building energy security through domestically produced renewable fuels,” they wrote. Perhaps it’s just a coincidence, but during his first year in office, Obama twice used corporate jets belonging to agribusiness giant ADM, the world’s biggest producer of corn-based ethanol.

Many of the neoconservatives who pushed for the war in Iraq and are now pushing for the U.S. to decrease its imports of foreign oil, are trying to get the import tariffs on ethanol removed. In January, one of that group’s leaders, Ariel Cohen, a prominent neocon who works at the Heritage Foundation, lauded Bush’s State of the Union speech, in which he laid out a plan to reduce American gasoline consumption. Cohen claims that imported oil is a “dire geopolitical threat.” But he complained that Bush’s proposals do not “address the need to bring into the U.S. the most competitive ethanol, sugar-cane ethanol, which is now penalized with punitive tariffs.”

Those tariffs are going to stay in place for one simple reason: they protect the Iowa ethanol business. That point was made clear by Iowa Senator Charles Grassley, a Republican, shortly after Bush’s speech. “Lifting the ethanol tariff would undermine faith in the domestic renewable fuels industry,” Grassley declared. “We need to continue the current supportive policies of the domestic industry….Lifting the tariff would only undercut our domestic efforts, virtually eliminate any chance of developing ethanol from other sources, and potentially leave us dependent on foreign sources for our ethanol.”

Thus, for Iowans like Grassley, and for the leading candidates for the White House, foreign oil is bad. But foreign ethanol is even worse. And that worldview is going to get a lot of play between now and January 18 – the date of the Iowa Caucus.

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