Economy, Regs, & Taxes

The Ethanol Boondoggle Will Continue

USDA Sec. Sonny Perdue supports the ethanol mandate. Evidently there are some parts of the swamp that will never be drained.

Lewis Morris · May 11, 2017

Agriculture Secretary Sonny Perdue informed reporters this past weekend that one promise Donald Trump intends to keep is his support for ethanol. At a farming event in Iowa with Republican Senator Chuck Grassley and Rep. Steve King, Perdue said, “Ethanol is here to stay, and we’re going to work for new technologies to be more efficient.”

Unfortunately, this is one Trump campaign promise that would have been good to break. The Renewable Fuel Standard — known as the ethanol mandate — is a classic example of what happens when the government interferes in the marketplace, with an agenda to boot. Through presidential administrations both Republican and Democrat, the government has heavily subsidized the production and distribution of ethanol, as well as required a certain amount of its use, in the hopes of making renewable fuels the next great thing.

That hope hasn’t been realized.

The EPA, which last November called for 19.28 billion gallons of ethanol to be blended into the nation’s gasoline supply, has maintained for years that ethanol is just what the environment needs. As the legend goes, ethanol burns cleaner than gasoline, which is good for the air, and it relieves our dependency on oil, which is good for the Earth.

So, when corn prices are forced higher because 40% of the crop is grown specifically for ethanol production, we shouldn’t mind. Nor should we care that this starts a chain reaction of price fluctuations that lead to more expensive food. And we shouldn’t trouble ourselves that gasoline is comparatively more expensive per gallon with ethanol or that the biofuel harms automobile engines. We’re doing a good thing for the environment.

Except we’re not.

Farmers are so eager to plant corn to sell to ethanol producers, they are foregoing planting other crops that have real value in the nation’s food supply (and the world’s, for that matter). Too much planting of any one crop on the same land will eventually lead to nutrient-poor soil, which saps the land of its ability to produce good crops.

Soil depletion and erosion are just one part of it. Billions of gallons of water that could be used for other purposes are diverted to produce ethanol. The additional fertilizers used to produce more corn are polluting the water table at a greater rate than would otherwise take place.

All this abuse to the land and to taxpayer’s pocket books has not yielded any positive change to the environment. There is no substantive proof that ethanol consumption is leading to lower CO2 levels, or that it is having any effect on the global surface temperature, which has remained relatively unchanged for 19 years.

Knowing all these things, why is Trump backing ethanol so vigorously? One would think that the man who campaigned on “draining the swamp” and getting the engine of American commerce running again would look at the ethanol mandate and consider it a relic of a bygone “progressive” era. Surely he sees that it’s exactly the kind of cronyist graft that typifies the swamp.

Well, Trump made a promise to farmers when he was on the campaign trail in Iowa in 2015. Like virtually every other presidential hopeful, with the notable exception of Ted Cruz, Trump praised ethanol, and promised to support its mandated use as president.

Farmer and grain futures trader Jerry Gulke put it as plain as can be: “The farm states put Trump over the top,” Gulke told CNBC. “You could say Trump owes us something.”

Trump recognized the sway that the farming community had on his victory last month when he made an about-face on dumping NAFTA. Perdue and other members of his administration told him it would be a terrible political mistake, pointing out that his rural, blue-collar base would be hardest hit in a post-NAFTA America.

“It shows that I do have a very big farmer base, which is good,” Trump said. “They like Trump, but I like them, and I’m going to help them.”

As far as ethanol is concerned, what this shows is Washington, DC, at its worst, churning along on cronyism and wealth-redistributing political favors despite all the signs pointing to bad decisions being made worse by reaffirmation of a failed policy. Evidently there are some parts of the swamp that will never be drained.

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