Dave Juday, The Juday Group
For nearly three decades, politicians, pollsters, and pundits have considered support for ethanol a litmus test for legitimacy in Iowa presidential politics. Former Vice President Al Gore, who won the Iowa Democratic caucuses in 2000, famously explained the strategizing over ethanol policies that has occurred in many campaign war rooms over the years. “First-generation ethanol I think was a mistake… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.”
The question commentators and analysts are trying to answer now, is this: After the Iowa caucus victory by Senator Ted Cruz of Texas, who openly opposed the renewable fuel standard (RFS)—i.e., the federal law that mandates certain levels of ethanol be blended into the nation’s fuel supply—is the era of ethanol policy dominating the Iowa primary process over? The truth is it is coming to an end and has been for some time. Indeed, the RFS may not exist at all by the time Iowans caucus in 2020.
Senator John McCain famously skipped the Iowa caucus in 2000 because of his position against ethanol subsidies (mostly consisting of tax credits and protective tariffs back then). In 2004, when President George W. Bush won the Iowa caucuses, he had already been working on a promised energy bill that included the first version of the RFS, which was adopted in 2005 after his reelection.
So by 2008, the scramble to show sufficient support for ethanol had evolved into a simple question of whether a candidate supported the RFS. McCain still did not; he came in third in 2008 when he eventually won the Republican nomination. Governor Mike Huckabee won the Iowa caucuses that year with 32 percent; he was just as strong an advocate of the RFS this time around and garnered about 2 percent of the vote. In 2012, former Senator Rick Santorum won the caucuses with 24.6 percent of the vote—just 35 more votes than eventual nominee and RFS supporter Governor Mitt Romney. Santorum offered unabashed support for the RFS then, and this year as well. He garnered 1 percent of the vote this year.
One thing to note about the Iowa results is that, in the aggregate, they were not dramatically different than 2012. Two anti-RFS candidates finished in the top five. It was 2012, in fact, that was the beginning of the end. Consider, when Santorum and Romney virtually tied in 2012, they were less than four percentage points ahead of Rep. Ron Paul, father of 2016 candidate Senator Rand Paul. The senior candidate Paul opposed the RFS and got 21.5 percent of the vote in the 2012 Iowa Caucus. Also, Texas’s Rick Perry, who as governor actually petitioned the federal government to waive the RFS, got 10.5 percent of the vote coming in fifth that year, just as Rand Paul did this year, despite his opposition to the RFS.
That ethanol was losing its punch could be seen in the 2011 Ames, Iowa, straw poll, leading up to the caucuses. In the straw poll, a remarkable 84 percent of voters backed candidates who were either questioning or openly critical of current ethanol policy. Indeed, the winner of the straw poll was ethanol critic Rep. Michele Bachmann, who hailed from the Corn Belt in Minnesota. Bachmann opposed the 2007 Energy Independence and Security Act, which established the federal ethanol mandates, citing ethanol’s “mixed results in efficiency and costs.”
Pundits likely will cite all kinds of reasons why Cruz was not hurt by his promise to phase out the RFS. Few will hit on the real reason: There is a growing recognition that the RFS is broken. Administratively, the Environmental Protection Agency has met its statutory deadlines to set the biofuels volumes under the RFS only twice in nine years. In fact, the volumes for 2014 and 2015 were set retroactively.
The RFS was based on faulty assumptions about the market for motor fuel and the availability of alternatives to gasoline. So-called “advanced biofuels”—those fuels made from feedstock other than corn starch—have yet to be sufficiently commercialized, and other categories, including corn ethanol, have run into practical limits under the RFS (referred to as the “blend wall”). The RFS is a classic example of central planning, and it is failing as is to be expected. As Cruz said on Meet The Press prior to the Caucus:
“Right now ethanol is banging into the [renewable fuel standard]. . . . The blend wall is [essentially] a cap. As people in Iowa know, ethanol’s not expanding its market share because the EPA is preventing it from doing it. By the way, no other candidate has pledged to remove the blend wall. No other candidate is focusing on the future for ethanol.”
And that is the lesson from the Iowa caucuses. Cruz did focus on the future of ethanol, with a principled, market-oriented approach. He did not focus on the bureaucracy built around the RFS. As he observed, “the lobbyists very much want to keep Iowa focused on the ethanol mandate, because it keeps Iowa dependent on Washington.”
