Farm-state interests just conquered Big Oil in a fight over biofuels, proving that in Donald Trump’s Washington, King Corn still reigns.And that, boys and girls, is what we call Political Capitalism.
The clash erupted over the future of the Renewable Fuel Standard, a 12-year-old law that compels the use of fuels such as corn-based ethanol and soy-based biodiesel. Although the president had repeatedly promised Midwest voters he would "protect" ethanol and support the program, his Environmental Protection Agency was considering steps to dilute the mandate.
Farm-state governors and senators revolted -- setting off a behind-the-scenes struggle between two special-interest heavyweights. Lobbyists for oil refiners warned of higher gasoline prices if the administration backed down. Iowa leaders countered that Trump could face political retribution in 2020 during the state’s first-in-the-nation caucuses. Republican senators threatened to delay confirmation of his nominees.
"I wasn’t afraid to put the squeeze on," Senator Joni Ernst, an Iowa Republican, said in an interview. "This was really important. We’ve got 88,500 family farms here in Iowa, and they rely on this."
After three weeks of frenzied lobbying by both sides, the president ordered his EPA administrator to back off -- handing an unalloyed victory to the farm belt. EPA chief Scott Pruitt’s formal capitulation came days later in the form of a letter that detailed concessions to biofuel producers and underscored corn’s continued clout in the nation’s capital.
The issue is politically perilous for any president, but especially Trump, who visited ethanol factories while campaigning in Iowa and promised the state’s voters he would stand by the home-grown biofuel if they elected him to the White House.
But biofuel industry leaders grew worried after Trump began staffing his administration with allies of the oil industry, which views the biofuel requirements as costly and burdensome. Chief among them: Pruitt, a former attorney general from Oklahoma who criticized the RFS before he became EPA administrator and is expected to run for political office from the state, where ethanol-free gasoline flows at many filling stations and the oil industry dominates.
Then came a formal EPA request for public comment on possibly reducing biodiesel quotas. The Sept. 26 "notice of data availability" that set those potential changes in motion posed some 20 questions about ways to lower quotas. None related to increasing the mandate. It explicitly invoked oil industry arguments about the danger of relying on imported biodiesel.
A day later, Bloomberg reported the EPA was weighing a plan to allow exported biofuel to count toward domestic quotas -- a move that would drive down compliance costs for refiners but disadvantage many ethanol makers.
The threat was obvious. "It galvanized our industry," said Brooke Coleman, executive director of the Advanced Biofuels Business Council.
The oil industry, by contrast, remained fractured over the best prescription for what they argue are rising costs of complying with the law. Oil industry lobbyists urged Trump administration officials not to give in to an "extortion" attempt by senators, nor back down from changes they described as modest fixes needed to keep gasoline prices from spiking.
But they were outmatched. In the Midwest, the news of a possible reduction in biofuels quotas arrived as cash-strapped farmers were already growing concerned about Trump’s trade policy. Taking the teeth out of a program that helps to put a floor under corn and soybean prices would only add to their current woes, they worried. Some 38 percent of the corn crop is destined for ethanol plants, according to the U.S. Department of Agriculture.
The response was immediate. Ethanol supporters who had battled biodiesel backers on other policy matters linked arm in arm....MUCH MORE
From the Political Capital website:
Political capitalism is a private-property, market-oriented system that is compromised by business-sponsored government intervention. It is a socioeconomic system in which many or most regulations, subsidies, and tax-code provisions result from the lobbying efforts of directly affected businesses and their allies.
Today in the United States, there is greater political transparency and competition between political elites than was evident in the business-dominated past (the 19th and most of the 20th centuries). Interventions routinely result from non-business special interests representing education, the environment, labor, minorities, religion, retirees, science, and taxpayers, among others. Still, business interests—unified or in opposition—are arguably the most important of the elites that compete for special government favor in American politics today.
There are two avenues to business success under a private-property, profit-and-loss system. When using the economic means, or free-market means, businessmen provide goods or services in an open market and rely on voluntary consumer patronage. When using the political means, businessmen obtain a governmental restriction or favor that provides the margin of success beyond what consumer preference alone would give. Market entrepreneurship is the way of capitalism; political entrepreneurship, or rent-seeking as it is known in the economics literature, is the way of political capitalism.
Business interests welcome competition for the things they buy (to minimize costs) far more than for things they sell. They may profess support for free enterprise in general but not in their particular area. There, competition is disparaged as "unbridled," "cut-throat," "excessive," or "unfair," and calls are made to constrain the free market.
Historian Gabriel Kolko has defined political capitalism as "the utilization of political outlets to attain conditions of stability, predictability, and security—to attain rationalization—in the economy." Much of the intervention that he and other historians documented in U.S. history was for business, by business to "allow corporations to function in a predictable and secure environment permitting reasonable profits over the long run."...MORE