Trump wants to “drain the swamp”. Here’s one way for him to do so

In Washington, several of Donald Trump’s nominations to key federal government positions are being held up for political reasons. Among them is that of William H. Northey, who was appointed by the White House to the post of Under Secretary of Agriculture for Farm Production and Conservation. Northey’s confirmation is currently being blocked by Senator Ted Cruz over the Trump administration’s silence regarding the recent altering of the U.S. Renewable Fuel Standard (RFS).

The blockade came after Cruz and Senator Mike Lee, along with seven others, sent a letter asking for an urgent meeting on environmental policies concerning biofuels (they later got it). The lawmakers believe the Renewable Fuel Standard needs a serious overhaul, and, in order for the White House to live up to its rhetoric on battling special interests in Washington, fundamental reform of America’s wasteful ethanol policy must be made a key priority.

The role of overturning the RFS mandate—which dates back to 2005 and makes it compulsory for producers to add 15 million gallons of ethanol to gasoline—would ultimately fall on the Environmental Protection Agency, currently headed by Scott Pruitt. There is precedent for progress on this matter. In 2013, the Obama administration reduced the amount of mandated ethanol from 18 million down to the current 15 million, due to the fact that there wasn’t nearly enough gasoline to mix it into.

The nine senators are very concerned about the issue. They write in their letter:

We request that within the next three weeks, you convene a meeting regarding the RFS and pro-jobs policies with us, our Senate colleagues who previously lobbied you on behalf of the ethanol industry, and relevant members of your administration to discuss a pathway forward toward a mutually agreeable solution that will also save refining jobs and help unleash an American energy renaissance.

Their worries are indeed well-founded. Small producers, for whom the cost of mixing the mandatory amount of ethanol is extraordinarily high, tend to opt out of their obligations by referring to Renewable Identification Numbers (RIN), which allow them to pay for the production of their ethanol by larger operators. What sounds incredibly nonsensical is indeed no less than that: it’s a 15-million-gallon guarantee for the ethanol lobby, which has effectively persuaded multiple past administrations to write their market-distorting priorities into American law. This system is a drain on the performance of small- and medium-sized businesses and the jobs that they create. Between February and August, a price hike of 200 percent on biofuel credits made it clear that the big winners are actually hedge fund managers, not the ethanol farmers working in the business. The system ends up benefitting Wall Street, not Iowa.

Trump was voted into office on the promise that he would drain the swamp—meaning rid Washington of its damaging lobbying sector and create public policy in the interest of the people rather than whoever is best at peddling influence. One of the many ways to do that would be to get rid of the Renewable Fuel Standard altogether, which would see the energy market become fairer. Right now, the crony capitalism of the ethanol quota is causing small refineries to lose their ground to large companies, and is costing the United States thousands of jobs.

Senators who succumb to the ethanol industry’s lobbying are also holding up key nominations; they want not only to maintain the RFS, but to expand it. The most astonishing part of their stance is how blatantly obvious it is that they’ve been bought off, as it makes no sense, either from a jobs, business, or environmental perspective, to support the current framework.

The RFS is a crony creation, and while it would ideally disappear altogether, other solutions are possible. There is a middle ground between abolishing it completely and expanding it: amending the RINs system to allow exports. By permitting exports to regions such as Europe, which is consistently keen on the use of ethanol, the Trump administration could boost agricultural production in the United States and put job creation back on track. The United States is already creating thousands of jobs through Europe’s demand for biomass products such as wood pellets, which present a more environmentally friendly alternative to coal. This is a result of Europe’s increasing skepticism of nuclear energy, which has powered much of the continent for so long.

It stands to reason that an amendment to the Renewable Fuel Standard is the least that the Trump administration could do to stand against crony capitalism and say yes to market reforms. However, in order to that, the president first needs to say no to corporate lobbyists and the senators who are in their back pockets.

This is a key area in which Donald Trump really can drain the swamp while keeping his promises on job creation. What is he waiting for?

This article was first published by The American Conservative.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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