RFS: A Bootlegger’s Dream

In the 1980s, Professor Bruce Yandle of Clemson University developed the Bootlegger and Baptist theory of public choice to describe how private interests use political action to extract profits by wrapping their activities in the garb of the public good. The theory derived its name from bootlegger support of Baptist efforts to prevent the sale of alcohol on Sundays. Bootleggers supported those efforts because they limited competition without restraining the demand for booze.

The ethanol lobby, with its epicenter in Iowa, promotes the RFS with all sorts of claims about environmental and energy security benefits, all of which are illusory. When Congressman Henry Waxman needed votes to pass the Clean Air Act Amendments of 1990, he made an ethanol deal with the farm lobby and citizens have been paying the price ever since.

At the time, the auto and oil industries made the case that they could meet reduced tailpipe emissions without Congress telling them how.

This confidence was based on the results of the most extensive fuel-vehicle testing program that had ever been conducted. Instead, a formula for making gasoline was written into the Act. Imagine, legislators acting like chemists? Not being satisfied with that mandate, Congress then mandated specific volumes to be blended on a legislatively set time schedule. It assumed that gasoline consumption would just keep rising. $140 crude oil and the great recession relegated that assumption to the scrapheap of failed pork barrel initiatives, since gasoline demand peaked around 2009. Since then there has been increasing pressure for EPA to lift the 10% limit on ethanol blending so that higher percentages can be used. This pressure continues even though auto manufacturers will not warranty non flex-fuel vehicles using gasoline with higher percentages.

Every politician knows that there is no economic, energy, or environmental reason for the RFS standard but when it comes to presidential politics there are not many profiles in courage. The admonition to do the right thing and let the chips fall where they may does not apply when it comes to Iowa and presidential campaigning.

As the federal government has grown ever more powerful and expanded the regulatory state, crony capitalism has grown like a crop on steroids. Since 1970, the number of federal regulations has grown from 69,000 to 130,000. As they have, some firms and special interest groups with lawyers and lobbyists have worked the system to promote their agendas and constrain competition. This is one reason why economic growth and capital investment have been so anemic. Too many firms are gaining their profits in Washington instead of in the marketplace where competition breeds innovation, job creation, and economic efficiency. When Senator Elizabeth Warren says that the system is rigged she is right even though her prescription would only make a bad situation worse.

The President, the Congress, and Presidential aspirants could for once face up to the serious consequences on continuing down the road of creating and rewarding more bootleggers. The RFS is a good place to start and the Iowa media could begin telling the citizens of Iowa the truth. Their obsession with Washington pork is part of a problem and not part of a solution to any of our problems. US farmers can do quite well by meeting the food needs of an expanding global population. Crony capitalism will eventually kill the goose that lays the golden egg of prosperity unless it is stamped out.

 

This article appeared on the National Journal’s Energy Insiders weblog at https://disqus.com/by/wokeefe/

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