Ethical governance is better governance. Corruption is bad for economic growth. Voters often reject candidates and political parties associated with corruption.
And the first two months of the Trump administration have ethics experts of all political persuasions apoplectic.
But observers wonder if corruption will matter – will it ever be linked to concrete, real life problems for people who do not follow politics closely?
We are about to find out, as the danger posed by Carl Icahn’s role within a Trump administration (here’s a piece I wrote in November ) has given rise to a concrete example of Trump rejecting the interests of some of his core voters in favor of his donor and pal, Carl Icahn.
Stories thus far have focused on the mechanics of Trump’s efforts to benefit Icahn, who has an interest in a refinery that is opposed to federal ethanol policy that has been very beneficial to Iowans.
However, less has been made about how Trump’s assistance to Icahn represents a pivotal flip-flop against key Trump voters in favor of a donor and business partner.
Moreover, a powerful political family that has done a lot for Trump, the Branstads, appears to have betrayed their past allegiance to Iowa and ethanol in return for Trump administration jobs.
In short: Icahn has corrupted Trump, Trump has corrupted the Branstads, and the Branstads and Trump have betrayed Iowans.
1. Branstad, Trump, Ethanol and Cruz
People have a tendency to view all things that occurred as inevitable once they happened, rejecting contingency. Few fields evince such a fallacy more than politics.
Donald Trump was not the inevitable Republican nominee. A blowout loss to Senator Ted Cruz (R-TX) in the opening Iowa Republican Caucus would have been a huge problem for Trump.
One reason Donald Trump finished a strong 2nd in Iowa was the surprising support of Iowa’s Republican Governor, Terry Branstad. And Branstad was very explicit – Iowa needed to defeat Cruz, per Branstad, because Cruz was bad for ethanol.
The federal ethanol mandate “has attracted major employers like Dow and DuPont” to produce ethanol, and since “the law’s passage, the price of corn has more than doubled, to an average of $4.11 per bushel in 2014 from an average of $1.96 per bushel in 2005. Between 2011 and 2013, it climbed to $6 per bushel.”
Lincolnway Energy President Eric Hakmiller told the New York Times that, “If you live in Iowa in a nice house, and send your kids to good schools, it’s because of ethanol.”
As the conservative National Review summarized, Branstad acted to protect ethanol by intervening in the critical Iowa GOP Caucus against Ted Cruz.
Governor Branstad, historically known for welcoming all candidates to Iowa and remaining rigorously neutral throughout the process, boosted Trump in the home stretch before the February 1 caucuses by casting his chief opponent, Ted Cruz, as a “big oil” advocate whose anti-ethanol stance could be “very damaging to our state.” Two weeks before the caucuses, Governor Branstad sent shockwaves through the state by saying of Cruz at a renewable-fuels summit, “It would be a big mistake for Iowa to support him.”
It wasn’t just Governor Branstad, but also his son.
At the same time, Eric Branstad, who runs a Des Moines-based consulting firm called Matchpoint Strategies, was leading a pro-ethanol group, America’s Renewable Future. In that capacity, he and his colleagues in January began shadowing Cruz around the state in a decked-out Winnebago with “Ted Cruz Can’t Be Trusted!” slapped across its side. (emphasis added)
The Branstads didn’t just denigrate Trump’s biggest rival, Ted Cruz, they assisted Trump himself.
Eric Branstad surprised Iowa GOP veterans by not just hounding Cruz, but promoting Trump. Any doubts about his allegiances were erased on caucus night, Republicans say, when Eric Branstad spoke on Trump’s behalf at Merrill Middle School in Des Moines.
If the younger Branstad’s support for Trump was surprising to peers, his father’s accommodation of the controversial candidate was perplexing. Governor Branstad refused throughout the Iowa campaign to condemn or criticize Trump, even when he skipped the Des Moines debate three days prior to the caucuses.” (emphasis added)
Every little bit of assistance mattered – while Ted Cruz ultimately won Iowa, it wasn’t the knockout win he needed or had previously had cause to expect. As Politico put it on Iowa Caucus night,
The Texas senator, a clear frontrunner in Iowa just a month ago, took the top spot in the state’s first-in-the-nation GOP caucuses Monday night, receiving 28 percent of the vote with 99 percent of precincts reporting. But Donald Trump’s close second-place finish and a strong third-place showing from Marco Rubio could leave the Republican presidential race just as muddled as it’s been for months […]. (emphasis added)
In short, Trump said he was “100% behind” the ethanol mandate, and might even strengthen it. In turn, the Branstad family offered valuable assistance to Donald Trump. Branstad family support helped Trump avoid a far-away third place, boosting Trump over Marco Rubio into second while pulling potential landslide winner Ted Cruz back to the pack.
The Branstads acted explicitly in the name of ethanol.
And that wasn’t the end of what the Branstads and Iowa did for Donald Trump in 2016.
2. Swing State Swings: Iowa Went for Trump, Bigly
As The Washington Post noted, Iowa swung hard for Trump this fall: “Of the six swing states that were key to Trump’s unexpected win in November, his margin of victory was the highest in Iowa, where he beat Clinton by 9 percentage points.”
The Branstad family was at the core of this impressive win for Trump, which reversed Iowa’s typical Democratic Party presidential affiliation:
The Hawkeye State went for President Barack Obama twice and voted Democratic in the last six out of seven presidential elections […] and Republicans are working hard to turn it red for Donald Trump. The outcome of those efforts is critical to Trump’s path to the presidency, and Republicans admit they can’t win the White House without Iowa. [...] “We are ready for change and Mr. Trump brings that change,” said Eric Branstad, who is running Trump’s Iowa campaign. (emphasis added)
3. Interlude – Did Supporting Trump work out for the Branstad’s?
Seemingly so! Governor Branstad was nominated on Trump’s first day in office to be America’s Ambassador to China. As The New York Times noted, Branstad “likes to describe President Xi Jinping of China as an `old friend’” and has long sought to create close ties between Iowa and China.
4. Icahn and Trump
Icahn and Trump have had a complicated history. Icahn clashed with Trump as an investor in Trump’s hotels, but he “also provided financing at critical moments to keep Trump afloat.” Icahn also gave more than $200,000 to Trump’s campaign and Joint Fundraising Committee.
That past relationship has put Carl Icahn in a great position to make even more billions.
Trump’s presidency also stands to be particularly good for Icahn. He has long railed against regulation from Washington, most recently in the energy sector. Now he is being tasked by Trump to help him slash government regulations in the newly created role of special adviser for regulatory reform.
Trump’s transition team argued that because “the title comes with no official duties and no salary,” “it is therefore not subject to federal disclosure requirements or conflict of interest laws.”
5. The President of the Renewable Fuels Association: Trump a Real Threat to the Corn Belt
[Please keep in mind: this piece is about the realities of policymaking and how and why political promises come to be broken, not the important discussion about the science or policy of climate and biofuels]
Carl Icahn has a beef with the Ethanol industry with which the Branstad family and the state of Iowa are so closely associated.
Icahn “controls one of the largest independent U.S. refiners,” and because it can’t add ethanol to gasoline, it has been “forced to buy credits to meet the requirements” under “a 12-year-old law mandating the blending of ethanol in gasoline.”
Icahn “argued loudly and repeatedly during the general election that the burden shouldn’t fall on companies like his but on fuel blenders instead.”
Fortunately for him, Trump agreed. As David Dayen has noted, “Last September, the [Trump] campaign posted an unusually technical policy platform supporting Icahn’s preferred point of obligation change. After it was discovered, the campaign took it down within hours.”
However, that brief glimpse of Trump campaign policy detail on September 15th, 2016 was apparently meaningful to one rich man. On September 27th, Carl Icahn contributed $150,000 to “Trump Victory,” the largest single contribution ever from Icahn in either Open Secrets or FEC.gov .
Was the contribution worth it? Bloomberg noted last week that, “Carl Icahn’s stake in a Texas refiner [CVR} grew by as much as $126 million Tuesday after the billionaire investor and special adviser to President Donald Trump helped broker a proposal to alter U.S. biofuels policy.”
And as Public Citizen’s Tyson Slocum told Bloomberg, “This is the purest definition of a conflict of interest that you can get. It is clear that Icahn has played a role in influencing aspects of administration policy that have a direct financial impact on Icahn’s business at CVR.”
Unlike so much corruption in DC, there are not layers and layers of cause and effect separating the president, the presidential ally, and the decision. As Reuters reported,
“RFA President Bob Dinneen told Reuters on Thursday that Icahn, an unpaid adviser to Trump on regulatory issues, had been the source. `Icahn indicated that he had spoken to the president about this issue and the president is supportive,’ of making this change to the biofuels program requested by refiners, Dinneen said. According to Dinneen, Icahn said `the plan was to issue an executive order’ that would shift the onus of blending biofuels into gasoline away from refiners and further down the supply chain to gasoline marketers.” (emphasis added)
Dineen and the Renewable Fuels Association definitely acted like they had seen a ghost, per Bloomberg’s account last week. The Renewable Fuels Association was going to fight Icahn at the EPA until “he was contacted by the White House and told in “no uncertain terms” that Icahn’s request would be granted. Dinneen said he then tried to get support from within the industry to get the best deal available.”
While the Iowa Renewable Fuels Association is continuing to fight, they appear to be facing insurmountable odds.
6. Has Icahn’s Pay-off From Trump Been Worth It?
Recall how Trump committed (briefly) to Icahn’s position in mid-September 2016 and Icahn sent over his largest hard money political contribution ever a couple of weeks later?
Well, look at the past 6 month history of CVR Energy, Inc. CVR Energy, Inc. ended November 8th, 2016 (Election Day, when Trump was a heavy underdog) at $12.79 a share. By the end of following day, November 9th, CVR was at $15.87, and it has not been lower since, despite the EPA issuing on 11/10/16 a “Proposed Denial of Petitions for Rulemaking to Change the RFS Point of Obligation.”
On December 4, 2016, as Public Citizen has noted, the Wall Street Journal reported that Mr. Icahn was “among several people talking to the president-elect about who should lead the EPA...and having Mr. Icahn vet EPA candidates.”
CVR had closed 12/2/16 at $16.75 a share. Following the WSJ article, it closed 12/5/17 at $18.06 and reached $21.14 and $24.77 at the end of the December 7th and 8th, respectively.
What happened on December 7th? Oil industry favorite Scott Pruitt was announced as Trump’s pick to head the Environmental Protection Agency.
7. Branstad Attacked Cruz For Oil Over Ethanol, But After Ambassador Nomination Sings A Different Tune
Governor Branstad would have been expected to oppose Scott Pruitt, Trump’s EPA Director. Instead a CQ reporter tweeted that, “Iowa Gov. Terry Branstad, Trump China ambassador nom, told USDA Outlook crowd Trump-Pence adm committed to rural America on trade, ethanol.”
Indeed, Iowa Public Radio noted that,
Governor Branstad is expressing confidence that the new Donald Trump administration will be pro-ethanol, in spite of his recent pick to head the Environmental Protection Agency. Nominee Scott Pruitt is Attorney General for the state of Oklahoma. Pruitt has argued against the Renewable Fuel Standard in proceedings before the U.S. Supreme Court. The RFS mandates ethanol blends in the nation’s fuel supply.”
Well, what happened on the same day as Pruitt getting the EPA nod? Governor Branstad was chosen as Ambassador to China.
What about the Governor’s son, who ran Trump for Iowa after having run pro-ethanol America’s Renewable Future?
Neither Trump nor Icahn need worry about Eric Branstad, he is a “Senior White House Advisor” working out of the Commerce Department.
8. Conclusion
Once inseparable, the fates of the Branstad family and Iowa’s ethanol industry are now divergent.
The Branstad family initially got on the Trump Train because of ethanol.
However, as the Branstads secured prestigious Trump Administration positions, they’re okay with Trump undermining the ethanol industry that is so important to Iowa and the Corn Belt.
And while Governor Branstad prepares to become Ambassador to China, Trump donor Carl Icahn is laughing his way to the bank.
Trump is already struggling in Iowa, as “only 42 percent of Iowans approve of the job that he’s doing and 49 percent disapprove, according to a Des Moines Register/Mediacom Iowa Poll this month.” Among their current worries, “[m]any Iowans worry Trump might cut support for wind-energy and ethanol programs.”
What will Iowa, so important to Trump in 2016, make of Trump choosing Icahn over Iowa?
