Pataki Would Phase-Out RFS and Wind Tax Credit, but Lays out Plans to Open Markets

Jun 15, 2015

This is the Q and A between Iowa Board of Regents President Bruce Rastetter and former New York Governor George Pataki at the Ag Summit March 7, 2015 in Des Moines.

R: Governor Pataki, welcome.
P: Thank you. Nice to be here with you, Bruce.

R: We appreciate you coming. From what I understand, you grew up on a farm?
P: I did. You know, when you think of New York, and the governor of New York, probably the last thing you think of are family farms. But when I left as governor we had over 35,000 family farms in New York state. I’m the last governor in over 100 years who was born, raised and spent most of his life on a family farm.

R: So, what role do you see of agriculture in the national economy?
P: It’s absolutely critical. First of all, it’s one of our most important commodities and products,  and it creates enormous employment. It also helps with our balance of trade because we export a great deal of our agricultural products and don’t just feed America but feed a large part of the world. But I think most importantly, one of the things I learned growing up on a farm is not just the economic value of agriculture, but the character and the values it teaches you. You know, when I was growing up we learned the value of work. And it didn’t matter if you were eight years old or 80 years old. When I was a little kid they would have us go out and pick up the full berry baskets. We were too small to pick and my 80 year old grandfather would be out there at the same time, you know, picking the heavier things. So you learn the value of family. You learn the value of work. You learn that if you plant something today you’re not going to get it tomorrow. You have to defer and keep working at it. And I think those values are extremely important for all of America, not just rural America.

R: So, as governor of New York you had to deal with a variety of environmental problems.
P: Sure.

R: One of the challenges in New York and Iowa is run-off. How would you suggest we deal with that?
P: When I was governor we did a lot of things in agriculture. And on run-off, we did a non-point source solution. We did a number of things. First, for large farms where you had over 500 animals, we created a program for methane digesters where you would take the manure, concentrate it. And we had a program where the state would provide grants of up to 75% of the cost of turning the methane from manure into energy that was used on the farm. We also had a program for smaller farms that couldn’t take advantage of that, where we had a grants program that would allow them to store manure in concrete contained facilities, and we would help them with that. We would help them with protecting watersheds and streams that ran through the farm. And then with the large feed-lots, New York State, when I was governor, was the first state in America to issue an emissions permit for a CAFO, a concentrated animal feedlot operation. And that was really historic. So we worked very closely with the Farm Bureau and agriculture to put in place all these programs on non-point source pollution and with concentrated animal feed-lots.

R: So as you think about those and various programs available by the USDA -- the CRP, the wetland reserve, the filter strips… and then beyond that, which are voluntary programs, and some of the ones you mentioned are state supported. How do you view the EPA’s recent Waters of the US, and the rule-making rather than basic programs?
P: I think that Waters of the US is just classic of the Obama EPA -- dramatic overreach. And it’s not just this proposal that should be shot down. It’s so many of the overreaching regulations that the EPA has imposed on business, small business, and the people of America. It’s wrong. It shouldn’t happen.

R: So, let’s talk a moment about ethanol.
P: Sure.

R: What’s your perspective on the RFS?
P:  You know, I’m a great believer in renewable fuels, and did a great deal when I was governor. But I honestly don’t think the federal government should require anybody in America to buy anything, whether it’s renewable fuel or Obamacare. I support ethanol, but I believe we should phase-out the RFS, but not simply do that. We have to have alternative markets. And I did that in New York. You just heard congressman King talking about how the petroleum industry has shut out ethanol, and they’ve done a very good job of that. We worked to overcome that when I was governor. And, I’ll tell you one thing you probably don’t know. When a service station or gasoline station signs a contract with a supplier, often that contract says they cannot provide any other alternative fuel. So that if you want to put in ethanol or natural gas or electric chargers, you can’t do it. That’s the petroleum industry. And what we did in New York was pass a law that I pushed and signed saying that those contracts are void. If a service station wants to put in any fuel, whether it’s ethanol, electric chargers or gas, that they do it. There are two other things I’d do to open up the market. First, when CAFE [Corporate Average Fuel Economy] was negotiated the automobile makers came in and said they were going to work a lot to make flex fuel vehicles more available. They haven’t done that. The solution is not mandating people to buy something. It’s giving consumers choice in E85 or anywhere from E10 or E15 up to E85. We want to put in blender pumps across America. When I was governor we had a pilot program to provide assistance to fueling stations that wanted to put in alternate fuels. There is so much that can be done. Ethanol is a good thing for America and for the world. It is clean. It is renewable. It is American made. We should push it, but not by forcing people to buy it.

R: What about wind?
P: Wind is something that... I worked a lot on both of these issues, and we have a number of wind farms that we were able to get in upstate New York. I think that it’s important, but I think that we have to totally restructure the tax code in Washington and get rid of all the exemptions, the loopholes, the breaks, the carve-outs, including the wind tax credit. Wind now is mature. It has reached the point where it can compete with regular energy on a grid parity basis. So it doesn’t need that. But there are two problems with wind where we can do things to make it more competitive. The resource is often far removed from where the people want to use it. If you have a great wind source in North Dakota you need a market and you have to get it to Minnesota or Chicago and the permitting process is brutal. I would have preemptive permitting for multi-state, high voltage, renewable power like wind, and like biomass, and others. And I would also work on storage. Because the other problem with wind is if it stops blowing you don’t have any power. So work with the wind industry to have both better storage, and, combined with natural generators that can be fired up quickly so that instead of being an intermittent source of power, wind can become a reliable source of power.

Former New York Governor George Pataki explains his views on agricultural policy
Credit John Pemble / IPR

 R: Let’s switch topics and talk a little bit about immigration. As you are aware, ag is very dependent upon immigrant labor. That’s legal immigrant labor and trying to make sure that that happens under H2A, temporary Visas. The immigration plan continues to be debated in Washington while farmers and ranchers are trying to make sure that they stay within the guidelines of what they think the law is. What’s your perspective on H2A and E-verify? Where should we flesh out the immigration plan?
P: Well, the two broad issues are what do we do with H2A and what about those who are already here illegally? On H2A, to me it seems very simple. You know, I still have a farm. And a couple years back I wanted to get a seasonal employee who had expertise in the area that we were trying to grow on our farm. And I looked at the requirements, and you had to publish the job offering. And by the time the person could have taken the job, the crop would have been destroyed. So, we have to do a couple of things with H2A. One is streamline the process so that it doesn’t take that long. And if you need workers seasonally, you are going to get them before the season and not half way through the season. And, the second is we should have a longer program for contract workers who we know can stay for a number of years and work. It might take longer to process them, but let them go through the process and stay here.

And, with those who are here illegally now, I believe it’s totally unrealistic if we think we’re going to take 11 million people and send them back where they came from. I think we do have to find a way for the vast majority of them to legalize their status here. And you’ve heard a lot of different proposals on that. I agree with much of those proposals. You just heard about Lindsey Graham saying they have to wait at the back of the line, I agree with that. Would have had to work, not be dependent on government, not created a crime. But those proposals, to me, leave two huge holes in the immigration issue. First is when we allow people to stay and grant them legalized status, we’re telling other people, “come here illegally.” Just hide out long enough, wait long enough, and we are going to do it again, because this would be the second time we did it. We do not want to encourage more illegal immigration. So, I would make any law that would normalize their status dependent on us controlling the borders. And, not trusting the government, but making sure that the director of Homeland Security certifies under oath, before any law takes effect, that fewer than 100 illegal immigrants have entered this country either across the border or by over-staying their Visas for six months prior before that law takes effect. What that does, is it says to the people who are already here, don’t tell others to come because if they do you’re not going to have a chance to have legal status. What it’s going to do is tell them that, don’t come, because if you don’t come then I can have the opportunity, perhaps, to stay in America. So, I think that’s absolutely critical so we know that we control our border first.

The second thing is:  We are a nation of the rule of law. And the rule of law is absolutely critical to protecting our rights. And it seems to me sometimes this administration forgets the constitution exists and we have to do more to hold their feet to the fire about the constitution. But when the first act of millions of people coming to America is to break the law, there has to be a consequence. And we have to understand that we cannot have an effective rule of law unless there is. So I would require that those seeking legalized status first acknowledge that they have broken the law and that they will abide by the law, and then pay a sanction. Not just let them stay here. I don’t think it’s realistic that we’re going to throw someone in jail who’s been here for ten years working because they came here illegally. We’re not going to fine somebody making $10/hour thousands of dollars. But, we can do to uphold the rule of law what we do in communities across America when someone has broken the law - but you don’t want to put them in jail - and that is community service. What I would do is have mandatory community service -- 200 hours. You acknowledge you broke the law. You work in a school. You work in a hospital. You work in a nursing home voluntarily by community service. So that we both know, we control the borders and we know that we have upheld respect for the rule of law. So with those changes and the changes to the H2 program I think we could assure that adequate, good quality help agricultural employees are available.

R: Let’s switch gears and talk about trade. And, that’s obviously very important to the U.S.A. What’s your opinion on the trade promotion authority, and whether you as president would want that?
P: I think we should give the president trade promotion authority. I’m a great believer in free trade. I think it has helped America, but we also have to, when we negotiate agreements, understand that there are nations that are going to pretend they are for free trade but put up barriers. And so many Asian countries in particular put up artificial barriers to American agricultural products. Others have put up barriers for beef and things of that nature. So negotiate a fair trade agreement. Give the president the authority, but make sure that it is in fact free trade that goes both ways and not just an open door in the United States.

R: So, would that include Cuba?
P: Cuba… See I actually visited Cuba three or four years ago on a humanitarian mission that was authorized by the government. And it was one of the most distressing trips I’ve ever had in my life. Cuba is not just a Marxist state. It is a Stalinist state. I’ve been to China. That is a Marxist state. Cuba is different. It is very much more totalitarian. No free markets, the people are not allowed to own anything. So I would not open up relations with Cuba until we see significant change in their behavior. Same as with Iran. I would not allow Iran to have any opportunity to have any sort of a nuclear program until they stop exporting state terror across the Middle East and threatening us here.

R: So, let’s switch gears and talk a little bit about broadband. President Obama is advancing a Net Neutrality policy. What are your views on that?
P: You know, just what we need is a government department of the Internet. What a terrific idea. All the other government departments work so well. We’re going to take something where no one complains, where it’s a perfectly good system, and have government regulators come in and treat it as a utility. I think it’s utterly ridiculous. This is, if ever there was a case where the maxim, if it ain’t broke, don’t fix it, applies, it’s to the government trying to regulate the Internet. Broadband though… I know Governor Branstad has a very extensive agenda to expand broadband across Iowa. I think it’s extremely important. Because when you’re talking about the rural economy, small businesses, farms, all could expand their opportunities if they had that inter-connectivity.

R:  So as we think about modern ag, and part of modern ag has been bio-tech to help meet the basic needs of the poor in both the U.S. and around the world. Your perspective on bio-tech?
P: Bio-tech has been absolutely critical. I mean we have seen an explosion in the global population. We’re going to see probably another 2 billion people, going from 7 billion to 9 billion globally over the course of the next decades. And to be able to continue to expand our productive capability here in the United States is critical. So I’m very supportive of GMO agriculture. I think the science is quite clear it poses a threat to no one. I don’t think we should allow a state to try to frighten people by requiring labeling on GMO materials any more than we should require that organic food have a little note at the bottom saying cow manure was spread on this field six months ago and you better wash it very carefully. Give the opportunity for American agriculture to grow, and GMO not only helps us with that, it also helps reduce the need for pesticides and other applications. So I think it’s absolutely critical to continue to move forward with that.

R: So as you think about rural America and some of the challenges it faces in job opportunity, income levels, in education, health care access. How would you change that?
P: I think about this a great deal. Broadband is a real part of that. It’s not just for the access for small businesses or for agriculture, but also for quality of life issues. You mentioned health care, and you can have a local clinic that has the ability, if you sprain your ankle or hurt your shoulder, to do an x-ray and send it over the internet and have it read 1,000 miles away by the experts. So you can enhance health care in rural America with broadband. Same thing with education. Iowa has a great educational system, but you could offer more opportunities if you had long distance learning with broadband education. And one of the other things I think are absolutely critical to rural America, two things: One is, first of all, manufacturing. I refuse to be one of those who believes that Americans can’t out-compete the rest of the world making things if we create a fair economic climate. I know the work ethic of America, and I know we can do that. The biggest single impediment is Washington, where our taxes are so high and the regulatory burden is so high that manufacturers in particular find it hard to compete. We’ve got to dramatically reduce both of those burdens placed on rural America and all of America.

And then when it comes to agriculture, the strength in agriculture, two things: Lower the cost, increase the revenue. Lowering the cost, when I was governor we did three things. We eliminated school property tax on the first 250 acres of any farm.  We eliminated sales and use tax on any single product sold to a farm used at that farm for production, whether it was fertilizer, or fuel, or lumber for a barn. And we exempted all farms in New York state from electrical energy taxes and charges, utility charges. And that had a profound impact on lowering cost. Raising revenue, it’s higher value-added products. And when I was governor another thing we did, we created a shared facility where farmers could bring their produce and themselves, use that facility without a huge capital investment to upgrade their products. If you’re selling a commodity you get the commodity price. If you can turn that into a specialty product you get a much higher price. And, I’ll just give you two examples. We had apple growers bring in their apples and convert it to apple juice. We had cherry growers bring it in and convert it to cherry juice, higher value-added. And I know this because I still have a farm. My wife and I have a 412 acre farm up in the Champlain Valley. And the last ten years the main crop we have raised there has been debt. You know pretty much anybody who’s ever tried to make a living on a farm knows that that is the most likely crop that’s going to succeed year after year regardless of the weather. But what we have done in the last year is we’re trying to bring a value-added product. So, we now have Angus cattle. We have 63 of them. We’re hoping to have our first calves this weekend. And, in fact, Bruce, I should probably name one after you, if we have one this weekend. We’ll take a look at that…
R: Don’t pick on it.
P: And, we’ll make sure it’s the last one we send off to the processing plant if we do name it after you, Bruce. But, we’re going to have 23 calves this spring, God willing. And, what we do is instead of just selling hay, we now have the grass-fed cattle. We take them to the processing plant. We’re looking to retail it to have higher value-added. So higher value-added crops, lower costs bring back manufacturing because we have the work ethic and the rest of the world, the labor costs are higher. Transportation costs are higher. We can out-compete anyone with the right government-created economic climate.

R: So, you mentioned earlier talking about taxes. And, Washington now again is talking about revamping the tax code. They’re talking about capital gains, the basis, they’re talking about the estate tax. What would be your advice to them?
P: My advice would be to start all over. If you look at the tax code, and this is a fact: The tax code with all its regulations is 74,000 pages of lobbyist written gobbledygook. There’s not one person in America who can understand all the exemptions, and the credits and the rules, and the carve-outs and everything else. Get rid of virtually all of that. Keep some, like the home mortgage deduction, charitable deductions, things of that nature, and dramatically lower the rates on everyone. It would, first of all, make sure people pay their fair share because they’re not going to be able to take advantage of those loopholes and exemptions. The second thing it would do is it would grow our economy. Because we would see businesses say, “I understand what’s going on. The rate is lower. I don’t have to look for a loophole or a gimmick. I can just hire an employee and make more products.” And, the third thing it would do, is it would put lobbyists out of business. And believe me, I think that would be a very good thing for America.

R: Governor, that’s, we’re out of time so thank you for coming.
P: Bruce, thank you. Thank you very much.