With Congress back from recess and energy prices soaring, politicians are beating the drums to stir up public support for the energy bill stalled in the Senate. The United States "desperately needs a coherent energy policy, and S. 2095 (the bill in question) will address many of the critical issues facing our nation," say 20 senators of both parties in a letter to Senate Majority leader Bill Frist. President Bush likewise charges, "If [lawmakers] are interested in jobs staying here at home, if they're interested in creating an environment in which we're competitive, we need an energy bill, one that encourages reliability for electricity, and one that encourages conservation and helps us become less dependent on foreign sources of energy."
This is not simply nonsense -- it's nonsense on stilts.
Why must the government establish a "coherent energy policy"? Generally, we've left decisions about energy investments to private investors. Five- or ten-year economic plans are traditionally the stuff of Russian Politburos, not American presidents. It's amazing to hear Republican politicians argue that, absent some guidance from Washington, businessmen will blindly stumble through the marketplace, unable to intelligently invest in the energy sector absent some sort of congressional blueprint. It's also insulting to one's intelligence to hear politicians claim that, absent political interference in the marketplace, consumers will not have the faintest idea how to conserve energy or even be aware of the benefits of doing so in the face of high prices.
In short, we can either allow private investors and supply and demand to dictate the contours of America's energy economy or we can allow politicians and government planners to do so. Aren't Republicans supposed to favor the former and not the latter?
President Bush's contention that the energy bill promises a cure for everything that ails the economy is likewise preposterous. Almost every one of the 1,000-plus pages of the bill is dedicated to throwing taxpayer subsidies at politically favored energy industries. Now, it's no surprise that the companies which will receive this kind of gift are all for it -- or that the employees of those companies and the businesses dependent upon them are likewise charmed by the proposal. But with the federal government already a half trillion dollars in the red, can we really afford such generosity, particularly when the recipients of this tax-funded largesse are among the largest and healthiest corporations in the world?
Nor is there any reason to think that spreading federal tax dollars like pixy dust over uncompetitive technologies will magically transform them from ugly market ducklings into beautiful economic swans. If something like clean coal technology has economic merit, it will have no trouble attracting investors. If it doesn't, then no amount of federal subsidy will magically give it economic merit.
This is not ivory tower theory -- it's hard historical fact. If throwing tax money at "neat-o" technologies that couldn't pull their weight in the marketplace were a worthwhile endeavor, we'd all be driving cars powered by "synfuels," or, alternatively, tooling around in roomy, conventional automobiles getting 75-plus miles per gallon. Meanwhile, we'd be lighting our homes with electricity generated by the neighborhood fusion power plant (or, alternatively, from nuclear power plants delivering electricity that was literally "too cheap to meter"), or would even have unplugged from the power lines completely thanks to ubiquitous, low-cost residential solar energy panels.
Today's political energy fads -- be they "clean coal" technology, hydrogen powered fuel cells, or whatever -- are no different than yesterday's. Nor are today's politicians any better positioned to outguess private investors than yesterday's. All that has changed is a new set of hucksters have come around to fleece a new set of voters. We might as well burn the money and dance around the fire for all the good these expenditures will do.
Putting established energy sectors on the dole is even less justified. If investors can't make a buck by building a natural gas pipeline from the Alaskan North Slope to southern Alaska, then fine -- it tells us that the project will be a net drain on the economy. Likewise, if small oil producers in the Lower48 can't compete with producers elsewhere, it tells us that their labor and capital could be more productively invested elsewhere. Subsidizing such projects and industries simply shovels money into an economic black hole.
Virtually nothing in the energy bill currently languishing in the Senate will improve the performance of America's energy markets. On the contrary, it would transfer money from taxpayers to well-connected energy industries that either don't need the hand out or shouldn't get it in the first place. America should "just say no" to this modern version of political tonic water.