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July 28, 2005 [LINK]

Energy bill: futile, misguided pork

The House passed the Energy Policy Act of 2005 today, and all indications are that it is little more than classic pork barrel politics, creating the illusion of serious action but accomplishing very little. Consisting of 1,725 pages, the energy bill passed by a vote of 275 to 156, in contrast to the razor-thin margin of the CAFTA bill. With such a big majority, it must be pretty good, right? Rep. Joe Barton (R-TX) called it a ringing endorsement of free enterprise system, while Rep. Joe Markey (D-MA) heaped scorn on it, calling it "socialism." (But I thought folks on his side of the aisle liked socialism...) For example, "The House bill includes incentives aimed at encouraging the nuclear power industry to build the first new plants since the 1970s," which is exactly the kind of statist (!) industrial policy that one might find in in France, Germany, or Japan. Likewise for the tax incentives to those who buy hybrid gas-electric vehicles; are those folks somehow more virtuous than those who just choose to drive less when prices go up? See Washington Post for more details. An editorial in today's Post paid the bill a backhand compliment: "It could have been a lot worse." Scott McClellan declared,

This is a good bill. ... This legislation will help us reduce our dependence on foreign sources of energy and help address the root causes that have led to high energy prices.

That assessment follows from the mistaken premise that higher energy prices are somehow unnatural or wrong. Has anyone in the White House ever read an economics textbook? The "root causes" of higher energy prices are exponentially increasing global demand (mostly from China, but also from SUVs) and steadiliy diminishing supplies. We live in a world of scarce resources: Get over it! Jerry Taylor and Peter Van Doren of the CATO Institute provide a libertarian critique of the Republican bill:

Although conservatives claim to find much therein to embrace, virtually every section of the bill represents a rejection of free markets and limited government.

As I wrote on June 15 in response to President Bush's speech on energy policy, if the White House had more long-term vision or political courage, they would bite the bullet and propose something truly radical that faces up to cold, hard reality -- something like an across-the-board tax hike on energy. That would accomplish more in one fell swoop than all those hundreds of special "incentives" that, to skeptical eyes, look a lot like political paybacks. While at the gas pump today, I saw a sticker that shows how much of the price per gallon is due to Federal and state taxes, and I was shocked that it was so low. Since the tax is assessed per gallon, not per dollar, the proportion of the price due to taxes declines as the price goes up. (For a comparison of gas taxes in the major industrial countries, see Unfortunately, many of today's "conservatives" regard tax hikes of any shape or form as anathema. Why? Because now that "conservatives" are in the majority, getting reelected has become their number one priority, which means taxes are a big no-no. Sad to say, it seems that the post-election "window of opportunity" the Republicans had to push through a truly far-reaching agenda has pretty much closed, and all we have to look forward to for the next three years are "minor repairs" that ignore fundamental problems. Another reason for the blind disregard for the laws of supply and demand among "conservatives" is that faith in the power of markets has gotten out of hand, to the extent that miracles are expected. Among the true believers, prudent skepticism is regarded as rank heresy.

To understand such blatant inconsistency between principles and practice, one must turn to a leading political scientist, R. Douglas Arnold, author of The Logic of Congressional Action. The energy bill can be interpreted in his framework as a deadly combination of a "politically attractive policy" (where local benefits are obvious, but the costs are hidden and diffuse) and a "politically compelling policy" (where the popularity of the intended effects outweighs the legislator's doubts that the means will actually work). The result: bad public policy.

More on Unocal

While we're on the subject of energy policy, take a look at the very first blog post by my old friend David Givens, on the subject of the bidding war between Chevron and China's CNOOC for Unocal, at

Posted (or last updated or commented upon): 28 Jul 2005, 11: 11 PM

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