Time to try a free-market energy policy

Phil Kerpen President, American Commitment
Font Size:

Time after time, politicians believe they know best. Taxpayer-funded investments in “green jobs” have been repeatedly exposed as failures, but what F.A. Hayek called “the fatal conceit” — the idea that central economic planners have the knowledge and wisdom to make decisions for us — keeps a firm grip on Washington. Politicians seem intent on picking winners and losers, substituting their own political whim for legitimate consumer preferences, but fail to recognize the disastrous consequences.

Consider this. On Thursday, the Ways and Means Committee will meet to consider whether micromanaging our energy supply through the tax code is the proper policy, and if so, which favored companies and technologies should benefit. One specific item on the agenda: a bill to provide enormous new subsidies for vehicles powered by natural gas. The very next morning, a hearing will be held right down the hall at the Energy and Commerce Committee so that lawmakers can shake their fists for the cameras, loudly denouncing the Solyndra scandal and a multi-billion-dollar Energy Department loan guarantee program designed to prop up solar panel production and other “green” technologies.

It’s not just solar. Jimmy Carter’s Synthetic Fuels Corporation was a failure. Ethanol subsidies have driven up food prices around the world, but the industry has still failed to compete against the cheap, abundant fossil fuels that American consumers want. Environmental groups now denounce the subsidies since it turns out that ethanol is not so clean after all.

The lesson of Solyndra, and the broader disaster that so-called green jobs have been here in the U.S., is that the results of government intervention to support favored energy technologies range from failure to scandal. But some in Washington never learn.

The next massive subsidy scam is called H.R. 1380, the so-called New Alternative Transportation to Give Americans Solutions Act of 2011 or NAT GAS Act. The bill would provide hefty subsidies — $64,000 per truck, in this case — to subsidize the conversion of vehicles to natural gas. The bill, sadly, has bipartisan support, including over 80 Republicans who apparently believe that the only difference between right and wrong is which industries they prefer to lavish with special giveaways.

The consequences of huge subsidies to shift natural gas into the transportation sector are easy to foresee — especially if the EPA succeeds in its efforts to greatly curb natural gas production through restriction on fracking and other burdensome regulations. If we artificially boost demand at taxpayer expense, prices will go up. That means higher natural gas bills for home heating, and it means higher prices for all the industries that use natural gas as a feedstock. Just as ethanol subsidies rippled through corn prices to higher food prices, natural gas subsidies would have economy-wide effects through higher prices for chemicals, plastics and fertilizers.

Maybe natural gas is the transportation fuel of the future. But the way to find out is to cut back on regulations and restrictions and make clear that we will allow clean production of natural gas in this country. Then let the market sort it out.

The official question being asked at Thursday’s committee hearing is “whether energy policy should be conducted through the tax code.” The answer is no. We need a tax code that is flat, fair and treats industries the same way. The purpose of the tax code should be to raise revenue for the legitimate functions of the federal government. It is not to tip the scales toward favored technologies.

New subsidies, like the NAT GAS act, should be off the table. It’s time to stop picking winners and losers, cut back on unnecessary regulations and let the free market unleash America’s energy resources based on consumer demand — not political whim.

Phil Kerpen is vice president for policy at Americans for Prosperity and the author of “Democracy Denied: How Obama is Ignoring You and Bypassing Congress to Radically Transform America — and How to Stop Him” (BenBella Books, October 18, 2011).

Tags : energy
Phil Kerpen