Time to eliminate wasteful energy subsidies
It was just over three years ago that President Obama hailed Spain’s renewable energy subsidy program as a model that the United States should emulate. And it was just two years ago that his administration applied billions from our ill-fated trillion-dollar stimulus program to fulfill a similar vision here at home. In the process, Congress gave the president the leeway to fund everything from alternative energy loan guarantees — like the $535 million awarded to now-bankrupt solar panel provider Solyndra — to subsidies for renewable energy technologies that would otherwise fail commercially.
The administration promised that these subsidies would produce millions of new jobs: shovel-ready jobs, green jobs or jobs that cannot be shipped overseas — all advertised to appease the anxieties of voters suffering under great economic uncertainty and high unemployment.
These subsidy-laden efforts not only failed to achieve their intended outcomes, they also came at uniquely high costs to taxpayers, workers, businesses and consumers. To ensure this does not happen again, Congress should end the practice of providing costly, unnecessary and wasteful energy subsidies.
Aside from the lunacy of emulating the policies of a country like Spain (whose unemployment rate hovers above 20 percent) or granting our own federal government (the same one that amassed nearly $15 trillion in debt) the power to decide which particular companies and technologies to financially support, it’s clear that Washington politicians and bureaucrats are not capable and should not be involved in picking winners and losers in industry. To continue on our current track is a surefire recipe for higher prices, more wasteful spending and continued job losses.
The best solution is to scrap all targeted subsidies across the board while simultaneously enacting broad-based corporate tax reform that results in simpler and significantly lower rates. This way, all energy providers, as well as industrial consumers of energy, would compete on an even playing field and have incentives to invest private (not taxpayer) dollars to commercialize, produce and utilize all viable energy products.
Unfortunately, manipulating markets through subsidies is one of Washington’s favorite bipartisan games. Last week, House lawmakers introduced a four-year extension of the production tax credit for wind power, which cannot compete with coal and natural gas absent the subsidy. The hand-in-glove relationship between the Washington establishment and Big Business will make it difficult to eliminate these wasteful subsidies, even though eliminating them could save more than $100 billion over the next five years.
Voters will punish members of Congress who continue to support favored industries and politically connected companies. The recent collapse of Solyndra and other failed “public investments” are examples of why Americans feel that the federal government should not be attempting to pick winners and losers in the private sector.
A recent Heritage Action for America national survey found that most voters (72 percent) are strongly opposed to the federal government choosing specific energy companies and industries to support. Nearly two-thirds of voters (65 percent) are concerned with the possibility that the federal government providing financial support to certain industries could lead to crony capitalism and corruption. And 60 percent agree that when private investors don’t want to risk losing their money in a business or industry, that’s proof that the government should not invest in a company.
Now is an especially opportune time to cut energy subsidies, because 60 percent of voters believe that government overspending and our skyrocketing national debt are preventing the U.S. economy from growing and creating jobs. While not a cure-all to Washington’s spending addiction, eliminating costly and wasteful energy subsidies would certainly send a strong signal that policymakers are serious about turning the page on a painful economic chapter in our nation’s history.
Michael A. Needham is the chief executive officer of Heritage Action for America.