Enormous pressure is building on Congress to extend, before year’s end, a massive slew of special interest tax breaks that have expired. Some of these are nothing more than ordinary business expenses incurred by almost every business engaged in commerce. We should not simply renew those, we should make them permanent. But others are classic rent seeking, which, once expired, should be left on the ash heap of history. Take for example the perennial wind production tax credit (PTC). It kills jobs, raises the cost of energy (especially on the middle class), and makes millions for lobbyists.
Extending the wind production tax credit is a very bad idea both with respect to policy, and, for Republicans, with respect to politics.
Bad American Energy Policy
It should go without saying, but cannot because the lefty wind supporters try to pretend otherwise: Wind is not just incredibly expensive relative to fossil fuels, but also other so-called “alternative” energy sources. A recent study by the Brookings Institution – hardly a bastion of right-wing thought – concluded when all costs are included (construction and generating cost and the need for backup power) wind power is considerably more expensive than alternatives. It costs 5.64 more cents per kilowatt-hour than a comparable coal-fired power plant. The study went on to make clear that “renewable incentives that are biased in favor of wind and solar and biased against large-scale hydro, nuclear, and gas combined cycle are a very expensive and inefficient way to reduce carbon dioxide emissions.” Other countries, such as Germany and Spain, are now moving away from wind subsidies. America should too.
Wind advocates justify these taxpayer wealth transfers to the wind industry using the “infant industry” argument. The logic is “if Uncle Sam will just give us a little money for a little while, we’ll catch up with the big bad energy guys and provide Americans with a competitive energy source they will love.” None of that is true.
First, the wind production tax credit has been around since 1991, making it an infant industry old enough to drink beer legally in the United States. Moreover, wind power electricity generation has been used since the 19th century, but has been rejected consistently by cost-conscious consumers.
Second, in some regional electricity markets, the production tax credit allows wind power generators to bid their power at zero, because they will make money from the tax credit of 2.2 cents per kilowatt hour. Energy sources not supported by the federal bureaucracy using taxpayer dollars have suffered, in many instances leading to the forced closure of nuclear and coal power plants across the Midwest. More taxpayer subsidies, fewer jobs.
Bad Politics
Democrats from inner-city Chicago and New York City to energy-producing states like Colorado and Louisiana seem convinced the wind PTC may be good politics and embrace the president’s war on affordable energy. But this causes the cost of electricity to increase for their constituents while it threatens others’ jobs in energy production. Democrats mislead voters on the causes of the price increases and job losses, and are then rewarded with money from the American Wind Energy Association.
The politics for Republicans, however, are clear: let the wind PTC expire.
When confronted with the true cost of wind, the vast majority of all Americans – particularly massive numbers of common-sense Republicans – get the joke. Survey research done over the years contradicts the Sierra Club’s claim that “people like wind” and strongly indicates that voters like the idea of someone else paying for wind power. When it comes to their own pocketbooks, however, they’re less eager. Similarly, utilities have offered consumers the option of participating in voluntary “green” or “clean” programs. Participation rates were low, on the order of 1 percent of ratepayers. Public opinion on the subject is pretty clear. Consumers like affordable energy from the most efficient source their utility can provide.
Moreover, nearly every elected Republican member of Congress claims to be a true believer in limited government, yet their opponents will get tons of money from the wind industry. So far this cycle, these taxpayer-subsidized profits have been used to “thank” candidates in Colorado (Mark Udall) and Iowa (Bruce Braley) for their support of wind. Similarly, the Sierra Club has targeted 25 House Republicans this election cycle for not supporting an extension of the production tax credit.
Why should Republicans be expected to support the very same people who want to grow the government and limit Americans’ choices?
Congress also has an opportunity to use the expiration of this tax credit to reject President Obama’s plan to regulate carbon emissions by executive fiat. After all, the Department of Energy drew a direct line between the wind production tax credit and the president’s proposed rule on greenhouse gas emission from power plants, noting that the tax credits enable state mandates for renewable energy. Without them, the president’s effort to meddle in consumer choices will fail.
Congress should send a clear message opposing the president’s proposed rule on regulating carbon emission by ending the wind production tax credit. A vote for the tax credit is a vote for the president’s plan.