An energy policy for main street America

The political landscape in America following the November 2010 mid-term elections appears to make it virtually impossible for President Obama to act on his promise to make sweeping energy reform the cornerstone of his legislative programme for 2011. The launching of an energy-cum-climate-change campaign would appear tantamount to political suicide for the President.

An Administration grappling with a trillion dollar deficit, an anaemic-jobless recovery, a hostile House of Representatives, and a Senate suffering from the worst form of sclerosis – and most of all an Administration desperately needing to reconnect with middle-American voters before the 2012 election – could not possibly afford to shoot the moon on behalf of energy policy reform in America.
 
What could he possibly say that would garner the attention, much less the votes of the likes of Republican Joe Barton (R-Texas) and his rabble-rousing colleagues in the House who are busy planning hearings to curtail the regulatory power of the EPA or possibly even to launch a major inquiry on the “sham” science of global warming?

But imagine for a minute if he were serious, and President Obama were to declare that for 2011 and 2012, he is going to make energy his number one domestic priority.

President Obama: “I am proposing that both Houses of the Congress put their priority focus on collaborating with me in finalising and passing one comprehensive, bipartisan piece of legislation, ‘The Economic Revitalisation and Long-Term Energy Security Act of 2011.’  As I promised late last year, this is my legislative priority for the next two years, and it is the primary achievement that I intend to leave behind as the historical legacy of my Presidency.”

First, we are going to take a serious bite out of current and future budget deficits by eliminating government subsidies and tax credits on production of all primary sources of energy on a step-down basis over the next three years.  These energy subsidies – for all kinds of different fuels and energy sources – are the sordid legacy of more than 50 years of politics as usual in Washington. They are bleeding our national treasury, and they result, essentially, in government intervening with an overwhelmingly heavy “hidden hand” to undermine the working of the free market when it comes to energy choices for Americans.

We have abundant, inexpensive energy sources in this country, particularly clean burning natural gas, and it should be the policy of the Federal government to allow the lowest-cost producers, not the best lobbyists, to meet consumer demand for energy. The proper role for government is to use taxation and regulatory policies to ensure that the full costs of all energy sources are reflected in the market, not to subsidise different energy sources at different rates in an incoherent fashion.

Second, in order to protect national security and to reduce the national balance of payments deficit, the Act calls for a 25 percent excise tax on gasoline, diesel, and other liquid or gaseous motor fuels made from petroleum and downstream feedstock chemicals. The tax will kick in at the pump on a month-by-month basis, over the coming year – far slower than the spike in gasoline prices we have experienced when the OPEC cartel has been able to gauge the American people periodically over the years. This tax is one that has been strongly advocated  by the US Chamber of Commerce, and Chamber President Tom Donahue said it best in 2009 when he told Congress to “Just damn do it!” This step is critical for our national security.

Every red-blooded American knows – in his or her heart – that were it not for our nation’s addiction to petroleum, we would have avoided much of the heartbreak and pain of the past decade as we have engaged in wars and conflicts around the globe in regions that are unimportant to America except for their links to our energy supply. It is time an American President told the truth, and took steps to defend this country from massive economic disruption of petroleum supplies before terrorists and the governments who harbour them take matters into their own hands. The Lord only knows how close we have come to Armageddon due to our petroleum addiction in recent years.

Third, to reduce the impact of the first two actions on wage earners, senior citizens and other low-income people, the Act immediately and permanently eliminates all payroll taxes on the first $30,000 of income and eliminates the current ceiling of $106,000 for Social Security taxes. It is time for Congress to address the fact that payroll taxes, and especially the capped Social Security taxes, are among the most regressive of all taxes on ordinary, working Americans. I recognise that, to some extent, by taxing gasoline, we are proposing to shift the burden to the transportation budget of working-class Americans, but people have a choice, especially over time, as to how they use their transportation budget, whereas the payroll tax is finite and fixed. The only way working people can reduce their payroll taxes is to work less.

Fourth, monies from the petroleum fuels excise tax will be allocated equally to an expanded Highway and Transportation Infrastructure Trust Fund and to a National Fund for Energy Research and Development. In the short term, we desperately need to rebuild the transportation infrastructure of this country, and the pain of trying repeatedly to convince Congress to authorise new monies for the Fund is far too great. The current process makes a mockery of good governance practices by inviting every legislator in Congress to earmark monies for his or her special pet projects rather than enabling the country to invest wisely and rationally into the infrastructure it needs to
keep the economy strong in the future. For the long run, we also need, once and for all, to embark on a 30-year programme to develop, perfect and prepare for commercialisation of the energy technologies that will propel forward and make competitive the American economy from 2050 onward.

Voila. In the short term, economic stimulus, budget deficit reduction, tax relief for those who need it most. Importantly, a big step to assert national security before the next terrorist event or political crisis disrupts global petroleum supplies.

For the long term, a level playing field for American energy policy that is likely to lead to more affordable, cleaner energy supplies in the future – a continuing push to natural gas as a primary energy source, and the gradual electrification (or re-electrification) of the American transportation system. That is an energy supply chain that can be subtly taxed, regulated and made more efficient through American technological ingenuity in coming decades to target President Obama’s admirable goal, articulated in 2009, to reduce CO2 emissions by 83 percent below 2005 levels by 2050.

President Obama’s speech would also open up a national debate about the hodge podge of energy subsidies, pork-barrel projects, and “white-elephant” governmental boondoggles that constitute our national energy policy – all in the name of energy independence, or under the banner of “cheap abundant energy supplies for America.”  What have we as a nation accomplished in the four decades since Richard Nixon proclaimed in November 1973: “Let
us set as our national goal, in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy source.”

The fact is that America is stuck with a staggering labyrinth of energy-related policies and regulations, the sum total of which has resulted in very detrimental consequences for the best interests of our country. It is bad enough that America is further from energy independence than when President Nixon spoke. It is even worse that our national energy policies since then have basically undermined national security, exacerbated the national debt, corrupted a huge slice of the American economy under a system of “crony” capitalism that is far from the American ideal of free enterprise, and contributed to serious environmental degradation and the build-up of greenhouse gases in the earth’s atmosphere.

So, let’s be clear.  There is no question that the Act as President Obama proposes it would bring disruptive change across the entire landscape of the “business as usual energy lobbies” in Washington. Oil producers would actually live with the tax, but suffer the most from the elimination of the hidden and deeply embedded subsidies. The renewable energy interests, newly nurtured on the mother’s milk of Washington’s breast, need the subsidies in their current incarnation. Nuclear energy advocates and ethanol producers – the recipients of the lions’ share of “new energy” subsidies awarded in recent years, and poised to receive hundreds of billions of new subsidies in coming years, would see their so-called private funding sources shrivel overnight. But, the real question to ask is, would this Act constitute good long-term energy policy for America?

In a Rolling Stone interview, Mr Obama made a sweeping statement about why energy policy, and specifically ending the dependence on oil, is so critical to the nation’s future, saying “…it is good for our economy, it’s good for our national security, and, ultimately, it’s good for our environment.”  If he believes this, he needs to make the case, not to the Democrats or Republicans on the icy shores the Potomac River, or even to the Tea Party members scattered across the hinterlands, but rather to Main Street America. They will get it. Hey, Mr Obama, aren’t those the folks who got you elected in the first place?