Saturday, May 17, 2008
President George W. Bush and Sen. John McCain went to bat on energy policy this week. And guess what? They both struck out.
Bush went hat in hand to the Saudis to ask for more oil production in order to bring down world prices. He whiffed. They said no for the second time this year.
ExxonMobil chairman and CEO Rex Tillerson said it's "astonishing" that Bush keeps asking Saudi Arabia to pump more oil, rather than working harder for increased oil production at home.
Tillerson called this "terribly upside down" and went on to say the president should be fighting to open U.S. coastal waters to drilling and production on the outer continental shelf. He correctly wants to end the federal moratorium on such offshore drilling, where kajillions of barrels of oil and natural gas are being completely ignored.
Motorists are furious with oil at $125 a barrel and a $4 pump price for gas. And they seem to be taking it out on the GOP. That may not be fair, since Bush does favor a pro-production energy policy that includes offshore drilling, building refineries, clean-coal development, oil sands, natural gas and nuclear power. But Democrats in Congress stridently oppose these ideas, as does Hill-Bama on the campaign trail. They want an excess-profits tax. Brilliant.
Nonetheless, the longer the energy stalemate lasts, the angrier voters get. You can see it in consumer-confidence polls that are now hitting 25 year lows.
What's to be done?
McCain weighed in with a cap-and-trade program that he alleges will solve our global climate and energy problem. It's a bad idea. It's really a cap-and-kill-the-economy plan, as well as an unlimited spend-and-tax-and-regulate plan. It's a huge government command-and-control operation that would make any old Soviet Gosplan bureaucrat smile.
Ironically, the United States has virtually the cleanest air of any country in the world. And market forces over the past 30 years have increased all manner of energy efficiency per unit of gross domestic product by more than 50 percent. In fact, according to the editorial page of Investor's Business Daily, U.S. carbon emissions grew by only 6.6 percent between 1997 and 2004, compared with 18 percent for the world and 21 percent for the nations that signed the Kyoto protocol on greenhouse gasses. (Think Europe.)
Then there's a bunch of scientists who don't think we have a global-warming problem at all. And many who do acknowledge the threat link it to solar warming, or increased solar activity, rather than carbon.
Cap-and-trade, in other words, may very well be unnecessary. Meanwhile, it will surely reduce economic growth in the years ahead.
The regulatory aspects are mind-boggling. All manner of U.S. businesses -- be they small pig farms, large power plants or the millions of companies in between -- will be subjected to government rulemaking and standard-setting. EPA inspectors will literally have to visit 5 million American businesses in order to evaluate carbon emissions and figure out allowances for trading permits.
Think of it. Some sort of federal cap-and-trade department will send out 100,000 inspectors to comb through American corporations and calculate their carbon stories. This is total insanity. The Congressional Budget Office guesses it will cost at least $1 trillion. And a lot of that cost comes from the government's willingness to give companies carbon allowances that then can be traded in some sort of after-market.
Later on, according to the McCain plan, the government will auction off these allowances, reaping a gigantic windfall. But so far there are no strictures on this revenue honey pot and the unprecedented federal spending it will fuel.
Some global warmers simply want to tax carbon. That at least would reduce the Gosplan effect. Responsible people like Harvard's Greg Mankiw have even suggested taking the carbon-tax revenue and using it to cut income-tax rates. This is a much better idea -- that is, if you buy into global warming at all.
My friend Art Laffer tells me Al Gore wants a carbon tax, with the revenues being used to abolish the Social Security/Medicare payroll tax altogether. Laffer would prefer a big income-tax-rate reduction that would get us to a 13 percent flat tax. I agree. Either way, taxing carbon, when compared to cap-and-trade, is the lesser of two evils.
To be fair, McCain does favor nuclear power. But he is opposed to Tillerson's idea of drilling offshore and President Bush's idea of drilling in Alaska. That's not good. And make no mistake about it, his cap-and-trade plan will vastly increase the cost of doing business everywhere, including gas prices at the pump. And when you cap something like power well before so-called alternative-energy technologies have been invented or commercialized, you put a cap on economic growth and prosperity.
That's not going to make (SET ITAL) anybody (END ITAL) happy.
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