Underhandedness

I agree with John Cole that delaying a report from the E.P.A. on fuel efficiency so it wont have any impact on the National Pork…err the National Energy Bill is going to be seen as underhanded.

The executive summary of the copy of the report obtained by The Times acknowledges that “fuel economy is directly related to energy security,” because consumer cars and trucks account for about 40 percent of the nation’s oil consumption. But trends highlighted in the report show that carmakers are not making progress in improving fuel economy, and environmentalists say the energy bill will do little to prod them.

“Something’s fishy when the Bush administration delays a report showing no improvement in fuel economy until after passage of their energy bill, which fails to improve fuel economy,” said Daniel Becker, the Sierra Club’s top global warming strategist. “It’s disturbing that despite high gas prices, an oil war and growing concern about global warming pollution, most automakers are failing to improve fuel economy.”

It is this kind of underhandedness that makes it hard to defend the Administration. I do disagree with John’s (apparent) view that the Energy Bill is a good thing. The bill is nothing more than a mish-mash of pork programs for various companies. Apparently nothing was learned from previous oil shocks. When the government gets involved in trying to craft an energy strategy it is almost surely going to result in pork and mis-allocated resources.

For example, the tax breaks for hybrid cars. The tax break basically says that right now the hybrid most likely uses more resources than regular automobiles unless the reduced emissions is greater than the savings in gasoline expenditures and the tax break combined. Is this likely? Perhaps, but I’m skeptical. Further, what does this do in terms of the high cost of gasoline? Nothing. Instead of spending money on gasoline we are spending it on tax breaks.1

Update: Jerry Taylor of the Cato Institute pretty much sums up my view on the Energy Bill. I strongly recommend reading the whole thing, but in case you aren’t here is a quick summary:

  1. The Energy Bill assumes that politicians know better than energy industry investors what constitutes a good investment.
  2. Ignores past examples of politicians bungling investment decisions:
    • Nuclear power was going to be the wave of the future.
    • Synthetic oil–wasting $80 billion.
    • Alternative energies such as solar, wind and geothermal–billions spent and only a tiny fraction of energy produced via these methods.
  3. Subsidies to provide incentives to produce more oil and gas; as if oil at $60/barrel isn’t incentive enough.
  4. Incentives for conservation; again, as if high gasoline and energy prices aren’t incentive enough.

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1Some might be thinking, “Huh? Spending on tax breaks?!” Think of it this way. Suppose we have a government budget of $100 and we have tax revenues of $100. Now, if we give tax breaks worth $10, so now we have a $10 deficit. Now we either pay for it now via higher taxes, or we pay for it later with higher taxes (and higher taxes than a current tax increase due to interest on the deficit). Basically, a tax break in one area means that eventually there will have to be a tax increase somewhere else. On top of this, these kinds of things introduce distortions into the economy. Unless the benefit in reduced emissions exactly offsets the tax incentive there is a distortionary effect.

FILED UNDER: General, US Politics
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. bryan says:

    The Energy Bill assumes that politicians know better than energy industry investors what constitutes a good investment. Ignores past examples of politicians bungling investment decisions:

    * Nuclear power was going to be the wave of the future.
    * Synthetic oil–wasting $80 billion.
    * Alternative energies such as solar, wind and geothermal–billions spent and only a tiny fraction of energy produced via these methods.

    Actually, energy industry investors are hardly capable of judging what is a good investment in terms of future energy sources. In fact, energy company investors have a vested interest in maintaining the status quo, since higher energy prices/demand for oil mean higher profits for their industry. Now, they’re still a sight better than politicians …

    And the nuclear energy argument is also somewhat disengenuous. Environmental psychosis (and the phobias caused by Three MIle Island and Chernobyl) derailed nuclear energy, not the lack of benefits from its use.

  2. Steve Verdon says:

    Actually, energy industry investors are hardly capable of judging what is a good investment in terms of future energy sources. In fact, energy company investors have a vested interest in maintaining the status quo, since higher energy prices/demand for oil mean higher profits for their industry. Now, they’re still a sight better than politicians …

    So in short they are very bad businessmen.

    And the nuclear energy argument is also somewhat disengenuous. Environmental psychosis (and the phobias caused by Three MIle Island and Chernobyl) derailed nuclear energy, not the lack of benefits from its use.

    While it is true that nuclear power was done in by environmental hysteria, I doubt it would have ever made it to a point where it was “too cheap to meter”.

  3. SoloD says:

    Withholding the EPA report is typical of the little minor things that Republicans have been doing since they gained control of the Congress and the Presidency that should offend those who believe in a fair government. Other examples are holding votes open in the House well beyond the 15 minutes allocated for voting, so they can twist arms; leaking obviously false stories to the press; or commissioning “studies”, ala Tomlinson at the CPB, whose results are predetermined.

    None of these things are, in and of themselves, scandalous. But in the aggregate, these activities demonstrate the disregard that many Republicans actually have for government.

    (I am not saying that everything under the Democrats was fair and equitable, but generally, Democrats stick closer to the “rules”, because Democrats believe in good government.)

  4. ATM says:

    (I am not saying that everything under the Democrats was fair and equitable, but generally, Democrats stick closer to the “rules”, because Democrats believe in good government.

    Democrats don’t believe in good government, and don’t stick to the rules. Urban areas tend to be ruled by Democratic politicians and are notoriusly corrupt. Democratic politicians in Congress were quite good at shoveling pork to their favored causes. And Democrats are much better at changing the rules when its suits them because they know that the press won’t call them on it because for the most part they pro-Democrat and anti-Republican.

    Regarding tax breaks and subsidies in general, I would argue a valid reason for creating them in the first place is to accelerate changes so that when economic conditions change, we aren’t completely exposed to the effects because we have alternatives in place.

  5. Herb says:

    I can not help but laugh when it comes to Congress passing any piece of legislation that is supposed to be for the good of the American people. The Energy Bill is a real belly romper, Congressman and Senators are going to vote in a manner that lines their own pockets the most and you, I or anyone is not going to change that fact. One comment states that Democrats are for good government and another states that Republicans and more for the people, What world do people who think this way, come from. These Congressman don’t give one thought about you or me. The entire energy bill is one big joke

    The Energy Problem will not be solved until the “Big Money Boys” git it stuck to them right in their pocketbooks.

    In the mean time, you and I are going to pay higher prices for gasoline, heating oil, and natural gas while the energy companies continue to post higher and higher profits.

  6. Anderson says:

    I can not help but laugh when it comes to Congress passing any piece of legislation that is supposed to be for the good of the American people.

    Is there another kind of legislation that Congress passes?

  7. jen says:

    If someone has the keys to unlock the safe here – there’s an open Italics tag in the comments on this post. Probably comment #1. It’s affecting the entire blog from this post down.

  8. Steve Verdon says:

    I’m not seeing it Jen. I’ve looked but they all looked closed to me. I did a minor tweak to the 1st comments html, but since I can’t see the probelme to begin with, I can’t be sure that fixed your problem. Just out of curiosity, what browser are you using?

  9. bryan says:

    I previewed my comment five times trying to get that italic out, but couldn’t find anything wrong. It could be in the text of the post.

    But to the nuclear energy point:
    “While it is true that nuclear power was done in by environmental hysteria, I doubt it would have ever made it to a point where it was “too cheap to meter.”

    NOTHING is going to be “too cheap to meter” in our time. Anyone who said that was engaging in typical hyperbolic politics and anyone who believed it was engaged in cranial-anal inversion.

    I think you watched that Walt Disney nuclear energy movie one too many times.

  10. Steve Verdon says:

    Bryan,

    I hope you don’t mind I just turned your italicized portion into blockquotes. That seems to have fixed the probelm. I still didn’t see an unclosed emphasis tag, but sometimes WP gets weird with paragraphs and html tags within html tags.

  11. Steve Verdon says:

    I think you watched that Walt Disney nuclear energy movie one too many times.

    Well actually I’ve never seen it and it was Taylor who used that bit of rhetoric. Still it is not uncommon for politicians to use this kind of rhetoric which I think is Jerry Taylor’s point: politicians make politically convient comments, not realistic comments.