Can You Tell Which Party is Which?
From the Wall Street Journal,
My question is – where is the private industry part of the plan? Oh, sure, there are other references to “Regulatory changes will be sought, so more refineries can be built,” but these are certainly the exception rather than the rule.
When this plan first came out, the Bush Administration was
criticized for thinking too long-term because the plan did nothing to alleviate
gas prices at the pumps, or
Shortly thereafter, Jeffords defected and our own Jeff Bingaman took over the Senate Energy Committee. Of course, we all know that a Democrat would never engage in pork barrel politics, or propose industry-friendly legislation, would he? Guess again – the Bingaman energy plan (search for the Energy Security Tax Incentive Act of 2001) calls for (among other things):
Yep, that’s right, ol’ Jeff and the boys are gonna
take your taxes and pay BP Amoco whopping sums of money to bring oil down from
“Conventional wisdom might view the Democratic takeover of the Senate as a black day for energy producers. But that is far from true. Senator Jeff Bingaman (D-N.M.), the new chairman of the Senate Energy and Natural Resources Committee, proposed the Energy Security Tax Incentive Act last March. In at least one important respect, it is more favorable toward the natural gas industry than a bill introduced by former Committee Chairman Senator Frank H. Murkowski (R-Alaska).
“Here's
the background: BP, Phillips, and Exxon-Mobil have formed a consortium to
consider how to move gas from their large Alaskan reserves to the lower 48
states. But the producers doubt, or so they say, that even the high 2001 prices
for natural gas warrant an investment in the pipeline capacity to get the gas
down. Bingaman beckons them with a US $0.25-per-million-Btu ($0.25/1055 million
joules) tax credit for gas produced and delivered into interstate commerce
before
Now, surely Jeff doesn’t
have any ties to the oil industry, does he?
A quick glance through the Bingaman-related 1999-2000 cycle FERC and
Common Cause sites ought to tell us.
After you sort down through the Trial Lawyers, the Letter Carriers and
other federal government and municipal “workers” unions, you see
·
Sempra Energy Employees Political
Action Committee Fka Pacific Enterprises Companies -
$4000
·
American Gas Association - $3000
·
Cinergy - $3000
·
Marathon Oil Company - $3000
·
Atlantic
·
Public Service Company Electric
& Gas PAC - $3000
·
Allegheny Energy Company - $3000
·
Chevron Employees - $3000
·
BP Amoco - $3000
·
Power PAC (Edison Electric Institute)
- $2917
·
CoalPAC - $2000
·
etc.
Now, I’m sure that Jeff isn’t alone in receiving these contributions, but I am fairly certain that he will never fear for getting tagged as an “oilman”, even though he certainly has ties to the industry.
But let’s consider both of the policies in a little more depth.
The president’s energy plan will
call for the construction of at least 1,300 new power plants in the next 20
years ….
Um, hello? Wouldn’t “the president’s plan” be a euphemism for “the central plan”? Where is the free trade if the central government is planning economic activity? How do they arrive at figures like 1300? Why not one big fusion plant, or 26000 small, private plants, millions of solar or wind converters, or some intermediate number of cogeneration plants?
… there
will be additional spending to explore more efficient and cleaner ways to build
these plants.
There will be spending? By whom? Of whose money? On what? Is this a
euphemism for, “Pork is to be had by all.”
More than likely, this is the “investment in
The president … is sure to
agitate environmentalists with his heavy reliance on coal and nuclear power.
Then why should the president be interested in relying on coal and
nuclear power? Shouldn’t he leave this
to a free market? Then they will rely on
whatever is the most efficient method of providing power? When I say efficient, I mean in the narrow,
technical sense of an economist, which means that they must consider
externalities. This is where the
president should concentrate – proposing laws that internalize
the externalities. The 1990 provision
for tradable SO2 emissions permits would be a good starting point. After that is taken care of, we can safely
rely on producers and consumers to choose the fuel that
results in the greatest improvement of the general welfare.
… the
administration has already recommended that $2 billion be spent over the next
few years on clean-coal technologies.
A two-fer. When the administration proposes, they are proposing that they do the spending, that it be our money, and that they will be giving it out according to the normal rules of hog-slopping. Can anyone say corporate welfare?
And on “clean coal technologies”? Reminds me of the 1977
Clean Air Act, which specified scrubbers instead of simply allowing coal users
to decide for themselves the best way of cleaning up their output streams. The best – and cheapest! – way
was to switch to low sulfur Western coal, but that would have cost union miners
jobs in the Eastern coal fields. The act
also extended the life coal-fired plants and delayed the introduction of
gas-fired plants … or (God help us all) nuclear plants.
Congress will be asked to renew
the Price-Anderson Act, the law that protects companies from unlimited
liability if there is catastrophe….
There is a downside to nuclear plant operation – the owners are shielded from liability. This is just corporate welfare in another form: instead of spending money on insurance or risk minimization measures, the legal monopolies that run the utilities can spend more on their boards and their lobbyis … whoops, I mean regulators and elected representatives. Now that I think about it, there isn’t much difference between the three groups.
If nuclear power is really as safe as the reactor manufactures (and the
NRC) claim, then they should be able to afford insurance. If not, then the Price-Anderson Act is a
means by which some people (potential victims) are stripped of their property
rights (to not be victims) by the government and its beneficiaries (regulated
utilities). Dropping the Price-Anderson
Act will help insure that we get the right amount of nuclear power – enough if
that turns out to be 0.
While nuclear power and coal will
play a role, the report will contend that 90% of the new facilities will be
gas-fired. This has forced Mr. Cheney to
look around the globe for help in obtaining that much gas.
Why does Mr. Cheney have to look around the globe? Hasn’t anyone told him that he is no longer an executive at Halliburton? If it is true that the market will choose for 90% of the power to come from those plants, then the price will rise, and it will be in the self interest of oil and gas companies to find it. No politician need enter into the fray.
Unfortunately, this shows the insidious nature of planning in a mixed
economy. It could very well be that 90%
of the energy will come from a yet undiscovered technology. Certainly, few could have predicted that we
would have cheap DSL in our homes; everyone was predicting that we needed fiber
to the curb to get any kind of bandwidth.
If the central planners and wonks begin adopting resolutions, policies,
laws, and regulations designed around the gas scenario, then when something
supplants that (and it will), we will be stuck on the wrong side of the
technology momentum. Consider France and
Minitel: the French invested a great deal of money in
a system that for many years was high tech.
The non-planned internet eventually overtook and far surpassed Minitel – yet France Telecom continues to poor millions
into its promotion efforts.
Depression-era, nitwit populist farm programs continue to try to keep
people on farms despite the fact that the demographics have shifted so that now
only 2% of the population works on a farm, as opposed to about 50% in 1932. Dante reserved a special Ring of Hell for
prognosticators, and for good reason.
Mr. Bush wants to open up 8% of
the Arctic National Wildlife Refuge to exploration. He will seek to appease environmentalists,
who hate the idea, by directing more than $1 billion in royalties to be used to
study alternative sources of fuel.
This is beautiful. How can they know how much “needs” to be explored unless someone has already explored it? And the second part is right on the money: environmentalists are traditionally left wing authoritarians who oppose all corporate welfare … unless it is the kind of welfare they like. The corporate welfare that support Archer-Daniels-Midland, for example. The Cato institute once estimated that 50% of ADM’s profits were generated by the various forms of federal subsidy programs in which they participated. These were things like alcohol fuels (environmentalists), crop price supports (pro-family farm populists, aka socialists), and export subsidies (farmers).
$1 billion dollars in
corporate welfare? That’s a lot
of jack. Now where is that coming from
again? Oh yeah, that’s essentially rent
charged by the government, who are the guardians of our land. We the landowners are charging we the
petroleum users rent. And why are we
considering this plan? Because, stupid:
gas and electricity are getting too expensive.
Round and round it goes ….
[Mr. Cheney’s task force] will also ask
Congress to grant eminent-domain authority to the Federal Energy Regulatory
Commission to aid construction of [a national electricity grid].
Oh. My. God. How can they claim to be pushing a free market program based on government coercion and theft to carry out central planning? We are truly living in the Clinton Age when someone can look you right in the eye and say, “This isn’t a robbery. I just want to make sure that your possessions are safe. I am very adamant about this. Give them to me or I will kill you.”
What about the Bingaman plan?
Sec. 101. Credit for Energy-Efficient Property Used
In Business. Establishes
tax credits for ten to thirty percent of investments in renewable energy
technologies and energy-efficient property used in business.
Includes solar water heaters and photovoltaic panels, geothermal technologies,
combined heat and power systems, low core loss distribution transformers,
anaerobic digester property, wind turbines, fuel cells, heat pumps, central air
conditioners, and advanced natural gas water heaters, furnaces and cooling
equipment.
If it weren’t for the Nanny state, we wouldn’t even know what was good for us. Sure, it’s worth while to save money, but we don’t know it’s worthwhile, so they will give us money in order to save money. With all of those tax credits, do you suppose that the federal revenues will go down? And then they’ll lower spending to keep it within budget, right?
Not a chance. These are tax credits to offset high tax rates, my friend. And like all targeted tax cuts, they will benefit a very small subsection of people. On the one hand, people will go out and buy energy-saving devices that are not efficient: if they were efficient, the tax incentive would not be necessary. This also means that revenues for certain manufacturers will go up more than the efficient amount.
On the other hand, in whose interest is it to take advantage of these breaks? They are most valuable to those paying taxes at the highest marginal rates (psst – that means “the wealthy”). Since these credits are for businesses, it means that the most profitable businesses will be the beneficiaries of more tax credits for purchasing things that they don’t need.
Actually, it’s worse than that. Say they are operating an air conditioner that is too small. They would purchase a larger one of the same technology, but it is more expensive to operate, so they get by with the small one. They could also purchase the same size unit with new, super-efficient technology that is therefore cheaper to operate, but it is much more expensive to purchase. Their actions prove that the existing unit is not too small – their revealed preference shows that they would rather be the current temperature than to spend the money.
Now, they see that they can get a substantial tax break by buying one of the new technology units. Do they buy the same size? No, they buy one that is much larger because a larger one of the new technology will cost the same to operate as the existing, smaller one. They may end up actually using more energy, since the deciding factor on buying the new air conditioner was not operating cost, but initial purchase price. The government is going to help them out with that, so they make the plunge, and cool off at our expense.
Sec. 102.
Is George Orwell writing
this? Because it
certainly looks like a satire of ventral planning. First, it implies that there will be a
national standard for commercial buildings.
I doubt that a national standard will be of much use, since the energy
usage in
Then it says that the deductions
will be for increasing efficiency. Never
mind the fact that all businesses already have an incentive to decrease
operating costs, and therefore landlords have an incentive to provide energy
efficient buildings. This is obvious
from the outset, but despite that, most people are surprised to learn that
But this synopsis goes further:
it says that they will reduce the deductibility of energy bills because this
will increase federal revenues. Now,
what is the goal? To
increase revenues, or decrease energy usage? If the goal is to increase revenues, why does
the rest of the bill concentrate on providing subsidies? This is just another attempt to gain control
of our lives by first gaining control over our purses. Unfortunately, Americans are all too reticent
about turning that power over to the government in exchange for the privilege
of receiving some of it back in the form of handouts.
Sec. 602. Oil and Gas from Marginal
Wells. Provides
a counter-cyclical tax credit for marginal oil and gas wells when the price of
oil falls below $14.00 per barrel and the price of gas falls below $1.56.
Provides a tax credit of $3 per barrel for oil and a 50
cents per 1,000 cubic feet for natural gas produced from marginal wells. Credit
is phased out between $14.00 and $17.00 per barrel of oil and $1.56 and $1.90
per mcf for natural. The credit can be carried back
ten years.
Wow – is this a policy wonk’s or an oilman’s wet dream? If this, then that, else, except for. Basically, it says that if the price falls,
we will provide welfare for oil companies, and if prices rise, we will let them
take their profits.
Let’s look at just the oil side
of it. What if I have a well that just
breaks even at $14/bbl? At any price
above that, I pump, and at any price below that, I stop. At $14/bbl, consumers pay a certain amount at
the pump, and everyone is happy. Now the
government steps in, and provides the price supports of $3/bbl times the
company’s marginal tax rate. Let’s say
it’s 33%, so the price supports are $1/bbl.
That means the company is making $1/bbl profit at $14. In fact, they can just operate a well that
breaks even at $13/bbl, and all better wells are profitable.
This means that more oil is
produced at $14/bbl than would be produced at that price otherwise. What does that mean to the consumer? Nothing. The going rate is $14/bbl. The same amount of people will purchase oil
at $14/bbl under price supports as purchased it at that price without the price
supports. What it means, then, is an oil
glut, and additional profits for oil producers, but no
help at the pump (don’t worry: you aren’t going to need much help at
$14/bbl). Oil gluts aren’t much use to
anyone but storage facility operators – and exporters. The end result will be to decrease American
dependence on foreign oil.
The subsidy doesn’t mean much to
the consumer, then, but it means a lot to the taxpayer. Since most American oil consumers are also
American tax payers, it means that the subsidy will result in a net transfer
from them to American oil producers and to foreigners who benefit from the glut. You may also notice that oil was indeed below
$14/bbl back in 1997, so this is a retroactive tax break for them.
That’s a funny result, isn’t
it? In order to prevent profits from
going to foreign oil companies, we are going to provide benefits to foreign oil
consumers. Instead of those benefits
being provided by American fuel consumers, they are going to be provided by
American taxpayers. And since the cost
is borne by taxpayers instead of fuel consumers, it means the consumers have
less incentive to conserve, and also less take-home pay. Thanks, Jeff.
Sec. 606. Crude Oil and Natural Gas
Development Credit. Counter-cyclical tax credit for domestic development drilling and
enhanced recovery work for natural gas and oil during periods of very low oil
prices. Applies when oil is below $11/barrel, phasing
out at $14. Intended to maintain stable investment in
new drilling to keep the oil and gas service industry employed and to maintain
stable natural gas supplies.
Counter-cyclical? Oh,
you mean, “under the radar”? Nobody is
going to complain about price supports that kick in when oil falls far below
what it is currently going for, so this is a stealth price support
subsidy. This is exactly what an oil
cartel would like to have the power to do itself. The executives and shareholders of the
nation’s oil companies thank you, Senator Bingaman.
Sec.
609. Incentive to Develop
Now let me get this straight – Bush and Cheney are the anti-environmentalists, but the Democrats running the Senate are not, yet they introduce a subsidy to BP, Phillips, and Exxon-Mobil to do what is naturally in their interest to do anyhow? This part of the bill is a transfer from American tax payers in most of the lower 48 to Alaskans, Californians, and oil companies.
As can be seen by a comparison of the two proposals, neither
is free market. Both depend to a great
extent on target subsidies and tax credits.
The ostensible reasons are to encourage desirable growth, but the true
effect is to transfer decision making to