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Something for Everyone

From the December 1, 2003 issue: A grotesquely irresponsible energy bill nears completion.

Dec 1, 2003, Vol. 9, No. 12 • By IRWIN M. STELZER
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IF PORK WERE A FUEL that could produce electricity and power SUVs, America would now be independent of imported oil. Unfortunately, the pork contained in the first new energy bill in over a decade has more to do with a desire to please Iowa corn farmers and assorted auto and energy companies than with the urgent need to reduce our reliance on oil from the world's most unstable region.

For once, Senate minority leader Tom Daschle has it right when he complains that the bill "does almost nothing to increase energy security." That, of course, hasn't stopped him from going along with legislation that Senator John McCain aptly calls "the no lobbyist left behind" bill. And Michigan congressman John Dingell, a long-serving Democrat who has been through more energy policy battles than any other member of Congress, was even less polite. Picking up this 1,100-page legislative tome that it took Congress three years to concoct, Dingell announced, is "like lifting the lid of a garbage can and smelling the strong smell of special interests."

Of course, Republicans are not insensitive to the fact that Democrats who oppose the energy bill will be taking the caviar out of the mouths of Iowa farmers. So they are watching with more than a little amusement as the key contenders in the upcoming Iowa caucuses explain their opposition, and as they confront what will be represented as still another legislative victory for the president, even though its cost is four times that of the legislation originally proposed by the White House.

After a good deal of agonizing, and some pressure from Northeastern senators, Daschle decided he could live with the bill. With one eye, or perhaps both eyes, on the corn farmers in his home state of South Dakota, he professed to see its subsidies for renewable energy sources and its new appliance-efficiency standards as offsetting "to a certain extent the many liabilities in the bill."

Other unhappy senators, loath to deprive the myriad beneficiaries of their slabs of pork, hunted for other virtues in the bill. It would repeal the Public Utility Holding Company Act, which prevents industrial companies from acquiring electric companies, and constrains some utility mergers. That repeal just might open up new sources of capital to the industry, although why shareholders of non-utilities should rush in with capital when shareholders of the utilities think it unwise to commit their capital to the business is unclear to this economist.

The bill also just might do something to shore up the reliability of the national electric grid. It increases the power of the Federal Energy Regulatory Commission to override the states in some instances in which state commissions are delaying the siting of transmission facilities needed to relieve congestion--a good idea, unless you believe that governments closest to the people should decide in whose backyard a transmission tower can be built. Still, not a costly provision, and one that might do some good, although it can do nothing to eliminate the human error and equipment failure that were largely responsible for the most recent blackout.

Then we come to the real money. The tax incentives contained in the bill will cost $25.7 billion over 10 years, according to the Congressional Budget Office, plus another $5.4 billion in direct spending--a total price tag several multiples of what Bush had in mind. But since the president has dismissed the already burgeoning federal deficit as "just numbers," money is no object to a White House eager to notch victories on its legislative revolver in advance of the election that is now less than a year away.

Republican farm state senators and price-fixer Archer Daniels Midland are not the only ones delighted with a bill that unashamedly purchases the votes of key senators. Like other farm state senators, Byron Dorgan, the North Dakota Democrat who chairs the Senate Democratic Policy Committee, was wooed with provisions that mandate a doubling in the use of ethanol by 2012. Never mind that some environmentalists claim this corn-based gasoline additive does more to damage the environment than to benefit it. And the $1.5 billion in loan guarantees for a power plant to use North Dakota's very dirty coal (lignite) is sufficient reason for Dorgan to use his not inconsiderable influence to press his Democratic colleagues to go along with the bill. He won't have to twist the arm of Montana Democrat Max Baucus, who finds the new subsidies to increase the use of diesel fuel made from the soybeans grown in his state simply irresistible. Or of John Breaux and Mary Landrieu, the Louisiana Democrats whose opposition to the bill was eroded by the $1.1 billion it contains for restoration of their state's coastline.

The list of beneficiaries doesn't stop there. There are incentives to build a trans-Alaska natural gas pipeline; subsidies to cover the insurance costs associated with the production of nuclear power; tax breaks to encourage a bit more domestic production of natural gas and oil; handouts to the automobile companies to spare them the need to devote more of their own money to research into energy-efficient vehicles; $100 million per year in production tax credits for new nuclear plants; $6.2 million to promote the use of bicycles; $1 billion for a nuclear reactor in Idaho to produce hydrogen, and so much more that one is put in mind of the Stephen Sondheim lyric: "Something for everyone, a comedy tonight."

Except that it isn't really very funny. The president and Congress have missed a golden opportunity to do something about our large and increasing dependence on imported oil. Saudi Arabia, our second largest supplier after Canada, is teetering on the brink of chaos; Venezuela, our fourth largest supplier, is in the hands of a Castro sound-alike; Nigeria's production, our fifth most important source of imports, is periodically interrupted; Iraq, if and when it gets back into full production, has promised to rejoin the OPEC cartel that provides over 40 percent of our imports and that is now keeping prices above the growth-retarding $30 per barrel level; Iran's mullahs aren't eager to make it easy for us to buy oil from their large reserves should we ever want to do so; Libya isn't exactly likely to prove a friend in need; Russia is still a minor supplier, with an oil sector that has been destabilized by Vladimir Putin's jailing of one of his nation's "oiligarchs." And China is now a major competitor for any new sources of oil that might become available.

As a result, the American economy remains at risk of oil supply interruptions and price spikes that can stifle economic growth. Ask this: Should a radical terrorist group seek to depose the House of Saud, would we be in any position to stand idly by, or would we once again face the necessity of sending troops to the Middle East, in this case to secure the Saudi oil fields? We would, of course, do the latter. Understandably. But what is less understandable is our politicians' failure to initiate the programs that will in the long run reduce--not end, merely reduce--our dependence on foreign oil.

Rather than confront this problem by imposing a tax on imported oil, Congress and the president have responded by breeding an expensive pre-Thanksgiving turkey that will do nothing to satisfy the nation's appetite for imported oil. And the bill may be even worse by the time it passes. A threatened filibuster on Friday, November 21, as this magazine went to press, temporarily delayed the measure. But the Republican leadership in the Senate seemed confident that it would gather (read: purchase) the required votes. "There are lots of offers being made," said Maria Cantwell, Washington Democrat.

But it is not the expensive and useless provisions that the bill contains that should most trouble us. The major liability of this bill is not what it contains, but what it doesn't. It leaves our energy policy stuck where it has been ever since Presidents Nixon, Ford, Carter, and their successors talked the talk but failed to walk the walk towards a sensible response to our dependence on imports. We continue to rely on aircraft carriers and troops to assure adequate supplies of oil to fuel our cars and heat our homes. No photo op of a smiling president, pen in hand, surrounded by the grinning authors of this senseless legislation, can conceal that shameful fact.

Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).