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Energy Theater

What the president's State of the Union proposals really mean.

11:00 PM, Feb 6, 2006 • By IRWIN M. STELZER
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HE CAME, he saw, he spoke. His was the sound, Democrats, sullenly refusing to applaud at many points, provided the fury, and sober reflection reveals the significance to be nothing at all.

The president, apparently satisfied with the few cuts that Congress enacted last week, said nothing in his State of the Union that indicates a burning desire to balance the federal budget. True, he called for the elimination of some 140 failed government programmers, but that was merely repeating the unheeded requests of his predecessors. Congress isn't about to stop funding any programs so long as there are votes to be had from continuing it.

He also asked that Congress grant him a line item veto. Past presidents have asked for this prerogative--which amounts to a shift of power from the Congress to the executive; Congress quite naturally has declined to dilute its own power.

Add to this picture of continued profligacy two things and it is clear that new Federal Reserve Board chairman Ben Bernanke will have to pursue a monetary policy with continued budget deficits lurking in the background. Remember: loose fiscal policy puts greater pressure on the Fed to tighten monetary policy.

The president is asking Congress to make permanent the tax cuts it voted when the economy needed an economic stimulus, and is proposing to fund several new programs designed to end what he terms America's addiction to oil, and "move beyond a petroleum-based economy and make our dependence on Middle Eastern oil a thing of the past."

President Bush set as his goal the replacement of some 75 percent of the oil America imports from the Middle East by 2025. Since only about 17 percent of our imported oil comes from that volatile region, that would mean reducing total imports by a bit less than 13 percent, although from what base the president meant--current consumption, or consumption in 2025--it is not clear.

If the president has his way, the government will invest in a variety of alternative technologies: $281 million already targeted for clean coal technologies is to be brought forward; $54 million will be spent to develop emissions-free coal plants that capture and store carbon emissions; $148 million is devoted to a Solar America Initiative; $44 million will go for wind energy research; $150 million to help develop bio-based transportation fuels from agricultural waste products such as "wood chips, stalks or switch grass."

The president's men might be right, and wood chips and switch grass might be the answer. But history suggests that bureaucrats are not quite as good at picking winners as is the market.

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