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The Really, Really Bad Debt

By Bill Becker

Mar 23, 2009
Newt Gingrich

A second problem with Gingrich’s prescription is this: Our oil addiction is bad not just because we import a lot of it. It’s also bad because it is a major contributor to climate change, no matter where the oil comes from. The issue is not how much oil we can take from the ground; it’s how much carbon we can put into the air.

Third, it’s been pretty well established by the Department of Energy and other experts that more domestic drilling would not do much to lower petroleum prices, even if we didn’t put a price on carbon. Clean coal and nuclear power won’t lead to lower energy prices either. In addition to many other drawbacks, electricity from next-generation nuclear power plants and power plants equipped with clean coal technology (if it’s ever perfected) will cost considerably more than electricity today – and considerably more than electricity is likely to cost in the years ahead from wind and solar resources. For example, officials at DOE estimate electricity will cost 36-81 percent more from coal-fired power plants equipped to capture their carbon emissions.

So whose is the greater vision for our times? No contest.

The Tax Bugaboo

As I predicted in a past post, any policy that puts a price on carbon will be branded by opponents as a tax increase, even if it does not involve a tax. The “tax” word is the poison dart that everyone throws these days at energy and climate proposals they don’t like, often for vested or ideological reasons.

For example, Boehner complains that Obama’s proposal for a cap-and-trade system (which is not a carbon tax) will “increase taxes on all Americans who drive a car, who have a job, who turn on a light switch, pure and simple.” The Independent Petroleum Association of America (IPAA) protests that Obama’s 2010 budget proposal will deliver a “devastating blow” to the U.S. oil and gas industry by repealing several tax breaks those industries now enjoy.

Yet the president has proposed sending most of the revenue from carbon trading – estimated at $645 billion over the next 10 years – back to taxpayers. When it comes to subsidies like those the oil and gas industries now receive in a textbook example of corporate welfare, I come back to the problem of oil addiction: If oil addiction is bad, then why are we still subsidizing the drug? We should be subsidizing the cure. As The Economist puts it: “There is no point in calling for cleaner energy while subsidizing the dirty kind.”

Everyone who believes that the marketplace should be allowed to solve our energy and climate problems – and that includes a lot of fiscal conservatives – should be overjoyed at the prospect of pricing carbon and ending subsidies for fossil fuels. Both policies create more accurate market signals by bringing the price of fossil energy closer to its true costs to society. Repealing fossil subsidies would eliminate a public policy perversity that encourages consumers to undermine the critical national goals of economic, energy and climate security.

“Capitalizing on Crisis”

Some critics of Obama’s aggressive first 50 days in office argue that he is using the economic crisis to implement a liberal agenda. An example is Jonah Goldberg’s March 10 rant in the Los Angeles Times, titled “Obama’s fear-mongering”. An excerpt:

"The real scandal is that this administration thinks crises are opportunities for governmental power-grabs. … It's scary. Its amorality is outweighed only by the grotesque and astoundingly naked cynicism of it all. … Obama's defenders respond to this argument that Obama's motives are decent, noble and pure. He wants to help the uninsured and the poorly educated. He wants to make good on his vow to halt those rising oceans. But this is just a rationalization. Every president thinks his agenda is what's best for the country; every politician believes his motives are noble. The point is that scaring people about X in order to achieve Y is fundamentally undemocratic."

Goldberg goes on to accuse Obama’s supporters of being two-faced because many of them decried how President Bush and the Republican Party used fear to push its agenda after 9-11.

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