Nicolas Loris / @NiconomistLoris
Do we need a national energy plan? Many politicians think so. In fact, the Senate is considering a massive new energy bill that’s more than 400 pages long.
But energy is one of the last sectors of the economy that needs help from the federal government.
The bipartisan bill illustrates why bipartisanship isn’t always a good thing. Many times it means there are goodies available (which taxpayers will have to pick up the tab for).
We’ve detailed the problems with the Energy Policy Modernization Act.
Harmful provisions include taxpayer handouts for workforce training programs, targeted tax credits for hydroelectric production, demonstration projects for geothermal energy and hydrokinetic energy, a recycling program for critical minerals, nudging businesses to be more energy-efficient with government programs, increasing bureaucratic interference in the housing market, and empowering Washington to own and control land, among other problematic ideas.
None of these activities is the role of the federal government.
Many politicians treat the economy as if it were a football game, and they were the head coach.
Many politicians treat the economy as if it were a football game, and they were the head coach. Business owners and employees are the players. High prices are the opponent.
A carefully scripted game plan designed by Congress and government bureaucrats will allegedly maximize economic growth and job creation. Those “plays” include handouts for politically preferred energy technologies, trade barriers, taxpayer-funded job-training programs, energy efficiency mandates, special energy financing programs, and much more.
Yet instead of long-term growth and healthy market competition, we experience stagnant innovation and industries that become dependent upon the taxpayer. Politically connected companies will benefit. The cumulative result is hundreds of pages of legislation that direct how capital investments flow.
There are substantial opportunity costs caused by the provisions like the ones in the Energy Modernization Act. Capital is in limited supply, so investors will direct labor and capital to the government-anointed projects. Other innovative, promising technologies and ideas that do not have the government’s blessing will miss out.
Policymakers should learn the lesson from the last two major energy bills signed into law.
Policymakers should learn the lesson from the last two major energy bills signed into law. The Energy Policy Act of 2005 and Energy Independence and Security Act of 2007 contained about 800 pages combined of provisions that allow the government to control sectors of the economy.
These bills established the loan guarantee program, gave us the Renewable Fuel Standard (also known as the ethanol mandate), and provided other government interventions into the market place that Americans continue to pay for. Despite widespread opposition, bad policies remain in place.
The most recent energy bill follows the same line of thinking. Lacking something more recent to take credit for, both political parties are at it again, calling for another “comprehensive” energy bill.
If politicians really want to help, they should remove the market distortions created by government policy—policies that artificially raise the price of energy—in the first place. American households and businesses have reaped the benefits of lower energy bills and gas prices as a result of market-driven production.
When prices go up, energy companies respond by delivering more supply—so long as the government stays out of the way. Each bit of tinkering politicians propose (and the Senate bill is full of tinkering) distorts that process to the harm of all Americans.
Nicolas Loris, an economist, focuses on energy, environmental and regulatory issues as the Herbert and Joyce Morgan fellow at The Heritage Foundation. Read his research