PrintJune 3, 2009
Cap and Fade
All great national powers have relied on access to and control of large quantities of natural resources, including energy and foodstuffs, to maintain their influence and status. Government policy that limits access to these resources must certainly weaken the nation as a whole.
It would be bad enough if we had a president who simply refuses to plan for future energy needs and does nothing. What we have now is a president who intends to do a great deal -- to reduce the amount of energy available to American industries and individuals. With the full support of the president, the Democratic Congress is gearing up to pass a cap and trade program which would force American businesses to purchase carbon credits at a total price now under negotiation, but originally estimated to be as much as $100 billion per year. This cost would be passed on to consumers in the form of higher utility bills, higher gasoline prices, higher prices for services, and higher prices for everything that is manufactured and transported.
What is the cost of cap and trade per taxpayer in terms of future inflation, reduced productivity, and slower job creation? One estimate would be $333 per person -- the $100 billion figure (based on White House Budget Director Peter Orszag's admittedly "underestimated" figure of $646 billion over ten years as reported on February 2, 2009 in US News and World Report and allowing for annual inflation of 3%) divided by the population of the United States. (Other estimates run as high as $2 trillion.)
More significant, perhaps, is the figure of $1332 per family of four, multiplied by two: $2664. That is the amount that each taxpaying family of four would pay in additional energy costs, since under current proposals non-taxpayers would have their energy bills subsidized through some form of government payment or credit (such as an energy tax rebate for tax filers who pay no federal tax to begin with -- otherwise known as welfare). And that figure of $2664 is itself subject to upward revision as energy supplies per capita are squeezed in future years while population and energy needs -- such as the electricity it takes to operate a large flat panel television set -- grow while the use of fossil fuels is gradually choked off, meaning higher prices for the consumer.
The fact is that the Obama administration is intent on diminishing, not increasing, our energy supplies. The administration's environmental policy, contrary to promises made during the campaign, has turned against expanded offshore drilling. By executive order it has removed a million acres of western lands from development and, for the time being if not indefinitely, has shut down exploration in Alaska's government lands. It has issued edicts banning mountaintop mining of coal, and with its proposed new standards of emissions, has placed most new coal-powered plants on hold. A hundred years worth of natural gas (at current usage levels) sits in the ground unused and perhaps ten times this amount lies unexplored onshore and offshore, but the Obama administration keeps talking wind and solar farms, which provide for less than two percent of current needs.
Barack Obama was not kidding when he stated during the 2008 campaign that he "wouldn't mind" if the price of gasoline went to twelve dollars a gallon, though this statement was disavowed when public outrage surfaced as the price of gas actually did go to over four dollars a gallon. There are many ways to drive the price of gasoline to $12 a gallon without seeming to do so. Cap and trade is the most far-reaching, but there are a wide range of additional restrictions, legal delays, lease renegotiations, and new or increased taxes that will move us further toward this "goal": the goal, that is, of reshaping the American economy into a nonproductive, high-unemployment, "post-material" society resembling the leftist enclaves of Berlin or Brussels.
Then there is the "multiplier" effect of energy strangulation, an effect which is more difficult to compute but which would manifest itself in the form of slower growth, reduced trade, job losses, and less innovation -- all of this for the announced purpose of slowing so-called global warming. As has been pointed out by scientists worldwide, the earth's climate has periodically warmed and cooled in natural cycles since the beginning of time. As recently as 1970, mankind was shivering through a cold cycle. During the past decade, we have entered another cycle of cooling, according to Professor Bill Gray at Colorado State University and Jeremy Ross at Storm Exchange, as reported in Barrons. The twenty-first century will undoubtedly witness further cycles of warming and cooling, none of them leading to the "catastrophic" consequences that the Obama administration so confidently predicts.
Add to this the rather inconvenient truth that even those scientists who support the global warming thesis are insisting that a cap on CO2 emissions would have practically no effect on the earth's temperature, either because they recognize that warming takes place largely as a result of natural cycles or because they adopt the more radical position that it is too late to do anything about it. In either case, why should we bother? A cap and trade policy has now been in effect in Europe for over a decade: has it had even the slightest effect on the earth's temperature? What can be demonstrated quite conclusively is that far-reaching cap and trade legislation would create a costly bureaucracy, reduce economic activity, and lead to inflation, and these effects would not be a one-time hit: they would amount to a permanent tax on the American people.
Why, one might ask, is Obama pursuing this destructive energy policy? The answer is, because he is a politician beholden to a powerful environmentalist lobby, and that lobby is opposed to all forms of economic growth, not just fossil fuels and nuclear energy. To put it bluntly, Obama's energy policy is beholden to a Luddite fantasy of happy peasants shoveling manure in a sustainable village economy. It is not an energy policy that bears any relation at all to the modern world, but it is a fantasy of "niceness" that garners liberal votes.
The current recession will likely end within twelve months, and when it does the global demand will drive energy prices back up to their pre-recession levels. It would seem that a reasonable course of action would be to prepare for this inevitability by establishing policies that would increase energy production from traditional as well as from alternative sources. This is precisely what the Chinese government is doing as it aggressively buys up the rights to natural resources around the world. A recent Wall Street Journal article noted that, unlike American producers, CNOOC, the Chinese state-run oil company, had expanded its exploration budget during the current recession. Unfortunately, neither Obama nor the Democratic Congress has any idea of the energy time-bomb that is ticking away.
Just when we should be expanding our own energy supplies, Obama is doing everything he can to reduce them. In fact, the current proposals for cap and trade, lease renegotiation, and increased taxes follow a long pattern of liberal mismanagement and willful interference with the free market. Does anyone seriously believe that Congress is capable of managing the production of oil and gas, or of anything else, more efficiently than private industry? Anyone so deluded need only calculate the return on equity of Congressional expenditures during the past several decades. Democrats like to camouflage new government spending by calling it an "investment," but that's one form of investment that has earned less than nothing. It's a shame that we don't have Exxon CEO Rex Tillerson in Congress instead of Schumer, Kennedy, Pelosi, and Reid. Then our national government might be as well run as some of our outstanding private corporations.
Thank you, Barack Obama, for making my life less rich. Thank you for making our country less secure as your expanded ethanol proposal sets the stage for hunger around the globe. Now I read that, with your program of new mileage standards, the cost of new vehicles will rise by an average of $1,400 in the future. Perhaps that is how the administration intends to make a profit with its "investment" in Chrysler and GM. What's next? A tax on household pets? New regulations for how much toothpaste we squeeze out every morning?
Cap and trade is another name for national decline. By restricting the production of fossil fuels, we are reducing future growth. At the same time, we are setting the scene for spiraling inflation. Slow growth and high inflation - stagflation -- will strangle our country until the Obama energy policy is reversed. If it is not reversed, we can expect our nation to fade to the second rank of countries. Our national security depends upon the availability of affordable and stable sources of energy. Windmills and solar farms constitute a nice little two percent of this energy, but what about the other ninety-eight percent?
Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan, and has published nine books.
