If you believe that government should by-and-large leave
businessmen and consumers alone to govern their own affairs and
that politicians should not be in the business of micromanaging the
economy, then you’re probably a Republican. If so, you’re also
probably naive because any resemblance between Republican rhetoric
and Republican policy is purely coincidental. The passage of the
Energy Policy Act of 2003 in the House of Representatives earlier
this month demonstrates once again that the only real disagreement
between the two parties, at least when it comes to economic policy,
is which group of “Peters” ought to be robbed and which collection
of “Pauls” ought to be awarded a place at the government
trough.
Consider: The GOP saw fit to force companies to add renewable
fuel (i.e., ethanol made from corn) to gasoline even though it
takes more energy to produce ethanol than is gained by burning the
stuff in engines. Moreover, ethanol is three times more expensive
to produce than gasoline (which is why it has to be mandated upon
an unwilling fuels industry) and it can’t be shipped in pipelines
used for standard gasoline. This makes ethanol even more expensive
and renders the nation more vulnerable to occasional regional
supply shocks. But it is made from corn.
The Republicans also chose to cap the liability faced by owners
of nuclear power plants for damages that may result from radiation
accidents. But an important first principle of markets is that
entrepreneurs should face all the costs of doing business,
including the possibility of damages inflicted on third
parties.
The bill expands the government owned-and-operated Strategic
Petroleum Reserve to 1 billion barrels even though the existence of
a public inventory undermines the incentive for private
inventories. Moreover, political control over inventories increases
rather than decreases risk in petroleum market operations and
encourages more, not less, price volatility.
The GOP also saw fit to reduce the time over which electricity
transmission assets are depreciated so that “needed” transmission
is built. Yet economists agree that the proper mixture of
generation and transmission should be determined by market forces
rather than by provisions of the tax code.
Republicans also created a tax deduction for small refiners to
comply with new diesel fuel sulphur rules. If the GOP thought the
rules were too costly, they should have repealed them. Going this
route, however, gives a leg-up to inefficient small corporations
and blurs the true cost of environmental regulations.
Another tax credit was established for small crude oil and
natural gas producers to increase domestic production. Beyond the
silliness of preferring greater domestic production from small
companies rather than from large ones, energy prices are set in
world markets regardless of how much we import. Fewer imports
accordingly make us no less vulnerable to petroleum market
shocks.
Just to make sure that “no lobbyist is left behind, ” the
Republicans even managed to extend the tax credit for electricity
generated by so-called “renewable” fuels through 2007. Yet the
pursuit of renewable energy as a major source of electricity is a
pipe dream in that wind power and solar energy, because of their
natural variability, require fossil fuel backup. They thus cannot
replace coal, nuclear, or natural gas alternatives. If wind and
solar were as economically competitive as their supporters allege,
of course, it would scarcely need the subsidy to begin with.
We could go on and on (as the bill itself does, for 768
agonizing pages of this kind of stuff), but what’s the point? If
this is smaller government and less intervention, then what would
larger government and more intervention look like?
While it’s tempting to argue that the Energy Policy Act of 2003
represents the sheerest hypocrisy in that it flies in the face of
everything Republicans allege to stand for, that would presuppose
that Republicans are consciously saying one thing but doing
another. Conversations with Republican office-holders, however,
suggest that they scarcely understand the implications of their
rhetoric about limited government and are thus incapable of
hypocrisy. They are, however, capable of intellectual incoherence,
and that’s what we have here.
