Poor President Bush is getting hammered as hard on his energy plan by conservatives as by liberals. The libertarian Cato Institute correctly termed the proposals “a smorgasbord of handouts and subsidies for virtually every energy lobby in Washington.”
What could Bush have done differently? While I am not a conservative, let me suggest a speech that the president might have given that would have reflected true conservative principles and, at the same time, won him more respect at both ends of the political spectrum.
“My fellow Americans: Today I want to present some new ideas to deal with some energy problems that we face. Some term it a crisis. I don’t agree that electricity shortages in one state and real gasoline prices approaching what they were in the Reagan administration constitute a crisis. But these problems have concentrated the minds of many citizens and offer an opportunity to take a fresh approach, not only to energy, but also to preserving environmental quality.
“As a conservative, I believe that markets can play a valuable, primary role in our economy. But market prices do not always correctly reflect all the costs or benefits of a particular good or service. Economists across the political spectrum agree that when such ‘externalities’ exist, the best response is not for government to impose some sort of politically determined rationing scheme, set of prohibitions or technical requirements.
“Instead, government should impose taxes so that the cost to consumers is a good approximation of the true cost to society. Then consumers and producers alike can use their ingenuity and inventiveness to find ways to use less of such commodities or to find less harmful alternatives.
“Therefore, I call today for abolition of all federal CAFE fuel-efficiency standards for vehicles and similar standards for electric appliances. We will replace these technical “government knows best” standards with a 50 cent-per-gallon tax on all motor fuels and similar taxes on coal and other fossil fuels that approximate their damage to the environment. This tax is a starting point; it may be adjusted upward or downward as we gain better knowledge of the true costs of such fuels.
“Car and appliance manufacturers will still be required to calculate and prominently list average levels of energy use for their products, but we will let informed households choose which tradeoffs make sense for them.
“I will similarly propose the repeal of most national standards for discharges into air and water and their substitution either with taxes on such discharges or on particular raw materials, such as mercury or cadmium and other heavy metals, the use of which is frequently harmful to health or the environment.
“I realize that this proposal represents a sea change in our nation’s policies. It is also clear that Congress is ill-suited to determine the specific taxes to be applied to counteract external costs. Therefore, I propose establishment of an independent board, modeled on that of the Federal Reserve, to consider the best scientific and economic analysis available and determine the exact levels of tax in each case.
“As a Republican, I am acutely aware that taxes often have negative effects. Therefore, I will be sure that these measures will be revenue-neutral. That is, any increases in revenue caused by these new pollution taxes will be completely offset by reductions in personal income taxes.
“To do this in the fairest way and to ensure that even households who owe no federal taxes get a break to offset higher energy costs, we will introduce new funded tax credits for all children and adults. Regardless of income or wealth, all Americans will get roughly equal payments, either as a decrease in taxes withheld and owed, or as a direct check for retirees and others without taxable income.
“Critics will complain that higher energy prices are regressive. But our funded tax rebates will eliminate that objection. Furthermore, higher fuel prices will increase demand for mass transit in many areas. Higher use will result in a virtuous circle of economies of scale, lower per rider costs and more frequent service. This will help poorer urban families enormously.
“Additionally, while I personally feel that there is great future potential for nuclear power, it is also clear that we have subsidized this alternative excessively in the past. One particularly egregious subsidy is the 1950s Price-Anderson Act, which limits the liability of nuclear operators in case of catastrophic accidents. The do-nothing Carter administration should have abolished this market-distorting measure after Three Mile Island. It failed to do so, but I am determined to see it repealed.
“There also may be great potential in new technologies such as battery electric or hybrid vehicles. But government historically has a very bad record of identifying technological winners. Furthermore, there are unaddressed safety issues involving the hundreds of pounds of scalding hot, caustic or toxic materials such vehicles generally contain.
“Therefore, we will follow a general principal of financing basic and applied research into new energy and environmental technology. Our system of taxes on externalities will provide incentives to producers and consumers. They have the intelligence to find the best solutions.
“My fellow Americans, I know that many of you will find these ideas strange at first. They do represent a revolution in how our government operates. But bear with my administration and hear us out. I am convinced that we have an opportunity to make our economy more efficient, more just and more caring of the environment.”
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.