Monday, April 28, 2008
By Phil Kerpen & James Valvo
Big-government, command-and-control technocrats believe that when central planning fails, the solution is a better plan and smarter planners. They never step back and look at whether planning makes sense in the first place. This was true of the Soviet Union, with tragic five-year plan after five-year plan. It was true of Communist China, with Mao’s revolutionary upheavals. And today, here in the United States, it is true of government energy policy.
The 1970s and early 1980s saw all manner of failed energy policies — from Nixon’s Project Independence price controls, to Ford’s CAFE mandates, to Carter’s Synthetic Fuels Corporation and windfall profits tax, to Bush and Clinton’s publicly financed push for electric cars. The latest example is the 36-billion-gallon biofuel mandate enacted into U.S. law last year.
U.S. dependence on imported energy continues to reach record levels while no commercially viable biofuels have been produced. At the same time, the government-subsidized burning of our food supply to create ethanol has both increased carbon dioxide emissions and driven up food prices at a startling rate. This must end.
Even environmentalists are calling for a halt to government subsidies and mandates on biofuels. Lester Brown, founder and president of the Earth Policy Institute, and Jonathan Lewis, a climate specialist with the Clean Air Task Force, spoke out on Earth Day with an article titled “Ethanol’s Failed Promise.” They outlined the desperate need for Congress to abandon a policy that should never have been enacted. In a daze over rising fuel costs, increased dependence on foreign oil, and a fear of carbon emissions, Congress has been backing the politically favored food-to-fuel ethanol program. But “the mandates are not reducing our dependence on foreign oil,” wrote Brown and Lewis. “Last year, the United States burned about a quarter of its national corn supply as fuel — and this led to only a 1 percent reduction in the country’s oil consumption.”
The failure to reduce oil dependence is not the only flaw in the ethanol program. It also has driven food prices disturbingly high. The World Food Program is warning that the upward pressure on food prices is likely to lead to a “silent tsunami” of hunger. Josette Sheeran, the program’s executive director, warned that “The price of rice has more than doubled in the last five weeks.” The World Bank estimates that food prices have increased by 83 percent in three years. British Prime Minister Gordon Brown acknowledged what many have been saying for years: “The production of biofuels needs to be urgently re-examined.”
Unintended consequences are the inevitable result when politicians pick untested feel-good solutions to market-created concerns. A decade of ethanol policies has once again proven this true. But we now stand on the cusp of an even larger congressional blunder: cap-and-trade. And this time higher food prices will not be the only negative result.
The Congressional Budget Office says current cap-and-trade legislation would amount to a $1.2 trillion tax hike on the American economy over the next ten years. This tax will be passed along to consumers in the form of higher prices for gasoline, electricity, heating oil, food, and any product that is transported to market. In the throes of an ethanol disaster, it would be inexcusable for politicians to ignore these hardships.
But we’ve seen this too many times before. Each new generation of central planners believes the previous generation wasn’t smart enough. Yet central economic planning is forever doomed to failure since the approach itself limits human freedom, ingenuity, entrepreneurship, and innovation. These are the true engines of prosperity, and they will best manage all our problems, including those in the energy arena.
— Phil Kerpen is policy director and James Valvo is policy and public affairs assistant for Americans for Prosperity.