Facing new polling showing that 52% of the American people believe that he does not deserve a second term in office, President Barack Obama attempted to reach out to conservatives yesterday by promising $8.33 billion in federal loan guarantees for a pair of nuclear reactors in Georgia. The President told an enthusiastic audience of union officials in Lanham, MD: “Those who have long advocated for nuclear power — including many Republicans — have to recognize that we will not achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable.”
In other words, as newspapers across the country have noted this morning, President Obama’s nuclear loan guarantee announcement is really nothing more than a transparently cynical attempt to revive his moribund cap-and-trade/energy tax proposals currently languishing in the Senate. In reality, the $8.3 billion announced yesterday is actually just a first down payment on the $18.5 billion in loan guarantees that were authorized under the Energy Policy Act of 2005. While the administration should be applauded for following the law, loan guarantees are not enough to recreate a robust nuclear industry in the United States. Indeed, an expansion of the program could do much more to stifle the industry’s growth than to help it.
And expanding the nuclear loan guarantee program is exactly the approach the Obama administration plans to pursue. Their 2011 budget provides an additional $36 billion in loan guarantee authority to nuclear energy projects. When added to the $18.5 billion previously authorized under the Energy Policy Act of 2005, the American taxpayer will now be subsidizing $54.5 billion in loans to the nuclear industry. But just as conservatives do not support subsidies for wind, solar or biomass energies, conservatives should not support subsidies for nuclear power, either. Heritage Research Fellow Jack Spencer explains:
Expansive loan guarantee programs, however, are wrought with problems. At a minimum, they create taxpayer liabilities, give recipients preferential treatment and distort capital markets. Further, depending on how they are structured, they can remove incentives to decrease costs, stifle innovation, suppress private-sector financing solutions, perpetuate regulatory inefficiency and encourage government dependence.
President Obama’s bureaucratic/special interest/Washington approach to energy policy is clear: tax and regulate those energies unpopular with his political base while subsidizing and mandating the use of those energies that his supporters favor. This is the same approach the United States tried in the 1970s under President Jimmy Carter, and it was a colossal failure.
What America really needs is a true free market approach to the energy sector, and the nuclear industry is a great place to start. Specifically, the federal government should: limit the loan subsidies of Energy Policy Act of 2005 to existing law; avoid creating a government-dependent nuclear industry; remain committed to scientific conclusion on Yucca Mountain; introduce market principles into nuclear waste management reform; and focus the government on key responsibilities like establishing predictable and effective regulation that will ensure safety and security.
Just as with the health care debate, the White House seems to believe they can win conservative support for their big government policies by buying off selected industries. What the White House continues to fail to realize is that true conservatives are pro-market, not pro-business. Subsidies and mandates are never the answer to an ill-functioning market. A predictable and reliable regulatory framework where firms and consumers can find the best solutions through undistorted price signals is the better approach for energy, health care … and really just about everything.
Quick Hits:
- U.S. Marines and Afghan soldiers seized the site of Marjah’s government offices, setting the stage for Kabul to attempt to resume its authority.
- The Obama administration’s economic-stimulus program has delivered only about a third of its total $787 billion budget so far, much of that to maintain social services and government jobs and to provide tax cuts for workers.
- More than $3.5 billion in economic stimulus funds are going to programs that President Obama wants to eliminate or trim in his new budget.
- The ink is barely dry on the pay-as-you-go law, and Democrats are seeking to bypass it to enact parts of President Obama’s Second Stimulus.
- According to a Texas Health Science Center poll, 57% of respondents said Congress should start over on health care reform.
Data show 2009 was a record year for lobbying on energy issues. 1747 clients (firms and groups) hired lobbyists to work in the area of energy and nuclear power. This is a stunning 93 percent increase from 2006.
This increase may be stunning, but it isn’t surprising. With literally trillions of dollars put into play by various cap-and-trade bills over the last three years, it would have been surprising if lobbying hadn’t grown by leaps and bounds.
Though initially offered as legislation to fight global-warming, the justifications for cap and trade followed the polls (from global warming to climate change to energy security to economic stimulus to green jobs to who knows what’s next) and the bills’ provisions followed the money. Effectively a huge energy tax, early proposals kept the trillions in new taxes for federal spending. In the end, the only bill to pass either house of Congress, the Waxman-Markey bill, gave virtually all of the revenue away to a grab bag of special interests.
This evolution perfectly fits the theory of Professors Gordon Tullock and Nobel Laureate James Buchanan who developed public choice theory—a sub discipline of economics that investigates the self-interested use of the political process. Public choice theory predicts the regulatory process will be bent toward the goals of private enrichment as politicians and rent-seekers (a term coined by Anne Krueger in her 1974 analysis of this behavior in India and Turkey) do what economists assume all business owners and consumers do—look out for themselves.
So legislation and regulations that promise billions in taxes for some energy companies (and their customers) and offer billions in benefits to others will get both sides excited and generate the demand for lobbyists that we have now seen.
For instance, the Climate Action Partnership strongly supports cap-and-trade legislation, especially if its members get big chunks of the tax revenue. Among the founding corporate members, Duke Energy, BP, Honeywell International, NRG Energy, Shell Oil, Dow Chemical, and Alcoa rank in the top 50 most active clients lobbying in the energy area.
As current and proposed policies offer billions in subsidies to both wind and nuclear power, it’s another dog-bites-man story when we find representatives of the wind and nuclear power industries in the top 50 as well. Of course those expecting big losses from the proposed regulations and taxes are lobbying hard to stave them off. So coal and refining interests are also well represented in the top 50.
Stricter rules on lobbying can change the form the lobbying takes (indeed the numbers above only reflect official use of registered lobbyists), but reducing government control of the economy reduces the root cause of the lobbying and is the one solution to controlling the growth of rent-seekers and their mouthpieces on K Street.