More bad ideas on en­ergy from our po­lit­i­cal class

The Washington Times Weekly - - Commentary - LAWRENCE KUD­LOW

Pres­i­dent Bush and Sen. John McCain went to bat on en­ergy pol­icy last week. And guess what? They both struck out. Mr. Bush went hat in hand to the Saudis to ask for more oil pro­duc­tion in or­der to bring down world prices. He whiffed. They said no for the sec­ond time this year.

ExxonMo­bil chair­man and CEO Rex Tiller­son said it’s “as­ton­ish­ing” that Mr. Bush keeps ask­ing Saudi Ara­bia to pump more oil, rather than work­ing harder for in­creased oil pro­duc­tion at home.

Mr. Tiller­son called this “ter­ri­bly up­side down” and went on to say the pres­i­dent should be fight­ing to open U.S. coastal wa­ters to drilling and pro­duc­tion on the outer con­ti­nen­tal shelf. He cor­rectly wants to end the fed­eral mora­to­rium on such off­shore drilling, where ka­jil­lions of bar­rels of oil and nat­u­ral gas are be­ing com­pletely ig­nored.

Mo­torists are fu­ri­ous with oil at $125 a bar­rel and a $4 pump price for gas. And they seem to be tak­ing it out on the GOP. That may not be fair, since Mr. Bush does fa­vor a pro-pro­duc­tion en­ergy pol­icy that in­cludes off­shore drilling, build­ing re­finer­ies, clean-coal de­vel­op­ment, oil sands, nat­u­ral gas and nu­clear power. But Democrats in Congress stri­dently op­pose th­ese ideas, as does Hill-Bama on the cam­paign trail. They want an ex­cess-prof­its tax. Bril­liant.

None­the­less, the longer the en­ergy stale­mate lasts, the an­grier vot­ers get. You can see it in con­sumer-con­fi­dence polls that are now hit­ting 25 year lows. What’s to be done? Mr. McCain weighed in with a cap-and-trade pro­gram that he al­leges will solve our global cli­mate and en­ergy prob­lem. It’s a bad idea. It’s re­ally a cap-and­kill-the-econ­omy plan, as well as an un­lim­ited spend-and-tax-an­dreg­u­late plan. It’s a huge gov­ern­ment com­mand-and-con­trol op­er­a­tion that would make any old Soviet Gos­plan bu­reau­crat smile.

Iron­i­cally, the United States has vir­tu­ally the clean­est air of any coun­try in the world. And mar­ket forces over the past 30 years have in­creased all man­ner of en­ergy ef­fi­ciency per unit of gross do­mes­tic prod­uct by more than 50 per­cent. In fact, ac­cord­ing to the edi­to­rial page of In­vestor’s Busi­ness Daily, U.S. car­bon emis­sions grew by only 6.6 per­cent be­tween 1997 and 2004, com­pared with 18 per­cent for the world and 21 per­cent for the na­tions that signed the Ky­oto pro­to­col on green­house gasses. (Think Europe.)

Then there’s a bunch of sci­en­tists who don’t think we have a global-warm­ing prob­lem at all. And many who do ac­knowl­edge the threat link it to so­lar warm­ing, or in­creased so­lar ac­tiv­ity, rather than car­bon.

Cap-and-trade, in other words, may very well be un­nec­es­sary. Mean­while, it will surely re­duce eco­nomic growth in the years ahead.

The reg­u­la­tory as­pects are mind-bog­gling. All man­ner of U.S. busi­nesses — be they small pig farms, large power plants or the mil­lions of com­pa­nies in be­tween — will be sub­jected to gov­ern­ment rule­mak­ing and stan­dard-set­ting. EPA in­spec­tors will lit­er­ally have to visit 5 mil­lion Amer­i­can busi­nesses in or­der to eval­u­ate car­bon emis­sions and fig­ure out al­lowances for trad­ing per­mits.

Think of it. Some sort of fed­eral cap-and-trade de­part­ment will send out 100,000 in­spec­tors to comb through Amer­i­can cor­po­ra­tions and cal­cu­late their car­bon sto­ries. This is to­tal in­san­ity. The Con­gres­sional Bud­get Of­fice guesses it will cost at least $1 tril­lion. And a lot of that cost comes from the gov­ern­ment’s will­ing­ness to give com­pa­nies car­bon al­lowances that then can be traded in some sort of af­ter­mar­ket.

Later on, ac­cord­ing to the McCain plan, the gov­ern­ment will auc­tion off th­ese al­lowances, reap­ing a gi­gan­tic wind­fall. But so far there are no stric­tures on this rev­enue honey pot and the un­prece­dented fed­eral spend­ing it will fuel.

Some global warm­ers sim­ply want to tax car­bon. That at least would re­duce the Gos­plan ef­fect. Re­spon­si­ble peo­ple like Har­vard’s Greg Mankiw have even sug­gested tak­ing the car­bon-tax rev­enue and us­ing it to cut in­come-tax rates. This is a much bet­ter idea — that is, if you buy into global warm­ing at all.

My friend Art Laf­fer tells me Al Gore wants a car­bon tax, with the rev­enues be­ing used to abol­ish the So­cial Se­cu­rity/Medi­care pay­roll tax al­to­gether. Laf­fer would pre­fer a big in­come-taxrate re­duc­tion that would get us to a 13 per­cent flat tax. I agree. Ei­ther way, tax­ing car­bon, when com­pared to cap-and-trade, is the lesser of two evils.

To be fair, Mr. McCain does fa­vor nu­clear power. But he is op­posed to Tiller­son’s idea of drilling off­shore and Pres­i­dent Bush’s idea of drilling in Alaska. That’s not good. And make no mis­take about it, his cap-and­trade plan will vastly in­crease the cost of do­ing busi­ness ev­ery­where, in­clud­ing gas prices at the pump. And when you cap some­thing like power well be­fore so-called al­ter­na­tive-en­ergy tech­nolo­gies have been in­vented or com­mer­cial­ized, you put a cap on eco­nomic growth and pros­per­ity.

That’s not go­ing to make any­body happy.

Lawrence Kud­low is a na­tion­ally syn­di­cated colum­nist.

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