Ecological Disaster Is No Excuse for Creating an Economic Disaster

Carrie Lukas
|
Posted: Jun 29, 2010 12:01 AM

Americans are horrified by the damage being done to the Gulf Coast region's environment and local economies by the oil spill. Clearly, every measure needs to be taken to mitigate that damage and figure out what went wrong so that such accidents can be prevented in the future. Yet the disaster in the Gulf shouldn't be an excuse to create a new economic disaster, by raising energy prices for millions of Americans and by ceasing responsible exploration for oil and natural gas.

While the Administration has been slow to take action to mitigate the oil spill's damage (and in some cases, it has been actively impeding state and local efforts to combat the damage and turning away foreign assistance), it is wasting no time in using the disaster to advance a long-planned “energy bill” that will increase costs for all Americans and lead to more job loss.

Politicians are gathering to consider what iteration of cap-and-trade Congress might be able to ram through before voters can make their preferences known in November. The details of the legislation will matter very much, particularly to the industries and companies that will lobby for exemptions and favored treatment. And, much like with health care, we likely won't know exactly how much more individual Americans will have to pay as a result of any new cap-and-trade bill until the legislation is fully implemented.

Yet we do know that Americans will be paying more, and not just for direct energy usage—for gasoline to power their cars and for oil and gas to heat their homes—but for just about every product and service they consume. By design, any cap-and-trade program will raise the cost of using fossil fuels, which currently supply about 85 percent of America's energy needs. Those higher energy prices are meant to encourage both American families and businesses to use less energy: to buy more fuel efficient vehicles and appliances, and incorporate alternative energy sources.

Glenn Beck

That may happen over time, but in the short-term Americans' habits can only change so much. As businesses spend more money on overhead, from lighting building to transporting goods, they will have less to spend on employing workers or investing in new research and technologies. Some of those higher costs will be passed on to consumers. Americans will have to spend more on everything from food to clothes to service calls to home heating. That means their overall purchasing power will decline. And as they buy less, American businesses will suffer.

The effects of any cap-and-trade program will be compounded by efforts to limit domestic drilling. The courts will debate whether and for how long the Administration can prevent offshore drilling, but the implications of such a moratorium are clear. Energy companies won't wait forever to get a green light from the Administration. They will take their equipment—and their jobs—elsewhere around the world. To the extent that the Administration is successful in decreasing overall drilling, the supply of oil and natural gas will decrease and prices will rise.

In his Oval Office address, President Obama urged, “The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now.” And certainly the idea of a world powered by perfectly clean, renewable energy appeals. Unfortunately, it simply isn't realistic. Even under the most optimistic scenarios, alternative energy sources will supply only a small fraction of our energy needs for years, if not for decades. America will have to continue to rely overwhelmingly on fossil fuels. That means the United States needs an energy policy that allows responsible exploration of energy sources domestically as well as a rigorous energy marketplace that encourages the development of the next generation of energy sources.

Americans may dream of a world run solely on alternative energy, but they also dream of an economy in which people can find work. Unfortunately, today unemployment titters near 10 percent. The only jobs being created are taxpayer-financed, government jobs, which mean that the private sector is being squeezed even more. Government exacerbates our economic woes by running up trillion dollar debts, creating burdensome new regulations on everything from consumer loans to private health insurance, and by threatening to raise energy prices on an already cash-strapped country.

Washington can't prevent every disaster. Yet it shouldn't be in the business of making new disasters out of old ones.