Erika Johnsen

The oh-so-magnanimous federal government reserves the divine right to bestow subsidies on its politically-favored subjects, and these subsidies can take multiple forms, including direct cash payments and grants, tax breaks, and providing loans at below-market prices. All types of subsidies distort free-market signals and put some sort of damper on free enterprise -- with the ability to subsidize, the federal government renders itself capable of picking the marketplace's winners and losers based upon politics instead of merits, and encourages rent-seeking behavior rather than the artlessly efficient and wholly unbiased regulatory mechanism of competition. This is particularly and egregiously true in the American energy sector: in the general stampede for subsidies, almost no form of energy -- renewable or fossil fuel -- has been left out, and the tax code concered with the energy industry is accordingly convoluted and cumbersome.

Last week, Senators Jim Demint (R-South Carolina) and Mike Lee (R-Utah) introduced the Energy Freedom and Economic Prosperity Act (EFEPA), a bill to repeal all energy-specific tax credits.

Senator DeMint said, “Our tax code is riddled with loopholes for special interests and it’s time to end this corporate welfare that is hurting our economy. When Washington picks winners and losers in the energy market, those with the highest paid lobbyists win while the small businesses and taxpayers lose. We shouldn’t favor ethanol over hydrogen, nuclear over natural gas, or oil over renewables. The free market economy works when everyone competes on a level playing field and works to provide Americans with the best, lowest-cost products. The ultimate solution is to create a true flat tax that ends all corporate welfare, and this is a significant first step.”

Senator Lee said, "The federal government has for decades been making the mistake of picking winners and losers in the energy industry. Not only does this go against the very nature of the American economy, but it is accomplished by adding layers of costly complexity to our tax code. The waste and futility of our current energy policies are demonstrated time and time again, from the backfiring of ethanol mandates to the bankruptcies of favored companies like Solyndra to the utterly inexplicable rejection of the Keystone XL pipeline. In this era of rapidly growing energy demands, we must be willing to stop government interference in the energy market and the obstruction of domestic energy production. There is no more efficient way to power the nation."

An excellent, bold proposal that should (in theory) be able to appeal to the hearts and minds of both "drill, baby, drill"-types and the "greener-than-thou" crowd, for several reasons. First off, it could put an end to a lot of the political gamesmanship that goes into the federal government's Solyndra-esque endeavors, in which they attempt, in their neither august nor judicious but complete lack of wisdom, to "invest" our own money for us and ostensibly safeguard our futures on our behalf (yeah... no). In an even larger context, however, this bill would simplify the tax code and stop many of the subsidies received by the fossil fuel industries. Right now, we as consumers don't necessarily realize the full extent of the costs of gasoline and electricity -- the price we pay at the pump and our utilities bills are what we feel like we pay for our traditional energy sources, because these subsidies are built into the prices. Ergo, we have less incentive to conserve our use of these resources, and our demand for new, alternative, and renewable types of energy is lower than it might otherwise be.

All types of energy deserve a "fair shake," to borrow a phrase from President Obama, but they deserve it from the free market, not from the auspice of the federal government's wishful thinking. I have absolutely nothing against alternative energy in theory, but it must demonstrate itself capable of fluidly fitting in with our infrastructure, efficiently meeting consumer demand, and competing on its own merits -- greenies may (mistakenly, I believe) argue that our consumption of fossil fuel isn't sustainable in the long term, but fiscal insolvency definitely isn't.


Erika Johnsen

Erika Johnsen is a Web Editor for Townhall.com and Townhall Magazine. Follow her on Twitter @erikajohnsen.