The Gang of 10. Sounds like something out of Westside Story. I keep waiting for Riff from the Jets to enter the picture somewhere, but it hasn’t happened yet. In reality, the Gang of 10 is a group of senators, 5 Democrats and 5 Republicans, leading the charge to combat high gas and energy prices. While the plan does suggest it will increase domestic supply, this is a bit misleading. Even worse, the majority of the plan focuses on the same tried and failed tax hikes, tax incentive gimmicks, and subsidies that led us to be in this position in the first place.
So, I’m calling it the gangrene plan. The definition of gangrene is the decay of body or tissue that results from a lack of blood supply. In a somewhat similar manner, the Gang of 10 plan will cause our economy to further decay from a lack of energy supply. Okay, the analogy is a stretch – take it or leave it. (On a tangential note, do not Google Image “gangrene” after lunch; it’s just not a good idea.)
The Institute for Energy Research (IER) does a thorough job explaining the flaws in the Gang of 10’s plan. Their full analysis can be found here. To summarize, the flaws include:
•Removing cars off conventional gas through taxpayer money for research & development and taxpayer credits. Yet, R&D should be left for the private sector to fund, not the taxpayer. IER writes, it would make more economic sense to lower marginal income tax rates and take steps to increase domestic energy supplies, rather than to require taxpayers to use credits on technologies that currently do not pass the market test.
•Enhancing conservation through renewable energy. This part includes more subsidies and taxpayer-sponsored incentives to expand renewable energy and promote environmental efficiency. Conservation can and should play an important role, but extending subsidies and tax credits to unproven renewable energy sources has been tried unsuccessfully since the ‘70s.
•Increasing domestic production. This part of the plan generated the most buzz because it calls for drilling on areas currently off limits. But Red Cavaney, president of CEO of the American Petroleum Institute exploits the flaws: While this new proposal would expand access in the waters of the Outer Continental Shelf, it unfortunately limits any expansion over current law to the eastern Gulf of Mexico and waters off four Atlantic Coast states in the South. Even in these areas, development in federal waters less than 50 miles offshore would be banned – despite the fact that offshore facilities would need to be 12 or fewer miles from shore to be visible from land. Leasing in the North Atlantic and off the Pacific Coast would be banned and plentiful hydrocarbon resources in Alaska would remain off limits. Significant regulatory burdens on new development would remain in place.
•Speculation. I’ll turn back to the IER analysis: Fortunately, the New Era does not currently call for the Commodity Futures Trading Commission (CFTC) to further regulate investment in oil futures. However, the “Gang of Ten” states that it will await the September CFTC report to make a final determination. In the meantime, the Gang would be well-served by reading the July interagency task force report, which found no evidence that institutional investors were driving up oil prices.[vii] The July report looked at a variety of measures, including the term structure in oil contracts (i.e. near- versus distant-term futures contracts), oil inventory data, and even econometric analysis of the timing of price changes versus the positions of large investors. All such tests revealed no indication that high oil prices were the result of manipulation.
•Offsets. As IER points out, offsets are synonymous with tax hikes. And the bad part is that $54 billion of the $84 cost of this bill needs to be “finalized.” It genuinely shows the lack of planning that actually went into this plan.
While the 10 Senators should be commended for their bi-partisan effort to reduce high energy prices in America, real praise will come not simply from effort but from the value they create. In all likelihood, the plan won’t do as much damage as the Communist Gang of Four who spearheaded the disastrous Cultural Revolution, their energy solutions are based on the same anti-market principles. Envy-based taxes will not lead to more oil; regulations to force “the people” to do what is good for themselves are not policies of liberty or growth
