The sometimes staggering greed of corporate America is matched only by its affection for simple solutions to complex problems. Bloomberg.com offers a perspective on energy policy that you may have missed.
President George W. Bush used his State of the Union address to lay out an ambitious energy policy that significantly expands a number of existing programs. The centerpiece of his plan will increase our reliance on biofuels by a factor of five. In other words, he announced a policy that makes no sense whatsoever.
Of all of the embarrassing corners of government policy, our approach to energy may be the most shamefully indefensible. And now the indefensible is going to get bigger.
Sounds OK so far, but where are they going with this?
Ethanol subsidies are the worst kind of government program. Ethanol is a costly fuel source that takes so much energy to produce that it has little impact on our reliance on other sources of energy. Indeed, some estimates suggest that our energy consumption might go down if we banned ethanol altogether.
Why the big subsidies? Ethanol is more popular in Midwestern states than “American Idol” because it drives up corn prices. This side of our energy policy is welfare for farmers and nothing else.
Domestic oil production might seem like a nice thing, but subsidizing it has little impact on the concerns mentioned above. A subsidy for production lowers costs and increases consumption. It is hard to imagine that higher oil consumption is what the global warming crowd has in mind.
Hmmm. So what does Bloomberg propose as an alternative?
If our leaders are serious about weaning us off of oil, then the economic textbooks provide guidance on how to do it. Government should tax things that produce pollution. If you are worried about global warming and energy security, then you should support a carbon tax.
Oh. A gas tax.
Consider a tax of $15 per metric ton of carbon dioxide — a tax rate comparable to the current carbon price in the European Emissions Trading System. Focusing only on carbon and assuming a short-term reduction in carbon emissions of 10 percent in response to the tax, a $15-per-ton tax rate would collect almost $80 billion a year, an amount that represents 28 percent of all corporate taxes collected in the U.S. in 2005.
The price changes aren’t huge. The price of gasoline would increase by 13 cents a gallon, the cost of electricity generated by natural gas by 0.6 cents per kilowatt-hour, and the cost of electricity generated by coal by 1.4 cents per kwh.
And what do they suggest we do with all that extra revenue?
And all that revenue could be used to reduce corporate taxes, perhaps even stimulating higher economic growth.
So let me get this straight: our energy policy is whacked because it’s taking with one hand what it’s giving with the other and the solution is to raise corporate taxes so you can lower corporate taxes?
Of course, that’s not what’s going on here. What Bloomberg is suggesting is a little more corporate welfare and wealth-sharing: it wants to tax consumers and energy corporations and use the money to lower the tax bills of non-energy corporations. Corporate Wall Street apparently believes that raising taxes is OK after all, provided it’s our money instead of theirs and they are the beneficiaries instead of us.
Gee, for a minute there I thought they might be suddenly coming over all, you know, public-spirited. Live and learn.
Still, it’s interesting that the Voice of Wall Street is perfectly prepared to eat a few of its own children to line the pockets of the rest. Kind of tells you where they’re really at, don’t it?
Update: A gas tax sure is a popular way to raise money.