Although bipartisan support for legislation generally constitutes a political Good Housekeeping Seal of Approval, sometimes it’s little more than the residue of cynical logrolling at the public’s expense. A case in point is the emerging Senate “consensus” in favor of cap-and-trade legislation, which will be the subject of Senate hearings October 26. Rather than sell the legislation on its reputed environmental and economic merits, the White House and its allies are now planning to use federal largesse to buy the handful of Republican votes needed to get this legislative monster over the hump in a floor vote, possibly before the Thanksgiving recess.
Now, most Republicans support the free market and question federal interference in the private sector. This explains their skepticism about Obama’s push for federal health-care reform. But in the energy sector, the White House is banking on a few Republican senators — the press has indentified Lindsey Graham (S.C.), John McCain (Ariz.), and Lisa Murkowski (Alaska) — giving up their economic principles in exchange for more federal subsidies for their preferred form of energy: super-expensive, financially risky nuclear power.
Normally, this wouldn’t work. Certainly, before the Energy Department and the White House began offering billions of dollars in federal loan guarantees for the construction of new nuclear-power reactors, most Republicans understood that federal largesse for commercial energy projects was anything but free.
Consider loan guarantees. Bringing just one nuclear plant on line can cost as much as $10 billion, and supporters of nuclear power want to build scores of these plants in the next two decades. That’s a lot to loan. In fact, in 2003, the Congressional Budget Office determined that “well over half” of the electric utilities pleading for such handouts would be likely to default, leaving taxpayers holding the bag for billions upon billions of dollars. There’s plenty of reason to believe that this projection is all too relevant today.
In any case, this is an old saw. The last time the federal government pushed commercial-energy loan guarantees, it was for a single synfuels project, which, after years of mismanagement and technical difficulties, finally tanked, leaving the public with a bill for $13 billion. More recently, Washington’s darling has been corn ethanol, supported with tax credits and direct subsidies. This has produced an even larger financial black hole. The most recent estimates have the U.S. losing roughly $10 billion on this bet for the year of 2008 alone. In fact, corn ethanol is now so uncompetitive, the only way to keep its production viable is by the federal government’s dictating that gasoline producers and consumers buy and use it.
Unfortunately, none of this history has deterred enthusiasts for wind, solar power, “clean” coal, or nuclear power from demanding similar federal handouts. It ought, however, to deter Congress, which has already bailed out failed banks and automakers with well over $1 trillion in Treasury funds. After such an orgy of spending, the last thing we need is for Congress to spend more taxpayer money to support yet more multi-billion-dollar commercial ventures, many of which are sure to fail and will have to be bailed out in turn.
More important, fiscal conservatives, energy experts, the best of the environmental community, and pro-nuclear nonprofits understand that when the federal government tries to pick commercial-energy winners and losers, it not only gets things wrong, but also jacks up the cost of energy for everyone and makes it harder for the real winners and losers to emerge. Ultimately, it’s not just wasteful, it’s a super-regressive tax on energy innovation.
That such incentives would be used as a sweetener for cap-and-trade legislation, which itself is a massive tax on the U.S. economy, at the very time that the U.S. is suffering its worst recession since World War II, gives political cynicism a bad name. Most fiscal conservatives, no matter what they think about global warming, know that spending and taxing to reduce carbon emissions is something that can and should wait until we have gotten our economy rolling again. The best also have demonstrated that using a cap-and-trade market is far less efficient and sensible than simply imposing a tax on the carbon content of different fuels.
How, then, could Senate Republicans be seduced into supporting all of this? Simple: self-deception. Expanding nuclear power, they argue, is the answer that can’t wait; it is too important to be left to market forces to accomplish. This, however, is an assertion of faith, not reason. Surely the same line of non-argument is just as valid for other risky forms of energy — e.g., solar and wind. Rather than meet this point head-on and make the case for favoring nuclear power, Senate nuclear proponents unintentionally concede the point by suing for federal subsidy “parity” with renewables. Nuclear power, they plead, should merely get the same federal handouts wind and solar power receive: Three wrongs apparently make a right.