1776 was quite a year for American ideas — and not just because of the political philosophy embodied in the Declaration of Independence. Just as importantly, 1776 also saw the publication of Scottish economist Adam Smith’s The Wealth of Nations, the first textbook, if you will, on free-market economics.
As with the Declaration, The Wealth of Nations is a treasure trove of principles that are at the heart of America’s exceptionalism and unparalleled economic success. Adam Smith realized something revolutionary for his time: The wealth of nations is not dependent on finite factors like the precious metals nations possess. Rather, it is determined by the labor of their citizenry and how productively that labor is employed. This led Smith to additional modern economic concepts such as the opportunity for almost limitless economic growth through division of labor and employment of capital, and perhaps most famously, the “invisible hand” of the free market, which organizes economic activity with astounding efficiency.
At the heart of America’s recipe for remarkable economic growth since World War II has been cheap energy. As mentioned, Adam Smith wrote about division of labor, employment of capital, and how those factors could increase productivity, economic output, and wealth. He gave eighteenth-century examples of how that works. But he couldn’t possibly have imagined just how powerful such an engine could become — or what cheap energy could do for American economic growth.
The Obama approach to cheap energy? Cheap energy is a key part of the problem. This attitude is perhaps even more worrisome than the president’s actual environmental goals like taxing and regulating away purported “man-made” climate change. His primary means of getting there is, pure and simple, dramatically raising the price of energy — not increasing productivity and innovation.
Before President Obama tapped Carol Browner to be his climate-change czar, she was listed as a leader of the Commission for a Sustainable World, which argued that developed countries actually must shrink their economies and consumption to address climate change. Similarly, White House science advisor John Holdren had advocated “de-industrializing” America. That means we all need to “face up to . . . zero net physical growth” in which we all need to consume far less. As a candidate, Barack Obama himself admitted that his cap-and-trade plan would necessarily create “skyrocketing” utility costs. And even in office, Obama’s energy secretary Steven Chu has baldly stated that he hoped the U.S. would “boost the price of gasoline to the levels in Europe,” currently about $7 per gallon.
Small wonder that President Obama still has the Gulf of Mexico virtually shut down to oil and gas activity nine months after the Deepwater Horizon disaster. The formal moratorium is lifted, and promises to resume drilling abound, but the reality remains — a virtual shutdown. And offshore may be the good news. Onshore, federal permitting for domestic energy resources has been reduced by a whopping 79 percent since Obama took office.
According to the International Energy Agency, these Obama trend-lines mean that we’ll need to import 300,000 barrels of oil more per day in 2015. Even at today’s oil prices (which are likely to look low in 2015), that’s $27 million more per day, $9.855 billion more per year flowing out of our national economy.
To me, this sure doesn’t add up to a renewal of American prosperity. Rather, it seems to be giving up on that very goal. It’s as if President Obama is saying: “Well, yes, our time has passed.” And that’s probably because the President never understood The Wealth of Nations and how America became so exceptional to begin with.
— David Vitter is a U.S. senator from Louisiana.