Thursday, December 18, 2008

When Independence Means Shackles

Last summer as fuel prices hit record highs, the GOP finally found a message that resonated with voters. Thus began the relentlessly repeated cry of “energy independence.” Smug Republicans watched Democrats beholden to the religion of heavy-handed environmental enforcement squirm as voter ire increased with the gasoline prices.

Then fate rendered the GOP’s energy independence mantra largely ineffective, as the same central bank and government policies that had precipitated the meteoric rise in oil prices abruptly caused the bottom to drop out of the proverbial barrel. After the summer peak, oil prices began dropping precipitously. By October, Americans were focusing on the much larger problem of a failing economy than on prices at the gas pump.

Thus, the GOP’s only substantive campaign issue shriveled up like an old grape on a vine and was obscured by the dense gloom of a broad based economic crisis. But the issue didn’t go away completely. Politicians on both sides of the aisle got a glimpse of how powerfully energy independence resonates with voters across the board, including those coveted independent voters.

Now you regularly hear Democrats as well as Republicans offering obeisance to the gods of energy independence. And the beautiful thing is that no one mouthing these words has to actually change policy positions. Oil drilling and nuclear energy enthusiasts have perhaps more ammo than before. Yet supporters of utopian but ethereal ‘green alternative energies’ — as well lovers of unsightly, habitat-destroying wind turbines and subsidy-gobbling corn ethanol — also have lustful hunger for a larger piece of the federal pie reflected in their gleaming eyes as they dutifully recite the energy independence catechism.

The GOP adoption of the energy independence slogan bothered me from the beginning. It particularly troubled me when I heard some of the serious conservo-libertarian types in Congress echo this phrase before and after the election. Why? Because they should know better. And if they do know better they are cynically playing you and I for saps in hopes of generating more GOP friendly votes (which is standard politician behavior).

Protectionism by any other name
On the surface, energy independence sounds marvelous. Wouldn’t it be great to quit buying oil from despots that hate America (some of whom use that money to fund terrorism)? Wouldn’t it be fantastic to no longer be beholden to international price swings? Wouldn’t we all love more stable, relatively low oil prices and the development of new ‘clean and green’ energy sources?

Yes, yes, and yes-yes! The trouble is that none of this bears any semblance to economic and international policy reality. It all seems to make sense on the surface, but in truth energy independence is not desirable from either domestic or foreign policy perspectives. Celebrated economist Arthur Laffer explains why in this WSJ op-ed.

Laffer writes, “The platitude of "energy independence" makes zero economic sense.” The way to lower costs and improve products is to expand the market as broadly as possible. Protectionism that seeks to contain a market to a specific geographic area always drives up costs and results in less efficient uses of precious resources. This is why tariffs ultimately hurt the entities that impose them.

As for dealing with despots, Laffer contends, “The issue of how to handle the anti-American nature of oil-exporting nations is not for the Commerce Department, but for the White House, the State Department and perhaps the Department of Defense.” Why? Because “embargoes don't overturn despotic regimes. More often than not they harden them, as in Zimbabwe, North Korea and Cuba.”

Besides, trading with less savory players keeps them in check far better than refusing to do so. While doing business with them puts us over a barrel, as the argument goes, refusing to trade with them increases their danger to us rather than diminishing it.

Moreover, protectionist energy policies would not mean that the market for oil produced by foreign nations would dry up. Rather, it would mean that competitors like China and India would end up getting oil far more cheaply than we would. Also, Laffer explains, “Businesses that use oil would move offshore, costing American jobs while still polluting the world's environment.”

The artificially limited energy market would bring with it many more faux ‘green’ projects than we are seeing today — heavily reliant on taxpayer subsidies, of course. The only way all of this protectionism and eco-energy could be funded would be dramatically increased energy prices coupled with hefty job-killing tax increases.

In short, energy independence is pure chimera. It should not happen. Thankfully, the laws of reality mean that it can never happen. But that will not stop politicians and their business cronies from trying to reduce liberty and make a quick buck off of promoting it anyway.

Anyone in a position of power that throws around the term ‘energy independence’ and any policy promoted under that umbrella should be regarded with a healthy level of suspicion. Paradoxically, when the word energy is coupled with the word independence, the result ends up being the exact opposite of liberty.

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