Obama’s Blueprint for a Secure Energy Future

Last week, President Obama unveiled his Administration’s “Blueprint for a Secure Energy Future”.

Like most big-picture strategic summaries of complex subjects, a whole lot of content gets reduced to a few simple phrases that have become almost devoid of meaning.  In this case, the Obama Energy Blueprint distills into three priorities:

  1. Develop and secure America’s energy supplies
  2. Provide customers with choices to reduce costs and save energy
  3. Innovate our way to a clean energy future

How can anyone object to these motherhood and apple-pie themes?

At the next level of detail, the Obama Energy Blueprint  proposes a long list of individual recommendations, such as incentives for more domestic oil/gas development, programs to facilitate the transition of the vehicle fleet away from petroleum fuels, tighter energy efficiency requirements, and a national clean energy standard.

One by one, most of the listed initiatives have merit.  Unfortunately, some are probably pretty ineffectual, each has its own set of unintended consequences, and there is considerable potential for interference among programs in such a voluminous mixed bag of policy items.

Alas, this is what happens when government is forced to accept suboptimal solutions because the optimal approach is foreclosed due to political realities. 

At a fundamental level, with this Blueprint, the Obama Administration is seeking to simultaneously (1) end American reliance on foreign oil for transportation, (2) reduce U.S. greenhouse gas emissions caused by burning fossil fuels, (3) ensure that the U.S. profits from development and adoption of next-generation energy technologies, and (4) accomplish (1)-(3) without costing U.S. citizens more money on energy expenditures.

The challenge is that all four of these objectives cannot be achieved simultaneously, especially in the near-term. 

Actually, objectives (1), (2) and (3) can be achieved pretty quickly, say within a decade or so, if you’re willing to ignore the fourth objective about reducing energy costs to citizens.  But, alas, the fourth objective is really the only one that most Americans care about with any intensity, and if the U.S. is going to focus on the fourth objective, the first three are hard to tackle in any meaningful way.

To achieve the first three objectives, all that’s required is some fairly simple — if broad-reaching — policies:  namely, higher taxes on oil imports and a carbon tax.  With higher energy prices facing consumers, the millions of economic actors across the U.S. will make investment and consumption decisions that will spur the development and deployment of alternative energy approaches to displace oil and reduce emissions while fostering U.S. leadership in the clean energy industries of the future. 

But, of course, such taxes — for that mattter, any taxes — are anethema in Washington these days.  Having spent all of his political capital (and then some) over the past two years on health care reform and economic stimulus, Obama does not have the strength to propose a straightforward energy policy to achieve the goals that implicitly underlie his Blueprint. 

Frankly, I think the energy policy imperative is a great opportunity for a politically bold leader to take on the issue of restructuring U.S. taxes so as to boost economic output.  Maybe I’m naive, but I don’t see why increased taxes on energy cannot be enacted as part of a quid pro quo for reduced taxes on income and capital gains — which would be unquestionably a tonic for the economy. 

I know that a common rationale for opposing such a change is that a shift in taxation of this kind would be regressive (i.e., fall disproportionately highly on lower-income citizens), but it shouldn’t be all that difficult to come up with some mechanism for providing rebates on increased energy tax burdens borne by the poor.  In other words, there should be an answer that reconciles higher energy taxes among the populists on both the left and the right of the political spectrum.

Actually, I think the real reason that higher energy taxes don’t get any traction in D.C. is that the major incumbent energy companies would be unambiguous losers, and they simply won’t allow that to happen.

As a result, President Obama must resort to issuing documents like the one released last week:  a blueprint that looks like a building designed by a hundred architects each working on a different room.