Posts Tagged ‘State of the Union’

The New Environment for Climate and Energy Policy

February 7, 2010

In his recent State of the Union address, President Obama signaled the administration’s new messaging and policy strategy for climate and energy. Not once did he mention “cap and trade,” instead he referred to the need for a “comprehensive energy and climate bill.”

He discussed energy and climate policy in the context of American innovation and international competition. He specifically mentioned that China, Germany and India are making investments in clean energy technology in their pursuit of knocking the U.S. off its global pedestal.

Though he backhandedly chided “those who disagree with the overwhelming scientific evidence on climate change,” he offered another rationale for supporting energy reform, stating that “the nation that leads the clean energy economy will be the nation that leads the global economy.”

The new strategy is savvy in light of the declining public enthusiasm for combating climate change and the inability so far to get legislation passed in the Senate. The economy currently is trumping concerns over the environment. So far, opponents have been able to concentrate on the cap-and-trade provisions of the bill – labeling it “cap and tax.” Cap and trade is an easy target because it is a complex mechanism that relatively few people truly understand. Rebranding enables a discussion of how energy and climate policy affects the U.S. economy and our global standing while removing a bull’s eye for opponents. Focusing on the need to reform our energy regime can appeal to a wider segment of the population and attract broader support.

Energy and climate are intrinsically linked and have serious repercussions for our economy and security. I called for comprehensive energy reform repeatedly in another forum last year.

Americans understand that our current energy system is unsustainable and threatens our security. We recognize that fossil fuels are not replenishable and that our dependence on foreign oil leaves us vulnerable to regimes that are unfriendly to us and regions that are politically unstable. We also believe that the ingenuity and entrepreneurship of Americans can solve problems such as this.

Americans see that every time that the stock market picks up, gas prices rise as well. We also witness almost everyday new examples of hostilities from countries that provide much of our oil and our military activities in regions that are oil rich. It won’t take much of an outreach effort to make Americans realize that energy prices will go up even if no price is assigned to carbon because heightened competition with the likes of China and others for dwindling oil reserves will cause prices to skyrocket – effectively a tax. Putting a price on carbon will simply allow the proceeds to go towards developing domestic alternatives (and American jobs), instead of going to bolster another country.  

Placing a price on carbon is about accounting for externalities in our energy market – the costs that are not incorporated in the price we pay for energy. Those externalities do not simply include damage done to the environment. Even the most hardened climate skeptic can believe that our reliance on oil can cause costly U.S. militarily intervention in oil-producing regions and represents a vulnerability that our enemies would like to exploit.

Putting a price on carbon is necessary for the energy market to function properly. Alternatives will not be able to compete with fossil fuels price wise in the near term unless the externalities are priced in. And the experience with ethanol underscores how relying on government subsidies and mandates alone can be ineffective and even harmful. The market can work, but it needs some help. Announcing that proceeds would go towards investment in clean energy technologies, helping Americans in need cope with rising energy costs or pay down the federal debt, as opposed to going to general revenues, would likely help gain public approval.

In his address, the president also mentioned building new nuclear power plants and drilling offshore for oil. This was a political and policy maneuver. Many Republicans support nuclear power and expanded offshore drilling. It is also a recognition that we cannot make the transition to renewables like wind and solar overnight. There must be a bridge to this cleaner future that involves responsible domestic production of resources like oil and natural gas, And nuclear will likely be necessary for baseload energy.

There is room for a compromise that involves increased domestic production of oil, natural gas and nuclear energy while putting a price on carbon and laying the foundation for a cleaner future. We are seeing that in a promising collaboration across party lines between Senators John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT). The Gang of Ten compromise in 2008 also shows that bipartisanship is possible.

The president has set the table for a possible breakthrough. What is required now is some public engagement and bipartisanship to make it happen.

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The New S-word

February 5, 2010

There is a particular word that the Obama Administration apparently feels is too provocative for public discourse – that word is “stimulus.”

The President mentioned the word exactly once in his State of the Union address, ditto for the White House Budget, which is 192 pages.  Doing one better, OMB Director Peter Orszag and Treasury Secretary Tim Geithner managed not to utter the term at all in their numerous appearances before Congressional committees this week in defending the budget, even though the lawmakers questioning them constantly referred to the word. However, in each of these cases numerous references were made to the official name of the stimulus — the “Recovery Act.”

Likewise, administration officials calling for more public funds to be pumped into the economy consistently refer to the need for a “jobs bill” as opposed to another “stimulus.” The White House has obviously conceded the messaging battle over the stimulus and has decided that the better part of valor is to regroup and re-market the concept. Many voters feel they have benefitted little from the stimulus; terms like “recovery” and “jobs” are what they want to hear.

Going back to the budget, the release of the President’s budget this week, which is marked by deficits and debt as far as the eye can see, has spawned a great deal of discussion over what will be the effects of growing U.S. debt. Policy Daddy has highlighted some of the pieces that are well worth reading and considering:

David Sanger of the New York Times writes that U.S. debt could hurt its global standing.

Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

Sanger also states, “Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable.”

Similarly, Gerald Seib of the Wall Street Journal warns that mounting debt is a threat to national security.

The U.S. government this year will borrow one of every three dollars it spends, with many of those funds coming from foreign countries. That weakens America’s standing and its freedom to act; strengthens China and other world powers including cash-rich oil producers; puts long-term defense spending at risk; undermines the power of the American system as a model for developing countries; and reduces the aura of power that has been a great intangible asset for presidents for more than a century.

Former CBO Director Douglas Holtz-Eakin and former House Budget Committee Chairman James R. Jones also argued recently that American debt has international implications.

From Afghanistan to China to Copenhagen, the actions of President Barack Obama have international significance. However, the greatest worldwide implications will stem from a domestic issue that he must not ignore: our nation’s mounting government debt. The U.S. has a debt problem, and the world is watching. The administration’s response will dictate not only the standard of living of future generations of Americans, but also their country’s global standing.

In discussing his “Fiscal Democracy Index” in USA Today economist Gene Steuerle contends that unsustainable promises are crowding out the ability of government to undertake any new initiatives to improve the nation or meet the needs of the next generation.

Thanks to decades of promises for ever-higher benefits and low taxes for the indefinite future, there’s now less give in future budgets than at any point in American history. At least profligate Congresses in the past confined their excesses and temporarily large deficits to the current year. Until recently, they didn’t box in the future.

Underscoring all of this, Moody’s warned that the nation’s AAA bond rating is at risk because of debt and slow growth. Dealing with our debt in a thoughtful and forward-looking way must be a national priority.