August 4, 2008
POLITICS: Cantor: Obama "seeking culprits rather than solutions" on Energy
Courtesy of my RedState connection, I participated in a short conference call this morning on Obama's energy policy (before the rollout of Obama's latest energy speech, which Ed Morrissey hits the highlights of here) with Virginia Congressman and House Chief Deputy Minority Whip Eric Cantor, and McCain campaign spokesman Douglas Holtz-Eakin. Here's my summary of the call.
The chief theme pushed by Cantor and Holtz-Eakin is that Obama is at best weakly committed, and at worst outright opposed, to more domestic energy production. At all turns they brought the conversation back to this theme, which has clearly been a winning one for Republicans in general and the McCain campaign in particular. Rep. Cantor pointed out that Obama's recent statements of willingness to support domestic drilling "if that's what we have to do" is not leadership and conflicts with his own party's position in the House. The Q&A session was more involved and is discussed below the fold.
Cantor & Holtz-Eakin took five questions, four from MSM sources and one from yours truly.
1. An AP reporter (Bob Lewis) asked about Rep. Cantor being on the VP shortlist and asked about his conversations with Sen. McCain on this point. Rep. Cantor pointedly responded that he was on the call to discuss energy policy and refused to comment. (For those of you reading tea leaves, while the McCain campaign was deploying Cantor, it was also sending Mitt Romney out on CNN and circulating transcripts of his appearance, so one should not get over-excited about the choices of surrogates; they have clearly decided to make maximum use of the people on the short list whenever possible).
2. A reporter from USA Today (David Jackson) asked about the Democrats' "use it or lose it" proposal to embargo new drilling rights until oil companies use the leases they have already purchased from the federal government. Holtz-Eakin responded that Sen. McCain supports 'use it or lose it' because it is already current law, in the sense that under current law an unused lease reverts to the government after five years. (This isn't exactly the same as what the Democrats are proposing, but his point is that we already have rules on this topic that McCain supports).
3. I asked about two things - one, Obama's announced plan "that would give families a stimulus check of $1,000 each, funded in part by what his presidential campaign calls 'windfall profits from Big Oil.'" - and two, this passage from Obama's website on "Energy & the Environment":
Clean Technologies Deployment Venture Capital Fund: Obama will create a Clean Technologies Venture Capital Fund to fill a critical gap in U.S. technology development. Obama will invest $10 billion per year into this fund for five years. The fund will partner with existing investment funds and our National Laboratories to ensure that promising technologies move beyond the lab and are commercialized in the U.S.
My question was whether we should be concerned that Obama was moving towards more government control of sources of energy production that had heretofore been controlled by the private sector (I thought better of asking them to directly compare Obama's energy policies to those of Hugo Chavez).
Rep. Cantor replied first, saying that we are not going to be able to tax our way out of energy supply problems, and after noting again the Democrats' lack of action on this issue he stressed that imposing windfall profits taxes had been tried under President Carter and led to less domestic energy production. He accused Obama of "seeking culprits rather than solutions" on energy. He noted that there is broad popular support, over 2/3 support, for more domestic oil exploration, and said we would not solve our energy problems by cutting people checks and that it was a dicey business to start trying to decide which profits are legitimate.
Holtz-Eakin stepped in next to say that at a technical level, Sen. Obama's plan to use taxpayer money for 'venture capital' just doesn't work, noting that lots of private venture capital in Silicon Valley and elsewhere is already heavily invested in the search for alternative fuels. He contrasted Sen. McCain's plan, which utilizes the private sector in the search for new battery technology. He concluded that Obama is offering "just words to fill a void where he knows we need action."
4. A reporter from the St. Louis Post-Dispatch asked whether the current energy crisis was all Bush's fault for failing to ask for national action after 9/11 to wean us off foreign oil. Rather than rehash the battles over prior energy bills, both Cantor and Holtz-Eakin took the view that the problems had been longstanding and bipartisan, but Cantor closed for the kill on Obama by noting once again the failure of action on pending drilling bills:
The first thing he should do is pick up the phone and call Speaker Pelosi and ask her to move for a floor vote on the bill now pending in the House to allow for more domestic energy exploration.
5. A reporter from the Chicago Sun-Times compared energy to housing and asked why Americans think we have an entitlement to cheap oil. Rep. Cantor challenged the use of the term "entitlement" but said that the simple fact is, we are in a fossil fuel economy and as long as we are, we need to lower prices because they are hurting families and businesses.
"My question was whether we should be concerned that Obama was moving towards more government control of sources of energy production that had heretofore been controlled by the private sector (I thought better of asking them to directly compare Obama's energy policies to those of Hugo Chavez)."
It looks like the Democrats are not the only ones looking for more government control of sources of energy production. This is from McCain's website:
"John McCain Will Commit $2 Billion Annually To Advancing Clean Coal Technologies. Coal produces the majority of our electricity today. Some believe that marketing viable clean coal technologies could be over 15 years away. John McCain believes that this is too long to wait, and we need to commit significant federal resources to the science, research and development that advance this critical technology. Once commercialized, the U.S. can then export these technologies to countries like China that are committed to using their coal - creating new American jobs and allowing the U.S. to play a greater role in the international green economy."
Oops. Both parties seem to have energy policies that seem a little gimmicky. I give Obama a slight advantage on energy because he seems to working more from the demand side of the equation rather than supply.
"A reporter from the Chicago Sun-Times compared energy to housing and asked why Americans think we have an entitlement to cheap oil."
I do not think we are entitled to cheap energy, but the term entitlement has always implied that the government will tax some or all segments of society and tranfer wealth to the beneficiary of the entitlement. To call delievery of energy an entitlement is wrong intellectually incoherent, because if the goverenment would just get the hell out of the way, energy companies could supply oil and electrical powerat market prices. The only way energy becomes an entitlement is if Obama's proposal of windfall taxes on oil companies applied to rebates becomes a reality.
Over-regulation, stupid regulation and anti-energy regulation is keeping the cost of energy high, and there is no need for an entitlement to bring prices down. I'm confident that oil companies would trade tax advantages that the Left claims Bush provided for the ability to drill wherever they think recoverable oil exists. Moreover, if we could get out of the NIMBY mindset that prevents drilling, andrefineries and pipelines from being built, we could vastly improve the delivery structure. Energy companies could pay their own way, and charge the consumer whatever the goods would fetch in a free and open market.
Finally, I am completely aghast that the Left continually acts as if a tax break is somehow a giveaway, and gets away with this intellectual dishonesty. A giveaway is an entitlement. A tax break allows an individual or corporation to keep more of the money that has been honestly earned through legal commerce. That reporter from the Chicago Sun-Times needs a basic course in economics courtesy Thomas Sowell.
Just to show intellectual honesty and consistency, I will agree with you MVH that I do not want McCain to involve the government in any kind of scheme of picking winners at tax payer expense. This is what markets are for. The more the government distorts energy by favoring technologies, selectively granting tax breaks or other favors, the longer we will have to wait for this to be solved.
I will disagree that Obama has anything worth offering as he (and McCain too) personally has no experience in the energy business, or in any other business. Let's see either of these guys put up their own damn money instead of mine and yours in the energy flavor of the month. I still remember Carter's Synfuel Corporation that wasted a tremendous amount of other peoples' money instead of his own.
MVH, the reason I don't like Obama's energy policies and prefer McCain's is precisely because Obama focuses mainly on demand rather than supply.
I'd agree that McCain has some crummy, non-free-market gimmicks in his plan, but on the whole there's some good and important stuff too. A post on the two energy plans is still on my to-do list.
Wow. They took five whole questions to cover energy policy!! What a show of candor and openness. Could McCain have answered any of the five?
You are nuts if you think increasing supply will do anything but put off judgment day for a very short time. As RFK once wrote, "Government belongs wherever evil needs an adversary and people in distress cannot help themsleves." Without wholesale changes in the way we fuel transport, heat and cool our buildings, etc. we will never achieve even some degree of freedom from Middle East oil tyrants. Off-shore drilling just isn't going to do it.
1. They've had a whole bunch of these calls lately.
2. I'm not only talking about oil supply. The long game has to include alternatives/substitutes to oil as well.
McCain needs to point out the inaccuracies and misleading statements made by Obama today through a campaign advertisement.
Since when and how does Obama think he has the authority to take profits away from a business?
I'm not thrilled with the government picking winners and losers either unless there is a sure-fire winner in the alt energy field, and as well all know, there isn't one.
I don't absolutely oppose government involvement in energy on philosophical, free-market grounds because oil is a special kind of market, namely, an oligopoly. Of course, that doesn't mean I would rubber-stamp any government policy, but it means that I am willing to treat that market differently.
Moreover, the national security implications of energy is another reason to consider government involvement.
As for the supply/demand issue, I'd like to hear your thoughts.
I think the recent price drop (approximately $0.50 here in Northern California) has resulted from two things: a drop in demand (which increases supply) and the expectation of increased drilling off our coasts. I cannot prove it, but the demand drop is probably the larger effect of the two at this time, but that is the short term. Offshore drilling and (hopefully) mining oil shale suggests a sustainable longterm increase of supply that is not hampered by political disruptions such as those in Nigeria and Venezuala, and of course all of the uncertainty of uninterrupted flow in the Middle East.
In my investing life, I've seen uncertainty over the future the biggest killer of a good stock market. Obvious, in the case of imported oil, the effect of uncertainty is reversed as prices will increase rather than decrease as in the previous example.
The time required to bring new supplies online will of course vary from site to site, but our technology for drilling is very exciting since we now can sink multiple wells from a single point (directional drilling). In some cases, we can probably start recovery in a few years, in others, it will obviously take longer, but at least once the system is set up, disruption will only occur due to weather, earthquake or other natural phenomena, and not due to some political or religious fanatic.
When Ronald Raegan was elected in 1980, we had comparatively high prices as well. One of the first things he did was to eliminate Federal price controls on domestically produced oil. The price drop was virtually immediate, due at least in part to a forward look to a future increase of basic domestic supply.