One of President Obama's top policy priorities in January should be a major new energy bill because expanding domestic energy production will promote economic growth and increase government tax receipts.
In his first term, after a series of high-profile, government-boosted green energy failures, Obama pivoted to an “all-of-the-above” energy strategy and took some steps to scale back regulatory burdens for traditional energy projects and open up domestic exploration. But much more needs to be done.
Energy entrepreneurs still face an ever-thickening web of regulations. For instance, in the case of hydraulic fracturing — a promising technology that frees up underground oil and natural gas deposits — at least 10 federal agencies have already launched regulatory initiatives.
Regulators are well within their powers to consider the environmental impact of energy projects, but the status quo is overly complex and costly. The White House can ratchet back needless rules while still meeting key green goals. Environmental regulations should have to meet strict cost/benefit tests. Private oil and gas companies should be allowed to quickly launch safe projects. And the administration should dramatically scale back the handouts flowing to wasteful renewable projects.
When it comes to jobs, expanding domestic oil and natural gas production would create tens of thousands. Many would be concentrated in states having the most trouble shaking off the recession.
No part of the American economy is more ripe for job growth than oil and natural gas. This sector already has 9.2 million positions and has added 100,000 new jobs since the start of the recession, making it one of few industries to post positive growth in recent years. By some estimates, fully using America's untapped oil and natural gas resources could create another 2 million jobs over the next two decades.
It's also time to eliminate wasteful government spending on hopeless “green” projects. Today, more than 75 percent of all tax subsidies go to renewables. The government also provides billions in direct support to the industry. These benefits are so lavish that the average solar company's effective tax rate is actually a negative 245 percent! Wind energy's effective tax rate is a negative 164 percent.
Public engineering of the energy market might be appealing in theory. In practice, though, the government has proved to be bad at picking good investments. Solyndra isn't the only flop. Several government-backed battery factories have also closed. The most recent example is the electric car battery maker A123 Systems, which took in over $249 million in federal grants before declaring bankruptcy in October.
The government may have a role to play in financing the earliest stages of energy research and development. But that's it. Passing an expansive energy bill geared at increasing domestic production while cutting wasteful green subsidies would create jobs, boost the economy and reduce the deficit. This must be President Obama's top priority come January.
Thorning is senior vice president and chief economist for The American Council for Capital Formation.