The Really, Really Bad Debt

Newt Gingrich

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It’s time for a reality check in the contentious debate over the investments President Obama has proposed to fight global climate change and build a new energy economy.

As Ken Burns once put it, “we need a little more Pluribus and a little less Unum” in the United States these days. Instead, a newly outraged Outrage Class is firing bullets made of silly putty, hoping some will stick to the new president.

Here are some prominent examples:

Burdening Our Children With Debt

A frequent argument from fiscal conservatives is that borrowing money to build a new energy economy – including the investments contained in Obama’s stimulus package and his 2010 budget proposal – will place an unconscionable debt on our children. Reacting to deficit projections from the Obama budget, for example, House Minority Leader John Boehner (R-Ohio) said: “We simply cannot continue to mortgage our children and grandchildren’s future to pay for bigger and more costly government.”

But the debt we should be most concerned about is our carbon debt. It’s a far more serious threat to future generations.

Researchers at the National Oceanic and Atmospheric Administration recently concluded that even if we stop emitting carbon dioxide now, the impact of climate change from emissions already in the atmosphere will have “legacies that will irreversibly change the planet” with damages continuing for 1,000 years. Among them are coastal inundation, drought, desertification, wildfires and disruptions to agriculture. They all carry big economic costs that will undermine our kids’ prosperity, as well as their health, safety and quality of life.

We all agree that it would be far better to pay cash up front to build the green economy, but past Congresses and the past administration have left the country broke. The president’s response to Boehner was right on target: “What we will not cut are investments that will lead to real growth and prosperity over the long term.”

Not making those investments now will burden our children with an irreversible carbon debt that sentences them to hundreds of years of tragically negative returns. The carbon debt is by far the worst curse.

Drill, Baby, Drill!

In a TIME column titled “The Bad New Deal”, Newt Gingrich argues that Obama’s budget proposals will cripple the economy rather than heal it. Among other things, Gingrich writes, Obama’s proposal to levy a 13 percent excise tax on offshore oil drilling is “threatening the domestic oil and gas industry at a time when we should be encouraging it to return resources home to America.”

Gingrich would have the Obama administration join the “drill, baby, drill” chant that inspired such enthusiasm at the Republican National Convention and embrace a “strategy for energy abundance that would lower energy costs by exploring for more domestic oil and natural gas, as well as investing in sources of affordable energy for the future, including clean coal, renewable fuels, wind and nuclear.”

There are a couple of problems here. First, Obama is the chief advocate of using America’s native energy resources. The difference is that he favors resources that lead us out of the age of carbon, pollution and resource wars. Compare Gingrich’s policy statement above with this one by Obama in his 2010 budget proposal:

The pursuit of a new energy economy requires a sustained, all-hands-on-deck effort because the foundation of our energy independence is right here, in America – in the power of wind and solar, in new crops and new technologies, in the innovation of our scientist and entrepreneurs and the dedication and skill of our workforce.

As we face this challenge, we can seize boundless opportunities for our people. We can create millions of jobs. We can spark the dynamism of our economy through long-term investments in renewable energy that will give life to new businesses and industries, with good jobs that pay well and can’t be outsourced.

A second problem with Gingrich’s prescription is this: Our oil addiction is bad not just because we import a lot of it. It’s also bad because it is a major contributor to climate change, no matter where the oil comes from. The issue is not how much oil we can take from the ground; it’s how much carbon we can put into the air.

Third, it’s been pretty well established by the Department of Energy and other experts that more domestic drilling would not do much to lower petroleum prices, even if we didn’t put a price on carbon. Clean coal and nuclear power won’t lead to lower energy prices either. In addition to many other drawbacks, electricity from next-generation nuclear power plants and power plants equipped with clean coal technology (if it’s ever perfected) will cost considerably more than electricity today – and considerably more than electricity is likely to cost in the years ahead from wind and solar resources. For example, officials at DOE estimate electricity will cost 36-81 percent more from coal-fired power plants equipped to capture their carbon emissions.

So whose is the greater vision for our times? No contest.

The Tax Bugaboo

As I predicted in a past post, any policy that puts a price on carbon will be branded by opponents as a tax increase, even if it does not involve a tax. The “tax” word is the poison dart that everyone throws these days at energy and climate proposals they don’t like, often for vested or ideological reasons.

For example, Boehner complains that Obama’s proposal for a cap-and-trade system (which is not a carbon tax) will “increase taxes on all Americans who drive a car, who have a job, who turn on a light switch, pure and simple.” The Independent Petroleum Association of America (IPAA) protests that Obama’s 2010 budget proposal will deliver a “devastating blow” to the U.S. oil and gas industry by repealing several tax breaks those industries now enjoy.

Yet the president has proposed sending most of the revenue from carbon trading – estimated at $645 billion over the next 10 years – back to taxpayers. When it comes to subsidies like those the oil and gas industries now receive in a textbook example of corporate welfare, I come back to the problem of oil addiction: If oil addiction is bad, then why are we still subsidizing the drug? We should be subsidizing the cure. As The Economist puts it: “There is no point in calling for cleaner energy while subsidizing the dirty kind.”

Everyone who believes that the marketplace should be allowed to solve our energy and climate problems – and that includes a lot of fiscal conservatives – should be overjoyed at the prospect of pricing carbon and ending subsidies for fossil fuels. Both policies create more accurate market signals by bringing the price of fossil energy closer to its true costs to society. Repealing fossil subsidies would eliminate a public policy perversity that encourages consumers to undermine the critical national goals of economic, energy and climate security.

“Capitalizing on Crisis”

Some critics of Obama’s aggressive first 50 days in office argue that he is using the economic crisis to implement a liberal agenda. An example is Jonah Goldberg’s March 10 rant in the Los Angeles Times, titled “Obama’s fear-mongering”. An excerpt:

"The real scandal is that this administration thinks crises are opportunities for governmental power-grabs. … It’s scary. Its amorality is outweighed only by the grotesque and astoundingly naked cynicism of it all. … Obama’s defenders respond to this argument that Obama’s motives are decent, noble and pure. He wants to help the uninsured and the poorly educated. He wants to make good on his vow to halt those rising oceans. But this is just a rationalization. Every president thinks his agenda is what’s best for the country; every politician believes his motives are noble. The point is that scaring people about X in order to achieve Y is fundamentally undemocratic."

Goldberg goes on to accuse Obama’s supporters of being two-faced because many of them decried how President Bush and the Republican Party used fear to push its agenda after 9-11.

Commentary rarely gets more specious than that. Can we really compare Obama’s initiatives – improving education, investing in a new energy economy, dealing with climate change and addressing health-care costs, all of them important to U.S. prosperity — with the Bush Administration’s unauthorized surveillance on American citizens, revocation of due process for detainees, torture and the costly fabricated war in Iraq?

In his TIME commentary, Gingrich shows he’s not above a little fear-mongering himself. He invokes Nazi Germany, Imperial Japan and Global Communism to push a 12-point agenda he calls his American Solution for Jobs and Prosperity:

"Here in America, the unemployment numbers keep growing. Such icons of U.S. economic power as Citigroup, General Motors and General Electric are in trouble. The big-spending strategy employed by George W. Bush and now Obama has so far failed to turn around the economic decline. Congressional leaders are talking about the need for a second stimulus package. No one should underestimate the danger posed by these policy failures. Gigantic economic dislocations have gigantic noneconomic consequences. The Great Depression led to the rise of Nazi Germany and a militaristic Japan, the spread of communism and World War II."

If these commentators are disturbed by Obama’s agenda, they must be downright outraged at the American people. Obama is doing exactly what he was elected overwhelmingly to do: Change our course and put America back on a path that makes us hopeful and proud.

Surely Obama’s loyal opposition can muster better arguments than these. Or perhaps they can’t. Either way, we should all beware of special interests, soldiers of the status quo and ideologues who think they can treat us like dummies. Let’s don’t prove them right.