Don’t Collude In Raising Energy Prices

After many months of discussion, votes are expected in the next few weeks on some sort of infrastructure package as well as the first votes on the Democratic Party’s go-it-alone additional spending bill (beyond the regular budget), which they want to pass through reconciliation.  While the administration’s preposterous attempt to define every progressive spending priority as “infrastructure” was correctly laughed at, the infrastructure package that is currently under negotiation is still a bad deal. Even worse, by giving some bipartisan cover to some of the administration’s spending, a bipartisan infrastructure deal makes the passage of a blowout multi-trillion-dollar left-wing reconciliation package more likely.

Infrastructure Package

While the bipartisan infrastructure package has yet to be written, we do have an outline of what it contains. While more focused on actual infrastructure, the package is still a wasteful and unnecessary $1.2 trillion. Perhaps most ridiculous is the $15 billion in subsidies for electric vehicles and charging facilities. Why exactly federal taxpayers should be paying for this, rather than EV owners themselves, is not explained. 

The package also includes tens of billions of dollars for passenger rail and mass transit. While at least meeting the definition of physical infrastructure, these subsidies for unused services should be cut off. Passenger rail simply does not make sense in a country as large and spread out as the U.S.

The California high-speed rail fiasco of the last decade should have put to rest the passenger rail fantasy, but this package looks to shovel even more good money after bad. Mass transit ridership cratered during the pandemic and has not recovered, and it may never recover.

It is not smart to spend tens of billions more on something no one wants to use.  Even if ridership recovers at some point, why should federal taxpayers be subsidizing the mass transit systems of large, wealthy cities? New York and Washington, DC should pay for their own excessively expensive systems.

The package also seeks to spend tens of billions of dollars subsidizing electricity transmission build-out.  Stripped of context, this might sound like a reasonable idea, why not have “more resilient” transmission? But the context is that we already have a grid that is robust and well-suited for reliable, baseload electricity generation (which comes from nuclear, hydro, natural gas or coal).  What the grid struggles to handle is the wild swings of generation from unreliable renewables like wind and solar. These sources are at the heart of the grid issues we have seen recently in California and Texas.

The only reason there is any need to build long-distance transmission is because of federal and state subsidies and mandates forcing unreliable wind and solar into the electricity system. Taxpayers are being told to pony up tens of billions of dollars in this infrastructure package (which is only a down payment, far more will be needed) in order to “solve” the transmission problems created by government in the first place.

On top of all this unneeded spending, the infrastructure bill does nothing to address the biggest problems we have building infrastructure in this country — the permitting and regulatory processes that slow projects to a crawl and make American infrastructure projects far more expensive than in other countries.

The Reconciliation Package

While the bipartisan infrastructure package contains plenty of bad policy on its own, the deal looks even worse in the context of the reconciliation package that both President Biden and House Speaker Nancy Pelosi have insisted must pass with the infrastructure bill. The reconciliation bill, while its contents are still vague, would be a disaster for the American economy. Its provisions will drive up the cost of energy and goods throughout the country, turbo-charging already high and growing inflation and exacerbating the challenges posed by monstrous federal deficits.

According to reporting, the reconciliation bill is set to contain a Civilian Climate Corps, a “clean electricity” mandate, subsidies for electric vehicles and renewable electricity, a tax on methane (natural gas) emissions, subsidies for weatherization, and most damagingly a border carbon tax.  Most of these energy-related inclusions are designed to do one thing:  increase the cost of energy.

A “clean electricity” mandate, however defined, will increase the cost of electricity. A tax on methane emissions will increase the cost of natural gas and thus everything that natural gas is used for, like home heating. A border carbon tax would increase the cost of every good coming into the country. This tax would fall on food, clothing, construction materials like steel and wood, cars, electronics, anything and everything imported.  All of these taxes would be paid by consumers, and would damage the poor, those on fixed incomes, and local institutions like schools and hospitals the most.

The Senate Should Not Collude

Even those components of the reconciliation package that don’t directly raise energy costs are expensive or harmful as a policy matter. There is a reason that the administration is trying to jam all these provisions through in a reconciliation package.  The contents are harmful and unpopular, catering to the left-wing of the Democratic Party, not to America as a whole. These extreme policies cannot pass Congress through the regular legislative process or as stand-alone legislation, so the administration is playing this two-track game: a bipartisan infrastructure package for political cover, paired with a blowout $3.5 trillion collection of damaging left-wing policy. 

Make no mistake: passing the infrastructure package makes the reconciliation package more likely to succeed. The Senate should not go along with this farce. The votes cannot be separated as a practical matter; a vote for the infrastructure package is as good as a vote for the reconciliation package, and all the energy taxes and inflation that come with it.

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