Friday, April 29, 2011

The Energy Speech I Wish the President Would Make

The Energy Speech I Wish the President would Make.

It's as predictable as the tides. Every time the price of gas goes up, three things happen. First, people complain about how much it costs to fill up their tanks. Reporters are dispatched to gas stations and show people putting 20 or 25 gallons into the tanks of their large vehicles (only vehicles that get poor gas mileage have 20 + gallon tanks, as tank size is calibrated to roughly get us 300 miles between fillups), and to listen to them claim poverty about how they can't afford to spend that much money on gas, how it's taking food out of the mouths of their children, etc. Second, politicians call press conferences and say that the price of gas is too high, ordinary Americans are suffering, and if they are from the opposition party, something must be done. If they are from the majority party, they claim that they will do something.

The third thing of course is that people use less gas.

What I really wish our President would do is let his brainiac of an Energy Secretary write his speech. I imagine it would go something like this:

My fellow Americans, I'm going to tell you something that you already know. The price of gas has gone through the roof. It's causing you pain at the pump. Some of you are suffering because of it. You're spending an increasing amount of your paychecks not on good food for your kids, or education, or healthcare, or even vacations, but simply on getting to and from work. You drive by the gas station and the price seems higher each time you go by. You're not sure if you should top up today at $4.50 per gallon or drive until your tank is empty and hope that it will be back down to $4.25. Its frustrating and to be quite frank, scary.

It's also dangerous to our economy. The price of fuel is a part of the price of almost everything we buy. When fuel costs, or more specifically, transportation costs, go up, the price of any good that has to be transported will go up.

And it gets worse than that. Since we currently import most of our oil, the benefit of that higher gas price flows primarily out of the country. It increases our trade deficit, and does nothing but harm to our economy. We have to find a better way.

And that's actually where the good news is. There is no resource mightier than the ingenuity of the American spirit. We might not have enough oil to to fuel our current transportation energy needs, but the American entrepreneur, the American Engineer, the American innovator and the American people in general can fix pretty much any problem that is thrown their way. If.... If they are given the proper incentives and if the government does not try to solve the problem for them.

I am going to put a plan forth today that meets the following criteria:

- First - it will provide immediate assistance to all Americans, especially those who are having difficulty making ends meet.
- Second - it will not add a single penny to the deficit. Nor will it create a new source of government revenue
- Third - it will provide the proper incentives to encourage us to innovate our way out of our dependence on imported oil

I know that these three criteria sound almost impossible to meet in one program. Presidents have been promising to do something about the high price of oil since the first oil crisis in 1973. The truth is that we have always known how to address the problem, we just haven't mustered the political will.

American individuals and businesses are fundamentally intelligent. We respond appropriately to situations that we can predict and understand. If you knew today that the price of gasoline would never come down, ever, and in fact, you knew that it would continue to rise at a rate faster than that of inflation, it would affect your decisions, wouldn't it? You might go and immediately check the inflation on your tires. You might call your co worker who lives a few blocks away and see about arranging a car pool. You might look at your old gas guzzler and decide that it was time to trade it in for a more efficient car. If you were looking longer term, you might even consider moving closer to where you work or getting a job closer to where you live.

If you owned a business that spent a lot of money on transportation, you'd be even more likely to look into how you use energy. You'd find ways to spend less money of gasoline, whether that was using more efficient routes for your delivery trucks, buying new trucks or even changing how you get products to market.

If you ran a company that makes cars, trucks, generators and other things that burn gas, you'd likely spend more getting more efficient products to market. But only if you were absolutely sure that gas prices weren't going to come back down. Because if they did come down, you know from history that as soon as they do, consumers stop caring about efficiency, and all of that money that you spent creating more efficient cars, trucks or generators would have been wasted.

Hopefully by now, I've been able to convince you that there is an opportunity in high gas prices, that we can use these high prices, as long as they stay high, to make some changes in the way our economy works, so that we can become more efficient and use less gasoline. But even if I have convinced you that it might be a good idea, some of you are going to point out, rightfully so, that high gas prices cause real Americans real pain, right now. And if the prices go any higher, that pain is going to get worse.

You're absolutely right, and my plan will address that.

I propose to give every American a subsidy to help them pay for the high price of gas. The amount of that subsidy will start fairly small, but will increase over time. This will ensure that the people who are barely making ends meet right now won't be pushed over the edge by increased gas prices.

I see that you are looking at me like I'm crazy. After all, with a large budget deficit and and huge debt, how can we afford to increase government outlays. Here's how - the subsidy, I'm going to call it a royalty payment, is going to be paid for by implementing a new fee on oil. In other words, this royalty will cost the government not one penny, nor will it be used to raise government revenue. It will be a straight pass through - we will pay out in royalties all of the money that we collect. The only difference will be the cost to administer the program. But since that will be done using the existing tax collection infrastructure, even that amount should be small.

Here's how it will work: the royalty will be a refundable tax credit. We will immediately apply that to the way withholding is computed, so that you will see more money in your paycheck as soon as the plan is passed.

But let's be clear, you will all also see an immediate increase in the price of gas. For those of you who use the average amount of gasoline, the net effect will be that you will have a larger paycheck and will spending more at the pump. If you make no changes in how and what you drive, there is no net effect on your wallet.

But, if history is any guide, you will see that high price of gasoline at the pump, and will decide that you'd like the benefit of the bigger paycheck without having to pay the cost of the higher gas prices, and that will motivate you to act. Some of you may decide to stop driving altogether, and ride a bike to work. Or take public transportation. Or walk. Those might be good outcomes for you and your family, but you won't do it because you can't afford to drive, you'll do it because you would rather use your royalty payment for something other than buying gasoline.

The whole point of the plan is to unleash the energy of the American spirit to solve this problem. But if we want to kick our addiction to foreign oil, the only way to make sure that we will do that is to increase the price that we pay. And if we don't kick our addiction to foreign oil, we can be pretty sure that the price will go up anyway, there just won't be any royalty payment to offset it.

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