Memo to the NTU

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Memo to the NTU

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From time to time, I am asked to sign petitions, mostly of a free market orientation (those that oppose economic freedom are quickly consigned by me to the delete file). Whenever I can, I do sign them; I am convinced that they do no harm, may do some good, and take very little time to read and add my name to them in any case. So, the opportunity costs are small.

But, every once in a while I decline, because while I need not enthusiastically support each and every word in a given petition, I am uncomfortable signing my name to any that violate what I take to be libertarian or (Austrian) economic principles.

The most recent one to cross my desk, well, be sent to me via e-mail, was from the National Taxpayers Union. This is almost always a group that can be reliably counted upon to support capitalism. However, this petition unfortunately, had several problems with it. I suggested a few changes that would allow me to hop aboard, but, usually, it is far too late in the process to make any changes after it is widely circulated, and many people have already signed on.

In what follows, please see the following: I. A letter to me from the NTU; II. The petition they had asked me to sign in this particular instance; and III, my response. See if you can pick out the problems I might have had with this missive before looking at my critique of it. (No peeking, now.)

I. The letter

From: NTU Sent: Mon 8/20/2007 4:21 PM To: NTU Subject: Sign-on to NTU Economist Letter on Opposing Energy Legislation

Sign on to NTU letter opposing anti-market energy legislation

Dear Economist:

You recently received an email from the National Taxpayers Union (NTU) asking you to sign on to the following statement on energy policy (see pasted copy below). The statement, which will be signed by economists throughout the nation, argues that the energy legislation currently before Congress contains yet another package of harmful taxes, regulations, and subsidies that will further distort energy markets in this country. Over 130 economists have already signed on in support. The statement will be released to the media and on our website later this month.

We have yet to receive a response from you and hope that you will consider signing on. If you would like to sign, all you need to do is send a brief reply email to NTU’s Keith Capp indicating your title, name, organization, and your desire to sign on. (Note: Affiliations will be listed for identification purposes only.)

Thank you very much for your consideration of this important request.

Sincerely,

John Berthoud, Ph.D. President, National Taxpayers Union

II. The Petition

An Open Letter to the United States Congress:

We, the undersigned economists,* write to strongly advise against the inclusion of damaging anti-market provisions in the energy legislation now moving through Congress. History has shown that attempts by the federal government to tax, regulate, and subsidize our way to more plentiful and secure energy have failed miserably. This Congress ought not to repeat those expensive mistakes when considering energy policy.

If Congress seeks a reduction in America’s dependence on foreign oil, the tax increases found in the House’s energy bill won’t achieve the goal. Vengeful tax hikes on so-called "Big Oil" serve no economic purpose. In 1980, Congress instituted a windfall profits tax to punish the industry. The result, according to a Congressional Research Service study, was a drop in domestic oil production of 3 to 6 percent and an increase in oil imports of 8 to 16 percent.

But instead of simplifying and equalizing tax treatment across all industries, current proposals attempt to bestow favors upon certain sectors at the expense of others. The energy bills propose dozens of new tax credits for so-called "alternative energy" programs, many of which are expensive and not commercially viable.

The House and Senate bills also propose harmful mandates on fuel usage and energy production. Forced consumption of 36 billion gallons of heavily-subsidized ethanol by the year 2022 will significantly raise fuel prices, taxes, and food costs for millions of consumers. Furthermore, requiring that electricity producers derive 15 percent of their power from alternative sources will artificially increase utility bills for American families.

Finally, the legislation purports to let government lead the way to energy independence by creating a slush fund from which alternative energy programs will be funded. Unfortunately, Congress cannot consistently identify and nurture emerging technologies because it distributes funding based on political concerns rather than sound science or economics. Just one example is the $2 billion Carter-era, feel-good boondoggle called the "Synfuels" program, which sought (and utterly failed) to produce alternatives to petroleum. The lesson from this and other experiences is that political forces cannot replicate the results of market forces.

If Congress wants to pursue a sound energy policy, it ought to reduce government interference in the markets that are capable of delivering innovative energy solutions to consumers. By easing regulatory burdens, ending distortions that divert productive capacity, and allowing the price mechanism to do its job, Congress would be providing American consumers and taxpayers with far more plentiful energy at a lower cost than any package of taxes, regulations, and subsidies could ever hope to do.

Sincerely,

The Undersigned (*Affiliations listed for identification purposes only)

III. My response

Dear NTU:

Sorry, I can’t sign your otherwise very good petition, due to these three problems:

1. You say: “If Congress seeks a reduction in America’s dependence on foreign oil,”

But this implies it is a reasonable goal for Congress to aim at, and that this bill just goes about attaining it in the wrong way. I don’t see this as a reasonable goal. Why should Congress or anyone else for that matter have a say in the freely made decisions of the American people in determining the proportion of foreign and domestic oil they wish to consume?

However, the argument is made in some quarters that Americans purchasing foreign oil helps support dictatorships abroad. Why is this wrong?

It is wrong on several accounts.

First of all and perhaps most important, the U.S. is the world’s biggest “dictator,” not domestically but certainly in a foreign context. That is, the U.S. is a dictator to the peoples of numerous other nations. This being the case, following this principle, we should not be purchasing domestic oil. But if we cannot buy oil from either foreign or domestic sources, we are in dire straits. Only the most fervant anti human environmentalists would welcome such a scenario (even though they do not act consistently with it in their own lives).

Second, it implies that the best way to promote liberty in those countries that are ruled by dictators is by boycotting them. This has not worked out too well in Cuba, has it? No, a more reasonable and efficacious way to deal with people in these nations is through commercial interaction. When we get to know them, and they, us, when bonds are forged between countries, dictatorship lessens. Free trade, full free trade, is not only economically beneficial, it helps with these sorts of challenges as well.

Third, a boycott hurts not so much the dictators of these countries, but the average citizen. Remember, the people who live in these foreign dictatorships are for the most part victims, not perpetrators of evil. How does an attempt to starve them help them? The hope is that this will encourage them to overthrow their overlords, but this rarely has rarely if ever taken place in history. Revolutions are typically waged by the middle or upper classes, not by starving people. If there is to be hope of change, leaders of places like Cuba most see the U.S. up close and personally. They must witness how much better their lives would be under our economic system than theirs. But this can only occur if barriers to trade, investment and travel are reduced, not increased.

2. In the petition, the following words appear: “Unfortunately, Congress cannot consistently identify and nurture emerging technologies because it distributes funding based on political concerns rather than sound science or economics.”

First, it is impossible for congress to identify any such thing. Have we learned nothing from the fall of the USSR? I suggest the authors of this petition read Mises on the socialist calculation debate on this matter.

Second, suppose that we ignore this point. It would still be incompatible with libertarianism for congress to engage in central planning even if it could.

Third, I think it is “fortunate” not “unfortunate” that congress can not do this.

3. The NTU petition also contains the following: “By easing regulatory burdens, ending distortions that divert productive capacity, and allowing the price mechanism to do its job, Congress would be providing American consumers and taxpayers with far more plentiful energy at a lower cost than any package of taxes, regulations, and subsidies could ever hope to do.”

No, under these conditions, it wouldn’t be congress that would be providing all these great things; rather, it would be the free enterprise system that would be doing so.

Rectify these three problems, and I’ll gladly sign on.

Best regards,

Walter Block, Ph. D. Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics Joseph A. Butt, S.J. College of Business Administration Loyola University New Orleans 6363 St. Charles Avenue, Box 15, Miller Hall 318 New Orleans, LA 70118 c.v.: http://www.cba.loyno.edu/faculty.html tel: (504) 864-7934 fax: (504) 864-7970 wblock@loyno.edu

Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable.

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