by Mitt Romney
I have a different concern. If we drill and pump the last available drop of oil from every domestic source, we may walk into a trap set by the oil oligopolists who would like nothing better than to watch us exhaust our own oil supplies now so we’ll become entirely beholden to them in the future. On the other hand, if we don’t drill, we risk aiding the oil cartels by increasing demand for their oil today and watching helplessly as that demand drives world prices skyward—filling their coffers and emptying ours.
The solution to this dilemma may be to explore and develop oil from these new domestic locations, but also to carefully meter the amount of oil we actually produce from them in order to moderate the pricing power of the foreign cartels and to safeguard our long-term supply. In effect, the oil produced from these new sources would serve as a kind of supersize strategic oil reserve. And if very large oil reserves were discovered or if oil substitutes showed greater and earlier potential, we could open the spigot.
Given the decade or longer lead times that are often required to produce oil, it would take years to significantly expand actual production, but in the near term, the presence and potential of these reserves—and America’s willingness to exploit them—would have a stabilizing effect on world oil prices. The more difficult production environment, enormous investment, and long lead times to bring new wells into production would make this course difficult, but not impossible. The right step is to get started by authorizing exploration and infrastructure construction.
The Game Changers
Nuclear, natural gas, coal, and additional drilling for oil will help a great deal in moving us toward energy security. If major discoveries are made or if new technologies for energy extraction are achieved, they may take us to our goal. But barring a truly massive discovery, they alone can’t get us there. Wind, ethanol, and solar help, too, but their impact on reducing foreign-sourced oil is relatively small. We can hope that hydrogen or some new energy source will emerge, but we can’t stake America’s future on them. So to become energy secure, we may need to turn to those game-changing incentives that will lead individuals and businesses of all kinds to invest in efficiency and to reduce their use of oil and energy.
Four game-changing approaches are currently in broad debate, each with distinct advantages and disadvantages. Simply pointing out the problems with each is a luxury we cannot indefinitely afford—we will need to choose the best alternative among those we currently know, or develop a new one.
A so-called carbon cap-and-trade mandate is widely supported, even by some Republicans, including Senator John McCain, the Republicans’ 2008 presidential nominee. Once a national cap on greenhouse gas emissions is set, each emitter is given or acquires credits that allow it to continue to emit these gases. If it wants to emit more of the gases, say to grow its business, it can acquire credits from others—at the price set by supply and demand in the marketplace. Or if it finds ways to reduce its emissions and thus doesn’t need all the credits it already owns, it can sell its excess credits to others.
In many ways, cap-and-trade seems market-oriented, and it has worked reasonably well as it has been applied to other pollutants when it has been limited to a narrow group of players and geographies. For example, emissions of sulfur dioxide from electric power plants have been successfully reduced in the United States through a cap-and-trade strategy. But that success was achieved among only a few hundred entities, all of whom are in the same highly regulated industry in the same country. Most important, those utilities had ready options that would help them eliminate their sulfur-dioxide problem—they could invest in scrubbers that remove pollutants from coal, or switch to alternative fuels like natural gas. Even with those advantages in place, the price of sulfur-dioxide emission credits has swung by as much as 80 percent a year. A healthy market cannot sustain that kind of unpredictability.
A cap-and-trade mandate for carbon dioxide emissions would be even more complex. Most entities that emit carbon dioxide have no alternative to reduce their emissions other than shrinking their production or closing down—there aren’t any current commercial-scale technologies that scrub carbon dioxide from coal or from oil. And a carbon dioxide cap-and-trade system would involve thousands of industries across the full spectrum of the economy. The oversight and regulatory requirements alone would be daunting, and how would credits be fairly allocated? Lobbyists are already having a field day on the various proposals moving through Congress—the special-interest carve-outs and set-asides have already destroyed the credibility of the bill. Further, it would be virtually impossible to predict the price of permits and credits. European attempts to use a cap-and-trade program to help meet Kyoto Treaty emissions standards have been hit hard by these drawbacks, and current estimates are that the European Union will achieve less than half of targeted carbon dioxide reductions with little environmental benefit.
As governor, I explored joining with other New England states to create a carbon dioxide cap-and-trade program for our electric utilities. I was assured by its proponents that it would raise electric rates by only 3 to 5 percent. But when I met with the state’s major manufacturers, they produced estimates of 30 percent increases in rates. One of the state’s largest employers insisted that if we implemented the plan without a safety valve to limit the cost and volatility, his company would not be able to locate any new facilities in our state. I didn’t sign on.
A national program that included not just the electric-utility industry but all industries would likely spark unmanaged volatility. It would depress industrial investment in America, leading to job losses in a wide array of industries. An international cap-and-trade treaty would entail even greater and perhaps insurmountable problems with measurement, price volatility, allocation of credits, and enforceability.
Perhaps the greatest weakness of an international cap-and-trade program would be the fact that the largest and the fastest-growing carbon dioxide emitters, China and India, have no interest whatsoever in joining. Absent their participation, our cap-and-trade program would disadvantage our employers with higher and more volatile costs. Those that are large energy users would likely move their activities to countries that were not part of the cap-and-trade treaty, costing more American jobs, and incidentally, emitting the same or more greenhouse gases in their new location. Besides losing jobs, American consumers would ultimately shoulder the cost of the credits in the form of higher prices for products, services, and electricity.
Cap-and-trade is an energy tax, disguised in the sheep’s clothing of market terminology. And it is an energy tax that would have little or no effect on global warming.
As bad as a well-crafted cap-and-trade program may be, what was passed in 2009 by the House of Representatives was worse. Even cap-and-trade proponents like Senator McCain voted against it.
An alternative to cap-and-trade is the imposition of a wide array of government mandates, standards, and subsidies—something that again would be a lobbyist’s delight. The automotive CAFE mandates are the most familiar, and they have in fact improved fuel economy while also depressing the auto industry and its employment. But as discussed above, automobiles are just one part of our oil and energy picture. Given the number and extent of energy consumers and carbon dioxide emitters in our economy, it would be literally impossible to impose enough mandates to make a meaningful difference. We might feel good about ourselves for doing something constructive, and we might win a bit of approbation in Europe, but we would remain dependent on foreign oil, just like the Europeans.
Subsidies do in fact stimulate private investment, and they may be effective in building an industry from its infancy. For that reason, I have supported ethanol subsidies, which have encouraged its relatively rapid development. But we should acknowledge that subsidies for one form of energy also discourage investment in alternatives that don’t receive subsidies, which may undermine innovation. And because taxpayers ultimately have to pick up the tab for government spending, subsidies are in fact a hidden form of e
nergy tax. Once an industry is up and running, the disadvantages of subsidies outweigh their benefits.
The third alternative is a direct oil or carbon tax. This would indeed stimulate oil efficiencies and investments in oil substitutes, but it would also fatten government, harm employers and employees, and hurt consumers. It’s a regressive form of taxation that would penalize those least able to shoulder the burden. It’s a nonstarter.
The fourth incentive system, a tax swap, has been proposed by conservatives such as Greg Mankiw, Harvard economist, author, and former chairman of the Council of Economic Advisers under President George W. Bush, and by Charles Krauthammer, the accomplished author, commentator, and columnist, among others. Under this approach, a gas or carbon tax would be paired with a coinciding reduction in another tax, such as the payroll tax, creating no greater burden for taxpayers and no new revenues for government. The higher energy prices would encourage energy efficiency across the full array of American businesses and citizens. It would provide industries of all kinds with a predictable outlook for energy costs, allowing them to confidently invest in growth. And profit incentives—rather than government subsidies—would stimulate the development of oil substitutes and carbon-reducing technologies.
Comparative analyses of the tax-swap plan with a cap-and-trade system have demonstrated that the tax swap is likely to be five times as effective in reducing carbon dioxide emissions and presumably, about five times as effective in reducing energy consumption. A major drawback of a tax-swap program, however, is that some energy consumers would be disproportionately affected, particularly those in certain energy-intensive industries, those who must travel long distances, and those who rely on fixed incomes. Americans who have worked their entire lives under one set of expectations shouldn’t find their retirement years shaken by a radical switch in government policy. While the tax swap may be the best among the four alternatives currently under consideration, a great deal of work remains to be done if it is to become a viable option. (And we may hear of entirely new alternatives—as Ross Perot said, I’m all ears.)
In the final analysis, we should aggressively pursue domestic energy sources such as oil, gas, coal, nuclear, wind, and solar. And as we also consider game-changing measures and incentives, we should make our choice with three things in mind: Will it actually achieve energy security? Will it strengthen the economy? Will it avoid unfairly creating winners and losers?
Energy is a far more complex subject than it was back when my father was building fuel-efficient if uncool cars and berating the gas-guzzling dinosaurs. And it has become much more important in the half-century since—economically, environmentally, and geopolitically. Most of us don’t give a thought about how dramatic a role energy plays in our everyday lives—even as we begin each day by switching on lights, showering with hot water, toasting a slice of bread, and catching a bit of news on television in the minutes before we drive our car off to work. It’s time for that to change. The moment is long past due for us to recognize that we will inexorably run low on oil and that we must replace it with substitute fuels that make us more secure, free us from unfavorable foreign entanglements, make our economy stronger, and don’t endanger the health of our planet. It’s an enormous challenge—yet it’s the kind Americans have proven time and again that we can meet head-on.
No Apology: The Case For American Greatness
10
The Culture of Citizenship
My jobs required travel. Consultant, venture capitalist, Olympic manager, and even governor—each put me on the road. I hated being away from Ann and the boys, so while I was away I focused as on my work as much as possible, completing projects as quickly as I could so I could head home. Yet, in the end, what I learned about the places where I traveled and the people there was often greater than what I learned about my projects.
The differences between the places I visited were startling. I had seen the countries and their citizens on television, of course, but being there and experiencing life there—driving, shopping, eating, holding meetings, telephoning, conversing, and simply observing the daily events of people’s lives—offered new perspectives and raised questions I wouldn’t otherwise have considered. I wondered how such vast differences could exist between countries that were literally next door to each other. How could Americans be so rich and Mexicans so poor? How could Israelis have created a highly developed, technology-based economy while their Palestinian neighbors had not yet even begun to move to an industrial economy? As I traveled to Africa, Asia, the Middle East, South America, and to both halves of Europe that had previously been divided by the Iron Curtain, I discovered that the prosperity gap is really a canyon. Why is that?
In his best-selling book Guns, Germs, and Steel, Jared Diamond notes that long ago, the availability of minerals like iron ore meant that some nations could fashion weapons and conquer their neighbors while others without those minerals could not. The complex geography of germs and disease could cripple the economy of one nation while opening new possibilities for another. A nation’s rivers, mountains, and deserts dramatically shaped the transportation network essential for trade and economic development. For scholars like Diamond and many others, the relative differences between nations and people are largely the result of these kinds of inherent natural features. To a degree, there is truth in that perspective, but it simply doesn’t fully account for the great differences between nations and civilizations.
Harvard professor David Landes’s Wealth and Poverty of Nations adds crucial insight as to why some nations prosper and others do not. His examination concludes that culture makes all the difference, not only when it comes to understanding why great civilizations failed in the past, as described earlier, but also in explaining why differences between nations exist today. What people believe, value, strive for, and sacrifice for profoundly shape the nature of their society and affect its prosperity and security. So while America’s abundant natural resources certainly facilitated its ascent, it is America’s culture that enabled the nation to become and remain the most powerful and beneficent country in the history of humankind.
Many aspects of America’s culture are today in question, in decline, or even under attack. Before the essentials of American culture are replaced or weakened, we should explicitly acknowledge the values that got us where we are, ask whether they are important to our national strength, and if so, take urgent measures to strengthen and in some cases to restore them.
A Nation of Hard Workers
What is it about America’s culture that propelled us to world leadership? What elements of our culture are essential to our future strength? The list is long, but among them is the fact that Americans like to work. After forty hours a week on the job—and many more for lots of us—we head out to wash the car, weed the garden, mow the lawn, tackle household chores, and taxi the kids.
And when Americans recreate, many do so with a kind of dedication and gusto that looks a lot like work; even when we relax, many prefer to quietly work on a project rather than sit in a lawn chair. When my father-in-law retired after a career as an engineer, the first thing he did was buy a drafting table and secondhand machine tools so that he could make things in his garage. His retirement move to Florida changed his climate but didn’t change his occupation. He spent more time in his retirement garage in Florida than he had at his workplace back in Michigan.
Almost everyone who agreed to come to America as an immigrant surely understood that the new life would entail back-breaking work. Essential tasks in the early settlements were brutal, unrelenting, and sometimes matters of life or death. Recent immigrants, too, have known that driving a taxi, washing dishes, cleaning construction sites, or picking vegetables might very well be part of their future. Whether we learned our work ethic from our parents or it was passed to us in their genes, we are hard workers. And it’s an element of our culture critical to our economy.
Creative destruction closes the doors to hundreds of thousands of busines
ses a year, putting millions of Americans out of work. Entrepreneurs open the new businesses that put the temporarily unemployed back to work again. Few undertakings require more work than starting a business from scratch. The grueling demands of getting a business up and running, the inevitable setbacks and roadblocks, and the fear of losing one’s savings and the investments of friends and family, drive these people to work a hundred hours a week or more. I’ve never met a successful entrepreneur who didn’t like to work.
Our collective ability to be focused, smart, and accurate over long hours of work are a big part of our productivity. Over centuries, these attributes helped create America’s productivity lead, our high standard of living, and our national wealth. Americans continue to know how to work—on average we’re on the job 25 percent more than the Germans, 15 percent more than the French, and even slightly longer hours than the famously industrious Japanese.
During my campaign for governor, I decided to spend a day every few weeks doing the jobs of other people in Massachusetts. Among other jobs, I cooked sausages at Fenway Park, worked on an asphalt paving crew, stacked bales of hay on a farm, volunteered in an emergency room, served food at a nursing home, and worked as a child-care assistant. I’m often asked which was the hardest job—it’s child care, by a mile.
One day I gathered trash as a garbage collector. I stood on that little platform at the back of the truck, holding on as the driver navigated his way through the narrow streets of Boston. As we pulled up to traffic lights, I noticed that the shoppers and businesspeople who were standing only a few feet from me didn’t even see me. It was as if I was invisible. Perhaps it was because a lot of us don’t think garbagemen are worthy of notice; I disagree—anyone who works that hard deserves our respect.
