Economists Warn Congress Against Energy Legislation

Published December 1, 2007

As House and Senate leaders work to resolve differences in energy bills that passed each chamber this summer, 234 economists, including a Nobel Laureate, wrote Congress with a single message: More taxes, regulations, and subsidies will harm, not help, American energy policy.

“We write to strongly advise against the inclusion of damaging anti-market provisions in the energy bills moving through Congress,” the statement began. “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.”

There are considerable differences between the House and Senate energy legislation, though both include severe restrictions on energy choice. The House version proposes punitive tax treatment for oil, while the Senate bill would impose new automobile mileage standards. Both chambers propose heavy taxpayer backing for certain forms of energy such as ethanol and wind.

Market Superiority

The 234 signatories of the open letter include economists from the academic and professional sectors. In addition to Nobel Laureate Edward C. Prescott of Arizona State University, distinguished economists from institutions such as Harvard University, The University of Chicago, University of Michigan, and University of California at Los Angeles endorsed the statement.

The signatories also included representatives of some of the most prestigious research institutions in the country, including The Brookings Institution, Hoover Institution, and Institute for Research on the Economics of Taxation.

The statement recommends, “Congress … ought to reduce government interference in the markets that are capable of delivering innovative energy solutions to consumers.” The economists note current energy legislation falls short because it “distribute[s] funding based on political concerns rather than sound science or economics.”

The statement also says provisions that would raise taxes on the oil industry, propose unwise mandates on alternative fuel usage, and subsidize so-called “alternative energy” would fail to accomplish their desired ends because “political forces cannot replicate the results of market forces.”

Practical Advice

The economists conclude their statement with practical advice: “By easing regulatory burdens, ending distortions that divert productive capacity, and allowing the price mechanism to do its job, Americans will have far more energy security at a lower cost than any package of taxes, regulations, and subsidies could ever hope to create.”

Natasha Altamirano ([email protected]) is communications manager and Peter J. Sepp ([email protected]) is vice president for communications at the National Taxpayers Union.

For more information …

“An Open Letter to Congress: Current Energy Legislation Will Weaken Supplies, Worsen Tax Burdens,” October 17, 2007: