Is it politically realistic to eliminate energy subsidies?
Yesterday I wrote about the policy question of “getting rid of all energy subsidies,” as proposed in a new Washington Monthly piece by Jeffrey Leonard. My conclusion, in a nutshell, is that subsidy reform is richly warranted, but we shouldn’t be under any illusion that we can get to a “free market” in energy. Government is always and everywhere involved in energy markets and progressives should be fighting for energy outcomes that reflect their values, including, in some cases, supporting smartly crafted subsidies. Even if it makes sense as a political gambit, we shouldn’t mistake a blanket anti-subsidy stance as smart policy.
But does it make sense as a political gambit? Could a massive subsidy-sweep actually happen?
Leonard argues that it could, that “we find ourselves in a new political moment when for the first time it is possible to imagine an alliance of GOP libertarians, disaffected environmentalists, and budget hawks coming together for a grand deal that would sweep away sixty years of bad energy policy.”
Unlike Leonard’s case against current subsidies, this is … unpersuasive.
First, I realize that there’s a lot of ambient talk about spending cuts and deficit reduction in American politics right now, but to take it seriously is to forget a key fact: Republicans don’t care about the deficit. I find it frustrating that otherwise smart political observers haven’t internalized this, so, like an American tourist in a foreign country, let me try shouting:
REPUBLICANS DON’T CARE ABOUT THE DEFICIT.
If you need evidence of this, just look at what they’re trying to do right now: repeal health-care reform, which the CBO says would raise the deficit by $230 billion. The House GOP is trying to institute new budget rules that would explode the deficit. They’re battling to indefinitely extend the Bush tax cuts for the rich, which would add $3.9 trillion to the deficit over 10 years. They don’t care about the deficit. They care about cutting taxes on rich people, rolling back regulations, and dismantling entitlement programs. That’s what they do, despite the media’s seemingly endless willingness to be duped by their rhetoric.
For more on this point, see, oh, Chris Hayes, Jonathan Chait, Paul Krugman, Matt Yglesias, Jonathan Bernstein, Washington Post editors, New York Times editors, Kevin Drum, (Republican) Bruce Bartlett, Bloomberg News, David Leonhardt … even this guy:
This should no longer be subject to debate: Conservatives don’t care about the deficit. And if Leonard expects the Tea Party to enforce real deficit discipline on the Republican establishment, he’s going to be sorely disappointed. Tea Partiers are driven by inchoate hatred of a list of liberal enemies, not by principled views on the budget. Regardless, the Republican establishment is perfectly adept at ignoring its base when its corporate clients are threatened.
Basically, Leonard asks, “if you care about the deficit, shouldn’t you support cutting pointless subsidies to wealthy energy incumbents?” To which the answer is, they don’t care about the deficit, and they do care about wealthy energy incumbents, so, um, no.
As evidence that the tide is turning, Leonard cites Al Gore and Republican Sens. Jim DeMint (S.C.) and Tom Coburn (Okla.) questioning corn ethanol subsidies. And it’s true that the politics of corn ethanol subsidies do seem to be shifting slightly, though not to the point that anyone’s actually, you know, doing anything about them. It’s also true that Obama’s budget proposed a modest rollback of (some) oil subsidies — but even that prompted furious blowback from Republicans.
To sum up: Nobody but nobody in politics is going to cut subsidies to a favored constituency out of concern over the deficit. And one or two people saying something reasonable while nothing at all happens does not exactly constitute a “new political moment.”
Could subsidy reform stick?
A more substantive problem with the idea of rolling back all energy subsidies has to do with the durability of such a reform over time. Earlier this year I read a fascinating book by political scientist Eric Patashnik called Reforms at Risk: What Happens After Major Policy Changes Are Enacted. It’s about the aftermath of political reforms — which ones endure and which don’t, and why.
One of the chapters is on the Tax Reform Act of 1986, which radically simplified the tax code, eliminating dozens of loopholes and shelters. It was somewhat of a miracle that it happened at all; the rules of political gravity seemed to undergo a strange inversion. But what happened afterward? As Patashnik documents, political gravity reasserted itself, various powerful constituencies came back to the trough, and over time the tax code returned to its former complexity. The reform didn’t stick because it didn’t change anything structural — all the same incentives were in place afterward.
I fear any sweeping “Subsidy Reform Act” would meet the same fate. Energy companies have huge incentive to seek tax favors; politicians have huge incentive to grant them. It’s hard to see how that basic structural situation is going to change, and if it doesn’t, subsidies that are eliminated are likely to creep back in over time.
I really do like the idea of eliminating energy subsidies, but in practice it is just wildly unlikely. If progressives want energy outcomes that reflect their values, the answer is not to appeal to the hollow, hypocritical fiscal hawkery of American politicians. The answer is to make clean energy a more powerful political force. That, more than anything else, is the key to subsidy reform.