Energy & Entrepreneurs

The Democrats and Small Business: Energy Policy

by Raymond J. Keating

TheHill.com reported on Monday (August 23) that House Democrats would be focusing on the party's small business agenda this week, as a way to regain ground among the voters.

But considering the policies that a Democratic White House and Democrat-led Congress have been pushing for the past 20 months, is that really a smart strategy?

Consider, for example, energy policy.

The clearest message coming from the Obama White House and Democrat-led Congress is overt hostility to carbon-based energy.

In terms of the BP Gulf oil spill, for example, the only clear action taken by the Obama administration was to impose a deepwater drilling moratorium. That accomplished nothing more than further damaging the U.S. economy, limiting U.S. domestic energy production, and raising policy uncertainties about such development in the future.

In an August 25 Washington Examiner column, Robert Bryce of the Manhattan Institute noted that "a July 10 memo from Michael Bromwich, the director of the Bureau of Ocean Energy Management, to Interior Secretary Kenneth Salazar ... said that a six-month freeze on deepwater drilling would cost the U.S. more than 23,000 jobs. Bromwich also predicted that the drilling moratorium would cut offshore oil and gas spending by $10.2 billion in 2011 and cut royalty and tax payments to state and federal governments by a total of nearly $700 million."

Even more daunting is the threat raised by climate change legislation. Some say that effort is dead in Congress, but in late July, the President reaffirmed his support for such legislation. That effort is focused mainly on imposing CO2 emissions caps on the U.S. economy, and renewable energy mandates on electricity producers.

The results can only mean higher electricity costs, and all of the accompanying negatives for consumers, entrepreneurs, businesses and the economy.

For example, among the key findings from a study for the American Council for Capital Formation and the Small Business & Entrepreneurship Council released in July estimating the costs of legislation (using the Kerry-Lieberman "American Power Act of 2010") that would mandate large reductions in CO2 emissions were GDP losses, over an 18-year period, ranging from $1.5 trillion to $2.1 trillion; by 2030, there could be as many as 1.9 million fewer jobs in the overall economy; and also by 2030, residential electricity prices would be 29.3% to 42% higher, and gasoline prices would be up by 15.2% to 18%, or 60 to 71 cents per gallon cents in inflation adjusted dollars.

It's an economic mystery how reduced domestic energy production and increased energy costs could possibly be good for small business.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.