Alex Hankins

On both of the most salient issues of the day, health care reform and climate change, proponents of the corresponding legislation are setting their sights on the rich to pay for these expensive measures.

The massive government health care bill in the House involves a very expensive restructuring of the health care system in the United States–so expensive, in fact, that Democrats are proposing a tax increase on the rich, that is, in addition to the one that will occur when the Bush tax cuts expire in 2011.  They are calling it a “surtax“–a yet-undetermined slice of the incomes of those earning over $200,000 per year, which would be used to help pay for the implementation of the health care overhaul.

At the same time, a study just released by the National Academy of Sciences calls for governments to target their wealthiest citizens for carbon dioxide-cutting regulations and taxes.  As opposed to the Kyoto Protocol, which sets emissions standards for countries, the authors of this new report recommend tracking and restricting emissions on an individual basis.  The rationale is that since wealthy people expend more energy and give off more CO2 than the less prosperous, they should be held to an international cap on CO2 emissions and taxed if they exceed it.  Surely, this is music to populist politicians’ ears, and it comes just in time for the cap-and-trade bill that faces a tough fight in the Senate.

So the idea, judging by this latest volley against the rich, is to convince people that enjoying a higher standard of living than most others is leading to Armageddon, while simultaneously drawing upon the richest members of society like human ATMs to pay everyone else’s medical bills.  The classic political formula–providing benefits to the many at the expense of a few–is in full employment, which is much more than one can say of either the American or European economies in the foreseeable future.  The realization of today’s dominant political agendas will see to that.

Eager to sustain his regulatory whirlwind, President Obama is now calling for efficiency standards for household and business lighting.  As if the climate-themed energy rationing bill that just blew through the House wasn’t enough, the White House now wants to force lamp and light bulb manufacturers to make their products use less energy.  This plan appears modeled after the ambitious fuel efficiency standards applied to the now decimated auto industry and Obama’s order to the Department of Energy to mandate increased efficiency for household appliances.  It’s almost funny — the government, of all entities, telling private enterprises to be more efficient.

Are these the winds of change we’ve been anticipating?  Something is floating on the breeze, but it smells disappointingly familiar.  That’s because all this has been done before, and by the administration of George W. Bush, no less.  In late 2007, then-President Bush signed an energy bill into law that established long-term efficiency standards for automobiles and household appliances and ordered a phasing-out (ban) of the incandescent light bulb by 2014.  For all his hot air about changing the country’s direction and breaking from the strides of the previous administration, Obama hasn’t even shown originality in his determination to send the economy into a tailspin.

As with his predictions regarding jobs and unemployment, Obama’s stated expectations for this new light bulb bill are, quite frankly, hogwash.  He says consumers will save up to $4 billion annually in energy costs, erroneously assuming away the greatly increased energy and light bulb prices that would result, which would drive down purchases.  Also, any replacements that do take place would be piecemeal — replacement and installation costs alone would be enough to encourage most consumers to hang on to their incandescent bulbs and older appliances for as long as they can.  Why pay and risk more for light when you can avoid it?

The biggest problem with this legislation, as with most government intrusions into the economy, is its total disregard for business incentives and consumer self-interest.  Businesses fully recognize that efficiency, especially energy efficiency, is consistently in high demand throughout the market, so any serious drive toward boosting profits must necessarily focus on innovations that they can use to entice cash-strapped consumers.  An added benefit brought by the resulting savings is that consumers have more money to spend.  So the incentives are there.  Improving technology is a win-win situation all around, but only if it is voluntary.

Simply commanding progress does not make it happen.  If some imagined and desired technology does not exist, ordering people to work harder will not make it arrive faster.  It’s not as if any industry wants to lag behind technologically.  The incentives are there.  Sure, a business can seize upon an underdeveloped idea like, for example, a car motor fueled by something that produces water vapor as its only exhaust, and pour its resources into making the motor work, but the fact that the idea is still inadequately understood would mean inevitable waste and likely failure for the business.  Maybe it turns out that the motor has to be too big to make it worth installing in a car.  Maybe it depletes this clean fuel more quickly than current motors expend current fuel.  Maybe it’s more dangerous.  Maybe only a certain car model can effectively use this motor, and consumers don’t like its size or shape.  Maybe a better idea comes along, or the motor and fuel cost too much even for die-hard environmentalists to use regularly.  The bottom line is that taking such a leap is a huge risk that no savvy investor would touch with a ten foot pole.  Even if something profitable finally does come out of such an investment, so much money would be wasted in the process of developing, refining, and marketing this unfamiliar product that the business may go bankrupt by the time the car hits the market.

So it is with lamps.  Energy efficiency is great, but without market efficiency, any products that do come out of this forced innovation (there’s no shortage of oxymorons in government) will be dead on arrival.

Then again, the economic illiteracy of the aformentioned bills’ supporters is only part of the problem.  Without even trying to understand how such regulations would affect their constituents or considering the idea that private expenses are private matters, the government is already charging ahead with more controls, more limits on liberty.  The private sector has solid incentives to innovate.  The government does not.  That is why it should come as no surprise when this legislation, which is mystifyingly supposed to help prevent climate catastrophe, ultimately inflicts more damage on the United States than a category 5 hurricane.  At this point, any change in the winds would be welcome.