New York City--As used in Washington, the term "silly season" means what happens to government in an election year. Legislation becomes almost impossible to pass, politicians grow more disingenuous than usual. And no one does anything without assessing how it plays politically. When one party controls Congress, the other may decide to prevent any action to create the appearance of a "Do Nothing" Congress. As both the House and Senate now prepare to debate energy legislation once again -- perhaps as soon as tomorrow or on Monday -- the question is are we stuck in the silly season or is there a real chance for legislation to move forward.
While exacerbated by it being an election year, in a sense, the failure of the government to take any meaningful action on energy this year despite a full fledged energy crisis is a textbook example in how markets move faster than government. Since January, the price of oil climbed from about 100 up to 150 and then dropped back down to just over 100 where it closed last night. During the interim, America experienced a mini oil shock -- not as severe as those in the 1970s because prices have come down -- but severe enough. $4 dollar and up a gallon gas this summer shocked the economy, driving real changes in behavior that so far are sticking. Americans are driving lass, taking mass transit more and are no longer buying gas guzzling cars. Some of the changes can't be reversed. The car companies shuttered plants making SUVS and are retooling to make hybrids or high efficiency cars. Airlines cut routes, hiked fares and are only now staunching the flow of red ink that began this summer. And what did government do during all this drama? Nothing. Nada.
In one sense, this all might be an argument for laissez faire economics. The price signal of $4/gallon gas worked. Demand dropped leading to a price correction. It is hard to see how legislation if any had passed would have made things better in the short term. And, indeed, legislation is a clumsy tool for short term objectives.
For the long term, however, one would think that Congress might have interpreted a 50% spike in prices at the pump as a signal to do something to avoid or at least mitigate the type of shock we encountered. For example, one would think at a minimum Congress would have extended renewable tax credits to develop alternative energy sources to oil. But Congress did not. Majority Leader Harry Reid brought up the Investment Tax Credit eight times and Republicans blocked cloture on as many occasions.
Lest anyone think we can leave it all up to the market, Opec's decision yesterday to cut production to make sure oil does not drop below 100 per barrel, shows that this is not all about the market. There is such a think as a huge government controlled, anti-American cartel plunk in the middle of the oil market, controlling supply if not demand. Thus while legislation is not the answer for short term problems, a renewed energy policy is vital to America's long term economic and strategic objectives.
The legislation likely to move to the floor tomorrow in the House and next week in the Senate has been crafted specifically to attract Republican votes. It contains generous provisions for off shore drilling. In addition, it has important initiatives to reduce dependence on oil over the long term such as the critical extension of existing renewable tax credits, green building standards, a tax credit for weatherization, commodities market reform and incentives for oil companies to accelerate drilling on federal lands. However, if those who want to make Congress appear to be doing nothing win out over those who want it to do something, this effort will suffer the same fate as the previous energy initiatives this year.
There is, however, a potential way to break the log jam.
This election season is unusual in featuring two Members of the Senate at the head of their respective tickets. Both presumably want action on energy. And as the leaders of their party, both should be able to unite their parties to break the logjam. The legislation now has the drilling that Senator McCain wants and the support for alternatives he says he wants as well. It also contains support for renewable energy at the heart of Senator Obama's energy plan.
Accordingly, I am calling on Senator McCain to bring his party together to support comprehensive legislation and on Senator Obama to do the same. If the party leaders marshal their troops there is no reason we cannot see real action on energy even during the silly season.
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