Kansas City Kerry
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By Paul Beston
Published 3/24/2004 12:08:38 AM
Over the past week, the New York Sun and the Kansas City Star have been reporting another unsavory story about John Kerry's antiwar past. Witnesses and FBI meeting minutes conclusively place Kerry at an event he has always denied attending: The November 1971 meeting of Vietnam Veterans Against the War (VVAW) in Kansas City, in which a plan to assassinate pro-war senators was discussed. How seriously the plan was debated is in dispute; some veterans say it was nothing more than "guys ticked off and talking big at midnight," while others remember a bitter confrontation over the idea. All agree, however, that Kerry was not involved in the discussions and would never have approved of such a plan.
Nevertheless, the Kerry campaign is eager to distance itself from one of VVAW's most notorious episodes. Now that the evidence of his attendance is overwhelming, the campaign is trying to chalk up its earlier denials to faulty memory. Late last week Kerry spokesman David Wade conceded that Kerry had been there, but clung to the contention that the senator simply didn't remember the meeting. Wade's description of the Kansas City meeting as a "historical footnote" was too clever by half -- if the meeting and Kerry's attendance really were footnotes, the campaign would never have cared about the story in the first place.
On Monday, the Sun reported on a former VVAW member who claims Kerry operatives urged him to change his story about Kerry's presence in Kansas City. John Musgrave, a Marine who earned three Purple Hearts in Vietnam, claims that John Hurley, head of Veterans for Kerry, asked him to call back the Star reporter he had spoken with and "tell him you were wrong." Hurley insists he only asked Musgrave "to be very sure of his recollection." Apparently this simple instruction required two phone calls to impart.
The Kansas City story has emerged at the same time that the FBI has revealed it conducted surveillance on Kerry during 1971 and 1972, when he was rising to fame as an antiwar spokesman. The FBI monitored the Kansas City meeting as well, though it's not clear if it picked up the chatter about assassination plots. When informed of the FBI story recently, Kerry unleashed his practiced moral indignation, harumphing about civil liberties and the sad abuses of power of the Hoover-era FBI: "I'm surprised by [the] extent of it. I'm offended by the intrusiveness of it. And I'm disturbed that it was all conducted absent of some showing of any legitimate probable cause [italics mine]. It's an offense to the Constitution. It's out of order." Then the Kerry campaign trotted out more of its defiant, desperate macho, claiming that the FBI revelation was "a badge of honor."
Kerry has not explained why the FBI was wrong to spy on meetings where political assassinations were being discussed. If that isn't "legitimate probable cause," what is? The senator likes to bluster about President Bush's supposed failures on homeland security, and perhaps he is worth heeding on that score. After all he, not our hopelessly provincial president, has real-world experience with groups threatening violent action. He should make the most of it. Perhaps a line can be worked into his stump speeches, right after the line about aircraft carriers: "I know something about assassination plots, too."
ANOTHER QUESTION THAT COMES to mind is whether Kerry felt any obligation to report the plot to authorities. Under certain conditions, knowing about such a plan -- even a plan that was probably half-baked at best -- and not reporting it could be a crime in itself. Gerald Nicosia, the author of Home to War, a largely positive treatment of the VVAW, absolves Kerry of any responsibility: "I think if the thing ever got off the ground, Kerry would do something to stop it." Still, it would be worthwhile for someone to ask Kerry directly, if only because Kerry would provide at least two answers to choose from.
For those opposed to Kerry's presidential ambitions or troubled by his conduct after returning home from Vietnam, the Kansas City story shines a welcome light. It may even do the senator some damage. But it is unlikely that Kerry's disgraceful behavior as a member of VVAW -- slandering American soldiers, spreading fictitious atrocity stories, theatrically discarding someone else's war medals -- will be a major factor in the campaign. The Vietnam records of Kerry and Bush have been given a going over, almost as if they are preludes to the real campaign, when the two candidates can tackle real issues like prescription drugs, gay marriage, and outsourcing.
Our political culture has been irrevocably altered by the Clinton ethos of "moving on." There is a widely held sentiment among the media, and perhaps even the public at large, to let sleeping Vietnam dogs lie. Let's just agree to disagree, the thinking goes. Besides, George Bush is hardly an articulate advocate for the merits of the Vietnam War. In his February interview with Tim Russert, he denounced the war because "we had politicians making military decisions," as if this is not a feature of every war.
Kerry has little to fear from the Kansas City story. Even if there is a bombshell revelation yet to come, the story is already playing out on the familiar terrain of "gotcha" personal campaigning, devoid of genuine historical context. Kerry faces an opponent who has no desire to discuss Vietnam-era politics and a public that has long-since accepted the liberal narrative of Vietnam as a wrongful war. And he operates in a political culture in which a Democrat's sins are easily forgiven, if in fact they are viewed as sins in the first place.
All of this is to be regretted, because the election of 2004 offered one of the last chances to have a meaningful national debate about the merits of the Vietnam War. Unless I was out of the room the last 30 years, I don't think we've had it yet. As an interested non-expert who grew up in Vietnam's aftermath, it seems to me that Vietnam in the context of the Cold War and Iraq in the context of the Terror War have many points of comparison.
Chief among them is the concept of the Twilight Struggle against an implacable global adversary, where the rules of engagement cannot preclude elective interventions that are part of a long-term strategy. But the only discussion about Vietnam we tend to get is of the quagmire variety whenever an American soldier dies in Iraq; only then is the war in Iraq said to be "like Vietnam."
The Right lacks confidence in its Vietnam arguments and the Left has no moral authority, so the two sides have agreed to a silent truce on the matter. But it's not a truce that serves the interests of the country, any more than VVAW did then or John Kerry does now.
Paul Beston if a writer in New York.
http://www.spectator.org/dsp_article.asp?art_id=6331
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FBI Shadowed Kerry During Activist Era
Mon Mar 22, 7:55 AM ET Add Top Stories - Los Angeles Times to My Yahoo!
By John M. Glionna Times Staff Writer
As a high-profile activist who crossed the country criticizing the Nixon administration's role in the Vietnam War, John F. Kerry was closely monitored by FBI (news - web sites) agents for more than a year, according to intelligence documents reviewed by The Times
In 1971, in the months after the Navy veteran and decorated war hero argued before Congress against continued U.S. involvement in the conflict, the FBI stepped up its infiltration of Vietnam Veterans Against the War, the protest group Kerry helped direct, the files show.
The FBI documents indicate that wherever Kerry went, agents and informants were following -- including appearances at VVAW-sponsored antiwar events in Washington; Kansas City, Mo.; Oklahoma City; and Urbana, Ill. The FBI recorded the content of his speeches and took photographs of him and fellow activists, and the dispatches were filed to FBI Director J. Edgar Hoover and President Nixon.
The files contain no information or suggestion that Kerry broke any laws. And a 1972 memorandum on the FBI's decision to end its surveillance of him said the agency had discovered "nothing whatsoever to link the subject with any violent activity."
Kerry, now the presumed Democratic presidential nominee, has long known he was a target of FBI surveillance, but only last week learned the extent of the scrutiny, he told The Times. The information was provided by Gerald Nicosia, a Bay Area author who obtained thousands of pages of FBI intelligence files and who gave copies of some documents to The Times.
The FBI files shed new light on an early chapter in Kerry's public life and are another example of the extent to which the U.S. intelligence apparatus monitored and investigated groups opposed to government policies during the Vietnam era, especially the Hoover-run FBI.
FBI harassment of some activists and leaders in the antiwar and civil rights movements -- including the Rev. Martin Luther King Jr. -- was exposed after Hoover's death in 1972, and reforms were mandated in the bureau to prevent such abuses and restore public confidence.
The files reviewed by The Times on Kerry do not show that the FBI engaged in any illegal actions in its surveillance of him. But the documents also show the lengths the government went to investigate not only Kerry, but the VVAW and other antiwar groups.
Intelligence officials referred to the VVAW in their reports as the "New Left." "Due to abundant indications of subversive influence, we are actively investigating VVAW," read one FBI report from 1971.
The documents could become an important resource for historians because they show the extent of U.S. government surveillance directed against an individual who, three decades later, may become president.
They also suggest that Kerry's memories of some of his antiwar activities, including the date he left his position on the VVAW national steering committee, were inaccurate. Kerry has stated that he left the group in the summer of 1971, but the files show that he did not quit until the late fall of that year.
Kerry said he was troubled by the scope of the monitoring documented in the papers.
"I'm surprised by [the] extent of it," he said in an interview. "I'm offended by the intrusiveness of it. And I'm disturbed that it was all conducted absent of some showing of any legitimate probable cause. It's an offense to the Constitution. It's out of order."
Kerry told The Times that knowing the scope of the government surveillance against him had made him more conscious of selecting the right people to run intelligence agencies. If elected president, he said, he would appoint an attorney general "who knows how to enforce laws in a way that balances law enforcement with our tradition of civil liberties."
"Today's FBI isn't the FBI of J. Edgar Hoover. The FBI of today is on the front lines of the war on terror, and it's critical that they be effective," he said. "But the experience of having been spied on for the act of engaging in peaceful patriotic protest makes you respect the civil liberties and the Constitution even more."
Kerry said that in 1987, two years after assuming office as a senator from Massachusetts, he requested and received an FBI dossier on himself. He later told aides it was "boring," and mostly included news clippings. The senator was apparently unaware that a much larger file existed that included reports on his activities as a VVAW leader.
Kerry said he was disturbed by "this extensive component of spying" on him that wasn't in his file. "If I was the subject of individual surveillance and individual tape recordings, I'd have thought it would have been released to me," he said.
Fourteen boxes of FBI files standing 12 feet high have been sitting for five years at Nicosia's home in Corte Madera.
Many of the files include mention of Kerry, who became the VVAW's most widely recognized figure after he sought to make the case against the Vietnam War in testimony to the Senate Foreign Relations Committee in April 1971. His appearance was widely reported because of his stature as a veteran who had been awarded a Silver Star and three Purple Hearts. As a lieutenant, Kerry had commanded swift boats patrolling the sniper-filled rivers across the Mekong Delta.
"The Nixon people viewed antiwar protesters as anti-American subversives," said Douglas Brinkley, author of "Tour of Duty," a book that details Kerry's Vietnam-era exploits. "Because of his record as a war hero, they feared Kerry's influence with the public."
Many FBI reports on Kerry relied on informants who had infiltrated the VVAW. One report, filed after a gathering in Oklahoma City on Nov. 8, 1971, described how 22 veterans gathered to talk about "alleged war atrocities in which they participated in Vietnam."
The file added: "From four p.m. to five p.m., John Kerry (news - web sites), featured convention speaker and national spokesman for VVAW, spoke to one hundred to two hundred people, followed by brief question and answer period. Kerry spoke against the war and encouraged young people to vote for candidates who will end the war. He said VVAW members will continue to be active in activities to end the war, but indicated that VVAW members are against any type of violence."
Other former VVAW members recalled their suspicion that their telephones were being tapped and their concern that informants had infiltrated their ranks.
"Once, our national office in Washington called the phone company to say they couldn't pay the bill," said Bill Crandell, a writer who lives in Silver Spring, Md. "They were told, 'Don't worry, it's being paid.' "
Crandell said he and others assumed that intelligence agents made sure that the phone lines remained active, though the FBI files reviewed by The Times contain no mention of wiretapping.
Ann Barnes, who worked with the VVAW and who now lives in Milwaukee, said the protesters took the surveillance seriously. "Wherever you went, there'd be people taking your picture, writing down your license plate, doing what they did," she said. "At demonstrations, we'd spot the guys tailing us and say, 'Hey, there's our guys over there.' But we weren't really laughing."
Kerry also recalls the shadow of surveillance. "I wasn't doing anything that I was worried about," he said. "That was the nature of the FBI and the dialogue of the times.... People used to joke about it more than anything, but it was frustrating."
He added: "I remember coming out of a meeting and seeing one of their unmarked cruisers sitting there. Somebody had left a firearm on the seat, as a form of intimidation. In Washington, when I walked the streets ... I knew there were surveillance cars. But never to the depth I know about now."
When Nicosia began researching his book "Home to War," a history of the Vietnam veterans movement, he sent a Freedom of Information request in 1988 to the FBI seeking its VVAW surveillance files.
Eleven years later, in 1999, he received 14 boxes of largely redacted files. But the release came too late for any significant inclusion in his look at the VVAW, which was founded in 1967 and drew 10,000 members nationwide.
He had not read the files before allowing The Times to view a portion of them last week. After a call from Nicosia, Kerry aides came to his home to collect the same 50 pages of documents copied by The Times.
The files show that Kerry and his activities within VVAW were a subject of FBI surveillance throughout the summer of 1971, during a time he had said he had already left the organization.
The documents include evidence that Kerry did not resign from the VVAW's national steering committee until November 1971, during four days of meetings in Kansas City. Several Vietnam-era histories -- and Kerry himself -- had said his resignation occurred at a VVAW gathering in St. Louis in July.
Previously, Kerry had denied being at the Kansas City gathering. But the FBI files, along with interviews with former VVAW members, indicate that he attended at least some portion of the meetings, using the occasion to resign his post as one of the group's national coordinators.
"I still have no memory of a Kansas City meeting.
"I have this stark memory of the humidity that day [I resigned from VVAW].... I just remember forever a dark storm brewing, with these huge thunderhead clouds."
But his recollection was that he resigned at the St. Louis meeting. "And every reminder we have since then has put it there, including Nicosia's book," he said.
But the files include a "priority" memorandum dated Nov. 16, 1971 -- the day after the VVAW's Kansas City meeting ended -- from Hoover to Nixon and other high-ranking administration officials. Quoting a "confidential source," the report said Kerry was there and had resigned from the VVAW for personal reasons.
"It's just weird," Kerry said, when asked about the discrepancy. He attributed his previous assertions to a faulty memory.
For example, he said, "there was a day in where I gave two speeches in Norman, Okla. I remember the first speech. I don't remember the second. It's just the nature of memory."
Several VVAW members also distinctly remember Kerry's presence in Kansas City.
"I remember the Kansas City meeting like it was last week," said Barnes. She said Kerry read an emotional resignation letter while scores of VVAW members sat around long tables in a church classroom.
"He said he was going into public service, that he was going to run for office," said Barnes. "It was a short speech, but it was emotional. Everybody cheered."
Afterward, Barnes recalled, Kerry and others stepped outside the church for a break, only to see FBI agents taking pictures of them from across the street. Barnes recalled saying to Kerry: "You've been thinking about this a long time."
And Barnes recalled Kerry saying: "Yeah, since high school."
The files document other Kerry appearances in 1971.
One report from Oklahoma said, "The entire conference lacked coordination and appeared to be a platform for John Kerry, national leader of VVAW rather than for VVAW."
Another concluded that a speech he gave at George Washington University was "a clear indication that Kerry is an opportunist with personal political aspirations."
But the reports were not always accurate. In one, an informant reported that Kerry planned to accompany VVAW co-director Al Hubbard to Paris to meet with North Vietnamese representatives to negotiate a POW prisoner of war release.
But another FBI file and other historical accounts report that Kerry was critical of Hubbard for making the trip and for exaggerating aspects of his military record. "John Kerry again attempted to have Al Hubbard voted off the executive committee as Kerry stated he did not think Hubbard ever served in Vietnam or was ever in service," reported one Kansas City informant on the tension that existed between Kerry and Hubbard.
Kerry recalled his opposition to VVAW leaders meeting with North Vietnamese officials. "I thought that would be disastrous to the credibility of the organization," he said, "to the people we were trying to convince about the war."
Kerry soon left VVAW, which he thought had lost its focus.
"The group achieved a lot of good, but it eventually splintered and diversified into these various things," he said. "It started to broaden into this diverse tug of war."
On Friday, the Kerry campaign released pages from the senator's personal FBI file, including a May, 24, 1972, memorandum in which the agency decided to end its information- gathering on Kerry's activities.
"It should be noted that a review of the subject's file reveals nothing whatsoever to link subject with any violent type activity," the report said. "Thus, considering the subject's apparently legitimate involvement in politics, it is recommended that no further investigation be conducted regarding subject until such time as it is warranted."
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Energy Bill Too Weighted Down to Power the Country
by Charli E. Coon, J.D.
Backgrounder #1736
March 17, 2004 | |
The good news is that U.S. Senate leaders have drafted a scaled-back energy bill: the Energy Policy Act of 2003 (S. 2095). The Senate bill would slash about $17 billion from the conference report, the Energy Policy Act of 2003 (H.R. 6), making the 10-year price tag for this package around $14 billion instead of $31.1 billion.
The bad news is that the new, leaner bill "achieves the same goals the old bill did."1 In other words, special interests would still receive substantial taxpayer subsidies--just not as quickly and as much--due in part to budget gimmicks that delay implementation of most of the provisions until later in 2004.2
For example, large agribusinesses would still be enriched through an ethanol mandate; the coal industry would still receive over $2 billion in subsidies; and uneconomical renewable resources would still be given preferential tax treatment. Moreover, unnecessary programs, studies, and grants would still be authorized--such as a $6.2 million study on the feasibility of converting motor vehicle trips to bicycle trips and $50 million to fund a five-year transit bus demonstration program.
Likewise, under the new Senate energy bill, federal spending would continue to increase, and Congress would still interfere with the marketplace.
The Senate has just replaced one misguided, billion-dollar, pork-laden bill with another.
Regrettably, the new Senate bill still fails to meet the nation's future energy needs. Total energy consumption is expected to increase more rapidly than domestic energy supply through 2025.3 As a result, net energy imports are projected to increase from 26 percent of total U.S. consumption in 2002 to 36 percent in 2025.4 Yet the Senate proposal would do little to narrow the growing gap between supply and demand.
Given the major policy flaws in both the conference report and the Senate bill, Congress needs to scrap both pork-laden proposals, go back to the drawing board, and draft a sensible bill that would enhance the nation's energy security and ensure adequate, reliable, and affordable supplies of energy to consumers. A responsible plan would:
Authorize access to domestic energy supplies that are currently off-limits, such as the Rocky Mountains and offshore;
End taxpayer handouts to special-interest groups representing a wide array of large and small businesses, industries, and companies in the energy sector;
Strengthen the country's energy infrastructure by:
Enhancing the nation's electric reliability standards to ensure transmission grid reliability,
Granting the Federal Energy Regulatory Commission (FERC) limited "backstop" authority to issue permits for interstate electricity lines in bottleneck areas,
Repealing the antiquated Public Utility Holding Company Act,
Reforming the convoluted federal lands permitting process, and
Delaying the FERC plan to create a "standard market design" for the sale of electricity on the wholesale market.
Allow Indian tribes, acting as sovereign nations, to set up their own regulatory systems for energy projects;
Privatize federal power and eliminate the preferences that federal and municipal utilities and electric cooperatives enjoy; and
Allow the market--not Congress--to determine the nation's energy winners and losers.
Moreover, the Senate energy bill would set back movements toward a reformed tax code. Not only does the bill contain enough tax arcana to keep many tax lawyers fully employed--thus, moving the Bush Administration away from its goal of simplifying the tax code--but it would also stand as a monument to using the tax code for economic engineering.
Quite apart from the need for more energy supplies, it is grossly unfair to ordinary taxpayers--both businesses and individuals--for Congress to use the tax code to benefit a few at the expense of everyone else.
Both bills would use the tax code to modify economic behavior, distorting the economic signaling of the marketplace and making the energy sector and the economy more inefficient. For example, if the energy marketplace is signaling that petroleum supplies are currently sufficient, then an effort by Congress to create greater supplies through tax in-centives would drive down spot petroleum prices, distort returns on equity and assets used in exploration, and dislodge plans by companies to heighten their exploration activity when the price of oil justifies it.
Cost of Energy Plans
A closer look at the conference report and the Senate's new--and purportedly leaner--bill shows just how costly, pork-laden, and irresponsible both proposals are. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that the conference report would increase direct spending by as much as $5.4 billion over the 2004-2013 period5 for such activities as research on ultra-deep wells, coastal restoration in the Gulf Coast, and development of rural electric projects in distressed communities in Alaska.
More alarming, however, are the "incentives" purportedly needed to enhance the nation's energy supplies. In fact, these incentives are nothing more than giveaways to special-interest groups to buy their support for the bill. The CBO and the JCT estimate that the tax giveaways would total over $25 billion between 2004 and 2013, making the total price tag about $31 billion over 10 years.
The conference report, however, has even more giveaways and needless federal spending than are reflected in the CBO and JCT estimates--including a minimum of $46 billion in new spending authorizations over five years, subject to appropriation action. This figure does not even include other provisions in the bill that authorize "such sums as are necessary." Given the rapid growth in federal spending over the past several sessions of Congress, these new authorizations understandably call into question "promises" for fiscal restraint this year.
While less costly than the conference report (the Congressional Budget Office has not yet published an official estimate of S. 2095), the scaled-back Senate bill still uses the federal tax code to load the proposal with giveaways to special interests totaling about $14 billion. For example, the bill would still subsidize production of oil, gas, bio-diesel, and other types of fuels; give generous subsidies to large agribusinesses through a new ethanol mandate; and provide an $18 billion loan guarantee for construction of a natural gas pipeline in Alaska.
Giveaways to Special Interests
The generous handouts to special interests come in a variety of forms, such as tax credits, tax deductions, tweaks to the tax code, and other changes in existing laws. The tax titles (Title XIII) of both energy bills contain a number of subsidies, including the following:
Tax Credit for "Favored" Fuels--Production Tax Credit (PTC)
Both the conference report and the Senate bill include a production tax credit (PTC). This market-distorting provision extends preferential tax treatment for uneconomical renewable resources used to produce electricity--including wind, closed-loop biomass, and poultry facilities. The conference report would expand this subsidy to include new resources: open-loop biomass, geothermal energy, solar energy, small irrigation power, and municipal solid waste (the Senate bill would also include bio-solids and sludge). This special-interest handout alone would cost $3 billion over 10 years (2004-2013).
Yet, despite two decades of taxpayer subsidies, grid-connected generators that use renewable fuels are projected to remain minor contributors to U.S. electricity supply--increasing from 9.0 percent of generation in 2002 to only 9.1 percent by 2025.6 Generation from non-hydroelectric renewables is projected to increase from a mere 2.2 percent in 2002 to only 3.7 percent in 2025.7
Instead of subsidizing these uneconomical energy sources, Congress should enact legislation that would permit exploration of areas that are currently off limits, such as the Rocky Mountains, offshore, and the Outer Continental Shelf. This legislation--not taxpayer subsidies--is the responsible way to enhance the nation's energy supplies and provide consumers with abundant, affordable, and reliable energy.
Tax Breaks for Congressionally "Privileged" Fuels and Alternative Motor Vehicles
Both bills also include a variety of provisions that interfere with the marketplace for fuels and the vehicle industry at a cost of $4 billion over 10 years.
One scheme creates an artificial market for four select vehicles (so far rejected by the marketplace) by providing a new tax credit for the purchase of hybrid motor vehicles, lean-burn diesel vehicles, alternative-fuel motor vehicles, and fuel motor vehicles. The conference report would also repeal (the Senate bill would modify) the current-law phase-out for the credit for electric motor vehicles. The free marketplace--not Congress--should determine whether consumers want these particular vehicles.
Select fuels, such as bio-diesel and certain bio-diesel mixtures, would also receive special treatment by means of a new tax credit. Additionally, the eligibility for the small-producer ethanol credit would double from a production capacity of 30 million gallons per year to 60 million gallons, and cooperatives would be allowed to pass through this credit to their patrons.
Taxpayer Subsidies for Specific
Residential and Business Property
Likewise, the conference report and the new Senate bill include a variety of market-distorting, energy efficiency measures--including tax credits, deductions, and provisions to entice the purchase of specific products; the manufacture of particular appliances; the construction of certain homes; and specified improvements to existing property--at a price tag of $2 billion over 10 years. While conservation and energy efficiency are important components of a responsible energy policy, accurate price signals from the market--not congressional meddling with the market--should determine which energy efficiency measures consumers take and which products they purchase.
Subsidies for the Coal Industry
Coal-fired electricity generation is expected to continue growing in 2004 and 2005, driven by increasing demand for electricity.8 While coal is essential to electricity production and the national economy, the costs of new, innovative, clean coal technologies should be borne by the industry--not the taxpayers. Both proposals include over $2 billion in handouts to the coal industry over 10 years.
Handouts for Oil and Gas Industries
Proponents of the generous tax breaks for the oil and gas industries--such as a tax credit for oil and gas production from marginal wells (wells that produce fewer than 15 barrels of oil a day and less than 90 thousand cubic feet of natural gas per day)--argue that these subsidies are not handouts, but merely incentives needed to increase domestic energy supplies. In the conference report, these subsidies would enrich the oil and gas industry by about $7 billion over 10 years. The Senate bill would delay some of these subsidies to make the proposal appear less costly in hopes of garnering votes from fiscal conservatives.
However, these incentives are needed only because Members of Congress do not have the political will to ensure that U.S. consumers have adequate, affordable, and reliable supplies of energy. If this were their goal--not special-interest handouts--they would have authorized oil and gas exploration in Alaska, in the Rocky Mountains, and on the Outer Continental Shelf. The tax breaks for the oil and gas industries would likely increase domestic supplies to some degree, but this is the wrong way to do it.
Tax Breaks for Reliability
The tax tweaks in this category are intended to enhance the delivery of the nation's energy supplies. For example, these provisions shorten the class life and recovery periods for natural gas gathering lines, distribution lines, and electric transmission property. They permit small-business refiners to claim an immediate deduction for up to 75 percent of the costs of complying with environmental regulations on sulfur emissions, and they also modify special rules for nuclear decommissioning costs. The Joint Committee on Taxation estimated that these handouts would cost taxpayers about $4.3 billion if Congress adopted the conference report.
The new Senate bill contains similar provisions. While well-intended, these tax tweaks favor certain investments rather than allowing market signals to determine where those investment dollars should go.
Additional Special-Interest Giveaways
The conference report also includes miscellaneous tax breaks for a variety of special interests. In fact, one of these taxpayer subsidies even gives a two-year suspension of tariffs on imported ceiling fans. According to The Wall Street Journal, this provision was added as a favor to Atlanta-based Home Depot, Inc.9 While still too costly, the new Senate bill strikes this industry-specific handout from the energy bill.
Loan Guarantees
Regrettably, Congress's largesse is not limited to the tax title. Buried in both bills are various loan guarantees for specific projects. For example, the report authorizes a loan guarantee of up to $18 billion to support the construction of an Alaska natural gas pipeline from the North Slope to the lower 48 states--a project that industry has considered too economically risky to attract private investments.
Likewise, the bills authorize the Secretary of Energy to make loan guarantees (amounts to be determined by the Secretary) for a variety of clean coal projects around the country--including coal gasification, integrated gasification combined cycle technology, and petroleum coke gasification. While advancing clean power is commendable, the private sector should finance these projects without taxpayer subsidies.
The bills also authorize the Secretary of Energy to provide loan guarantees (no amounts given) for the construction of facilities to produce Fischer-Tropsch diesel fuel10 and its commercial byproducts. Likewise, both bills authorize the Secretary of Energy to provide loan guarantees (no amounts given) for construction of facilities to process and convert municipal solid waste and cellulosic bio-mass into fuel ethanol and other commercial byproducts. If these facilities really merit construction, the marketplace will attract the private capital needed without the generous "assistance" of taxpayer dollars.
More Excessive Spending
Lest any special interest connected to the energy sector be left out of these generous taxpayer subsidies, Congress also created a host of unnecessary programs, studies, and grants. Under the conference report, these new spending authorizations would cost taxpayers tens of billions of dollars over the 10-year period.
The new Senate bill also includes costly and unwarranted new authorizations, such as $1.1 billion to restore the coastal impact of offshore oil and gas drilling, and $500 million for the development of rural electric projects in Alaska.
More Favors for Special Interests
Among the major beneficiaries of these handouts are corn farmers and big agribusinesses. One company alone, Archer-Daniels-Midland (ADM), produces over 40 percent of the nation's ethanol. Under the Clean Air Act of 1990, the federal government mandated reformulated gasoline (RFG) to improve air quality in smoggy cities. RFG requires either methyl tertiary butyl ether (MTBE) or ethanol to make gasoline supposedly burn cleaner.11 Both bills create an artificial market for ethanol by mandating a doubling of its use by 2012. Consumers will pay for ethanol's special treatment with increased prices at the pump. Consumer demand--not congressional favors for special interests--should determine whether there is a viable market for ethanol.
Further, due to concerns about ground water contamination, both the conference report and the Senate bill ban the use of MTBE by December 31, 2014, and provide $2 billion in grants to assist producers of MTBE in converting to production of other fuel additives.
Given that the federal government established a fuel oxygenate standard that encouraged the use of MTBE, the conference report includes liability protection for producers and users of MTBE during the industry's 10-year phase-out. This safe harbor provision became one of the most contentious provisions in that report. The House approved the conference report on November 18, 2003, by a bipartisan vote of 246 to 180.
Due in large part to this MTBE liability protection, however, Senate proponents of the report have been unable to garner the votes necessary to break a filibuster. Senate leaders recently negotiated an agreement on a new energy bill (S. 2095) that deletes the safe harbor provision, and the Senate is expected to vote on the new bill in the near future. Nonetheless, the House and Senate versions will still need to be reconciled before either energy plan can become law.
Other generous handouts for ethanol and motor fuels programs in these bills include $12 million for a resource center to further develop bioconversion technology using low-cost biomass for the production of ethanol at the Center for Biomass-Based Energy at the University of Mississippi and the University of Oklahoma; $125 million for research grants and development of renewable fuel production technologies; and $750,000 in grants to producers of cellulosic biomass ethanol and waste-derived ethanol in the U.S.
Moreover, in both bills, Congress would continue to meddle with the market by authorizing spending for research and development in specific areas of the energy sector. For example, the conference report authorizes $2 billion over five years for a hydrogen research program and almost $38 billion over five years for other select categories of energy research and development. These include commercial application activities such as $3.9 billion for energy efficiency; $3 billion for renewable energy; $2 billion for nuclear energy; $2.9 billion for fossil energy; and almost $24 billion for science projects.
The list of new spending authorizations for unnecessary taxpayer-funded programs, grants, and projects in these bills goes on and on. Congress needs to stop trying to micromanage the energy sector and allow the marketplace do what it does best--choose the nation's energy winners and losers.
Conclusion
Congress needs to remember that the primary purpose of a comprehensive energy plan is to provide consumers with sufficient, affordable, and reliable energy supplies. Regrettably, neither the conference report on H.R. 6 nor the new, slimmed-down S. 2095 achieves this objective. Instead, both bills simply enrich a wide range of special interests at the expense of taxpayers and consumers. Consumers would be better off without an energy bill than with either of these seriously flawed energy plans.
Charli E. Coon, J.D., is Senior Policy Analyst for Energy and the Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation. Erin Hymel, Research Assistant in the Roe Institute, contributed to this paper.
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1. Press release, "Domenici Introduces Lean Energy Bill in Wake of Frist-Daschle Agreement for Swift Consideration," Committee on Energy and Natural Resources, U.S. Senate, February 13, 2004, at www.energy.senate.gov/news/rep_release.cfm?id=218069 (February 17, 2004).
2. Update for Tuesday a.m., Environment & Energy Daily, February 17, 2004, at www.eenews.net/EEDaily/Backissues/021704/021704d.htm.
3. U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2004 with Projections to 2025, DOE/EIA-0383 (2004), January 2004, p. 6, at www.eia.doe.gov/oiaf/aeo.
4. Ibid., pp. 6-7.
5. Congressional Budget Office, Conference Agreement for H.R. 6, the Energy Policy Act of 2003, letter to Representative Billy Tauzin (R-LA), chairman of the House Committee on Energy and Commerce, November 18, 2003, at www.cbo.gov/showdoc.cfm?index=4800&sequence=0.
6. U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook with Projections to 2025, DOE/EIA-0383 (2003), January 2004, p. 85.
7. Ibid.
8. U.S. Department of Energy, Energy Information Administration, Short-Term Energy Outlook--January 2004, released January 7, 2004, at www.eia.doe.gov/emeu/steo/pub/steo.html.
9. Shailagh Murray and John J. Fialka, "Energy Bill Is Laden with Tax Breaks," The Wall Street Journal, November 18, 2003.
10. Fischer-Tropsch diesel fuel contains less than 10 parts per million of sulfur and is produced from coal or coal waste through liquification.
11. Ben Lieberman, "NY's New Gas Crunch," Competitive Enterprise Institute, November 16, 2003, at www.cei.org/utils/printer.cfm?AID=3751 (February 6, 2004).
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