Cato Institute: Zeroing Out the Department of Energy
“All Americans are involved in making energy policy. When individual choices are made with a maximum of personal understanding and a minimum of government restraints, the result is the most appropriate energy policy.”
- Reagan Administration Energy Plan (1981)
The U.S. Department of Energy (DOE) oversees nuclear weapons sites and subsidizes conventional and alternative fuels. The department has a history of fiscal and environmental mismanagement. Further, misguided energy regulations have caused large loses to consumers and the economy over the decades.
DOE will spend about $45 billion in 2011, or about $380 per U.S. household. It employs about 17,000 workers directly and oversees 100,000 contract workers at 21 national laboratories and other facilities across the nation. The department operates 37 different subsidy programs.
Department of Energy research activities should be terminated. The private sector is entirely capable of funding its own research into coal, natural gas, nuclear power, solar power, and other forms of energy. Businesses will fund new technologies when there is a reasonable chance of commercial success, as they do in other private industries.
Federal energy subsidies impose a burden on taxpayers, and they can be counterproductive if they steer the marketplace away from the most efficient energy solutions. Furthermore, federal energy research has a track record of poor management, cost overruns, and wasteful boondoggles.
The Strategic Petroleum Reserve and the Power Marketing Administrations should be privatized. The Federal Energy Regulatory Commission should be terminated. Ending all these activities would save taxpayers about $18 billion annually, as shown in the table.
The bulk of the Department of Energy’s activities are defense-related. Those activities, which total about $19 billion annually, should be moved to the Department of Defense. That would allow for a more transparent presentation of defense costs in the budget, and it would allow the Department of Energy to be abolished.
Click here for a list of proposed spending cuts to the department to save taxpayers about $18 billion annually.
Subsidy Programs, R&D: Cut to Eliminate
The energy industry has been heavily regulated and subsidized by the federal government for decades. The Department of Energy’s array of subsidy programs grew out of atomic research efforts of the 1950s, responses to the energy crisis of the 1970s, and concerns about conservation and global warming in recent decades.
The department spends about $9 billion annually on civilian energy research and subsidies. The following are some of the major program areas with the 2008 spending levels listed:
- Science. This $3.9 billion program area funds research on such activities as high-energy physics, nuclear physics, and fusion energy.
- Energy Efficiency and Renewables. This $1.5 billion program area funds research into hydrogen power, solar power, wind power, weatherization, vehicle technologies, and other activities.
- Fossil Energy Research. This $646 million program area funds research into coal, oil, and natural gas technologies.
- Nuclear Energy. This $695 million program area funds civilian nuclear energy research.
- Electricity Delivery. This $157 million program area funds research into electricity transmission.
Federal energy research should be phased-out as an unneeded cost in an era of massive government budget deficits. The private sector is entirely capable of performing research into coal, nuclear, solar, and alternative energy sources for itself. Businesses will fund new technologies when there is a reasonable chance of commercial success, as they do in every other private industry. Federal subsidies may even be actively damaging to our energy future by steering markets in the wrong direction, away from the best long-term energy solutions.
Federal energy research has a poor track record. With regard to fossil fuels research, for example, the Congressional Budget Office has concluded: “Federal programs have had a long history of funding fossil-fuel technologies that, although interesting technically, had little chance of commercial implementation. As a result, much of the federal spending has not been productive.”1 That is a polite way of saying that these programs have been a waste of taxpayer money.
This essay discusses the record of waste and mismanagement in Department of Energy projects during recent decades. The number of major spending boondoggles in this department is remarkable. The problem is that departmental leaders and members of Congress have shown an unfortunate urge to try and centrally plan the energy sector. But they have been responsible for throwing tens of billions of dollars of taxpayer money down the drain on projects of little value.
Policymakers often make grandiose promises, such as proposing to make America “energy independent” or to convert the nation to a “green economy.” Those visions don’t make any sense, but even if they did history shows that the Department of Energy would be incapable of putting them into place with any degree of competence. Federal energy schemes are often poorly managed and generate huge cost overruns, or they aim at objectives that make little economic sense, as the following case studies illustrate.
Clinch River Breeder Reactor
National Ignition Facility
National Laboratory Mismanagement
Synthetic Fuels Corporation
Alternative Fuel Vehicles
Sen. Rand Paul Leads the Way
Freshman Sen. Rand Paul (R-KY) has raised the bar in Washington by releasing a bill that would make substantial, specific, and immediate cuts in federal spending. While policymakers on both sides of the aisle have largely paid lip service to stopping Washington’s record run of fiscal profligacy, Paul’s proposal makes good on his campaign promise to seriously tackle the federal government’s bloated budget.
Paul’s bill would target $500 billion in cuts for fiscal 2011 alone. While audacious by Washington standards, cutting federal spending by that amount would still leave us with a projected $1 trillion deficit this year. Nonetheless, the federal government’s scope would be dramatically curtailed, which would pay dividends in coming years as the economy is unshackled from numerous failed federal interventions.
DOE has become a chief source of corporate welfare. Paul would eliminate subsidies for all energy industries — from fossil fuels to so-called “green” energies. He notes that the government’s interference in energy development should be ended and the free market allowed to “start taking the reins.”
Thus far, the spending cut bar in Washington has been set pretty low. Policymakers from both parties and varying ideological backgrounds have been timid in spelling out precisely what they would cut. By getting specific, Paul has raised the bar, which will hopefully put pressure on others — in particular, the congressional Republican leadership — to move beyond a vague, myopic fixation on nondefense discretionary spending.