"I have to tell you that there are some Democrats, for example, who represent states or districts that are heavily reliant on old power plants and are more heavily manufacturing based," President Obama said during a Google online chat session with the public on Friday. "And the truth is that if you produce power using old power plants, you're going to be emitting more carbon, but, to upgrade those plants means energy is going to be a little more expensive, at least on the front end."
Naturally, Obama understated the costs involved in upgrading power plants and switching to new sources of energy. But his remark is true in its essentials: In exchange for very modest reductions in carbon emissions, his policies require consumers to pay higher upfront prices for electricity.
Now compare Obama's statement to the theory behind his stimulus package -- both the $800 billion package he championed and signed in 2009 and the additional stimulus he has since asked Congress to enact. The assumption underlying his proposed and enacted deficit spending, expansion of entitlements (such as food stamps) and demand-side tax breaks as stimulus is that Americans have a temporary cash-flow problem. The idea is that because people don't have enough money in their pockets, commerce is suffering, causing hiring to lag. So by providing a small pay increase to workers and extra business for contractors, the Recovery Administration was supposedly alleviating this temporary cash crunch so as to ease the economy back onto the road to recovery.
Apparently, though, the one hand in Obama's White House doesn't know what the other is doing. Because even as "stimulus Obama" talks about putting more money in people's pockets, "green-energy Obama" is demanding that Congress un-stimulate the economy by burdening Americans with the large upfront costs. As Obama put it on Friday, it's his job to convince people to "take actions now where the benefits are going to be coming down the road -- or at least avoiding big problems down the road -- and it's hard when people are thinking about day to day issues." Indeed.
The Institute for Energy Research predicts that new EPA rules on mercury and cross-state pollution targeting old power plants will shut down 34 gigawatts of coal-fired production capacity, or 10 percent of the U.S. total. Those burdened most by the energy price increases resulting from these rules -- as with the price hikes that result from Obama's more ambitious plans for carbon reduction -- will be the poor, who already spend a greater percentage of their income on energy than those who are more affluent.
Obama's energy and economic policies are thus incoherent and working at cross-purposes. He acknowledges yet fails to appreciate the trade-offs involved in carbon rationing and other environmental regulations. If you wonder at the stimulus' failure to put the economy back on track in spite of such large expenditures, this contradiction explains it all. How can Obama maintain that the economy is stuck because middle and lower-income Americans don't have enough money in their pockets, then at the same time enact policies that guarantee they will have even less money in their pockets? What good is it to inject billions into the economy via government, only to have them taken out again through government-mandated increases in the price of electricity?