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Congressman Tom McClintock

Representing the 4th District of California

Ending Energy Subsidies

July 10, 2014

Congressman McClintock offered an amendment on July 9, 2014 to the Energy and Water appropriations bill to require energy companies to fund their own research and development programs, rather than continuing to require taxpayers to subsidize their activity to the tune of billions of dollars.  The Congressman delivered remarks in support of the measure on the House floor:


Amendment to Energy and Water Appropriation Bill

Ending Energy Subsidies

July 9, 2014


Mr. Chairman:


This amendment requires energy companies of all kinds to fund their own research and development programs rather than continuing to require taxpayers to subsidize their activity to the tune of $3.1 billion. 

If we are serious about an all-of-the-above energy policy, we have to stop using taxpayer money to pick winners and losers in the energy industry and require every energy technology and every energy company to compete on its own merits.

For too long we’ve suffered from the conceit that politicians can make better energy investments with taxpayer money than investors can with their own money.  It is this conceit that has produced a long line of scandals best illustrated by the Solyndra fiasco.

This research doesn’t even benefit the common good by placing these discoveries in the public domain.  Any discoveries – though financed by the public – are owned lock, stock and barrel by the private companies that receive these public funds.  Public cost – private benefit.  That is nothing but corporate welfare and that is what these energy subsidies amount to.

My amendment protects taxpayers from being forced to pay the research and development budgets of these companies.  It gets government out of the energy business and requires all energy companies and all energy technologies to compete equally on their own merits and with their own funds.

Last year when we debated similar amendments, we heard of all the technological breakthroughs financed by the federal government – from railroads to the Internet.  We heard of all the public subsidies of industry that date back to Hamilton’s Report on Manufactures in 1791.  We heard promises of future breakthroughs from this massive expenditure of public funds.

I freely recognize that if you hand over billions of dollars of public subsidies to private businesses, those private businesses will do very well.  I freely recognize that some of these dollars will produce breakthroughs that will then be owned by these private companies and they’ll do extremely well.

But what the advocates of these subsidies fail to consider is Bastiat’s dilemma between the seen and the unseen – the immediate effects that you can clearly see and the unintended effects that cannot be seen.

In this case, what we don’t see directly is the opportunity cost of these subsidies.  Investors using their own money are very focused on making investments based on the highest economic return of those dollars.  Politicians using other people’s money make investments based on the highest political return of those dollars.  That is the principle difference between Apple Computer and Solyndra; or between Fed Ex and the Post Office.  

These public subsidies in effect take dollars that would have naturally flowed into the most effective and promising technologies and diverts them into those that are politically favored.  Dollar for dollar this minimizes our energy potential instead of maximizing it.

For example, hydraulic fracturing has revolutionized the fossil fuels industry and offers us the very real potential of becoming energy independent.  After the 1973 oil embargo, the federal government began heavily subsidizing research on this technology.  According to CNN, “Between 1978 and 2000, the federal government spent about $1.5 billion on oil and gas production research, much of it on extracting fuel from shale, according to a 2001 report by the National Academy of Sciences.  But the process remained expensive and research faded as oil prices came back down in the 1980’s…By the 1990’s private industry began to step back into the business with new technologies that lower costs, leading to today’s boom.”

We were told last year that the little companies don’t have the capital to develop their big ideas.  That’s why we have investors who can accurately evaluate those ideas and invest in the best of them.  Government investment doesn’t do that very well or very efficiently. 

If the technology is promising, it doesn’t need our help and if it isn’t promising it doesn’t deserve our help.

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