The U.S. Department of Energy recently awarded $2.4 billion in stimulus money to develop and manufacture electric vehicles. The ostensible purpose of the government’s effort is to set the nation on a path toward more environmentally friendly transportation. But as the USA Today notes, electric cars might not provide the environmental benefits that proponents cite:
Biofuels lobbyists have been successful in securing federal funding and regulatory support. As an industry that thrives on federal subsidies, any threat to its privileged status is a cause for alarm. This week Energy Secretary Stephen Chu set off such alarm when he told a group of alternative energy developers that “if it were up to me, I would put every cent into electric cars.”
It didn’t take a Ph.D. in economics to recognize that the federal “Cash for Clunkers” program would put upward pressure on used-car prices. In nominating it “the dumbest program ever” back in August, Chris Edwards noted that “low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.”
Yesterday the Wall Street Journal took a lengthy look (subscription required) at the deteriorating financial situation of domestic biofuel producers. According to the Journal:
Try as they might, supporters of big government spending cannot make federal programs work very well. The Department of Energy, for example, has been plagued by mismanagement, cost overruns, and scandals for decades.
Today, the Washington Post reports on the poor performance of DoE’s environmental clean-up programs. As I reviewed in the linked essay, these enormously costly programs have been plagued by mismanagement for at least 25 years. Last week, Lou Dobbs lambasted DOE’s National Ignition Facility in California for its huge cost overruns (Hat Tip: Harrison Moar).
I summarize these costly projects and other DoE boondoggles here. With bipartisan support for increases to energy subsidies, we can expect a raft of bipartisan boondoggles developing over coming months and years.
People who support expanded federal intervention into areas such as energy and health care naively assume that policymakers can make economically rational and efficient decisions to allocate resources. They cannot, as a Washington Post story today on FutureGen illustrates.
The story describes the political battle over the location of a $1.8 billion ”clean coal” plant. I don’t know where the most efficient place to site such a plant is, or if such a plant makes any sense in the first place. But the story illustrates that as soon as such decisions are moved from the private sector to the political arena, millions of dollars are spent to lobby the decisionmakers, and members of Congress are hopelessly biased in favor of home-state spending regardless of what might be best for the national economy as a whole.
President Obama has promised to ramp up spending on such green projects. So get ready for some huge political fights over the big-dollar spoils, and get ready for some monsterous energy boondoggles.