The Very Essence of a Problem Requiring Government Action

It's a rare day in April when I wake up and say, "You know, that Senator Lugar really makes sense." And if such a day were to occur, you'd expect it to be on April Fool's Day rather than, say, Monday, April 3rd. However, this morning I said to myself, "Self, you know, that Senator Lugar really makes sense."

We've seen, since the dark days of the Reagan administration, a blind insistence that all of our problems can be solved by "markets". Particularly within the field of energy, this faith in the ability of "markets" to solve problems has persisted despite quite a bit of evidence to the contrary. When FERC Chair Kurt Hebert famously told the people of San Diego during the California Energy Crisis that, "If the truth hurts Granny, you have to let Granny die," he meant that if he had to choose between his belief in "markets" and letting old women in California die when they couldn't afford their medicine and their energy bills, he preferred to cling to his faith in "markets" and watch the old women die. The Enron traders thought that was great and enjoyed mocking "Grandma Millie." In the end, FERC was forced to put price caps and must-offer requirements in place -- to regulate -- in order to restore some sanity to California's energy market. Some problems can't be solved by simply asserting blind faith in unregulated "free" markets. Energy is one of those problems. Lugar appears to "get" that.

The March 20th issue of Platt's Inside Energy reports that Lugar gave a speech at the Brookings Institute and said that energy is the "albatross of U.S. national security," and that "the U.S. was risking economic disaster at home and influence abroad by not addressing it with full force." He said given the stakes, the "White House and Congress must reshape the national energy strategy and not simply try to make technologies desirable to the market."

The report continues: "We have entered a different energy era that requires a much different response than in past decades," the Indiana Republican said. "We could take our time if this were merely a matter of accomplishing an industrial conversion to more cost-effective technologies. Unfortunately, U.S. dependence on fossil fuels and their growing scarcity worldwide have already created conditions that are threatening our security and prosperity and undermining international stability.

In the absence of revolutionary changes in energy policy, we are risking multiple disasters for our country that will constrain living standards, undermine our foreign policy goals, and leave us highly vulnerable to the machinations of rogue states."

He added, "Any realistic American foreign policy must redeploy diplomatic, military, scientific, and economic resources toward solving the energy problem."

Lugar goes on to explain that, "By the time a sustained energy crisis fully motivates the market, we are likely to be well past the point where we can save ourselves. Our motivation will come too late and the resulting investment will come too slowly to prevent the severe economic and security consequences of our oil dependence. This is the very essence of a problem requiring government action."

Now, it will be interesting to see if and how the White House responds.