Facing new polling showing that 52% of the American people believe that he does not deserve a second term in office, President Barack Obama attempted to reach out to conservatives yesterday by promising $8.33 billion in federal loan guarantees for a pair of nuclear reactors in Georgia. The President told an enthusiastic audience of union officials in Lanham, MD: "Those who have long advocated for nuclear power — including many Republicans — have to recognize that we will not achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable."
In other words, as newspapers across the country have noted this morning, President Obama's nuclear loan guarantee announcement is really nothing more than a transparently cynical attempt to revive his moribund cap-and-trade/energy tax proposals currently languishing in the Senate. In reality, the $8.3 billion announced yesterday is actually just a first down payment on the $18.5 billion in loan guarantees that were authorized under the Energy Policy Act of 2005. While the administration should be applauded for following the law, loan guarantees are not enough to recreate a robust nuclear industry in the United States. Indeed, an expansion of the program could do much more to stifle the industry’s growth than to help it.
And expanding the nuclear loan guarantee program is exactly the approach the Obama administration plans to pursue. Their 2011 budget provides an additional $36 billion in loan guarantee authority to nuclear energy projects. When added to the $18.5 billion previously authorized under the Energy Policy Act of 2005, the American taxpayer will now be subsidizing $54.5 billion in loans to the nuclear industry. But just as conservatives do not support subsidies for wind, solar or biomass energies, conservatives should not support subsidies for nuclear power, either. Heritage Research Fellow Jack Spencer explains:
Expansive loan guarantee programs, however, are wrought with problems. At a minimum, they create taxpayer liabilities, give recipients preferential treatment and distort capital markets. Further, depending on how they are structured, they can remove incentives to decrease costs, stifle innovation, suppress private-sector financing solutions, perpetuate regulatory inefficiency and encourage government dependence.
President Obama's bureaucratic/special interest/Washington approach to energy policy is clear: tax and regulate those energies unpopular with his political base while subsidizing and mandating the use of those energies that his supporters favor. This is the same approach the United States tried in the 1970s under President Jimmy Carter, and it was a colossal failure.
What America really needs is a true free market approach to the energy sector, and the nuclear industry is a great place to start. Specifically, the federal government should: limit the loan subsidies of Energy Policy Act of 2005 to existing law; avoid creating a government-dependent nuclear industry; remain committed to scientific conclusion on Yucca Mountain; introduce market principles into nuclear waste management reform; and focus the government on key responsibilities like establishing predictable and effective regulation that will ensure safety and security.
Just as with the health care debate, the White House seems to believe they can win conservative support for their big government policies by buying off selected industries. What the White House continues to fail to realize is that true conservatives are pro-market, not pro-business. Subsidies and mandates are never the answer to an ill-functioning market. A predictable and reliable regulatory framework where firms and consumers can find the best solutions through undistorted price signals is the better approach for energy, health care ... and really just about everything.