Point of order: Is there anything sane about Joe Biden’s energy policies? For that matter, was there anything sane about Barack Obama’s energy policies while Larry Summers served as Obama’s National Economic Council chair?
Answer: not really. We got continually lectured during that administration that we couldn’t drill our way to energy independence, an argument proven false almost as soon as Donald Trump took office. Biden and his team haven’t made that argument, at least not explicitly, but they have made it very clear that they have no intention of drilling more to re-acquire energy-independent status.
Speaking at the Boston Globe’s Globe Summit on September 15, former Obama administration Economist Larry Summers said this about current U.S. energy policy: “It’s kind of insane that we have truck and trains carrying oil all over this country, rather than constructing pipelines, which would permit accessing more resources and cheaper, safer transmission.”
Yes, it is kind of insane that regulators in the United States continue to hamper the domestic oil and gas industry by forcing it to move such large volumes of oil via trucks and trains. There is nothing inherently wrong with these modes of transportation, mind you: It’s just that they are less efficient, more expensive, more dangerous and more polluting than moving oil in pipelines. Other than those fairly key factors, they’re great.
Yet, even in the midst of a building global energy crisis, the regulators in the Biden administration continue to hold up permits for critical pipeline infrastructure, which, as I pointed out last week, leaves entire regions of the country highly dependent on trains and trucks to deliver their oil and refined products.
It’s even more insane than it seems on first blush. Trains and trucks rely on fossil fuels, after all, so the transport of oil compounds whatever carbon release comes from the oil itself. Furthermore, both methods of transport hold bigger risks for accidental releases than pipelines do, and both utilize infrastructure that is also used for human transport. And now, the extra use of gasoline and diesel to move oil to refineries on trucks puts upward pressure on already-high fuel prices at the pump.
It’s not the only Biden policy that Summers considers insane, either. Four weeks ago, Summers warned that Biden’s Academia bailout would make inflation worse, after warning in February 2021 that Biden’s massive stimulus bill would touch off hyperinflation:
Summers, a former top economic official in the Clinton and Obama administrations, called for caution as reports swirl that President Biden is close to making a decision on whether to extend the ongoing payment moratorium for student loans – and potentially wipe some debt clean.
“I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases,” Summers said in a series of tweets on Monday.
“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college,” Summers added.
Maybe Biden’s just insane? Naah, he’s not crazy — just incompetent.
Summers is getting crosswise with the White House on inflation again this week. Summers wants the Federal Reserve to pour on the rate hikes to prioritize ending the inflationary wave that has bedeviled American consumers. Not all of the wealthy like that idea, however:
Ark Invest CEO and CIO Cathie Wood has taken aim at former U.S. Treasury Secretary Larry Summers over his recent comments on inflation.
“Larry Summers seems to be leading the Biden administration astray with his conviction that inflation is intractable, with the ‘70s as his guide,” Wood tweeted Saturday. “The ‘70s inflation started in 1964 with the Vietnam War and the Great Society and burgeoned for 15 years.”
The Great Society was a series of domestic programs launched by President Lyndon Johnson that included the War on Poverty, Medicare and Medicaid and Head Start.
“This inflation started fewer than two years ago with COVID and supply chain bottlenecks, exacerbated by Russia’s invasion of Ukraine this year,” Wood continued. “The Fed is solving supply chain issues by crushing demand and, in my view, unleashing deflation, setting it up for a major pivot.”
Tesla CEO Elon Musk, who has previously warned that “a major rate hike from the Federal Reserve risks deflation,” replied to Wood’s tweet, saying “the fundamental error is reasoning by analogy, rather than first principles.”
First principles in inflation would be to exercise significant fiscal discipline in an inflationary wave, as well as applying supply-side economic policies. Neither Biden nor the Democrat-controlled Congress appear keen on doing either, however. That leaves the Fed with few options except to kill demand while supply chains rebound, or simply to allow inflation to run away and erode wages and assets for a long term.
Had Biden listened to Summers in the first place, we wouldn’t have to choose between those two options. Biden chose fiscal insanity for its short-term political benefits, just as he chose energy insanity for the same reasons.