False Advertising in the Senate Energy Bill

COMMENTARY Environment

False Advertising in the Senate Energy Bill

Jun 20th, 2007 6 min read

Former Senior Policy Analyst, Energy and Environment Thomas A. Roe Institute for Economic Policy Studies

Ben Lieberman was a specialist in energy and environmental issues.

Like the idea of paying more for less? If a certain piece of legislation now before Congress becomes law, we might have no choice.

Despite having the words "consumer protection" in its title, the latest Senate energy bill would actually boost the cost of gasoline, electricity, food, cars and home appliances. In fact, virtually everything touched by the Renewable Fuels, Consumer Protection and Energy Efficiency Act of 2007 will go up in price and down in quality.

Notwithstanding public outcries over $3-per-gallon gas, the bill's main provision would increase the amount of costly ethanol and other renewable fuels Americans are required to use. The 2005 energy bill mandated that agricultural-based renewable fuels -- mostly ethanol made from corn -- be mixed into the gasoline supply. Ethanol usually costs more than gasoline and dramatically lowers fuel economy, so the mandate has hurt drivers. And the competition for corn has driven up the prices of food items such as sweeteners, corn-fed meat and dairy products.

Despite this, the Senate now wants to expand the mandate fivefold, from 7.5 billion gallons this year to 36 billion gallons annually by 2022. The price for fuel and food, already higher under the current mandate, would likely skyrocket. In addition, the heavy government subsidies for renewables, including a 51-cent per gallon tax credit, would rise along with the mandate. They would soon reach $10 billion and eventually exceed $20 billion annually. In effect, taxpayers would be paying nearly $200 per household for the privilege of higher fuel and food prices.

It gets worse. The bill also would require that 15 percent of electricity be generated by politically correct but expensive means like wind and solar. As with ethanol, the only reason these alternatives need federal mandates in the first place is that they are too costly to compete otherwise. In effect, the government is trying to force more expensive energy options on the public. If this bill becomes law, expect a boost in electric bills to go along with the boost in pump prices. And since wind and solar energy are heavily subsidized, it would cost us as taxpayers as well.

In addition, the bill sets new federal efficiency standards for a number of home appliances such as refrigerators, clothes washers and dishwashers. The goal is to reduce energy use by setting arbitrary limits on how much electricity these appliances may consume. But past appliance regulations have actually hurt consumers.

For one thing, mandatory improvements in efficiency usually raise the purchase price of appliances, and sometimes the increase is more than enough to negate the energy savings. These regulations can also hamper product performance. Consumer Reports has documented some of the technical glitches in high-efficiency appliances, most recently finding that new ultra-efficient clothes washers meeting the latest standard "left our stain-soaked swatches nearly as dirty as they were before washing," and suggesting that "for best results, you'll have to spend $900 or more." Yet the Senate would impose new rounds of such standards.

Far more troubling than efficiency standards for appliances are those for cars and trucks. In theory, we can all save big at the pump by switching to more efficient vehicles, and at the same time cut down on oil imports. But to meet any tough new Corporate Average Fuel Economy standards, cars and trucks need to be made lighter, which also makes them less safe in collisions. According to a 2002 National Academy of Sciences study, vehicle downsizing has cost 1,300 to 2,600 lives per year. The far tougher miles-per-gallon requirements in this bill would likely add to the death toll.

Beyond safety concerns, there is the consumer choice issue. A variety of smaller but more fuel-efficient vehicles are already on the market. Does the car-buying public -- including parents that need the capacity and safety of a bigger vehicle -- really want Washington essentially forcing smaller vehicles on everyone?

Consider, too, what the bill doesn't do. There are no provisions for even one drop of additional domestic oil. America remains the only nation that has placed a significant amount of its oil potential off limits, both offshore and onshore. But this bill does nothing to change that. Nor does it streamline other energy constraints, such as the red tape that has limited refinery expansions and contributed to the 2007 jump at the pump.

A "consumer protection" bill that's anti-consumer. An "energy" bill that's anti-energy. Too bad the laws against false advertising don't apply to Congress.

Ben Lieberman is Senior Policy Analyst in the Roe Institute for Economic Policy Studies at The Heritage Foundation.

With union membership in steady decline, Organized Labor faces a choice. It can do the hard work necessary to shed the New Deal-model that still shapes its outdated approach and adapt to today's economy. Or it can flex its political muscle and get Congress to make it easier to force workers to join.

Union leaders have selected curtain number two.

Lately, they've been using their clout in the new Congress to push the cynically misnamed "Employee Free Choice Act." Its most well-known provision would strip workers of the privacy of the ballot box and make them join a union by publicly singing a union card. But the act goes further. Almost overlooked is the binding arbitration section of the act, which would do even more to undermine workers' rights and a free economy.

At issue is how long it takes to hammer out a new labor contract. One third of the time, union leaders allege, employers take more than two years to agree to an initial contract with a newly formed union. So the Employee Free Choice Act would let unions send the contract to binding arbitration after 90 days of negotiations. When that happens, a government-appointed arbitrator sets wages and working conditions, and the contract binds both employers and employees for two years.

Never mind the fact that the researcher who produced the one-third figure says that it applies to only a limited number of organizing drives, and that the actual rate is less than half that much for all organizing campaigns. Or the fact that binding arbitration itself is glacially slow and takes an average of 15 months to produce contracts in states that use it. Unions see binding arbitration as a chance to have the government impose far greater concessions on employers than they could ever win at the bargaining table.

Binding arbitration would end free markets throughout much of the economy. Government officials could dictate wages and working conditions to any company unfortunate enough to be organized. Wage controls failed in the 1970s, but Organized Labor wants to bring them back.

Since arbitrators are outside government officials, not businessmen, they lack the detailed knowledge of a company needed to write a workable contract. In a first contract, arbitrators have no previous contracts to look to for guidance. They would probably look to contracts signed by other firms in the same industry, meaning that they're likely to force innovative firms to adopt the same businesses models as their competitors.

Arbitrators who write a poor contract could easily bankrupt a company. In a competitive market, firms cannot pass high wage costs onto consumers without losing most of their customers. Unlike collective bargaining, where employers and employees must live with the contract they produce together, the law leaves arbitrators unaccountable for the results of the contracts they write.

Binding arbitration would do just as much damage to workers' rights. They would lose all recourses currently available to them. Union members would lose their right to vote on ratifying the contract they must work under, and they could not strike over the final contract, no matter how bad it is. Binding arbitration gives workers a contract whether they like it or not.

Binding arbitration could also cost workers their pensions. Unions are likely to press the arbitrator to force newly organized workers to join a multi-employer union pension plan, and in industries where these plans are common, the arbitrator would likely agree.

Mismanagement and overly generous benefits have left many of these plans under funded, and unions are eager to add new workers so that their contributions will keep the benefits flowing to current retirees. But once in, new workers would be paying largely to shore up an endangered plan, not to build a secure retirement for themselves.

In addition, labor law prevents workers from voting to decertify their union while a contract is in place. So binding arbitration would guarantee that if a union used pressure tactics to intimidate workers into joining, they couldn't vote that union out for at least two years.

Unions are counting on binding arbitration to revitalize their movement. There is talk in Washington that labor officials recognize that trying to take away workers' right to vote in privacy is politically toxic, and that they could accept, for now, a compromise bill that includes only the binding-arbitration provision. Such a compromise would be almost as bad as the original bill -- stripping workers of their rights while allowing Washington officials to dictate wages and working conditions.

Union leaders might want to return to the 1970s, when union membership was twice what it is today. But America workers shouldn't be forced to go along for the ride.

James Sherk is a policy analyst in the Center for Data Analysis at The Heritage Foundation.

First published in the McClatchy Tribune wire

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