- The Washington Times - Thursday, December 23, 2010

After January’s swearing-in ceremonies, Congress will confront hostile Washington weather and

equally treacherous political battles - ongoing wars, a struggling economy, immigration debates and energy and environmental issues.

This all seems familiar to people who have worked in government or industry or who closely observe the political scene. But can the newly elected officials avoid the same mistakes and find long-term solutions to these recurrent problems?

Energy and environmental issues remain highly contentious. Former House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid drove deleterious measures such as the “cap-and-trade” bills. In theory, such schemes may have provided a workable emissions regulatory regime, but it was buried in political garbage and giveaways guaranteed to bring job losses and damage our economy.

The election results, shifts in party balance and new committee leadership (Rep. Fred Upton replacing Rep. Henry A. Waxman as chairman of the Energy and Commerce Committee for one) augur that the 112th Congress will exercise more regulatory restraint and economic and technological concern than the 111th. We can look for efforts to craft policies that encourage the clean use of all fuels to spur U.S. job growth.

Another case in point is EPA’s greenhouse-gas regulations, scheduled to take effect next month. The new rules would have the same impact on jobs and the economy as cap-and-trade. We can hope moderate Democrats such as Sen. John D. Rockefeller IV will work in the new Congress to undo the damage before it takes effect.

Natural gas also will be spotlighted for qualities that appeal across party lines. It offers major new tax revenue for federal, state and local coffers. As a clean-burning fuel, it can reduce greenhouse-gas emissions. And because hydraulic fracturing has enabled extraction of “tight gas” from resources across the country, from New York’s Marcellus Shale to the Barnett Shale in Texas, these huge new gas reserves provide promise for economic growth.

Of course, taxes will continue to be a hot topic as the White House continues to target billions of dollars of energy incentives. The new Republicans in the House and Senate, while certainly friendlier to traditional energy sources, are also more sensitive to deficit spending. They are likely to insist on “pay-fors” to compensate for continuing or new incentives.

The administration continues to call for an end to “dual capacity” (protection against double taxation for U.S.-based firms that compete in the global market) as well as elimination of the Section 199 manufacturing deduction - but only for major U.S. international oil companies. No matter who holds House or Senate committee chairmanships, anti-business and anti-oil officials will continue to urge that these “loopholes” be closed, even though repeal would make U.S. companies less competitive, increase the costs of U.S. oil and gas production and hurt the economy.

Lawmakers should have learned over the past two years that economywide policies - regardless of how well-intentioned - simply do not work. They spawn unintended (but foreseen) results that often are ignored despite their damage.

As one example, Congress has extended ethanol subsidies - whose scheduled expiration at the end of this month would have added more than $17.7 billion to Treasury collections. Instead, over the next four years, an import tariff of 54 cents per gallon on 600 million gallons of imported ethanol will “earn” the U.S. Treasury $324 million a year ($1.3 billion for 2011-14). But continuing the 45-cents-a-gallon tax credit to blenders (for a minimum of 10 billion gallons per year) will cost the Treasury $18 billion by the end of 2014.

Continuing these subsidies guarantees that Americans will continue to pay more for sugar products. The subsidies will continue to drive up the cost of feed and the price of meat and vegetables and will continue our World Trade Organization woes.

Despite the clear dissatisfaction of the voters in November, new and longtime federal legislators always pose a threat to a healthy, pro-business environment that benefits workers and consumers. Let’s hope the 112th Congress breaks that mold, focuses more on creating a healthy environment and discards the “simplicity” of crushing mandates that work against America’s future prosperity.

Jack Rafuse worked in national security and energy during several administrations. Then he worked for an energy company before starting his consultancy, the Rafuse Organization.

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