Bush and the Environment

With Jerry Taylor
Director of Natural Resource Studies
The Cato Institute
Friday, Jan. 25, 2002; 11 a.m. EST

President Bush and his administration have come under fire from environmental groups on his relaxing of arsenic levels in drinking water, ANWR and a host of other policy issues since he first came to power one year ago. Is this criticism fair?

Jerry Taylor, director of Natural Resource Studies at the Cato Institute, was online to take questions and comments on President Bush and the envoronment.

Founded in 1977, the Washington, D.C. based Cato Institute a non-profit public policy research foundation dedicated to "traditional American principles of limited government, individual liberty, free markets and peace"

A transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Alexandria, Va.: Senator John Kerry (D-Mass.) has a proposal to raise federal fuel economy standards. But guess what? There are already more than 50 different models out there on dealer lots today that get 30 MPG, and the top ten most fuel efficient cars represent less than 2 percent of sales. The problem is, no one wants these little econoboxes, and to get better fuel economy, you have to eliminate features consumers want, like size, power and safety. I don't think Kerry will be giving up his SUVs any time soon for a subcompact. What a hypocrite. Does Cato have a position on CAFE standards, which are nothing more than leftists trying to dictate consumer choice? Thanks.

Jerry Taylor: I largely agree. I'd actually like to ask Sen. Kerry what he plans to do with the fancy, gas guzzling speedboat he tools around with in the Woods Hole area all summer long. It uses about 30 gallons per hour of fuel. "Energy conservation for thee but not for me" I'd guess.

I don't support CAFE standards. Energy is becoming more plentiful, not more scarce, with time, so I doubt that there's any more reason to worry about conserving energy than there is to worry about conserving paper clips. The more immediate argument against CAFE standards, however, is that they reduce the marginal cost of driving. If you reduce the marginal cost of doing something where demand is somewhat "elastic," then you will get more, not less, of it. If you want to reduce gasoline consumption, the only real way to do so is to increase the marginal costs of gasoline consumption, which means increasing fuel costs and thus the cost of driving. So even if you support the government's role in reducing energy consumption, CAFE standards are not the way to go.

Washington, D.C.: Do you think that the Cato Institute, known for its pro-business stance, has any real credibility commenting on the adequacy of the Bush Administration's environmental policy?

Jerry Taylor: Yes.

OK, if you insist on a more detailed answer, I guess I'd argue with your characterization of Cato as "pro-business." We are pro-free markets, which does not necessarily mean that we are "pro-business." For instance, in an op-ed I wrote for the Wall Street Journal Monday, I heavily criticized Enron for its manipulation of the regulatory code. I wrote an op-ed in the Washington Post Last year attacking the idea that the feds should subsidize nuclear power. I could go on and on but would end by underscoring Cato's long-standing, vigorous opposition to corporate welfare.

Boston, Mass.: President Bush's achilles heel seems to be the environment. Whether you agree or disagree with his policies, he does not seem to explain why he makes these decisions. What can he do better to communicate the rational behind these decisions?

Jerry Taylor: Republicans don't really have a philosophically coherent position on environmental protection beyond "we largely agree with the current laws and regulations, we just want them to be less costly and less intrusive where possible." It's hard to sell that position when the other side speaks in near-religious terms and in moral absolutes.

So for Bush to better communicate the rationale behind his decisions, he needs to develop more compelling rationales. But I'm not sure if it's that important politically. Voter surveys and exit polls demonstrate that few voters consider environmental policies to be that important compared to other issues that motivate their votes for one candidate or another. For instance, the environmental organizations in Washington over the last several weeks are arguing that Bush's record is virtually a replay of the Reagan environmental record and all the supposed horrors therein. While I disagree with that assessment, it's worth pointing out that Reagan won reelection in a landslide despite this supposed crippling achilles heel.

What really matters in politics are swing voters. Some voters are going to vote against a Republican candidate no matter what. Others will vote for that candidate no matter what. Politicians don't care to spend much time talking to either group; why should they - they can't effect their votes. It's the middle group that counts. Most Americans who care a lot about the environment will always find the Democratic nominee more attractive, which is probably the main reason why Republicans don't spend more time trying to appeal to those voters.

Arlington, Va.: How can President Bush in good concience advocate drilling in a national wildlife refuge without first attempting to approve our energy efficiency, which could save much more energy than we would get through new drilling? I think he has a major conflict of interest.

Jerry Taylor: People can increase the efficiency with which they use energy without any government help. If you want to do so, you can buy a fuel efficient car, install insulation, travel less, turn down your thermostat, etc. You may even save money doing so (but may not; it depends).

Government's track record in "improving" energy efficiency is mixed. If the price of energy is trending downward - as it now is - people are naturally going to be less inclined to conserve energy because the capital investments necessary to do so will generally be greater than the energy savings they might secure. When government mandates those investments - for example, when it mandates fuel efficient appliances - it's mandating that people make trade-offs between up-front capital costs and long term marginal costs that they otherwise were not willing to make when the choice was there's alone. Not only does this force people to make investments that are probably less attractive than the investments they could have made in other areas to save money, but it does not necessarily improve the overall efficiency of the use of resources.

Plano, Tex.: Even without the well supported problem of the U.S. contribution to Global Warming, there are plenty of reasons to reduce energy use in the USA. Texas is now full of cities that have dangerous air conditions over 20 times a year, and unhealthy for some conditions over 100 times a year. An easily achievable increase in gas mileage would remove the need for oil from the Gulf States, and the trickle possible out of the ANWR in a decade or so, and would take effect in five years. This would make America safer and richer. Your argument on marginal costs is faulty, because the amount of driving people do is not elastic with the price of gas. There hasn't been a noticeable change in mileage with price increases, and most people's amount of driving is relatively fixed by time constraints.

Jerry Taylor: The economics literature indeed demonstrates that the demand for gasoline is elastic even in the short run. For instance, the year 2000 saw the first drop in the absolute amount of gasoline consumed in this counry for the first time in a non-recession year in history. Why? Because, as you may recall, gasoline prices spiked to around $2 a gallon in a number of areas that year.

As far as the alleged relationship between energy consumption and pollution, let me point out that the EPA reports that, since 1970, energy consumption in the United States has increased by 41%. Over that same period, emissions of volatile organic compounds (an important contributor to summer-time urban smog) dropped 42%, carbon monoxide emissions dropped 28%, particulate matter emissions of 10 microns dropped 75%, sulfur dioxide emissions dropped 39%, and lead emissions dropped 98%. The number of days in which cities in Texas violated federal air quality standards also dropped by about 80 percent or so. That's not to say that I'm necessarily against further improvements in air quality, but it is to say that air quality improvements can indeed be achieved even if we consume more - not less - energy.

Laurel, Md.: I don't understand why ANWR is such a sacred lamb.

Drilling there may lead to oil spills, but why is the environment worse off from spills in Prudhoe Bay than anywhere else?

Jerry Taylor: Agreed.

Crofton, Md.: Please explain what you mean by "energy is becoming more plentiful, not more scarce". My understanding of oil reserves is that they are finite. When they are used, the remainder by definition becomes more scarce. Are aliens funneling additional oil to Alaska from planets unknown?

Jerry Taylor: We can tell whether something is becoming more scarce or more plentiful by inflation-adjusted prices. The inflation-adjusted price of oil and oil products such as gasoline have been steadily declining for over a century. If you wanted to look at other indices, such as our present stock of oil reserves (defined as the amount of oil that can be produced immediately for a profit if necessary) you'll see that we have about 10 times more oil reserves today than we had in 1970.

But your question is a good one. The answer to the riddle is that resources are fixed and finite because they are not natural. What is a resource and what is not a resource is defined by whether that "thing" we're talking about can be used profitably by human beings. Oil can be, so it is. Waves for the most part cannot be, so they aren't. But with technological progress, the stock of natural "stuff" that can be used as a resource increases with time. Soon, we will probably be able to harness waves for electricity in a profitable way, and coastal areas with a lot of tidal movement will become resources even though today they are not considered economic resources in that manner.

So ... since resources are largely invented through human technology and know-how, and since human technology and knowledge is growing exponentially today, it stands to reason that resource availability will also grow exponentionally. And if we examine the price data, we see that that has indeed been the case.

Alexandria, Va.: Why isn't there more of a story to be had of President Bush's home in Crawford, which makes use of solar and geothermal energy sources. For someone who allegedly doesn't care about or understand alternate energy sources, our President sure does know how to use them.

Jerry Taylor: I don't know why he doesn't tell that story more often. But as far as such technologies are concerned, remember that they are, in a sense, luxury goods. Solar panels for you home cost a LOT of money (typically $10,000 - $30,000), and they don't pay for themselves in reduced energy costs for at least a decade (longer if you take out the government subsidies). I know a lot of rich people that install these things; they can afford it and can also afford the opportunity cost of doing so. I don't know a lot (actually, any) less economically advantaged people who do so.

Alexandria, Va.: From a free market perspective, where do you stand on the environmental effects of public works, such as the Woodrow Wilson Bridge improvements?

Do you say that the government should let the private sector build a toll bridge, or do you think that placing environmental restrictions on tax-funded GOVERNMENT actions is also an impediment to the operation of free market?

Jerry Taylor: I think road construction and road ownership/management should be undertaken by private investors, not governmental agents. In such a world, investors would have to indemnify neighbors for the monetarized externalities (environmental and otherwise) that such projects impose on others. I don't have any particular expertise on the question of the environmental impacts of the Wilson Bridge project (although I do live just south of there), so I'll just leave it at that.

Suitland, Md.: With the outcome of the votes for the presidential election so close, it's clear that without the (Independent Block) of voters the current president would not be in office. The acquisition of this block was successful because of the "Aggressive" stand the President took on CO2 levels and other environmental positions to co-opt then Vice President Gore's position. Do you think it is fair for an administration to claim that it is being unfairly criticized by the very same environmental groups that they (the administration) agreed with during the Presidential Campain? Note: I think it is the failure of this administration to take any aggressive pro-environmental stance because of it's pro-corporate ties to industry polluters that will ultimately result in the Republican Party loss of control in the House of Representatives as it did the U.S. Senate.

Jerry Taylor: Your assertion that Bush won the election because of independent voters largely motivated by his alleged aggressive stand Bush took on tackling greenhouse gas emissions is doubtful. I have a hard time believing that voters who wanted an aggressive policy to tackle global warming would vote for Bush and not for Gore. Moreover, Bush was not shy about saying on the campaign trail that he would not support adoption of the Kyoto Protocol.

Washington, D.C,: Is carbon dioxide a pollutant? Are carbon dioxide emission standards established at the state level a back door attempt at ratifying the Kyoto Protocol?

Jerry Taylor: When we exhale, we "pollute" the atmosphere with carbon dioxide. When plants struggle to life, they must "inhale" carbon dioxide or die. It's a natural agent in the environment, so I have a hard time tagging it as a pollutant with all the connotations that word has.

The real question is whether industrial carbon dioxide emissions (which largely come from the burning of fossil fuels) is dramatically warming the planet. I think it has some warming effect, but the data suggests that the warming will be far more attenuated and far more benign than is popularly understood. And yes, I think state-level action to reduce greenhouse gas emissions is an attempt to gain through the back door what can't be gained through the front.

Washington, D.C.: Cato's defense of the Cheney/Bush administration's dismal environmental performance is not factually credible. Cato is nothing but the lobbying front-organization for the world's largest polluters. Your directors and officers should be jailed -- and I assure you, many will be.

For the record, I'm not wild about the administration's environmental performance to date because it accepts far too much of the regulatory status quo which I have a great deal of problem with. If you paid attention to the Washington Post last year, moreover, you'd have seen that Cato was outspokenly critical of the administration's energy bill because it was largely a bill to subsidize industry (including those industries that never gave the Bush campaign a dime, by the way). And not that it's relevant one way or the other, but about 3/4ths of our budget comes from non-corporate sources.

I hope your wrong, of course, about my imminent jail time for offering my libertarian ideas in public. I wouldn't like to wake up one morning and find myself in Cuba ....

Minneapolis, Minn.: Let's just say for a moment that lower automobile fuel efficiency is not necessarily a good thing. What, if anything, can be done to effectively increase fuel efficiency? Tax credits? Speed limits? Nothing?

Jerry Taylor: IF you want government to intervene in the economy to reduce energy consumption, the only real way to do it is to tax energy more than we do today. If you want to reduce the consumption of something, you have to increase its marginal costs. Energy efficiency mandates on widgets simply reduces the marginal costs of consumption and thus increases consumption. The reason why we don't see the Left arguing that the tax position, I suspect, is because that is an unpopular argument to make.

Washington, D.C.: I tend to lean libertarian on almost every issue, but the one area in which I differ with Cato is the environment. The environmental affects everyone, and so it seems like an appropriate area for the government to mandate reasonable protections -- and if it's going to err too far to one side or the other, isn't it safer to err on the side of caution? The alternative -- not protecting the environment enough -- could have frightening consequences.

Jerry Taylor: Big question that could take hours to answer to your satisfaction I suspect. But quickly, for what it's worth:

It is not necessarily true that "the environment" effects everyone. If Dallas Texas, for instance, chooses to forgo the kind of investments in drinking water quality that, say, Boston is willing to make, then the quality of Dallas' drinking water effect, well, Dallas residents and not Boston residents. I believe that environmental problems that effect communities should be addressed by the community being effected and by no other political entity because they are the ones who have to live with the inevitable trade offs involved in public policy.

Of course, some environmental pollution issues have no boundries - global warming, for instance. And others have cross-state impacts such as smog in some areas.

Erring on the side of caution is not a helpful admonition abesent a discussion of costs, benefits, and risk tolerances (which admittedly differ from person for person). For example, we know that driving a car is risky - even the safest cars are risky and even when driving at low speeds. Should we automatically err on the side of caution and never enter an automobile? Of course not; we balance the risks of doing so with the benefits of doing so.

To the greatest extent possible, where those risks and benefits are internalized, they should by made by the individual. I don't think it's risky to eat produce treated by agricultural chemicals, so I eat them. Others might legitimately have different risk tolerances, so that shop at Fresh Fields.

New Jersey: While Bush might be able to win re-election regardless of his environmental record, do you believe that moderate republicans running for House and Senate positions might be more vulnerable if the Administration does not do a better job of explaining actions that might be perceived as anti-environmental?

Jerry Taylor: Maybe ... but I'm no arm-chair political strategists. But it seems to me that legislators in both parties have a long record of successfully getting reelected even when their constituents prefer another party's presidential candidate. For example, throughout the 70s and 80s, Democratic presidential candidates - with the exception of Jimmy Carter - got absolutely creamed at the polls. Yet incumbant Democratic legislators were more than capable of maintaining their majorities in the House and Senate and getting reelected regardless.

Old Town, Alexandria, Va.: What do you make of the reports that Interior Secretary Norton never submitted Fish and Wildlife Serives reports that criticize the new Army Corps of Engineers rules on wetlands protection?

Was this an oversight or a politcal move?

Jerry Taylor: I must confess that I'm not familiar enough with the issue to say.

Alexandria, Va.: You say: "When we exhale, we "pollute" the atmosphere with carbon dioxide. When plants struggle to life, they must "inhale" carbon dioxide or die. It's a natural agent in the environment,..."

Can you agree that naturally-occuring CO2, like naturally-occuring particulate emissions from volcanoes, is not a pollutant but that industrial emissions of CO2 and particulates are pollutants?

Since many pollutants occur naturally somewhere in nature we would have very few substances labelled pollutants if we adopted your standard.

Jerry Taylor: As I said, we're arguing about semantics for the most part. If you think that global warming is a serious problem and that anthropogenic emissions are a major cause of that warming, whether we label CO2 a "pollutant" or a "thingamibob" is irrelevant, isn't it?

Sparta, N.J.: Do you believe Bush will be better for the environment than Gore would have been?

Jerry Taylor: I think that trends in environmental quality are largely independent of federal public policy. The environment is getting cleaner primarily because we're getting richer as individuals, and rich people have a greater preference for environmental quality (which is, in a sense, a luxury good) than do poor people. The better the economy does - ironically - the more people will want the government to procure more environmental goods on their behalf and the more people will spend their recreational dollars on services that require environmental quality (white water rafting, hiking, etc.). Moreover, the wealthier an economy and the more technologically efficient that an economy becomes, the more investors are capable of investing in production efficiencies that have - even if unintentionally - very large and very positive effects on the environment.

Washington, D.C.: First I want to thank Cato for the amazing job you do, thanks. The environmental debate seems caught up in how tough certain regulations are, when we should be focusing more on market and performance based standards and methods. Do you see any hope that this administration will make any progess in moving toward a more rational, effective environmental policy?

Jerry Taylor: Thanks. My major complaint with the debate about whether this or that President is "good" or "bad" for the environment is that the debate is exclusively concerned with policy inputs rather than environmental outputs. We fuss about whether the administration spent enough on this program, hired enough bureaucrats for that program, passed new regulations here or adjusted policies there but ingore whether any of those inputs are actually having an impact on the outputs we're concerned about - clean air, clean water, etc.. We should judge an administration by measurable trends in environmental quality on it's watch, not by the kind of inputs pursued on that watch ... remembering, of course, that there's a lot of factors that impact on environmental quality that are outside the federal government's reach.

Washington, D.C.: If you could predict the future, after the extraordinary energy crisis in California, and the events of Sept. 11 highlighting the need for energy security, what will happen with movement toward electric deregulation?

Jerry Taylor: Neither the California crisis nor the events of 9/11 will have much impact on the movement toward electricity deregulation. First, there IS not and never was a movement towards deregulation - there was a movement to replace one regulatory regime with another, and that "new" regime was in some ways less regulatory but in other ways more regulatory than the regime it was replacing. Second (and more to your point I suspect), the political movement toward this new, restructured regulatory regime hit a wall before the California crisis came upon us and was not going any further politically anyway.

Washington, D.C.: What type of energy plan do you think will come out of the Senate? Will it include drilling in ANWR?

Jerry Taylor: I don't think that a significant energy plan will come out of the Senate. I don't think that the Senate will pass a measure allowing drilling in ANWR because the Democrats have enough votes and enough political incentive to sustain a fillibuster on the subject. There will some symbolic gestures here and there to subsidize energy efficiency and renewable energy, put the plan that emerges will have little effect on the energy economy ....which I think is - on balance - a good, not a bad, thing. Energy markets are fundamentally broke and they don't need wholesale fixing by government.

Detroit, Mich.: President Bush said last week that he is supporting hydrogen fuel powered cars. If this is true, then why do we need more oil that won't be able to be used for 10 years?

Jerry Taylor: According to the New York Times, hydrogen-powered cars cost about $100,000 per unit to produce today and are not commercially viable for decades. I suspect that the administration's plan to subsidize research in this areas was a polically-inspired gesture. And I don't think anything will come of it beyond the waste of even more tax dollars in our quixotic search for magical energy supplies (synfuels, nuclear fussion, and base-station solar come to mind as examples of such things).

Washington, D.C.: I have read that the ANWR might only contain 6 months worth of oil supply. My guess is that it would take about 10 years to drill for the oil. If these facts are true, why drill there?

Jerry Taylor: Industry's best estimate is that ANWR could produce about 1 million barrels of oil per day at its peak. That's a 1.25 percent increase in global production that, all things being equal would reduce world oil prices from $20 per barrel to about $18. While that’s not inconsequential, it’s not an OPEC cartel-breaker either.

But assume for the sake of argument that ANWR holds about 5 billion barrels of economically recoverable reserves (a reasonable estimate given what we know). That oil would have a discounted value of about $30 billion. That’s a lot of wealth we could create for an economy nosing into a recession. Is the frozen tundra above it worth that much? The only way to really know the value of something is to see how much people are willing to pay for it. While it’s certainly possible that the environmentalists could raise that kind of money if they had to enter an auction for ANWR, my guess is that they couldn’t and, thus, that the wilderness is less valuable than the oil.

Canada: What do you think are the biggest misconceptions that American's have about the environment and pollution?

Jerry Taylor: An entire catologue could be presented here, but I think the biggest misconceptions are (1) that public lands managed by public lands bureaucrats are going to be better protected from an environmental perspective than private lands managed by private individuals; (2) that all gains in environmental quality stem from government rules and regulations. I believe that improvements in technology, gains in per capita income, and advances in science have more do with the it than does the EPA or her state-level counterparts; and (3) that environmental quality is worsening over time and that some "day-of-reckoning" will soon be upon us. In reality, the data all show an unmistakable trend of environmental improvements over time but people simply refuse to believe it.

Dauphin Island, Ala.: I agree that many areas of environmental protection are beyond the reach of the federal government (and probably better left that way!). But, I have a hard time believing that industrial plants would have invested as much money as they have in cleaning up pollutants were it not for tough environmental standards. What do you think?

Jerry Taylor: Yes and no. If government is going to deem an environmental media a public commons, then if goverment does not regulate the use of that commons, industrial plants are certainly going to overuse it as a dumping ground for its waste products. But, of course, if government gave people property rights over environmental resources and allowed them access to civil courts to protect their property against trespass, no regulation would be necessary; tort cases would force industrial plants to invest in pollution abatement even without any further government help.

But aside from that, I believe you overlook some of the little things. For instance, when I was a boy, it was a sign of real strength to crumple a coke or beer can. That's because there was a lot of metal in those cans. But can companies have every incentive to figure out ways to make cans with less resources; it cuts back overhead. So today, even my mom can do what Marlon Brando did in the movies to such great effect. There is 10 times less metal in those cans today than 50 years ago. This is had a huge secondary effect on resource use, pollution, etc, even though the investment to economize on metals in can production had nothing to do with environmental rules or regulations.

Multiply that story by thousands of similar stories and you begin to see how much goes on to improve environmental quality - and how many investments are made that do so (even indirectly) - that have nothing to do with the federal government.

Jerry Taylor: Thanks for your time, everyone. I must go now. Feel free to contact me further at the Cato Institute. You can go to our webpage to read our environmental and energy work at www.cato.org

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