ENERGY, ARMIES, AND BUDGET CUTS

U.S. lawmakers soon will perform a tricky balancing act on energy and fiscal issues. Within the next few weeks, Congress must approve, reject, or let die proposals for a national energy strategy. After that, but probably before the 1992 general elections, it will have to acknowledge the failure of last year's budget fiasco and deal, once again, with ominous fiscal jeopardy. Like jaws of a vise, the issues are connected.

Oct. 21, 1991

3 min read

U.S. energy policy as recently practiced has been to forgo the country's largest exploratory opportunities, tolerate rapidly rising dependence on foreign oil, and militarily defend sources of foreign oil as necessary. This policy is manifest in decisions to defer leasing or otherwise discourage activity on federal lands, to deny leasing of the Arctic National Wildlife Refuge Coastal Plain, and to commit American lives to the defense of Persian Gulf oil.

A BUDGET THREAT

A serious threat now looms for energy policy as practiced. With the 1990 budget agreement disintegrating, many lawmakers want cuts in military spending beyond those justified by fading threats from the old Communist world. Cuts as deep as some propose might compromise the country's ability to defend foreign petroleum sources.

The wrong combination of actions on fiscal and energy issues-excessive sacrifice of military strength coupled with failure to stimulate domestic exploration and production, for example-would seriously damage U.S. economic interests. But it need not be so.

The U.S. can maintain a proper worldwide military capability. It can reduce the chances that it will have to make use of that capability in defense of economic interests abroad. And it can have the money to do it. All it takes is some overdue adjustment in legislative priorities.

Specifically, Congress must cure itself of environmental manias, forget fantasies about tax "fairness," and concentrate on helping the country realize its potential. Corrective fiscal and resource management initiatives would, by fostering income-generating activity, do more than any conceivable tax hike to increase federal revenues.

Too many barriers still exist between energetic minds and the capital and natural resources necessary to solve problems and create wealth. To revive a sputtering economy, Congress should reduce the capital gains tax rate. To boost domestic drilling, it should exclude from alternative minimum taxation the writeoffs operators need for cost and capital recovery. To moderate dependency on imported oil, it should lease the best exploratory prospects to oil and gas producers.

Promoters of tax "fairness" and do-nothing environmentalism have it wrong. Investments create not just wealth for successful investors but also jobs for the unemployed. Drilling yields not just profits for successful producers but also energy for U.S. consumers. And modern petroleum operations have little effect on the environment, nearly all of it temporary.

A NEW APPROACH

The U.S. needs imported oil and must remain prepared to defend friendly producers. But the foreign policy pressure would not be as great if it produced more oil of its own. The U.S. also needs progress toward a balanced federal budget. Last year's $500 billion, 5 year tax hike isn't doing the job.

It's time for a new approach. Congress should remove government from expensive areas where it has no business. It should acknowledge links between energy, fiscal, and military policies. And it should manage the nation's financial and natural resources in ways that encourage investment. If it does so, budget problems will take care of themselves. Balance is the key. Energy policy is the place to begin.