Failing Coal Isn't a Security Threat—Bailouts Are

Devin Hartman, Nicolas Loris

economy, Americas

A self-imposed wound on America's free markets causes more damage than coal or nuclear plants going under.

By most key economic indicators, the U.S. economy is remarkably healthy. Consumer confidence is high, unemployment is low, and it seems as if every week the stock market is setting a new record. Despite these successes, however, there is a growing disease that, if left unchecked, will slowly eat away at the economy’s robust health like a cancer. This disease is central planning and it is aggressively attacking the energy sector.

Both Republicans and Democrats have imposed energy subsidies, mandates and regulations that often appear tempting to “solve” a wide range of politically concocted problems. Whether it is energy security, scarcity, or an environmental concern, politicians continually find excuses to intervene in the market.

It’s not surprising that central planning in the energy industry has a lousy track record for the same reasons socialism failed—government lacks the information and motivation to substitute effectively for competitive private forces. Just think about the disastrous direct and unforeseen economic and environmental costs of one of the worst failures of planning in U.S. energy policy history: Soviet-style production quotas for ethanol.

Energy central planning grants government control over the means of production consistent with its arbitrary view of how the future ought to be planned. As recently noted by George Will, such industrial policy has become a form of compassionate socialism, where government tells consumers what to buy in a supposed effort to help them. And, despite wildly differing views on what “compassionate” means and much to the chagrin of innovators, consumers, and taxpayers, central planning bias has unfortunately gained steam in the last two administrations.

The Obama administration embarked on a green industrial pathway via subsidies and the expansion of energy planning under the Clean Power Plan. Now, to mitigate a nonexistent grid emergency, the industrial policy pendulum risks swinging more severely in the opposite direction, in the form of the Trump administration’s massive bailout proposal for certain unprofitable coal and nuclear plants. As Will notes, the president’s order that the energy secretary must protect “yesterday’s coal industry against the market menace” of cheap natural gas embodies compassionate socialism in practice.