Purposely raising energy prices hurts low-income families the most

Real life is about trade-offs, but you wouldn’t guess it from listening to many politicians. They speak of their policies as all-upside, no-downside. Best to keep the “narrative” simple than to muck it up with complications and negative consequences.

We see that tendency in Gov. Jay Inslee, who touts his environmental regulations as not just planet-friendly but ones that will position Washington to lead in the “green economy.” The old political aphorism that goes “Don’t believe your own press releases” must not be a favorite of his; you wouldn’t guess that his ideas for “the most precious environment in the history of the solar system” have any downsides.

Many of the environmental proposals from Inslee and others like him come down to this: energy must be made more expensive so people use less of it. When it comes right down to it, that’s the end result of so many of the energy proposals you see today, including Inslee’s carbon cap proposal. Cheap energy is the enemy.

It’s rarely put quite that clearly because that desire flies in the face of what most voters want. Not surprisingly, they don’t want higher energy costs or to spend more of their income on energy.

Rising energy prices hit lower-income households the most
In fact, many families already spend plenty on the gasoline, electricity, and natural gas they need. Energy costs have risen 7% since 2005 in constant dollars (33% overall), due in part to all these regulations and programs whose aim is, at base, to make energy more costly.

That has a real effect on American families, especially those with lower incomes. We know, from statistics based on federal data, including from the Obama White House’s Energy Information Administration, that 40% of households spend an average of 17% of their income on energy. For the bottom 25 million households, it averages out to 22%.

Who do you think feels the pinch from all these schemes to raise energy prices? Those same families. It’s a real-world consequence that doesn’t make it into politicians’ sunny pronouncements.

Further, these statistics on percentage of income spent on energy only take into account direct energy spending. Rising energy costs also mean rising prices on many goods, especially food prices. Families get squeezed from all sides when the political class aims to increase energy costs.

That’s true even despite attempts to set up complicated “rebate” systems to help those at the lower end of the income scale deal with higher costs, as well as lessening job losses. These attempts to lessen the impacts on some people and some industries, and the rebates, carve-outs, and exemptions to accomplish that, can’t apply to everyone, of course. After all, raising energy costs is the very point of these schemes in the first place.

The debate over these programs is partly about what kind of economy we want. Do we want an economic system that is transparent and fair, or one where politicians decide who is exempt, who gets rebates, and what industries are too important and must be “carved out”? Inevitably, these complicated schemes develop into a corrupt system where campaign contributions and political connections are noted every step of the way.

Most families don’t look at it from that perspective. They just know that some are determined to raise energy costs on them, and they don’t view that as a positive development.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.