Selected Skirmishes: Energy Crisis?

Don't have a cow about Energy Secretary Hazel O'Leary.


When U.S. Energy Secretary Hazel O'Leary was discovered running up extraordinary travel costs–apparently failing to take full advantage of the efficiencies instituted by the president's reorganization of the White House travel office–she responded proudly that her far-flung international itinerary had benefited American business to the tune of $19.7 billion. In fact, that was her conservative estimate, as she had already testified before Congress that some $27.7 billion in contracts had been secured by U.S. firms as per her marketing efforts. That seemed like a hot return on a few measly millions of dollars in airfare and hotel charges.

But economic benefits are often difficult to estimate with pinpoint accuracy. Hence, in a revised Energy Department scenario, agency officials whittled the actual benefit number down to $2 billion. It was important, said the department spokeswoman, to separate out the "finalized or bottom-line results" from "total potential value." By whatever measure, Vice President Gore chimed in that Mrs. O'Leary had created "thousands of jobs" with her exhaustive schedule.

But there are some who believe that the better way to create thousands of real jobs would be to abolish the Department of Energy, an agency that evades public responsibility by floating below the voter's radar screen. Its fairy tale existence began in the "energy crisis" of 1973-74, when a temporary Federal Energy Administration was created to deal with the notorious oil shortage. Those gas lines actually began in Spring 1973–prior to the Arab oil embargo–and were the direct product of the wage-and-price-control scheme (a Nixonian fiasco curiously escaping Oliver Stone's cinematic genius). This made the FEA the perfect governmental solution: Hire federal bureaucrats to fill in holes which other federal bureaucrats dig.

When the oil-price controls were ended, circa 1981, the shortages disappeared–a coincidence with implications so deeply conspiratorial that energy policy may yet ignite Mr. Stone's well-developed sense of fancy. Now, a decade and a half later, we have seen the hurly-burly forces of the unregulated marketplace deliver us gasoline for about $1.10 a gallon. In 1970 dollars, and accounting for the buried tax increases, this reduces to about a nickel, give or take. It's far below what consumers paid for gas in 1960, 1970–or at anytime in our history before we had an energy "crisis."

So: For what do we need a Department of Energy? The agency was slated for abolition by President Reagan in 1981 and the Republican Congress in 1995, but today it thrives with an annual budget of $15.4 billion. It's more alive, certainly, than Elvis. The DOE really doesn't do much for the money: The energy price controls are abolished, and we have no U.S. energy policy–as every esteemed, high-level commission has ominously warned us about for two decades now. DOE pushes around some synfuel subsidies here, promotes some U.S. exports there, doles out some research funds–penny-ante stuff.

Of course, an agency that really doesn't do much may be performing optimally. The robust U.S. economic growth of the past decade, in substantial measure a product of declining energy prices, is testimony to the DOE's wisdom in restricting its activities to more or less meaningless public demonstrations and petty political graft. In this world, letting the energy secretary jet to India for $750,000, or put her best friend on the payroll at a little over standard government pay scales, or hire private firms to monitor reporters (producing a list of agency friends and enemies), is just paying the freight for efficient (read: irrelevant) performance. Promise not to mess with the real economy, and your international escapades are on us.

When General Accounting Office auditors were called by congressional Republicans to testify about the travel expenses rolled up by the DOE, Democrats launched a counterattack. Employing the sharp prosecutorial questioning of Rep. John Dingell (D-Mich.), they uncovered that GAO investigators had found no evidence that the DOE had broken any law. Sure, the GAO found hundreds of thousands of dollars in expenses unaccounted for, uncovered phantom billings, and discovered that Madame O'Leary's transoceanic, rock-star-like entourages included scores of unnecessary DOE employees.

But the Democrats were absolutely right: This isn't illegal. It's just government business as usual.

"Reinventing government," that focus-group-tested buzz term of the early Clinton administration, is kind of like the Cubs' pennant chances. Not impossible, but we'll all be pleasantly surprised when it happens. Meanwhile, let's be realistic about the game we're watching. The "reinvented" Department of Energy has nothing to do with U.S. energy policy.

In the end, there is just one DOE number that can be easily verified by taxpayers. We currently have one Department of Energy. What would America lose if we were to have zero?

Contributing Editor Thomas W. Hazlett (hazlett@primal.ucdavis.edu), an economist at the University of California at Davis, is a visiting scholar at the American Enterprise Institute.