Energy Surcharge and the Scam of Magic Government Economics


The green program that Patrick Anderson describes in a Providence Journal article today may be a near-perfect encapsulation of the scam that is progressive government, with its magical economic thinking (i.e., that everybody makes out when government controls money):

State lawmakers are debating a plan to help home heating oil and propane customers pay for energy efficiency improvements — such as new furnaces — with a surcharge on those fuels. …

The cost: a half-penny-per-gallon surcharge on oil or propane in the first two years of the program that would rise to 1 cent per gallon in the fourth year of the five-year plan. …

There are an estimated 186,400 properties heated with oil or propane in Rhode Island, 149,800 of them residential, Kearns said.

The program would be capped at $2 million per year, be overseen by a new advisory board and administered by a third-party consultant. Administrative costs would be capped at 10 percent.

For the low, low cost of a few bucks a year to 186,400 fuel users, some contractor can get $200,000 to manage the program.  Installers and manufacturers get to pocket the other $1.8 million, and a few hundred Rhode Islanders (heavily weighted toward insiders and others “in the know”) would get new furnaces (or something equivalent).  It all sounds great, doesn’t it?

Except… you’re still talking $2 million from people who won’t have it to spend on something else.  If a single household were able to invest its $4 per year at a 4% rate of return, the family would have another $224 after 30 years.  Now add that loss to every other similar scam that government runs at our expense.

On the other end of the deal, the consumer either gets a furnace or something else that he didn’t really need or simply unloads a cost he would have had to bear on to somebody else.  As for the installers and manufacturers, they absorb resources that would have gone to some other purpose, setting off a chain of cost shifting that drains resources from some innovation at the margins of what people would voluntarily finance.

When government takes money from people to give it to somebody else, the things that might otherwise have happened are impossible to see, so the deal looks like it’s all upside.  We can imagine that every family would have just wasted that $4 per year.  But giving a few self-interested bureaucrats authority over other people’s money is never the most efficient plan for the economy.

  • Max

    Rumor has it that Rep. Anastasia Williams has already pitched a tent outside the Department of Energy Office at 1 Capitol Hill with application in hand.