Earlier this week, President Obama released his fiscal 2011 budget proposal. It is a blueprint for Congress, with many assumptions built into it, including a cap-and-trade system. During today's OnPoint, Daniel Weiss, a senior fellow and the director of climate strategy at the Center for American Progress, discusses the president's energy and climate recommendations. He explains why he believes nuclear power plant funding should not be included in the final budget and discusses how the proposed budget will affect the oil and gas industries.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Daniel Weiss, senior fellow and the director of Climate Strategy at the Center for American Progress. Dan, thanks for coming on the show.
Daniel Weiss: Thanks for having me, Monica.
Monica Trauzzi: Dan, the Obama administration released its fiscal year 2011 budget earlier this week. It's a blueprint with many assumptions built into it, including a cap and trade, and the budget plan calls for lawmakers to pass a cap and trade, but it leaves many blanks open. So, what's the benefit of not being specific on the numbers when it comes to cap and trade?
Daniel Weiss: Well, it's important to note that their budget anticipates that there will be a global warming/pollution reduction program adopted by Congress. They left out the specific numbers because the exact nature of that program was still in flux. The House passed one proposal; the Senate is now working on something that could look very different. So, ultimately, they left it as a placeholder. They also said that they anticipate that this program would be revenue neutral, because any revenue generated from it would be used to help reduce the impact of higher prices on consumers, help low-income families, invest in clean energy, and invest in adaptation, both here and abroad. Interestingly enough, the two bills that are pending right now, the House passed bill and the Kerry/Boxer bill in the Senate, would both actually reduce the deficit over time, according to the Congressional Budget Office.
Monica Trauzzi: It's a big assumption though and many people feel that legislation is unlikely this year in the Senate. So, does that impact the balance of the budget at all?
Daniel Weiss: It does not. Some people believe that there won't be a bill this year. I happen to believe that there's still a great opportunity to do so. Senator Kerry and Senator Graham and Senator Lieberman have put together a tri-partisan coalition that's working together to have a bill up on the Senate floor this spring. If by some chance that effort does not succeed, then it will have no impact on the budget because there will be no global warming program adopted. There'll be no revenues generated or expenditures coming from that.
Monica Trauzzi: You've taken issue with the proposal for nuclear power plant funding. Why shouldn't that be a part of the budget?
Daniel Weiss: Well, you have to remember, we already have a program of 18 1/2 billion dollars in loan guarantees to the nuclear energy industry. Right now, the top four pending applications each have problems with the project. For example, there's a project in Texas where the city of San Antonio was one of the partners now wants to pull out casting doubt over whether or not the project is going to go forward. There's no need to add another $36 billion in loan guarantees while we haven't used this first money. Second, there's a great possibility that the loan guarantees will be defaulted on. The Congressional Budget Office predicted a few years ago that we will see a default rate of about 50 percent in all these loan guarantees, which means there's a one-in-two chance that a taxpayer will have to pick up the tab and that these loan guarantees will never be paid back. Lastly, although nuclear power has to be part of any global warming solution, it doesn't make sense to invest a lot and give a lot more to the nuclear energy industry until the supporters of nuclear energy come to the table to support a comprehensive, bipartisan global warming bill. So far, a lot of those people, like Senator Alexander and Senator Murkowski, have yet to do so. It doesn't make political sense to give them something they want, more money for nuclear power, without securing their support for a more comprehensive package.
Monica Trauzzi: EPA's budget was cut by about $300 million. Is that a disappointment or is money sort of being kept in the right places there?
Daniel Weiss: Well, it's important to remember that EPA got a big boost in the 2010 budget and also got a lot of money to the American Recovery and Reinvestment Act or, as many people collect the stimulus package. So, I think that, overall, they are much better off than they were over the previous eight years under President Bush.
Monica Trauzzi: So, should money though be included for EPA greenhouse gas reductions with the fate of legislation and the endangerment finding unknown at this point?
Daniel Weiss: EPA needs to have the money required to enforce the law of the land, which was handed down by the Supreme Court. They are in the process of doing so. It's critical that they have the resources to carry out those responsibilities that the court deemed that they have, so that's a very important piece and hopefully they'll have all the resources they need to do that. Now, as you know, President Obama, administrator Jackson, and many in Congress have said it's their preference that Congress acts, but until that happens, they are following the law of the land as deemed by the Supreme Court.
Monica Trauzzi: What will the key sticking points for Republicans be?
Daniel Weiss: In the overall budget?
Monica Trauzzi: In the overall budget.
Daniel Weiss: My guess is the biggest sticking point is that President Obama's budget would reduce subsidies to big oil by $36 billion over 10 years. But you have to remember, that $36 billion over 10 years is less than half of the net profits of the big five oil companies in 2009 alone. BP, Chevron, ConocoPhillips, Exxon Mobil and Shell have made over $75 billion in 2009 alone. This $36 billion in cuts is half of that and it's going to be spread out over 10 years. In 2005 President Bush said that when oil is above $55 a barrel oil companies should not need tax incentives to go drill. We agree with President Bush on this one and so eliminating these tax breaks for big oil will help reduce the deficit and make sure that we're investing our money in clean energy and not the dirty fossil fuels of the past.
Monica Trauzzi: Republicans have said that this budget means higher taxes, higher energy prices, and fewer jobs and many programs are seeing cuts. How does that trickle down to the taxpayer?
Daniel Weiss: Are you talking about the overall budget?
Monica Trauzzi: Yes.
Daniel Weiss: Well, there's no tax increases on the environmental side here. If there is a global warming program, it's going to be revenue neutral, that the revenue raised will be turned back to ratepayers and low-income families or invested in clean energy. We've already seen, through the American Recovery and Reinvestment Act, that investing in clean energy creates jobs. Just two of the programs under ERA clean energy programs will create nearly 900,000 new jobs, as well as weatherize a million homes, double our renewable electricity by 2012, and dramatically increase our capacity for manufacturing the clean energy technologies of the future. So, we know that there are net economic benefits from these investments. I think the Republicans are issuing talking points, rather than any sort of profound analysis of what the president's energy budget would do.
Monica Trauzzi: So, will the shift in the Senate's makeup mean a tougher battle to get this budget passed? I mean what are your predictions for what we might see in the coming months?
Daniel Weiss: Well, as the old saying goes, the president proposes and Congress disposes. There is obviously going to be a lot of to-ing and fro-ing on this budget. Senator Brown of Massachusetts is a Republican, but he also comes from a strong pro clean energy state and a state that's going to be on the front lines of the impact of global warming damage, given that it's a coastal state. Sea level rise would devastate Massachusetts. That suggests to me that Senator Brown may be more open to investing in clean energy once he's here, rather than how he's seen during his campaign.
Monica Trauzzi: OK, we'll end it there. Very interesting stuff thanks for coming on the show.
Daniel Weiss: Thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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