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Understand the Energy Department Before Closing It

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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When you hear the name “Rick Perry,” you might recall that time during the 2012 Republican presidential primary race where he forgot the name of a government agency he wanted to eliminate. After saying he wanted to ax the Department of Commerce and the Department of Education, he blanked on the third. Later in the debate, he said that his forgotten target for destruction was the Department of Energy. 

A responsible leader doesn’t forget the name of a government agency that he wants to shut down. A responsible leader studies the department in detail, learning all of the things that it does, and thinks about how things would change if the department were abolished. And so for Perry, that “oops” moment was enough to persuade voters that he lacked the firm grasp of the facts needed in a presidential candidate. He soon abandoned the race.

But it seems like in the Republican Party of 2016, leaders are not rewarded for being responsible and informed. Instead, the party’s leaders are rewarded for finding new targets, justified or not, for the outrage of their voter base.

Unfortunately, this impulse for wanton destruction seems to be present at the intellectual level as well. In a recent op-ed in the Washington Examiner, economist Peter Grossman of Butler University called for the Energy Department to be closed. Unlike Perry, Grossman can at least remember his target -- he’s written a book calling U.S. energy policy a failure. But the case he lays out is weak and unpersuasive.

Grossman views the Energy Department as a panicked response to 1970s-era theories of looming fossil-fuel scarcity:

The DOE was conceived in dark and pessimistic beliefs and forecasts that have proven totally wrong…The original legislation justified a Department of Energy because…we were [supposedly] rapidly running out of fossil fuels, especially oil and natural gas.

In reality, the department was created in an effort to increase government efficiency by combining of a bunch of existing agencies. One of these was the Energy Research and Development Administration, the successor to the Atomic Energy Commission, which itself grew out of the Manhattan Project. That agency managed the U.S.’s nuclear weapons programs. This is still one of the Energy Department’s jobs -- it includes the National Nuclear Security Administration, which oversees the safety of the U.S. nuclear stockpile.

Let that sink in a moment. Grossman is proposing to abolish the agency that keeps U.S. nuclear weapons safe. He doesn’t appear to have thought very carefully about who would take over that task, or whether valuable experience and knowledge would be lost in the hand-off. He also doesn’t seem to have thought about what would happen to the department’s extensive system of national labs, which research all sorts of next-generation technologies.

But even if we forgive these oversights, Grossman’s story doesn’t add up. The Energy Department’s roots in nuclear energy also show that it wasn’t simply a response to high oil prices. Government support for nuclear power boomed in the 1950s, when oil was cheap. The goal wasn’t to avert a fossil-fuel crunch, but to give humanity even cheaper sources of power.

That’s still the department’s goal. As Bloomberg New Energy Finance reports, solar energy is now cheaper than coal power in many places, even without government subsidies, and is getting cheaper still. As a partial result of this technological improvement, coal is on the wane, while solar is booming. Scaling plays a huge part in this process.

Solar’s rise hasn't come because of a fundamental technological leap, but because of learning curves. As production rises, prices tend to fall. Here, via BNEF, is a graph of how this has worked for solar panels:

That means the Energy Department’s subsidy programs, which encouraged solar growth back before the economics made sense, probably had a hand in jump-starting the era of abundant energy that we now see stretching before us.

Grossman doesn’t acknowledge this. He writes that “the only energy breakthrough of the last four decades has been fracking.” That’s a bit like saying that the only new piece of consumer electronics in the last four decades was the flat-screen TV.

So no, we shouldn't heed Grossman’s call to abolish the department. More to the point, we should just stop rewarding intellectuals and politicians for casually calling for the abolition of government agencies in the absence of understanding what they actually do.

No doubt, my call is likely to fall on deaf ears, at least while the Trump administration is in power: Perry has just been nominated to head the Energy Department.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net