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Conservation unquestionably is necessary, and Carter is right in contending in effect that consumers and industry will not save energy unless waste is heavily penalized financially. Through the familiar use of taxation to bring about socially desirable change, the Administration is seeking to give industry and consumers a number of choices in which "doing the right thing" will be profitable. But the President has perhaps unwittingly discouraged the chances for the possibility of increasing U.S. oil and gas supplies by rigging his taxes so that the oil industry gets no additional money to find and develop new oil and gas fields. Complains John Winger, the Chase Manhattan Bank's chief oil economist: "There was a reference by the President to the need for higher prices to deal with replacement costs [of oil], and in the next breath he said he would raise the price through the tax mechanism. That doesn't provide the funds to pay the bills for development."
By relying almost exclusively on federal tax incentives and penalties, Carter also raises a danger of making the Government the director and problem solver on energy as well as the goal setter. Despite its best intentions, the Government has blighted every industry it has touched, notably the decrepit U.S. railroads and the nation's dwindling maritime fleet. Carter's aides vehemently deny that a huge bureaucracy would be needed to oversee his program, and Schlesinger is known as a lean administrator. Nonetheless, the program is so complex and involves the Government so heavily at every turn that the proposed new Department of Energy would carry heavy bureaucratic burdens.
As to the inflationary aspects, they are to a degree unavoidable. The U.S., as Carter notes, has been fooling itself by paying artificially low prices for energy—but, unhappily, any rise in energy prices raises the U.S. cost of living. The impact could be offset partly by an increase in supply—but none of the money raised by his energy taxes will be devoted to developing new energy sources. Indeed, the taxes would create a second inflationary impulse, because they would be returned to consumers through the income tax system, thereby giving people more money to spend.
Why was the program shaped this way? Energy Aide Schlesinger and other Carter assistants insist they were simply being pragmatic, looking for the quickest, most effective way to solve energy problems. At a White House background briefing, a top Carter energy aide declared, "One of the areas in which the sacrifice will be required to be the greatest will be our cherished beliefs." Yet an ideological tone of suspicion of the oil companies seemed to wind through many of Carter's remarks. In his April 18 speech, he told the public that "you might be right" in believing that the oil industry has been withholding supplies from the market—even though an Interior Department investigation of the possible extent of such withholding has not even begun.