All About the Fundamentals: Three Misconceptions of the Heritage Foundation’s Deficit/Energy Proposa

The Heritage Foundation recently released a report proposing a near dismantling of the Department of Energy's research budgets in the name of budget deficit reduction.

In a new report, the Breakthrough Institute, ITIF, and Americans for Energy Leadership pick apart the Heritage proposal and demonstrate that it displays a fundamental lack of understanding of technological innovation and therefore serves as a poor guide to America's energy, economic, and fiscal policy.

In particular, there are three major misconceptions in the Heritage proposal:

1. The proposal fails to meaningfully reduce the deficit now or in the future.

Even though the proposal advocates cutting DOE research budgets in the name of deficit reduction, the Department of Energy represents a tiny portion of the federal budget and contributes little to the deficit and national debt. Moreover, the proposal fails to distinguish between government spending and productive public investment in science and technology, which drives innovation and economic growth.

2. Heritage fails to understand where technological innovations come from.

Heritage wrongly assumes that "when it comes to energy policy, the free market works" and is best suited to develop new technologies. In fact, the energy sector is anything but free, and has always been characterized by extensive regulations and subsidies, natural monopolies, and other divergences from the free-market ideal held by Heritage. Moreover, Heritage ignores the long history of public support for innovation and assumes the private sector will invest sufficiently in energy innovation. For decades, the energy sector has consistently underinvested in R&D, and market failures plague the energy innovation process at each stage of development, from lab to market launch. There is a broad expert consensus that public investment and public-private partnerships are essential to moving new, innovative technologies into the marketplace.

3. The proposal ignores the immediacy and enormity of U.S. energy challenges.

While Heritage pays lip service to energy security, its recommendations would undermine many of the best efforts underway to achieve it. The Department of Defense has recognized the critical role that innovative clean energy technologies will play in enhancing their strategic and tactical abilities, as well as the nation's energy security. DOD also views the DOE as a strategic partner in its effort to reduce its own vulnerability from relying on fossil fuels. If Heritage had it their way, DOD would lose a key partner in the long-term effort for greater force effectiveness and security through better energy management.

The full report can be downloaded here

A point by point rebuttal to the Heritage proposal, released last week by BTI, ITIF, and AEL, can be viewed and downloaded here.


See also:

Know Your Heritage: The Heritage Foundation's Incoherent Attack On Public Investment in Energy Innovation