I’ll start by answering the last question first: unfortunately the political landscape and policy debate hasn’t changed much at all, which will hurt our ability to address America’s energy and environmental issues.

That’s one of the key messages from a forthcoming report by the Information Technology and Innovation Foundation and the Breakthrough Institute titled, “Taking on the Three Deficits: An Investment Guide to American Renewal.” The report argues that what’s needed is a fundamentally different framework that counters the predominant approach that all government expenditures are “on the table” to close the budget deficit, estimated to grow to $18 trillion by 2021. While such a strategy makes policymakers appear bold in their approach, in practice it would actually be counterproductive. Across-the-board budget cuts would ultimately reduce economic growth and lead to a higher budget deficit over time.

The reason is simple: America isn’t tasked with eliminating just one deficit; it actually faces three interrelated deficits. In addition to the worsening budget deficit, America faces a persistent and growing trade deficit, representing a hidden tax on future generations who will have to pay it off with reduced consumption of goods and services. America also faces a deepening shortfall in public investments in the building blocks of innovation such as R&D, education, and infrastructure. All told, America isn’t challenged with just an $18 trillion cumulative budget deficit by 2021 – it’s challenged with an estimated $41 trillion three deficits by 2021.

And there are no silver bullets to solving the three deficits as each deficit impacts the others. For example, cutting investments in R&D stifles the development of breakthrough science and new technologies such as clean energy, nanotechnology, and biotechnology that are the backbones of future waves of economic growth. As such, U.S. exportable industries become less productive, harming American international competitiveness, exacerbating the trade deficit and reducing federal tax revenue. As conservative columnist George Will warns, cutting productive public investments is akin to “making an overweight aircraft flight-worthy by removing an engine.”

In other words, it’s an approach the United States cannot afford to take.

What’s needed is a more nuanced budget policy debate that breaks from traditional budget frameworks. Most often, the debate comes down to discussions of discretionary vs. non-discretionary budgets or defense vs. non-defense expenditures. But from a three deficits point-of-view, these matter little. In fact, addressing the three deficits first requires distinguishing which government expenditures are productive investments and which are consumptive spending. In doing so, policymakers should consider three simple criteria:

1. Innovation. Does the program or policy help spur innovation to create new products, processes, technologies, or knowledge that in turn adds value or creates new industries?

2. Productivity. Does the program or policy increase the productivity of organizations and the economy as a whole?

3. Competitiveness. Does the program or policy help close the trade deficit by making U.S. firms more globally competitive, thereby increasing exports, or reducing imports?

By using these three metrics as an investment guide, policymakers can begin making better budget decisions and effectively increase high-impact productive investments and tax reforms while targeting consumptive spending for cuts. And as in other areas, not all energy-related expenditures are created equal.

Take a look at how the current budget debate is impacting energy policy. Under the current approach, key investments in energy innovation, productivity, and competitiveness like ARPA-E, the regional innovation clusters program, R&D in emerging technologies like small modular reactors and key clean technology R&D programs within EERE are either targeted for cuts or are significantly underfunded. For instance, under the House 2012 DOE budget proposal, total energy innovation budgets would be cut by 12 percent compared to 2011 funding levels, while unproductive consumptive energy spending like oil and gas subsidies and ethanol tax credits would continue untouched.

These policy choices negatively impact the three deficits. If we cut our investments in clean energy technologies (which directly increases the investment deficit), the U.S. increasingly loses out on the ability to invent competitive clean technologies domestically and sell them abroad. In addition, failing to support the nascent clean energy industry domestically, we lose out on growth potential and federal tax revenue, thus reversing or wiping out any small budget deficit reductions made from cutting energy innovation. It’s absolutely the wrong approach and reflects the entrenched interests in the energy sector rather than what’s best for the competitiveness and growth of the U.S. economy as a whole.

The super committee – and Congress in general – has two choices. One, cut the budget deficit on the backs of the trade and investment deficits through indiscriminate policy and potentially put the U.S. economy on the route to fiscal and economic ruin. Or two, make targeted, growth-enhancing investments to spur innovation, productivity, and competitiveness while making cuts and reforms to consumptive spending elsewhere.

For the last year, some in Congress have been prodded by a cadre of lobbyists for big corporate polluters to do everything they can to delay, weaken, or eliminate clean air protections. The Clean Air Act has improved and safeguarded public health for the last 40 years. As the super committee attempts to make substantial recommendations on how to cut $1.2 trillion over the next 10 years, they are likely facing the same barrage of influencers attempting to not only make major cuts to substantive health programs, but graft on a dirty air agenda as well.

A rigorous, peer-reviewed analysis, The Benefits and Costs of the Clean Air Act from 1990 to 2020, conducted by the EPA, found that the air quality improvements under the Clean Air Act will save $2 trillion by 2020 and prevent at least 230,000 deaths annually. Additionally, the public supports EPA’s efforts to implement and update the Clean Air Act. A recent bipartisan survey indicates that those pushing riders or otherwise interfering with EPA are out of touch with voters. The survey shows that over 70 percent of voters do not want Congress to stop the EPA from setting stricter pollution limits and 66 percent of voters would prefer that EPA set pollution standards, not Congress. Moreover, 54 percent of voters believe updates are actually more likely to create new jobs than cost existing ones.

As the committee finalizes its recommendations, it must not forget to consider the hundreds of thousands of people who deal with the health effects associated with air pollution each day. Even seemingly minor delays have huge impacts. Take the current debate in Congress over the Mercury and Air Toxic Rule. Some are insisting on using any tactic available to delay the finalization of the rule, yet for every month that it gets delayed, 1,400 people die prematurely.

It is evident who the winners and losers are if some in Congress succeed at exaggerating claims and convincing colleagues that maintaining vital public health protections will come at the cost of jobs and the economy: big polluters will end up with even higher balance sheets, and an increased number of families will be forced to deal with emergency room visits, asthma attacks and death of loved ones.

The list of what is at stake in the supercommittee budget debate is long and contentious. Everything from sacred cows like Social Security to the perennial punching bag of conservation programs could face the same cleaver.

What is at stake in the budget debate is a chance to fundamentally move America away from the destructive habits of the past and into a new century of prosperity. One thing that should not be on the chopping block is the 1.25% of the federal budget devoted to environmental and natural resource protection. That’s because that small investment in federal natural resource and environmental protection programs returns more than $1 trillion dollars to the U.S. economy every year, according to a recent report by Southwick and Associates, and also supports 9.4 million jobs. From hikers and bikers to hunters and anglers, the outdoor recreation economy depends on America’s vast network of wild lands to be the strong economic driver that it is. Nearly 1,000 groups of hunters, anglers and outdoorsmen have joined together to urge the supercommittee to protect the programs that keep this engine running.

Although cutting the federal government’s meager support for environmental protection and natural resource management would be “penny wise and pound foolish”, one place Congress should definitely target is the billions of dollars in unmerited and obsolete tax subsidies for the oil and gas industry. While American families are struggling to make ends meet – and struggling to fill the gas tank – their tax dollars are still subsidizing the oil and gas industry to the tune of more than $4 billion a year – putting more than $6,000 into oil industry coffers every single minute. Meanwhile, the oil industry is hardly feeling the same squeeze – raking in another quarter of multi-billion dollar profits. Still, the industry wants more – threatening lands and communities while still skimming taxpayer dollars.

Americans have a long list of unique and historic achievements in conservation and preservation of our natural landscapes. Testaments to our outdoor heritage range from Yellowstone National Park established in 1872 to our newest National Monument – Fort Monroe, established November 2011 – and should be preserved for generations to come. The trillion-dollar benefit that outdoor recreation has to communities across America depends on strong support from Congress. But when it comes to outdated handouts to the fossil fuel industry, it is time to leave them on the cutting room floor.

In order to get America back on the right track, the super committee needs to take a comprehensive approach at not only government spending and tax reform, but also at federal policies that directly and indirectly impact the American economy. These government policies and regulations have the ability to stunt job growth, force families to stretch their already tight budgets even further, and add to the country’s seemingly ever-escalating deficit. This is especially true when it comes to energy. It is imperative that Congress put a stop to regulations that restrain our nation's economic potential, particularly those imposed by the EPA.

There is no clearer illustration of the negative economic potential of the EPA’s regulations than the Utility MACT rule, set to be implemented in December. On the most basic level, we know that Utility MACT will be the most expensive regulation in history to implement. This fact alone should suggest to sensible policy makers that the rule's scope and implementation period should be altered to reduce financial impact. But the sheer cost of the program to the direct targets of the rule - electric utilities - isn’t the only problem. Instituting Utility MACT would increase electricity costs while decreasing reliability for consumers, create a loss of jobs and a decline in job creation in the energy sector, and ultimately lead to further economic turmoil.

The EPA has openly admitted that it does not take job creation into account when drafting new regulations. This blatant disregard for the state of the economy and the welfare of the American people is yet another example of how unplugged the EPA has become from the economic reality of American families.

In a hearing earlier this week, the House Oversight and Government Reform Committee examined the economic impact that the Utility MACT rule would have on consumers, businesses, taxpayers and the larger economy. Others are asking similar questions in formal and informal venues across the United States. So much debate and hesitation surrounding the regulation indicates that our policy makers recognize there is something fundamentally defective with the Utility MACT rule. There is no reason not to delay this job-killing rule until we have more information about what its harmful effects might be.

Congress has stated time and again that promoting job creation is one of its top priorities. We can only hope the super committee realizes that actions are louder than words.

(These comments were submitted by Brian M. Johnson, Senior Tax Advisor at the American Petroleum Institute.)

We’ve all heard the stories; friends, neighbors, relatives, American’s out of work. With each passing day, the government continues to struggle with ways to bring down the national debt and concerns continue to grow about our energy security as every economic recovery takes fuel to run the engine back to growth and sustainability. What if there was a straight-forward way to tackle these concerns? Well, there is, and America’s oil and natural gas industry can help answer our nation’s challenges.

The Super Committee has a great opportunity to utilize America’s oil and natural gas industry to help contribute to our economic recovery. Unfortunately, while this industry is in a position to help, many have proposed a false solution – raising taxes. Increasing taxes on America’s oil and natural gas industry, one that supports over 9 million job and contributes more money to the Treasury than any other industry ($87 million a day) could cost 48,000 jobs, and decrease government revenue by almost $30 million by 2020.

Punitive taxes aimed at our industry could cost jobs, drive up imports and eventually reduce revenue to the government.

On the other hand, American energy can be part of the solution. By allowing this industry do its job effectively and responsibly it can create not only over 1 million new jobs right here in the US, but increase government revenue by $127 billion in just 9 years.

Despite what some may say, this industry does not receive “tax breaks.” To be clear, the oil and natural gas industry receives the exact same or similar deductions that apply to all industries. With policies that allow our industry to utilize our own resources at home, we can actually contribute more money to the federal government while also creating more American jobs.

Congress should not be looking to penalize America’s private sector, but be focused on helping it put people back to work.

All natural resource programs of the U.S. government amount to a little more than 1% of the Federal budget. This proportion has declined sharply over the last 30 years because funding for natural resources and the environment has been level during that time while other government spending has increased dramatically. So conservation programs did not cause the deficit and cutting conservation programs can’t fix the deficit. Yet this past year of budget cutting has revealed that America’s natural resource funding is, for some in Congress, a target for deep cuts. Will these programs be cut even more in the Budget Control Act process?
While conservation should shoulder its fair share of budget reductions, the kind of drastic cuts to natural resource programs we saw in the debate over the FY 11 budget (like the attempt to zero out the North American Wetlands Conservation Act)are not proportional and represent a frightening departure from America’s longstanding, wise and highly successful conservation tradition.
So we could wring our hands about the bad things the Super Committee might do, but it is more useful to consider the remarkable opportunity before that committee to put forward a long term vision for funding natural resource and environmental programs—an approach that could allow us to actually do a better job as stewards for our nation’s land and water. Here’s how this could happen:
The Super Committee is supposed to think ahead 10 years. Having worked at on-the-ground land and water conservation and restoration projects around the U.S. for more than 30 years, my experience suggests that there is nothing so helpful as reliable funding over time to allow conservation to move forward with sound planning, thorough involvement of citizens, fair dealing with landowners, and figuring out how to make every conservation dollar count. The Committee could set out a long term environmental investment strategy and projected funding levels for programs like the Conservation Title of the Farm Bill, the Land and Water Conservation Fund, and the large scale restoration programs of the EPA, the Army Corps of Engineers, and NOAA (for places such as the Great Lakes, Puget Sound, the Gulf of Mexico, and the Everglades) and then let Federal agencies, state and local governments, non-profits and private landowners figure out how to spend that money as creatively and cost-effectively as possible. Compared to the on again/off again budgeting process we often use today, this long range funding approach can make Federal natural resource agencies more efficient. And long-term partnerships with other levels of government and the private sector can leverage federal investments by adding money from other sources to conservation and environmental initiatives.
The Super Committee could also figure out a way for America to pay for a big piece of such programs by dedicating revenues from the use of public natural resources to protecting, managing and restoring public natural resources. In fact that was the idea of the Land and Water Conservation Fund when it was created more than 40 years ago--some of the royalties from oil and gas drilling in Federal waters should go to purchase critical conservation lands and build recreational facilities at parks and preserves. While that promise was broken, the approach still makes sense (and a recent public opinion poll revealed that more than 75% of voters agree). There are other revenues derived from the properly valued use of public resources that could be added to offshore oil receipts. These are not taxes. They are the American people getting fair value for what they own. This income could be deposited into a national trust fund for the care of America’s land and water that could supplement regular appropriations.
The use of reliable sources of Federal money can be made still more effective by managing our natural resources on a large scale—in an integrated, whole of government, and whole watershed/whole natural system basis with particular attention to investment in the kind of green infrastructure (such as forested watersheds, floodplains and coastal wetlands) that provides lower-cost benefits to this country’s communities. This scale of conservation can ensure that the results are durable, that government agencies work together across traditional boundaries, and that the needs of communities are balanced with the needs of the environment.
So we shouldn’t fear the Super Committee’s impact on our environment, but urge it to take the long term and comprehensive view of the funding that environmental stewardship requires. Yes, there may be a bit less money overall, but if the amounts are reliable and predictable over time, if the use of natural resources helps to pay for the protection of natural resources, if Federal money is spent cooperatively with other public and private funds, and if spending is focused on solving the most critical problems of larger natural systems, then the Super Committee could really be super when it comes to protecting our environment. Our environment is not a luxury. It is a foundation for our economy, the source of our food and water, an essential ingredient of the quality and character of life in America. We should expect that the Super Committee and the Congress understand this and will act accordingly.

U.S. government spending has grown by nearly 40% in the last three years, with the federal debt increasing from $10.7 trillion in 2008 to $14.9 trillion this month. Given this unsettling trend, it’s clear that our nation’s fiscal health is at stake in the deficit debates now dominating Washington. And energy could play a vital role ameliorating this problem.

An ideal solution would entail some combination of tax reform and spending cuts. Former Sen. Alan Simpson and former White House chief of staff Erskine Bowles also laid out a plan as chairs of President Obama’s Deficit Commission laid out a plan along these lines. Tomorrow, the super committee will hear from both Bowles and Simpson during a hearing on previous debt proposals. Its members would do well to listen closely.

Spending Cuts

The last truly comprehensive reform of government took place 80 years ago. And the time for a new “Hoover Commission” to rebalance the roles of federal and state governments is long overdue. Our leaders should start by taking the budgets of federal agencies back to the 2008 level. Additional consolidation, streamlining, and redefinition of roles should lead to a smaller, smarter, and more efficient federal government and should help move government spending back from the current 24% of GDP level to the historical 18-20%.

Economic growth and job creation would also be stimulated by reducing the regulatory burden on business, which does not mean reducing public health and safety or environmental protections. Since 1908, the Code of Federal Regulations has grown 55 percent—now topping over 150,000 pages. And according to Heritage Foundation research fellows James Gattuso, Diane Katz, and Stephen Keen, “The regulatory burden increased at an unprecedented rate during FY 2010, as measured by both the number of new major rules as well as their reported costs. Even more are on the way in 2011.”

Congress should implement a five year moratorium on new regulations except where a compelling need can be justified and independently verified would do wonders for the economy. The intervening five years should be used to develop a more streamlined and efficient approach to regulation, including a process for terminating existing regulations which either serve no useful purpose or impose costs that exceed their benefits.

Tax Reform

The other part of the deficit equation is tax revenue, which has shrunk due to economy stagnation and the un- and underemployment of 15 million Americans. Uncertainty over taxes and regulation has also had a chilling effect on job creation and investment and, therefore, tax revenues. In order to change that, lawmakers must create an environment where the private sector will have the confidence to invest some of the $2 trillion dollars that it is holding on the sidelines.

Here is the point where energy can come into play. Instead of pushing for punitive taxes on the oil and gas industry—which is creating hundreds of thousands of new jobs and investing billions in domestic operations—Congress should lower the corporate tax rate and eliminate special interests loopholes. An original analysis of data from 12 major companies’ SEC annual filings found effective tax rates ranging from 50% to negative 11%. This disparity exposes the kinds of crony capitalism promoted by our current tax provisions.

Lowering the tax rate, simplify the whole system, and protecting our multinational firms from double taxation on foreign income would encourage capital investment and stimulate economic recovery. These wholesale changes would also protect against the discriminatory treatment of one individual or industry over another (ie. the White House’s proposed repeal of ‘dual capacity’—a protection against double taxation of income already earned and taxed abroad—and Section 199—a manufacturer’s tax deduction made available to many industries—for just the oil and gas industry).

Before the Super Committee adopts the President’s plan to penalize our traditional energy sector, it should look at what the industry has been doing recently in terms of job and economic wealth creation. It needs to look no further than states like Pennsylvania, Ohio, Texas, etc. which have been adding jobs as a result of encouraging oil and gas exploration and production. The economic benefits to North Dakota have been so good that its legislature has reduced individual income tax rates.

There are no mysteries to restoring a robust economy, there is only the lack of political will to do the right thing and let the chips fall where they may.

Today, most advanced economies and many emerging ones, including China, Brazil and India are pulling out the stops to claim a large share of the $2.3 trillion global clean energy market. American companies can compete in virtually any sector of the economy if we put our minds, policies and resources toward that goal. For the sake of our economic future, we should be aggressively pursuing the development and deployment of clean energy technology, even in this era of austerity.

Rather than focus on the economic opportunity, however, a substantial number of Members of Congress are instead doing their best to kill the emerging clean energy sector in the United States. We at Third Way are avowed deficit hawks. The federal government must cut spending to get its budget in order and for the economy to grow. But we must reduce the deficit in a way that helps encourage private sector growth, not retard it.

Every industry is going to have to reduce its reliance on the federal government. This should be done, however, in an orderly fashion that prioritizes what’s best for America’s long-term economic outlook. That is why Third Way proposed in its plan to trim the deficit by $1.2 trillion that the super committee should focus first on reducing government incentives to established, profitable industries and sectors that have other clear national policies that provide market certainty and help drive demand. As one example, the ethanol industry already benefits from a renewable fuels standard that ensures a national market for its product—something the renewable energy industry does not have. These and other cuts in spending on established energy industries would produce approximately $48 billion in savings over ten years.

What we can’t afford are doctrinaire political attacks on every safeguard that protects America’s water, air, and wildlife. Putting aside the moral or public health rationales for regulation, gutting environmental protections makes no sense economically. Yes, there is a need to reform those mandates that do not work or are more costly than intended when they were created. Complying with regulations by minimizing or properly containing pollutants at the source, however, is almost always less expensive than anticipated. Conversely, cleaning up pollution after the fact is usually far more expensive for industry and the American taxpayer. Would EPA need such a large budget for Superfund site cleanup each year if better regulations were in place to help ensure that waste was disposed of properly in the first place? Talk about savings!

Let’s just hope that members of the super committee are keeping one eye on how smart budget cuts can help grow the economy. The deficit needs to be reined in and reined in now. But misguided attempts to act out anti-regulatory talking points or cut the legs out from under promising new sectors will have unintended economic consequences we could be regretting far beyond the time the super committee is relegated to dusty history books.

The United States is $14 trillion in debt, which places an inescapable burden on future generations. We need to cut some federal spending but would compound the burden if we fail now to lay the groundwork for future jobs, industries and economic growth through appropriate forward-looking policies. Future economic growth will require secure, stable, affordable sources of domestic energy and energy efficiency. It will also require markets for American-made products.

Leaders of the House and Senate Agriculture Committees are preparing this week to submit plans to the Deficit Reduction Committee for $23 billion in cuts to farm programs. Washington policymakers should bear in mind that America’s agricultural producers want, above all else, access to markets that provide fair prices for their products. The Energy Title programs of the farm bill account for less than 1 percent of total outlays among all Farm Bill programs but have an outsized impact in developing new markets and creating opportunities for economic growth and jobs.

In less than a decade, the United States has become a world leader in production of biofuels. This has already helped reduce our reliance on imported oil and contributed to economic growth. With continued growth of renewable energy, America’s farmers can make a sizeable contribution to the nation’s energy security. Advanced biofuel companies also have made considerable progress in producing biofuels from agricultural residues and new energy crops and they are just beginning to build the first advanced biofuel production facilities.

Already, the advanced biofuel industry has created 5,000 new jobs for scientists and engineers working to scale up production. As the industry grows, it can create as many as 800,000 new jobs in agriculture, transportation and production.

But biofuels are only a part of the renewable energy and sustainable biomass picture. There are more than 900 biobased product companies employing approximately 54,000 people across the United States, according to a survey conducted by Iowa State University’s Center for Industrial Research and Service published in 2010. Continued development of biorefineries producing renewable chemicals and biobased products can generate new jobs and economic growth in the rural areas where economic development is greatly needed. These renewable bioproducts also cut down on our dependence on imported oil.

With the United States’ advantages in biotechnology innovation and agriculture, we can lead the world in producing energy, biofuels, chemicals and materials from renewable resources. By doing so we can create new markets for agricultural goods and new jobs in rural America, where they’re needed most. A robust energy title in the Farm Bill is needed to support growers and land owners in the sustainable production of new energy crops for biorefineries and bioenergy.