Will The Heritage Foundation Stick To Their Principles Or Cave To Their Oil Industry Backers?

September 24, 2009 3:21 pm ET — Chris Harris

Will the Heritage Foundation stand firm in its opposition to subsidies and maintain its conservative principles? Or will it cast its credibility aside in order to appease its donors in the oil industry?

The Heritage Foundation Sings The Gospel Of Laissez Faire Economic Policy

Over the past couple years, a lot of change has come to Washington.  Since 2006, control of both houses of Congress and the White House has shifted from Republicans to Democrats. 

Throughout this democratic changing of the guard, much has also stayed the same in this city.  Admirably, conservative think tanks and interest groups have generally remained constant on their view of laissez faire economic policy - including their aversion to subsidies, which they say distort the market.

The Heritage Foundation is a prime example.  Over the years, its experts, scholars, fellows and bloggers have consistently disparaged government attempts to stimulate or suppress demand for certain products or industries.

For instance:

Subsidies and price caps distort the market, which results in supply and demand imbalances, artificially high prices, and risky investment decisions

When a project is deemed economic by the marketplace, there is no need for any special government incentive or subsidy. Conversely, if market conditions do not support a project, the financial risks should not be shifted to taxpayers.

Many of these so-called incentives distort the marketplace and give taxpayer subsidies to special interests.

The reality is that subsidies don't promote new energy, they promote bad business.

Instead of passing more market-distorting mandates, Congress should enhance domestic energy supplies by removing impediments to oil and natural gas production on federal lands, including the Arctic National Wildlife Refuge (ANWR), streamline bureaucratic regulations, and let the marketplace--not political interference--determine the nation's energy winners and losers.

Moreover, subsidies are poor policies because they distort normal market forces and encourage government dependence. By subsidizing a portion of the actual cost of a non-competitive project, the government is artificially making it cheaper and distorting the allocation of resources by directing capital away from more competitive projects.

You see? They're consistent.

But will they stay that way?

The Obama Administration's Move To Phase Out Fossil Fuel Subsidies

Earlier this week, President Obama's national security adviser for international economic affairs, Mike Froman, said "I would simply say that we put on the table the desirability of reaching an agreement to phase out fossil fuel subsidies."

The American Petroleum Institute, the organization tasked with looking out for oil industry profits, is not too excited about that news.  They said:

But his call to "phase out fossil fuel subsidies" is the wrong approach that should be seen for what it really is: a giant tax hike on American consumers. By raising energy taxes under the veil of eliminating fossil fuel subsidies, oil and natural gas companies would be deprived of the capital they need to invest in exploration and development. That would likely kill jobs, restrict the energy supply and increase costs to consumers and businesses.

The Heritage Foundation has accepted millions of dollars from the world's largest oil companies. For instance, Exxon Mobil has donated $385,000 since 2001. Additionally, the think tank has accepted over $3.2 million from the Koch family foundations. The Koch family, of course, owns the oil services company Koch Industries, which is currently the largest privately held company in the United States.

What Matters More, Principles Or Money?

As Washington begins to debate "phasing out fossil fuel subsidies," the Heritage Foundation will be an important voice.

Will the Heritage Foundation stand firm in its opposition to subsidies and maintain its conservative principles? Or will it cast its credibility aside in order to appease some of its largest benefactors?

Only time will tell.