THE $100 BILLION NIPPLE

And so he is. He no longer scrapes by on piddling billions; his latest brainchild, the Energy Independence Agency, is a $100 billion baby. It is to channel money into energy projects, most of it to be advanced by the Treasury, but all of it beyond the control of Congress or the Executive and hidden from the federal budget - another US Postal Service, equally efficient, only two orders bigger.

What would happen if the capital for energy projects were to be allotted by bureaucrats instead of by a free market? We have some experience from the pilot project, the FEA. Crude oil going into the refineries, for example, cannot be allotted by the market, because controls give it a two-price structure. The difference is compensated by the FEA's entitlement rules, whose fine print covers 100 pages, but which ultimately results in issues like these: Why should Gulf go out and get oil when it is going to be confiscated? Why should Mobil go out and get oil when it can get Gulf's oil at half the cost?

But the hodge-podge of bureaucratic product allocation would pale beside the hodge-podge of bureaucratic capital allocation. Suppose a region needs a 2,000 MW power plant, what type should it be? As surely as HEW is infested with Affirmative Actioneers, EIA would be infested with sun worshippers, and they might finance a solar plant which works out (at IO% efficiency, 50% spacing and sunshine 80% of the daytime) to 40 square miles of collecting area. A nuclear plant could do the job on a few acres, but that would be politically sensitive, so they would finance it only in low population density areas, like maybe the Arizona desert, where it could bake in the sun and import the cooling water from Mexico. Is that not the way things are done in politics?

Of course energy companies are short of capital. Of course they need $100 billion, and more, if America is to become energy independent. But there is a saner way for the government to supply the money: Cut the corporate income tax, which now amounts to half of profits and represents double taxation not used in many other countries.

Decisions tend to be wise when the decision maker's own money is at stake.