Thursday, March 19, 2009

Higher Math

I don’t understand public policy math. Outraged by the AIG bonuses of $165 million, lawmakers are proposing to make major changes to contract law and tax law in order to recover about 0.1% of the $173 billion that the government has authorized to support AIG. It would appear that 0.1% of a big number is, as the accountants say, material to public policy discussions.

Last year, when energy prices were front page news, there was a resurgence of interest in opening the Arctic National Wildlife Refuge (ANWR) to oil drilling. Estimates of ANWR’s oil production capacity range from 510,000 barrels per day to 1.45 million barrels per day. For the sake of this discussion, let’s say that ANWR will produce 1 million bpd.

The Energy Department forecasts U.S. oil consumption to be 19 million barrels per day through 2010. Let’s say that, if and when ANWR comes online, U.S. consumption will grow to 20 million bpd because of the success of alternative energy and conservation programs. To these eyes ANWR’s one million barrels per day, or 5% of our annual petroleum consumption, are certainly worth pursuing.

Some politicians dismiss drilling in the Arctic because its current reserve estimates of 3.2 billion barrels are “just a six-month supply” of U.S. annual consumption. Yet we will agonize for days over AIG bonuses that are 0.005% of the President’s proposed 2010 $3.55 trillion budget.
Like the umpire who decides if it’s a strike or a ball,
Only the politician knows if it's too big or too small.

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