Energy and Equity

So becalmed is the energy scene that it took the coldest January in decades, raging blizzards in the Plains, snow in Atlanta, and 34-degree temperatures in Miami to remind us that all is not well: energy costs remain a high and sometimes crushing burden. This winter's massive heating bills came on top of 9-percent unemployment, with industrial centers of the cold Midwest hit especially hard. Looking ahead, there is the prospect of falling real wages, shrinking welfare programs, and still higher natural gas prices. The country is face-to-face again with the question of how fairly energy costs are being borne by different sectors of the public.

Are we satisfied with the way we have managed the human side of the transition to high energy prices? Not really, it seems, and one reason why is that the story is complicated. Energy prices are high everywhere, but they affect different people differently by income group, region, industry, and place of residence, to name just most obvious variables.

Who are the poor?

Take the position of the poor. How do we determine who they are statistically, and, having done so, how do we find them in the flesh? There is a wide choice of statistical measures: the number of poor can range from about 24 million, if one accepts the so-called Poverty Line, to 45 million if the gauge is the Bureau of Labor Statistics' Lower Living Standard.

Going behind statistics to real people, diversity is the rule. Some live in the Northeast or Midwest where high heating-oil prices, cold winters, and old housing combine to squeeze especially hard. Some live in the Southwest and West. There, residential energy needs are much lower, and controlled natural gas prices and low-cost hydro power help ease the strain—but gasoline plays a bigger role in the budget. Some are homeowners, others renters, some live in relatively energy-efficient apartments, and some in dilapidated, one-family dwellings. Some have their incomes indexed. Some can draw on assets. Aid "in kind" helps out some, and confuses the statistics because it is not counted as income. The averages on which so much social policy is based are particularly flawed when energy burdens are being assessed.

Policy choices

How should the nation make assistance available? The efficient and simple way—and one dear to economists—is to neatly separate energy and income. High energy prices make poverty more oppressive, but they do not cause it. Thus, an ideal policy would supplement income to alleviate poverty and allow recipients to decide whether to spend those extra dollars on energy, food, education, entertainment, or whatever. Freedom of choice and incentives to conserve energy are preserved. This remedy need not get involved in determining what makes people poor, but simply raises incomes that fall short of meeting necessary expenditures.

Tradition runs the other way. Governments seem to prefer to subsidize specifics, as in food stamps, subsidized housing, and Medicare. Energy assistance has taken the form of paying people's fuel bills, winterizing their houses, and basing added payments on some estimate of a shortfall in meeting energy costs. These policies may be far from the economists' abstract ideal, but in the real world, they may be the way to go, especially when aversion to welfare schemes is on the upswing. Somehow it seems less wrenching for government to appropriate funds to keep poor people from freezing than to raise their income.

The current trend is to get the federal government out of the whole issue of energy assistance and let the states handle it, a thrust with much to recommend it. The energy dimension of poverty varies so heavily with the where and how of a person's or family's living conditions that local control makes sense. But the history of some state-managed assistance schemes, such as Aid to Families with Dependent Children, suggests that different states will tend to adopt widely differing standards of how well off recipients should be. New inequities almost surely will take the place of old ones. Moreover, what happens to energy prices is still strongly influenced by policies made in Washington. Should the federal government be allowed to withdraw, however gradually, from the consequence of its decisions?

The whole problem of fairness in sharing the energy burden deserves a fresh look by Congress and the administration. Unresolved fundamental issues have been dormant, but they will not lie still much longer.

A final intriguing thought. Until now, poor people dependent on fuel oil in the Northeast and Midwest have been hardest hit. But barring unexpected events, the natural gas and electricity consumers West and South of the traditional sufferers will be next. Misery will not seek company, but it will get it.