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President Highlights Refrigerators to the U.S. Chamber of Commerce

February 7th, 2011 · 1 Comment

Today, in a gesture that legitimately frustrated many, the President walked across Lafeyette Park to give an address to the U.S. Chamber of Commerce

There the President was, smiling and thanking for an introduction a man, Tom Donahue, who has worked hard to destroy President Obama and to undermine President Obama’s agenda

The President’s speech is unlikely to satisfy many. 

It preemptorarily sacrificed much rhetorical (and substantive) ground in the continued discussion of “a government-wide review [for] outdated and unnecessaryregulations” and that “another barrier government can remove is a burdensome corporate tax code with one of the highest rates in the world” (even though effective payments are far lower …). 

Yet, the President did not simply surrender to the business community with some sort of ‘government is bad and lets dismantle it together’ mantra that could have come from a politican ready to sacrifice the common good for an ideological gold star from fossil-foolish anti-science libertarian businessmen.

But ultimately, winning the future is not just about what the government can do to help you succeed. It’s about what you can do to help America succeed.

For example, even as we work to eliminate burdensome regulations, America’s businesses have a responsibility to recognize that there are some safeguards and standards that are necessary to protect the American people from harm or exploitation.

Few of us would want to live in a society without the rules that keep our air and water clean; that give consumers the confidence to do everything from investing in financial markets to buying groceries. Yet when standards like these have been proposed, opponents have often warned that they would be an assault on business and free enterprise. Early drug companies argued that the bill creating the FDA would “practically destroy the sale of … remedies in the United States.” Auto executives predicted that having to install seatbelts would bring the downfall of their industry. The President of the American Bar Association denounced child labor laws as “a communistic effort to nationalize children.”

Of course, none of this has come to pass. In fact, companies adapt and standards often spark competition and innovation.

This is important. Time after time, those opposing government action to protect the common good have screamed that there would be a devastating (“job killing”) impact from regulation while those supporting action have, nearly uniformly, understated the eventual benefits (for a variety of reasons, including a desire to remain as solidly grounded in ‘fact’ and not to exaggerate the case). To look at the Clean Air Act, for a moment, the roughly $500 billion that it “cost” to implement from 1970 through 1990 returned benefits of over $22 trillion.  And, well, that over 40-to-1 benefit stream has continued to grow in the 20 years since.  E.g., government regulation can pay high benefits.  Secretary of Energy Steven Chu explains that writing regulation and setting standards are — without exception — the lowest cost move with the highest payoff to the economy that the Department of Energy can pursue.    As he puts it, “forcing people to save money is a cost that I am willing to bear.”

When it came to highlighting the value of public-private partnership and the meaningful impact of government standard setting, President Obama (his speech-writers?) turned to Secretary Chu’s realm (energy) with the case of refrigerators:

Look at refrigerators. The government set modest targets to increase efficiency over time. Companies competed to hit these markers. And as a result, a typical fridge now costs half as much and uses a quarter of the energy it once did, saving families and businesses billions of dollars.

The paragraph above comes from the prepared remarks released to the press. Thus, are those the President’s or his speechwriters’ words? I don’t know. However, the President’s actual comments to the Chamber are revealing as to his understanding of this case:

None of these things came to pass. In fact, companies adapt and standards often spark competition and innovation. I was travelling when I went up to Penn State to look at some clean energy hubs that have been set up. I was with Steve Chu, my Secretary of Energy. And he won a Nobel Prize in physics, so when you’re in conversations with him you catch about one out of every four things he says. (Laughter.)

But he started talking about energy efficiency and about refrigerators, and he pointed out that the government set modest targets a couple decades ago to start increasing efficiency over time. They were well thought through; they weren’t radical. Companies competed to hit these markers. And they hit them every time, and then exceeded them. And as a result, a typical fridge now costs half as much and uses a quarter of the energy that it once did — and you don’t have to defrost, chipping at that stuff — (laughter) — and then putting the warm water inside the freezer and all that stuff. It saves families and businesses billions of dollars.

So regulations didn’t destroy the industry; it enhanced it and it made our lives better — if they’re smart, if they’re well designed. And that’s our goal, is to work with you to think through how do we design necessary regulations in a smart way and get rid of regulations that have outlived their usefulness, or don’t work.

What the President might not be aware of is that this is not just the case of cutting energy demand, but it is a case of reversing significant energy demand increases while improving quality for a combination of reduced costs and increased capability:

In 1973, refrigerators were the largest single use of electricity in the home and the demand had been growing at 9.5% per year since WWII. Energy efficiency had been declining as manufacturers sought to cut costs. Utility planners had, at that time, carved out a 9.5% growth rate in refrigeration power demand indefinitely. In the face of the oil embargo, California began to drive standards that were followed by five state and national standards (Energy Star as latest round). In 1972, the average refrigerator used about 2000 kilowatt hours / year. Today, with ice makers & water cooling & increased average size & inefficient side-by-side models, the average refrigerator uses under 500 kwh/year. And, by the way, in current dollar terms, the price of refrigerators has dropped per cubic foot in part because the requirements for energy efficiency have led manufacturers to redo production lines & drive improved efficiency in construction.

 Refrigerators are a poster child for the power of invisible energy:  that we can truly transform our nation (and the global economy) through serious attention to energy efficiency.   And to do so will require government action to regulate, set standards, to create the conditions for private businesses to find that the right choice (lower-cost and cleaner energy choices — including energy efficiency) becoming the easy and preferred choice for their own businesses and for the products (and services) that they offer their clients.

We can hope that some of the business leaders in attendance had their ears and minds open. Every time an American buys or opens a refrigerator they are experiencing the benefits of productive public-private interaction.   We need to make the power and value of this collaboration understood and better leveraged for achievement of the common good.

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Tags: economics · Energy · energy efficiency · President Barack Obama · refrigeration · Secretary of Energy Steven Chu

1 response so far ↓

  • 1 Robin // Feb 7, 2011 at 1:09 pm

    I think we can be almost certain that he understood that the changes in refrigerator standards are also an example of how improved energy efficiency was a public and personal good.

    Thanks for writing this up — it summarizes what I wanted to know about his meeting with the Chamber of Commerce.