January 2012

Don’t Believe the Ethanol Hype

by Richard Morrison on July 31, 2007 · 2 comments

in Environment

We happy few here at Open Market have really been in tune with the rock journalists of America recently. First Kurt Loder trashes Michael Moore’s Sicko, and now Rolling Stone blows the whistle on the ethanol scam:

As the king of ethanol hype, Sen. Chuck Grassley of Iowa, put it recently, “Everything about ethanol is good, good, good.”

This is not just hype — it’s dangerous, delusional bullshit. Ethanol doesn’t burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption — yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America’s energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 — twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon — about half of ethanol’s wholesale market price.

More news and analysis on the topic is available at the Facts About Ethanol site.

Just when you thought the Farm Bill couldn’t get any worse…

by Ivan Osorio on July 31, 2007

in Economy

Over the last several days, my colleagues at CEI have pointed out some of the worst aspects of the Farm Bill — and it’s bad. But now The Wall Street Journal shines a spotlight on a little-noticed aspect of the bill that would make it even worse:

The overstuffed farm bill now waddling through Congress — toward a possible veto by President Bush — has attracted so much waste that everyone with a genuine interest in agriculture is feeling disheartened. Yet the bill has earned unlikely support from the labor union lobby.

Hmmm. Could this be at all related to a new and unprecedented Davis-Bacon requirement for ethanol construction? Davis-Bacon is the Depression era holdover that forces federal construction contracts to pay a “prevailing union wage” — determined by the Department of Labor — rather than a market wage. This anachronism was attached to the bill last week by House Democrats; a staffer tells us he’s never before seen Davis-Bacon in a farm bill.

This, of course, would make the price hikes for food and fuel that an increased ethanol mandate would engender even worse — as a sop to the Democrats’ organized labor base, this is pandering of the most vulgar sort. The President already has plenty of other reasons to veto the monstruous Farm Bill, but this fight should not end here: Davis-Bacon deserves to be repealed.

This is the first time that Davis-Bacon has been in the public spotlight since the aftermath of Hurricane Katrina, when President Bush suspended Davis-Bacon in areas affected by the storm to help facilitate rebuilding in those areas — only to reverse his order in the face of political pressure.

As I noted at the time, Davis-Bacon was supported by all-white labor unions during the 1930s, in order to disadvantage African-American workers in federal construction projects (Any praise for Bush for suspending Davis-Bacon then is moot now, since he reinstated it soon after without even attempting to defend the suspension):

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The Not-Just-Private-Equity Tax hits shareholders of REITs

by John Berlau on July 31, 2007 · 1 comment

in Economy

An Associated Press story today on proposed “carried interest” tax hike legislation aimed at soaking private equity had this interesting description of what the proposals would do:

Congress is debating whether to force companies set up as limited partnerships — and their managers — to pay taxes at the same rate as income earned by ordinary Americans.

But reading the fine print of the press release of main sponsor Rep. Sander Levin (D-Mich.) shows that the House bill would also hike the taxes of plenty of “ordinary Americans” as well — specifically, the numerous American shareholders in real estate investment trusts, or REITs.

The question-and-answer section at the end of Levin’s release asks, “Would this affect REITs,” and answers, albeit in a convoluted way, in the affirmative:

To the extent that a Real Estate Investment Trust is receiving income in the form of a carried interest in another real estate partnership, this would affect the character of income received for purposes of determining the character of income distributed to shareholders. [Emphasis added]

You may not have understood all of this, but you can probably infer that Levin’s short answer is: Yes, REIT shareholders will get their taxes hiked, too.

Let me try to explain this. In a partnership — private equity or any kind — the partners are taxed on a business’ earnings at individual tax rates instead of the business itself being taxed at corporate rates. In a limited partnership, the general partner gets an ownership stake in exchange for managing the firm and assuming all the legal liabilities for the other partners. He or she will be taxed at the rates of ordinary income for management fees, and for much of the business’ activities. But the general partner will pay the individual capital gains rate when the other partners receive capital gains for sales of such things as stock and real estate. This is called the carried interest.

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More Reasons for DDT Use

by Angela Logomasini on July 31, 2007

in Environment

A recent upsurge in Dengue offers a depressing reminder that malaria is not the only serious mosquito-borne disease affecting the world. Dengue—a virus transmitted by mosquito bites—can lead to fever, severe joint pain, internal hemorrhaging, and death for some.

This year, many Asian nations—particularly Cambodia, Indonesia, and
Vietnam—are suffering from a serious outbreak. Regarding this year’s occurrence Kroeger Axel of the Dengue research coordinator for the World Health Organization notes: “We always think next year it will get better, but we always find next year it gets worse … There’s a very clear upward trend.”

The spread of Dengue could eventually affect the United States, as it did in 2001 when there was an outbreak in Hawaii. U.S. public-health officials quickly controlled that outbreak with the assistance of pesticides. Unfortunately, many nations do not have access to the products we use, which are expensive. They stand to lose the most from green activist campaigns against products like DDT, which otherwise could offer a safe, affordable, and effective tool in this battle.

Bergman the Hack

by Eli Lehrer on July 31, 2007 · 2 comments

in Culture

Fran,

Obviously, I’m sorry to see that Ingmar Bergman has died. But, beyond some half-praise for his visuals, I can’t think of much good to say about his movies. Bergman and, more importantly, the critics who adored him, did more than any other director to harm the reputation of foreign-made films here in the United States.

Heavily subsidized by the Swedish state for many of his films, most of what he did was boring, slow moving, and utterly unaware of the nature of the medium. Parts of the Seventh Seal would have worked very well on stage but become preposterous, slow, pretentious on film. Even in his last film, the much acclaimed Fanny and Alexander, he goes way over the top more than once.

He rarely got good performances out of his casts either. Only one actor who frequently worked with Bergman (Max von Syndow) had a substantial Hollywood career. What remains in most of his movies hearkens back to his original career as a puppeteer: over-the-top stage acting, nice visuals, and not much in the way of writing. It’s not very surprising that he spent the last 25 years of his life directing only on stage. His style was ill-suited to the camera. I tend to think that many in Hollywood liked him because his films so evoke high-brow legitimate theater that many big time actors idealize.

The acclaim that critics and the Hollywood elite showered on Bergman resulted in many people going to see his films and then, I think, deciding that foreign films in general just weren’t the bother. Insofar as he influenced much better filmakers–Krzysztof Kieslowski, Woody Allen, and Robert Altman to name three–I guess the world is poorer without Bergman around. And, while I haven’t seen any of his plays, I’m willing to believe that he was a great stage director. But as for his films, well, I strongly suspect they’ll be forgotten within my lifetime.

Chris Horner on Book TV

by Richard Morrison on July 31, 2007

in Coalitions & Outreach, Global Warming

Chris recently gave a presentation on his book, The Politically Incorrect Guide to Global Warming (and Environmentalism) before an eager audience here in Washington. The smart producers at C-SPAN sent a camera along and here is the result (total playing time 32:55).

At Last, Competition for Amtrak?

by Eli Lehrer on July 31, 2007

in Mobility

A small upstart company run by a Colorado multi-millionaire, GrandLuxe Rail Journeys, appears to have broken a major barrier and started providing scheduled, competitive rail service in the United States. While the company also provides “land cruises,” (that emphasize sightseeing by train) it also has a few services that would be useful for people looking to go from point a to point b. Although I have no idea if it has a viable business model, its existence seems to show that the death of government-run Amtrak won’t mean an end for long-distance rail service in the U.S.

A handful of tourist-oriented heritage railroads and at least one other “land cruise” company still operate in the U.S. but, for about 35 years, only Amtrak has provided scheduled point-to-point inter-city service over significant distances. Amtrak also operates most of the commuter railroads in the country under contract and will even provide the locomotives for GrandLuxe.

This new company seems to be providing a high-end product at an appealing price: a little checking around shows that its Washington, D.C.-Miami fares are lower than the best business-class fares I could find. It’s a niche market with limited client base to be sure but, of course, so are Amtrak’s own inter-city trains.

Maybe the market doesn’t exist for this kind of travel. It’s a lot slower than flying however one chooses to look at it. But at least one entrepreneur appears willing to see if there’s a market niche where Amtrak has failed.

Lott Vindicated?

by Iain Murray on July 31, 2007

in Legal

Some readers may remember the long-running defamation suit between John “Freedomnomics” Lott and Steven “Freakonomics” Levitt. Defamation suits are rarely settled in the plaintiff’s favor, so this (subsrciption required) may be regarded as more than a small victory for Lott:

John R. Lott Jr.’s defamation lawsuit against a fellow economist, Steven D. Levitt, has provisionally been settled — but it may yet roar back to life. In documents filed on Friday in federal court, the two parties outlined a settlement that requires Mr. Levitt, who is a professor of economics at the University of Chicago and a co-author of the best-selling book Freakonomics: A Rogue Economist Explains the Hidden Side of Everything, to send a letter of clarification to John B. McCall, a retired economist in Texas. …

By some measures, Mr. Lott appears to have won little from his 15 months of litigation. No money will change hands, and the settlement does not require a formal apology from Mr. Levitt.

But on certain points of reputation and pride, Mr. Lott might take some satisfaction. Mr. Levitt’s letter of clarification, which was included in Friday’s filing, offers a doozy of a concession. In his 2005 message, Mr. Levitt told Mr. McCall that “it was not a peer-refereed edition of the Journal.” But in his letter of clarification, Mr. Levitt writes: “I acknowledge that the articles that were published in the conference issue were reviewed by referees engaged by the editors of the JLE. In fact, I was one of the peer referees.”

The settlement also leaves open the possibility of Lott appealing against the dismissal of the second part of his suit, that Levitt defamed him in Freakonomics itself.

Reformist Attorneys General Target Abuses

by Hans Bader on July 31, 2007

in Legal

In recent years, some state attorneys general have used their offices to sponsor lawsuits that redistribute billions of dollars from businesses into the pockets of their trial lawyer cronies. CEI describes this in greater detail in The Nation’s Top Ten Worst State Attorneys General.

Now this problem has been criticized by reform-minded attorneys general as well. This subject (and CEI’s study of the worst state attorneys general) came up for repeated discussion in today’s Federalist Society forum, “Reaching Too Far: The Role of State Attorneys General,” which featured attorneys general Bob McDonnell of Virginia, John Suthers of Colorado, and J.B. Van Hollen of Wisconsin, as well as former attorney general Don Stenberg of Nebraska.

Suthers described how trial lawyers and lobbyists descend like vultures at attorney general conferences in the aftermath of the multibillion dollar tobacco Master Settlement Agreement, in which trial lawyers extracted billions of dollars from the tobacco industry through assistance from some state attorneys general.

Stenberg discussed how contingency-fee arrangements between state attorneys general and trial lawyers to bring lawsuits in the name of the state in exchange for a share of the money recovered breed conflicts of interest and prevent settlements in the public interest. He cited examples of trial lawyers who received millions of dollars under the tobacco settlement but then demanded and sued the states that hired them for even more money (as happened in Massachusetts).

J.B. Van Hollen described his efforts to revitalize law enforcement in Wisconsin, and undo the damage done by his predecessor Peg Lautenschlager, who was ranked number 9 on CEI’s list of the worst state attorneys general. Lautenschlager allowed big backlogs to develop in the state’s crime lab, resulting in violent criminals remaining free to commit more crimes and murders, even while she devoted her office’s scarce resources to ideological causes and nuisance lawsuits against businesses like cranberry growers.

McDonnell discussed how outmoded court rules can turn a meritless lawsuit into a dangerous weapon, such as state rules restricting summary judgment that make it much harder to dismiss lawsuits that have no genuine factual basis in state court than federal court.

Since the tobacco Master Settlement Agreement came up repeatedly in the discussion, it’s worth mentioning that the tobacco settlement imposes disproportionate burdens on certain states, like Colorado and Virginia. As Stanford’s Jeremy Bulow and others have observed, the tobacco settlement effectively redistributes money from states that have growing rapidly growing populations (like Colorado), or growing populations and high cigarette sales (like Virginia) to states with stagnant populations (like New York State, which has 7 percent of the country’s population but receives an eighth of the tobacco settlement). That’s because the MSA is financed by a flat assessment on every cigarette sold in the country by most cigarette companies, while the money is divided up between states based on an arbitrary, fixed formula that remains the same in perpetuity, regardless of how a state’s population (and share of national cigarette sales) changes over time.

State attorneys general in town today to criticize activist colleagues

by Christine Hall on July 31, 2007

in Legal

The Federalist Society helpfully hosted a panel discussion today on the on-going abuse of power by state attorneys general – otherwise known as attorney general activism. You know, the same group elected officials who brought the tobacco settlement down on us. The $240 billion partnership between the states and Big Tobacco (which CEI is challenging in court).

Not that it’s the only bogus lawsuit brought on by state AGs and their trial lawyer buddies. Apparently cranberries can be an AG target. Wisconsin’s current AG, J.B. Van Hollen, relayed the tale of how his predecessor suited a cranberry grower, alleging that the cranberry bogs were a “public nuissance” under Common Law. The ousted AG in question, Peg Lautenschlager, was on CEI’s list of worst attorneys general (not surprisingly).

Other AG lawsuits are equally as bogus but far less amusing. Internet service providers, social networking websites (like MySpace and Facebook), car manufacturers, electric utilities — all targets of meritless AG lawsuits. Former California AG (now state treasurer) Bill Lockyer led a lawsuit alleging that cars are a public nuisance, inflicted by manufacturers. Ironic, Colorado Attorney General John Suthers noted on today’s panel, that the state had spent so many years building highways…for cars.

The list is long, but you can peruse many of the scurrilous stories in Hans Bader’s report, The Nation’s Top Ten Worst State Attorneys General.

Not of (last year’s) baddies were on hand today, unfortunately. Today, in addition to the AGs from Colorado and Wisconsin, we had the Virginia AG Bob McDonnell, the former Nebraska AG Donald Sterngerg, and the Federalist Society’s pro bono director, Peggy Little. One AG even waived the report in the air and said he’s relieved not to see his name on the baddie list! Well, General McDonnell, there’s always the next report to worry about!

See also – Hans Bader’s blog post about the event!

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