January 2012

CA Restaurant & Bar Owners (not drinkers) Will Feel the Pinch of Nickel Tax

by Michelle Minton on January 28, 2009 · 2 comments

in Economy, Employment

February 1st 2009 is the day that California Governor Arnold Schwarzenegger’s per-drink tax increase will go into effect throughout the state. The tax hike will be a seemingly small 5 cent increase on beer, wine, and spirits in an attempt to in an attempt to shrink the state’s budget deficit of $40 billion.

Is this a wise idea? Well, “sin taxes” like those applied to drinking and smoking are, generally, intended as deterrents against an activity some government agent believes is harmful to “the public”. But discouraging people from drinking in California is like Vegas charging gamblers extra money each time they place a bet in a casino–it could have very negative consequences for economic well-being of an industry that the state relies on for a thriving economy.

In 2005 the wine industry provided California with $3.2 billion in taxes, licenses and fees. California wineries, both as agriculture and tourism are profit-powerhouses within the American economy (California wine production has a $51.8 billion impact on California and $125.3 billion on the U.S. economy at large and provides 800,000 people with jobs), but like just about all other industries wine production is suffering through the current financial crisis. Worldwide, sales are down for wine, especially at the higher price points (though you wouldn’t know it if you happened to be an economist at the white house) and things are likely to get worse as the global economy falters.

Called a “per-drink” tax, the raise is meant to hit consumers of alcoholic drinks, an arguably an unwise consumer to target, the tax actually hits bar and restaurant owners harder than consumers and potentially will affect wineries and vineyards that make a lot of their profit from distribution to those bars and restaurants.

Increased prices and reduced foot-traffic are forcing restaurant and bar owners to either raise prices and purchase smaller quantities of alcohol or to buy less. Tumbling profits and rising prices are forcing producers and distributors to make some tough choices such as cutting back the workforce or cutting production.

All of it trickles down to the bar and restaurant owner already dealing with fewer customers, increasing cost for food ingredients, and smaller profits–for them it is more than a nickel; it could be the difference between staying in business or shutting their doors and letting all of their workers go.

Californians should push back hard on this idea and the Governor should be careful that in this latest round of blood-letting, he doesn’t bleed California businesses dry.

Al Gore, the lobbyist

by Julie Walsh on January 28, 2009

in Energy, Environment, Global Warming

In a letter dated January 26th, 2009 Al Gore’s company Generation Investment Management sent a coalition letter along with other institutional investors representing $1.7 trillion in assets to Senate Majority leader Harry Reid. The letter asked for:

1) longer-term economic incentives including extending the Production Tax Credit (PTC) for five years or more,

2) funding for energy efficiency programs – such as retrofitting buildings,

3) federal funds to flow to states that allow utilities to treat energy efficiency comparable to new supply; states that adopt energy efficiency resources standards to achieve energy savings goals; or, states that adopt strong building codes to encourage energy savings, and

4) that part of the funding in the stimulus package should be directed toward modernizing and improving the electric grid system.

Today, two days later,  Al Gore, The Climate Protector, testified to the Senate Foreign relations Committee of the need for:

1) renewable tax credits and “small” grants for wind power and solar,

2) energy efficiency and conservation,

3) decoupling (giving utility companies a guaranteed source of revenues and Gore’s declared “single most important measure”), and

4) the need for a new electric grid.

He also frequently mentioned solar energy (an extremely expensive source of energy), deforestation (big area of carbon trading) and soil carbon credits (they need the farm votes).

Of course, Chairman Gore punctuated these requests by the possibility of every earthly catastrophe befalling us if we don’t grant him his requests.

Liveblog of Al Gore Climate Hearing

by Iain Murray on January 28, 2009 · 19 comments

in Energy, Environment, Global Warming, International

No TV station seems to be covering this live, but you can watch here.

Kerry in his introduction says “if there was a cost-free way of tackling climate change, we’d take it, but there isn’t.” There is (at least comparatively) – adaptation – and Kerry, Gore and their ilk have stood in the way of research and implementation of adaptation. Lugar makes this point in a slightly confused fashion (and gives too much credence to the finagled Stern Report), but eventually gets good on the subject of biotech.

Gore links global warming, financial crisis and terrorism as all caused by our use of coal and oil. How convenient for him. Oh, and China as well. Urges Congress to pass “the entirety” of the shtimulus bill. Presumably including the resodding of the National Mall as a vital step in combating the climate crisis.

Says Kyoto II must be negotiated this year, not next. I presume he will strongly criticize the Administration when this doesn’t happen.

Says developing companies are leading the way. Praises Brazil for its bold leadership – when they are investing over $100 billion in oil exploration over the next 5 years. There’s an inconvenient truth for you, Al. And what about the gorilla in the room – China?

Praises Reagan for leading the Montreal Protocol, which he says is a model. This was debunked by CEI ten years ago.

Here comes the slideshow! All of a sudden it’s “some scientists,” not all scientists. Interesting. Arctic graphics all very impressive, but fact remains that there are strong arguments that the changes there are natural. Gore remains worried about Greenland. He’s out of date.

No real change in Gore’s arguments about glaciers, beetles and wildfires from An Inconvenient Truth. All are dealt with in Marlo Lewis’ magnum opus Al Gore’s Science Fiction. Still wants to link Hurricanes to Global Warming, despite retreats on that from scientists.

Shows he’s read ‘How to Lie with Statistics’ in his contemptible attempt to say disasters now are worse than they were. Roger Pielke Jr and Indur Goklany have both debunked that notion comprehensively.

On oceanic acidification, there is a splendid new study from SPPI that really puts that question to rest.

In questions, Gore endorses 350ppm as the “target level” for CO2, and notes that some people don’t think we can do “what the science mandates.” Very revealing phrasing. To those in the coal industry, he says that new energy jobs will give them “even better jobs.” I’d like to see the evidence for that specific claim.

Says wind power is now fully mature and competitive. So no subsidies needed, then? No, he says it can expand its role with subsidies. Aha. Meanwhile, perhaps someone should tell the backers of the London Array.

Also says that solar is mature too. The plain fact is that all forms of solar energy are remarkably inefficient, and the best summary of why is in William Tucker’s new book, Terrestrial Energy (and Tucker supports strong action on global warming).

Unfortunately, technical problems made me miss the rest of Kerry’s questions, so I’ll end there.

Bottom line: nothing new from Gore, despite his assertions to the contrary. His concerns are overblown and his “solutions” remain grossly expensive pipe dreams. I personally believe global warming is a risk, but Gore’s program represents a potentially disastrous misallocation of global resources.

200 Economists Oppose the Stimulus Plan

by Cord Blomquist on January 27, 2009 · 34 comments

in Economy, Features, Stimulus to Nowhere, Zeitgeist

The Cato Institute is running full-page ads in the Washington Post, the New York Times, and Roll Call this week disputing the claim from President Obama that their is a consensus about the stimulus package.  As Mr. Obama puts it:

There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.

We at CEI disagree and, as it turns out, we’re not alone.  Cato’s ad includes the names of 200 economists who oppose the “stimulus” package.  Among them are towering intellects like James Buchanan, who won the Nobel Prize in economics in 1986 for his work on how politicians’ self-interest and non-economic forces affect government economic policy.  How appropriate.

In the ad, Cato’s club of 200 economists respond to Mr. Obama claim in big, bold-face letter, declaring:

With all due respect Mr. President, that is not true.

They continue by saying:

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

Here’s a PDF copy of the ad.  If you agree that government action won’t help us out of our economic mess and may even make matters worse, be sure to foward the ad to friends via email, share it on Facebook, tweet about it on Twitter, and otherwise spread the word.

You can Digg this post here.

You can read more about the opposition to the stimulus by visting Cato’s site at http://www.cato.org/fiscalreality or by reading CEI’s Agenda for Congress at http://cei.org/congress.

Is the TARP Unconstitutional?

by Ivan Osorio on January 27, 2009 · 2 comments

in Bailout Watch, Economy, Legal

Also at Heritage today, FreedomWorks chief economist Wayne Brough described his organization’s legal analysis of the constitutionality of the Troubled Assets Relief Program. “There is a very strong non-delegation argument against the TARP,” he said. “They basically took all the debate out of the Congress and put it all in the Treasury in the Executive branch…They gave the Treasury a $700-billion blank check to spend at whim.”

For more on bailouts, see BeyondBailouts.org, a project of the Competitive Enterprise Institute and the National Taxpayers Union, as well as John Berlau’s entry on bailouts in CEI’s new Agenda for Congress.

DeMint’s Smaller-Government Stimulus

by Ivan Osorio on January 27, 2009 · 3 comments

in Deregulate to Stimulate, Economy

This week, Senator Jim DeMint (R-S.C.), in response to President Obama’s stimulus plan, announced his own alternative stimulus package, which David Weigel, at the Washington Independent, summarizes thus:

• Make the Bush tax cuts permanent and “take uncertainty out of the economy.”

• Let small businesses “write off more of their business expenses.”

• Cut the top corporate tax rate from 35 percent to 25 percent.

• Cut the capital gains tax.

• Cut spending and “reign in the out of control congressional earmarking practice.”

This would encourage investment in the most productive sectors of the economy, unlike Obama’s proposed $825 billion of increased spending, which DeMint criticized today at the Heritage Foundation. Of the infrastructure component of the stiumulus, he said that, “Less than 10 percent of this is going to roads and bridges,” with a lot of that money “going to liberal causes.”

DeMint also noted the importance of the opportunity costs, which those who tout the “benefits” of government spending rarely acknowledge. He noted that the costs of government spending extend beyond the dollar amounts government shells out, to the “costs in terms of allowing people to keep money in the private market,” since, “there’s a multiplier effect when the money is out there rather than comes here [to Washington].”

For more from David Weigel on Sen. DeMint’s remarks today, see here.

For more on how to “deregulate to stimulate,” see Wayne Crews’s essay in CEI’s new Agenda for Congress.

Clinton: World “Exhaling” Under Obama?

by Sam Kazman on January 27, 2009

in Politics as Usual, Sanctimony, Zeitgeist

Secretary of State Hillary Clinton reportedly declared “There is a great exhalation of breath going on in the world as people express their appreciation for the new direction that’s being set and the team that is put together by the president.”  That’s a cute contrast to President Bill Clinton’s claim that he “didn’t inhale.” Different context, perhaps, but it is change.

Kiss Off to Consumers

by Jonathan Tolman on January 27, 2009 · 8 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Energy, Odds & Ends, Politics as Usual, Stimulus to Nowhere, Zeitgeist

The appropriations portion of the House stimulus bill is not the only legislation with bad ideas.  The House Energy and Commerce Committee has also marked up their portion of the stimulus package.  During the Committee markup, Chairman Henry Waxman (D-CA) inserted a provision that would “decouple” utility rates from the amount of electricity or natural gas that the utilities sell.  According to the “decoupling” provision, states that accept federal energy efficiency grants from the economic stimulus package will have to ensure that utilities recover the revenue lost when consumers use less energy.

In other words, in states that accept the energy efficiency grants, utilities that use the grants to help consumers lower the energy consumption will be able to raise their rates to compensation for the loss in revenue.  Consumers who participate in the programs may see their energy use go down, but may not see any change in the size of their utility bills.  This is the legislative equivalent of a giant wet kiss to utility and environmental lobbyists but a giant kiss off to consumers.

Green Pork

by Jonathan Tolman on January 27, 2009 · 2 comments

in Agriculture, Deregulate to Stimulate, Economy, Environment, Politics as Usual, Stimulus to Nowhere, Zeitgeist

In addition to tens of billions of dollars in the House stimulus bill for infrastructure and other projects to create jobs, there are also funding items that appear to do the exact opposite.  For example, the House stimulus bill contains $175 million dollars for Natural Resource Conservation Service to purchase conservation easements in floodplains.  Funding for the program would effectively be spending tax dollars to pay farmers to stop farming.  Not only would such conservation easements not be creating any jobs, they actually would likely be doing the opposite by taking farmland out of production.

What makes this funding even more egregious is that removing farmland from production tends to increase food prices.  What makes this provision seem even more out of place is the House stimulus bill also includes $200 million in funding for Senior Nutrition Programs, claiming the programs need additional funding due to “rising food costs.”  If Congress was really concerned about rising food costs one would think that they would be less eager to take farmland out of production.

When the Irreversible Effects Meet the Immovable Policy

by Iain Murray on January 27, 2009

in Energy, Environment, Global Warming, International

Apparently, global warming is now irreversible. Or, at least, it is if you don’t consider any of the policy options that might, you know, reverse it. As Roger Pielke Jr points out, the study didn’t examine the potential for geoengineering:

Geoengineering to remove carbon dioxide from the atmosphere was not considered in the study. “Ideas about taking the carbon dioxide away after the world puts it in have been proposed, but right now those are very speculative,” said Solomon.

Then only reason geoengineering remains speculative is because the global warming industry is locked into one policy model: mitigation. If adaptation is the red-headed stepchild of global warming research, geoengineering is the unacknowledged bastard, kept tied up in the basement and fed only with a bucket of fish heads.

Meanwhile, the McKinsey Global Initiative has come out with version 2 of its “we can save the world very cheaply” report, which is available if you register and give them your email address via the links here. The fiendish consultants have disabled the ability to cut their charts out, so you’ll have to get a copy for yourself, but their Exhibit 1 shows that all the “affordable” options are to do with energy efficiency, not grand new green energy projects, which are much more expensive and require aggressive carbon pricing (and this needs to be born in mind as well). Furthermore, these are truly global initiatives – something has has to be done everywhere, around the world – as Exhibit 4 makes clear. Something we can do quite affordably may be a different kettle of fish heads for the developing world. If you can’t afford an incandescent lightbulb, you can’t afford an LED lamp, whatever the CO2 abatement potential is. I hope to provide a full response to the McKinsey paper soon.

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