January 2012

LibertyWeek 35: Dodd Man Out?

by Richard Morrison on March 24, 2009

in CEI Projects, Podcast

Your hosts Richard Morrison and Cord Blomquist welcome back special guest co-host Michelle Minton for Episode 35 of the LibertyWeek podcast. We begin with a celebration of human achievement and a peek into the realm of secret government documents. We then investigate how the White House is going to waste another $1 trillion of your money and how the British beer tax has managed to kill off 20,000 jobs. Finally we focus on the history of the scandal-addled Sen. Dodd of Connecticut and the future of U.S. Olympic glory.

BONUS BOOK FEATURE: We congratulate our good friend Steve Milloy on the publication of his new book, Green Hell: How Environmentalists Plan to Ruin Your Life and What You Can Do to Stop Them. The book is a one-of-a-kind, comprehensive takedown of the entire environmental movement that will open your eyes to a looming threat to our economy, our civil liberties, and the entire American way of life.

Obama for global financial governance?

by Fran Smith on March 24, 2009

in Economy, International, Nanny State, Politics as Usual

With the G-20 meeting looming in the midst of a worldwide recession, President Barack Obama sent an essay published today in about 30 newspapers to urge world leaders to work together to take “bold, comprehensive and coordinated action that not only jump-starts recovery, but also launches a new era of economic engagement to prevent a crisis like this from ever happening again.”

In his essay, Obama puts blame on the financial institutions for causing the crisis and the “absence of oversight.”

We must put an end to the reckless speculation and spending beyond our means; to the bad credit, over-leveraged banks and absence of oversight that condemns us to bubbles that inevitably bust.

He intimates that he would support some sort of global financial regulatory system, as he states:

Only coordinated international action can prevent the irresponsible risk-taking that caused this crisis. That is why I am committed to seizing this opportunity to advance comprehensive reforms of our regulatory and supervisory framework.

All of our financial institutions — on Wall Street and around the globe — need strong oversight and common sense rules of the road. All markets should have standards for stability and a mechanism for disclosure. A strong framework of capital requirements should protect against future crises. We must crack down on offshore tax havens and money laundering.

Rigorous transparency and accountability must check abuse, and the days of out-of-control compensation must end. Instead of patchwork efforts that enable a race to the bottom, we must provide the clear incentives for good behavior that foster a race to the top.

His essay ends with–

But I also know that we need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy. That is a false choice that will not serve our people or any people.

Sounds like a false dichotomy to me.

Toxic Asset Rip-Off

by Hans Bader on March 23, 2009 · 3 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Features, Politics as Usual, Regulation, Stimulus to Nowhere, Zeitgeist

That’s how analysts describe the trillion-dollar toxic-asset buy-up program proposed this weekend by the Obama Administration: “the president is putting forth his idea to have the Treasury become the new AIG. In order to get hedge funds to buy up toxic debt, Obama is proposing that the Treasury provide loans up front and insurance against potential losses on the back end. It’s what Paul Krugman called ‘heads I win, tails the taxpayers lose.’ By the way, it may cost another $1 trillion.”

The Treasury Secretary claims taxpayers won’t lose a full trillion, because the assets aren’t as worthless as their current market prices suggest. But if that’s true, why does he continue to insist on federal accounting rules that force banks to value their assets at the current depressed market prices? Either the accounting rules are right — in which case taxpayers will end up losing a trillion dollars — or they are wrong, amplifying financial panics — in which case the rules should be repealed, so that banks, not taxpayers, will be able to take the risk of holding the assets. (If these accounting rules, known as “mark-to-market” accounting, had been in place in the late 1980s, “every major commercial bank would have collapsed,” wiping out the economy).

It’s not even clear that all these bailouts are needed. As William Seidman, the banking official who helped clean up the S&L Crisis as head of the RTC, notes, the government’s $170 billion AIG bailout was absurdly expensive and wasteful. “We paid off huge debts that AIG had in the swaps market, which we probably did not have to do. We bought a number of assets from AIG at high prices, which we probably did not have to do.”

That includes a huge unneeded windfall for the investment bank formerly headed by Treasury Secretary Paulson, Goldman Sachs, which received billions of dollars from taxpayers that it did not even need, through the AIG bailout. As James Piereson notes,

“Goldman wound up receiving $12.9 billion in December from AIG in an initial payout from the TARP money. Thus, taxpayer funds were used not so much to bail out AIG, but rather its “counterparties,” including Goldman and a dozen or so other major banks. Now, in an interview with the press on Friday, Goldman’s chief financial officer has declared that the company was never in jeopardy from a collapse of AIG — that it held some $7.5 billion in collateral against its AIG account and that it had hedged the remaining $2.5 billion in its net exposure using credit-default swaps with other parties. . .David Viniar, Goldman’s chief financial officer, insisted that the company would not have been damaged if AIG had been allowed to collapse. Even so, the company profited handsomely from the payout from AIG, courtesy of the American taxpayer. Goldman could not turn down the payout without damaging its shareholders, Mr. Viniar said. In other words, if the U.S. government — via AIG — was going to offer a gift, Goldman was not in a position to turn it down. Which raises the question: What then was the point of the AIG rescue? The claim by Paulson et al that a collapse of AIG would bring down the international financial system was entirely unsubstantiated. Congress passed the bailout bill under pressure from the financial authorities that they had to act to ‘save the system.’ It turns out that this was far from being true. The lesson from this is that everyone — most especially members of Congress — should look skeptically upon claims that this or that institution is ‘too big to fail’ or that a catastrophe awaits of a major financial institution is not bailed out.”

Politicians frequently claim the sky will fall if their proposals are not implemented, even when they know that is not true. Obama claimed the $800 billion stimulus package was needed to avert “disaster” and “irreversible decline.” But the Congressional Budget Office, controlled by his own Congressional allies, admitted that the stimulus package will shrink the economy over the long run, in reports released both before and after the bill’s passage.

While pushing through $8 trillion in bailouts, and trillions more in debt from massive budget increases, the Obama administration has ignored inexpensive possible remedies for the financial crisis like reform of “mark-to-market” accounting rules. Many commentators are now calling for relaxation of those rules in order to stem the financial crisis, including former FDIC Chairman William Isaac, Congressmen Ed Perlmutter (D-CO) and Paul Kanjorski (D-PA), the Wall Street Journal, John Berlau, Jeff Miller, Holman Jenkins, Newt Gingrich, and the Republican Study Committee

Human Achievement Hour

by Michelle Minton on March 23, 2009 · 18 comments

in Energy, Environment, Global Warming, International, Odds & Ends, Private Conservation

This week CEI announced the creation of Human Achievement Hour (HAH) to be celebrated at 8:30pm on March 28th 2009 (the same time and date of Earth Hour).

Our press release described ways people might celebrate the achievements of humanity such as eating diner, seeing a film, driving around, keeping the heat on in your home—all things that Earth Hour celebrators, presumably, should be refraining from. In the cheekiest manner, we claimed that anyone not foregoing the use of electricity in that hour is, by default, celebrating the achievements of human beings. Needless to say, the enviros in the blogosphere didn’t take to kindly to our announcement.

Matthew Wheeland, an environmental journalist called the holiday “mind-blowingly strange” and pondered if Earth hour folks are including in their numbers people in countries that don’t have enough electricity to make the choice to turn out their lights. Of course, they don’t have the choice to acquire electricity whereas anyone can choose to stop using human technology if they wish.

In fact, one might even say that they are seething about it–lighting up the various green-oriented blogs with comments such as this sarcastic gem from Jon Petherbridge:

Human achievement hour. Another great idea. I’ll remember how great we all are as I watch the heat mirages rising from the surrounding hoods as my arm hangs out the window during my next July traffic jam.

Or maybe I’ll remember it the next time an American attack aircraft blows up a wedding party in Afghanistan. At least in that example we don’t have to feel bad for the dead Afghanis as they have a sexist culture that we are morally obligated to obliterate, quite literally if necessary. I reckon I’ll celebrate human achievement hour when everybody’s divorced or bisexual and drinking coca-cola in traffic jams on their way to work folding sandwiches for the lawyers and the bankers who we will worship for allowing us to support them by paying on our credit cards.

Go human achievement hour. Pile it on. Diversify, equalize, refinance and over qualify.

I’m feeling better already.

I love and will not give up my electric toothbrush.

They are also attempting to erase any attention directed at HAH, such as the Wikipedia article.

Of course, there are people out there who appreciate what we are trying to say. For example, Rajesh in India writes on his blog:

Coming from India where we routinely suffer power cuts due to mixed-market policies of the government, I found this post from The New Clarion fantastic…Lets use the wavelength of both light and philosophy to keep darkness at bay.

Green and private conservation are fine. We have no problem with an individual (or group) that wants to sit naked in the dark without heat, clothing, or light. Additionally, we’d have no problem with the group holding a pro-green technology rally. That’s their choice. But when this group stages a “global election” with the express purpose of influencing “government policies to take action against global warming,” we have every right as individuals to express our vote for the opposite

If our Human Achievement Hour is at all a dig against Earth Hour, it is so only by the fact that we are pointing out what Earth Hour truly is about: it isn’t pro-earth, it is anti-man and anti-innovation. So, on March 28th I plan to continue “voting” for humanity by enjoying the fruits of man’s mind.

U.S. Chamber unveils NIMBY Watch Web site

by Marlo Lewis on March 23, 2009

in Energy, Global Warming, Stimulus to Nowhere

Last week, the U.S. Chamber of Commerce unveiled a NIMBY-Watch Web site called Project No Project .

With case studies from more than 30 states, Project No Project  chronicles how NIMBY (“not in my backyard”) activists “block energy projects by organizing local opposition, changing zoning laws, opposing permits, filing lawsuits, and bleeding projects dry of their financing.” Many of the projects blocked are not coal plants but alternative energy projects or infrastructure often touted as “green.”

The site invites readers to provide examples from their own locales of NIMBY efforts to block or stall energy-related projects.

Proponents of “green jobs” should be concerned as much as free-market and property-rights advocates, because ”stimulus” projects are vulnerable to the same NIMBY tactics that, for example, have immobilized the Cape Wind Project in Nantucket, Mass.

Although Project No Project does not mention it, we also know from  comments submitted by the U.S. Chamber and allied groups on EPA’s Advanced Notice of Proposed Rulemaking, that NIMBY forces will aquire powerful new litigation tools if EPA, in response to the Supreme Court’s Massachusetts v. EPA decision, establishes greenhouse gas (GHG) emission standards for new motor vehicles. (For more background, see my recent post on MasterResource.Org.)

In a nutshell, vehicular GHG emission standards will make carbon dioxide (CO2) a “regulated air pollutant” under the Clean Air Act (CAA). That, in turn, will automatically make CO2 “subject to regulation” under the Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program. 

The cutoff for regulation as a “major stationary source” under PSD is a potential to emit 250 tons per year (TPY) of a CAA-regulated air pollutant. Approximately 1.2 million previously unregulated entities (office buildings, hotels, big box stores, enclosed malls, even commercial kitchens) actually emit 250 TPY. All would be vulnerable to new regulation, monitoring, paperwork, controls, and penalties if EPA establishes GHG emission standards for new motor vehicles.

To qualify for a PSD permit, major stationary sources must comply with “best available control technology” (BACT) standards. Even part from any investments required for BACT compliance, the PSD permitting process is costly and time-consuming. In 2007, each permit on average cost $125,120 and 866 burden hours for a source to obtain. No small business could operate subject to the PSD administrative burden.

So NIMBY forces must be licking their chops at the prospect that EPA Administrator Lisa Jackson plans on April 30 to issue an “endangerment finding” for GHGs. An endangerment finding  is the prerequisite to establishing GHG emission standards for new motor vehicles and, thus, the critical first step to making CO2 a CAA-regulated “air pollutant.” 

When and if EPA regulates CO2, expect a surge of litigation demanding that EPA impose PSD and BACT requirements on developers proposing to build or renovate big box stores, strip malls, fast-food restaurants, or other projects NIMBYites deem undesirable or contrary to “smart growth.”

Bottom line: Applying PSD and BACT to CO2–the inexorable consequence of establishing vehicular GHG emission standards–will turn the CAA into a gigantic Anti-Stimulus package. Is Team Obama paying attention?

“Heads I win, Tails the Taxpayers Lose”: Toxic Asset Rip-Off

by Hans Bader on March 23, 2009

in Bailout Watch, Deregulate to Stimulate, Economy, Politics as Usual, Regulation, Stimulus to Nowhere

That’s how analysts describe the trillion-dollar toxic-asset buy-up program proposed this weekend by the Obama Administration: “the president is putting forth his idea to have the Treasury become the new AIG. In order to get hedge funds to buy up toxic debt, Obama is proposing that the Treasury provide loans up front and insurance against potential losses on the back end. It’s what Paul Krugman called ‘heads I win, tails the taxpayers lose.’ By the way, it may cost another $1 trillion.”

The Treasury Secretary claims taxpayers won’t lose a full trillion, because the assets aren’t as worthless as their current market prices suggest. But if that’s true, why does he continue to insist on federal accounting rules that force banks to value their assets at the current depressed market prices? Either the accounting rules are right — in which case taxpayers will end up losing a trillion dollars — or they are wrong, amplifying financial panics — in which case the rules should be repealed, so that banks, not taxpayers, will be able to take the risk of holding the assets. (If these accounting rules, known as “mark-to-market” accounting, had been in place in the late 1980s, “every major commercial bank would have collapsed,” wiping out the economy).

It’s not even clear that all these bailouts are needed. As William Seidman, the banking official who helped clean up the S&L Crisis as head of the RTC, notes, the government’s $170 billion AIG bailout was absurdly expensive and wasteful. “We paid off huge debts that AIG had in the swaps market, which we probably did not have to do. We bought a number of assets from AIG at high prices, which we probably did not have to do.”

That includes a huge unneeded windfall for the investment bank formerly headed by Treasury Secretary Paulson, Goldman Sachs, which received billions of dollars from taxpayers that it did not even need, through the AIG bailout. As James Piereson notes,

“Goldman wound up receiving $12.9 billion in December from AIG in an initial payout from the TARP money. Thus, taxpayer funds were used not so much to bail out AIG, but rather its “counterparties,” including Goldman and a dozen or so other major banks. Now, in an interview with the press on Friday, Goldman’s chief financial officer has declared that the company was never in jeopardy from a collapse of AIG — that it held some $7.5 billion in collateral against its AIG account and that it had hedged the remaining $2.5 billion in its net exposure using credit-default swaps with other parties. . .David Viniar, Goldman’s chief financial officer, insisted that the company would not have been damaged if AIG had been allowed to collapse. Even so, the company profited handsomely from the payout from AIG, courtesy of the American taxpayer. Goldman could not turn down the payout without damaging its shareholders, Mr. Viniar said. In other words, if the U.S. government — via AIG — was going to offer a gift, Goldman was not in a position to turn it down. Which raises the question: What then was the point of the AIG rescue? The claim by Paulson et al that a collapse of AIG would bring down the international financial system was entirely unsubstantiated. Congress passed the bailout bill under pressure from the financial authorities that they had to act to ‘save the system.’ It turns out that this was far from being true. The lesson from this is that everyone — most especially members of Congress — should look skeptically upon claims that this or that institution is ‘too big to fail’ or that a catastrophe awaits of a major financial institution is not bailed out.”

Politicians frequently claim the sky will fall if their proposals are not implemented, even when they know that is not true. Obama claimed the $800 billion stimulus package was needed to avert “disaster” and “irreversible decline.” But the Congressional Budget Office, controlled by his own Congressional allies, admitted that the stimulus package will shrink the economy over the long run, in reports released both before and after the bill’s passage.

While pushing through $8 trillion in bailouts, and trillions more in debt from massive budget increases, the Obama administration has ignored inexpensive possible remedies for the financial crisis like reform of “mark-to-market” accounting rules. Many commentators are now calling for relaxation of those rules in order to stem the financial crisis, including former FDIC Chairman William Isaac, Congressmen Ed Perlmutter (D-CO) and Paul Kanjorski (D-PA), the Wall Street Journal, John Berlau, Jeff Miller, Holman Jenkins, Newt Gingrich, and the Republican Study Committee

Alarmists turn blind eye to global warming benefits–again

by Marlo Lewis on March 23, 2009

in Energy, Global Warming, International, Natural Resources

Tomorrow, the House Foreign Affairs Committee will hold a hearing on the national security threats from melting Arctic ice. Greenwire (subscription required), the Online environmental news service, explains the rationale for the hearing:

 In a report last year, the European Commission warned that the North Atlantic Treaty Organization must be prepared for an intensified “scramble for resources” as melting glaciers and sea ice open up previously inaccessible areas to exploitation. The report explicitly expressed concerns over “long term relations with Russia,” (ClimateWire, April 2, 2008).

Now, opening up ”previously inaccessible” areas to oil and gas development could also be a font of economic and national security benefits. One thing we know for sure about Arctic mineral resources–they aren’t owned by Saudi Arabia, Iran, or Venezuela, and never will be controlled by OPEC.

Yes, there will be competition for those resources, but since when is competition an automatic negative for the USA?

Clearly, there are opportunities here as well as risks–opportunities to create thousands of high-paying U.S. jobs, boost GDP by tens to hundreds of billions of dollars, and generate billions in deficit-reducing tax revenues and royalties.

More pertinently, exploitation of previously inaccessible resources could significantly diversify U.S. oil and gas–a longstanding objective of U.S. energy security policy.

But Gorethodoxy demands blind obedience by its votaries. Discussing the potential benefits of global warming is strictly verboten.

Blind to Obama’s Broken Promises

by Hans Bader on March 23, 2009 · 13 comments

in Bailout Watch, Economy, Politics as Usual, Sanctimony, Stimulus to Nowhere

In 2008, Obama promised a “net spending cut” (although he never did come up with cuts to offset his proposed spending increases). Obama broke this campaign promise in a big way with his proposed budget, which could bankrupt the United States, according to senior Senators.

Obama’s budget would increase spending levels so much that budget deficits would rise by $4.8 trillion to $9.3 trillion while taxes would increase by $1.9 trillion, according to the Congressional Budget Office.

Yet Obama’s campaign workers have apparently learned nothing from this. Across the country, they are now volunteering their time to lobby fellow citizens to support his budget. “It’s the change we all voted on,” said Althea Thomas of Evanston, Illinois. Well, it’s not the “change” that was sold to me by my Uncle Ernie, a California campaign worker for Obama. He didn’t say anything about trillions more in debt, and tried to get me to vote for Obama based on George Bush’s costly war in Iraq.

Obama has broken at least ten campaign promises, including seven promises in signing the economy-shrinking $800 billion stimulus package, and one promise in signing the Lilly Ledbetter law and the SCHIP tax increase.

After it covertly inserted language into the stimulus package to protect millions of dollars in bonuses at AIG, a major liberal donor, the Administration later switched course and sought to curry favor with an outraged public by praising the House for passing a 90 percent bonus tax, a tax broadened to cover not just AIG but also employees at other, healthy TARP banks. On March 22, the New York Times reported that the Administration wants to impose vague compensation limits on all banks and financial institutions, whether or not they receive any taxpayer money at all, and perhaps all public companies as well. To avoid stringent application of those limits, companies’ executives would have an incentive to curry favor with their federal masters, by making campaign contributions to Obama and his liberal Congressional allies (the way AIG did). Meanwhile, the Administration is now backtracking on its earlier praise for the legislation that would tax the AIG bonuses.

Obama claimed the $800 billion stimulus package was needed to avert “disaster” and “irreversible decline.” But the Congressional Budget Office, controlled by his own Congressional allies, admitted that the stimulus package will shrink the economy over the long run, in reports and studies released before and after the bill’s passage.

In other news, Obama nominated a former fundraiser for the left-wing group ACORN to serve as a judge on the Chicago-based Seventh Circuit Court of Appeals. ACORN, a beneficiary of the stimulus package, helped spawn the mortgage crisis by promoting “liar loans.” It has also engaged in extensive financial fraud and vote fraud. The Obama Administration has chosen ACORN to help conduct the 2010 census, which will be used to reallocate seats in Congress.

Fishing for Rationality in the Beauty Salon

by Greg Conko on March 23, 2009

in Culture, Healthcare, Nanny State, Personal Liberty, Precaution & Risk, Regulation

Are you thinking of getting one of those cool new “fish pedicures” in which two-inch-long carp nibble dead skin off your toes and feet? Well, you’d better act fast. Many states are considering a ban on the process. And an article in this morning’s Wall Street Journal (sorry, may be for subscribers only) explains that 14 states have now already banned it or found that the process violates an existing cosmetology or other public health rule.

Indeed, the introduction of fish pedicures in the United States was almost stillborn after Vietnamese immigrant John Ho imported the technique and thousands of fish from China. Ho, who is believed to be the first to use the technique in the U.S., was almost thwarted by the Fairfax County Virginia Health Department, which decided that a communal tub shared by the feet of several customers at once was a “public swimming pool” and that the fish made it unsanitary. A switch to individual tubs was enough to make it lawful in Virginia.

And, in other good news, Ohio has made an affirmative decision that the process is OK. In a fit of rationality that often seems unusual for state public health officials, the Ohio Board of Cosmetology decided the practice was sanitary enough. As the Journal explains:

[O]phthalmologist Marilyn Huheey, who sits on the Ohio State Board of Cosmetology, decided to try it out for herself in a Columbus salon last fall. After watching the fish lazily munch on her skin, she recommended approval to the board. “It seemed to me it was very sanitary, not sterile of course,” Dr. Huheey says. “Sanitation is what we’ve got to live with in this world, not sterility.”

Would that all governments recognized what seems so obvious.

Regarding the Economics of Environmentalism, A Response to CAP’s Brad Johnson

by William Yeatman on March 20, 2009

in Global Warming, Odds & Ends

Over at the Center for American Progress, Brad Johnson, my sometimes interlocutor, takes issue with a recent Gallup poll for giving a “false choice between environmental protection and economic growth.” The subject of Johnson’s analysis is a report on the Gallup website that says,

“For the first time in Gallup’s 25-year history of asking Americans about the trade-off between environmental protection and economic growth, a majority of Americans say economic growth should be given the priority”

Mr. Johnson asserts that the Gallup’s poll is flawed because the question is inaccurate. According to Mr. Johnson, there is no trade-off between economic growth and environmental protection. We can have our cake and eat it, too, implies Mr. Johnson, and he cites two studies to prove his point.

His evidence, however, is far from convincing.

He first notes a UC-Berkeley study that claims “California’s Green Policies Have Created 1.5 Million Jobs and Added $45 Billion to The Economy.”

Yet the results of this study have been contested by many knowledgeable sources, among them the Pacific Research Institute’s Tom Tanton, who formerly served on the California Energy Commission, as well as Dr. David Kreutzer, an economist at the Heritage Foundation.

Tanton and Kreutzer are colleagues and friends of CEI, so some readers might mistakenly fault their excellent work on account of the ideological affinities of the organizations for which they work.

But if you are inclined to discount these studies, then you must also discard Mr. Johnson’s second piece of evidence, “A National Green Economy Creates Millions of New Jobs,” which was authored by Greenpeace International.

In any case, the most damning indictment of the UC-Berkeley study is the fact that its author, Professor David Roland-Holst, ran one of the two models used in an analysis commissioned by the California Air Resources Board to measure the economic impact of AB 32, California’s 2006 global warming law. The CARB study concluded that reducing greenhouse gas emissions about 20% by 2020 would increase economic growth in the Golden State. A non-partisan peer-review promptly ripped the study to pieces for being wrong and politically motivated.

Fighting the supposed problem of “global warming” might or might not be a good idea. After all, it hasn’t warmed in almost a decade, despite a steady increase in global greenhouse gas emissions. The much-vaunted “scientific consensus” failed to predict steady global temperatures, and they can’t explain it, either.

So it seems there is some uncertainty on global warming. What is certain, however, is that reducing emissions also reduces economic growth, by making energy more expensive.

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