January 2012

Finding Something to Praise in Obama’s Speech Today

by Iain Murray on September 22, 2009

in Economy, Energy, Environment, Global Warming, International, Regulation, Sanctimony, Stimulus to Nowhere

While this speech is mostly hogwash, I am surprised and delighted to be able to find one thing to praise in it:

Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge

This is the right thing to do, for reasons I explained in my recent paper co-written with Sterling Burnett of NCPA (extract follows jump).

While many governments of developed nations argue for a worldwide reduction in fossil fuel use in order to combat climate change, those same governments also subsidize energy use and production.

In 2001, the countries of the EU-15 (the “old Europe” nations in the European Union) spent $16.77 billion (in 2009 dollars) subsidizing coal and $11.23 billion subsidizing oil and gas.

The International Energy Agency (IEA) estimates that developing countries spend around $220 billion annually on subsidies for energy production and consumption, of which $170 billion subsidizes fossil fuels [see Figure I]. Including developed countries, subsidies for energy production and consumption worldwide amount to around $300 billion, the majority of which are for fossil fuels.

Such subsidies reduce energy prices below what the market would set, encouraging greater use and raising emissions levels. Direct subsidies include grants to producers and consumers, government investment in research or infrastructure and preferential loans or tax treatment. Indirect subsidies include trade restrictions, price caps and market regulations that guarantee sales volume and restrict competition.

Many signatories to Kyoto subsidize carbon-based fuel use and production. Such subsidies “tilt the playing field,” discouraging research expenditures by private energy companies in developing alternative energy sources. Producers and consumers of other energy sources then demand subsidies to “level the playing field.” Thus, government intervention causes significant distortions in energy markets.

British Petroleum estimates that countries that subsidize transportation fuel use accounted for 96 percent of the increase in oil demand in 2007.13 Many of them are less-developed nations that subsidize both production and consumption of fuels. The IEA estimates that removing domestic price subsidies in China, India, Indonesia, Iran, Russia, Kazakhstan, South Africa and Venezuela would reduce global energy use 3.5 percent and reduce global CO2 emissions 4.6 percent.

U.S. Energy Subsidies.

The U.S. Energy Information Administration (EIA) calculates that federal energy subsidies amount to $16 billion annually [see Table II]:

In 2007, the federal government spent approximately $5.5 billion on subsidies for the coal, oil and natural gas industries— principally tax breaks for investment — including $3 billion for coal and natural gas, and more than $2 billion for research and development of clean-coal technology to reduce greenhouse gas emissions from coal.

The government spent an additional $1.2 billion for electricity production and use (not fuel specific), and $2.8 billion to increase the energy efficiency of homes and businesses.

It spent an additional $5 billion for renewable energy production and use, mostly in the form of tax breaks.

Finally, $1.2 billion went to the nuclear industry.

The EIA found that subsidies doubled from 1999 to 2007, due mainly to expanded subsidies for renewable energy and clean-coal technology.

Policy Recommendations. There are a number of neutral energy policies that could be implemented at the national or international level to reduce subsidized production and use:

International trade talks should include eliminating subsidies for fossil fuel production and consumption.

National budgets should be reviewed with the goal of eliminating programs that encourage energy use.

Subsidies and tax breaks, or tax penalties, for specific energy technologies should be eliminated to remove price distortions in energy markets.

A neutral energy tax policy, for example, would include replacing the federal tax-depreciation schedule for investment in new capital stock with immediate expensing. New equipment almost always produces fewer emissions per unit of output than older equipment.

Changing the depreciation schedule so that new investments could be written off immediately would make it profitable to replace old equipment at a much quicker pace. This simple change could do more to increase energy efficiency throughout the economy than the current complicated expensing regime.

Unfortunately, given the President’s praise for loan guarantees and tax credits elsewhere in the speech, he is failing to pursue a neutral energy tax policy, but I’ll give him due credit for at least addressing half of the market distortion.

Obama Speech to the UN

by Myron Ebell on September 22, 2009 · 16 comments

in Energy, Global Warming, International

President Barack Obama’s speech on global warming to the United Nations today is based on fantasy.  Here are some quotes from the speech followed by the reality.

“…[T]he threat from climate change is serious, it is urgent, and it is growing.”  Reality: global mean temperatures increased slightly from 1977 to 2000.  Temperatures have been flat since then.

“Rising sea levels threaten every coastline.”  Reality: sea levels have been rising on and off since the end of the last ice age 13,000 years ago.  The rate of sea level rise has not increased in recent decades over the nineteenth and twentieth century average.

“More powerful storms and floods threaten every continent.”  Reality: there is no upward global trend in storms or floods.

“More frequent drought and crop failures breed hunger and conflict in places where hunger and conflict already thrive.”  Reality: there is no upward global trend in major droughts.  Reversals in large-scale cycles have meant that the southward march of the Sahara Desert into the Sahel has been reversed in recent years and the Sahara is now shrinking.

“On shrinking islands, families are already being forced to flee their homes as climate refugees.”  Reality: some Pacific islanders may want to emigrate to New Zealand or Australia and are claiming that their islands are disappearing as the reason, but shrinkage has been minimal in recent decades because sea level rise has been minimal.

President Obama’s policy prescriptions are energy rationing and energy poverty disguised as growth and prosperity.  The emissions reductions that he promises the United States will make through cap-and-trade legislation are dead in the water in the U. S. Senate and would not survive a second vote in the U. S. House.  If enacted, cap-and-trade would consign the economy to perpetual stagnation and make the U. S. into a second-rate economic power.

His policy prescription for poor countries is to promise them massive “financial and technical assistance”.  The track record of paying off poor countries is that it has lined the pockets of corrupt leaders and bureaucracies with billions and tens of billions of dollars, but has done nothing to help those countries become prosperous.  What these countries need is free markets and abolishing barriers to trade.  The global warming policies advocated by the Obama Administration and the Democratic-controlled Congress would raise trade barriers and foster energy poverty throughout the world.  Energy rationing is not the way forward and is not a message of hope for the poorest people in the world, who lack access to electricity and modern transportation.

Regulation of the Day 54: Shovelnose Sturgeon

by Ryan Young on September 22, 2009

in Deregulate to Stimulate, Environment, Natural Resources, Regulation, Regulation of the Day

Shovelnose sturgeon population figures are healthy. Why does the Fish and Wildlife Service want to list it as a threatened species, then? Because it looks like the pallid sturgeon, which is currently listed as endangered.

AP: Obama Health-Care Plan Raises Taxes, Breaks Campaign Promises

by Hans Bader on September 21, 2009

in Energy, Environment, Global Warming, Healthcare, Natural Resources, Politics as Usual, Sanctimony

The Associated Press is now chiding President Obama for falsely claiming that his proposed tax on uninsured people is not a tax.   It is a tax increase, the AP says, and it would be enforced by the IRS: “Memo to President Barack Obama: It’s a tax. Obama insisted this weekend on national television that requiring people to carry health insurance – and fining them if they don’t – isn’t the same thing as a tax increase. But the language of Democratic bills to revamp the nation’s health care system doesn’t quibble. Both the House bill and the Senate Finance Committee proposal clearly state that the fines would be a tax.”

The AP also notes that the Administration’s proposed health-care tax increases contradict “Obama’s campaign pledge on taxes”:  “”I can make a firm pledge,’ he said in Dover, N.H., on Sept. 12, 2008. ‘Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.’ He repeatedly promised ‘you will not see any of your taxes increase one single dime.’”

Obama earlier broke his promise not to raise taxes by signing into law a regressive SCHIP excise tax increase and backing a massive new cap-and-trade energy tax (supposedly to fight global warming)

It’s part of a long line of broken promises, such as Obama’s pledge to enact a “net spending cut,” which he broke with huge budgets that will explode the national debt through $9.3 trillion in massively increased deficit spending.

The costly cap-and-trade energy legislation passed by the House and supported by Obama would lead to big tax increases, Administration officials privately have conceded, even though they publicly claim otherwise.  “Officials at the Treasury Department think cap-and-trade legislation would cost taxpayers hundreds of billion in taxes, according to internal documents circulated within the agency and provided to The Washington Times” by CEI.  It could raise household taxes by $1761 per year, equivalent to a 15 percent tax increase.   It would also result in “loss of steel, paper, aluminum, chemical, and cement manufacturing jobs,” as jobs migrate overseas to countries which have fewer environmental protections than the U.S. does.

Obama earlier admitted that “under my plan of a cap and trade system, electricity rates would necessarily skyrocket,” since its costs would be passed “on to consumers.”  Although cap-and-trade backers claim it will cut greenhouse gas emissions, it may perversely increase them and also result in dirtier air, as well as harming forests and water supplies.

Americans for Tax Reform summarizes the tax increases in ObamaCare: an individual mandate tax of $900 per individual or $3800 per family (if you don’t have health insurance); an employer mandate tax of $400 per employee if health coverage is not offered; an “excise tax on high-cost health plans”; a “medicine cabinet tax”; capping Flexible-Spending Accounts (FSA’s); abolishing most HSAs; and increasing tax penalties for HSAs.

All these tax increases won’t even pay for Obama’s massive spending binge.  He is relying on $2 trillion in imaginary savings to pay for his health-care plan.  Even Democratic governors have criticized its huge cost.

One of Obama’s economic advisers said his health-care plan would lead to “crippling deficits” and “higher taxes.”  The Congressional Budget Office also says it will increase the deficit.

New Frontier? Hardly

by Ivan Osorio on September 21, 2009 · 1 comment

in Agriculture, Culture

Today in the Washington Examiner, James Jay Carafano of The Heritage Foundation makes a strange case for what he describes as the opening of a new American frontier — where it was once closed. The column is highly unconvincing for two main reasons.

First, and most importantly, Carafano seems to imply that there is some direct correlation between food production levels and the number of people working in agriculture:

A report prepared for the G8 in April concluded that global food production would need to double by 2050 to keep the world fed. U.S. agriculture will have to be an important part of that increase. Likewise, strong, vibrant rural communities are needed to build sustainable agriculture and protect water, wildlife and other natural resources.

America’s vanishing middle should be of concern to all Americans. Though agricultural workers comprise only about 2 percent of the work force and account for less than 1 percent of GDP, they are at the start of a vast and vital assembly line. American farms are part of a complex industry that processes and distributes food, energy (biofuels) and other products — by some estimates about 20 percent of the economy.

This is a non-sequitur in regard to agricultural production. Fewer people work on farms today because increases in productivity allow fewer workers to produce more. As the Department of Agriculture’s Economic Research Service notes:

American agriculture and rural life underwent a tremendous transformation in the 20th century. Early 20th century agriculture was labor intensive, and it took place on a large number of small, diversified farms in rural areas where more than half of the U.S. population lived. These farms employed close to half of the U.S. workforce, along with 22 million work animals, and produced an average of five different commodities. The agricultural sector of the 21st century, on the other hand, is concentrated on a small number of large, specialized farms in rural areas where less than a fourth of the U.S. population lives. These highly productive and mechanized farms employ a tiny share of U.S. workers and use 5 million tractors in place of the horses and mules of earlier days.

Second, Carafano’s definition of “frontier” seems to rely entirely on population density:

Today, hundreds of counties in the Plains states house fewer than six people per square mile. By 19th-century standards, that was frontier territory.

But Frederick Jackson Turner, whose famous 1893 essay, “The Significance of the Frontier in American History,” Carafano cites at the beginning of his column, didn’t settle on population density alone as a definition:

What is the frontier? It is not the European frontier — a fortified boundary line running through dense populations. The most significant thing about it is that it lies at the hither edge of free land. In the census reports it is treated as the margin of that settlement which has a density of two or more to the square mile. The term is an elastic one, and for our purposes does not need sharp definition. We shall consider the whole frontier belt, including the Indian country and the outer margin of the “settled area” of the census reports.

Much of that “free land” was available in previously unsettled areas, where legal and political institutions were weak, when they were present at all. I would propose such a lack of strong central authority as part of  any sensible definition of “frontier” — a criterion that no part of the U.S. meets today.

Yvo de Boer’s low/inflated expectations

by Marlo Lewis on September 21, 2009

in Global Warming

In today’s E&E TV interview with Monica Trauzzi (http://www.eenews.net/tv/), UNFCCC Executive Secretary Yvo de Boer did not balk at Trauzzi’s statement that, “Senate Majority Leader Harry Reid has indicated that the Senate may not see floor action on climate until next year.” Nor did he bat an eye when she said that the Obama administration seems to have ”shifted to using the Clean Air Act to regulate emissions.” Like many observers, de Boer appears to have low expectations for the Waxman-Markey bill, at least for this year.

Nonetheless, de Boer spoke as if he expected President Obama to accomplish great things at Copenhagen climate conference in December: “From an international point of view, from the point of view of U.N. negotiations it’s not essential that this legislation be finalized, but that statement of political intent from the president — that’s the thing that really counts in the international arena.”

Oh really — like President Bill Clinton’s statement of political intent when he signed the Kyoto Protocol in November 1998? Clinton’s signature proved to be worth little from ”the point of view of U.N. negotiations,” because Clinton dared not submit the treaty to the U.S. Senate for a debate and vote on ratification.

The House passed Waxman-Markey by a razor thin (219-212) margin. In the Senate, proponents will need to find a three-fifths (60-vote) super-majority to defeat a GOP filibuster.  To ratify Kyoto II, Obama would need to assemble a two-thirds super-majority. In the Copenhagen round, the EU is pushing for tougher emission reduction targets than those in Waxman-Markey.

If President Obama, Sen. Reid, and Sen. Barbara Boxer (D-CA) prove unable to assemble 60 votes to pass Waxman-Markey in the Senate, what are the odds that they could line up 67 votes to ratify Kyoto II?

Mr. de Boer is mistaken. The fate of Waxman-Markey largely foreshadows and determines the fate of Kyoto II.

ObamaCare’s Smoke and Mirrors: Huge Costs Paid for by Imaginary Savings

by Hans Bader on September 21, 2009

in Healthcare, Legal, Politics as Usual, Sanctimony

Obama’s health care plan uses imaginary savings to finance massive new spending. His claim that it will not increase the deficit is based on the notion that he can squeeze $2 trillion in savings out of the current health care system to finance his plan’s huge costs.

Washington Post columnist Charles Krauthammer, who once practiced medicine, points out in his column that these savings aren’t real, and that politicians falsely promise to pay for new programs through imaginary savings all the time:

“Obama said he would largely solve the insoluble cost problem of ObamaCare by eliminating ‘hundreds of billions of dollars in waste and fraud’ from Medicare. . . .That’s just an insult to our intelligence. Waste, fraud and abuse as the all-purpose piggy bank for budget savings has been a joke since Jimmy Carter first used it in 1977. Moreover, if half a trillion is waiting to be squeezed painlessly out of Medicare, why wait for health-care reform? If, as Obama repeatedly insists, Medicare overspending is breaking the budget, why hasn’t he gotten started on the painless billions in ‘waste and fraud’ savings?”

Even staunch Democrats admit the president’s claims are questionable.  Tennessee Governor Phil Bredesen (D) is criticizing Obama’s health care plan as “the mother of all unfunded mandates,” saying it will force states to massively raise taxes or run big deficits. Earlier, one of Obama’s own economic advisers said his health care plan would explode the federal budget deficit and lead to “crippling deficits” and “higher taxes.”

The Associated Press said Obama’s proposals would “would drive up the deficit by billions of dollars.”  The Washington Post, which hasn’t endorsed a Republican for president since 1952, noted that “the expanded coverage would add more than $1 trillion to the deficit.”

LibertyWeek 61: How About FCC Neutrality?

by Richard Morrison on September 21, 2009

in CEI Projects, Environment, Features, Global Warming, Podcast, Zeitgeist

Your host Richard Morrison welcomes returning guest co-host William Yeatman and special guest commenter Ryan Radia to the program for Episode 61 of the LibertyWeek podcast. We start with the FCC’s just-announced proposal for “net neutrality,” Treasury documents that reveal the true cost of cap-and-trade legislation and the plan for getting over California’s great depression. We then move on to the G20 Summit’s potential path to prosperity and the ever-expanding scandal that is ACORN.

ACORN Tied to Brooklyn Land-grabber

by Marc Scribner on September 21, 2009 · 1 comment

in Economy, Legal, Personal Liberty, Politics as Usual, Stimulus to Nowhere

The multi-billion dollar Atlantic Yards development project in Brooklyn, New York–subsidized to the tune of $1.6 billion by New York taxpayers–is facing new scrutiny after politically-connected developer Bruce Ratner’s ties with embattled left-wing activist group ACORN were revealed. As it currently stands, the public-financed redevelopment plan relies on extensive use of eminent domain that would leave many long-time residents and business owners out in the cold. But ACORN, as one would expect, is framing the debate in racial terms:

ACORN’s New York director, Bertha Lewis, is a vocal and enthusiastic supporter of Ratner’s development. At a news conference announcing the project would proceed, Lewis, onstage, planted photo-op kisses on both Ratner and Mayor Michael Bloomberg.

Lewis has also framed it on racial terms: “The overwhelming folks who are opposed are white people and wealthier people and more secure people and people who just arrived. *** We’re tired of being pushed out.”

It helps inspire Lewis, one imagines, that ACORN got that loan from Ratner and that Ratner gave her a hand in devising the low-income housing portions of his development. Ratner, it appears, has bought an ally, not just with cash, but with power — ACORN will now be shaping who lives where. “We’re developers now,” Lewis told New York Magazine.

But what Lewis and ACORN don’t mention is that Ratner quietly directed $1.5 million in grants and low-interest loans to the cash-strapped group last year–after major foundation support dried up due to an embezzlement scandal–leading Atlantic Yards opponent and former Working Families Party (a New York minor party with deep ties to ACORN) activist Patti Hagan to declare, “ACORN is a corrupt organization that had its silence bought by Ratner.” Opposition groups, including Develop Don’t Destroy Brooklyn, have alleged corruption in the past, and even fence-sitting local politicians are questioning the development timeline and the security of future funding, which do not look promising. In fact, a new study estimates that the Atlantic Yards project would take twice as long to complete than Ratner currently claims. But objections from actual neighborhood activists are unlikely to change ACORN’s mind on the project. An ACORN whistleblower says the group stands to bring in at least $5 million annually in housing revenue thanks to a cushy deal brokered by Ratner.

Regulation of the Day 53: Y2K

by Ryan Young on September 21, 2009

in Deregulate to Stimulate, Economy, Legal, Regulation, Regulation of the Day, Tech & Telecom

The case for regulatory sunset provisions is inadvertently made by an entire chapter in the Code of Federal Regulations devoted to lawsuit rules for the Y2K computer bug from nearly a decade ago.

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