January 2012

Is GOP Opposition to Cap-and-Trade Self-Contradictory?

by Marlo Lewis on August 18, 2010 · 1 comment

in Global Warming

Betsy Moler of the U.S. Climate Action Partnership and Phil Sharp of Resources for the Future would like Republicans to think so. After all, if GOP opposition to cap-and-trade is self-contradictory, then it is unstable, hence reversible.

Few Republicans will be gulled by this line of chatter, but just to make sure, I posted a column debunking the Moler-Sharp argument on MasterResource.Org, the free-market energy blog.  

Republicans like markets (or say they do), and cap-and-trade is “market-based,” according to Moler and Sharp. In fact, cap-and-trade is politics-based. The demand for the traded commodity (the emission allowances) is entirely a creature of the cap, which is itself created not by the market but by politicians.

People posting comments on my column made astute observations, which suggest the following definition. Cap-and-trade: Government creation of a market in a commodity that everyone makes and nobody wants; from which a rent-seeking few gain windfall profits at consumers’ expense; and in which opportunities for corruption and creative accounting abound.

Mexico’s Retaliation — A Good Idea?

by Fran Smith on August 17, 2010 · 1 comment

in International, Legal, Trade

Cato’s Dan Ikenson posted today in favor of the trade retaliation measures announced by Mexico in response to the U.S. refusal to open its market to Mexican trucks, as the U.S. had agreed to do under the North America Free Trade Agreement.  Dan details the 15-year history of U.S. intransigence–which involves labor unions, environmental groups, and Congress putting up road blocks.  This recent move by Mexico expands the list of products that will have punitive duties imposed, since their earlier imposition of tariffs didn’t get the U.S. moving.

As a general rule,  I don’t support trade retaliation for a host of reasons — the first being that the measures end up harming people, the consumers in Mexico who have their choices restricted or face rising prices on those goods, and the U.S. exporters, who likely will face falling Mexican demand for the affected goods. Retaliation may also harden the opposition to free trade in the U.S., especially among the NAFTA-haters — the labor unions and environmentalists.

Trade retaliation also can escalate in a tit-for-tat fashion.  “We’ll find something we can get you on,” whether it be a pseudo-phyto-sanitary standard or some other non-tariff approach.

In favor of the Mexican retaliation, a solid argument could be made that the U.S. has acted egregiously in not living up to its NAFTA commitments over a 15-year period.  And Dan Ikenson has made a convincing case. A trade agreement is a contract, with procedures included for settling disputes relating to the agreement.  Mexican followed the rules, brought its complaint, and a NAFTA panel unanimously ruled in favor of them in 2001.  But, the U.S. delayed and tried to wiggle out of its commitments. So Mexico does wear the “white hat” in this dispute, and its actions are justified in the context of NAFTA.

What I’m concerned about is how the labor unions will use this and spin it — with calls of  “unfair” and “unsafe”– to further undermine support for free trade.  Already, the Teamsters’ Jim Hoffa has asked the president to challenge Mexico on the tariffs and said the only way to solve the problem is to not to open the U.S. borders to “unsafe” Mexican trucks but to “renegotiate” NAFTA.  And the labor unions have been running the trade show in Washington, with Congress’ advice and consent.  They have held up the three pending free trade agreements with Panama, Colombia and South Korea, and labor unions’ latest trade attack is focused on Guatemala for not abiding by their labor commitments in the Central America Free Trade Agreement.  They are flexing their muscles for the battles to come.  And it doesn’t bode well for progress on free trade.

Federal Register Hits 50,000 Pages

by Ryan Young on August 17, 2010

in Deregulate to Stimulate, Economy, Regulation

And it’s on pace to hit a near-record 80,447 pages. Over at the Daily Caller, I crunch some of the numbers and offer up some Ideas for regulatory reform, inspired by Wayne Crews’ 10,000 Commandments.

-The Federal Register’s accelerating pace is due to two things. One is implementation of the health care and financial regulation bills. The other is that, fearing a party change in Congress, lame-duck regulating may have already begun.

-Keeping Federal Register page counts in check is important. Keeping the contents of those pages in check is even more important. Comprehensive regulatory reform involves much, much more.

-Such as five-year sunsets for all new regulations unless specifically reauthorized by Congress.

-And a comprehensive look at the regulatory state in each year’s Economics Report of the President.

-And a bipartisan commission to comb through the books for harmful or obsolete regulations. They would hand their recommendations for repeal to Congress for an up-or-down vote, without amendment.

Fannie-Freddie White House Sham Summit Produces Short-Sighted Solutions

by John Berlau on August 17, 2010

in Bailout Watch, Economy, Nanny State, Odds & Ends, Politics as Usual, Zeitgeist

After ramming through a “financial reform” bill that increases government controls on such ”ants” (hat tip to House Minority Leader John Boehner’s comments–distorted by the press–in full context) as orthodontists with installment plans and retail stores with layaway plans, but leaving the elephants Fannie Mae and Freddie Mac to roam free with unlimited taxpayer backing, the Obama administration is today holding a promised summit to at least discuss putting some kind of fence around the government-sponsored enterprises.

But given the controlled atmosphere of the summit–which President Obama is not even attending, preferring instead to campaign on the West Coast–any fence this Obama administration will build will be very easy for the housing elephants to trample over.  Geithner set the tone of the summit this morning with what Fortune calls his “spilled milk” opening remarks attempting deflect criticism of Fannie and Freddie’s losses. “There is nothing we can do to decrease the significant losses Fannie and Freddie incurred ahead of this crisis,” he said.

So far, the firms have taken $15o billion in taxpayer aid.  The Treasury Department’s “Christmas bailout” of the GSE’s–the December 24 order removing the caps of $200 billion dollars that Treasury was authorized to spend on each of the two mortgage underwriters–exposes the American taxpayer to unlimited liability for the entities and their potential new missteps.

Competitive Enterprise Institute President Fred Smith had long warned about the systemic risk Fannie and Freddie posed to the financial system, warning as early as 2000 that their implosion could cause a taxpayer bailout of as much as $200 billion.  Members of Congress expressed shock and outrage, but Smith turned out to have underestimated the ultimate costs.

And new research shows that rather than being “late to the subprime party,” as some press narratives had describe it, Fannie and Freddie created and drove the subprime market as early as the ’90s. Indeed, according to housing expert Edward Pinto, Fannie’s former chief credit officer who has presented his findings before Congress and should himself be asked to testify before the commission, millions of mortgages to borrowers with credit scores of less than 660–considered by prominent researchers to be the dividing line for subprime loans–had been labeled by Fannie and Freddie as prime going back as early as 1993.

In his writings for the American Enterprise Institute, Peter Wallison, now also a commissioner on the Congress-created Financial Crisis Inquire Commission,  noted that this misrepresentation by the government-backed mortgage giants could have itself been a major factor in inflating the housing bubble. “Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007,” he wrote.

Simply making the government support of Fannie and Freddie direct–an idea conference attendee Bill Gross of PIMCO proposed and Geithner implied support for–may produce slightly more honest accounting. But it would continue the distortion of government support for housing that is hurting both short-term growth by channeling private funds to government-guaranteed housing instead of more innovative economic  sectors, and long-term prosperity by adding possibly $1 trillion to U.S. national debt.

CEI has long advocated that the government both break up Fannie and Freddie and withdraw government support. More and more of the American public is coming to agree. A CNBC poll of its viewers this morning found that 68 percent believe that the GSEs are no longer necessary. While the poll is not scientific, it is significant, because CNBC’s viewer are not as conservative as those of FOX News or FOX Business.

Winding down Fannie and Freddie will not be easy, but it will not be the horrendous disaster many are claiming. Interest rates would likely go up, but housing prices will almost certainly go down, meaning that housing would likely hit equilibrium for credit-worthy borrowers with modest incomes. As CEI’s Smith has noted, there are “many American dreams,” and the claim of politicians of both parties that housing is intertwined with our economy is a circular argument. This intertwining is itself due to the government’s backing of housing.

Radical Capitalism: A Noble Experiment We Ought to Try

by Michelle Minton on August 17, 2010 · 2 comments

in Deregulate to Stimulate, Economy

Earlier this month, Bloomberg published an article by Boston University economist Larry Kotlikoff in which he declared that the U.S. was bankrupt and headed toward an economic disaster that would be “worse than Greece”:

Last month, the International Monetary Fund released its annual review of U.S. economic policy. … the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

…Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising.

We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.

In an article published in the July/August 2006 edition of the Federal Reserve Bank of St. Louis Review, Kotlikoff suggested that the only way to deal with the United States’ impending fiscal disaster would focus on productivity growth, which would translate to wage growth, combined with limited requisite tax hikes and an expanded tax base. While I can’t agree with all of Kotlikoff’s suggestions for reform (in particular his bid for mandatory enrollment in a universal health care system), he provides insight and intriguing options that the U.S. government must consider. One suggestion seems particularly viable: radically increase China’s ability to directly invest in the U.S.

It seems almost silly that up until this very day the federal government has hesitated to allow the second greatest holder of U.S. debt to directly invest in our economy. Presumably, allowing greater direct investment would increase China’s desire to see the US economy grow.

As I said, I certainly don’t agree with all of Kotlikoff’s suggestions, but he is is right in declaring that the time is now (or the time has passed) for U.S. regulators to take action to prevent economic collapse.

Perhaps it is time to take a chance on radical capitalism. It appears that the quality of life in the U.S. is bound to decrease no matter what steps we take to right the economy. So, is it not worth it to take a chance on radically cutting back government programs in an attempt to reduce the budgetary shortfall and see if the free market will pick up the slack?

There are plenty of books and articles that detail how capitalism has improved the quality of human existence, but perhaps it is time to consider how we might escape slipping into a fiscal dark-ages by letting the the invisible hand take the wheel of some of government provided services and focus government activity on protecting rights of individuals rather than directing lives and providing goods. Housing, education, retirement, food and drug oversight and enforcement–many of these services could easily be handled by free market enterprises and some shouldn’t be government priorities at all. If the quality of life in the U.S. is going to deteriorate one way or the other, why not give the open market a chance to assume the role as provider of some of these unessential goods and services. Who knows, it just might turn out that the quality of these goods and services increases rather than decreasing.

BlueGreen Alliance Forgets their Aristophanes

by Marlo Lewis on August 16, 2010

in Global Warming

Senate Majority Leader Harry Reid (D-Nev.) mothballed cap-and-trade legislation when it became apparent that he could not muster the three-fifths super-majority required to end a Republican filibuster. Because coal-state Democrats don’t like cap-and-trade either, assembling the requisite 60 votes to stop a filibuster was never easy. It became more difficult after Democrats lost their 60-seat majority with the election of Republican Senator Scott Brown of Massachusetts.

Unsurprisingly, sore losers are now calling for a change in Senate rules to abolish the filibuster or lower the number of votes required for cloture.

Congressional Quarterly Online reports that the BlueGreen Alliance, a coalition of labor unions and environmental organizations hawking cap-and-trade as a font of ”green jobs,” and a group of freshmen Democratic Senators led by Tom Udall of New Mexico, are calling for a change in Senate rules.

There’s just one small problem. It takes a two-thirds (67-vote) supermajority to change Senate rules. To belabor the obvious, two-thirds is more than three-fifths. If cap-and-traders were strong enough to change the rules, they wouldn’t need to change them — they could already easily overcome GOP filibusters.

If BlueGreenies can’t see what a pickle they’re in, they should try reading Aristophanes, the master of Greek comic poetry. 

Aristophanes’ play Ecclesiazusae, “Assemblywomen” or “Congresswomen,” is a ribald satire on egalitarian excess. Although written millennia ago, it is spot-on relevant in the Age of Reid, Pelosi, and Obama. 

As the play opens, a cabal of women led by Praxagora don fake beards, sneak into the Athenian Assembly, and agitate for a law to establish the rule of women. They gain the support of enough men to pull it off, because Athenians crave change and the rule of women is the only thing they have not yet tried.

Praxagora and her cohorts claim their agenda is to end all injustice, i.e., inequality. They set up cradle-to-grave welfare and institute a regime of free love in which every man may sleep with every woman.

To ensure that not even the natural assets of youth will be allowed to create inequality, Praxagora decrees that before a young man may sleep with a beautiful young woman, he must first sleep with an ugly old hag. Conversely, before a young woman may sleep with a stud, she must gratify a geezer. 

But, as Orwell was to observe centuries later, under socialism, some are more equal than others. Praxagora, you see, is married to a flatulent dotard named Blepyrus, so she has already done her duty to the elderly. She is now free to consort with as many young bucks as she pleases. It’s kinda like cap-and-trade, in which energy-rationing profiteers reap windfalls (regulatory rents) at public expense in the name of saving the planet.

To pass the Kerry-Lieberman bill, BlueGreenies would have to sneak into the Senate, don Republican disguises, and give Tom Udall and his pals a 67 vote super-majority.

Obviously, that’s not gonna happen, not this Congress or next, because fake beards only work in comedy.

Primer on Extreme Weather Mortality

by Marlo Lewis on August 16, 2010 · 1 comment

in Global Warming

The indomitable Indur Goklany — “Goks” to his friends — has just posted a primer on extreme weather-related mortality entitled, Global Death Toll From Extreme Weather Events Declining. 

If you are one of the hapless millions who watched Al Gore’s scare-you-mentary, An Inconvenient Truth, with its ad nauseum footage of hurricanes, tornadoes, drought, and floods, you might think that carbon dioxide emissions are making the world a more dangerous place.

Goks’ primer demolishes this falsehood. It also reaches the heretical conclusion that restrictions on carbon-based energy would actually impede progress in reducing deaths and death rates related to extreme weather.

Herewith a few excerpts:

Mortality Risk Declining

Based on 2000–08 data, extreme weather events are responsible for about 0.05% of all global deaths (31,700 deaths vs. 58.8 million, annually). That is, despite the media attention to such events, extreme weather events have a minor impact on global public health.

Long term (1900–2008) data show that average annual deaths and death rates from all such events declined by 93% and 98%, respectively, since cresting in the 1920s. These declines occurred despite a vast increase in the populations at risk and more complete coverage of extreme weather events.

Deaths and death rates from droughts were responsible for the majority (58%) of all deaths due to extreme weather events from 1900–2008. They also peaked in the 1920s. Since then, they have been reduced by 99.97% and 99.99%, respectively.

For floods, responsible for another 34% of aggregate deaths, deaths and death rates have declined by 98.7%–99.6% since the 1930s.

For storms (including hurricanes, cyclones, tornadoes, typhoons), responsible for 7% of extreme weather event deaths from 1900–2008, deaths and death rates declined by 47.0%–70.4% since the 1970s. 

“Blame” Fossil Fuels for Improving Safety

First, the decline in the death toll from droughts, in particular, is that global food production has never been higher than it is today (Goklany 1998, 2007). This is largely due to improved seeds, fertilizers, pesticides, irrigation, and farm machinery. This entire suite of technologies also enabled the Green Revolution.  But fertilizers and pesticides are manufactured from fossil fuels, and energy is necessary to run irrigation pumps and machinery. Without them, the benefits of improved seeds would be for naught. And in today’s world, like it or not, energy for the most part is synonymous with fossil fuels.

Additional CO2 in the atmosphere has also contributed to higher yields and food production (IPCC 2001: 254–257, 285) because it provides carbon, the basic building block of life, and also increases the efficiency with which plants use water helping offset declines in water availability, if any.

Another factor critical to reining food prices and reducing hunger worldwide is trade within and between countries which enables food surpluses to be moved to food deficit areas (Goklany 1995, 1998).  But it takes fossil fuels to move food around in the quantities and the speed necessary for such trade to be an integral part of the global food system, as it indeed is.  Moreover, fossil fuel dependant technologies such as refrigeration, rapid transport, and plastic packaging, ensure that more of the crop that is produced is actually eaten by the consumer. That is, they increase the overall efficiency of the food production system, which helps lower food prices and contain hunger worldwide.

The second important factor is better disaster preparedness, and more rapid response and delivery of humanitarian aid when disaster strikes.  Timely preparations and response are major factors that have contributed to the reduction in death and disease that traditionally were caused by or accompanied disasters from extreme weather events (Goklany 2007b).  Their success hinges on the availability of fossil fuels to move people, food, medicine and critical humanitarian supplies before and after events strike. 

Economic development also allowed the US (and other developed countries) to offer humanitarian aid to developing countries in times of famine, drought, floods, cyclones, and other natural disasters, weather related or not. Such aid, too, would have been virtually impossible to deliver in large quantities or in a timely fashion absent fossil fuel fired transportation.

Carbon Rationing Is Counter-Productive

Currently many advocate spending trillions of dollars to reduce anthropogenic greenhouse gases, in part to forestall hypothetical future increases in mortality from global warming induced increases in extreme weather events.  Spending even a fraction of such sums on the numerous higher priority health and safety problems plaguing humanity would provide greater returns for human well-being (Goklany 2009a, 2009b).

No less important, efforts to reduce greenhouse gas emissions would slow, if not retard, economic development and/or make fossil fuels scarcer and more expensive thereby militating against the very factors that have reduced deaths and death rates from extreme weather events.

You Can’t Make This Up

by Ryan Young on August 13, 2010

in Economy, Stimulus to Nowhere

$150,045 of stimulus money is being spent to restore a bridge that doesn’t connect to any roads and ends in an 8-foot drop.

Stimulus backers claim that the project created 1.9 jobs. That’s $78,971.05 per job created. That’s not a very good deal. Especially considering that no jobs were created on net, because that $150,000 was taken away from somewhere else in the economy.

Without the stimulus, that money would have been spent in other ways. Given that most jobs cost less than $78,971 to create, it may well be that the bridge restoration project meant fewer jobs were created than if the government had just left the money where it was originally — your pocket.

Regulation of the Day 146: Airplane Child Seats

by Ryan Young on August 13, 2010

in Deregulate to Stimulate, Health and Illness, Mobility, Nanny State, Personal Liberty, Precaution & Risk, Regulation, Regulation of the Day

If you and your small child are flying away on a vacation, most airlines will let the child fly for free. If the child sits in your lap, you don’t have to pay for a second seat. But the National Transportation Safety Board doesn’t think that is safe.  Severe turbulence and rough landings kill a lap-child or two every decade.

That’s why NTSB wants to require all children to sit separately, comfortably ensconced in the child safety seats they use when riding in a car.

The NTSB’s intentions are laudable. They’re trying to make people safer. But intentions are not results. And this rule’s results would be exactly opposite its intentions. It would kill far more people than it would save.

That’s because making parents pay for an extra ticket raises the cost of flying. Many families will choose to drive instead. And remember, driving is much more dangerous than flying. According to CEI’s Sam Kazman, studies show that the extra driving in lieu of flying would kill about 50 people per decade, plus thousands more injuries.

Throwing away 50 lives to save one or two lives is a bad deal. It is literally death by regulation. That’s also why the FAA has repeatedly refused NTSB’s periodic demands to make parents pay more to fly. May they stand firm again.

See also today’s press release from Sam Kazman.

CEI Weekly: Congress Bails Out State Teachers’ Unions

by Charles Huang on August 13, 2010

in Features

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the Weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.


>>Congress Bails Out State Teachers’ Unions
This week the House voted to funnel more federal money to public employee unions. The $10 billion “Education Jobs Fund” will be set aside to bailout state teachers’ unions, who earlier this year received $53.5 billion. Labor Policy Analyst Vincent Vernuccio slammed the bailout in his recent American Spectator op-ed, calling it “payback” for the unions’ support for Democratic candidates. Senior Counsel Hans Bader also criticized the teachers’ bailout on OpenMarket.
Read more at The Washington Examiner.

>>[Video] Chris Horner of the Politics of Cap and Trade on Fox Business


>>Shaping the Debate

Before Net Neutrality Eats the World

Wayne Crews’ op-ed in The Daily Caller

The Real Nuclear Option
Iain Murray’s op-ed in The Washington Examiner’s Examiner Opinion Zone

Obama Cripples Ford’s Funding, Then Subsidizes it
John Berlau and Andrew Kwiatkowski’s op-ed in The American Spectator

Is net neutrality good for gaming?
Ryan Radia’s citation on GamePro

>>Best of the Blogs

Around the Country with Public Sector Unions
by Ivan Osorio

Not So Ancient History – How CEI (and friends) Nixed Early Action Crediting (on three separate occasions)
by Marlo Lewis

>>LibertyWeek Podcast

Episode 105: Neutering the Net
Richard Morrison and Marc Scribner welcome new media guru Brooke Oberwetter to the show to discuss the latest developments in the net neutrality battle, Minneapolis’ failures in urban planning, the FDA’s desire to regulate e-cigarettes, and legalizing Internet gambling.

>>Support CEI

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