Host Richard Morrison and co-host Jeremy Lott welcome special guests Lee Doren and Greg Conko to Episode 60 of the LibertyWeek podcast. We start with a recap of the 9/12 D.C. Tax Protest, look into union rules that hurt minority contractors and consider the alleged ethics violations of former California Assemblyman Mike Duvall. We then turn to Greg Conko for his thoughts on free market healthcare reform and finish with a tribute to The Greatest Man Who Ever Lived, Norman Borlaug (1914-2009).
National Black Chamber of Commerce
Today, DC Progress, a public policy organization that focuses on the District of Columbia, hosted a panel on the issue of underemployment. DC Progress President Christian Robey noted that underemployment can be defined in different ways: either as somebody working at a job for which he or she is overqualified, or at fewer hours than desired. However defined, the problem of underemployment is one of unfulfilled potential, both for job creation and for access to good jobs that do exist. (Disclosure: DC Progress currently shares offices with CEI.)
Thus, the solution to underemployment lies in removing obstacles to greater job creation. National Black Chamber of Commerce President Harry Alford went straight to the heart of the matter. “The solution to underemployment and unemployment are free enterprise and entrepreneurship.” At the local level of Washington, DC, he identified project labor agreements as a major regulatory stumbling block to local residents, including minority residents, gaining access to better jobs. And the problem is likely to get worse, due to President Obama’s rescinding of an Executive Order prohibiting project labor agreements (PLAs) on federal construction projects, a decision Alford said he was “disturbed” by.
Project labor agreements handicap nonunion contractors who wish to bid on federal projects by imposing burdensome requirements on them. Under a PLA, an open shop contractor could be required to employ workers from union hiring halls, acquire apprentices from union apprentice programs, and require employees to pay union dues. As an example, he cited Nationals Park, which, was built under a PLA. Although it is in Southeast DC, “very few people in southeast Washington”worked on it. As Alford noted, most minority contractors are nonunion.
“The biggest problem with unions is the games they play with these apprenticeship programs,” Alford also said, noting that it can take up to four years for an apprentice to make it to journeyman — without an enforceable guarantee of union membership at the end. (Alford noted that he was only talking about construction unions.)
For more on project labor agreements, see here.
Most media coverage of H.R. 2454, the American Clean Energy and Security Act of 2009 (ACES), focuses on the bill’s cap-and-trade program and the free rationing coupons (emission allowances) that the bill’s co-sponsors, Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), had to hand out to utilities and other interests to secure their support for the legislation.
But the cap-and-trade program occupies only one of four of the bill’s main sections (“titles”). Other titles contain a host of mandates and “incentives” (carrots and sticks) to reshape energy and transportation markets.
ACES, for example:
- Requires utilities to meet a certain percentage of their load with electricity generated from renewable sources, like wind, biomass, solar, and geothermal.
- Promotes small-scale “distributed generation” of renewable electricity by offering three renewable electricity credits (instead of one credit) for each MWh produced.
- Authorizes electric power generators to create a Carbon Storage Research Consortium with the power to assess “fees” (aka taxes) totalling approximately $1 billion annually to fund carbon capture and storage (CCS) demonstration plants.
- Directs the EPA Administrator to hand out free rationing coupons to subsidize CCS.
- Establishes a CCS mandate requiring new coal-fired power plants to emit 65% less carbon dioxide if permitted after 2020, and emit 50% less if permitted between 2009 and 2020; also requires EPA to review these standards not later than 2025 and every five years thereafter.
- Requires utilities to ”consider” developing plans to support electric vehicle infrastructure, and provides assistance (including free emission allowances) to subsidize electric vehicles and infrastructure.
- Mandates stricter building codes achieving 30% higher energy efficiency in 2010 and 50% higher in 2016 for new buildings, and establishes a “building retrofit program” for existing residential and nonresidential buildings.
- Mandates tougher energy efficiency standards for indoor and outdoor lighting, hot food holding cabinets, bottle-type drinking water dispensers, hot tubs, commercial-grade natural gas furnaces, televisions, and other appliances.
- Requires the President, EPA, the Department of Transportation (DOT), and California to establish greenhouse gas (GHG)/fuel economy standards for new passenger cars and light trucks.
- Requires and sets deadlines for EPA to establish GHG emission standards for heavy-duty engines and vehicles and non-road vehicles including marine vessels, locomotives, and aircraft.
- Requires States to establish goals and submit transportation plans to reduce transport sector GHG emissions, and imposes sanctions on States that fail to comply.
- Requires the Deparment of Energy (DOE) to establish industrial energy-efficiency standards.
These measures are economically and environmentally irrational even if you believe that global warming is a “planetary emergency.” As the Charles River Associates (CRA) report for the National Black Chamber of Commerce points out, the renewable electricity, CCS, electric vehicle, and energy efficiency mandates will not yield net emission reductions beyond what the bill’s emission caps already require. The targeted interventions may accelerate GHG reductions in some industries or sectors, but that just allows emissions to increase elsewhere in the economy without breaking the cap.
The rationale for cap-and-trade is that it allows the market to find the least-costly methods of reducing emissions. By superimposing renewable electricity, CCS, electric vehicle, and energy efficiency mandates on that system, Waxman-Markey dictates the means as well as the goals.
There are two possible outcomes. First, which is exceedingly unlikely, the cap motivates reductions in exactly the same ways as the targeted mandates and incentives. In that case, observes CRA, the mandates “would waste resources on needless monitoring, measuring, enforcement and compliance.”
If, as almost certainly would happen, the mandates compel different actions and investments than industry would otherwise undertake to meet the cap, then the same emission reductions would be achieved at higher cost. The targeted mandates and incentives “can only substitute more costly GHG cuts for those that could have been made at lower cost.”
So what is the point? Why tout cap-and-trade as an “efficient,” “market-based” solution and then gunk it up with cookie-cutter, command-and-control measures?
Several reasons come to mind including deep distrust of markets, an abiding belief in old-fashioned central planning, the desire to rig market outcomes to benefit or punish certain interests, and the desire to create more work (endless full employment) for bureaucrats and lawyers.
One that should not be discounted, though, is the pleasure some people derive from placing their heels on other people’s necks. Politics is chiefly about the organization and application of power. It tends to attract people who enjoy bullying and coercing others. To regulate is to coerce. Command-and-control regulation is more coercive than the market-based variety. So despite their real or feigned enthusiasm for cap-and-trade, many climate activists are hopelessly addicted to mandates.
The National Black Chamber of Commerce (NBCC) today released a study by Charles River Associates (CRA) on the economic impacts of H.R. 2454, the American Clean Energy and Security Act of 2009 (ACESA), the regulatory climate bill sponsored by Rep. Henry Waxman (D-CA) and Ed Markey (D-MA).
The results aren’t pretty, and they generally get worse over time as the Act’s emission caps tighten. Relative to baseline levels, ACESA would:
- Reduce employment by 2.3 million jobs in 2015, 2.7 million jobs in 2020, 2.5 million jobs in 2030, and 3 million jobs in 2050;
- Lower average annual wages by $170 in 2015, $270 in 2020, $400 in 2030, and $960 in 2050; and,
- Decrease average household purchasing power by $730 in 2015, $800 in 2020, $830 in 2030, and $940 in 2050.
More valuable than any of these estimates, which depend on many variables that can change unpredictably, is the report’s clear economic logic and common sense.
The report specifically debunks two myths propagated by ACESA proponents. One is that there would be virtually no cost to consumers because (a) utilities would receive lots of free emission allowances, avoiding costs they would otherwise pass on to ratepayers, and (b) revenues from auctioned allowances would be returned as dividends to low-income households.
What this myth overlooks is that emission caps inescapably–and by design–increase the cost of producing and consuming energy. The “cap” in cap-and-trade “works”–that is, reduces emissions–by creating an artificial scarcity in the right to produce and use fossil (carbon-emitting) energy. This drives up the price of coal, oil, and natural gas. It also increases reliance on higher-cost non-fossil energy.
About 85% of our total energy is carbon-emitting, and about 99% of all transport sector energy is carbon-emitting. Since energy is used to produce and move everything from autos to food to houses to bytes of electronic information, ACESA’s impacts would cascade through the economy. In the report’s words:
This analysis reveals that businesses and consumers would face higher energy and transportation costs under ACESA, which would lead to increased costs of other goods and services throughout the economy. As the costs of goods and services rise, household disposable income and household consumption would fall. Wages and returns on investment would also fall, resulting in lower productivity growth and reduce employment opportunities.
Although free allocations and revenue recycling can ameliorate the impacts of cap-and-trade on some industries, communities, or income groups, “the cost of bringing emissions down to the levels required by the caps cannot be avoided.”
Proponents also claim ACESA can revive the economy by creating millions of “green jobs.” The CRA study agrees that ACESA would lead to “increases in spending on energy efficiency and renewable energy, and as a result that significant numbers of people would be employed in ‘green jobs’ that would not exist in a no carbon policy world.” However, proponents ignore both the fossil energy-related jobs ACESA would destroy and other job losses due to rising energy costs and lower productivity:
This study finds that even after accounting for green jobs, there is a substantial and long-term net reduction in total labor earnings and employment. This is the unintended but predictable consequence of investing to create a “green energy future.”
Several other findings are noteworthy:
- Declines in employment are heavier in the Mountain West (-3.5%), Great Plains (-1.4%), Oklahoma and Texas (-1.8%), Missiippie Valley (-1.5%), Mid-Atlantic (-1.3%), Southeast (-1.1%), and Midwest (-0.6%) than in California (-0.4%) and Northeast (-0.3%). ”The Northeast and California fare better than other regions because of their initial economic circumstances. Namely, these regions’ industries are less energy-intensive, as is hte overall composition of industry.” By sheer coincidence (not), the bill’s co-sponsors, Henry Waxman and Ed Markey hail from California and the Northeast.
- The bill’s renewable electricity and energy efficiency mandates make neither economic nor environmental sense even if we assume that global warming is a “planetary emergency.” The rationale for cap-and-trade is that it allows the market to find the least-cost methods of reducing emissions. By superimposing a system of renewable electricity and energy efficiency mandates on that system, ACESA would dictate the means as well as the goals. There are two possibilities. If, by coincidence, the cap itself motivated all of the actions required to comply with those mandates, then the mandates “would waste resources on needless monitoring, measuring, enforcement and compliance.” If, as is more likely, the mandates compel industry to buy more renewable energy or invest more in efficiency upgrades than it otherwise would to comply with the cap, the total emissions reduced would not change but industry’s (hence consumers’) costs would be higher. The renewable electricity and energy efficiency mandates “can only substitute more costly GHG cuts for those that could have been made at lower cost.”
- The economic impacts estimated in the report are conservative because they make a very favorable assumption in favor of ACESA, namely, that domestic industries would be able to exceed the cap by about 30% during 2012-2050 by purchasing international offsets (e.g. payments to preserve forests in development countries). Access to international offsets are especially important to cost-containment in ACESA’s early phase, totalling 83% of the required emission “reductions” in 2015. “However, in light of the difficulties in measuring, verifying, and ensuring the permanence of these offsets, international negotiations have stressed domestic sources of emission reductions over international offsets.” The Kyoto II treaty that will be negotiated in Copenhagen “might allow far fewer” offsets than ACESA would provide. ”This would drive up costs substantially.”