On the Blog

Apollo VII Astronaut Walter Cunningham: Examine the Climate Data For Yourself

Somewhat Reasonable - November 03, 2014, 4:41 PM

Apollo VII astronaut Walter Cunningham, a friend of Heartland who has spoken at three of our climate conferences, gave a speech a CFACT Collegians event at the University of Minnesota last week. KSTP, the ABC affiliate in Minneapolis, covered the lecture and did a nice feature on the American hero who is a tireless advocate for ensuring the scientific method, and not political advocacy, drives the climate debate and public policy.

Said Cunningham in the KSTP interview:

I’m here to encourage everyone to look at the data themselves, not just buy what they’re told. I find that my standards for science are more important to me than anything else, and I hate to see them being depreciated by the alarmists’ claims today. Politics and the media and what have you have allowed us now to be facing one of the biggest scientific hoaxes in history. That’s what’s being pushed on us.

Cunningham is also the author of Global Warming: Facts vs. Faith, which Heartland published in 2010.

Watch the excellent KSTP story below, which also mentions how The Heartland Institute (through the Nongovernmental International Panel on Climate Change) serves as a scientific counter to the United Nations Intergovernmental Panel on Climate Change.

Categories: On the Blog

Cancel the Midterms? I Don’t Think So!

Somewhat Reasonable - November 03, 2014, 4:10 PM

Writing in The New York Times on Monday, November 3, 2014, from Durham, North Carolina, Professor David Schanzer and his student Jay Sullivan suggest that, by U.S. Constitutional amendment, the country should eliminate midterm elections. Instead, they suggest, Congressional representatives and Senators alike should hold four- or eight-year terms coincident with the President’s and be elected only when American voters also elect a U. S. President.

While at the time of the nation’s founding “it was important for at least one body of Congress to be closely accountable to the people,” Professor Schanzer and his undergraduate student argue, that is no longer the case.

Their reasoning – if you can call it that – is that elections come too often, they cost too much money, they “weaken the president, the only government official [worth mentioning] elected by the entire nation,” and – last but not least – the electorate in midterm elections tends to be “whiter, wealthier, older and more educated” than the electorate during presidential elections.

That last reason alone ought to be enough to reject the Durham duo’s suggestion: as Jay Leno might say, if the nation were to let its national policy be decided only by younger, less-educated, and less wealthy citizens with less at stake – say, college students, for example – what could possibly go wrong? (Obamacare, to name but one thing.)

The fact that Duke University is famously the home of frat boys with the poor judgment to hire professional strippers to entertain them and at least one undergraduate who pays her inflated tuition by performing in pornographic movies, we trust, are just unfortunate coincidences.

But there’s a reason that the late William F. Buckley, Jr. once wrote that he’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University. Professors (and their students) in their ivory towers are very fond of pontificating about things that make no sense out here in the real world. (Although, to be sure, on the practical side this week Harvard is offering a workshop on how to have anal sex.)

The real reasons for rejecting the absurd proposal that the electorate have less say in their government go to the heart of a constitutional republic. The very design of the U. S. Constitution, explicit in its first three words, is that “we the People” are sovereign and intended to govern. And it’s likely not coincidence that the first-designated house of the first-designated branch of government is the people’s house, the House of Representatives. (The Senate, in contrast, was designed to represent the States, not the people, and to be selected by the state legislatures. Changing that, too, was a mistake.)

Surely the founders “would not be pleased with the dysfunction, partisan acrimony and public dissatisfaction that plague modern politics,” say the Duke authors, who have apparently never read The Federalist Papers. The purpose of the U. S. Constitution is to put limits on national government power, not to embolden it. It’s for that very reason that the powers of the federal government – legislative, executive, and judicial, enumerated in that order – are divided among three separate but co-equal branches, each of which is supposed to check and to balance the other. If the Founders had wanted another king, then they would have created a monarchy, not a constitutional republic.

If the good professor and his student don’t think it’s worth their while to vote in midterm elections, then by all means let’s not discourage them. They can always put on their beer goggles and go to a fraternity party instead.

Categories: On the Blog

The Lies Phony Climate Experts Tell

Somewhat Reasonable - November 03, 2014, 1:37 PM

For decades now both the U.S. and Europe have suffered the arrogance and the lies of so-called “climate experts.” Mind you, there are some real ones and, when it comes to global warming and climate change, the interchangeable names for the lies, they are the ones labeled “deniers” and worse for telling the truth.

The fundamental lie is that humans, through their use of fossil fuels, coal, oil and natural gas, are creating huge amounts of carbon dioxide (CO2) which in turn is warming the Earth. You will hear the lies again when the UN Intergovernmental Panel on Climate Change releases its latest report.

“The report should galvanize the world to take urgent and collective action to curb climate change,” says Frances Beinecke, president of the Natural Resources Defense Council. “We’re almost out of time to avoid the worst…” We have been told this since the 1980s. It is pure fear mongering.

The problem for the phony “climate experts” is that the Earth has not warmed in the last 19 years and CO2 plays a minimal role in the alleged warming. What you never hear the “climate experts” tell you is that CO2 is vital to all life on Earth because it is the “food” that all vegetation depends upon for growth. More CO2 is a very good thing and, in the past, its levels in the atmosphere have been much higher.

On October 24 my eye was caught by a news article that reported that “European Union leaders agreed on a set of long-term targets on energy and climate change, Friday, giving financial sweeteners and weakening some objectives along the way to secure a deal…European leaders committed to cutting carbon emissions by at least 40% by 2030 compared with 1990 levels, which will be legally binding on every member state.”

One of the real meteorologists, Anthony Watts, took notice of the EU. “…Anyone who is expecting a rational re-appraisal of European environment policy—don’t underestimate the blind determination of Europe’s green elite to fulfill their dream of an emission free Europe. They will, in my opinion, happily bomb the European economy back into the stone age to achieve their ridiculous goal.”

In November of last year, Holman W. Jenkins, Jr., a columnist for The Wall Street Journal, took note of Germany’s “love affair with renewables (solar and wind energy) brings high prices, potential blackouts, and worries about ‘deindustrialization.’”

“Like Mao urging peasants to melt down their pots, pans and farm tools to turn China into a steel-producing superpower overnight, Germany dished out subsidies to encourage homeowners and farms to install solar panels and windmills and sell energy back to the power company at inflated prices. Success—Germany now gets 25% of its power from renewables—has turned out to be a disaster.”

Jenkins noted that not only had Germany’s output of carbon dioxide increased, but “money-strapped utilities have switched to burning cheap American coal to provide the necessary standby power when wind and sun fail.” The cost of electricity rates in Germany is triple those in the U.S.

Yes, solar and wind power everywhere require fossil fuel plants as a backup whenever the sun is obscured by clouds or the wind doesn’t blow. In the U.S., Obama’s “war on coal” has decreased the number of utilities that utilize it and, in turn, reduced the amount of electricity available. The prospect of blackouts here has increased. If we encounter a harsh winter, that would put people’s lives in danger.

One has to understand that the lies about global warming and/or climate change are in fact an environmental agenda designed to reduce industrialization and the use of energy everywhere.

Harold Schwager, a senior member of BASF’s executive board said in an interview, “Many European companies which are energy-intensive are finding out that the benefits of shifting investment to the U.S. are significant.” Germany and the EU are driving out industry and the jobs it represents because of their idiotic carbon dioxide emissions policies.

This is why we all need to understand the real “environmental” agenda. Writing in the Financial Times on October 27, Nick Butler said “Last week’s European summit on climate change failed to address the hard reality that current policies are not working.”

As in the U.S. the construction of wind turbine farms such as the one offshore of Borkum, Germany in the North Sea only exist by virtue of extensive subsidies that are wreaking havoc on European energy markets. That’s the reality!

Here in the U.S. in 2008, then-candidate Barack Obama gave a speech in Golden, Colorado, saying that his planned investments in “green energy” would create “five million new jobs that pay well and can’t ever been outsourced.”

How did that work out? Six years later we know those “green” jobs were not created and that his energy policies have actually reduced the production of vital electricity. Will new jobs in industries dependent on fossil-fuels be created? Yes and they will come from European industrial investment and increased oil and natural gas production here despite Obama’s agenda.

That is why the European Union’s idiotic commitment to cut greenhouse gas emissions (CO2) is putting the entire continent in danger and that is why America has to stop providing subsidies and tax breaks to “renewable”, “green” energy here and mandating its use

Whenever you hear some “climate expert” or politician refer to global warming or climate change, they are lying to you. We have more CO2 in the atmosphere and the Earth is still in a cooling cycle.

Categories: On the Blog

Global Warming is a Political Ruse in Florida Governor’s Race

Somewhat Reasonable - November 03, 2014, 11:55 AM

Outside activist groups are spending millions of dollars on political ads claiming Florida Republican Gov. Rick Scott is not doing enough to fight global warming.

A look at the facts, however, reveals Florida is more than pulling its weight on the global warming issue, and the political ads are actually an attempt to promote a Democratic political candidate rather than an effort to fight global warming.

Liberal billionaire Tom Steyer, who made his fortune funding coal power in third-world nations, is leading the global warming push in Florida, spending $10 million on anti-Scott political ads. The ads take a decidedly negative and sarcastic tone, including claiming Scott’s plan to address global warming is to build an ark for himself and his friends.

Tom Steyer

Steyer’s sarcastic tone aside, there is essentially nothing a Florida governor can do to change the global temperature. The United States accounts for less than 15 percent of global carbon dioxide emissions, and Florida accounts for only 4 percent of the U.S. total. Accordingly, Florida accounts for significantly less than 1 percent of global carbon dioxide emissions. Florida could eliminate all its carbon dioxide emissions and scientists would never be able to measure the impact on global temperatures.

Even so, global warming activists argue Floridians should shoulder the burden of global warming action in order to demonstrate leadership. Floridians, however, already are demonstrating leadership and paying a high price for it.

Global warming activists say the best method of reducing carbon dioxide emissions is to cut energy use. Florida, however, is a national leader in this regard, with only seven states using less energy per person.

Global warming activists target coal power, despite the relatively small amount of electricity Floridians use, because coal produces more carbon dioxide than any other widely used electricity source. Florida, however, has already weaned itself off coal. Coal powers 39 percent of the nation’s electricity, but Floridians use less than half as much coal—just 21 percent.

As a result of these factors, only 10 states emit less carbon dioxide per person than Florida. All 10 of the other states accomplish this by utilizing large amounts of emissions-free hydroelectric power or nuclear power. Unfortunately, global warming activists generally oppose both these emission-free power sources. Florida is unique in accomplishing its low-carbon economy while using less nuclear power than the national average and essentially no hydroelectric power.

Any way you cut it, Floridians already are in a national leadership role in reducing greenhouse gas emissions, and our low-carbon economy comes at a very high price. Floridians pay substantially higher electricity prices than the national average and much higher prices than any of our neighbors.

In 2013, Florida electricity prices were 8 percent higher than in Georgia, 13 percent higher than Mississippi’s, 14 percent higher than Alabama’s and 29 percent higher than Louisiana’s. These higher energy prices take a bigger bite out of Floridians’ living standards, and the higher energy prices make it more difficult for Florida businesses to compete with businesses in other states. That means fewer jobs for Floridians.

Despite Florida already taking a costly lead in reducing carbon dioxide emissions, the federal government recently announced new global warming restrictions that will impact Florida more severely than other states. The new EPA restrictions will require a 30 percent national reduction in power plant carbon dioxide emissions, but they will impose different requirements on different states. Floridians will be hit especially hard, being forced to reduce carbon dioxide emissions another 38 percent, rather than the national average of 30 percent. This will further widen the gap between Florida’s high-cost, low-carbon economy and those of the rest of the nation.

Why then are Steyer and other activists pouring so much money into criticizing Scott for not imposing even more severe global warming restrictions? The answer is quite simple — partisan politics. Steyer is targeting only Republicans in the 2014 elections, and he is ignoring Democrats who support allowing higher carbon dioxide emissions in their home states.

Global warming activists can argue endlessly for stricter global warming policies, but they cannot argue with a straight face that Scott and Florida are lagging behind the efforts of other states.

Categories: On the Blog

Just Say No (and Know) to Secret Science

Somewhat Reasonable - November 03, 2014, 11:50 AM

In June the House Science Committee under Chairman Lamar Smith (R-TX), passed “The Secret Science Reform Act,” out if the committee. It has lingered on legislative limbo ever since.

This is unfortunate because each day the Environmental Protection Agency foists hundreds of new pages of regulations (amounting to hundreds of millions of dollars in cost) upon the economy.  These regulations cost jobs, raise energy prices and for what?  While the EPA says the regulations will save lives and ultimately create jobs, the science behind their claims is routinely hidden. If this bill becomes law, that would change as it would require the EPA to disclose all the science and models used to come to their conclusions and that these efforts be reproducible by independent researchers.  Transparency of all taxpayer funded research and the research used to make rules imposed on the public should be the rule (except, perhaps, in the case of national security risks).

This shouldn’t even be controversial, but it is because the EPA wants to work behind closed doors. I believe this is because many, if not all, of its myriad rules are indefensible based on the science — rather they are about controlling the economy.

I’m open to being proven wrong, so let’s expose and test the science.

We at The Heartland Institute have been tracking this effort from the beginning.  To who widespread support for the bill, Heartland has circulated a citizens petition calling for transparency in the science used by the EPA to justify its actions.  We hope you will join the effort.  Go here to read the petition and join the effort if you are so moved:


For more information about this bill see:

http://science.house.gov/sites/republicans.science.house.gov/files/documents/HR%204012_0.pdf or


Together we can make put the burden on the EPA to show why its science should be secret contrary to all scientific progress in history.

Categories: On the Blog

Minimum Wage Hikes Remain a Bad Policy, Both for States and Nationally

Somewhat Reasonable - November 03, 2014, 11:18 AM

On November 5, voters in five states—Alaska, Arkansas, Illinois, Nebraska, and South Dakota—will decide whether to increase their respective states’ minimum wages, with the stated purpose of alleviating poverty.

In addition to state-level initiatives usually funded by organized-labor groups, some in Congress have been pushing for a hike in the federally mandated minimum wage, a “price floor” for labor below which no state will be allowed to fall.

Although conventional wisdom suggests President Obama and his congressional allies’ interest in the minimum-wage debate is political in nature—and I do not entirely disagree with the hypothesis that it is an effort to boost flagging popularity in a midterm election year—it is irrelevant whether progressives in the local union hall or progressives in the nation’s capital are the ones behind minimum wage hike proposals. The policy still creates a surplus of workers and hurts those it purports to help.

By raising the cost of an employee beyond the natural convergence point of supply and demand curves, minimum wages cause the price of filling an entry-level job to exceed the marginal value of hiring one more employee. Businesses are not charity programs; a company does not hire an employee because the employee needs a job; it makes the hire out of a self-interested expectation of receiving more value from the employee’s work than the agreed-upon wage paid to the employee.

That, of course, is the same reason people spend any money on anything: The value derived from obtaining the items or services exceeds the attachment to those funny green strips of paper in their pockets. Raising the price of anything, including labor, means fewer people will buy it.

Like the law of gravitational attraction between pieces of matter or electromagnetic radiation’s inverse-square law, the law of supply and demand applies universally. Bad policy ideas that raise the price of labor will hurt the unemployed and underemployed, wherever they may be.

Categories: On the Blog

Fee for Service Is Not the Problem

Somewhat Reasonable - November 03, 2014, 11:09 AM

If you go to your doctor with severe pain or some other symptom suggesting a serious injury or illness, do you want him or her to have a financial incentive to treat you, or would you rather the doctor have a financial incentive to withhold care?

Although few will admit it, a sizeable number of health care policy wonks seem to prefer the latter, having apparently diagnosed doctors being paid for the care they provide patients as one of the problems with the U.S. health care system.

This view was perhaps best expressed by President Obama back in the summer of 2009, when he was pushing for what ultimately became the Affordable Care Act, a.k.a. Obamacare.

“You come in and you’ve got a bad sore throat, or your child has a bad sore throat or has repeated sore throats,” Obama said at a press conference. “The doctor may look at the reimbursement system and say to himself, ‘You know what? I make a lot more money if I take this kid’s tonsils out.’”

The heart of this allegation is what is known as fee-for-service medicine. Essentially, this means doctors are paid for the treatment they provide patients, no more and no less. In other words, pretty much the same way most of us pay lawyers, accountants, mechanics, hair stylists, and anybody else who provides a service for us.

But medicine is different than these common services, we are told, because few of us have the expertise to understand whether we really need a particular treatment. So under fee-for-service, the argument goes, it’s difficult to check an unethical doctor who recommends unneeded care.

The supposed answer to this is to move away from fee-for-service and instead embrace alternative forms of compensation for doctors, primarily what are now called accountable care organizations (ACO).

The ultimate aim of those pushing the ACO model is to create a system where a group of doctors, typically affiliated with a hospital, is given a fixed amount of money per patient, and they are expected to provide care to their patients with those funds. The doctors and affiliated hospital can make more money if they stay under budget, and they lose money if they go over budget.

If any of this sounds familiar, it should. It’s basically what numerous people in the 1990s and early 2000s went hoarse screaming about when health maintenance organizations (HMOs) followed this model and were accused of withholding needed medical care in order to earn greater profits.

Defenders of ACOs use different buzzwords such as shared savings and coordinated care, and they claim this will be different from HMOs because of electronic health records, evidence-based medicine or some other reason. But it’s still the same old HMO model.

The solution to the fee-for-service problem isn’t gussied-up HMOs. It’s recognizing that fee-for-service itself isn’t a problem; third-party payment of medical bills is.

The reason fee-for-service generally works for lawyers, plumbers, and mechanics is we’re paying directly for those services, whereas insurance shields us from having to pay directly for more than a fraction of our health care.

Moving away from third-party payment and putting patients in a position to reap the savings when unnecessary care is avoided will provide the needed check on the handful of unscrupulous doctors who might try to take advantage of people who don’t have an expertise in medicine.

Most important of all, it will ensure that when you do go to the doctor with a serious problem, the incentive present is to treat you, not withhold care.

Categories: On the Blog

Frac Sand Study: Lots of Scare, Little Science

Somewhat Reasonable - November 03, 2014, 10:45 AM

How would you feel if you walked into a doctor’s office and the doctor told you about the potential dangers of heart surgery but didn’t tell you the risks can be minimized with proper precautions or about any of the benefits of the surgery? That would be a frightening experience, because we need as much information as possible to make the best decisions, and withholding vital information from those who need it most is unethical.

Unfortunately, special-interest groups have published a study attempting to scare the people of Wisconsin and other parts of the Upper Midwest about mining sand used for hydraulic fracturing, commonly referred to as “frac sand,” by presenting only one side of the story.

Instead of basing the study on the best available scientific evidence and discussing both the costs and benefits of frac sand mining, anecdotal evidence (which is unscientific and unreliable and can lead to cherry picking data) is used to focus on costs while completely ignoring benefits.

This special-interest study attempts to portray frac sand mining as an industry running amuck, operating without oversight or regulation. It also tries to paint the industry as a threat to a clean water supply and as a possible cancer risk, but it doesn’t provide even a grain of real science to support these claims.

Contrary to assertions that the frac sand industry lacks proper oversight, the Wisconsin Department of Natural Resources’ (DNR) website states all nonmetallic mining operations (including frac sand) must obtain DNR water permits to operate in the state. Additional permits are needed for water withdrawal, modifying wetlands, storm-water discharge, air pollution for construction and operation of the facilities, mine safety, and many more industry practices. DNR rules also require frac sand companies to restore the land upon completing the mining process, reestablishing wildlife habitats or farm fields.

The study also raises concerns about the amount of water used to wash frac sand, leading some to fear these operations could potentially deplete water resources. However, frac sand washing and processing was only the sixth-largest use in the ten counties that reported frac sand watering operations, and most frac sand facilities use a closed-loop process, indicating nearly 90 percent of water can be recycled for onsite reuse. Because most of the water is recycled, EOG, a sand plant in Chippewa Falls, Wisconsin which uses approximately two million gallons a day, requires only 18,000 gallons of “make-up water” each day.

A vital part of recycling water for frac sand processing is removing the small clay particles from the water by using the flocculant polyacrylamide, a safe chemical used by most municipal wastewater treatment facilities, to get clay particles to “clump together” and settle out of the water. Perhaps in an attempt to stir up fears about water contamination and cancer outbreaks, the study states polyacrylamide can also contain acrylamide, a known neurotoxin, but it fails to provide proper context. Polyacrylamide can contain acrylamide, but only in trace amounts.

The study additionally fails to acknowledge acrylamide breaks down quickly into CO2 and ammonia. Within 14 days, 74–94 percent of acrylamide breaks down in oxygen-rich soils and 64–89 percent in oxygen-poor soils. Because horizontal groundwater flow velocities are typically on the order of centimeters per day, acrylamide does not last long in ground water. This further reduces the probability of negative health effects.

The study also purports to have evidence of acid mine drainage, which frac sand mining does not create, but the data has mysteriously disappeared from the host website.

Make no mistake, everything we do has an environmental impact, and frac sand mining is no exception. But to exaggerate the costs and ignore the benefits is dishonest. Wisconsin can take reasonable precautions to develop frac sand resources in an environmentally responsible way and continue to enjoy the benefits of creating thousands of high-paying jobs throughout the state.

Unscientific studies, half-truths, and missing data stand in the way of an informed discussion about frac sand in the same way a doctor does when he or she tells you the costs and none of the benefits of a procedure. Wisconsinites should seek a second opinion.

[First published at the Milwaukee Journal Sentinel.]

Categories: On the Blog

The Oil Price Election Connection

Somewhat Reasonable - November 03, 2014, 10:45 AM

After years of rising gasoline prices, people are puzzled by the recent drop that has a gallon of gas at levels not seen in nearly four years. Typically in times of Middle East unrest, prices at the pump spike, yet, despite the violence in Iraq and Syria, gallon of gas is now at a national average of $3.

The public hopes it will last. The oil industry can’t afford continued price suppression.

I believe the price will tick up in the days ahead (post-election)—which will make it economic for producers to continue to develop—but the increases will not be so dramatic as to take away the economic stimulus the low prices provide.

Experts call the low cost the “equivalent to a tax cut averaging almost $600 for every household in the U.S.” while it boosts our gross domestic product by 0.4 percent. Consumers surely welcome the reprieve. But why now and why won’t it last?

As gasoline prices have made headlines, several narratives are repeated. Generally the explanations revolve around two basic truths—but, as we’ll explore, there is more.

The reasons offered for the drop in prices at the pump (which reflects the price of a barrel of oil) are 1) increased North American oil production and, 2) sluggish economic growth in Europe and Asia—which together result in a surplus, or a global glut, of oil.

American Abundance

Following a multi-decade decline, U.S. oil output now stands at a 28-year high—up 80 percent since 2008. Thanks to the combined technologies of hydraulic fracturing and horizontal drilling, the U.S. equaled Saudi Arabia’s production over the summer and experts predict the U.S. to become the world’s top producer by 2015. CNN Money reports: “The U.S. isn’t addicted to foreign oil anymore. The shale gas boom in the U.S. is a game changer for oil prices.” Our country’s oil imports have fallen from 60 percent of consumption to less than 30 percent. The data proves out what any beginning economics student knows: more supply + less demand = lower prices.

ISIS Influence

The U.S. has changed global oil markets, but so has ISIS. Several months ago, when ISIS first emerged as a threat to Iraq’s oil production, oil prices experienced the usual uptick. However, when the Iraqis and Kurds thwarted its southern movement and it did not take over Basra’s oil fields, prices eased.

In this new war, different from the days of Al-Qaeda, rather than blowing up oil fields to hurt Western economies, ISIS captures oil-producing regions in Syria and Iraq and uses the bounty for its own benefit.

ISIS has become a real player in the global oil markets. The territory controlled by ISIS has a pre-war capacity of 350,000 barrels per day (bpd). Estimates vary, but it is widely believed that ISIS produces 50-80,000 bpd—most of which the terror group on the black market at prices assumed to be $25-60 per barrel. ISIS reportedly funds its activities with oil revenues as low as $1 million a month to as high as $3 million a day—with $2 million a day being the most frequently cited (likely paid in cash or bartered goods). Production and revenues could easily increase if it were not for the militant’s limited technical prowess in working in the oil fields. To overcome the lack, ISIS is advertising for experienced engineers to run its oil operations (apparently the we’ll-kill-your-family-if-don’t-work approach hasn’t been successful).

ISIS doesn’t abide by any international agreements or price regulations. This is a “black market.” There are no tangible income or production numbers. We don’t definitively know all of ISIS’ customers.

The region’s long-established smuggling routes make it easy for the oil to be trafficked out of the territory. Once in the hands of middlemen, “no big traders, no serious companies are going to fool around with that oil,” says Matthew M. Reed, vice-president of Foreign Reports, a Washington-based consulting firm that analyzes oil and politics in the Middle East. He continues: “That oil is essentially radioactive at this point. No one wants to touch it.”

But, someone buys it—to the tune of millions of dollars a day. Who would buy the “radioactive” oil?

Some of ISIS’ heavily discounted oil reportedly ends up in Pakistan. A CNN article titled: “How Iraq’s black market in oil funds ISIS” states: “ISIS controls smuggling routes and the crude is transported by tankers to Jordan via Anbar province, to Iran via Kurdistan, to Turkey via Mosul, to Syria’s local market and to the Kurdistan region of Iraq, where most of it gets refined locally.” As Reed pointed out, legitimate traders won’t deal in it, so it likely goes to nations that care little about the rule of law—perhaps, North Korea and China. The outlets that are soaking up the discounted oil, are not buying the full-price oil, which leaves millions of dollars, 50-80,000 barrels, a day of full-price oil, on the table, looking for a buyer.

So, U.S. oil and ISIS oil continue to put a lot of supply into the market, keeping the price low. Unless coalition forces successfully bomb the oil fields in ISIS control, the black market oil supply will grow. If Republicans, who support developing our resources, take control of the U.S. Senate, our production could well increase. Both will help keep supply high, and prices low.

Saudi Strategy

The last piece in the low-priced oil puzzle is Saudi Arabia. BusinessWeek states: “With the U.S. on track to become the world’s largest oil producer by next year, it’s become popular in Washington and on Wall Street to call America the new Saudi Arabia. Yet the real Saudi Arabia hasn’t relinquished its role as the producer with the most influence over oil prices.”

The Saudi kingdom reportedly needs oil at $83.60 a barrel to balance its national budget. Yet, in September, with prices already down, due to a global oil glut, the Saudis boosted production. Then, in October, it lowered prices by increasing the discount offered to its Asian customers. Oil prices have reached the lowest level in nearly four years. Despite calls for price hikes from other OPEC nations, primarily Venezuela (which recently announced food rationing), the Saudi policy will not likely change before the November 27 OPEC meeting.

Saudi Arabia’s price war has surprised the markets and made watchers wonder what they are up to. With its government 85 percent dependent on its oil revenues, the Saudis need to protect their turf as the dominant force in oil.

Some say the move “is the result of a deliberate strategy by the Gulf nation to test the mettle of rival producers from Russia, to fellow OPEC member Iran and US shale producers.” Most experts agree that keeping prices low hurts higher-cost production such as that from U.S. shale oil and Canadian tar sands. Higher prices encourage more discovery and development. A report from Aljazeerah claims: “OPEC leader Saudi Arabia hopes to claw share from U.S. producers.”

The Financial Times reports: “The lower prices also appear to be designed to put a brake on the shale oil boom, which has been the most significant upheaval in global energy for a decade.”

Two years ago, Saudi Arabia did much the same thing—increasing production and dropping oil/gasoline prices. At that time, the U.S. faced an important presidential election where one candidate loudly supported America’s new energy abundance and the other’s energy agenda was all about “green.” Had gasoline still cost in the range of $4.00 on November 6, 2012, the party in power would have suffered; the public would have been screaming: “Drill, baby, drill.” The Saudis came in and with their unique ability to throttle production up or down, took some heat off of the Obama Administration.

Now, in the midst of another election cycle—one that is very important to the future of oil production in America, the Saudis, once again, appear to be orchestrating geopolitical outcomes. OPEC’s oil output is close to a two-year high—despite production drops in Angola and Nigeria. Saudi Arabia has made up the difference.

Some observers say the Saudis’ increased production in a time of global over-supply “is not about a political attack on the U.S.” Others see it, as “more nuanced.” Yet, last week a Saudi industry official, discussing the production/export data leaks acknowledged: “Sorry, it is politics.”

It seems clear that OPEC does not want U.S. production to increase, and Saudi Arabia is in a position to try influence American politics. Lower prices favor the party in power. A shift in control of the Senate would mean a change in America’s energy policy—one that favors our homegrown energy resources; one that Saudi Arabia doesn’t want.

However, it appears, regardless of possible Saudi meddling, the Senate leadership will shift. Once American voters make that decision on November 4, the OPEC leader will no longer have the incentive to inflict short-term pain on its own economic climate for long-term gain. Saudi Arabia will likely dial back production and the intentionally low price will stabilize—but not so much that it hurts the benefit to the American economy that abundant energy provides.

The American consumers win; American energy producers win.


(A version of this content was originally published on Breitbart.com)

Categories: On the Blog

Weather Channel Founder to CNN Host: Put Both Sides of Climate Debate on the Air

Somewhat Reasonable - November 02, 2014, 7:16 PM

CNN “Reliable Sources” host Brian Stelter got the worst of it with his exchange with John Coleman today.

Weather Channel Founder John Coleman caused quite a stir with his open letter demanding UCLA’s Hammer Museum bring balance to a climate presentation highlighted by Michael Mann. That letter led to this appearance Monday on “The Kelly File” on Fox News, which led to a spot on “Coast to Coast AM,” which lead to CNN’s “Reliable Sources” asking Coleman to come on the program, which aired today.

Host Brian Stelter thinks the story is how The Weather Channel “is distancing itself” from Coleman’s science-based skeptism of man-caused, catastrophic global warming. The real story is how Coleman dominated his segment on “Reliable Sources,” scolding CNN for not putting on skeptic scientists who could explain, for instance, that global warming has stopped for 18 years, and why the “97 percent consensus” is bunk.

Below is the video, and below that is a transcript for posterity.

TRANSCRIPT (typed from video by The Heartland Institute)
November 2, 2014
“Reliable Sources,” CNN

Host: Brian Stelter
Guest: John Coleman, founder of The Weather Channel, American Meteorological Society Meteorologist of the Year (1982).

Stelter: A story you will see nowhere else this morning. It’s about one of the biggest crises we face — climate change — and a media war over that crisis. ‘Climate deniers,’ people who believe climate change is not happening in any meaningful way are sometimes painted in the media as fringe characters, as kooks. So this might shock you. A man who co-founded The Weather Channel thinks climate change is a hoax. His name is John Coleman.

Before launching The Weather Channel in the early 1980s, he was the original weather man on ‘Good Morning America,’ and after launching the channel, he was also a local weather man in New York, Chicago, and San Diego. Now he’s retired, but his recent open letter, saying that climate change is ‘not valid,’ and got a lot of attention and landed him on prime time on Fox News. So, what did The Weather Channel do? It very publicly disavowed him. After all, for those who believe that the climate is changing, and fast, this is a life and death matter.

I’ve said before here on Reliable Sources, I don’t think there are two equal sides to climate change. The scientific consensus is that it’s real, the debate is over what to do about it, and the press has to be careful about creating this notion of sides. But Coleman’s platform as a co-founder of a channel dedicated to weather is unique, and so is the channel’s declaration that it believes climate change is happening. So this morning, both players are here: Coleman and the CEO of The Weather Channel, David Kenny.

First, let me bring in John Coleman, he’s in San Diego this morning. Thank you for being here.

Coleman: It’s nice to be on CNN. Hello to all your viewers. I resent you calling me a ‘denier.’ That is a word meant to put me down. I’m a skeptic about climate change and I want to make it darn clear that Mr. Kenny is not a science, I am. He’s the CEO of The Weather Channel now. I was the founder of The Weather Channel, not the co-founder.

Stelter: And I’m glad you did, because I’m addicted to The Weather Channel, I watch a lot of cable news …

Coleman: I’m talking now. Hold on just a minute. I’m not done. And CNN has taken a very strong position on global warming that it is a consensus. There is no consensus in science. Science isn’t a vote. Science is about facts. And if you get down to the hard cold facts, there’s no question about it. Climate change is not happening. There is no significant man-made global warming now, there hasn’t been any in the past, and there is no reason to expect any in the future. There’s a whole lot of baloney, and yes, it has become a big political point of the Democratic Party and part of their platform. And I regret that it has become political instead of scientific, but the science is on my side.

Stelter: I don’t think we’re going to come to a conclusion about the topic right here …

Coleman: Oh I know we’re not, because you would’t allow it to happen on CNN. But I’m happy that I got on the air and got a chance to talk to your viewers. Hello everybody. There is no global warming.

Stelter: What I do wonder is that when you see the government, when you see NASA when you see other institutions say that 97 percent of climate scientists agree, do you think they are they making it up? What I don’t understand is, how you square that?

Coleman: That’s a manipulated figure and let me explain it to you. The government puts out about $2.5 billion directly for climate research every year. It only gives that money to scientists who will produce scientific results that support the global warming hypothesis of the Democrat Party position. So, they don’t have any choice. If you’re going to get the money, you gotta support their position. Therefore, 97 percent of the scientific reports published support global warming. Why? Because those are the ones the government pays for and that’s where the money is. It’s real simple, but that doesn’t mean it’s right. That doesn’t make it true. That only makes it bought and paid for. The money goes in circles.

Stelter: I’m not a scientist, so I’m not going to try to refute you …

Coleman: Boy, that’s the truth. So please stand back from this issue and let the two sides be on the air. There are 31,000 scientists who have signed a petition that says it is not valid, that my position is correct. And we’ll keep battling, and we will prevail in time, but I don’t know if we’ll do it in my lifetime.

Stelter: I do hope viewers are Googling the data you’re sharing because I do think it’s skewed. I have to say that.

Coleman: No. It’s not true. I hope you will go to the websites that present the papers that show that none of this alarmism about ice and heat waves and droughts, none of it is happening.

Stelter: Is The Weather Channel part of the conspiracy?

Coleman: Well, The Weather Channel has bought into it. As I’ve said it, they’ve drunk the Kool-Aid, but so has all the media. That’s no big surprise.

Stelter: Let me read to you what the channel said this week …

Coleman: Oh, I have read The Weather Channel’s statement. (cross talk)

Stelter: Let me read it to the viewers then. After you appeared on Fox, they did put out this statement distancing themselves from you. They said: “Mr. Coleman does have a place in our company’s history, and we appreciate the contributions that he made more than 30 years ago. However, we want to be clear: John Coleman is no longer affiliated with our company.” How did you feel to see them disavow you in that way?

Coleman: Well, no problem. (Laughs) That’s all accurate, and the statement that’s on their website which they re-issued this week was written back in 2007, and that’s a rather reasonable warmist statement. It’s not full of alarmism. It’s not full of ‘the sky is falling.’ It’s a pretty reasonable statement. The programming they put on the TV is not reasonable. And when they put on their ‘climate geeks,’ those aren’t scientists. Those are nuts.

Stelter: You sound like a man disappointed …

Coleman: They never put on a real skeptical scientist, they don’t give us any spot on their channel. That’s too bad that they don’t.

Stelter: You sound like a man disappointed by the channel that you helped create.

Coleman: Oh, I’m terribly disappointed. I created a channel to give people their weather — tell them what the weather is now, what it’s going to be where they live and in their region, and keep them posted on the weather and serve a real purpose. And that channel has been totally distorted and become as strange as it can be.

Stelter:John, thanks for being here this morning and thanks for sharing your views with us.

Coleman: Well, I thank you for letting me on CNN. I had my say, and it was great fun.



Categories: On the Blog

The Austrian Economist Who Should Have Received Nobel Prize

Somewhat Reasonable - November 02, 2014, 4:29 PM

On October 13th, the 2014 Nobel Prize in Economics was announced in Stockholm, Sweden, with French economist, Jean Tirole, the recipient for his work on developing models to better assist governments in regulating private enterprise.

A couple of weeks earlier, Reuters news agency had reported that the Austrian School economist, Israel M. Kirzner, was on the short list for consideration. In the eyes of many free market advocates, he would have been the far more deserving recipient for his insightful and original work on the nature and workings of entrepreneurship and the market process.

Over a scholarly career that has spanned a half a century, Kirzner has enriched our understanding of the theory of the competitive process, the role of the entrepreneur in bringing about market coordination and innovation, the nature of capital and interest, the dangers resulting from the regulated economy, and the importance of individual freedom for the open-ended creativity that enhances the general human condition.

Israel Kirzner was born on February 13, 1930, in London, England. Between 1940 and 1948, he lived in Cape Town, South Africa. He attended the University of Cape Town in 1947 and 1948 and the University of London in 1950 and 1951. He came to the United States and was a student at Brooklyn College in New York City from 1952 to 1954, earning a B.A. degree, summa cum laude. In 1955, he received an M.B.A. from New York University. And he earned his Ph.D. in economics from NYU in 1957.


Kirzner Meets Ludwig von Mises

It was while looking for classes to fill course requirements to complete his M.B.A. at NYU that Kirzner saw listed a seminar in economic theory offered by the famous Austrian economist, Ludwig von Mises, in the fall semester of 1954. He once recalled the first day of Mises’s seminar and the impression it left on him:

“That occasion was … my first meeting with Ludwig von Mises, and it is etched deeply in my memory…. His very opening substantive sentence that evening [was], ‘The market,’ Mises began, ‘is a process.’ Coming as I did from a rather spotty undergraduate training in economics (and mainly along Keynesian lines) Mises’ statement, I recall, left me completely puzzled. I had thought of the market as a place, an arena for exchanges, as an abstract idea referring to voluntary exchange transactions. I could not fathom what on earth could be meant by the observation that the market is a process. I now, in retrospect, consider that all my subsequent training and research in economics, both before and after obtaining my doctorate under Mises, has consisted in learning to appreciate what it was that Mises meant by this assertion.”

From 1954 to 1956, he worked as Mises’s graduate assistant, and wrote The Economic Point of View: An Essay in the History of Economic Thought, a study of the development of economics as a theory of the logic of choice and human action, as his dissertation under Mises’s supervision. It was published as his first book in 1960.

After graduating, he was hired as an assistant professor in the economics department at New York University in 1957, being promoted to associate professor in 1961 and full professor in 1968, a position he has held until his retirement in 2001.

Kirzner has published a dozen books, more than 100 articles, and more than 30 book reviews. He has also been one of the leading intellectual forces in bringing about the revival of the Austrian school of economics, after its long hiatus following the triumph of Keynesian economics after the Second World War.

Besides Kirzner’s influence through the originality and persuasiveness of his writings, in 1976 he founded an Austrian economics graduate study program at New York University that has helped to successfully train a new generation of Austrian economists.

And for more than 25 years, the weekly Austrian economics colloquium at NYU, under Kirzner’s general supervision, served as an important focal point for Austrian-oriented economists in the greater New York area. Over the years, many internationally renowned economists, including Friedrich A. Hayek, participated in the colloquium sessions.

Kirzner’s contributions to the Austrian school of economics have refined and extended the earlier works of Ludwig von Mises and Friedrich A. Hayek on understanding the workings of the market economy. He has developed these themes in a series of books, among which are: Competition and Entrepreneurship (1973); Perception, Opportunity and Profit (1979); Discovery and the Capitalist Process(1985); Discovery, Capitalism, and Distributive Justice (1989); The Meaning of Market Process (1992); How Markets Work: Disequilibrium, Entrepreneurship and Discovery (1997); and The Driving Force of the Market (2000).


Entrepreneurship, Alertness and the Market Process

Mises, as Kirzner explained, viewed the market as a “process.” But what kind of a process is it? Kirzner has emphasized that it is a process of entrepreneurial alertness. The satisfaction of consumer demand may be the purpose behind production, but there must be some who, in the social system of division of labor, have the specialized role of anticipating what it is that consumers will desire in the future and then hiring, directing, and coordinating the use of the means of production towards that end.

What guides entrepreneurs in this task is the anticipation of profits — revenues in excess of the expenses to bring goods to market — and the avoidance of losses. But one of the insights that Kirzner has highlighted is that while entrepreneurship is crucial to the workings of the market, it cannot be bought and sold like other goods or resources for a certain price. The reason is that the essence of entrepreneurial activity is “alertness,” an attention to scanning the market horizon for opportunities and innovations that can result in making better goods, or new goods, or bringing less-expensively manufactured goods to the market place.

But to be “alert” is to notice something that others have neither seen nor thought of before. Alertness means thinking and seeing “outside the box” of the known set of opportunities and routine ways of doing things. It is the process of discovering new knowledge and possibilities that no one has either previously imagined or noticed.


The Benefits from Competitive Markets

In Israel Kirzner’s view, one of the most important reasons for open, competitive markets is for individuals to have the profit incentives and the chance to benefit from alertness. The free-market institutional order creates the conditions under which people will be more likely to have the motivation to be alert, even though we can never know ahead of time what their creative discoveries will generate and unearth.

But why should the discovery and earning of such profits be considered “good” from the wider social point of view? Part of Kirzner’s answer is a development of Hayek’s insight that corresponding to the division of labor in society is an inevitable division of knowledge. Each of us possesses only a small fraction of all the knowledge and information in the world, and yet somehow all of our interdependent activities must be coordinated for each of us to benefit from the specializations and expertise of our fellow men.

Hayek emphasized that the coordination of the actions of millions of specialized producers and consumers around the global market is brought about through the price system. Any change in someone’s willingness or ability to supply or demand any product anywhere in the market is registered through a change in the price of the good, service, or resource in question.

Furthermore, such changes are occurring all the time in a world of unceasing change. The resulting changes in market prices due to shifts in supply and demand conditions are constantly creating new profit or loss situations.

A central task of the entrepreneur, Kirzner has argued, is to be alert to these shifts in market conditions and indeed to anticipate them as best he can.

His role in the market economy is to bring about modifications and transformations in what goods are produced, where they are produced, and with which methods of production, so that production activities are continuously tending to reflect the actual patterns of consumer demand.

Through his alertness to profits to be gained and losses to be avoided, the entrepreneur ensures the adjustments to change that are required for a process of continual coordination of market activities, upon which both the existing and an improving standard of living are dependent.


Profit and entrepreneurship

Profits, therefore, are the reward for an entrepreneur’s successful alertness to changing, discovered, and created opportunities in the market that result in the production, marketing, and selling of those products most highly and urgently demanded by the consuming public as expressed in their willingness to pay prices for them in excess of their costs of production.

On the other hand, it is the “social function” of competition to create the opportunities and incentives for entrepreneurs to compete against each other in the pursuit of those profits, with the tendency for those profits to be competed away in the attempt to capture consumer business.

Kirzner has not only argued that the possibility of earning profits is desirable because it pragmatically acts as the incentive mechanism to help bring supply and demand into balance and to bring productive innovations to market. He has also defended the justice in any profits earned on the free market. The direction of any production process is based on a vision and a conception in the mind of the entrepreneur about the likely shape of market things-to-come.

Precisely because it is a discovery process in which individuals perceive opportunities and possibilities in things and situations that others have not, the successful earning of profits should be considered to be “just” under the simple notion of finders-keepers.

Central to Kirzner’s reasoning is that every discovery of a new opportunity is the appropriation of that which had not existed before a human mind had seen the potential for gain in a particular situation or in the use of some object or resource in a new and different way. And, thus, the profit earned by bringing such an opportunity into existence rightly belongs to the discoverer.


Government regulation

From this conception of the market process, Kirzner has forcefully warned of the dangers resulting from government intervention, regulation, and taxation. Such government infringements on the freedom of the market stifle and close off the opportunities and incentives for entrepreneurial alertness and discovery, thereby hindering an effective coordination of many potential peaceful and mutually beneficial possibilities for gains from trade that any number of people might have happily taken advantage of.

It also retards or prevents the entrepreneurial experimentation with new and innovative methods of production that could improve the quality and variety of life, if only the open, competitive market is left free from the heavy hand of various government controls and fiscal burdens.

In his analysis of the market process and the dangers inherent in government regulation, Kirzner has also pointed out the weaknesses in much of “mainstream” or standard textbook economics. He has explained that many of the gains from market competition and the problems arising from government intervention are not always clearly appreciated because of the type of model of the market used by many economists.

In the textbook model of “perfect competition,” it is assumed that all market participants already possess perfect knowledge, that producers all are manufacturing a product exactly like their rivals in the same market, and that any attempt by a seller to influence the market price or to differentiate his product from that sold by his competitors is “proof” of “market failure.” And that any such “failure” can have only one cure: a wise and well-informed government intervening to “correct” the market.

Kirzner has vehemently argued — as did Mises and Hayek before him — that government regulators and planners have neither perfect knowledge nor sufficient wisdom to direct the economic affairs of millions of people. Indeed, it is precisely because of the limited and imperfect knowledge that we all possess that there is no institutional alternative to the market economy. The purpose of both price and product competition in the market is for entrepreneurs to constantly “test the waters” to discover exactly what it is that consumers want, in what varieties and quantities, and how best to produce and sell those things at the lowest costs possible.

These insights about the market process are central elements in Israel Kirzner’s profound contributions to our understanding of the free market system and a society respectful of individual liberty. One can only hope that next year the Nobel Prize will rightfully be awarded to this truly deserving scholar of the market order.

[Originally published at EpicTimes]

Categories: On the Blog

Reducing Ohio’s Renewable-Power Mandate is Progress, Not Regression

Somewhat Reasonable - November 02, 2014, 4:20 PM

Thirty states, including Ohio, have renewable portfolio mandates. These laws require a certain percentage of electricity to be generated from renewable sources, primarily wind and solar power.

Such laws were mostly enacted in the early 2000s. More-recent backlashes over rising electricity prices, lost jobs, and capital flight have led to proposals across the country to repeal or curtail these standards.

Last June, Ohio Gov. John Kasich became the first governor to sign a law reducing his state’s alternative-energy portfolio standard. Ohio’s leadership likely will open the door for more such policies to be proposed and passed in other states.

An executive of the Environmental Defense Fund called the Ohio bill a “step backwards.” Those who believe that renewable sources such as wind and solar energy are new, emerging technologies assert that government help is necessary to jump-start these industries. That isn’t true.

In fact, wind and solar power are old, stagnating technologies that date to the 19th century. They have benefited from lavish subsidies, tax credits, and mandates for many years.

Yet wind power provides only 1.4 percent of all energy consumed in the United States today. Solar energy provides less than one-fourth of 1 percent.

Such is the paradox of government interference in the energy sector: People turn to government to spur innovation, but government is a monopoly, shielded from the market forces that create innovation through competition and consumer choice.

That’s why wind and solar energy, propped up by governments everywhere, have stagnated instead of innovating. By contrast, technologies for hydraulic fracturing and horizontal drilling suggest what market forces can accomplish when government gets out of the way.

The boom in natural gas and oil extraction, in Ohio and other states, has created hundreds of thousands of jobs and lowered energy prices. It has led to a reduction in greenhouse-gas emissions, as power plants convert from coal-fired generation to cleaner-burning natural gas.

The Economist magazine reports that America’s natural gas boom “seems to be doing as much to reduce pollution as many of the efforts introduced over the years to restrict emissions from vehicles, power stations, and other sources.” Yet many renewable-energy supporters oppose fracking and horizontal drilling, even though lowering greenhouse-gas emissions is the main reason they say we need to force people to buy renewable-generated electricity.

The positive effects of energy breakthroughs are felt everywhere in the economy. But no one — including lawmakers and government officials — can foresee when or where the next energy breakthrough will occur. Conversely, government-created stagnation in energy has negative effects throughout the economy.

A 2011 study by the Beacon Hill Institute at Suffolk University in Boston projected that Ohio’s alternative-energy portfolio standard would cause the state to lose 9,753 jobs by 2025. It predicted Ohio consumers would face $8.6 billion in higher energy prices between 2016 and 2025, including more than $1.4 billion in 2025 alone.

Those figures might be a little lower, now that a modest reduction of the standard has been enacted. But Ohioans should continue to press for outright repeal of the mandate, to avoid these negative consequences altogether. Indeed, Ohio should eliminate all other energy mandates, subsidies, and tax preferences, to increase competition and cut energy prices.

Energy is one of the most crucial inputs of economic growth. The pricing, production, and distribution of energy are embedded in everything people and businesses do and create.

If Ohio lawmakers enact policies that promote competition and lower energy prices, households will benefit directly by having their money freed up for other purposes. They also will benefit from lower prices and more jobs, as money becomes available to businesses to redirect to hiring, investing, and increasing their payrolls.

That is, consumers benefit in both ways. It will take time for these benefits to be fully realized, but they should not be underestimated.

[Originally published at The Toledo Blade]

Categories: On the Blog

Minimum Wage Laws Should Not Be Used as an Election Gimmick

Somewhat Reasonable - November 02, 2014, 10:57 AM

While lawmakers across the country debate proposals to increase state minimum wage rates, proponents have turned their attention toward ballot measures that might kill two birds with one stone: putting voters on the record as supporting minimum wage increases as well as getting out the vote for Democrat candidates.

According to the National Conference of State Legislatures, 34 states introduced minimum wage increases during the 2014 session. Ten states—Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, and West Virginia—enacted increases during the 2014 session. Another five states – Alaska, Arkansas, Illinois (a nonbinding ballot question), Nebraska, and South Dakota – are placing propositions on their November ballots asking voters to approve increases in their state’s minimum wage.

Although supporters of minimum wage increases say they protect workers from exploitation by employers and reduce poverty, opponents question both the effectiveness and the true intent of the proposals, calling them election-year gimmicks.

Using the minimum wage as a political football or “get out the vote” tool is a shortsighted move that could damage a state’s economy. A minimum wage hike can increase unemployment and, ironically, poverty, by forcing businesses to make adjustments elsewhere to offset the increased costs of mandatory wage hikes.

Employers may respond to the increased labor costs by letting workers go, reducing hiring, cutting employees’ work hours, diminishing employees’ fringe benefits, raising prices to consumers, and lowering dividends to investors. The unemployment created by these laws has an especially strong effect on young and unskilled workers. Thus minimum wage laws end up hurting the very people they were supposedly intended to help.

Minimum wage laws also tend to increase prices, notes Mark Wilson of the Cato Institute in a 2012 review of more than 20 minimum wage studies looking at price effects: “a 10 percent increase in the U.S. minimum wage raises food prices by up to 4 percent.” Similarly, a 2007 study from the Federal Reserve Bank of Chicago found restaurant prices increased in response to minimum wage hikes.

Evidence shows imposing minimum wage increases is not an effective way to address poverty and often has the opposite effect by creating barriers to entry for workers with less skill and education. In a 2010 study, economists at Cornell University and American University found no reduction in poverty in the 28 states that raised their minimum wage between 2003 and 2007. A 2007 study by economists at the University of California-Irvine and the Federal Reserve Board found 85 percent of the studies they considered credible demonstrate minimum wage laws cause job losses for less-skilled employees.

There are alternatives to minimum wage laws that can help low-income families move out of poverty. The Earned Income Tax Credit (EITC), the nation’s largest poverty reduction program, is a refundable tax credit for lower-income working individuals and families based on income level and number of dependents. The EITC is designed to increase employment, stimulate spending throughout the economy, offset the burden of Social Security taxes, and encourage existing workers to stay employed. It covers a large group of low-income families, and several studies have found it is far more effective than the minimum wage. Twenty-five states and the District of Columbia have state-level earned-income tax credit programs.

Increasing the legal minimum wage is not an effective method of addressing poverty; it harms workers by creating barriers to entry for less-skilled and less-educated people while increasing the cost of products and services. Lawmakers and voters should reject this bad public policy and instead consider creating or expanding state-level earned-income tax credits.

Categories: On the Blog

Illinois Educators Can Learn From High-Achieving Nations

Somewhat Reasonable - November 02, 2014, 2:00 AM

With election season in full swing, one of the most widely used political attacks is for candidates to accuse their opponents of wanting or having already committed “cuts to education” resulting in “teacher layoffs.”

For example, Republican gubernatorial candidate Bruce Rauner’s “Remember This” TV ad accuses incumbent Democratic Gov. Pat Quinn of cutting school funding by $500 million and causing “teacher layoffs and crowded classrooms.” The Illinois Federation of Teachers, which has unanimously endorsed Quinn, says Rauner is the one who wants to “cut billions out of public education resulting in teacher layoffs [and] larger class sizes.”

Such talking points suggest education spending can only be cut at the expense of teachers, but research from the Friedman Foundation for Educational Choice shows cuts can be made without teacher layoffs. From 1992 to 2009, the number of administrative staff in Illinois public schools grew by 36 percent, while the number of students rose by only 14 percent. Had administrative staff growth been restricted to the same rate as students’ growth, Illinois could not only keep all its teachers but it could give every single one a $5,606 annual salary increase.

Administrative bloat is hardly an Illinois-specific phenomenon. Between 1992 and 2008, non-teaching staff in the United States grew 2.7 times faster than the number of students, yet public schools’ reading scores on the National Assessment of Educational Progress (NAEP) Long-Term Trend exam fell slightly and mathematics scores remained flat, according to Ben Scafidi, professor of economics at Georgia College & State University.

Today, the United States spends more of its operating budget on non-teaching personnel than any other country in the Organisation for Economic Co-operation and Development (OECD), except Denmark. For all that money, the U.S. scores near the average among OECD nations in reading and science and below average in mathematics, according to the 2012 Program for International Student Assessment (PISA).

When one Chinese education official was asked how Shanghai students achieved the world’s top ranking, she told CNN they take special measures to recruit high-quality teachers. This included high salaries, but it also included higher standards. Countries such as Brazil, Columbia, and Poland, which dramatically improved their rankings, had each raised their teacher standards, leading to improved teacher quality.

In recent years, 33 U.S. states have taken measures to toughen teacher requirements. Illinois, however, is moving in the opposite direction. Last April, Illinois dropped a basic skills test requirement for admission to a teacher-training program, out of fear it would result in significantly reduced enrollment in education schools, even though the test’s difficulty is mostly regarded to be at the high-school level. Such a decision costs Illinois public school students the high-quality teachers research says are needed to improve student outcomes.


Categories: On the Blog

Making It Easy to Predict the Next Financial Crisis

Somewhat Reasonable - November 01, 2014, 9:57 AM

It is a cliché, but true, that history repeats itself. This is largely due to the failure of each new generation to learn anything from the past as well as the human tendency toward the bad habits of greed and power-seeking. Only the names and faces change.

That is why the next financial crisis is entirely predictable.

On October 23, The Wall Street Journal had an article, “Relaxed Mortgage-Lending Rules Clear Final Hurdle.”  The financial crisis in 2008 was the direct result of relaxed mortgage-lending rules. Indeed, it was the result of government pressure on banks to make “sub-prime” loans to people who any bank might sensibly conclude could not replay them. Those loans, in turn, were sold to Fannie Mae and Freddie Mac, two government-sponsored enterprises, who then bundled and sold them as mortgage-backed assets.

As Wikipedia notes, the Federal National Mortgage Association, commonly known as Fannie Mae, was founded in 1938 during the Great Depression to expand the secondary mortgage market by securitizing mortgages by issuing mortgage-backed securities, allowing lenders to reinvest their assets into more lending. In 1970 the Federal Home Loan Mortgage Corporation, whose nickname is Freddie Mac, was created for the same reason. Both are overseen by the Federal Housing Finance Authority. Neither issues mortgages. As noted, they buy them from banks, bundle them as securities, and resell them.

Getting the government involved in the housing market has been a supremely bad idea, much as getting the government involved in education and, as we are learning, involved in the nation’s healthcare insurance sector. There are only a few things the Constitution authorizes the government to do and none of these are mentioned. That has never stopped politicians.

The Wall Street Journal article reported that “Three U.S. agencies signed off on relaxed mortgage-lending rules, helping complete a long-stalled provision of the 2010 Dodd-Frank financial-overhaul law.” Two commissioners of the Securities and Exchange Commission “warned the rules would do little to prevent a return to the kind of lax mortgage underwriting that fueled the financial crisis.”

The Economist also took note, saying “When politicians bashed Wall Street for its reckless mortgage lending in the wake of the subprime crisis, bankers retorted that it was the politicians’ enthusiasm for expanding home ownership, even if it meant small deposits and low credit standards, that had really fomented the disaster.” Suffice to say there is plenty of blame to spread around, but the banks had to play by the rules the government had put in place.

In the wake of the financial crisis “many banks have stopped lending to riskier borrowers” but the new rules simply recreate the conditions that led to it, although “the rules only affect the tiny market for securities issued without federal backing, less than 2% of the $1.58 trillion in mortgage securities issue in 2013…”

The rule changes are being hailed as an example of the how great the “reform” implemented after the financial crisis was in the form of the Financial Stability Oversight Council and Orderly Liquidation Authority, otherwise known as the Dodd-Frank Act.

Suffice to say it is a regulatory nightmare of several thousand pages of rules, often quite vague, that are still being interpreted. That said, its purpose, to prevent predatory mortgage lending, improve the clarity of mortgage paperwork for consumers, and reduce incentives for mortgage brokers to push home buyers into more expensive loans was needed. It also changed the way credit card companies and other consumer lenders had to disclose their terms to consumers.

As The Economist noted, the agreement regarding mortgage-lending rules “would permit banks to securitize and sell mortgages without retaining a 5% stake—leaving them little incentive to maintain high lending standards.” That needs repeating: little incentive to maintain high lending standards, the very reason we had a financial crisis in 2008.

All this is largely due to the progressive notion that everyone, no matter how little they earn, should be able to purchase a home. In reality, those at the low end of the economic ladder should not be encouraged or seduced into taking on such debt. When they do and the economy goes south, leaving them unemployed, they just walk away from the debt.

Why should the rest of us—taxpayers—bail out the mortgage sector as we did in 2008 with huge loans to the banks and insurance companies that had purchased mortgage-based securities? The government had to step in with the complete government takeover of Freddie Mac and Fannie Mae. We got stuck with the bill.

It also drove up our national debt, leading to the first reduction in the nation’s credit rating in its history.

There is already talk on Capitol Hill that, should Republicans take control of the Senate and retain it in the House, they are likely, as Reuters reported, “to target the Consumer Financial Protection Bureau and capital requirements on insurance companies.” To put it another way, the Republicans are the adults in Congress while the Democrats, liberal to the core, will never admit we are being set up for another financial crisis.

Categories: On the Blog

TUNE IN SUNDAY MORNING: Global Warming Skeptic John Coleman on CNN’s Reliable Sources

Somewhat Reasonable - November 01, 2014, 7:20 AM

John Coleman’s spot on “The Kelly File” Monday made some waves.

John Coleman, the founder of The Weather Channel and a long-time friend of The Heartland Institute, wrote an open letter to UCLA’s Hammer Museum last month, demanding it open up a climate change discussion to the “skeptic” point of view. That letter got a lot of attention, and Coleman has been making the rounds of media outlets this week.

On Monday, he was seen by two million viewers on “The Kelly File” with Megyn Kelly on the Fox News Channel. Later that night, Coleman was a guest on “Coast to Coast AM,” which for decades has been the most popular overnight radio program in North America with three million listeners.

So tune in to CNN at 11 a.m. ET on Sunday, Nov. 2 to watch Coleman on “Reliable Sources” talk about the media’s complicity in perpetuating an unscientific panic about man’s influence on the climate. Coleman tells us the conversation (taped on Friday for broadcast Sunday morning) focused on The Weather Channel’s response to Coleman’s Monday appearance on “The Kelly File.”

Coleman says the host “didn’t know what hit him,” and, “I assure you, this is not your average TV interview.”

Don’t miss it! Watch CNN’s “Reliable Sources” on Sunday morning.

You can watch all of Coleman’s presentations at Heartland’s international climate conferences here. Follow Coleman on Twitter, and check out his Facebook page.

Categories: On the Blog

Global Warming Is a Political Ruse in Florida Governor’s Race

Somewhat Reasonable - November 01, 2014, 5:32 AM

Tom Steyer, billionaire climate alarmist

Outside activist groups are spending millions of dollars on political ads claiming Florida Gov. Rick Scott (R) is not doing enough to fight global warming. A look at the facts, however, reveals Florida is more than pulling its weight on the global warming issue, and the political ads are actually an attempt to promote a Democratic political candidate rather than an effort to fight global warming.

Liberal billionaire Tom Steyer, who made his fortune funding coal power in third-world nations, is leading the global warming push in Florida, spending $10 million on anti-Scott political ads. The ads take a decidedly negative and sarcastic tone, including claiming Scott’s plan to address global warming is to build an ark for himself and his friends.

Steyer’s sarcastic tone aside, there is essentially nothing a Florida governor can do to change the global temperature. The United States accounts for less than 15 percent of global carbon dioxide emissions, and Florida accounts for only 4 percent of the U.S. total. Accordingly, Florida accounts for significantly less than 1 percent of global carbon dioxide emissions. Florida could eliminate all its carbon dioxide emissions and scientists would never be able to measure the impact on global temperatures.

Even so, global warming activists argue Floridians should shoulder the burden of global warming action in order to demonstrate leadership. Floridians, however, are already demonstrating leadership and paying a high price for it.

Global warming activists say the best method of reducing carbon dioxide emissions is to cut energy use. Florida, however, already is a national leader in this regard, with only seven states using less energy per person.

Global warming activists target coal power, despite the relatively small amount of electricity Floridians use, because coal produces more carbon dioxide than any other widely used electricity source. Florida, however, has already weaned itself off coal. Coal powers 39 percent of the nation’s electricity, but Floridians use less than half as much coal—just 21 percent.

As a result of these factors, only 10 states emit less carbon dioxide per person than Florida. All 10 of the other states accomplish this by utilizing large amounts of emissions-free hydroelectric power or nuclear power. Unfortunately, global warming activists generally oppose both these emission-free power sources. Florida is unique in accomplishing its low-carbon economy while using less nuclear power than the national average and essentially no hydroelectric power.

Any way you cut it, Floridians are already in a national leadership role in reducing greenhouse gas emissions, and our low-carbon economy comes at a very high price. Floridians pay substantially higher electricity prices than the national average and much higher prices than any of our neighbors.

In 2013, Florida electricity prices were 8 percent higher than in Georgia, 13 percent higher than Mississippi’s, 14 percent higher than Alabama’s, and 29 percent higher than Louisiana’s. These higher energy prices take a bigger bite out of Floridians’ living standards than in other states, and the higher energy prices make it more difficult for Florida businesses to compete with businesses in other states. That means fewer jobs for Floridians.

Despite Florida already taking a costly lead in reducing carbon dioxide emissions, the federal government recently announced new global warming restrictions that will impact Florida more severely than other states. The new EPA restrictions will require a 30 percent national reduction in power plant carbon dioxide emissions, but they will impose different requirements on different states. Floridians will be hit especially hard, being forced to reduce carbon dioxide emissions another 38 percent, rather than the national average of 30 percent. This will further widen the gap between Florida’s high-cost, low-carbon economy and those of the rest of the nation.

Why then are Steyer and other activists pouring so much money into criticizing Scott for not imposing even more severe global warming restrictions? The answer is quite simple—partisan politics. Steyer is targeting only Republicans in the 2014 elections, and he is ignoring Democrats who support allowing higher carbon dioxide emissions in their home states.

Global warming activists can argue endlessly for stricter global warming policies, but they cannot argue with a straight face that Rick Scott and Florida are lagging behind the efforts of other states.

[First published at The Federalist.]

Categories: On the Blog

Florida Teacher Fights Standardized Testing and Wins—For Now

Somewhat Reasonable - November 01, 2014, 4:42 AM

The world needs more teachers like Susan Bowles. The kindergarten teacher at the Lawton Chiles Elementary School in Gainesville, Florida risked her job to stand up for what she believes in.

What she believes is that conducting standardized testing three times a year, some of it required to be computerized, is simply not in the best interests of the kindergarten students she teaches. Despite the risk of losing her job after 26 years of teaching, Bowles felt compelled to speak out.

And something amazing happened. Instead of her being fired or reprimanded, the policy was changed. The community rallied around Bowles after she took a stand. Now, K–2 grade students will not be required to take the FAIR tests that Bowles refused to administer.

In the letter Bowles wrote to parents, she explained that even though she would be in breach of contract, she couldn’t in good conscience give the test to her students. The FAIR testing would have meant kindergarten students being tested on a computer using a mouse, Bowles said. Although many of her students are well-versed in using tablets or smart phones, most had not used a desktop computer before. Once an answer is clicked, even if a mistake was made and a student accidentally clicked the wrong place, there is no way to go back to correct it. This means the data that would have been collected would not have been accurate.

“While we were told it takes about 35 minutes to administer, we are finding that in actuality, it is taking between 35-60 minutes per child,” Bowles wrote. “This assessment is given one-on-one. It is recommended that both teacher and child wear headphones during the test. Someone has forgotten there are other five-year-olds in our care.”

The problem is not with the people she works for, Bowles said. “This is not an education problem. This is a government problem,” she wrote.

Bowles was not directly named in the letter to parents from officials changing the testing policy, but the letter does mention the recent attention surrounding the issue.

Bowles was brave in facing down the school administration, state and local officials, and teachers unions who continually protect the status quo and each other. She stood up by herself with no way of knowing what the consequences would be.

Bowles told me she feels lucky to have had the opportunity to speak her mind, because her husband was supportive and her children are grown. After hearing the policy had changed, Bowles said, she “hugged, laughed, cried, and did a happy dance” with other teachers who had been waiting outside her classroom because they had already heard the news.

“I was surprised and pleased that they actually backtracked on the FAIR, suspending it for one year,” said Bowles, noting tension over standardized testing has increased because of Common Core. “Of course, the fear is it will be back next year with a few tweaks.

“This fight should continue—not just regarding the excessive testing that takes away from our children’s learning, but also for the standards that have been adopted that are not developmentally sound, at least for elementary students,” said Bowles. “I can speak for the elementary grades that any developmental psychologist or early childhood educator would tell you that these standards are inappropriate.”

Two bills have been recently introduced to decrease the federal footprint on standardized testing. Education Secretary Arne Duncan has spoken about the possibility of over-testing.

The hope is that these changes aren’t just lip service. Parents, teachers, and legislators will have to continue to fight for students and against the education establishment. The contrasting approaches of the federal government and Susan Bowles regarding how children should be educated suggest we all should support more local control rather than failing federal mandates.

[First published in the Tampa Tribune.]

Categories: On the Blog

Some States’ Tax Policies Are Frightful, Others Are Treats

Somewhat Reasonable - October 31, 2014, 5:11 PM

Just in time for Halloween, the nonpartisan Tax Foundation has released its annual “State Business Tax Climate Index,” finding some states treat businesses in a rather beastly manner, while others give their local employers the fiscal equivalent of a king-sized candy bar.

The Tax Foundation notes, somewhat predictably, that states in New England and the Mid-Atlantic, such as New Jersey, received only rocks in their trick-or-treat bags. According to the index, the Garden State has one of “the worst structured individual income taxes in the country” and taxes property owners at one of the highest rates in the nation.

Life after death may not be a certainty for the dearly departed in New Jersey, but high inheritance and death taxes levied on their survivors helps ensure the state’s economy remains zombified, barely shuffling along with real gross domestic product growing by a mere 1.1 percent in 2013.

Its neighbor in the economic graveyard, New York, ranked dead-last in economic growth, as the state’s anti-business policies helped make the economy remain as quiet as the grave. In 2013, New York’s economy grew by just 0.7 percent.

New York’s ghastly combination of high individual and corporate income taxes, sales taxes, property taxes, and unemployment insurance taxes teamed up to cement the Empire State’s resting place as the worst state for businesses in the nation.

On the “Other Side,” business-friendly states such as South Dakota and Wyoming grew faster than the Blob. Wyoming, for example, does not tax the incomes of corporations or individual taxpayers, encouraging businesses to move to the Cowboy State. With its arsenal of economically sensible policies, Wyoming’s 7.6 percent increase in gross domestic product last year wasn’t the result of some occult ritual performed at the stroke of midnight, but sound economic policies.

North Carolina deserves a king-sized candy bar for stepping up its business tax game. After living in the crypt of a burdensome fiscal policy as recently as 2013, the Tar Heel State’s economy roared to life, growing by 4.1 percent in 2014. The Tax Foundation study credits a cocktail of economic potions such as cutting the corporate tax rate from 6.9 percent to 6 percent and compressing a byzantine individual tax system into a single bracket with “generous” standard deductions.

The “tax climate” is not the only factor involved in determining a state’s prosperity, but one does not have to hold a séance to figure out people are “crossing over” in increasing droves, from high-tax states to low-tax states. Over the decades, states unfriendly to business—such as those in the Northeast and New England—have lost 40 congressional seats to traditionally business-friendly regions such as the Southeast and Southwest.

This Halloween, state legislators across the nation would do well to overcome their fear of enacting pro-growth policies in their states and prepare themselves to reap the treats of good tax and fiscal policies.

[First published at InsideSources.]

Categories: On the Blog

Beware Common Core Proponents Asking for Treats

Somewhat Reasonable - October 31, 2014, 11:56 AM

It always seems appropriate that Halloween comes just days before an election. Politicians are masters at dressing themselves up in ways that obscure reality, in particular their positions on tough issues.

With the midterm elections looming, the winner of this year’s All Hallow’s Eve costume contest could be former Florida Gov. Jeb Bush, who soon may be announcing his candidacy for the 2016 Republican presidential nomination.

Among politicians of all stripes, Democrat and Republican alike, there has been no more avid booster of the so-called Common Core State Standards (which actually are national in scope) than Jeb Bush, the patrician son of President Bush I and brother of President Bush II.

Bush hasn’t hesitated from taking potshots at Common Core opponents, variously calling them politically motivated, conspiracy theorists, and even intellectual weaklings who value kids’ self-esteem over serious learning. He has shown no sign of seriously pondering critics’ arguments about the perils of CC’s would-be centralization of power over all education and the serious harm its one-size-fits-all and test-heavy regimen will do to children.

Now, in a five-page, pre-Halloween fundraising letter for his new organization, Excellence in Education National, Bush claims in order for any other policy changes in such areas as regulation and immigration to be effective, “we must first transform our failing education system and have no tolerance for the adult-centered K–12 system that exists today.”

Yet, in the 28 paragraphs about education that follow, Bush mentions Common Core not once. Nowhere can the words “Common Core” or “national standards” be found.

Trick or treat?

Bush says his new advocacy organization, for which he seeks contributions, will “build on the work” of his established nonprofit foundation, the Foundation for Excellence in Education. Yet that foundation has partnered with the Bill & Melinda Gates Foundation and accepted Gates’ largesse in pushing Common Core as the one true prescription for all that ails education.

This seems pretty tricky, and not much of a treat unless you are a member of the elite national standards inner-circle. The blog Truth in American Education even suggested a possible ethical lapse in a big Common Core booster asking for money while not being upfront with donors about where the money would go.

The letter primarily touts achievement gains in Florida public schools as a result of policies Bush pushed. Much of that is attributable to the increases in public and private school choice that Bush did champion effectively as governor. However, the real mind-stumper is how he believes genuine choice can survive if nationalized Common Core standards will be dictating not only K–12 curricula and teaching methods but also criteria for admission to college.

Maybe families could choose among schools with differing dress codes. That would be about it.

Other politicians have also attempted to disguise their devotion to Common Core this Halloween.

In a race for reelection against an ardent foe of the national standards, New York Gov. Andrew Cuomo (D) rolled out a startling campaign ad vowing to “disregard Common Core scores for at least five years.” Never mind that he didn’t say he would stop the testing; never mind that any hold on use of scores could be lifted after the election; never mind that (as Politico reported) Cuomo had set up a panel earlier this year to speed Common Core implementation after praising the standards as “a critical part of transforming New York schools.”

Then there is U.S. Sen. David Vitter (R-LA) who singled out just one of numerous Common Core-aligned programs, telling state schools chief John White, “I am very concerned with the extreme difficulty and frustration many students and parents are having with Eureka Math.”

The real problem is not one commercialized version of Common Core math but rather the whole “new math” approach of ditching fundamentals for abstractions. However, by picking on just one speck of the rotten Core, Vitter can hope to obscure the blistering rebukes he has delivered against Gov. Bobby Jindal, a fellow Louisana Republican, for trying to rid the Bayou State of CC entirely. Vitter, you see, has his sights set on succeeding the term-limited Jindal as governor next year.

Cuomo and Vitter have dazzled in their colorful chameleon get-ups, but they will have to settle for runners-up to Jeb Bush this Halloween.

[First published at Human Events.]

Categories: On the Blog
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