On the Blog

Jobs, Prosperity and Security via Oil Exports

Somewhat Reasonable - November 10, 2014, 2:50 PM

The midterm elections underscore how much Americans value energy, job and economic revival – and how much they want less Washington control of their lives, livelihoods, and dreams for their children and grandchildren. They also reflect the waning influence of radical Obama and Steyer climate change and anti-energy environmentalist elites. If ever there was a time to end the ban on oil exports, it’s now. With U.S. demand for oil products falling, production rising, and myriad studies making a strong case for selling American crude abroad, the president and Congress should terminate the ban as soon as possible. The nation’s demand for crude oil fell by 3.5% in September versus the same month a year ago. Gasoline demand fell by 3.0% because of efficiency gains in cars and trucks, coupled with a still weak economy, abominable 62.8% labor force participation rate, and too many people forced to work part-time, for lower wages and fewer benefits. Meanwhile, U.S. crude oil production soared in September, climbing to its highest level in 29 years – and demolishing claims that we are rapidly exhausting Earth’s petroleum. During September, the United States produced 8.8 million barrels of oil per day – an increase of nearly 14% over the previous year and 58% since 2005. In fact, the United States has now replaced Saudi Arabia as the world’s #1 oil producer. The International Energy Agency predicts that U.S. oil production will likely exceed 9 million barrels per day by the end of the year, with imported energy liquids reaching a remarkable low of 21% of our consumption in 2015, compared to 60% in 2006. Hydraulic fracturing played the key role in this. That brings us to the price component of Economics 101. Declining demand and rising supplies tend to drive prices down, and indeed crude prices plunged 28% – from $105 per barrel in January to $76 in November 2014. Prices for gasoline, heating oil and other petroleum-related commodities also dropped significantly. That’s a huge boon to consumers, from families to refiners to petrochemical makers. The AAA motorists club estimates that every one-cent decline in the pump price of gasoline feeds an extra $1 billion into the USA economy. The 71-cent drop per gallon has injected $71 billion in actual stimulus money, adding much-needed disposable income to households whose budgets have been pinched by higher taxes and rising costs for food, clothing and healthcare. Interestingly, the lower crude oil prices have occurred during a time of political unrest. In the past, crude prices have tended to climb rapidly when armies were on the march. Today, however, oil production in the United States and Canada appears to have ended the connection between military clashes and prices. Despite ISIS butchery in Syria and Iraq, Israel-Palestinian dissension, disputes over the South China Sea, Russia’s incursions into Ukraine, Islamist murders and kidnappings in Nigeria, and saber-rattling in North Korea, the global price of crude oil has declined steadily all year. Increased U.S. oil and natural gas production have also nearly single-handedly lifted America’s economy out of its recessionary doldrums. A U.S. Department of Energy report found that the number of oil and natural gas jobs grew 40 times faster than jobs in the rest of the economy from 2007 to 2012. Imagine how bad the Obama economy would be if it weren’t for the oil and gas industry that the President, his radical voter base and most of his cabinet secretaries still despise. Since 2012, the good news has continued. In the booming Marcellus Shale region of Pennsylvania, Ohio and West Virginia, the number of labor hours worked rose by 40% from 2012 to 2013, marking a new all-time high. (New York could also share in this job and revenue bonanza, but its political elites continue to block any and all fracking, severely hurting blue collar and farm families in western NY State.) Numbers like these make it easy to see the benefits of U.S. oil and natural gas production for the economy. Adding crude oil exports into the mix would multiply the benefits. A recent study by the economic analysis firm IHS Global concludes that allowing crude oil exports would lower gasoline prices by an additional 8 cents per gallon and support an additional 964,000 jobs in 2018. Moreover, it said, repealing the ban on exports would benefit all 50 states, not just those that actively produce oil and natural gas. The National Economic Research Associates (NERA) says eliminating the oil export ban would create high-paying jobs for almost 400,000 unemployed American workers, while the Brookings Institution calculates that ending the ban would boost America’s GDP by some $1.8 trillion! A U.S. Government Accountability Office echoed these analyses. The GAO’s federal auditors found that oil exports would lower energy prices for U.S. consumers, incentivize more domestic oil production, boost the economy, and lower the U.S. trade deficit by further reducing the need for foreign oil imports. The GAO also advised federal agencies to reexamine the size of the Strategic Petroleum Reserve “in view of changing market conditions,” including America’s new position as a global energy superpower. Though the GAO didn’t mention it, opening federally controlled onshore and offshore lands to leasing, drilling and fracking would also work wonders. Being energy-rich also gives America more leverage internationally. Consider the impact that crude oil and natural gas exports could have on Russia’s territorial ambitions. Up to half of Mr. Putin’s budget was fueled by energy exports in 2012. If U.S. energy supplies could be exported to our allies in Eastern Europe, until they can launch their own fracking revolutions, Russia’s ability to use energy exports as a political weapon would be constrained, and Putin’s financial strength diminished. Japan, South Korea and other Asian economies are also hungering to import American crude. Some major oil and gas users worry that even limited exports of U.S. crude would reduce supplies and send prices back up. Petrochemical and other manufacturers have created jobs and profited mightily from hydraulic fracturing, soaring domestic production, and sharply lower energy and feedstock prices, so one can understand their fears. However, lifting the ban on crude oil exports will create new markets and convince more voters and politicians to support opening more areas to environmentally sound drilling and fracking, and thereby fostering further exploration and production that will help keep prices low. Biofuel producers might also oppose ending the ban. The surge in oil and gas production makes it even harder to defend spending billions of taxpayer and consumer dollars on fuels that require some 40 million acres of farmland, plus vast amounts of water, fertilizer, pesticides and fossil fuel energy to produce. Their claims that biofuels help prevent climate change have become just as tedious and untenable. Global temperatures haven’t budged in 18 years, it’s more than nine years since a Category 3-5 hurricane made U.S. landfall, and any actual human influences on the global climate are not even detectable amid natural climate blips and fluctuations. It’s time to end biofuel mandates and subsidies, and focus on fossil fuels. The U.S. prohibition on crude oil exports is a relic of the 1970s. It was enacted in response to the Arab Oil Embargo and gasoline lines that snaked through the streets of major U.S. cities. Those days are gone. Today’s technologies are increasing the nation’s global strength and standing. Just imagine the jobs, security and prosperity we would enjoy if more states permitted fracking, and federal overseers issued Keystone pipeline permits and started allowing real energy production on lands they now keep off limits. If oil and natural gas exports were allowed, the could exert its new energy influence throughout the world without firing a shot. This is a superb opportunity for a newly Republican and bipartisan Congress – and for a President who up to now has been more ideological and defiant than most American citizens can accept. Congress and President Obama should speed oil leasing and exports now.

 

Categories: On the Blog

Gordon Tullock: Economist Who Explained Why Government Corruptly Grows

Somewhat Reasonable - November 10, 2014, 2:37 PM

Why is it that government grows in size and scope, and is so difficult to stop or reverse? Political economist, Gordon Tullock, who passed away on November 3, 2014 at the age of 92, was a path-breaker is explaining how and why big government keeps getting bigger.

Gordon Tullock was one of the founders of what has become known as Public Choice theory – applying the logic of economics to understanding the nature and workings of the political process.

Born in Illinois in 1922, Tullock earned a law degree at the University of Chicago in 1947. He served in the U.S. Foreign Service and was stationed in north China in the late 1940s, witnessing the Chinese Civil War that ended with the triumph of communism and the dictatorship of Mao Zedong.

The Birth and Logic of Public Choice

In the 1950s he began a long collaboration with economist, James M. Buchanan, which was devoted to the economic analysis of democratic political decision-making that resulted in their co-authored book, The Calculus of Consent (1962). Many familiar with Tullock’s contribution to the development of Public Choice theory felt that he had unfairly not been included in the awarding of the Nobel Prize in Economics that was given to James Buchanan in 1986 for this insightful extension of economic reasoning to the workings of government.

He went on to write a series of works on this theme, including Private Wants, Public Means (1970), The Logic of the Law (1971), The Social Dilemma (1974), The Vote Motive (1976); Rent-Seeking (1993) and Government: Whose Obedient Servant? (2000).

The starting point of Public Choice theory is that the logic and rationality of the political process has the same foundation as economic theory in general: individuals, whether in the marketplace or the political arena, are guided by self-interested motives to improve their circumstances; they weigh costs and benefits, and they respond to incentives.

In the political process there is an “iron-triangle” of three interacting groups of people. There are special-interest demanders those who desire favors and privileges from the government at the expense of consumers, competitors and taxpayers; there are politician suppliers who offer government-bestowed favors and privileges in return for campaign contributions and votes; and there are the bureaucratic managers of the regulatory, interventionist, and redistributive system, who are constantly on the lookout for ways and means to expand their authority and increase their budgets as avenues to more power and opportunities for promotion and higher salaries.

It is Rational to be Ignorant about Politics

Why do voters not see through the propagandistic smokescreen that is used to rationalize this process of legalized plunder? Tullock explained that it is because voters are rationally ignorant. For any one voter, his ballot, in terms of its potential to make the difference in any election, is insignificant in relation to all the votes cast.

Everything, after all, has a cost. More time devoted to any one activity means less time remaining available to do something else during any given period of time. Individuals allocate their time to any one activity for as long as they consider the additional, or “marginal,” benefit to be greater than the additional, or “marginal,” cost of using that same time for some alternative activity, instead.

Becoming an informed or knowledgeable citizen on governmental policies has a cost, since time has to be allocated and used to become that better-informed voter. For many people, any benefit from being a politically and economically informed voter is based on the significance that person’s vote might have on influencing the outcome of an election.

In almost all elections, the individual’s vote counts for little in determining that outcome, especially since the larger the number of people participating in the voting process, the smaller becomes the “weight” or importance of any one individual’s vote.

For example, in the November 2012 presidential election, 118 million eligible voters cast their ballot. This meant that any one voter counted for only 1/118,000,000 in deciding the outcome.

If politically informed knowledge is viewed as a means to the end of “making a difference” and therefore “why it should matter” to be an informed voter, the cost will often seem greater than the benefit from gaining very much political or economic knowledge about the candidates and the details of the policy issues at stake in the election.

Thus, it is reasonable – “rational” – for many voting-age citizens not to incur much of a cost in time and effort to be able to make a more intelligent decision in the political process. For most people it is just not worth the personal cost in time and expense to become intelligently informed on all the various policy issues that are being advocated by politicians, interest groups, and bureaucrats. Therefore, the average individual has little incentive to incur the intellectual expense to penetrate the political smokescreens.

However, on the other hand, those special interest groups who hope or expect to obtain clear and large concentrated benefits from various forms of government intervention, regulation and income redistribution have a strong motive to be highly informed abut the policy issues and the politicians who can provide them with their political privileges and favors.

Rent-Seeking: Pursuing Profits through Politics

One of Gordon Tullock’s most insightful contributions was the concept of “rent-seeking.” What motivates the drive for government favors and privileges is “rent-seeking” behavior. It is the name given to the pursuit of profits through the political process. A better name, perhaps, would have been “political profit-seeking” in comparison to “market-based profit-seeking.”

In the free marketplace, the only way in which producers can earn revenues and profits is by successfully competing against their rivals in offering better and less-expensive goods to the consuming public. But, Tullock said, there is another route to profits: the use of government to obtain restrictions and protections limiting the ability of market rivals to compete in ones own market or to receive direct government subsidies or contracts from the government to gain profits.

The costs from this process of politically acquired profits, Tullock explains, are the resources and labor devoted to manipulating the political process to ones advantage, rather than to producing the goods and services potentially desired by consumers on the market.

Economic Waste from Political Favoritism

Suppose there are three competitors in a market, each of who earns $5,000 of revenue that is just equal to cost their individual costs of production, given the price they competitively charge and the amounts of the good they, respectively, sell to the buying public. Combined they earn total revenues of $15,000.

Now suppose that it might be possible for one of these three producers to successfully influence politicians controlling the passing of economic policy legislation to give one of them a monopoly position in their market. One would have the legal monopoly privilege to be the single seller of this good, and the other two, as a consequence, would be regulated out of the market.

Further imagine that the lucky winner in the political competition to become the market monopolist would then earn total revenues of $20,000, with production costs of $10,000, resulting in a profit of $10,000.

The political pursuit of gaining this monopoly position, and the resulting extra politically based profits will act as an incentive for each of the three competitors to devote resources – expressed in sums of money – in the political lobbying process to try to become the winner at the expense of their two market rivals.

Each of them would have an incentive to possibly spend up to $15,000 to try to gain the monopoly position (equal to the current $5,000 they earn from being one of the existing competitors in this market, and which they would lose if they are driven out of this market, plus the $10,000 of extra profits that can be theirs if they gain the monopoly privilege.)

In other words, the three competitors would have a incentive to spend up to a combined total of $45,000 in the political contest to defeat the other two in pursuit of the monopoly position, so one of them can earn an extra $10,000 of profit.

Tullock insisted that this represented complete economic waste, in the sense that rather than those sums of money (and the real resources they represent) being applied through investment to make more, better and less expense goods available to the consumers of the society, they were used to influence and manipulate the political process in their direction instead of someone else’s.

Successful rent seeking results in closed-off markets and limits on competition, all of which in the longer run reduce the innovation and competitive rivalry that normally act as the stimulus for improvements in the quantities, varieties, and prices of goods available to consumers.

Bigger is Not Better – Benefits of Small, Local Government

Tullock also suggested that Public Choice theory can offer insights into the benefits from political federalism that are lost when power is centralized in one single political authority within a country. First, that very diversity of policy preferences among people suggests the reason that many issues should be decided at the local level, where the people most directly interested in and possibly affected by a particular policy may be concentrated. A smaller group may sometimes find it easier to reach a common agreement about things.

Second, if issues to be voted on are localized, the number of voters participating in an election is reduced in comparison to a national vote. As a consequence, the importance of any one person’s vote increases, and more people may be influenced to incur the personal cost of becoming better informed about the policies on which they may be expected to vote.

Third, if a jurisdiction is decentralized and its geographic size reduced, an individual who feels strongly enough that he can no longer endure the policies implemented within the area in which he lives, has a shorter way to go to move away. Some of the costs of voting with his feet, in other words, are reduced.

And, fourth, having many competing governments makes it easier for citizens to compare and contrast the costs and benefits from government programs implemented in different political jurisdictions. It may make some voters more informed about the likely consequences to be expected from a policy if they can look next door at a neighboring political jurisdiction that has already been experimenting with a policy they are being asked to vote on.

But the fact remains that in the political arena, relationships are based on force because the results are coercively imposed on people whether or not they supported the policies. This also highlights the fact that after any election, each voter is forced to live with a package deal, i.e., all the policies to be implemented by the politicians elected. No one can refuse to pay for or obey implemented government policies with which he disagrees.

Gordon Tullock’s Valuable Legacy on the Leviathan State

It must be admitted that Gordon Tullock did not offer many fruitful suggestions about how to escape from these and related dilemmas experienced in modern democratic politics. But what he did do was to clarify and explain the nature of the big government beast and what it feeds off to keep getting larger and larger.

The answer, in my view, can only be found in the wider context of moral and political philosophy about the nature of man in society, and a successful theory of individual rights to life, liberty and honestly acquired property.

But his does not distract from the important and valuable contributions that Gordon Tullock has left us with about the reality of the political process, and the problems we must confront to hold back and defeat the Leviathan State.

[Originally published at EpicTimes]

Categories: On the Blog

Philip M. Crane, R.I.P.

Somewhat Reasonable - November 10, 2014, 2:12 PM

With great sorrow I advise of the death Saturday, Nov. 8, 2014 of Philip M. Crane, a long-time Congressman from Illinois and leader of the national conservative movement.  He died peacefully at the home of his daughter Rebekah Crane in Jefferson, Maryland.  The cause was lung cancer.  He was 84.

Mr. Crane first went to Congress in a special election in 1969, held in the 13th Congressional District of Illinois when Donald Rumsfeld left Congress to go into the Executive Branch.  He was redistricted into the 12th and then the 8th Districts, and served continuously until January  2005, a period of 35 years.

In the very early 1970s he established and led what became the Republican Study Committee in the House of Representatives

In 1978 he was elected Chairman of the American Conservative Union and served in that capacity for two years.  His votes in the House of Representatives earned a lifetime ACU rating of 99%.

In 1994 Mr. Crane was very active and very generous in his support of my candidacy for President of the Cook County Board.  My wife, Kathy, and I became particularly fond of Phil and his wife, Arlene, who, alas, preceded him in death in 2012.

Mr. Crane was born in Chicago, Illinois on November 3, 1930 to George W. Crane III, M.D., and Cora Ellen Miller Crane.  He received his undergraduate degree from Hillsdale College in 1952 and went on to earn a PhD in history from Indiana University in 1963.  He served in the US Army from 1954-1956 and taught history at Indiana University and Bradley University.

He gained national recognition in politics through his work on the Presidential campaign of Barry Goldwater in 1964.  While working as an Assistant Professor of History at Bradley University (1963-1967), Mr. Crane proved to be a popular and charismatic public speaker on behalf of Goldwater.   Through these efforts and his book, The Democrat/s Dilemma which came out in 1964, Mr. Crane became a leading national figure in the fledgling conservative movement.

While serving as headmaster of Westminster Academy in Chicago in 1969, Mr. Crane was urged to enter a special election race triggered by the appointment of then Illinois Congressman Donald Rumsfeld to the Nixon Administration. Mr. Crane won the primary and went onto win the election, serving in that seat from 1969 until his defeat (by Melissa Bean) in November 2004.

As a leader of the conservative movement in Congress, Mr. Crane was instrumental in the founding of a number of conservative organizations that flourish to this day.  In 1973, he founded the Republican Study Committee which is the preeminent GOP conservative organization in the House of Representatives.  In that same year, he was a leader in the effort to form the Heritage Foundation which has grown into one of the most well known and respected conservative think tanks in the world.

In Congress, Crane spent most of his career serving on the Ways and Means Committee.  There he championed lower taxes, a simplified tax code, free market economics, and free trade.  He was the ranking member and eventually Chairman of the Ways and Means Trade Subcommittee.  There he led the effort to pass numerous free trade agreements including the North American Free Trade Agreement (NAFTA).   He was the leader of efforts, ultimately successful, to repeal laws that prohibited Americans from owning gold, buying, selling, and possessing gold.  He also was very active in efforts to reduce or limit government spending and authored and supported hundreds of bills and amendments to accomplish those ends.

His passion for history and the US Constitution was always evident in his public speeches and floor debate as he routinely cited historical events and the Constitution to make his case.  Crane also wrote numerous books.  In addition to his most celebrated work, The Democrat’s Dilemma, he also wrote the The Sum of Good Government in 1976, and Surrender in Panama: The Case Against the Treaty in 1978.  (He also composed a work of popular music, a Christmas song, “Little Sandy Sleighfoot”, which was recorded in 1957 by James Dean and initially sold some 300,000 records.)

In addition to his efforts on behalf of Barry Goldwater, Mr. Crane was actively/directly involved in Presidential politics in the 1970s and 1980s.  He was the first sitting Congressman to come out and openly support Ronald Reagan’s effort to defeat then-President Gerald Ford in the 1976 Republican presidential primary.   When it appeared that Mr. Reagan was not going to run in the next presidential election, Mr. Crane threw his hat in the ring in 1978 to run for the 1980 GOP nomination, only to have Mr. Reagan enter the race later.  Mr. Crane eventually withdrew from the race throwing his support to Reagan.

While Phil Crane was a fierce partisan in debate and on the campaign trail, he was very personable and well liked by members of both parties with whom he served.  He was well known for his great sense of humor and was a master joke teller and prankster as anyone who spent time with him would soon discover.  He took pride in hand writing hundreds of letters over the years to family, friends and constituents and was particularly quick to write a note to friends or colleagues who were facing difficult times or had lost a loved one.

A loving father and husband, Mr. Crane was preceded in death by his parents, George and Cora Crane , his wife, Arlene, his brother, George, and his daughter, Rachel.  He is survived by his siblings, Judith Crane Ross, Daniel Crane, and David Crane, and his children, Catherine Hott, Susanna Crane, Rebekah Crane, Jennifer Oliver, Sarah Crane, George Crane,  and Carrie Crane and by numerous grandchildren.

Services are expected to be Thursday, November 13, 2014, at Loudoun Funeral Chapels in Leesburg, Virginia, with burial near the family farm in Indiana.  If and when I have further information about visitation and funeral arrangements I will pass it along.

May his memory always be a blessing.

Categories: On the Blog

The Federal Communications Congress?

Somewhat Reasonable - November 10, 2014, 10:39 AM

Apparently Congress has an aspiring legislative rival in the Federal Communications Commission.

The FCC is considering administratively bypassing Congress and unilaterally reversing longstanding U.S. Internet policy in law with an administrative maneuver that could have sweeping and unintended negative consequences for U.S. trade and foreign policy.

To implement the FCC’s most recent redefinition of net neutrality, the FCC is seriously considering its net neutrality “nuclear option.” That would reverse administratively the legal status of the Internet from a lightly regulated “information service” to a utility price-regulated “Title II telecommunications” service, per Wall Street Journal reporting.

Rather than asking Congress for Internet authority that the FCC knows that it does not have, it apparently is scheming to creatively combine existing legal authorities, in ways in which they were never intended, in order to ban a two-sided free market for the Internet from developing.

The FCC covets a legal theory that would allow it to administratively dictate a permanent, zero-price subsidy for all downstream Internet traffic from cloud servers at Internet consumers’ expense.

Essentially, the FCC would be banning a two-sided free market where senders and receivers may negotiate payments, in favor of a permanent receiving-party-pays Internet economic model.

Some background here is important in order to understand the sweeping implications of this for U.S. trade and foreign policy.

In 1994, the Clinton administration privatized the Internet backbone. Its peering-arrangements were market-negotiated. That’s because the FCC legally treated Internet traffic as unregulated “enhanced” data services under the FCC’s 1980 Computer Inquiry II precedent, and not “Title II,” common-carrier-regulated “telecommunications.”

In 1996, the bipartisan Telecommunications Act also did not treat the Internet as “telecommunications.” To the contrary, that law explicitly stated: “It is the policy of the United States… to preserve the vibrant and competitive free market that presently exists for the Internet… unfettered by Federal or State regulation.”

Since 1996, the United States government has convinced international trading partners to not treat Internet traffic as “telecommunications” in order to ensure the development of a free and open global electronic marketplace, and to promote democratic discourse.

This purposeful consensus to not saddle the Internet with “telecommunications” price regulation has been integral to creating the free and open global Internet we know today.

Thus the world’s leading trading partners ensured that the Internet would not fall under the legal jurisdiction of the United Nations’ International Telecommunications Union (ITU).

International “telecommunications” legally falls under the UN-ITU equivalent of a trade treaty. Specifically, ITU agreement: ITU-T D.50 recognizes the sovereign right of each state to regulate “telecommunications” as that state determines.

The ITU’s “telecommunications” settlements regime operates under a sending-party-pays economic model, the exact opposite of the FCC’s desired receiving-party-pays economic model.

This allows each nation to set their own tariff on incoming traffic or information imports. In the past many nations set their telecommunications tariffs on incoming calls very high to generate large net trade payments from the U.S.

Now back to the FCC.

According to news reports, the FCC is responding to Silicon Valley pressure for a formalized American industrial policy that would protect and favor Silicon Valley’s cloud-based, client-server economic model, where the selling server-side never pays for delivery of its downstream traffic to the buying client-side.

Silicon Valley’s cloud client-server model — of ad-serving, video streaming, software on demand, and cloud-computing services — involves sending vastly more downstream traffic to American and international users than those users send upstream to Silicon Valley.

Now, one can understand why the FCC formally reversing the legal status of the Internet from un-tariffed Internet trade to tariffed “telecommunications” trade, where Silicon Valley would pay for its exceptionally disproportionate net downstream traffic under a sending-party-pays model internationally, would be a profound change in U.S. trade and foreign policy.

It gets worse.

The new secretary general of the ITU is Chinese, and China, Russia, Iran and the Arab states have convinced the vast majority of UN ITU member nations, which are heavily autocratic and have Internet censorship aspirations, to support eventual ITU governance and economic regulation of the Internet.

Edward Snowden’s leaks that the NSA has been near-universally surveilling foreign use of the Internet has only catalyzed and accelerated the UN-ITU’s Internet power grab plans.

It is in this international “telecommunications” tinderbox that the FCC is playing with matches by signaling to the world its likely plan to change the legal status of the Internet to price (and tariff) regulated “telecommunications.”

This is not an “administrative” call of three unelected FCC commissioners. This is a big-time congressional trade and foreign policy call that should involve the congressional leadership and the committees of jurisdiction responsible for trade and foreign policy, in addition to the FCC’s traditional congressional overseers for domestic matters.

And within the executive branch, the foundational legal status of the Internet should be a trade and foreign policy matter driven by the authorized Departments of state, treasury, defense, commerce and the USTR — not the FCC, a domestic regulatory agency with no lead trade or foreign policy authority from Congress.

Will the constitutionally empowered legislative and executive branches of government allow a mere administrative agency like the FCC to unilaterally reverse longstanding, successful, bipartisan, trade and foreign policy by acting like a self-appointed Federal Communications Congress?

Will the real Congress please stand up?

[Originally published at the Daily Caller]

Categories: On the Blog

Wake Up Australia

Somewhat Reasonable - November 10, 2014, 9:31 AM

Tomorrow is Remembrance Day, an appropriate time to reflect on our ability to defend ourselves. History holds lessons.

Back in Dec 1941, Japan suddenly attacked the huge US Naval base at Pearl Harbour. Three days later, two “invincible” British warships, “Repulse” and “Prince of Wales” were sunk by Japanese planes off Malaya. Soon Japanese armies were rampaging through Asia towards Australia.

By Feb 1942, the British fortress of Singapore surrendered and Japanese bombs were falling on Darwin. By Sept 1942 the Japanese army had slashed their way down the Kokoda Track and could see the lights of Port Moresby. They were looking across Torres Strait to Australia. At that time, most of our trained soldiers were fighting Rommel in North Africa or in Japanese prison camps.

Suddenly Australia was on its own and needed to defend itself with what we had here. Armies need soldiers, weapons, bullets, vehicles, fuel, food (and cigarettes). Rationing was introduced for petrol, food and cigarettes. An immediate critical shortage was copper for cartridge cases – we had mines producing lead, zinc, silver, gold and iron, but there was a critical shortage of copper. Fortuitously, just before the Japanese attack on Pearl Harbour, an exploration drill hole at Mount Isa had struck rich copper ore. Mount Isa was called on to avert a calamitous shortage of copper in Australia.

With government encouragement, Mount Isa Mines made the brave decision to suspend the profitable silver/lead/zinc operations and convert all mining and treatment facilities to extracting copper. The lead concentrator could be converted to treat copper ore, but the biggest problem was how to smelt the copper concentrates. Luckily the company had skilled engineers and metallurgists in the lead smelter. In a miracle of improvisation, scrap steel and spare parts were purchased and scavenged from old mines and smelters from Cloncurry, Mt Elliot, Mt Cuthbert and Kuridala and cobbled into a workable copper smelter. In 1943 the first Mount Isa blister copper was produced.

Production continued after the war when Mount Isa returned to extracting the then more profitable silver/lead/zinc. Later new plant was built enabling both lead and copper to be produced from this fabulous mine. This story of the importance of self-reliance has lessons for today. The war on carbon energy, the carbon tax, the renewable energy targets, escalating electricity costs and the voices in Parliament calling for Emissions Trading Schemes have all unnerved our big users of carbon fuels and electricity.

Smelting and refining have become threatened industries in Australia, and closure of the Mount Isa copper smelter and the Townsville copper refinery has been foreshadowed. Already six major metal smelting/refining operations have closed in Australia this century and more are likely. The closures have affected copper, lead, zinc, steel and aluminium – the sinews of modern industry. And the car industry, with all its skills and tools, is closing Local production and refining of oil is also declining, while “lock-the-gate” vandals are trying to prevent domestic exploration and production of gas.

More and more land and offshore waters are closed to exploration and mining, and heavy industry is scorned. It was estimated recently that by next year, half of Australia’s oil refining capacity will have closed. In the event of a disruption to tanker routes, Australia has just 12 days of diesel supplies before city fuel and food supplies start to dry up. We are losing the resources, skills and machinery needed for our own security, while we fritter precious resources on green energy, direct action, carbon capture and storage and other pointless anti-carbon chimeras.

Our foolish green energy policies and the suicidal war on carbon fuels are killing real industry leaving us unskilled and defenceless – like a fat toothless walrus basking on a sunny beach. Wake up Australia.

Categories: On the Blog

One Blog, Two Shameful Acts, Three Shameless Organizations

Somewhat Reasonable - November 09, 2014, 11:19 PM

Imagine two companies, one worth more than $31 billion and the second worth $315 billion, ask for and receive $1.6 billion in federal low interest loans to build a power plant.  The power plant delivers less power than promised and destroys wilderness and wildlife in the process. Then, rather than running for cover or making excuses, the companies boldly claim that the power plant was worthwhile and requests a federal grant to pay off the federal loan.

“Impossible,” you say, after a hearty guffaw.  Not so. Outrageous, yes, shameless, no doubt, but none the less true.

NRG Energy and Google have had the nerve to request the federal government give them money to pay off the loan that the government gave them to help build the Ivanpah Solar Power Plant. The same plant that has underperformed because despite being in a desert, they blame the sun for not shining up to their expected forecasts — forecasts they used to secure the loan.  The same power plant that is making flight unsafe for human pilots and killing birds by the truckload.

While NRG and Google will reap millions if not billions from this subsidized boondoggle over the course of its operations, they want to take the taxpayers for $539 million more.

Congress should be holding hearings or a trial, not considering a loan.

For more see: http://www.foxnews.com/politics/2014/11/08/world-largest-solar-plant-applying-for-federal-grant-to-pay-off-its-federal/

American corporations are not the only bad actors, however. A science institute in India is claiming that the ever entertaining charlatan’s at the IPCC have tried to pull a fast on over on developing countries.  The New Delhi based Center for Science and the Environment (CSI) is crying foul over a decision by the IPCC to drop a particular chart from its alarmist synthesis report.

The chart in question shows that the developed world is off-shoring its greenhouse gas emissions by shipping manufacturing overseas then importing the goods produced while taking credit for slowing or cutting emissions.  Was this a bit of chicanery on the part of developed countries or a case of accurate but unflattering accounting for emissions from developing countries?  I don’t know, but I am amused anytime one alarmist group attacks another one for falsifying data.

In fairness I wonder, if the companies in the developed countries offered to close their CO2 belching factories in developing countries, bringing the jobs and goods produced back home, but in doing so took the full blame for the greenhouse gas emissions caused (minus the emissions no longer resulting from transit, of course), if those egghead academics offended by the IPCC’s accounting, would then be happy?  I’d lay odds the workers, their families and the governments in the developing countries affected would be very unhappy.

Just a thought.

For more see: http://timesofindia.indiatimes.com/home/environment/developmental-issues/IPCC-dropped-key-chart-inconvenient-to-developed-world-CSE/articleshow/45064308.cms

 

Categories: On the Blog

Colorado State Smoking Ban: No Impact on Heart Attacks

Somewhat Reasonable - November 07, 2014, 4:17 PM

As early as 2004, various medical journals published articles claiming that small-community smoking bans resulted in nearly immediate reductions in heart disease.  For example, the high-profile BMJ reported that hospital admissions for acute myocardial infarction (AMI) declined 40%, from 40 to 24, in Helena, Montana, after implementation of a smoke-free ordinance (here).  Circulation, the journal of the American Heart Association, reported that AMI admissions dropped 27% “within months” in Pueblo, Colorado (here). Similar reports came from Bowling Green, Ohio (here), Monroe County, Indiana (here) and beyond.

The striking implication was: Eliminating second-hand smoke saves lives by reducing heart disease.

There were two problems with these claims.  First, the declines, based on small numbers of observations, were actually consistent with random variation (here).  Second, none of the reports accounted for the long-term downward trend in heart disease in the U.S.; they credited no-smoking intervention with the lower number of AMIs at a time when rates were declining nationwide.

In 2011, I documented that state-wide smoking bans in California, Utah, Delaware, South Dakota, New York and Florida had little or no immediate measurable effect on AMI deaths. The study, published in the Journal of Community Health (here), eliminated the “tiny-number” problem and factored in the national downward trend in AMI deaths.

I discussed these findings in my blog (here), but the work was largely ignored, until now.

Recently, researchers from three Colorado institutions reported AMI rates before and after a statewide smoking ban there; their work appears in the American Journal of Medicine (here).  (Thanks to Chris Snowdon, who also blogged about it here).

Paul Basel and colleagues found that “No significant reduction in [AMI] rates was observed” after the Colorado ban was implemented.  They also referred to our study:

“[The Rodu et al.] study compared the decline in [AMI] mortality in 6 states with smoke-free ordinances, with the average decline among 44 states unaffected by smoke-free policy.  No state with a smoke-free ordinance had a significantly lower observed [AMI] mortality compared with that expected by the nationwide secular decrease in states without the ordinance.  This emerging evidence highlights the importance of accounting for secular trends in [AMI] incidence before definitive attribution to smoke-free ordinances can be made.”

It is comforting to see unfounded second-hand smoke claims corrected, particularly in the pages of a prestigious journal.

[Originally published at Tobacco Truth]

Categories: On the Blog

Heartland Daily Podcast: Paula Bolyard on ‘Jock Taxes’ for the Chicago Bears

Somewhat Reasonable - November 07, 2014, 3:45 PM

Heartland Institute writer Paula Bolyard joins The Heartland Institute’s Budget and Tax News managing editor, Jesse Hathaway, to discuss a lawsuit filed by former Chicago Bears linebacker Hunter Hillenmeyer against the city of Cleveland, Ohio.

Hillenmeyer is challenging the constitutionality of the city’s “jock tax,” a tax targeted at taxing high-earning specialized professionals such as celebrities and professional athletes. Despite the economic evidence against such tax schemes, many cities and states levy jock taxes, in order to obtain revenue from visiting high-level professionals.

Related story:  Chicago Bears Linebacker Sues Cleveland over Targeted “Jock Tax”

[Subscribe to the Heartland Daily Podcast for free at this link.] 

Categories: On the Blog

Lower the Voting Age Again?  I Don’t Think So

Somewhat Reasonable - November 07, 2014, 11:51 AM

Progressives just can’t seem to accept that, when put to an honest test, their ideas consistently lose at the ballot box as well as in the marketplace of ideas.  Sure, a lot of people drank that “hopey-changey” Kool-Aid back in 2008, but how’s that working out for ya?

Not so well, judging by the results of, and the run-up to, the 2014 midterm elections.   Democratic candidates went to comically extreme lengths to distance themselves from Barack Obama, and Republican candidates significantly out-performed their polling.  So self-styled progressives keep trying to change the ground rules.

George W. Bush’s Electoral College victory over Al Gore in 2000 spawned a lot of proposals for a direct popular vote for the President, even though the Framers recognized it could lead to mob rule.  (Gore’s entire 500,000 popular vote margin, for example, could be explained by the twenty most lopsided of Chicago’s 50 wards, some of which went 99-1 or 98-2 for Gore.  Is that any way to pick a President?)

So it’s little surprise that a second bad idea has come forward in the past four days concerning how to “reform” the electoral process to keep Republicans from winning.

On Monday, November 3, Duke Professor David Schanzer argued with undergraduate assistance for abolishing those pesky mid-terms entirely.  And on Thursday, November 6, 2014, Temple University psychology professor Laurence Steinberg, a Kerry-Edwards supporter in 2004, advanced the idea that 16- and 17-year olds are “perfectly capable of making informed and reasoned political decisions” and should therefore be allowed to vote in national elections.

To put it plainly, this is bunk. Voters ought to have both some experience with and understanding of the Constitution and some skin in the game.

Invoking the language of “science” – the academy’s preferred term to social “studies” – Professor Steinberg admits that “[s]cience does not point to an obvious chronological age at which a bright-line legal boundary between adolescents and adults should be drawn for all purposes,” but insists that “most aspects of emotional and intellectual maturity reach adult levels sometime between 15 and 22.”  (To be somewhat reasonable, this would call for raising the minimum voting age to 22.)

But Steinberg distinguishes between what he calls “cold” and “hot” cognition.  (“Cold” cognition is when you engage in measured decision-making in consultation with others, he says; “hot” cognition applies to “situations in which their emotions are aroused, time pressure is a factor and they are in groups.”)  So what’s the difference between “consultation with others” and deciding things in groups?  And which one applies to choice of public officials and which one to where to go and what (and how much) to drink on spring break?

Professor Steinberg insists that teenagers are just as good at the former as “adults,” although not so good at the latter.  Because he believes that “cold cognition” is more relevant to voting, though, he favors lowering the voting age to 16.

Even by the professor’s own criteria, 16- and 17- year old voting is a bad idea.

Let’s see, now:  in an election, emotions are aroused (remember that hopey-changey stuff?), time pressure is a factor (voting ends at a time and date certain), and teens tend to hang out in groups and decide things based on peer pressure (“All my friends are voting for Obama ‘cause it’s cool”).  Check, check, and check; therefore no voting for you until you’re at least 21.

Teen-aged voting is also bad from the common sense perspective, informed by Constitutional history.  In 1789, when the Constitution was drafted, the average life expectancy of an American white male was 35 years and the minimum voting age was 21.  In 1971, the comparable life expectancy was 67.4, and a Constitutional Amendment permitted voting at age 18, but that was largely because 18 was the eligible draft age for males.  (Then, as now, females got a free pass.)

No comparable circumstances exist today.  Sixteen- and seventeen-year olds don’t register for the draft, most of them are still in high school, and all of them can be carried as children on their parents’ health-insurance policies until they’re twenty-six.

Self-styled progressives who want to get back to winning elections should come up with better ideas than simply how to stuff the ballot box.  But that would mean recognizing that the national government is intended to be one of limited and separated powers, that socialism never works no matter who is in charge, and that the ability to read TelePromTed speeches is no substitute for leadership and executive experience.

Lower the voting age to 16?  Better to raise it a few years to, say, 26.

Categories: On the Blog

Google’s Dominance Isn’t Peaking Its Proliferating!

Somewhat Reasonable - November 07, 2014, 9:06 AM

Apparently Google hopes to convince the new European Commission to buy into the same market predicate that it convinced Mr. Almunia to accept — that the fast and ever-changing Internet marketplace has rendered lasting market dominance and antitrust enforcement obsolete.

Like a magician or illusionist, one can make another believe anything if they can misdirect their attention from what is really going on.

Google’s latest misdirection ploy is to focus the media and the new EC on its new “peak” PR narrative that its search and Android dominance is at a “peak” — with the implication that Google’s market position is fleeting and will only go down from here because fast-changing innovation and competition will naturally supplant it.

And by extension, if people accept that Google’s dominance is “peaking” then they can more easily be convinced that Google’s dominance could decrease naturally without any government intervention.

This “peak” market frame is clever misdirection because it distracts people from focusing on how Google is broadly abusing its market dominance to extend its market power into additional, adjacent, and nascent markets.

However, a new competitor or innovation can only have a chance to supplant Google, if Google does not neutralize or dominate the new competitor or innovation first.

And that is unlikely because Google’s unique data dominance ensures that Google can spot new market demand, or an emerging competitive threat, very early so it can buy the nascent competitor, hire their key people, or just copy/steal the new product or service innovation.

Consider how Google already has leveraged its search and index data dominance to head off or neutralize several potential emerging competitive threats to its dominance, e.g. Apple’s iPhone, iPad, & App Store via Android, Maps, Play, Chromecast, & YouTube; Facebook’s social network & sharing via Google+, YouTube, Hangouts, & Photos; Amazon’s store & Web Servicesvia Shopping, Drive, & Compute Engine; and Microsoft’s software and Bing via Chrome, Toolbar, Docs, Apps for Work/Education, Gmail, Android, etc.

Google’s “Peak” narrative

Stratechery posited “Peak Google” because “native advertising” could eclipse search advertising like Microsoft’s PC software eclipsed IBM’s mainframes. Business Insider echoed Stratechery: “People are beginning to talk seriously about Google’s search business becoming irrelevant.” Quartz echoed again “Google’s dominance in search is nearing its peak.”MarketingLand echoed it for Android “Have We Reached ‘Peak Android’?” WSJ echoed it again on Android “Google’s Android Begins to Top Out.”  And from the FT’s Lex subscription product: “Google: soul searching; Search is losing share in digital advertising.

John Battelle spotted the “Peak” narrative and the common sense hole in Google’s PR misdirection: “A number of “Peak Google” pieces are in the air. But let’s not forget that Google has multi-billion dollar businesses in Android, YouTube, Ventures, and Apps/Drive et al. And it’s making plays in auto, healthcare, and energy. I don’t think Page is resting.”

Expect more on this “Peak Google” PR narrative in the weeks ahead as Google tries to quickly persuade Ms. Vestager, like it convinced Mr. Almunia, that Google’s dominance has peaked and that any antitrust enforcement of search, Android, etc. would be unnecessary and wasted effort.

However, the evidence shows Google’s market power is not declining, but actually proliferating virally.

Google even admits it.

In the case of its social network Google+, Google boasted in a December 2012 blog post: “Today Google+ is the fastest-growing network thingy ever.” About the same time Google Chairman Eric Schmidt boasted“Almost nothing short of a biological virus, can scale as quickly, efficiently or aggressively as these technology platforms and this makes the people who build, control and use them powerful too.”

Consider the facts that Google’s dominance is proliferating.

It is no coincidence that Google now dominates four additional search-related markets: video-YouTube, mobile-Android, location-Maps, and browser-Chrome. Tellingly, Google controls 5 of the 6, billion-user, universal web platforms: search, video, mobile, maps, and browser. That’s not peaking dominance; that is proliferating dominance.

Google also leads in 13 of the top 14 commercial web functions of the Internet data economy and is #2 in the 14th: #1 in data collection, search, tracking-analytics, digital advertising, mobile, video, location, browser, Internet Infrastructure, consumer-Internet of Things, Apps store, translation, & email; Google is #2 & #3 in social with YouTube & Google+.

In short, the European Commission needs to guard against getting distracted by Google’s misdirection in the “Google peaking” narrative.

What matters is how Google is abusing its dominance to maintain its overwhelming dominance in data, search, and search advertising, and to extend virally its dominance into a plethora of additional, adjacent and emerging markets.

And remember that Google’s data, search and search advertising dominance is lasting, precisely because Google is the only ecosystem in the world where: users and buyers can go for ~all information; publishers can go for ~all advertisers, readers, and viewers; and advertisers and sellers can go for ~all users and buyers.

No other entity can match Google’s data, search, and search advertising scale, scope, reach and capabilities.

[Note: For the detailed analysis of why Google’s data, search, and search advertising dominance are vast, purposeful, lasting and harmful, be sure to see: Google’s WorldWideWatch of the WorldWideWeb.]

***

Google Unaccountability Series

Part 0: Google’s Poor & Defiant Settlement Record [5-1-12]

Part 1: Why Google Thinks It Is Above the Law [4-17-12]

Part 2: Top Ten Untrue Google Stories [5-8-12]

Part 3: Google’s Growing Record of Obstruction of Justice [6-21-12]

Part 4: Why FTC’s $22.5m Privacy Fine is Faux Accountability [7-12-12]

Part 5: Google’s Culture of Unaccountability: In Their Own Words [8-1-12]

Part 6: Google Mocks the FTC’s Ineffectual Privacy & Antitrust Enforcement [8-10-12]

Part 7: An FTC Googleopoly Get Out of Jail Free Card? [8-30-12]

Part 8: Top Lessons to Learn for Google Antitrust Enforcers [9-14-12]

Part 9: Google Mocks EU and FTC in Courting Yahoo Again [9-26-12]

Part 10: FTC-Google Antitrust: The Obvious Case of Consumer Harm [11-25-12]

Part 11: Why FTC Can’t Responsibly End Google Search Bias Antitrust Investigation [11-27-12]

Part 12: Oversight Questions for FTC’s Handling of Google Antitrust Probe [11-30-12]

Part 13: Courts Not FTC Should Decide on Google Practices (The Hill Op-ed) [12-10-12]

Part 14: Troubling Irregularities Mount in FTC Handling of Google Investigation [12-17-12]

Part 15: Top Ten Unanswered Questions on FTC-Google Outcome [1-3-14]

Part 16: Top Takeaways from FTC’s Google Antitrust Decisions [1-7-13]

Part 17: Google’s Global Antitrust Rap Sheet [1-31-13]

Part 18: Google’s Privacy Words vs. its Anti-privacy Deeds [3-8-13]

Part 19: Google’s Privacy Rap Sheet Updated – Fact-checking Google’s Privacy Claims [3-13-13]

Part 20: DOJ & FTC Report Cards [4-12-13]

Part 21: The Evidence Google Bamboozled EU Competition Authorities [4-19-13]

Part 22: EU-Google: Too Powerful to Prosecute? Problems with Enabling Google [5-1-13]

Part 23: Google’s proposed EU Search Bias Remedies: a Satire [5-17-14]

Part 24: Google’s Antitrust Rap Sheet Updated [5-27-13]

Part 25: Is This the Track Record of a Trustworthy Company? See Google’s Rap Sheet [6-6-13]

Part 26: Top Questions as DOJ-Google Criminal Prosecution Deadline Approaches [7-12-13]

Part 27: The Evidence Google Violated the DOJ Non-Prosecution Agreement [8-8-13]

Part 28: Implications of EU Ruling Google Abused its Search Dominance [9-27-13]

Part 29: Google-YouAd is a Deceptive and Unfair Business Practice [10-24-13]

Part 30: EU’s Google Antitrust Problems Not Going Away [12-16-13]

Part 31:  How the Google-EC Competition Deal Harms Europe [2-10-14]

Part 32: Open Letter to European Commissioners to Reject EC-Google Settlement [2-16-14]

Part 33: Google’s Extensive Cover-up [2-25-14]

Part 34: An Open Letter on Google’s Opposition to Distracted Driving Legislation [2-27-14]

Part 35: Google’s Widespread Wiretapping  [3-20-14]

Part 36: The Growing EC-Google Competition Settlement Scandal – an Open Letter [3-31-14]

Part 37: Google’s Glass House [4-14-14]

Part 38: Google’s Titan Spy-Drones Mimic Military Spy Planes [4-17-14]

Part 39: Google’s Anti-Competitive Rap Sheet Warrants Prosecution not Leniency [4-30-14]

Part 40: Google Apps for Education Dangers [5-17-14]

Part 41: Google AdSense Lawsuit Spotlights the Corruption of Unaccountability [5-23-14]

Part 42: Six Ways the FTC is AWOL on Google [7-16-14]

Part 43: Fact-checking Google’s Public EC Competition Defense [9-21-14]

Part 44: Top 10 Reasons Why Google is Causing EU More Problems than Microsoft Did [10-1-14]

Part 45:  Google Profiting from Hacked Celebrity Women Photos is “How Google Works” [10-6-14]

Part 46:  Fact-checking Google Schmidt’s “Ich bin ein Big-fibber” Berlin Speech [10-14-14]

 

[Originally published at PrecursorBlog]

Categories: On the Blog

Gordon Tullock, R.I.P.

Somewhat Reasonable - November 07, 2014, 1:20 AM

Gordon Tollock, R.I.P. (1922-2014)

Gordon Tullock, one of the truly great economists of the 20th century, passed away on Monday. He was 92.

Tullock is best known for the role he played in founding the “public choice” school of economics, which subjects political decisions and programs to rigorous economic analysis, and for promoting the idea of “rent seeking,” whereby the origins of many regulations are tracked back to the self-serving efforts of corporations and interest groups.

The Calculus of Consent, coauthored with the late James Buchanan in 1962, was a seminal work on public choice theory and my first introduction to Tullock’s work. Parts of the book are difficult to understand, but much of it is accessible and well worth the time to understand. He wrote many smaller books and essays, a complete list of which can be found here.

A neat thing about Tullock is that even though he never took a course in economics, he served variously as a professor of economics and law and was widely viewed as a candidate to win the Nobel Prize in Economics. His only earned degree was a JD from the University of Chicago, his undergraduate studies having been interrupted by military service. His academic career and considerable contributions to economics are a tribute to the fact that you don’t need a license, or even a college degree, to practice economics and do it well.

Many of you probably already know that one of my all-time favorite essays is “The Transitional Gains Trap,” which Tullock wrote in 1975. I came across it while doing research for one of Heartland’s first policy studies, on taxicab deregulation. Tullock observed (as Mike Rappaport accurately summarizes the argument at the link above):

The government takes an action that initially benefits a particular group, although at the expense of imposing an inefficient policy on the public. But over time, even that special interest group will not benefit from the government program. Yet that group will fight hard to prevent the program from being eliminated, since eliminating it will make that group worse off.

So taxicab companies insist on imposing common carrier laws on ridesharing companies such as Uber and Lyft even though those laws have crippled their own ability to innovate and profit, and the public certainly would be better off if existing laws were repealed. It’s a great insight, and it can be applied widely.

[SPOILER ALERT! Regrets follow.]

I met Tullock on only a couple occasions, and talked at length with him only once at a meeting of the Association of Private Enterprise Education some years ago. He was gracious and generous with his time and advice, and it was easy to see why he was one of the most popular people at that event. I failed to take advantage of opportunities after that to get to know him, much to my regret and loss. I didn’t realize until reading an obituary that he was born and raised in Rockford, Illinois, and passed away in Iowa. We’re practically neighbors.

So pick up and read anything you can find by Gordon Tullock. Remember that public choice theory and “rent-seeking” are important parts of our intellectual approach to the world. And don’t fail to correspond and meet with the people you admire, because they won’t live forever… and neither will you.

Categories: On the Blog

Exposing the Green Money Machine

Somewhat Reasonable - November 06, 2014, 1:32 PM

It is doubtful that most Americans and others around the world know how vast the organizational structure of the environmental movement is and how much wealth it generates for those engaged in an agenda that would drag humanity back to the Stone Age.

If that sounds extreme, consider a world without access to and use of energy or any of the technological and scientific advances that have extended and enhanced our lives, from pesticides that kill insect and rodent disease vectors to genetically modified seeds that yield greater crop volumes.

Two of my colleagues in the effort to get the truth out are Paul Driessen and Ron Arnold, both of whom are affiliated with a free market think tank, the Committee for a Constructive Tomorrow, CFACT, They have done the research necessary to expose the wealth and the power structure of the environmental movement. They have joined together to write “Cracking Big Green: To Save the World from the Save-the-Earth Money Machine.” ($4.99, available from Amazon.com)

The Greens are forever claiming that anyone who disputes their lies is receiving money from big energy companies, but my experience is that it is think tanks like CFACT, small by any comparison with any major environmental organization, that support the search for the truth and its dissemination.

“Big Green” was formerly known as the Iron Triangle, “a mutually supportive relationship between power elites” so-named by Mark Tapscott, the Washington Examiner’s executive editor. It consisted of “government agencies, special interest lobbying organizations, and legislators with jurisdiction over their interests.” Today, it includes major environmental groups such as the Sierra Club and the Natural Resources Defense Council. To these add wealthy foundations and corporations that fund them.

It will no doubt astound many readers to learn that there are more than 26,500 American environmental groups. They collected total revenues of more than $81 billion from 2000 to 2012, according to Giving USA Institute, with only a small part of that coming from membership dues and individual contributions.

“Cracking Big Green” examined the Internal Revenue Service Form 990 reports of non-profit organizations. Driessen and Arnold discovered that, among the 2012 incomes of better-known environmental groups, the Sierra Club took in $97,757,678 and its Foundation took in $47,163,599. The Environmental Defense Fund listed $111,915,138 in earnings, the Natural Resources Defense Council took in $98,701,707 and the National Audubon Society took in $96,206,883. These four groups accounted for more than $353 million in one year.

That pays for a lot of lobbying at the state and federal level. It pays for a lot of propaganda that the Earth needs saving because of global warming or climate change. Now add in Greenpeace USA at $32,791,149, the Greenpeace Fund at $12,878,777; the National Wildlife Federation at $84,725,518; the National Parks Conservation Association at $25,782,975; and The Wilderness Society at $24,862,909. Al Gore’s Alliance for Climate Protection took in $19,150,215. That’s a lot of money to protect something that cannot be “protected”, but small in comparison to other Green organizations.

“If that sounds too intimidating to confront,” say Driessen and Arnold, “it gets worse. Our research found a truly shocking blind spot; many major environmental groups get nearly half their revenue from private foundations like the Pew Charitable Trusts, the Rockefeller Brothers Fund, and Wal-Mart’s Walton Family Foundation. Just the top 50 foundation donors (out of 81,777) gave green groups $812,639,999 (2010 figures), according to the Foundation Center’s vast database.”

If you wonder why you have been hearing and reading endless doomsday scenarios about the warming of the Earth, the rise of the seas, and the disappearance of species and forests, for decades, the reason is that a huge propaganda machine is financed at levels that are mind boggling.

Allied with politicians in high places, Big Green can count on them to maintain the lies. When the Earth ceased to warming nineteen years ago, it changed its doomsday campaign to “climate change” but the objective is the same, keep people so scared they will accept all manner of restrictions on their lives at the same time the availability of the energy on which they depend is reduced by a “war on coal” and other measures to keep oil and natural gas in the ground where it cannot be used.

“We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations,” said President Obama on January 21, 2013, in his second inaugural address. “Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and powerful storms.”

This may appeal to those who do not or cannot examine these claims, but the reality is that the climate is always in a state of change, is largely determined by the Sun and other factors such as the oceans and volcanic activity. Humans play virtually no role whatever and Big Green’s Big Lie, that carbon dioxide (C02) emissions influence the weather and/or the climate has long been disproved and debunked. The problem is that that the news and other media continue to tell the Big Lie.

For Big Green, science is not about irrefutable truth. It is an instrument of propaganda to be distorted to advance their lies.

The impact on their lives and on our economy can be seen in “higher energy bills, disappearing jobs, diminished family incomes, and fewer opportunities for better living standards for their children”, all factors that played into the outcome of the recent midterm elections.

For a short, powerful insight to Big Green power and agenda, I heartily recommend you read “Cracking Big Green.”

Categories: On the Blog

The Oil Price Reduction Election Connection

Somewhat Reasonable - November 06, 2014, 1:16 PM

After years of rising gasoline prices, people are puzzled by the recent drop that has the national average for a gallon of gas at $3. 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. The low cost equals a tax cut averaging almost $600 for every household in the U.S.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 of oil. 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, experts predict the U.S. will 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.” 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 pike. However, when Iraqis and Kurds thwarted its southern movement and it did not take over Basra’s oil fields, prices eased. 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 it sells on the black market at prices assumed to be $25-60 per barrel. The terror group’s most frequently cited oil revenue figure is $2 million a day. 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 where someone buys it.Some of ISIS’ heavily discounted oil reportedly ends up in Pakistan. 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. The last piece in the low-priced oil puzzle is Saudi Arabia. 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. Saudi Arabia’s government is 85 percent dependent on its oil revenues and, therefore, needs to protect its turf as the dominant force in oil. Most experts agree that keeping prices low hurts higher-cost production such as that from U.S. shale oil and Canadian tar sands, while higher prices encourage more discovery and development. A report from Aljazeerah claims: “OPEC leader Saudi Arabia hopes to claw share from U.S. producers.”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 been in the range of $4.00 on November 6, 2012, the party in power could have faced harsh consequences. The Saudis came in, and with their unique ability to throttle production up or down, took some heat off of the Obama Administration. In the midst of this 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.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. The shift in control of the Senate will mean a change in America’s energy policy—one that favors our homegrown energy resources; one that Saudi Arabia doesn’t want. In spite of possible Saudi meddling, the Senate leadership has shifted. Now that American voters have made that decision, 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 American economy.

 

Categories: On the Blog

FCC Should Ask Congress for Authority to Address Internet Fast Lane Issue

Somewhat Reasonable - November 06, 2014, 1:08 PM

If the FCC believes it needs additional legal authority to ensure no Internet “fast lanes” or “paid prioritization,” it should ask Congress for the authority to do it.

That’s what agency “creatures of Congress” do when their original legal authorities have obsolesced and need modernization to remain functional. It’s Congress’ constitutional role to set American communications/Internet policy; it’s the FCC’s role to implement and adjudicate it. That’s basically why the U.S. D.C. Court of Appeals overturned the FCC in 2010 in Comcast v. FCCand again in 2014 in Verizon v. FCC.

Now according to the WSJ and NYT, the FCC is considering ignoring Congress a third time on the same core question of the FCC’s broadband authority.

The FCC is floating the prospect of regulating the Internet backbone as a “Title II” common carrier utility for the first time. The proposal would bifurcate the Internet into a lightly-regulated, “retail,” Internet-tier, and a heavily-regulated, “wholesale,” common-carrier Internet-tier.

Let’s try a medical analogy to simplify this complicated FCC proposal in order to better understand it and its risks.

Think of the Internet as the information circulatory system of the world’s body, where Internet users are the world’s heart, edge providers are the body’s other organs and extremities, and the Internet’s American doctor is the FCC set on trying to prevent the potential discrimination diseases of “fast-lane-itis” and “paid-prioritization-itis.”

The FCC “doctor” is proposing to treat these potential diseases by experimentally treating some of the bloodstream very differently from the rest of the bloodstream.

First, the FCC doctor will continue to treat the blood cells leaving the heart via arteries (i.e. Internet users’ “retail” upstream traffic) with no new medical treatment (i.e. no new heavy utility-regulation.)

Second, however, to prevent potential blood inequality diseases that have not occurred yet, the FCC doctor proposes to treat the blood flowing through veins back to the heart(i.e. edge providers “wholesale” downstream traffic to Internet users), with the most potent medicine available (i.e. Title II common carrier utility price regulation.)

Then Dr. FCC promises that the harshest medicine and most invasive monitoring of only the blood cells (traffic bits) flowing (downstream) through veins and not the blood cells (traffic bits) flowing (upstream) through arteries, will have no side effects or bring any harm to the behavior, capabilities, strength or vitality of any part of the experimentally-treated body.

In addition, Dr. FCC professes confidence and reassures the patient, families and communities (i.e. the guinea pigs here) that this time the medical review boards (i.e. the Courts and Congress) will not reject and stop Dr. FCC’s harshest medical experimentation like they have previously, in ruling illegal previous FCC experimental treatments in 2010 and 2014.

If this sounds like a painful, complicated, and risky experimental procedure — it is.

When one analogizes what the FCC wants to do with the Internet ecosystem to what a doctor would do to a patient’s body, it becomes more clear that the FCC’s proposed treatment is more about making the FCC more important and necessary, and less about the health and best interests of the Internet and Internet users, and even less about what the medical review boards have already decided is best to not harm patients.

The FCC doesn’t need to make this so complicated and risky.

The choice should be simple – “do no harm” – doctors’ well-known Hippocratic Oath.

The FCC can “do no harm” legally by treating 90% of the perceived potential net neutrality problem under its court-approved Section 706 authority, with the assent and cooperation of the Internet infrastructure industry that would be so regulated, and then ask Congress for the 10% of legal authority that the FCC does not have, but believes it needs in order to protect the free and open Internet.

Or the FCC can cause incalculable harm by using a Rube Goldberg hybrid-approach to address 10,000% of the perceived potential net neutrality problem by changing the legal foundational status of the Internet to utility regulation with predictably strong opposition from the affected Internet infrastructure industry, the Courts and Congress.

Choose wisely, FCC. Do what’s legal and right. Respect the Constitution, Congress, the Courts, and the law.

And do no harm!

***

FCC Open Internet Order Series

Part 1: The Many Vulnerabilities of an Open Internet [9-24-09]

Part 2: Why FCC proposed net neutrality regs unconstitutional, NPR Online Op-ed [9-24-09]

Part 3: Takeaways from FCC’s Proposed Open Internet Regs [10-22-09]

Part 4: How FCC Regulation Would Change the Internet [10-30-09]

Part 5: Is FCC Declaring ‘Open Season’ on Internet Freedom? [11-17-09]

Part 6: Critical Gaps in FCC’s Proposed Open Internet Regulations [11-30-09]

Part 7: Takeaways from the FCC’s Open Internet Further Inquiry [9-2-10]

Part 8: An FCC “Data-Driven” Double Standard? [10-27-10]

Part 9: Election Takeaways for the FCC [11-3-10]

Part 10: Irony of Little Openness in FCC Open Internet Reg-making [11-19-10]

Part 11: FCC Regulating Internet to Prevent Companies from Regulating Internet [11-22-10]

Part 12: Where is the FCC’s Legitimacy? [11-22-14]

Part 13: Will FCC Preserve or Change the Internet? [12-17-10]

Part 14: FCC Internet Price Regulation & Micro-management? [12-20-10]

Part 15: FCC Open Internet Decision Take-aways [12-21-10]

Part 16: FCC Defines Broadband Service as “BIAS”-ed [12-22-10]

Part 17: Why FCC’s Net Regs Need Administration/Congressional Regulatory Review [1-3-11]

Part 18: Welcome to the FCC-Centric Internet [1-25-11]

Part 19: FCC’s Net Regs in Conflict with President’s Pledges [1-26-11]

Part 20: Will FCC Respect President’s Call for “Least Burdensome” Regulation? [2-3-11]

Part 21: FCC’s In Search of Relevance in 706 Report [5-23-11]

Part 22: The FCC’s public wireless network blocks lawful Internet traffic [6-13-11]

Part 23: Why FCC Net Neutrality Regs Are So Vulnerable [9-8-11]

Part 24: Why Verizon Wins Appeal of FCC’s Net Regs [9-30-11]

Part 25: Supreme Court likely to leash FCC to the law [10-10-12]

Part 26: What Court Data Roaming Decision Means for FCC Open Internet Order [12-4-12]

Part 27: Oops! Crawford’s Model Broadband Nation, Korea, Opposes Net Neutrality [2-26-13]

Part 28: Little Impact on FCC Open Internet Order from SCOTUS Chevron Decision [5-21-13]

Part 29: More Legal Trouble for FCC’s Open Internet Order & Net Neutrality [6-2-13]

Part 30: U.S. Competition Beats EU Regulation in Broadband Race [6-21-13]

Part 31: Defending Google Fiber’s Reasonable Network Management [7-30-13]

Part 32: Capricious Net Neutrality Charges [8-7-13]

Part 33: Why FCC won’t pass Appeals Court’s oral exam [9-2-13]

Part 34: 5 BIG Implications from Court Signals on Net Neutrality – A Special Report [9-13-13]

Part 35: Dial-up Rules for the Broadband Age? My Daily Caller Op-ed Rebutting Marvin Ammori’s [11-6-13]

Part 36: Nattering Net Neutrality Nonsense Over AT&T’s Sponsored Data Offering [1-6-14]

Part 37: Is Net Neutrality Trying to Mutate into an Economic Entitlement? [1-12-14]

Part 38: Why Professor Crawford Has Title II Reclassification All Wrong [1-16-14]

Part 39: Title II Reclassification Would Violate President’s Executive Order [1-22-14]

Part 40: The Narrowing Net Neutrality Dispute [2-24-14]

Part 41: FCC’s Open Internet Order Do-over – Key Going Forward Takeaways [3-5-14]

Part 42: Net Neutrality is about Consumer Benefit not Corporate Welfare for Netflix [3-21-14]

Part 43: The Multi-speed Internet is Getting More Faster Speeds [4-28-14]

Part 44: Reality Check on the Electoral Politics of Net Neutrality [5-2-14]

Part 45: The “Aristechracy” Demands Consumers Subsidize Their Net Neutrality Free Lunch [5-8-14]

Part 46: Read AT&T’s Filing that Totally Debunks Title II Reclassification [5-9-14]

Part 47: Statement on FCC Open Internet NPRM [5-15-14]

Part 48: Net Neutrality Rhetoric: “Believe it or not!” [5-16-14]

Part 49: Top Ten Reasons Broadband Internet is not a Public Utility [5-20-14]

Part 50: Top Ten Reasons to Oppose Broadband Utility Regulation [5-28-14]

Part 51: Google’s Title II Broadband Utility Regulation Risks [6-3-14]

Part 52:  Exposing Netflix’ Biggest Net Neutrality Deceptions [6-5-14]

Part 53: Silicon Valley Naïve on Broadband Regulation (3 min video) [6-15-14]

Part 54: FCC’s Netflix Internet Peering Inquiry – Top Ten Questions [6-17-14]

Part 55: Interconnection is Different for Internet than Railroads or Electricity [6-26-14]

Part 56: Top Ten Failures of FCC Title II Utility Regulation [7-7-14]

Part 57: NetCompetition Statement & Comments on FCC Open Internet Order Remand [7-11-14]

Part 58: MD Rules Uber is a Common Carrier – Will FCC Agree? [8-6-14]

Part 59: Internet Peering Doesn’t Need Fixing – NetComp CommActUpdate Submission [8-11-14]

Part 60: Why is Silicon Valley Rebranding/Redefining Net Neutrality?  [9-2-14]

Part 61: the FCC’s Redefinition of Broadband Competition [9-4-14]

Part 62: NetCompetition Comments to FCC Opposing Title II Utility Regulation of Broadband [9-9-14]

Part 63: De-competition De-competition De-competition [9-14-14]

Part 64: The Forgotten Consumer in the Fast Lane Net Neutrality Debate [9-18-14]

Part 65: FTC Implicitly Urges FCC to Not Reclassify Broadband as a Utility [9-23-14]

Part 66: Evaluating the Title II Rainbow of Proposals for the FCC to Go Nuclear [9-29-14]

Part 67: Why Waxman’s FCC Internet Utility Regulation Plan Would Be Unlawful [10-5-14]

Part 68: Silicon Valley’s Biggest Internet Mistake [10-15-14]

Part 69: Will the FCC Break the Internet? [10-22-14]

Part 70: Net Neutrality Has Become an Industrial Policy [10-31-14]

 

[Originally published at PrecursorBlog]

Categories: On the Blog

Los Angeles: Rail For Others

Somewhat Reasonable - November 06, 2014, 9:56 AM

A few years ago, the satirical publication, The Onion ran an article under the headline “98 Percent of US Commuters Favor Public Transit for Others.” The spoof cited a mythical press release by the American Public Transit Association (APTA), in which Lance Holland of Anaheim, California said “Expanding mass transit isn’t just a good idea, it’s a necessity,” Holland said. “My drive to work is unbelievable. I spend more than two hours stuck in 12 lanes of traffic. It’s about time somebody did something to get some of these other cars off the road.” The Onion spoof said that APTA would be kicking off a new promotional campaign using the slogan “Take the Bus… I’ll be Glad You Did.” The Onionspoof singled out Los Angeles County Metropolitan Transportation Authority (MTA) officials as saying that public support for mass transit will lead to its expansion and improvement.”

“Transit for Others” characterizes three decades of transit in Los Angeles County. Despite its massive $10 billion plus rail program, MTA bus and rail services carried fewer riders in 2012 (latest Federal Transit Administration data) than were carried by the buses in 1985 (MTA was formed in the early 1990s from a merger between the Los Angeles County Transportation Commission and the Southern California Rapid Transit District).

The Birth of Modern Rail

The history of the modern Los Angeles rail revival began with a special meeting of the Los Angeles County Transportation Commission on August 20, 1980. I was to play a principal role.

I had the honor of being appointed to LACTC by Mayor Tom Bradley to three terms and was the only principal commissioner who was not an elected official. The other members, under state law, were the Mayor of Los Angeles, a Los Angeles City Council Member, the Mayor of Long Beach, two city council members from other cities, the five county supervisors and an additional member appointed by the Mayor of Los Angeles (which was me).

The special meeting had been requested by legendary county Supervisor Kenneth Hahn, who proposed a 5-year reduction of the bus fare to $0.50 to be financed by a sales tax increase, which would be submitted to the voters at the November election. Any money not needed for the bus fare reduction would be used for unspecified transit  purposes.

The original motion by Supervisor Hahn was amended by Gardena Mayor Edmund Russ, who proposed a “local return program,” which would dedicate 25 percent of the funding to municipalities (and Los Angeles County for unincorporated areas) on a population basis, to be used for transit services. At that time, local operators provided less than 20% of the bus service, with the overwhelming majority of services provided by the Southern California Rapid Transit District (SCRTD).

I was concerned that the proposal by Supervisor Hahn failed to provide funding for a rail system. I believed at the time that a rail system would reduce the intractable traffic congestion in Los Angeles. I was also concerned at the rapidly rising unit costs of bus operations and was convinced that unless there was a “firewall,” no money would be available for rail.

As a result, on the spur of the moment, I introduced an amendment to direct 35 percent of the proceeds to rail. This motion was seconded by Supervisor Baxter Ward and was incorporated into the final package Supervisor Hahn accepted a shortening of the reduced fare period to three years. The measure, Proposition A was placed on the ballot and was passed by the voters in November.

Transit Since Proposition A

The impacts of the three programs approved in 1980 had varying results on transit in Los Angeles.

Three Year Fare Reduction (1982-1985): Between 1982 and 1985, there was a flat $0.50 fare for transit services in the county. SCRTD experienced an increase from 354 million to 497 million annual passengers. At 40%, this may be the largest three year relative increase in any large transit agency’s ridership in decades. Ridership fell after subsequent fare increases.

Further, the fare reduction was cost effective. The cost per new rider was less than $1.00 (2012$), a small fraction of typical projected costs per new riders on proposed rail transit systems around the country. By comparison, the cost per new rider on the east extension of the Gold light rail line was projected at more than $30 (2012$, $24.19 in 2003). This is more than 30 times the cost per new rider of the low fare program.

The strong ridership increase in response to the low fare program is consistent with the relatively low incomes of Los Angeles transit commuters. In 2013, the median income of Los Angeles County transit commuters was approximately one-half that of the national, 60 percent below that of the six metropolitan areas with transit legacy cities (New York, Chicago, Philadelphia, San Francisco, Boston and Washington) and even lower than the other 45 metropolitan areas over 1,000,000 population (Figure 1)

Local Return Program: Since 1985, when the bus fare reduction program ended, by far the greatest impact on ridership was from the Local Return program. In 1985, the existing local bus operators carried approximately 55 million annual passengers, a figure that rose to more than 130 million in 2012 (a nearly 140 percent increase). This ridership increase is more passengers that were carried on all the bus and rail systems of Dallas (DART), Salt Lake City and St. Louis in 2012, according to Federal Transit Administration data.

Urban Rail Program: Many miles of urban rail have been built in Los Angeles County, including two subways and five light rail lines (determined by route termini from downtown). But the hope that others would leave their cars for transit, as expressed in The Onion has not occurred. By 2012, Federal Transit Administration data indicates that MTA (formed by a merger of LACTC and the Southern California Rapid Transit District, which operated the system before) bus and rail system was carrying 475 million annual riders, down from the 497 million carried on buses alone in 1985.

This is despite constructing billions  in subway lines, light rail lines, and rapid busways and the addition of approximately 2 million residents to Los Angeles County.

The “Return” on Local Return: The big surprise was the “return” on the local return program. A number of new systems were established, such as Foothill Transit and the Antelope Valley Transportation Authority. Many cities established new bus and paratransit systems. The city of Los Angeles now operates a number of commuter express bus services and local circulation bus services throughout the city. Many of the new systems used competitive tendering, under which services are awarded to competing private companies, with fares, routes, and schedules dictated by the public agencies. One important advantage of competitive tendering is lower costs, which makes it possible to provide more service. This service approach has been used extensively in Denver and San Diego. Further, virtually all of London’s largest public bus system in the high income world is competitively tendered as are  all of the bus, subway, commuter rail and light rail services in Stockholm.

Overall, the Los Angeles County transit system, including MTA and the local operators experienced a ridership increase of 55 million between 1985 and 2012 (This excludes Metrolink, the five county commuter rail system established in the 1990s). Virtually all of the ridership increase is attributable to the local bus services operated by cities and by new sub-regional agencies (Figure 2).

Overall Transit Work Trip Share

Census Bureau data indicates that the employment access share of transit in Los Angeles County has declined modestly, from 7.0 percent in 1980 to 6.9 percent in 2013 (including Metrolink). Driving alone increased from 68.7 percent to 72.7 percent, while car pool commuting dropped from 16.8 percent to 10.0 percent. Outside of driving alone, the largest increase occurred in working at home rising from 1.5 percent to 5.2 percent (Figure 3). Unlike transit, working at home requires virtually no expenditures of public funds. Transit one-way work trips increased 77,000 daily, while driving along increased 947,000 and working at home increased 182,000. Car pools suffered a large loss (Figure 4).

Thus, despite rave reviews about its rail system, Los Angeles relies on cars to an even greater extent than before. Los Angeles qualifies as the next great transit city only if the standard is spending and construction, rather than ridership.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

—-

Note: Part of the MTA/SCRTD ridership loss was due to the transfer of services to Foothill Transit and the city of Los Angeles in the late 1980s.

Photo: Los Angeles County Transportation Commission logo from 1980s

 

[Originally published at New Geography]

Categories: On the Blog

The Unfinished Dodd-Frank Act

Somewhat Reasonable - November 06, 2014, 8:59 AM

The federal Dodd-Frank Act is considered by many to be the most significant financial legislation in modern history. Its purpose was to create a sound Economic Foundation to grow jobs, protect consumers, rein in Wall Street and big bonuses, end bailouts,and “too big to fail,” as well as prevent another financial crisis. Years without accountability for Wall Street and big banks had ushered in the worst financial crisis since the Great Depression that resulted in the loss of 8 million jobs, failed businesses, a drop in housing prices, and wiped out personal savings.

It was in response to this 2008 crisis, that the Obama administration urged prompt and full implementation of the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” meant also to serve as an inoculation against future crisis. Dodd-Frank was signed into federal law by President Barack Obama on July 21, 2010 at the Ronald Reagan Building in Washington, D.C.

Because of policy decisions made early on in the implementation process, it became nearly impossible for regulators to enact smart and well-coordinated regulations.  Furthermore, the process of rolling out the regulations became extremely political.

A brief Summary of the Dodd-Frank Wall Street Reform and Consumer Protection Act can be read here.

As part of its Liberty Speaker’s Series, the Illinois Policy Institute, CEO and President John Tillman, hosted a discussion of Dodd Frank and its fallout on Tuesday, October 28, at its headquarters in Chicago, 190 S. LaSalle Street, 40th Floor Library.

On the panel to discuss Dodd-Frank were three individuals who had been appointed to various government commissions to assist in the drafting, implementation, and oversight of the Dodd-Frank Act.

Paul Atkins, chief executive of Patomak Global Partners, LLC, was appointed by Congress and served from 2009 to 2010 as a member of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP). Atkins was then asked to serve on FSOCK, a creation of the Dodd-Frank Act and a uniquely powerful body within the executive branch of the US government.

It consists of 15 members, of which 9 are the chairs of other federal financial regulatory agencies charged with identifying and responding to emerging risks throughout the financial system (to prick the financial bubbles before they happen).  The Secretary of the Treasury serves as the Chairperson of the Council.

In discussing Dodd-Frank, Mr. Atkins warned that whenever a bill has “consumer” and “protection” in it, watch your wallets. Atkins called the 2,319 page bill basically rubbish.  Not unlike Obamacare, Dodd-Frank was pushed through Congress with no one knowing what was in the bill until after it had passed.  While Dodd-Frank created thirteen new offices and agencies, the government only got rid of one agency.  Dodd-Frank conveys the message that government knows best under the assumption that if enough smart people are assembled in the same room with enough information, they can do better than the free market.

Speaking about SIFI (Systemically Important Financial Institution) Institution), the $50 billion in consolidated assets threshold at which bank holding companies are subject to enhanced prudential supervision was called science fiction by Atkns. The $50 billion SIFI threshold sweeps in too many small banks that don’t pose a systemic threat, thus diluting attention from the big banks that do.

Jill E. Sommers served as a CFTC commissioner (U.S. Commodity Futures Trading Commission) for five years, from 2008 to 2013, one of only two Republicans.  The mission of the CFTC is to protect market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives — both future and swaps — and to foster transparent, open competitive and financially sound markets.

Ms. Sommers, as one five CFTC members, spent more than two years writing the Dodd-Frank Act rules to bolster oversight of the $639 trillion swaps market and the futures industry following a shortfall in customer funds at the failed brokerage MF Global Holdings Ltd.  Criminal or civil charges have yet to be filed against MF Global after the company left a $l.6 billion shortfall in customer funds when it filed for bankruptcy in October of 2010.

Sommers expressed concern over the agency’s approach to completing Dodd-Frank rules, citing a lack of coordination with the SEC and oversea regulators, that the agency hadn’t adequately considered public comments on proposed rules, and that an analysis of regulatory costs and benefits was lacking.  Industry needed relief from rules that were impossible to employ when first instigated.

Jill Sommers vented her frustration as to the role of the oversight and regulation of swap markets in a speech delivered before the Cadwalader Energy Conference in October of 2012, the day before the definition of “swap” became effective and compliance rules for swap deals kicked in.  According to Sommers, if dozens of requests weren’t granted for relief, the market could be damaged and irreparable harm could follow for market participants.  Sommers bemoans the fact that many of the rules finalized were vague and subject to legal challenges, which has resulted in real, unintended and very costly consequences.  Sommers has little confidence that the rules already in place have a chance of withstanding the test of times.  She instead believes that the commission will be consumed over the next few years using valuable resources to rewrite the rules we knew or should have known would not work in the first place.

Christopher Giancarlo was confirmed by unanimous consent of the U.S. Senate on June 3, 2014.  On June 16 he was sworn in as a CFTC Commissioner whose purpose is to protect market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives (both futures and swaps) and to foster transparent, open, competitive and financially sound markets.  Giancarlo’s term expires in April 2019.  Giancarlo took the place vacated by Jill Sommers on the CFTC.  His work on the Commodity Futures Trading Commission might be defined as the clean-up phase.  Giancarlo considers the Futures and Swap markets important to a thriving economy.  Of importance is that the government doesn’t interfere.  Food and energy prices are low because we don’t have government setting the price.

Mr. Giancarlo defined the Swap Market as looking more like the bond market, and the Futures Market more like the stock market.  The Swap Market, in comparison to the Futures Market, operates as controlled over-the-counter growth.  The Swap Market is now a global market.

On Sept. 9  Giancarlo gave the Keynote Address to the Global Forum for Derivatives Markets (35th Annual Burgenstock Conference) in Geneva, Switzerland.  He began his remarks by indicating that they would be his own and did not necessarily constitute the views of his fellow CFTC Commissioners or its staff.

Giancarlo posed three questions, although he realized that many in attendance already knew the answers and that they didn’t inspire confidence in the future.

  1. Are we fully honoring the commitment to coordinate our efforts to reform the derivatives market?
  2. Are we avoiding protectionism?
  3. Or are we building new 21th century protectionism around regional financial markets, especially in swaps and futures?

Giancarlo further indicated that “this lack of coordination in swaps clearing does not exist in a vacuum.  It is preceded by an uncoordinated approach in formulating the regulations of swap trading.”

The fourth anniversary of the signing of the Dodd-Frank was noted this summer on July 21. Most Americans think more regulation is the answer and that Dodd-Frank solved the problems causing the crisis, even believing that the law didn’t go far enough to punish private firms responsible for the crisis.  If anything, Dodd-Frank has made the financial system even more fragile than it was prior to the 2008 crisis.

As concluded in a committee staff report titled, “Failing to End Too Big to Fail: An Assessment of the Dodd-Frank Act Four Years Later’, released just days before the fourth anniversary signing of the Dodd-Frank Act by President Obama in 2010, the Dodd-Frank Act did not end “too big to fail” as the law’s supporters claim, but actually had the opposite effect of further entrenching “too big to fail” as official government policy.  According to Oversight and Investigation Subcommittee Committee Chairman Rep. McHenry, “Rather than institute market discipline and a clear rules-based regime, four years later Dodd-Frank’s failed policies have only worsened the risks within the financial system and recklessly handed financial regulators a blank check for taxpayer-funded bailouts.”  The report is available here.

Another article worth reading by Calomiris and Meltzer was published on Feb. 12, 2014 in the WSJ: How Dodd-Frank Doubles Down on ‘Big to Fail’.  It relates how Dodd-Frank doesn’t address problems that led to the financial crisis of 2008.

It remains to be seen if Mitch McConnell does controls the U.S. Senate in 2015, whether the Republican Party will push for full or partial repeal of Dodd-Frank.  In the meantime, Commission J. Christopher Giancarlo has his work cut out for him as a CFTC Commissioner.

First published on Illinois Review

Categories: On the Blog

Don’t Expect Big Changes to Come from the Republicans’ Big Wins

Somewhat Reasonable - November 05, 2014, 5:00 PM

A GOP wave election turned into a tsunami. But will anything really change?

Decades of disappointment should have taught us that the Republican Party’s big wins Tuesday will change little or nothing that comes out of Washington, DC in a substantive way.

The federal government and national debt grew under Republican Presidents Nixon, Ford, Reagan, Bush I and Bush II. Republicans have repeatedly used limited-government rhetoric to get elected and then have embraced big government when they have controlled it.

Going all the way back to Nixon, remember that Medicare and Lyndon Johnson’s other “Great Society” programs were barely off the ground when he took office. They could have been ended then because they were still small. Nixon instead let them grow and gave us a host of new regulations and government agencies, including the Environmental Protection Agency, certainly one of the government’s most abusive and renegade agencies.

Nixon also unilaterally shredded the international Bretton Woods system that was created near the end of World War II to establish fixed foreign exchange rates, with the dollar pegged at $35 for an ounce of gold. This made the US dollar a purely paper currency and set the stage for massive money printing and inflation. Nixon also imposed national wage and price controls because of the economic shock his policies caused. Imagine the howling we’d hear if Barack Obama were to impose wage and price controls!

Skipping ahead to the last time Republicans had control of the House and at least half the Senate, with a Republican president to back it up — during the George W. Bush (Bush II) administration that began in 2001 — they gave us huge increases in federal involvement in education with No Child Left Behind, and huge increases in entitlement spending by introducing Medicare prescription drug coverage. They let the national debt soar. They expanded business subsidy programs. They expanded the surveillance state and poured military hardware into local police departments. They enthusiastically backed military spending for attacks against countries whose governments had nothing to do with the 9/11 attacks. They gave us thousands of budget “earmarks” that were just billions of dollars of slush fund spending.

Those Republicans did give us tax cuts, but they made them temporary, and the tax cuts actually concentrated the tax burden onto fewer households.

George Bush the Elder gave us the infamous, “Read my lips, no new taxes” broken pledge; George Bush the Younger gave us the infamous, “I’ve abandoned free-market principles to save the free-market system” excuse for bailing out financial institutions, insurers and automakers.

Even if Republicans this time do try to substantially shrink the size and power of government, President Obama would veto the moves, and there is little chance the vetoes would be overridden. As several Heartland Institute advisers today note in a press statement on the election results, some Republicans are already softening their pledges to fight the Affordable Care Act, otherwise known as Obamacare.

At the state level, the Republicans might have more impact, because true believers in limited government have a better chance of being elected at state and local levels, and turning a state is easier than turning the national government, just as turning a rowboat is easier than turning a battleship. In recent years we’ve seen big improvements in tax and regulatory policies in a number of states, including Indiana, Michigan, Missouri, North Carolina, and Wisconsin.

On the other hand, Virginia recently went downhill under Republican leadership, and in Democrat-dominated Illinois, where Republican challenger Bruce Rauner this week defeated the Democrat incumbent, the General Assembly remains overwhelmingly in Democrat control. And who knows where Rauner really stands? He’s been all over the map on the minimum wage. He has declared his desire for big increases in education and infrastructure spending, even though Illinois has huge debts and budget deficits and the nation’s worst credit rating. He has declared a desire to expand the sales tax to services and to close “tax loopholes.” It’s possible Illinois could end up with a net tax increase even with a rollback in the state income tax rate that is scheduled to happen in 2015.

Furthermore, Rauner and Chicago Mayor Rahm Emanuel — who used to be President Obama’s chief of staff after having been a Democratic Party Congressman — are great friends. I doubt Rauner will reduce the flow of tax dollars collected from across the state to Chicago.

“Be humble in victory, Republicans – and don’t screw this up by returning to your old ways.” Those are the words of Ben Domenech, Heartland’s senior fellow for health care policy.

It’s good advice — advice the Republicans repeatedly have rejected over the years.

I know past performance is no guarantee of future performance, but it is a good indicator.

Categories: On the Blog

Some at The Heartland Institute Skeptical, Yet Hopeful about Republican Midterm Win

Somewhat Reasonable - November 05, 2014, 4:58 PM

After a sweeping Republican win in the 2014 midterms, some at The Heartland Institute are reluctant to take a sigh of relief. With the Republican party in firm control of congress, many new challenges and concerns face those who advocate limited government.

If recent history has taught us anything, it is that both major parties in the United States increase the size and scope of the federal government. While this time it may be different, small-government proponents are not holding their breath.

In a press release by The Heartland Institute, many contributors expressed their concerns. Research Fellow Steve Stanek states:

“The federal government and national debt grew under Republican Presidents Nixon, Ford, Reagan, Bush I and Bush II. Republicans have repeatedly used limited-government rhetoric to get elected and then have embraced big government when they have controlled it. I expect the same thing to happen this time.”

Recently, Republicans have held themselves as being the small-government party when competing with the Democratic party. So far however, they have yet to prove themselves as such. Senior Fellow Benjamin Domenech highlights this when he says, “Now they have an opportunity to prove they’re not going to make the same mistakes. Be humble in victory, Republicans – and don’t screw this up by returning to your old way.” Some are only slightly more hopeful.

You can tell Policy Advisor William Briggs isn’t sold when he states, “Congratulations to the Republicans, the party of slightly smaller government. Now, at least for the next two years, the rate at which regulations increase, taxes become more burdensome, and government intrudes into our lives will be marginally slower.”

The capturing of congress by Republicans also raises another issue. The potential for President Obama to use executive orders has increased. Director of Government Relations John Nothdurft states, “The president is likely to spend the next two years ruling by executive order rather than choosing to work with Congress.” With the past several years resembling a battle between Obama and the Republicans, it is unlikely the president will pursue bipartisan legislation.

Policy Advisor David L. Applegate highlights a major worry of republicans when he states, “Obama will double-down on his Constitutionally suspect practice of ruling by executive order and will try to legalize some six million-plus ‘undocumented immigrants’ in time to have them eligible to vote in the 2016 elections.”

While many are still wary of the Republican victory, most are still hopeful for the future. Multiple staffers from The Heartland Institute listed goals for the new congress. Senior Advisor Larry Kaufmann states, “If they really want to be bold, Republicans should begin to tackle entitlement reform, even though it will remain a political football.”

Those that support the ideas of limited government and free markets should take these election results as only a move in the right direction. A lot more work needs to be done. The newly elected Republicans have to be reminded that those who voted them in can easily vote them back out.

[Link to Official Press Release]

Categories: On the Blog

Corporate Inversions Piece in The Hill Highlights Major Problems with our Tax Code

Somewhat Reasonable - November 05, 2014, 3:01 PM

With recent news about Burger King and medical device manufacturer Medtronic relocating their headquarters outside of the United States to avoid high corporate taxes, the subject of corporate inversions has been a big topic of discussion in the media. While President Obama and the Treasury Department condemn these moves and construct roadblocks to prevent inversions, they fail to see the reasons that drive these corporations overseas.

As Bernard L. Weinstein writes in a piece published by The Hill, “Inversions should be viewed as a reaction to our famously dysfunctional tax system, especially as it applies to corporations.” Simply put, our far-reaching and complex tax code is pushing business out. And who benefits from these moves? The countries that are now collecting the tax revenue by offering an overall smaller tax rate. Weinstein continues:

“Besides being notoriously complicated, inefficient and riddled with special interest provisions, the system leaves U.S. companies with by far the highest tax burdens in the industrialized world.

“The federal tax rate for corporations is 35 percent. But when you include state taxes as well, according to the Tax Foundation, the rate is more like 39.1 percent. Compare that to a net corporate tax rate of 15 percent just across the border in Canada.”

When just looking at the numbers, it is an obvious choice for these companies to move their headquarters out of the country. This is a case of people voting with their feet.

What is worse is when the tax code is used as a weapon against a specific company or industry. Weinstein elaborates on this concept as well:

“We’re seeing a shameless example of that right now in the federal government’s tax assault on America’s domestic oil and natural gas producers.

“President Obama has never shown much love for this industry. Now he and certain allies in Congress from both parties are trying to engineer a massive new energy tax aimed at these companies and dressing it up in the language of tax reform.”

When the tax code is used in this manner, it is seen as unpredictable and troubling. While today it may be the oil and gas industry, tomorrow fast food chains or convenience stores may be the target. This idea gives more incentive for businesses to avoid the U.S. tax system.

Instead of making it harder for companies to move their headquarters out of the country, the government should work to make the tax code more appealing. The goal of tax reform should be to get foreign companies to pull a corporate inversion and relocate their headquarters here in America.

[Segments of this article originally published in The Hill]
Categories: On the Blog

Thinking the Unthinkable – Part III

Somewhat Reasonable - November 05, 2014, 12:54 PM

Nothing has changed my mind that it would be “unthinkable” for the FCC to classify Internet service providers as common carriers under Title II of the Communications Act, the part of the 1934 communications law derived directly from the Interstate Commerce Act of 1887. The purpose of the Interstate Commerce Act was to constrain what was then seen as the monopolistic power of the railroads. The railroads were deregulated in the 1980s – long before the emergence today’s broadband Internet providers.

In the first paper in this series, “Thinking the Unthinkable: Imposing a ‘Utility Model’ on Internet Providers,” I explained why, as a matter of domestic policy, it would be wrong to regulate Internet providers under Title II. In the second,“Thinking the Unthinkable – Part II,” I explained why classification of Internet providers as common carriers here in the U.S. likely would have substantial adverse consequences abroad as other countries use the FCC’s pro-regulatory action to justify their own Internet regulation designs.

In this third piece, I wish to focus further attention on the real-world impact of Title II regulation (or even rigid, inflexible non-Title II regulation) by taking the Title II advocates at their word regarding what they demand. In doing so, I hope to encourage those inclined to align themselves with the Title II advocates to understand the import of such alignment. And I hope to get the general press to ask each FCC commissioner whether he or she agrees with the Title II advocates that particular service offerings that the Title II advocates say should be banned as discriminatory and inconsistent an Open Internet should, in fact, be banned.

As the time for a potential FCC votes nears, it’s time to talk about real cases with real consumer impacts, rather than simply regurgitating open-ended mantras concerning preservation of an “Open Internet.”

For this purpose, here I’m going to copy in this excerpt from my August 26 FSF Perspectives titled “Net Neutrality v. Consumers”:

In the cause of furthering such consumer understanding, let’s begin by reviewing excerpts from recent Wall Street Journal stories about new wireless pricing plans offered by Sprint and T-Mobile.

  • “For about $12, Sprint Corp. will soon let subscribers buy a wireless plan that only connects to Facebook. For that same price, they could choose instead to connect only with Twitter, Instagram or Pinterest—or for $10 more, enjoy unlimited use of all four. Another $5 gets them unlimited streaming of a music app of their choice.”  “Sprint Tries a Facebook-Only Plan,”Wall Street Journal, July 30, 2014.
  • “T-Mobile US Inc. will let customers listen to several popular music services without counting it toward their data use, giving up a potential revenue source to bolster its subscriber base. The country’s fourth-largest wireless carrier said it is going to waive data charges when subscribers use services like Spotify, Pandora and Rhapsody.”  “T-Mobile Will Waive Data Fees For Music Services,”Wall Street Journal, June 18, 2014.

Each of the plans announced by Sprint and T-Mobile would appear to be attractive to consumers. In one way or another, they all offer subscribers additional choices for accessing services the subscribers wish to enjoy at a price lower than otherwise would be available or, alternatively, without incurring data usage charges that otherwise would be incurred. In the latter instance, such as the T-Mobile’s “Music Freedom” plan, this feature has become known as “zero-rating” because data usage charges do not apply when subscribers access sites covered by the plans.

I do not know whether these new wireless plans ultimately will prove successful in the marketplace, which continues to evolve at a rapid pace. But I have not heard of any meaningful consumer discontent with the plans. To the contrary, I surmise that consumers welcome the additional options, especially low-income or budget-conscious consumers who either are unable or unwilling to pay for wireless plans that are not limited in some fashion.

Leading Title II advocates are opposed to these plans on the basis that they discriminate by picking and choosing certain “edge providers” to favor, say Facebook over the “next-Facebook,” or certain music sites over others, or music sites over poetry sites.

In my “Net Neutrality v. Consumers” essay, you can see for yourself the statements by Free Press’s Matt Wood and Public Knowledge’s Michael Weinberg opposing these T-Mobile and Sprint wireless plans as inconsistent with their understanding of an Open Internet. And in the FCC’s Open Internet Roundtable (“Tailoring Policy to Harms”) in which I participated, Julie Veach, FCC Common Carrier Bureau Chief, very perceptively zeroed in on this issue right after the opening statements. You can view my exchanges with Mr. Weinberg and also with Stanford law professor Barbara van Schewick regarding the so-called “zero-rated” plans here beginning at the 33 and 93 minute marks. You’ll see they object to the plans.

It is possible, of course, to imagine other “zero-rated” or “sponsored data” plans, or other hypothetical offerings of a different variety, that similarly would run up against the Title II advocates’ claim that they are discriminatory and, therefore, should be banned. But we don’t need to imagine other hypothetical examples because we have real-world offerings to which they object.

To be clear, in my view, in light of the competitive environment, spectrum constraints, and unique technical requirements, the Commission should not extend any new net neutrality mandates to wireless providers. The costs of doing so very likely will exceed the benefits to consumers.

In thinking about imposing new net neutrality mandates, the current Commission Democratic majority appears to have a pronounced proclivity to elevate supposed potential harms to edge providers (especially non-existent ones, such as the “next Google or next [fill in the blank”]) above real-world consumer welfare benefits. So, Chairman Wheeler and each commissioner should consider whether they too, like the stringent Title II advocates, think that plans like those of T-Mobile and Sprint described above should be banned as discriminatory – despite the fact that, as far as I can tell, they may be attractive to consumers, especially low income consumers. (I am not suggesting that these particular plans will ultimately succeed in the marketplace, only that consumers will not be harmed by the providers’ seeking to meet perceived consumer demands.)

If the three Democratic commissioners think such apparently consumer-friendly plans should be banned, then perhaps, David Farragut-like, they should just proclaim, “damn the torpedoes, full speed ahead.” But make no mistake: In actuality, they will not be moving ahead, but retreating into last century’s world of legacy regulation, confining Internet providers into the strictures of a common carrier public utility-like regime.

If, on the other hand, the commissioners see the merit of allowing Internet providers to experiment in the marketplace by making available innovative, consumer-friendly service options such as the T-Mobile and Sprint offerings discussed here, perhaps they will slow down and think twice about the wrong direction the net neutrality proceeding seems to be headed.

PS – Oh yes, and perhaps some enterprising member of the press will actually ask the commissioners whether they agree or disagree that plans like T-Mobile’s and Sprint’s should be banned.

[Originally published at The Free State Foundation]

Categories: On the Blog
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