The Heartland Institute and the Nongovernmental International Panel on Climate Change (NIPCC) have been hard at work since 2011 on a new edition of Climate Change Reconsidered. The first volume of the new report, titled Climate Change Reconsidered II: Physical Science, will be released in digital form in September to coincide with the release of the United Nations’ Intergovernmental Panel on Climate Change (IPCC) 5th Assessment Report. A second volume on “Impacts, Adaptation, and Vulnerabilities” is slated for release in March or April 2014.
Heartland is planning to hold a press conference in Chicago on Sept. 17 at which it will announce the findings of the 1,200-plus-page report and release an executive summary. The organization will also host a “book launch luncheon” on Sept. 18 in the Heartland Institute library featuring three of the report’s lead authors. More details of the unveiling of Climate Change Reconsidered II: Physical Science, will be released in the coming weeks.
The research effort has been led by Craig Idso, Ph.D., chairman of the Center for the Study of Carbon Dioxide and Global Change; Robert Carter, Ph.D., Former Head of the School of Earth Sciences, James Cook University (Australia), and S. Fred Singer, Ph.D., president of the Science and Environmental Policy Project and professor emeritus of environmental science at the University of Virginia. An international team of lead authors, section authors, contributors, and reviewers is participating in the effort.
The first two volumes published in the Climate Change Reconsidered series, in 2009 and 2011, were widely recognized as the most comprehensive and authoritative critiques of the alarmist reports of the United Nations’ Intergovernmental Panel on Climate Change (IPCC). Reviews and the complete texts of both volumes are available here and here. In June, a division of the Chinese Academy of Sciences published a Chinese translation and condensed edition of the two volumes.
Steve Stanek discusses in this podcast with Tom Steward about the issue of taxpayers around the country seeing taxes raised for public golf courses. One in particular created in the mid-eighties in Red Wing, Minnesota. The golf course was originally believed to cost the taxpayers nothing and possibly even turning a profit along with being beneficial to not only community appeal, but putting them ahead of the curve at the time with the growing popularity of the game. Yet, today the local property tax payers have paid hundreds of thousands of dollars financing the course.
To their credit Steward cites that the city has been transparent with the options, fiscal realities, and documents regarding the state of the course provided on their website. The community wide discussion shows support of some current subsidies in particular community pools, however this does not include the funding of a golf course in the red. The problem not seen in the projected growth for today is that there would be “too many golf courses, not enough golfers”.
The San Francisco area’s recently adopted Plan Bay Area may set a new standard for urban planning excess. Plan Bay Area, which covers nearly all of the San Francisco, San Jose, Santa Rosa, Vallejo and Napa metropolitan areas, was recently adopted by the Metropolitan Transportation Commission (MTC) and the Association of Bay Area Governments (ABAG). This article summarizes the difficulties with Plan Bay Area, which are described more fully in my policy report prepared for the Pacific Research Institute (Evaluation of Plan Bay Area).
Plan Bay Area would produce only modest greenhouse gas emissions reductions, while imposing substantial economic costs and intruding in an unprecedented manner into the lives of residents. The Plan would require more than three quarters of new residences and one third of net additional employment to be located in confined “priority development areas.” These measures have been referred to as “pack and stack” by critics. The net effect would be to virtually ban development on the urban fringe, where the organic expansion of cities has occurred since the beginning of time.
Violating perhaps the most fundamental requirement of a rational plan, Plan Bay Area begins with a situation that no longer exists. Further, it is based on exaggeration, systematic disregard of official federal government projections and overly optimistic planning assumptions.
Exaggerated Population Projection: The Plan assumes that the Bay Area will grow 55 percent more rapidly between 2010 and 2040 than official California state Department of Finance population projections indicate. These state-produced estimates have tended themselves to be on the high side (Figure 1). The planners scurried about to resolve these differences, but there is no indication that the state will be revising its projections. Plan Bay Area’s population projection would require growth in the Bay Area to increase by more than one-half from the 2000-2010 annual rate. The exaggeration of population growth has its uses: it leads to a higher greenhouse gas emissions projection for 2040, providing a rationale for stronger policy interventions.
Ignoring Current Greenhouse Gas Emissions Projections: The Plan also ignores the new, more favorable DOE fuel economy projections (Figure 2). These projections were issued in December, well before the publication of the draft plan in April and the adoption of the final plan in July. Indeed, if the new DOE projections had been published the day before, Plan Bay Area should have been placed on hold and revised. In short, Plan Bay Area was out of date when adopted.
Overly Optimistic Planning Assumptions: The Plan assumes that travel by light vehicle (automobiles, sport utility vehicles and pickups) would be reduced by substantial increases in transit ridership. Plan Bay Area presumes that expanding transit service 27 percent over the next 30 years will lead to a near doubling of transit ridership. This is stupefying, since over the last 30 years, transit ridership remained virtually the same, while service was expanded nearly twice as much as would be planned from 2010 to 2040.
The plan also assumes that residents forced into the priority development areas will use transit and walking much more, materially reducing their use of light vehicles. This research behind this assumption is skewed toward transit oriented developments located on rail lines with good access to downtown. But nearly nine out of 10 employees in the Bay Area work outside the downtowns of San Francisco and Oakland downtowns, and that number is increasing (according to Plan Bay Area).
Given recent history, it seems wishful thinking to believe that small transit service expansions and downtown oriented transit development can do much to attract drivers from cars. The modest gains greenhouse gas emissions reductions projected in Plan Bay Area are likely exaggerations.
Plan Bay Area’s “pack and stack” densification is likely to produce even less than the modest substitution of transit and walking for driving (see The Transit-Density Disconnect). Traffic congestion, in this already highly congested area, is likely to be worsened, which could nullify part or all of the greenhouse gas emission reductions expected from reduced vehicle use.
Correcting Plan Bay Area Forecasts
Plan Bay Area would only modestly reduce light vehicle travel and greenhouse gas emissions. This is illustrated in Figure 3, which shows that the “pack and stack” strategies that would force most new residents and jobs into priority development areas, Plan Bay Area would reduce greenhouse gas emissions by 2 percent (“Plan Bay Area” line compared to the “Trend” or “doing nothing” line).
By contrast, correcting the Plan Bay Area 2040 population estimates to reflect the state population projections would reduce greenhouse gas emissions more than eight times as much (17 percent), without the “pack and stack” strategies. A further correction of the Plan Bay Area 2040 estimates to reflect the latest DOE fuel economy projections, would reduce greenhouse gas emissions 22 percent, 11 times as much as the “pack and stack” strategies.
Heavy Costs for Households and Businesses
The Plan’s “pack and stack” strategies seem likely to exacerbate the Bay Area’s already high cost of living. Currently, the San Francisco and San Jose metropolitan areas have the worst housing affordability among the nation’s 52 metropolitan areas with more than 1 million residents. San Jose’s median house price relative to its median household income was 7.9 last year, according to the Demographia International Housing Affordability Survey. San Francisco’s median multiple was 7.8. This severely unaffordable housing results from recent decades of urban containment or smart growth policies, which have severely restricted the land on which development can occur. This drives up prices (other things being equal), consistent with economic principle. This has been made worse by house and apartment impact fees imposed on developers that are far above the national average.
By comparison, in major metropolitan areas that have not implemented strong urban containment policies, the median multiple has typically been 3.0 or less since World War II, including the Bay Area before its adoption (Figure 4). The “pack and stack” strategies would largely limit new development to small parts of the Bay Area, an even more draconian prohibition than the long standing restrictions on urban fringe development. This further rationing of land could be expected to drive land prices even higher, making it even more difficult for households and businesses to live within their means.
The problem is already acute. The new US Census Bureau housing cost adjusted data shows California to have the highest poverty rate among the states and the District of Columbia (metropolitan area data is not available). An early 2000s Public Policy Institute of California report showed Bay Area poverty to be nearly double the official rate, adjusted for the cost of living. Ultra pricey San Francisco had among the ten highest poverty rates – over twenty percent – of any urban county in the country.
Unaffordable housing has also fueled an exodus to the San Joaquin Valley (Central Valley). Now more than 15 percent of the workers in the Stockton metropolitan area commute to the Bay Area, which led the Federal Office of Management and Budget adding Stockton to the San Jose-San Francisco combined metropolitan area (combined statistical area). In addition, the greater traffic congestion is likely to lengthen work trip travel times. This is likely to further increase emission while also burdening job creation and economic growth (see Traffic Congestion, Time and Money).
Ignoring the Economy and Poverty
Plan Bay Area effectively ignores these costs (despite rhetoric to the contrary), by failing to subject its strategies to a cost per ton metric. According to the United Nation’s Intergovernment Panel on Climate Change (IPCC), sufficient greenhouse gas emissions reductions can be achieved at a cost between a range of $20 to $50 per ton. The previous regional plan (through 2035) included such estimates. Only highway strategies achieved the IPCC range. Transit and land use strategies cost from four to more than 100 times the top of the IPCC range. Even those estimates did not include the prohibitively higher housing costs that result from urban containment policies. The cost metric is crucial, because spending more than necessary to reduce greenhouse gas emissions limits job creation and economic growth, which leads to reduced household affluence and greater poverty. This is the very opposite of the economic objectives of public policy. Virtually all political jurisdictions around the world seek greater prosperity for their residents and less poverty. A legitimate regional plan requires subjecting its strategies to economic metrics.
There is opposition to Plan Bay Area. A citizen movement worked for rejection and has now filed suit claiming that the Plan violates the California Environmental Quality Act. The suit also alleges that MTC and ABAG used a questionable interpretation of state law and regulation to justify the irrational Plan outcomes.
Opponents were also successful in obtaining a rare recorded vote at ABAG. The governing board (General Assembly) is composed of selected elected officials from cities and counties who are not elected to their ABAG positions. ABAG adopts virtually all of its actions by consensus, rather by recorded votes, as occurs in many of the nation’s regional planning boards.
Consensus decision making seem especially odd in California, where inability to obtain sufficient votes in the legislature for the state budget required a constitutional amendment. Neither do city councils and county commissions operate on a consensus basis on controversial issues.
There is no shortage of controversial issues, at ABAG or other regional planning agencies. A good first reform would be for recorded votes to be the rule, rather than the exception. Consensus decision making may be appropriate for clubs, but it is not for representative bodies in a democracy (Note).
Impeding the Quality of Life
Plan Bay Area was outdated when approved and reflects a world that no longer exists. Drafters have insisted on extravagantly expensive and intrusive policies that produce only minimal greenhouse gas reductions, and at great cost, using, among other things, unreasonably bloated population forecasts to bolster their approach. Unless changed, the Plan will likely be more successful in driving up housing prices, limiting options for families, and further congesting traffic than meeting its stated goal of reducing greenhouse gas emissions.
On August 27, Heartland Institute Research Fellow Benjamin Domenech was a guest on MSNBC’s “All In with Chris Hayes” to talk about conservatives in Congress pressuring Speaker Boehner to use the upcoming debt ceiling fight to defund Obamacare.
Ben said: I think the right flank is tired Chris of seeing these sorts of issues come up again and again and feeling an unwillingness of Boehner and McConnell to stand up to the President and fight on it. So, there’s a lot of bluster to sort of compensate for that, but I just have to point something out that’s a little different about this situation, the fallback from my perspective for John Boehner isn’t any more realistic than the sort of things that the tea party is really pushing him to do right now when it comes to defunding Obamacare versus delaying it. I think that’s one of the issues really we have to understand is not the typical the elites are being realistic, the tea party is being unrealistic divide. Because I don’t think that you have the votes for either of those things in the U.S. Senate, which makes it a moot point from my perspective. Whichever strategy, whichever leverage John Boehner is going to use in this situation, I think you’ve already seen the redline from Secretary Lew when it comes to the way these negotiations are going to play out. Frankly, if the President is willing to come to the negotiation table on these sorts of things is going to be an issue.
He further goes on to discuss the strength of the right, which is to have this argument because when the President, himself, has delayed portions of the Affordable Care Act it creates a handy little argument for the right to make. Which is essentially he’s exempting employers, he’s exempting friends, but he won’t exempt the American people, but to think that any of those things will actually become policy is foolish.
Watch the video below:
In the third of the six films of the Star Wars saga, the Sith Lord who has infiltrated to become the ruling Chancellor of the democratic republic confederation of peaceful worlds announces to the elected Assembly of representatives of those worlds that to deal with an exaggerated, fabricated crisis, “The Old Republic will be reorganized into the first Intergalactic Empire.” The distracted Assembly responds with polite applause. One of the few characters who understands what is happening remarks wryly, “So this is how the Republic ends. With applause.”
Proving that truth is stranger than fiction, this is happening right now in the United States of America. President Obama has already seized the power to rule by decree, and is doing so virtually every day now.
For those who do not immediately get what is meant by “rule by decree,” let me explain. The Constitution grants the power to legislate, to make laws, to the Congress, which is why it is called “the Legislative Branch.” It grants the power to carry out, or execute, the laws to the President, which is why the President and his Administration are called “the Executive Branch.” The Constitution accordingly specifies that the President’s duty is “to take care that the laws be faithfully executed.” It grants the power to interpret and adjudicate the law to the Judiciary, which is why that is called “the Judicial Branch.”
But President Obama does not accept the limitations of his role within this constitutional framework. He is now regularly exercising the power to legislate directly himself, either by announcing on his own supposed authority changes in existing laws that Congress has already passed, or by announcing that he will carry out entirely new laws that Congress never passed, or even refused to pass. These actions are brazen, lawless violations of the Constitution.
The President through his Executive Branch has the power to issue regulations interpreting the law as passed, for purposes of implementation. But all regulations must be authorized by an underlying law passed by Congress. Neither the President nor any agency underneath him in the entire Executive Branch can issue a regulation that contradicts or changes the law that is cited as authorizing it. In other words, if the law says 2014, the President has no authority to say screw it, I say 2015, by regulation or otherwise.
The same is true of Executive Orders. All Executive Orders must be based on authority granted to the President by some law passed by Congress, or by the Constitution itself.
The President does have the authority to refuse to enforce laws he believes are unconstitutional. But he cannot refuse to enforce laws because he disagrees with them, or to gain political advantage, such as delaying implementation of a law until after the next election, attempting to deceive the American people as to what has been enacted until the next election passes. The Office of Legal Counsel in the U.S. Justice Department exists to advise the President as to his legal powers. And this is what legal opinions issued by that office have said.
Similarly, in Clinton v. City of New York, the Supreme Court ruled, “There is no provision in the Constitution that authorizes the president to enact, to amend, or to repeal statutes…. The only constitutional power the president has to suspend or repeal statutes is to veto a bill or propose new legislation.”
The Lawless President President Obama has engaged in such lawless usurpation of authority most of all in regard to his pride and joy, Obamacare, which he finagled through Congress in 2010 on a strict party line vote, openly buying off recalcitrant Democrats who foresaw the coming train wreck with various political sweeteners at taxpayer expense. But now that it has passed, he refuses to implement it as passed, even though former House Speaker Nancy Pelosi famously said we would have to pass it to find out what is in it. But not when the public finding out what is in it might lead to political disadvantage for the Democrats, apparently.
The lawlessness started even before President Obama’s re-election. The law provided for $716 billion in cuts to Medicare in the first 10 years alone. But to evade political retribution for these cuts, the President delayed them until after the election, and dishonestly misrepresented them during the campaign. He and his campaign told voters the cuts involved only reductions in “overpayments” to doctors and hospitals providing health care to seniors, and in “subsidies” to insurance companies, which millions of seniors had chosen to provide their Medicare benefits under Medicare Part C, saying actual Medicare “benefits were not affected at all”— “not by one dime.”
The President did not want seniors to be able to see in their own lives that these gross mischaracterizations were not true. The Medicare Chief Actuary explained that within a few years, the cuts would reduce Medicare payments to doctors and hospitals to only about half what is paid under Medicaid for health care for the poor, which studies have documented results in poor health care for the poor. So the cuts disappeared until after the election, by illegal Presidential decree.
Similarly, the Obamacare law provided that insurance companies could not decline coverage for children with pre-existing conditions, but in an alleged mistake, the law as passed said that did not become effective until January, 2014. But to gain political advantage before the 2012 elections, HHS issued a rule declaring that this popular provision would become effective on September 23, 2010. Intimidated from challenging the illegal rule in court, health insurers began withdrawing the sale of child only policies, resulting in no one selling such policies in almost half the country.
The Obamacare law as passed also provides that the extensive Obamacare subsidies for purchasing health insurance on the exchanges apply in such Exchanges set up by the states, as the law contemplated. But 27 states exercised their right under the law to refuse to set up exchanges, leaving the federal government to do it in those states, primarily because the states were left with no discretion or authority regarding how to organize them. Only 17 states have actually established exchanges on their own. The law as written and passed only provides for the Obamacare exchange health insurance subsidies to apply in these 17 states. So on May 23, 2012, the IRS issued an illegal rule providing that the Obamacare exchange subsidies shall apply in all 50 states any way.
After the President’s re-election, he famously announced a delay for one year of one of the basic pillars of the law, the employer mandate requiring employers of 50 or more full time workers to buy health insurance for their workers, as the government specifies exactly what they must buy. The Obamacare law explicitly says the Obamacare law would become effective in 2014. The President has no legal authority to change that to 2015, as the Supreme Court has ruled. But the President brazenly flouted the law, the Constitution, and the Supreme Court by decreeing the mandate shall be delayed until 2015.
This rewriting of the law as we go is contributing to further Obamacare chaos. The exchange subsidies were only supposed to be available under the Obamacare law to those who do not receive the required employer-provided insurance. But since no such insurance will now be required next year, very few will actually have the elaborate and expensive employer insurance as required. Moreover, the CBO estimates on the cost of Obamacare are based on only a fraction of workers qualifying for the exchange subsidies.
The Obamacare law requires the exchanges to verify whether applicants for the exchange subsidies qualify because they do not have required employer coverage, and to verify applicant incomes with employers to determine how much applicants qualify for in subsidies. But with no employer mandate for next year, the Obama Administration recently issued another illegal rule authorizing exchanges to just take the applicant’s word on whether they have employer-provided health insurance, and how much they are paid.
The Obamacare law as passed provides that Obamacare shall apply to members of Congress and their staffs when it becomes effective next year. But that was causing extensive panic on Capitol Hill as our public servants began realizing what that would mean for them. So the Office of Personnel Management recently issued another illegal rule exempting Congressional members and their staffs from the Obamacare limitations on what the federal government could pay for their health insurance, which will still apply to others in the private sector.
The Obamacare law also provides for caps on out-of-pocket costs consumers themselves must pay under Obamacare policies, limiting such costs to $6,350 for individual policies and $12,700 for family policies. But because the Obama Administration is apparently unprepared to implement these caps, the Labor Department issued an illegal rule in February 2013, rewriting the Obamacare law once again to waive these caps until 2015.
The Obama Administration has similarly flouted the Obamacare law in regard to implementing the Small Business Health Options Program (SHOP), which was supposed to grant small businesses broader health insurance options, the Federal Basic Health Plan Option, which was supposed to offer a more affordable managed care insurance choice, and required electronic notification to consumers of eligibility for Medicaid and Exchange subsidies.
An Illegal Habit But President Obama’s illegal flouting of the law has not been limited to his own hapless Obamacare law. Last year, the President implemented the so-called DREAM Act by decree, after Congress had considered it, but refused to enact it, providing for new benefits for illegal immigrants brought to America as children. Before that, the President had ruled by decree that governors could apply for waivers from the welfare reform work requirements adopted in 1996 under President Clinton.
President Clinton was sent out during the Democratic National Convention to falsely claim that the ruling only allowed the governors to require more work. But under the 1996 welfare reforms, the governors did not need any more authority to require more work. The law already granted them complete authority to do so.
Earlier this month, Attorney General Eric Holder ordered all U.S. attorneys to stop prosecutions of all nonviolent, non-gang-related, drug crime defendants subject to mandatory minimum sentences. The law requires such mandatory minimum sentences. The Obama Administration is just refusing to follow and enforce the law.
Last week, the President asked the Federal Communications Commission to impose a $5 tax per cell phone to finance the extension of a program to expand Internet access. The American colonists protested in the Boston Tea Party against a 3 cent tax on tea, which they complained was not imposed in accordance with law. The colonists were smart enough to see that if the King could impose a 3 cent tax without legal authorization, there was no legal constraint at all on his abuses. That protest led to the Revolutionary War over the principle.
One of the articles of impeachment against Richard Nixon was that he used the IRS for special audits and investigations of his political opponents. Under Obama, we all know now that the IRS has done the same thing. President Obama has also refused to obey court orders, such as when the federal courts ruled that his so-called recess appointments of federal officials when the Senate was not in recess were unconstitutional, or the federal rulings that the President’s extended moratorium on Gulf oil drilling after the British Petroleum oil leak were illegal under the law,
Charles Krauthammer wrote earlier this month regarding President Obama’s lawlessness that “such gross usurpation disdains the Constitution. It mocks the separation of powers….If the law is not what is plainly written, but is whatever the president and his agents decide, what is left of the law? What’s the point of the whole legislative process — of crafting various provisions through give and take negotiation — if you cannot rely on the fixity of the final product, on the assurance that the provisions bargained for by both sides will be carried out.”
Krauthammer further explained the resulting breakdown of our government, saying, “Consider immigration reform. The essence of any deal would be legalization in return for strict border enforcement. If some such legislative compromise is struck, what confidence can anyone have in it — if the President can unilaterally alter what he signs?”
Krauthammer adds, “Yet, this President is not only untroubled by what he is doing, but open and rather proud. As he tells cheering crowds on his never-ending campaign style tours: I am going to do X — and I’m not going to wait for Congress. That’s caudillo talk. That’s banana republic stuff. In this country, the President is required to win the consent of Congress first. At stake is not some constitutional curlicue. At stake is whether the laws are the law.”
Democrats Against Democracy If the President can rewrite and make up the law, then the bonds of democracy are broken completely. We are no longer governed by laws adopted through the democratic process, but ruled instead by authoritarian, Third World-style decree.
These brazenly lawless abuses of office by the President more than justify his impeachment. But with the most partisan Democrat control of the Senate in our history, that impeachment would go nowhere in the Senate. Moreover, even to raise the word guarantees a 250% Democrat voter turnout next year, especially given how the public reacted when the Republicans attempted to impeach President Clinton for his much more mild violations of law.
But there is another check and balance on President Obama’s abuse of office. Hold the Democrat party politically accountable for the third world-style authoritarianism and suspension of democracy of the Obama Administration. They are the ones covering for the authoritarian caudillo, in Krauthammer’s words. They are the ones who selected Obama as their party standard bearer despite his radical left-wing extremist roots and background.
Those today who contribute to, support, and vote for the Democrat party are supporting this lawless suspension of our democracy. Is democracy even socially respectable in America today?
[First Published by The American Spectator]
The Senate Homeland Security and Government Affairs Committee has private alternative currencies in its crosshairs. The Chairman, Senator Tom Carper (D-DE) and Ranking Member, Senator Tom Coburn (R-OK), sent a joint letter to seven federal agencies last week asking for feedback and policy proposals for regulation of virtual currencies, like Bitcoin.
Bitcoin has surged in value and popularity recently as it has come to be embraced by more users across the planet. In a world of government fiat currencies, Bitcoin is an admirable innovation. But in a sense it extends the current currency framework, as opposed to revolutionizing it. It was created out of less than thin air when cybergeeks who saw it as a natural progression of the modern web specified the creation and distribution of the new cybercurrency in a paper posted on the Internet in 2008. The virtual currency was then launched into operation in 2009.
With an insight that eluded many 20th Century macroeconomists, the cybergeek innovators recognized the natural market connection between the value and the quantity of the currency. So Bitcoin is organized to inherently limit its quantity. All transactions in the currency are recorded by servers, designated as Bitcoin miners, on ledgers that are regularly updated and archived. Under a formula originally specified in the founding documents for Bitcoin, new Bitcoins are created with every ledger update. But the formula specifies that the number of new Bitcoins created with each such update is cut in half every 4 years, until it reaches zero in 2140, when the total number of Bitcoin units will reach their maximum quantity of 21 million. Each Bitcoin unit, however, is subdivided down to 8 decimal places, which creates 100 million smaller subunits called satoshis.
The value of each Bitcoin unit and satoshi subunit is established by market demand in daily transactions. So the specified Bitcoin supply can cover more in market value transactions depending on that market demand.
Bitcoins are bought and sold over the Internet every day. Those market transactions determine the current value of Bitcoins daily. Each company or individual in the market is free to determine whether and to what degree they will accept Bitcoins in return for the goods, services, and even property they sell. Germany formally recognizes Bitcoin as a legal form of private currency. But what is most significant about the development and rise of such currencies is that no government authorization or recognition is necessary for such currencies to operate in the market through the free exchanges and decisions of buyers and sellers. The validity and value of Bitcoin is up to each individual in the market.
No doubt Bitcoin aficionados can contest, expand or clarify every statement and judgment uttered about the cybercurrency. But the bottom line is that it is a private, alternative, competing, and complementary currency on the model espoused by Nobel Laureate Friedrich Hayek, designed basically on the monetarist model espoused by Nobel Laureate Milton Friedman. That monetarism is reflected in the steady, regular, predictable increase in its supply, and in the daily market revaluation of its value.
Bitcoin is not a fiat currency in that no government declares by fiat that it is legal tender for any particular use. But it is fiat in the sense that it is created in the cybersphere out of nothing more than imagination, with no inherent value, unlike gold or silver coins, or currencies backed by precious metals. In the book Rethinking Money, former EU monetary official Bernard Lietaer reports that 6,000 to 7,000 such private, alternative, competing and complementary currencies are currently in use around the world, the great majority not backed by anything of inherent value except the willingness of market participants to trade in them. The number of such currencies has shot up from an estimated 5,000 in 2005.
The public reason for the attention of government officials and regulators to this development is the potential for malevolent use of Bitcoin, and other such currencies, by criminals and even terrorists, to transfer funds for illegal activities and worse, and for money laundering. The Senate Homeland Security letter states regarding these currencies, “Their anonymous and decentralized nature has also attracted criminals who value few things more than being allowed to operate in the shadows.”
The Personal Liberty Digest (PLD), a top libertarian website, reported on August 14, “Liberty Reserve, another virtual currency system based in Costa Rica, was shut down in May when the Justice Department charged the company with money laundering and used the Patriot Act to lock it out of the American financial system.” The government complained that Liberty Reserve allowed customers to convert money into a virtual currency and transfer it from account to account with a 1% transaction fee, the PLD website explained. That sounds like a good deal to me, but “Justice and Treasury officials said that allowed criminals to hide the sources of their money,” PLD reported.
But criminals are not criminals until they are convicted of something, and hiding the source of your money is not against the law, except for what you are legally required to disclose on your tax return. The source of your money is not a public matter, but a feature of your personal privacy, absent a specific legal disclosure requirement. The Justice Department has no business even asking you about the source of your money until it has sufficient probable cause to bring you in for questioning, and/or to file for a warrant for your personal financial records.
Personal Liberty Digest quotes U.S. Attorney Preet Bharara as saying about the Liberty Reserve case, “The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.” But there is nothing on the public record I can see showing that there was anything illicit about Liberty Reserve. It is Bharara’s “global enforcement action” which is the first documented abuse I have seen of the Patriot Act, warranting Congressional investigation and correction. Without convicting any Liberty Reserve customer of breaking any law by converting money into a virtual currency and transferring it from account to account, Bharara’s “global enforcement action” against Liberty Reserve is an apparent violation of Due Process. Nor does the jurisdiction of the Patriot Act “encircle the earth,” which is imperialist rhetoric.
In March, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury cleared American users of Bitcoin, and similar currencies, of any legal obligations under U.S. law. But it held that American entities that sell such currencies to the public were Money Service Businesses (MSBs) subject to mandatory registration and disclosure requirements under U.S. law. Those duly adopted requirements are legally valid and enforceable. They apply within the U.S.
Which means that any foreign financial institution that operates wholly outside the U.S. can issue any sort of currency it desires, and its activities are not subject to U.S. regulation or enforcement. Moreover, it cannot even be punished by exclusion from the U.S. financial or payments system without due process of law. It must be shown at least to have participated in some activity that violated U.S. law, before it can be punished under U.S. law.
The Coming End of Fiat Currencies
The term “fiat currencies” is strange and mostly not understood in this modern “progressive” era, where everything is transformed by political “Progressives” into fiat rather than natural forms, which continue to exist as long as so-called “Progressives” have the power to impose them. So instead of Natural Law, we have fiat law, which is whatever those who currently have the political power say it is. And instead of Natural Rights, the world today mostly recognizes only fiat rights, which are only the rights those in power say we have. America was rooted in Natural Rights and Natural Law, which so-called Progressives have been rebelling against for more than 100 years, certain they had better ideas more suited to the modern world.
And so today we have fiat money instead of natural money. Fiat money is money with a government declared value, rather than a natural, inherent value. That is how the government takes some paper, slaps some ink on it, and supposedly it has the value the government and the ink says it has.
But that fiat money also lasts only as long as the ruling class has the power to impose it on us. That means the political power and the market power to do that. At some point, the market power, which is more real and natural, can overcome the political power. And that is the point we are reaching, when the innovation becomes more real and natural.
It is not Bitcoin, or Liberty Reserve, or any other private organization that is abusing and trashing the dollar. It is the United States Federal Reserve. Since the Fed was established in 1913, the dollar has lost 95% of its value. That is due to the depreciation of the currency resulting from the Fed’s monetary policies. The Fed has been a true to form “progressive” institution since its founding as one of the first reforms of the “Progressive” Movement.
Jim Cramer was quite wrong, and trite, when he appeared on a CBS TV show to say that Bitcoin is not a true currency, because there is no central bank to regulate it. Currencies do not need regulation by central banks to function as true currencies. Central banks need regulation by markets to keep their currencies functional. And Bloomberg News was equally wrong, and trite, when it so predictably published the dysfunctional progressive party line in a column on April 4 by Mathew Zeitlin, saying that durable currencies can only function as creatures of a state.
The dollar prevails as the world’s reserve currency because it has only been in competition with other fiat currencies that have been equally mismanaged or worse. The regulatory and prosecutorial hostility of the U.S. government towards private alternative currencies tells us that the U.S. government itself sees a vulnerability of the dollar to these currencies. The Fed has expanded that vulnerability now to the breaking point with its wild reckless policies of recent years.
When the Fed embarked on its Quantitative Easing policies years ago, Chairman Bernanke was so sure he could reverse them before they caused any real problems. But the real difficulty he should have foreseen, given past Fed experience, was that it would never seem like a good time to do so before it was too late. Now, years of near zero real interest rates and QE have not produced any real economic recovery. But these policies have stuffed the balance sheets of American banks, and the Fed itself, with government and corporate bonds that are going to plummet in value when the Fed slows QE bond buying, letting interest rates return towards normal, market levels, which will signal everyone else in the markets to stop buying too.
And how many other investments throughout the American economy have been based on those same near zero interest rates for continued viability? So when the Fed backs off QE, and its years long zero rates, that is going to rock the solvency of the entire U.S. banking system, the U.S. economy, and even the Fed itself. But if that forces the Fed to reverse course, and try to persist with QE and zero rates, that will ultimately cause ruinous inflation that will only worsen, until the Fed goes back to trying to withdraw from QE and zero rates.
The economy is already barely growing, if inflation is currently measured correctly. If the Fed further destabilizes the economy, the dollar will probably further decline, as who will want to buy dollars to invest in a declining economy only continuously threatened with even higher tax and regulatory burdens? But if the Fed redoubles on its current policies, the dollar will probably decline further under the threat of eventual inflation. Who will want to hold dollars under this increasingly narrowing conundrum? That is when the world may turn to something different.
It is not Bitcoin that will arise as the alternative global reserve currency, because as discussed above, it has no inherent value either, so it is subject to wide swings in market value too. The real threat to the dollar is a different, private, alternative currency that can arise, that is based in real commodities with inherent value.
Such a currency will not be rooted only in the imagination of cyberspace, but will look more like the currencies of old that gave rise to booming capitalism. A foreign financial institution free from meddling, destabilizing, self-interested, U.S. policy interference can issue a currency where each unit entitles the bearer to specified quantities of a diversified basket of precious commodities, like gold, silver, copper, oil, diamonds and similar commodities that inherently hold their value over the long run.
The market value of such a currency will inherently be stable, tied to real value in the real world. When the market value of the underlying commodities declines, the issuer of the currency can buy more, and expand the currency, which will stabilize its value, and accommodate a growing economy. When the market value of the commodities rises, the issuer can sell some commodities, and retire some currency, which will again stabilize its value. The rest of the world can and will see the value in such a new reserve currency, which would be designed more on the hard money, supply side model of Nobel Laureate Robert Mundell, and his former student Art Laffer.
Such a private, alternative currency was described and explained in detail in Lietaer’s book. This is the real threat to the global reign of the dollar. And the reaction of the U.S. government to Bitcoin shows that the U.S. government itself sees that dollar vulnerability.
[First Published by Forbes]
Obama has announced that he will defund the entire government rather than sign a bill that does not contain funding for ObamaCare. Senator Harry Reid has said he will not let the U.S. Senate pass a continuing resolution that does not contain funding for the program that he rammed through despite the opposition of the majority of Americans.
Now Obama, denying the need for congressional approval, is defunding part of his own program all by himself.
Delaying the employer mandate has the effect of losing the revenue from the penalties. But not to worry. In a July 31 article in the generally pro-Obama New England Journal of Medicine, Mark Pauly and Adam Leive state that the lost revenue amounts to a mere $10 billion, “a small fraction of the eventual cost of the exchange subsidies.” The Congressional Budget Office expects those to reach an annual $153 billion by 2023.
The Administration’s rationale for the postponement is to reduce a burden on employers. More importantly, say Pauly and Lieve, it gives them an opportunity to help employees “take maximum advantage of exchange subsidies.”
Less revenue in, more spending out: isn’t that the functional equivalent of defunding other programs in a zero-sum government budget?
Moreover, “crowding out of fully paid private insurance by more generously subsidized coverage”—already documented in Medicaid—poses an even greater threat to the government budget for financing the Affordable Care Act (ACA). The annual subsidy bill could nearly triple, Pauly and Lieve suggest.
Not verifying eligibility for subsidies is still another way for Obama to effectively increase the program’s drain on the Treasury. There is no guarantee that the money spent for such “liar loans” can ever be recouped.
The ACA is of course the great defunder of private insurance companies, hospitals, doctors, medical device manufacturers, and all the other entities subject to the premium price controls, fee cuts, and new taxes. Senator Reid finally admitted to the Las Vegas Sun that the plan is to purge the private sector from health care.
What a situation for the American system of government! We have two men, a President and a senator, each asserting the power to singlehandedly defund the entire government, shutting down everything that the people’s House has voted to fund—unless funds continue to flow to ObamaCare implementers and promoters, such as Planned Parenthood’s Navigators.
Spending on these implementers and promoters is leveraging the defunding of other items in the federal budget, as well as the private sector. All of ACA’s funds come from defunding businesses’ hiring and expansion plans, research and development, and the hopes and aspirations of current and future taxpayers.
Obama is a great pretender—pretending that all is well with the American economy. We will surely hear from those cronies who are getting funded by his redistributive largesse— and not so much from the invisible ones who are defunded, sucked dry, exhausted, or silenced.
Obama is the Great Defunder. Congress can either defund his pet program, or stand by as the PAC-Man-like program defunds and eats out America’s substance until it collapses. Maybe with a bang, maybe with a whimper.
I cringe every time I hear a politician or pundit talk about how a certain policy will create or destroy jobs. Yes, I get why it’s done; the unemployment rate in America is very high today and many people’s top priority is getting back to work. These people don’t care about savings rates, capital investment, or any other metric for economic health, as much as they care about employment prospects. Fine, but that doesn’t excuse those with power or expertise for using such imprecise and ultimately destructive terminology to describe government policy.
The purpose of economic activity is to make a profit. Individuals create products and services to be sold at a greater value than they were produced for. A healthy economy is one in which more products of higher quality are produced at greater profit rates. This is accomplished when individuals save money to be invested into productive activities.
The key is that the individual desire for personal gain is the driving force behind the producing, selling, and buying which makes up economic activity. Adam Smith noted the importance of self-interest all the way back in the 18th century with his famous passage about the butcher selling meat for the sake of personal gain. This selfish drive for wealth is the engine of economic growth; it is the progenitor of the creativity, savings, investment, and production which creates economic prosperity for all.
The crusade for job creation misleadingly draws attention away from the cause of economic growth and towards its secondary consequences, thereby inadvertently creating confusion between causes and effects. The butcher does not make and sell meat to provide jobs to his employees any more than the consumer buys computers to help out Microsoft. The fact that economic growth tends to create more jobs is a necessary side effect, but it should not be thought of as the goal of economic prosperity.
Furthermore, the concept of “job creation” is oddly homogenizing. The term, “job” can refer to a vast plethora of potential activities conducted for the sake of compensation. If the economy were to “gain” 10,000 jobs, that could mean anything from an increase in 10,000 software engineers, to 10,000 bus boys, to 10,000 prostitutes (not that they aren’t productive). Therefore, even as a broad proxy, learning the change in job numbers for the economy is pretty much worthless as an indicator of economic health.
My fear is that misleading language about job creation can lead to political pushes for policies which are bad for the economy but seemingly good for job creation. This has always been a Keynesian policy, but many voters aren’t explicitly aware of the voodoo economic claims behind state attempts to boost aggregate demand. However, if President Obama keeps touting “job reports” in his speeches, he will legitimize these aims and make job creation the implicit goal of all economic policy.
Such aims were behind many of the disastrous policies of the New Deal and more recently Obama’s stimulus programs. This is why we are endlessly subjected to calls for “infrastructure improvement” like wheel chair ramps in deserted slums of Detroit or green energy schemes like Solyndra. And we cannot forget the great benefits of natural disasters like hurricanes and tornadoes since they create jobs, never mind the lack of houses for those employed Americans to live in. To many unemployed Americans, the fact that these projects are not just useless, but costly to the economy, is irrelevant as long as they can provide some short term employment.
On the other side, we heard about how the federal budget sequestration earlier this year would “cost” the US millions of jobs. This is held up as the very worst thing that could ever possibly befall the economy. Yet when jobs are eliminated, it is virtually always due to rational calculations conducted by business owners to cut costs and strengthen profits. Such actions should be applauded, rather than condemned.
I propose that we completely do away with any language involving creating jobs as a goal or destroying jobs as an obstacle. Economic value should be thought of in terms of profits and productivity, not costs and employment.
The weekend edition of the Wall Street Journal (August 24-25, 2013) carried a front-page story titled “CEO Exit Sets Microsoft on New Path,” by Shira Ovide. The opening sentences report Microsoft “finds itself beset by competition on all fronts” and the company’s “Windows operating system will still power nearly all the 305 million personal computers expected to be sold globally this year, according to research firm Gartner Inc. But it will run just 15 percent of all computing devices, if PCs, smart-phones, tablet computers and other gadgets connected to the Internet are lumped together, given the rise of rivals such as Apple Inc. and Google Inc.”
The article was accompanied by a graphic illustrating the dramatical decline in Microsoft’s market value since 2000 (from $603 billion to $290 billion) while other competitors grew (Apple, for example, from $18 billion to $495 billion) and new competitors have emerged from nowhere (Google, worth $290 billion, and Facebook worth $99 billion).
This got me to thinking… didn’t we publish a book about Microsoft around 2000 that predicted something like this would happen? Indeed, we did. In 2001 we published Antitrust after Microsoft: The Obsolescence of Antitrust in the Digital Era by David Kopel. In 2002, my comments about a proposed Microsoft antitrust settlement were selected by the U.S. Department of Justice as one of just 47 “major” letters out of 30,000 submitted, and one of only 5 in favor of the settlement, to forward to the U.S. District Court for the District of Columbia, which eventually approved the settlement.
Heartland launched its Center on the Digital Economy in 1999 to study changes in public policy made necessary by the sweeping social and economic changes caused by the emergence of the digital economy. Antitrust after Microsoft was the first publication of the new center.
Kopel wrote, “the decade-old fear that Microsoft would monopolize the Internet seems far-fetched” (p. 7). “Computing is already moving far beyond the boundaries of the desktop POC, as Internet-only devices and devices that replace personal computers begin to take off. To worry in the year 2000 that Microsoft will own the future of computing because of its strong position in the desktop PC market is like worrying in 1938 that the Mutual Broadcasting System would own the future of electronic entertainment because of its strong position in radio” (pp. 32-33).
Many people did in fact worry about Microsoft’s “monopoly powers” back then. Microsoft was being sued for violating a variety of federal antitrust laws, many of them vague and of no value to consumers. The government sought to break up Microsoft into two companies, one selling Windows and one selling everything else, and forbidding the two companies from ever cooperating. The DOJ actually got a judge (Thomas Penfield Jackson) to issue a decision ordering that “remedy,” but it was reversed on appeal.
Reading through Kopel’s book today, I’m struck by how prescient he was in his forecasts of changing technology, emerging competition, and the deadening influence of antitrust law in this arena of rapid change. Kopel’s concluding sentences still ring true today, a dozen years on:
If the Microsoft case is the best the Antitrust Division has to offer America, then there is nothing of value in the Sherman Act. It is time to repeal that remnant of a less enlightened and much slower-paced era (p. 160).
Perhaps you read the USA Today editorial on August 19 that concludes with: “the most important gains could come from radical shifts that are as unanticipated as was North America’s emergence as an oil and gas powerhouse.” It points out “that free enterprise has a way of solving problems that is beyond the capabilities of government.” And continues: “The surge in domestic oil and gas production—spurred on by such new techniques as hydraulic fracturing (or ‘fracking’) did not come about as the result of government energy polices, but largely in spite of them.”
Other oil producing countries are taking note.
Mexico has huge oil-and-gas reserves— estimated at 115bn barrels of oil equivalent, comparable to Kuwait’s—but lacks the technology to develop non-conventionals, such as shale gas and deep-sea crude. President Pena Nieto is looking to make reforms that would allow foreign companies to partner with the state-owned oil company, Pemex, to bring the wealth to the surface.
The Saudi Prince Alwaleed recently warned: “the kingdom’s oil-dependent economy is increasingly vulnerable to rising U.S. energy production.” Alwaleed’s comments were penned before Mexico announced its intended energy reforms. The thought of Mexico’s resources flowing on to the global market has got to make the prince increasingly nervous.
The reality of North America becoming an “oil-and-gas powerhouse” threatens more than just OPEC nations. In response to the USA Today editorial, Frances Beinecke, president of the Natural Resources Defense Council (NRDC), wrote an “opposing view” proclaiming: “Increasing domestic oil and gas production is no panacea for our nation’s energy needs or economy.”
Energy and the Economy
Apparently, she is not aware that regions with oil-and-gas development have some of the lowest unemployment in the country—states with resource extraction such as Texas, Montana, Oklahoma, and Wyoming all have unemployment rates below the national average and North Dakota has the lowest in the country at 3.9%. My home state of New Mexico shares the rich Permian Basin with Texas. There, they tell me: “Anyone who can pass a drug test can get a job.”
Due to the increasing domestic resource development, President Obama’s stated 2010 goal of doubling exports by 2015 has already been met—though not through his initiatives, and in fact, in spite of them. Alan Tonelson, an economist at the US Business and Industry Council, says: “When the president talks about trade, when he talks about creating middle class jobs, when he talks about turning the US economy into an economy that lasts, he usually talks about manufacturing, those are the classic American living wage jobs. There’s no chance that he’s been thinking mainly about petroleum.”
Rayola Dougher, a senior economic adviser at the American Petroleum Institute, sums up the economic impact of oil and gas on the economy: “We have been a real engine of growth at a time when other industries have been languishing.”
Next, Beinecke states: “U.S. oil production may be up 44% since 2008, but so are prices. The costs of crude oil have risen 6% in that time.” While this claim appears to be accurate on the surface, it ignores the fact that the Federal Reserve has driven the value of the dollar down. In his Forbes article, “The rising price of the falling dollar,” contributor Charles Kadlec, explains: “The real price of the on-going debauchery of the dollar is measured by the loss of our prosperity and the debasement of our liberty.” Similarly, Paul Streitz, in American Thinker, draws the connection between our national debt and the price of oil: “excessive spending means monetizing our debt, which means printing money, which means foreign oil producers want more of it for the same barrel of oil.”
Of course, Beinecke resorts to the environmentalists’ standard claim: “The fracking that is driving our oil and gas surge has grown at breakneck speed.” She continues: “states have responded with weak rules and limited enforcement.” Environmental groups, like Beinecke’s NRDC, want federal government to add regulation on fracking—which will increase the cost and slow the growth of drilling.
Friday, August 23, was the deadline for public comment on the Bureau of Land Management’s (BLM) draft rule to regulate hydraulic fracturing on federal lands. Oklahoma Attorney General Pruitt and attorneys general from four other states sent a letter to the BLM, objecting to the agency’s intent to duplicate the state’s long-standing regulation of hydraulic fracturing. “States have been regulating hydraulic fracturing for more than 40 years with great success. This proposed rule is just another layer of unnecessary regulation that will cause significant delays and hinder natural gas production,” General Pruitt said. “The Supreme Court has made it clear that regulation of water and land use is a state and local power, and no law gives an agency such as the BLM the authority to pre-empt state regulations.”
Environmentalists’ hyperbole about the use of hydraulic fracturing would lead the general public to believe that the practice is new. In fact it has been successfully used to extract oil and gas for more than 60 years—and, over the decades, it has been refined and made giant technological leaps. Attempts to link fracking to water contamination have repeatedly been disproven.
Then her “opposing view” takes the climate change tack: “more oil and gas production will only exacerbate climate change … Last year alone, Americans suffered $140 billion in crop losses, wildfires, storm damage and other impacts of extreme weather made worse by climate change.” Once again, baseless charges.
The $140 billion in crop losses pertains to the 2012 drought, but the National Oceanic and Atmospheric Administration Drought Task Force, put together to examine whether or not “human-caused CO2-fueled global warming” was the cause, said, in a report, dated March 20, 2013: “natural variations in weather patterns caused this sudden ‘flash drought,’” and “The report rules out global ocean conditions as well as human-induced climate change, as major culprits.”
Additionally, as I addressed last month, Dr. Roger Pielke, Jr., from the University of Colorado, at the Senate Environmental and Public Works Committee hearing on climate, testified to the effect that Weather Related Disaster losses globally as a percentage of GDP had actually decreased by about 25% since 1990, while droughts have “for the most part, become shorter, less frequent, and cover a smaller portion of the U S over the last century.” Other figures of merit, hurricane frequency, intensity, damages, landfalls, and ‘accumulated tropical cyclone energy’ have shown no trends over long periods of record. Floods have not increased, flood losses have gone down significantly, while tornadoes have not increased in frequency, intensity, or normalized damage since 1950, and there is some evidence to suggest they have actually declined. Beinecke is either ignorant of the facts, or guilty of deliberately misstating information.
The wildfires Beinecke mentions are connected to the drought and add drama to her comments as we are currently fighting wildfires in 11 western states. However, the true blame falls squarely on the forest management plans as enacted by the US Forest Service, which has allowed the forests to be overgrown and unhealthy. Keeping the forest healthy through thinning costs about $600 per acre, but fighting a forest fire can cost nearly four times more.
One of her last assertions is: “Our new 54.5 mpg fuel standards will cut oil imports by one-third and save consumers $1.7 trillion at the pump.” The 54.5-mpg figure is a standard that Obama announced in 2009 and it applies to the fleet average a company must have. Because Americans continue to purchase more trucks and SUVs with much lower mpg, a company must produce cars like the Volt or the Leaf that are measured at 93 and 99 mpg equivalent. Overall the average might come out in the mandated range. BMW recently announced the introduction of its first electric car, the i3. They are moving into electric cars, not because of customer demand, but “to meet regulatory requirements.” The Wall Street Journal reports: “The car will earn emissions credits for BMW in markets such as California, reducing the likelihood that BMW will have to pay fines for failing to comply with carbon dioxide restrictions and giving BMW headroom under those rules to keep selling its more profitable internal combustion models.” While electric cars may slightly reduce gasoline use, they really still run on fossil fuels—namely coal.
I close my examination of Beinecke’s “view” with this: “True energy independence means reducing our reliance on oil and gas by investing in America’s abundant clean energy resources that can power our country and boost our economy without endangering our health and climate.” I believe that we all want to end US dependence on oil imports from countries that wish to destroy us. But nebulous “clean energy resources” will not do that. When environmentalists refer to “clean energy,” they are most often referring to wind and solar—which produce electricity, albeit ineffectively, inefficiently and uneconomically. Only a tiny fraction of electricity in the US is produced from oil. The oil we import goes toward the transportation fleet. Until there are quantum leaps in technology, there will never be a massive shift from petroleum-based vehicles to electric. So Beinecke’s dream of “clean energy resources” will not reduce our “reliance on oil and gas.”
The title of Beinecke’s USA Today post is: “More oil and gas ups our addiction.” In reality, the true addiction is the clean energy she touts. Alternative energies such as wind, solar and biofuels are addicted to government money and the junkies’ dealers are those with close ties to President Obama and other high ranking Democrats engaged in crony corruption.
Let’s give the Saudi prince something to really worry about. Let free enterprise solve problems that are beyond the capabilities of government. Let’s build the Keystone pipeline and work with Mexico to use techniques, perfected in America’s oil fields, to bring its wealth to the surface. North America can be an oil-and-gas powerhouse—but government energy polies have to change. Then prosperity and liberty can be restored.
[First Published by Townhall]
The final State Department report on the Keystone XL pipeline’s environmental impact is expected in a matter of weeks. Yet, the administration continues to send mixed messages as to which direction it is leaning. If the government announced it would make no sense to rebuild the World Trade Center in New York because when finished it would create only 50 jobs for maintenance people, you would laugh yourself silly. Yet that’s the line of argument President Obama used recently while talking about the Keystone XL pipeline project that, to appease environmental activists, he has blocked for the past five years.
“They keep on talking about this—an oil pipeline coming down from Canada that’s estimated to create about 50 permanent jobs—that’s not a jobs plan,” he said.
By Obama’s calculus, the 5,000 to 6,000 jobs a year created in the construction of the pipeline (State Department estimate) or the “approximately 42,100 average annual jobs across the United States over a one-to-two-year period” with wages totaling $2 billion the project would support (also State Department) are to be dismissed. These jobs include the manufacture of steel, the people making the pipe, and the waitresses and hotel workers. Of course, if the Keystone jobs were tallied in the same way as the Bureau of Labor statistics counts green jobs, the number would be massive.
No one knows better than the major labor unions—which support building the pipeline—that the entire construction industry is based on a continuing series of single projects, be they roads, buildings, bridges, or other structures.
Sean McGarvey, president of the AFL-CIO Construction Trades Department, which represents 13 unions, makes the point: “The interstate highway system was a temporary job; Mount Rushmore was a temporary job. If they knew anything about the construction industry they’d understand that we work ourselves out of jobs and we go from job to job to job.”
The AFL-CIO explains its support: “The American construction industry has suffered greatly. The national unemployment rate for construction workers remains above 13 percent and far too many of our members have lost homes and are struggling to put food on the table. For many members of our unions, Keystone XL is not just a pipeline; it is, in the most literal sense, a life line.”
And the bi-partisan support the pipeline attracts in Congress, clearly signals that many legislators understand the economic benefits that are generated throughout the supply chain and the economy down to the local level.
The oil pipeline from Canada will carry 830,000 barrels of oil daily to US refineries on the Gulf Coast. That will help strengthen trade relations with Canada, which is already our largest foreign supplier of oil, and reduce the nation’s dependence on other foreign sources of oil, many of which are hostile to the United States—such as Venezuela, with oil “dirtier” than that from Canada.
Obama’s green supporters argue for denying approval for construction on the basis of increased carbon dioxide emissions, and Obama has taken a deep bow toward them by insisting, in his National Climate Action speech, that he will veto pipeline construction if it “significantly” contributes to high emissions, but he didn’t define “significantly.”
The XL pipeline has been subjected to four environmental studies, and as lately as March of this year the State Department has said it presents no meaningful environmental risks.
One reason is that if Canada cannot send its oil to the United States, there is talk of building a pipeline to Canada’s coast and exporting the oil by tanker to Asia, particularly China. Thus any US action to deny pipeline construction would not affect emissions. In fact, US environmental controls are much more stringent than any found in developing countries like China.
The case for the Keystone XL pipeline is straight forward. Jobs will be created. Families will benefit. Local businesses and professions will grow. Governments will increase their tax receipts. The US economy will be fueled, to a larger extent, by oil from a nearby friendly country, thereby improving national security. Coupled with increased oil production in this county, we will move closer to energy self-sufficiency—while additional exports of petroleum products will help reduce the trade deficit.
The President should end the polarization of energy policy and begin uniting the country by supporting the real job creators. He should give the go-ahead for the XL pipeline immediately.
[First Published by Townhall]
It’s rapidly devolved into a gotcha game — where if someone doesn’t like something or someone, they cry “net neutrality violation!” and call for an FCC investigation — under the FCC’s self-asserted, all-powerful Open Internet order.
Senators and Representatives are now writing the FCC urging it to investigate CBS.com for an alleged net neutrality violation over a contract dispute over how much Time Warner Cable pays for retransmitting CBS programming. The FCC could have a role in this retransmission dispute under obsolete 1992 law, but not legitimately under the FCC’s Open Internet order.
The fact that U.S. senators and representatives imagine that a billing dispute among companies could be considered a net neutrality violation illustrates how arbitrary and capricious net neutrality politics and the FCC’s Open Internet order have become.
Apparently there is no objective, reasonable or predictable standard of what net neutrality is or what a violation of “it” is. That net neutrality has transmogrified into a political-catch-all for anything affecting consumers is powerful proof of how capriciously this issue has been abused.
Why has net neutrality become so capricious?
The answer is simple. The FCC’s process and thinking in implementing net neutrality has been capricious.
The FCC passed a controversial Open Internet order 3-2 that asserted unlimited power over the Internet without statutory authority to do so. Verizon is specifically challenging the order in Verizon v. FCC for being arbitrary and capricious, for not having statutory authority, and for violating Verizon’s First and Fifth Amendment rights under the Constitution.
Even ardent supporters of the FCC’s Open Internet order expect it to be overturned by the Appeals court in Verizon v. FCC because the FCC lacks statutory authority.
Let’s consider the many capricious elements of net neutrality and the FCC Open Internet order.
First, the FCC could not describe a problem that warranted regulation to solve.
Second, the FCC could not provide evidence of a problem warranting prophylactic pricing bans and regulation.
Third, the term “net neutrality” cannot be found in law.
Fourth, the core purpose of the FCC’s Open Internet order — “preserving openness” — does not come from Congress or the law, but was wholly made up by the FCC, meaning that the FCC effectively is trying to bypass Congress and the Constitution and effectively legislate all by itself.
Fifth, the FCC assertions of statutory and ancillary authority would make Rube Goldberg proud. The most capricious assertion the FCC makes to justify its power grab is that the Court should ignore that the Section 706 authority they assert was obviously intended by Congress to be de-regulatory authority in a de-regulatory act, not a sweeping font of unlimited legislative authority to regulate as the FCC determines as time passes. Adding capricious icing to this capricious cake, the Kennard FCC already determined in the late 1990’s that Section 706 was not a grant of new statutory authority.
Finally, the FCC’s order arbitrarily and capriciously claims that its sweeping assertion of unbounded authority will only be applied to part of the Internet ecosystem that it alone will determine. Adding capricious sprinkles to the order’s capricious icing and cake, the FCC does not justify why potential anti-competitive behavior in one part of the Internet ecosystem is a problem requiring preemptive price regulation when potential anti-competitive behavior elsewhere does not.
In sum, these public officials vast over-reach — in claiming that companies with websites have no right to determine the price and terms for their goods and services in a competitive marketplace – have unwittingly made the case for the arbitrariness and capriciousness of the FCC Open Internet order — only weeks before the U.S. Court of Appeals hears oral arguments on it in early September.
If I were the FCC, I would not want to have to answer pointed questions from the Appeals Court about why the FCC drew the net neutrality line where they did and not elsewhere because the answers are capriciousness.
[First Published by The Precursor Blog]
In his “Civil War Within the Second Civil War,” my Heartland Institute colleague Steve Stanek made some provocative observations in response to my blog post “America’s Second Civil War” and raised several questions, which I will attempt to answer at least in part here.
Islands of blue in a sea of red
The current President of the United States and the current Governor of the State of Illinois, Steve observed, won voter majorities in just 22 percent and 4 percent of the counties of the country and the state, respectively, that elected them. As shown at left, he noted, a color-coded 2012 electoral map by county shows that Barack Obama carried mere islands of blue surrounded by seas of red. (The Illinois map would look similar.)
“How representative is government when a governor can lose 98 of 102 counties,” Steve then asked, “and when the President of the United States can lose 2,388 counties and win only 689 of them?” The answer, of course, depends on the meaning of the word “representative,” but proceeds from the unavoidable truth that neither the Illinois governor nor the President of the United States is elected by county.
Existing electoral systems
In any electoral system, politicians win office by carrying the votes they need to win. In a popular election – such as for the governorship of Illinois – all that matters is the popular vote, not the number of counties the candidate carries. As Illinois Governor Quinn’s 2012 election amply demonstrates, one candidate’s amassing significant margins in a few heavily populated counties can outweigh a competing candidate’s victory margins in many more less populated counties.
In contrast, under the Electoral College system by which Americans elect a President, what matters is how many states the candidate carries, not counties; not even – as the 2000 election of President George W. Bush illustrates – the number of popular votes. The Presidential election system instead reflects the Great Compromise reached between big states and small states at the nations’ founding, in which each state receives the same representation in one house of Congress (the Senate) and the people of the state are (very roughly) proportionally represented in the other house of Congress (the House of Representatives). The number of electors each state receives is equal to the total number of the state’s Senators and Representatives. Although weakened somewhat by the 17th Amendment’s provision for direct election of Senators, this compromise was intended to help ensure that big states did not steamroller small states in the new union to which they were agreeing.
In the cases of both the Illinois governor and the U. S. President, therefore, the number of counties carried is simply irrelevant. Both Barack Obama and Pat Quinn won because, consciously or unconsciously, their campaigns recognized the irrelevance of counties and got out the votes that they needed to win – whether popular or electoral – and where they needed to win them. They devoted resources to urban areas and college towns for the political analogue of why Willie Sutton robbed banks (because that’s where the money is): because that’s where their voters are.
Where the voters are
That leads us to two of Steve Stanek’s more difficult questions to answer, which are the flip sides of each other: “Why have so many of those who want more government apparently concentrated in major cities and in counties dominated by college towns?” And “[w]hy have so many of those who apparently want less government concentrated in smaller towns and rural areas?” A full treatment of these questions would require a doctoral dissertation, but let me make a start.
Politicians choose their voters, not the other way around
First, the assumption behind these questions is not necessarily correct: People who concentrate in larger urban areas (and those include college towns) may not truly want more government; they may just be easier for politicians to get to the polls.
As a practical matter, politicians win elections less because they persuade voters of the wisdom of the politicians’ views than because they get their voters out. This involves finding the voters who share their views, making sure they register to vote, and making sure they get to the polls, or finding uncommitted voters willing to vote for them in exchange for some incentive. (This doesn’t necessarily mean a bottle of whisky or a ten-dollar bill, although that still goes on; it may simply mean promising to provide the voter with more government benefits down the line if the candidate wins.)
And once in office, presented with the opportunity, politicians tend to redraw district boundaries to favor their own re-election. Republicans famously did this in Texas in 2003 and Democrats equally famously did it in Illinois in 2011 in following the post-2010 Census. Computer programming and survey research enable redistricting down to individual voter addresses, so rather than the people picking their “representatives,” the politicians often get to pick the people they “represent.”
Urban voters’ short-term self-interest
In and of itself, of course, this is not a satisfactory answer because conservatives and libertarians – those who want less government – should in theory be able to get city dwellers to the polls as well as so-called progressives who want more and bigger government. So what is it about urban voters that leads them to vote for less freedom? Most likely they don’t see it that way. But a whole host of hypotheses suggest why they do so:
Urban areas (and college towns) by their nature attract young people who want to take on the world and to meet a larger and more diverse group of other young people. How many small-town kids dream of spending their whole lives where they grew up, as opposed to becoming an actor in Los Angeles, a dancer in New York, or a lawyer in Chicago? And once they put down roots in the Big City, how many will beget children who dream of returning to a small town or a rural environment? Celebrity ranchers in Montana and aging hippies in Vermont aside, not very many.
Both surveys and common sense tell us that young people tend to be more idealistic than realistic, and therefore more likely to fall for ideas they’re hearing for the first time than once-idealistic youngsters, later middle-aged, who’ve seen those same ideas tried and fail, often many times. (Socialism never works, no matter how many times it’s been tried, but what could possibly sound “fairer” than “from each according to his abilities, to each according to her needs”?)
Urban areas attract people without automobiles and also make their use less necessary. Cities are therefore more conducive to mass transit systems that – in practice, if not in theory – are run at taxpayer expense and therefore subsidized. Subsidies in turn attract more riders than would full market-based fares, leading to more people who don’t have – and no longer need – cars, and who therefore over time become dependent upon public transportation.
Similarly, urban areas are ostensibly friendlier to the elderly and the handicapped, who can find the non-family companionship, health care, and other services they need in larger number and closer proximity than in small towns and rural areas because of greater population density.
This same greater population density makes urban areas also more conducive to high-rise and other public housing and related social services. Again being subsidized, such housing and services tend to attract more low-income residents who come to depend on such government services and subsidies rather than on family and friends.
A combination of excitement and opportunity for college-educated (if that’s not an oxymoron) youth on the one hand and a magnet for the poor, the elderly, and the handicapped on the other means that urban areas are more likely than small towns and rural areas to have greater extremes of rich and poor in close proximity. That in turn leads to a greater incidence of crimes of opportunity and resentment like theft and burglary, which likely require proportionately more police, more jails, more courtrooms, and more security. (Like mass transportation, these services could be provided privately but historically they have not been, so again the public sector becomes larger and stronger.)
Over time these and other aspects of urban living have created enclaves of people of voting age who depend on government for their livelihoods, their support, and their security. Their self-interest then dictates that they vote for greater government because that’s what keeps them alive and well.
The symbiotic relationship of urban voters and big-government politicians
That’s also what keeps government officials alive and well: recognizing the self-interest of urban voters, politicians who cater to them provide even more subsidies to their constituents, which creates even more such voters in a manifestation of rent-seeking behavior. In time, the codependency of the high-needs voter and the spendthrift (statist) politician becomes a symbiotic and self-sustaining relationship.
Nothing creates a safer Congressional district or City Council ward, for example, than a sufficient number of high-rise public housing blocs whose residents are easy to identify, easy to recruit, and easy to shepherd to the polls. (That is why some precincts in Chicago and some wards in Milwaukee voted 99-1 or 98-2 for Al Gore in the 2000 election.) On a practical level, it’s a lot easier to bring voters downstairs or next door to register and to vote than it is to round up ranchers or sheepherders out on the prairie.
The tyranny of the majority
Let me now turn to Steve Stanek’s last questions: “Is it too much of a stretch to argue that people occupying 20 percent of the country want to enslave people in the remaining 80 percent? How about if we remove the word ‘enslave’ and insert ‘impose their will on.’ Would that be accurate?”
In a word, yes – to both questions.
Yes, it is too much of a stretch to argue that people “occupying 20 percent of the country want to enslave people in the remaining 80 percent” and, yes, if we remove the word “enslave” and insert “impose their will on,” that would be accurate.
By definition, all sentient voters want to impose their “will” on the rest of the population – that is why they vote in the first place: to see the policies they prefer enacted over the policies that they don’t. Unless reinstating slavery is actually on the ballot (which the 13th Amendment and post-1808 sensibilities have pretty much put to rest), their purpose is not to enslave other people, nor to enslave themselves, yet as Hayek recognized that is the inevitable consequence of statism.
No one’s liberty or property is safe when the legislature is in session, and freedom is lost one government program at a time. Yet some people will trade freedom for comfort, especially when they perceive that someone else is footing the bill.
What is “representative”?
So is either the Illinois or the federal system really “representative”? Again, it all depends on the meaning of the word.
Under the implicit definitions that the respective state and federal constitutions provide, the results are necessarily “representative” because the people of Illinois (not the counties) choose their governor, and electors chosen by a formula that in part weights states equally (neither by county nor by direct popular vote) choose the President. The Illinois gubernatorial election process therefore “represents” the people, and the Presidential election process “represents” both the states and the people, under applicable law and constitutional provisions, just as they were designed to do. That does not necessarily mean that either system is optimal.
Alternative systems — some radical proposals
Do better electoral systems exist? Beauty being in the eye of the beholder, it all depends on whom you ask. Political scientists, philosophers, and Constitutional law professors – even some lecturers in law – have proposed or discussed alternative voting systems for decades or longer.
Lani Guinier and others have advocated various systems of proportional voting – akin to what the Illinois legislature had until 1980 – in which each voter receives as many votes as offices (or propositions) are on the ballot, which the voter may then cast in any combination. Proportional voting rewards voter intensity and arguably protects minority rights: voters who strongly support a candidate or position and political minorities can cast all their allotted votes for a single candidate or proposition and therefore more likely have an impact in the election on the political process.
Under the former Illinois system, for example, voters elected two representatives from each legislative district and could divide three votes among candidates for those two slots as they saw fit: one vote for each of three candidates, 1 & ½ votes for each of two candidates, or all three votes for one candidate – the so-called “bullet” vote. Candidates obviously prized such “bullet” voters: Illinois General Assembly member Barbara Flynn Currie, the House Majority Leader since 1997, largely owes her initial 1979 election to such bullet voting in Chicago’s old Fifth Ward, and has been in the legislature ever since.
Another kind of weighted voting
Other kinds of weighted voting are possible, too, although even less likely to gain popular support than the proposal that helped tank Lani Guinier’s nomination to be Assistant Attorney General for Civil Rights during the Clinton administration.
On the theory that taxation without representation is tyranny, for example, one might advocate a system in which votes are weighted based on the amount of taxes each voter has paid in the relevant jurisdiction in the last election cycle.
Under such a system, to take one example, a large property owner who pays more in property taxes to support the local school system would have a greater say in how those tax dollars are spent to support the local schools. A high income voter who pays disproportionately high income taxes under the nation’s “progressive” income tax system would have more say in how federal tax dollars are spent on the theory that, quite frankly, such a voter is shouldering more of the load. (Or, to satisfy egalitarians, a federal taxpayer’s votes might be weighted according to the average or marginal rate the voter has paid over the last federal election cycle, which might have the salutary effect of encouraging a single-rate income tax.)
Such a system certainly sounds radical (and is highly improbable) but is actually within the mainstream of the history of American politics, from the Boston Tea Party to the current District of Columbia license plates that the President’s armor-plated SUV’s themselves bear – no “taxation without representation.” Again, it all depends on the meaning of “representation.”
With electronic voting and accurate record-keeping by applicable taxing authorities, such a system would also be relatively simple to administer. An electronic voting system could be pre-programmed to link the voter’s ballot choices to the applicable jurisdiction’s record of taxes paid during the previous election cycle – whether federal, state, county, or local – and automatically perform the required calculation, then transmit only the weighted vote (anonymously) to the election commission responsible for tallying the votes. By deleting all voter-specific information from the system and backups as soon as any recounts were completed and any subsequent litigation resolved, such a system could still preserve privacy and the secret ballot.
Direct popular election
Of greater currency and more likely to draw popular support at the national level is a direct popular election, which is what Illinois and most (if not all) states currently have for governor, the results of which Steve Stanek decries. For more or less the reasons that Steve suggests, both I and – evidently – the Founders think direct popular election of the President is a very bad idea.
Nonetheless, the “direct popular vote” movement raises its ugly head from time to time, most recently spurred by the results of the 2000 Presidential election in which Republican George W. Bush narrowly defeated Democrat Albert Gore, Jr. in the Electoral College despite garnering roughly half a million fewer popular votes. The current movement takes two forms.
Abolishing the Electoral College
The first would abolish the Electoral College system and replace it with a direct popular vote in which whoever gets the most individual votes would win the Presidency, at least in a two-candidate race. With more than two candidates some variations would require a runoff between the top two vote-getters if no one received an absolute majority on the first ballot; others would accept a plurality winner, such as Bill Clinton in 1992 and 1996; still others would implement an “instant runoff” in which each voter would cast first, second, and third place ballots at the same time, with second and third place ballots counted only for the top two candidates in the event no one received an absolute majority on the first ballot. All of these changes would require amending the U. S. Constitution and none of them is likely, at least in the near future.
Following the popular vote
Gaining slightly more traction is a second variation on a direct popular vote, which would amend state constitutions or change state laws to require the states’ electors to cast all their electoral votes for whoever wins the national popular vote. If Florida had adopted such a proposal by the year 2000, for example, then Gore’s national popular vote margin would have compelled Florida’s electors to cast their ballots for Gore and to have given Gore the Presidency, notwithstanding that Bush carried Florida, albeit narrowly.
The advantage of this proposal is that it would not require a federal Constitutional Amendment; the disadvantage is that it would nonetheless gut the Constitutional Compromise and lead exactly to the kind of tyranny of the majority that Steve Stanek decries at the state level.
Al Gore’s entire 2000 national popular vote margin of roughly 500,000, for example, is virtually identical to his popular vote margin in just the twenty most lopsided of the City of Chicago’s fifty wards, some of which went for Gore by margins of 99-1 and 98-2. One advantage of the Electoral College system is that if – hypothetically – every registered Chicago voter were to have voted multiple times for the same candidate, then they could only have helped Gore carry Illinois (as he did in 2000) and not the entire nation. Compelling states to cast all their Electoral College votes for the winner of the national popular vote would run precisely the same risk.
Another “great compromise”?
Ultimately, with respect to the 2012 Illinois gubernatorial election, this appears to be what Steve Stanek decries. So perhaps the answer to the perceived Illinois problem would be to “federalize” the state; i.e., to treat the State of Illinois as the union of its 102 counties and to provide each county with its own representation in the election of its governor.
Assuming that Steve wouldn’t want to see yet more elected officials – i.e., two (or more?) “senators” from each county – each county could be deemed to have “X” number of votes on behalf of the county that, as in the federal Electoral College system, would follow the popular majority in the county. How to determine that number would be problematic and extremely political, making recent redistricting boundaries in the state and for the Chicago City Council look like a picnic in the park, but it could be done.
Historically and philosophically, however, there is no reason to do it. Unlike the sovereign states, which formed the national government, the counties of Illinois did not form the state; it happened the other way around. And there is no apparent reason why, for example, the vote of someone in Sangamon County should count for more than someone in, say, Cook County, no matter how much any given voter or candidate in any given election might wish that were true.
Where do we end?
In the end, the electoral processes of both the country and the State of Illinois are probably better left alone. Computer-drawn, contiguous Congressional (and other) districts supervised by independent commissions would be preferable to current systems of gerrymandering but would require no changes in the election processes themselves. To win elections, conservatives and libertarians will simply have to do a better job of what “progressives” already do: identify their likely voters, register them to vote, and get them to vote while the polls are open. All that is necessary for liberty to perish is for those who love it to do nothing – but talk.
Read up, and get mad!
The Department of Defense has put out a “teaching guide” that charaterizies America’s Founding Fathers — the greatest champions of freedom in the history of civilization — as a group of dangerous frauds. If you think as they do — and cherish individual liberty and a government of limited and separated powers — you are an “extremist.”
Your tax dollars at work … and the left (as usual) got our money’s worth. From the Daily Caller:
A Department of Defense teaching guide meant to fight extremism advises students that rather than “dressing in sheets” modern-day radicals “will talk of individual liberties, states’ rights, and how to make the world a better place,” and describes 18th-century American patriots seeking freedom from the British as belonging to “extremist ideologies.”
This revelation of our government’s view of what it considers “some people’s” misunderstanding of the founding principles of this country is courtesy of the great Judicial Watch, which obtained details of this abomination.
More from the Daily Caller’s report:
Under a section titled “extremist ideologies,” the document states, “In U.S. history, there are many examples of extremist ideologies and movements. The colonists who sought to free themselves from British rule and the Confederate states who sought to secede from the Northern states are just two examples.”
Yes. Those two examples share exactly the same moral motivations. I’m glad some government bureaucrat who can never be fired pointed that out for us.
This is sick, but stands as a perfect encapsulation of the mindset of today’s leftist-dominated administrative state. The very reasons “the colonists” wanted to throw off an oppressive British regime — why the United States even exists — is now an “extreme ideology” that modern Americans must fear.
Read the whole Daily Caller story which features a great quote from Judicial Watch president Tom Fitton.
Oh, BTW: There is not a single word about Islamic extremism in this dread document about threats to the United States. Perhaps it’s because the globe’s most prominent oppressors of basic human rights don’t make a big deal out of finding ways to “make the world a better place.” That, apparently, is a dangerous tell.
HT: Ace of Spades.
As measured by the U.S. Bureau of Labor Statistics (BLS), labor productivity has risen by about 150 percent since 1967. However, wages adjusted for inflation have hardly risen since 1967. In the chart below, compare the solid red line (Labor Productivity) to the light blue line (Real Hourly Earnings).
The apparent divergence between Labor Productivity and earnings has been noticed by various progressive think tanks (e.g., the Economic Policy Institute) and is now making its way into public discourse. The divergence is easy to explain.
REASON #1. Overstatement of inflation
The first reason for the divergent trends between Labor Productivity and Real Hourly Earning is a bias in the Consumer Price Index. Economists believe the CPI overstates the rate of inflation by something like 1.5 percent because of inadequate adjustment for quality changes and inadequate adjustment for substitution effects. Dividing earnings by the Implicit Price Deflator (IPD), instead of dividing by the CPI, accounts for a substantial part of the apparent divergence of labor productivity and compensation. See the middling blue line in the chart.
REASON #2. Ignoring benefits and employer-paid taxes
The second reason for the apparent divergence of labor productivity and compensation is that a growing portion of the cost of labor is in the form of benefits and employer-paid taxes. These benefits and employer-paid taxes include employer contributions to retirement plans and health insurance policies, paid holidays and vacation days, and the employer-paid portion of the Social Security tax. Using Hourly Compensation, which includes benefits and employer-paid taxes, instead of Hourly Earnings, accounts for most of the remaining apparent divergence of labor productivity and compensation. See the deep blue line in the chart.
REASON #3. Overstatement of productivity
The third reason for the apparent divergence of labor productivity and compensation is an overstatement of labor productivity. There are two parts to this.
(3A) The measure used by the BLS for the productivity of labor is gross output. Gross output does not account for depreciation of physical capital and the amortization of intangible capital, what is called “capital consumption” in the National Income and Product Accounts. If the rate of capital consumption were constant, the distinction between gross output and output net of capital consumption would not be important when looking at changes in labor productivity. But, the rate of capital consumption has accelerated a bit during the recent past.
(3B) Another part of the overstatement of productivity is because part of the increase in output in recent years should be attributed to the increased use of imports in production. If the amount of imported goods and services used in production were constant over time, accounting for the use of imports in production would not be important when looking at the change in labor productivity. But, the use of imports in production has grown substantially during the recent past.
The dashed red line in the chart is my estimate of productivity since 1947, net of capital consumption and the increased use of imports in production. Compensation, properly measured, does track productivity, as it must.
As if all the attention paid to Anthony Weiner’s … um, wiener … hasn’t been enough, The Huffington Post’s Mollie Reilly reports in a story posted 08/19/2013 12:09 pm EDT and updated 08/19/2013 2:49 pm EDT, that Anthony Weiner’s wife, Huma Abedin, a “top aide” to former Secretary of State Hillary Clinton, is facing “renewed scrutiny” over her work as a “consultant for outside clients” while also serving at the State Department.
It seems that Ms. Abedin served her final months under the former Secretary of State as a “special government employee,” which allowed her to work for private clients while also staying on the public payroll. Granted, her husband is at least temporarily out of a job and – the last time we looked – his campaign to be the next Mayor of New York was not going all that well, but still … . Especially because Ms. Abedin’s private clients just happen to include – wait for it – the William Jefferson Clinton Foundation and Teneo Capital.
The Clinton Foundation is pretty self-explanatory, and Teneo is a global financial consulting and private equity firm founded by Douglas Band and Declan Kelly. For those with short memories, HuffPo reminded us in March 2012 that Band was an adviser to then-President Bill Clinton and helped found the Clinton Global Initiative; Irish-born Kelly is reportedly a longtime friend of former First Lady Hillary Clinton, a major donor to Hillary’s presidential campaign, and a top State Department envoy after President Obama appointed Hillary Secretary of State.
So it’s all very incestuous, with Ms. Abedin parlaying her State Department position with Mrs. Clinton into “special employee” status under Mrs. Clinton’s successor plus a paid position with Mrs. Clinton’s husband’s organization and its founders in the private sector. Where it begins to get murky, however, is when Congress and the Fourth Estate start asking questions.
In a June 2013 letter Sen. Chuck Grassley (R-Iowa) formally requested more information from current Secretary of State John Kerry concerning Abedin’s State Department arrangement, including whether her work had been “adequately disclosed to government officials who may have provided her information without realizing that she was being paid by private investors to gather information.”
A month later, Grassley complained to HuffPo, both the State Department and Abedin were “stonewalling” his requests. Abedin reportedly responded in a July 17 letter that the late 2011 birth of her son prompted her to request a change in her State Department status so that she could spend more time with her husband and son in New York City, rather than in Washington where the couple lived when the current mayoral candidate was still in Congress. “I certainly never ‘gathered information from government sources for the purpose of informing investment decisions of Teneo’s clients’,” HuffPo quotes Mrs. Weiner as saying in the letter.
But what, exactly, did the lady do in her “special employee” position, and why was she on the payroll of a highly politically-connected firm while also receiving a salary from the taxpayers? Don’t the State Department, the Clintons, and the Abedin/Weiners recognize that, at this very least, this is what political consultants call “bad optics”?
More important, even if that was not her purpose in gathering the information, did Ms. Abedin use any information she obtained from her State Department position to help inform investment decisions of Teneo’s clients? A lawyer who uses confidential information obtained in the course of representing a client to engage in insider trading, for example, can still be found guilty of insider trading even if the lawyer’s purpose in gathering the information was to represent the client.
A month after Ms. Abedin’s letter, on Sunday, August 18, 2013, The New York Times – not exactly noted for its Republican leanings – reported that it, too, has questions for the State Department. Specifically, it has asked for “the titles and job descriptions of other individuals [than Ms. Abedin] the department has permitted to serve in the capacity of special government employee,” and whether any of Mrs. Clinton’s other political appointees were given the same special designation. More bluntly: was Human Abedin the only one singled out for her special dual-role status? And if so, then why?
Like Sen. Grassley, The Times has reportedly been stonewalled. According to the Grey Lady, State Department spokesman Alec Gerlach responded that”[a]s a general policy, the Department of State does not disclose employee information of this nature.”
Here at Somewhat Reasonable™, we tend to disagree with Mr. Gerlach that how the taxpayers’ money is spent constitutes confidential “employee information” and instead to agree with Sen. Grassley, as quoted in The Times, that “[b]asic information about a special category of employees who earn a government salary shouldn’t be a state secret.” As Sen. Grassley observed in The Times, “[d]isclosure of information builds accountability from the government to the taxpaying public” and “[a]gencies that lose sight of transparency also lose public trust.”
By balking rather than being forthcoming, the State Department has now unfortunately joined ranks with the NSA, the IRS, and the Justice Department as agencies of paramount importance to the proper functioning of national government in which the public is rapidly losing trust. For the future of republican self-government that is a very sad and dangerous thing.
That is especially so when the apparent cover-up involves a tangled network of high-level connections with a probable 2016 Presidential Candidate — and we don’t mean Anthony Weiner.
The individual market is largely made up of people with tentative work histories. They may be self-employed or seasonal workers with surges of income, or they may work several part-time jobs, or they may even be fully employed in good paying positions but their employers don’t provide coverage.
In any of these cases, individuals are required to pay their own premiums in a timely fashion, even when money is tight in a given month. Insurers try to avoid lapses in payment by requiring automatic withdrawals from bank accounts, credit card back-ups, or prepayment of premiums on a quarterly basis. Like other businesses, the insurer may provide for a grace period of a week or so, but failure to pay means cancellation of the policy.
Coping with these issues is one of the reasons individual coverage has higher administrative expenses than group coverage.
It will be more than a little interesting to see how the Affordable Care Act deals with these problems, especially since cancellation means people will be in violation of a federal mandate.
Many people eligible for exchange coverage do not have bank accounts or credit cards. That is why inner city neighborhoods have storefronts that cash checks and issue money orders. Many people have surges of income, working one month but not the next, or collecting commissions one month and not the next. Many people have financial emergencies ― their transmission breaks down or they are out sick for two weeks, or their boyfriend moves out of the house ― they don’t have the money to pay their premium this month. We know these things will happen ― a lot.
So far, the regulations coming out of Health and Human Services are not encouraging (see pages 18337, 18387, 18394 and 18471 of the Federal Register.) As you might expect, the regulations are being written by people with nice bureaucratic jobs and steady paychecks. They have no idea what it is like to scramble to make ends meet.
It’s not that they haven’t tried. Lord knows they have issued more regulations than it would take to put a man on the moon. But they are illustrating the limits of the regulatory process. Regulations always mean “you must do Y, but you may not do X” ― as if every contingency can be anticipated from an office in Washington. So, rather than allowing insurance carriers to collect premiums in the ways they know will work, HHS has created a whole new and very restrictive method that must be followed to a “T.”
In this case, the bureaucrats realize that some people will have a hard time paying their bills, even when the bills are partially subsidized. So they have generously provided for a 90-day grace period for paying premiums ― but only for people who are getting a federal subsidy. None of this applies to people who are not subsidized.
The problem with a 90-day grace period for premium payment is that at the end of it you must pay for three months of premiums, when you couldn’t afford to pay one month in the first place. A lot of people won’t be able to do that, but meanwhile they have been running around with an insurance card receiving health services.
What then? Who is on the hook for those services? HHS has decided to split the baby. The insurance company will have to pay for the first month of non-coverage, but providers (doctors and hospitals) will have to absorb the costs incurred for the second two months. That could be a whole lot of money. The (formerly) insured person will be canceled after three months, but they get to re-enroll again at the end of the year without penalty. (And we were told one of the purposes of this law was to solve the “free-rider” problem. Oh, well.)
Along with paying for services during the first month of the delinquency, the insurer must: 1) notify HHS of the non-payment; 2) notify providers of the possibility of denied claims during the second and third months; 3) notify the insured that he/she is delinquent; 4) continue to collect the advanced tax credit on behalf of the policyholder; 5) return the tax credit for the second and third month to the Treasury; 6) issue a termination notice to the insured at the end of the grace period. Oh, and the carrier must also determine whether the insured has a disability as defined by the Americans With Disabilities Act, and make “reasonable accommodations” for such individuals. These are pretty substantial administrative burdens, and the costs will aggravate the Minimum Loss Ratio requirement for the carrier.
So, how many people do you suppose will do this? I would wager just about everybody. Why not? You can get 12 months of coverage for nine months of premiums and suffer absolutely no penalty. Did somebody say, “Train wreck?”
[First Published by National Center for Policy Analysis]
Heartland Research Fellow Benjamin Domenech was invited to be a guest on the Fox News Channel’s “Hannity” this week to talk about a new study from our friends at the Heritage Foundation on wasteful spending. Before we get to the video, here are some examples of what your tax dollars paid for:
- $300,000 to determine that the first bird on earth probably had black feathers.
- $450,000 on a federal study to discover that “robot nannies” can’t keep a baby’s attention.
- $681,387 to establish, for all time, that dudes look manlier when they are holding a firearm.
- $516,00 to create a video game that simulates a high school prom.
- $350,000 to confirm that golfers sink more putts if they imagine the hole is bigger than it actually is.
- $300,000 promoting the production and sale of caviar from … Idaho.
- $149,992 studying how to prevent co-eds from packing on the dreaded “freshman 15.”
Regular liberal Fox News Contributor Tamara Holder was given the task of defending such waste of hard-earned tax dollars. She took to it more vigorously than one would expect — and laughed her head off while doing it.
Ben didn’t think it was so funny, and quoted Calvin Coolidge — which is fitting, since Heartland recently hosted a Coolidge biographer at a luncheon event. Said Ben, quoting Coolidge: “Every dollar that we carelessly waste makes the life of an American that much more meager.” Then he added his own two cents:
This money doesn’t grow on trees, but comes from the American people.
Holder, nonplussed, kept laughing it up, mocking conservatives for making such a big deal about a few hundred thousand here and there tossed to the social sciences so we can “understand other humans.” Ben set her straight:
You’re missing the point. It’s not about the size of it, it’s the principle of the thing — the idea that maybe there are some things government shouldn’t do, and that these are some of those things because these are particularly ridiculous.
Tamara’s retort was that the “real waste of money” comes from private individuals “giving money to the Heritage Foundation.” Umm … those contributions are voluntary. The funding for these frivolous studies were conscripted from American taxpayers. That Tamara doesn’t know the difference — or pretends to not know the difference as she derides “the chick” at Heritage who produced “a picture book” outlining these absurdities — is quite damning on many levels.
As Ben noted, President Obama’s economy is becoming ever-more restrictive and painful for Americans who are increasingly relegated to part-time jobs (because employers are trying to flee Obamacare mandates) and struggling to make ends meet.
You want to take money out of their pockets and put tit towards these points? You think they are really that important? An answer to the “freshman 15.” … The point is, you’re still running shrimps on treadmills and measuring their activity. This is ridiculous.
Again, Holder offered no defense (this waste is indefensible, so who could blame her?) and she demanded to know what conservatives think should be funded by the federal government.
Watch the video to see the excellent response from Sean Hannity and Ben Domenech:
Watch the latest video at video.foxnews.com
A blogger for the Union of Concerned Scientists has finally found something imporant to be “concerned” about: Al Gore going around telling lies about the climate. That’s quite rich coming from an organization that recently libeled The Heartland Institute for its truthful climate work.
UCS blogger Gretchen Goldman, who admits to a fan-boy crush on fossil-fuel baron Al Gore since the 4th grade, gently corrected her idol after his exclusive interview this week with Ezra Klein at the Washington Post:
“The extreme events are more extreme. The hurricane scale used to be 1-5 and now they’re adding a 6. The fingerprint of man-made global warming is all over these storms and extreme weather events.”
As was pointed out earlier today by Jason Samenow, chief meteorologist at the Capital Weather Gang, this is untrue. There are no plans by the National Hurricane Center — the federal office responsible for categorizing storms — to create a new category. Though, it is worth noting that the rest of the interview included accurate and important information and it’s unfortunate that this blip made its way in.
Yeah, that’s … unfortunate. Such “Category 6″ mishaps tend to happen, Gretchen, when you and the rest of the alarmist crowd gleefully prop up a loony, unscientific, Middle-East-Oil-Soaked-sell-out as “the public face of climate science.” Goldman went on to note:
Politicians and others can be effective communicators of climate science and guide us toward policy action, but they risk creating confusion and eroding public confidence in science when they make misrepresentative statements.
You don’t say! Then perhaps you should publicly cut Gore loose — or perhaps you have too much invested in his wisdom and skill. Oh, well.
If you read Goldman’s whole post, you’ll see what one might consider a slow “official” walk-back by the climate alarmist community of the Gore-pushed meme that global warming will cause more intense and damaging hurricanes.
Though there is some evidence that climate change will influence hurricanes, the effect of climate change on hurricane intensity and hurricane frequency is complex and scientists are continuing to study the connection.
Hmmm. That’s now how Goldman’s hero Al Gore told it in his “Katrina is only the beginning” Oscar-winning film. She might want to shoot him an email about that. Goldman could also alert the alarmists at The Weather Channel, who told me Wednesday morning that despite this hurricane season turning out to be “a dud,” we “can’t let our guard down.”
Sure. But evidence seems to not sway the young woman who has earned a degree in atmospheric science:
Even without a “category 6,” the weight of the evidence of concerning climate impacts is overwhelming. And as I know my fourth-grade-self would agree, the time to act is now.
The realists are winning. The science deniers are losing. Maybe all we need is a rodeo clown wearing a Gore mask to push it over the top.