Somewhat Reasonable

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Only a month ago BP – which not long ago promoted itself as “Beyond Petroleum” – released an “energy outlook” video that projected 99 percent of America’s energy will be supplied domestically by 2030, in part because it says the U.S. will grow production from renewable sources 202 percent by that time.

Just don’t expect BP to participate in the alleged alternative energy “boom.” The London-based petroleum producer announced last week it would dump its investments in U.S. wind energy projects, which were said to be worth $3.1 billion. It’s hard to believe they’re really worth that much, however, especially without government subsidies – not to mention the fact that BP is so easily discarding “assets” that are supposed to hold great value. The move follows a December 2011 announcement that the company would exit the solar business.

 

So where does BP think – its “outlook” notwithstanding – the future of the energy really is? Well, the same place it has been in the past: with fossil fuels.

“BP has decided to market for sale our U.S. wind energy business as part of a continuing effort to become a more focused oil and gas company and re-position the company for sustainable growth into the future,” said Mark Salt, a company spokesman. “For BP, this effort represents another example of prudent and active management of our global portfolio, consistent with our pledge to unlock more value for shareholders.”

Environmentalists’ heads must be ready to explode. For years their pressure groups had slapped oil companies like BP and ConocoPhillips into submission, waging corporate campaigns to get them to adopt their centuries-old, inefficient sources of power generation – wind and solar – to appease their feel-goodism. They even succeeded in getting the oil giants to join the U.S. Climate Action Partnership for a time, until they exited in February 2010. Now BP, the “greenest” of the fossil fuel behemoths, is saying the way forward for its own “sustainability” is in oil and gas!

Adding insult to injury for the eco-zealots, BP is just emerging financially from huge fines and a publicity disaster caused by its April 2010 explosion and oil spill in the Gulf of Mexico. Bloomberg News estimates that catastrophe may cost the company $42 billion. Yet BP officials don’t see renewables as the path to recovery, but rather a refocus on the fuels the market truly demands: fossil fuels.

To re-emphasize:

• An enormous environmental accident gushed for weeks…
• Which led to disastrous economic consequences to many other industries, such as seafood and tourism
• Enviro-activists still harp about the spill to this day
• Local, state and federal governments heavily mandate and subsidize (“stimulate”) wind and solar
• The Obama administration demonizes the fossil fuel industries on a daily basis and…
• Raises the cost of their production by obstructing leases for drilling and projects like the Keystone pipeline

And despite all those financial and practical obstacles thrown in its path, BP still sees the best way forward is to reject renewables and refocus on oil and gas. There may be no greater an indictment of wind and solar energy than BP’s rejection, especially under these circumstances.

BP first showed its discontent with renewables when it bailed out on its 40-year solar business almost a year and a half ago – only four years after it had received a $7.5 million Department of Energy grant. BP Solar had just closed its only U.S. manufacturing facility, in Frederick, Md., the year before. The company had said it would outsource its production of solar photovoltaic panels to China and India, and then-CEO Tony Hayward told the Washington Post it was “moving to where we can manufacture cheaply.”

BP auctioned equipment in January 2012 from the closed solar plant, and with bankrupt Solyndra fresh in its memory, an experienced industrial auctioneer told the Frederick News-Post, “We’ve been doing more solar technology auctions lately.” One witness to the auction described a “somber scene” in which equipment was sold off in the midst of a storm that dumped nine inches of snow in northwest Maryland.

So much for the excuse that U.S. solar companies “can’t compete” because of the cheap, heavily subsidized production of panels in China and India. BP sent its manufacturing to those places, which would presumably have made solar viable, and it still shut down – even with its own U.S. grants. It was a fast and steep fall for BP Solar, which only six months earlier had produced a video (which BP has now removed from its YouTube channel) that espoused the innovative qualities of its solar panels.

Similarly now, a month after its rosy “energy outlook” video that promoted renewables growth, BP has dumped wind. The fact that such a globally known energy icon, which for a long time placed its sensitivity to environmental causes ahead of its core profit-making business, has bailed on the movement also shows how much the cause and concern for global warming has been depreciated in just a few years. As both temperature trends and public polls indicate, the climate “threat” that alarmists have tried to drum into the national conscience has fizzled away.

Clearly BP no longer fears the environmentalists’ messaging. Despite the Gulf disaster, sound economics, usable energy and scientific truth have won the day with BP’s decisions to quit solar and wind. Too bad politicians can’t see the light.

[First Published at the National Legal and Policy Center]

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The Wall Street Journal reported on April 5 that the federal prosecutors at the Department of Justice are considering a request to reduce the 292-month sentence imposed on Jeffrey Skilling for his conviction on one count of conspiracy, one count of insider trading, guilty on five counts of making false statements to auditors, and twelve counts of securities fraud. He was found not guilty on nine counts of insider trading.

The prosecutors are proposing negotiations with the Skilling defense with input from employees, shareholders and other victims of the Enron collapse. The resulting agreement, if reached, will be presented to Houston federal Judge Sim Lake who presided over the original trial and will have the final say about resentencing. The stated intent of the federal prosecutors is “to resolve certain disputed matters concerning sentencing.” It is not clear what those matters are.

Skilling has a pending petition for a retrial based on “newly discovered evidence.” The new evidence has not been publicly disclosed. However, I believe from reading decisions from previous appeals, they have to do with off-balance sheet special purpose entities where some of Enron’s debt was parked by Andrew Fastow, the chief financial officer. Special purpose entities (SPEs) are not illegal or contrary to accounting standards, if they meet some important conditions. The most important one is that the SPEs must be completely independent from the firm that created them.

That was not the case with the Enron SPEs. Fastow was in charge of the SPEs while he was still Enron’s CFO. He used the connection to syphon off tens of million dollars to his personal account. He subsequently pled guilty to wire and securities fraud. According to Biography.com, Fastow also became an informant and cooperated with federal authorities in the prosecution of other Enron executives, including Skilling. Indeed, Fastow was characterized as the “star witness” according to the New York Times.  Specifically, Fastow testified that Skilling knew of and approved the illegal connection between Enron and the SPEs. For his testimony Fastow  served only six years in prison.

It was subsequently revealed by the appellate court that Fastow had claimed in an interview by the Federal Bureau of Investigation Skilling did not know of the SPE connection to Enron was maintained. Moreover, this exculpatory evidence was kept from the Skilling defense team by the prosecution with the permission of trial Judge Sim Lake.

It has been reported by CNBC that the federal prosecutors have invited “employees, shareholders and other victims … to voice objections by April 17.”  The very hostile environment in Houston was widely acknowledged. Even Supreme Court Justice Sonia Sotomayor, a former prosecutor, recognized “the deep-seated animosity that pervaded the [Houston] community at large.”

Presumably objections from “victims”will be based on Enron’s share price decline in 2001 from $80 to less than $1. However, the preceding increase in share price in 2000 from $40 to $80 will probably not be one of the objections.

What is also unappreciated is the nature of Enron’s business model. In a word, it was hedging. In particular it was for natural gas prices. Shareholders and especially employees ought to have known about the value of hedging. Indeed, many of them may have hedged against the possibility of a decline in Enron’s share price. But these shareholders may be tempted to hide their hedge in order to share in damage awards.

Natural gas prices in 2000 rose from $2.50 per million Btus to $9 and then fell in 2001 back down to $2.50 per million Btus. The price spike followed decades when the prices were stable around $2.50 per million Btus. Thus, Enron’s share price moved in parallel with natural gas prices.

This connection gives a plausible rationale to Skilling’s run-on-the-bank theory. The sharp price decline also appeared in the 2008 market crash when there was a similar run on the bank at Bear Sterns. In this latter case the share price in one year ending March 2008 went from $150 to $2. Bear Stearns was later forced by the Treasury into JP Morgan at $10 a share.

Other 2008 runs on the banks according to Time magazine include: Lehman Brothers, AIG, Citigroup, Freddie Mac, Fannie Mae, several hedge funds and Iceland.

Large market moves are usually followed with government actions to divert attention from its role in causing the crash. The Enron case is no exception. The collapse of the newly established electricity market in California was the proximate cause. The flawed system forced all transactions into day-ahead and same-day markets. The so-called deregulated market, established without a single no vote by the California legislature in 1996, actually prohibited utilities from hedging. The two spot markets began operating in April 1998.

For a while the spot markets produced low prices for electricity. This was considered proof that the deregulation was working. But the inevitable disturbance in the markets arrived in 2000 and continued until the markets collapsed in 2001. Note that the electricity prices tracked the natural gas prices. during that time and even today. The reason is that the fuel used at the margin to generate electricity is natural gas. This connection is similar to the relationship between crude oil and gasoline markets.

The crisis in California Generated a lot of political heat and attracted the attention of federal prosecutors. It was then that the prosecution of Enron began.

The Enron case was an early example of what Harvey Silvergate describes as a similar prosecution tactic for insider trading cases:

“Accused traders and portfolio managers, looking at decades-long prison terms, come to understand that a much-reduced sentence awaits them if they cooperate with prosecutors. The key is to testify that they let the boss know that their trading moves were based on prohibited tips—such as an impending announcement of the success or failure of new-product testing, or a coming tender offer—and that the boss responded knowingly and with an admonition not to spread the secret around.”

That is hauntingly similar to the Enron prosecution. Not only did the federal prosecutors withhold the Fastow interview by the FBI, with the help of trial judge Sim Lake, but raises the possibility that the Fastow testimony at trial was suborned by the federal prosecutors.

That is not farfetched. In the notorious case of Ted Stevens, Senator from Alaska, exculpable evidence was withheld at the trial by the federal prosecutors. The New York Times on May 24, 2012 quoted a Justice Department report that two prosecutors engaged in “reckless professional behavior” but were only suspended by Attorney General Eric Holder for 40 and 15 days that were later reversed. This, despite the fact the Senator Stevens conviction just before the 2008 election that cost him his seat. This in turn gave the Democrats a filibuster-proof majority in the Senate, which enabled them to pass the health care law. There were even allegations in a report ordered by trial judge, Emmet Sullivan, that the prosecutors suborned perjury.

With this as background, it raises the possibility that a similar review of the Enron prosecution might take place. To head this off, a hedging strategy for the prosecutors is to reach a deal on resentencing of Skilling. If such a deal is reached, Skilling would have to withdraw his petition for a new trial. The prosecutors would therefore avoid being investigated.

Skilling has always maintained his innocence. However, he has already been deprived of his freedom for more than six years. He must now be evaluating whether he wants to stand on principle or to go for an earlier release. That must be a very difficult decision.

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How is it that every time environmentally supercharged politicians ring the alarmist bell, Mother Nature has a way of mocking their efforts? So was the case with the northern hemisphere’s strong finish to the winter season as much of Europe shivered under record cold while the eastern half of North America experienced March temperatures and snowfall that more than made up for a tranquil start to the season.

Of course, much of this news was being ignored by the “gangreenous” liberal media with the Los Angeles Times only able to recognize the extreme heat of Australia’s 2012-13 summer in its ongoing crusade to promote the climate change agenda. For those interested in acquiring a more balanced view of what was going on with the weather globally, one would have had to access the media sources like the U.K. Telegraph or some non-government U.S.-based weather services.

In short, for those who did not have such access, the U.K. “was subjected to its worst snowfall in 30 years,” as noted in an article by Telegraph Media Group on March 23. Indeed, a sharp increase in deaths during the winter months over previous years has generated some discussion over the wisdom of the carbon tax given the more deadly impacts of the cold on the U.K. population compared to the summer heat. So while Europe’s environmentalist lobby continued their drumbeat over global warming, the facts pertaining to increased mortality rates due to cold were belying a different story.

Meanwhile, the U.K.-based magazine, The Economist, attempted to make a begrudging concession to the scientific community that maintains a much less apocalyptic view of the world climate outlook (“A Sensitive Matter,” The Economist, March 30, 2013). The article questioned the accuracy of current IPCC climate models given their built-in high temperature sensitivities to changes in CO2 levels and the fact that continued growth in CO2 levels has not generated a concurrent rise in temperatures in the last 15 years. In fact, should the flat trend in global temperatures continue, the article states that the GCMs (global climate models) used by the IPCC may need to be revised to account for this unexpected change in the relationship between CO2 and global temperatures.

The article offers some insight into other factors that could alter the relationship between CO2 and temperature change such as cloud albedo, deep ocean temperatures, negative feedback from aerosols and the warming effect of black carbon or soot, but suggests that the net effect of these factors is to generate more warming than previously thought. The last part of the article reflects an attempt by the editor to reach some conclusion on the sensitivity issue.

The postulated use of the TCR, or transient climate response measure (defined as the temperature response after a gradual doubling of CO2 every 70 years), comes across as overly simplistic as it does not appear to adjust for other factors and feedback loops. Frankly, the article fails to mention some of the most significant factors that the community of climate change realist scientists believes are of major significance.

These include the sun and solar cycles (refer to studies by Dr. Willie Soon), the wider role of the oceans and ocean salinity in climate (refer to studies by Dr. William Grey) and the role of negative feedback loops in the determining temperature sensitivities (for a more detailed treatment of negative feedback loops in climate change analysis, refer to research by Dr. Roy Spencer). However, this is by no means an all-inclusive list as a number of other factors, many of which scientists are still attempting to understand, are known to have various effects on global temperatures.

Overall we found the editor of this article too unwilling to concede significant ground on the issue of climate change. The attributions to the IPCC as comprising the “mainstream of the scientific community” and representing “conventional wisdom” are questionable at best, especially given the multitude of errors and issues with the group’s first four scientific studies. There is also no treatment of the underlying credibility issue given recent scandals involving various participants in the IPCC’s work and well-documented weaknesses of the peer-review process. Third, the article comes off as focusing too much attention on CO2 as the “prime mover” in understanding the climate change issue, notably given the level of uncertainty about the effect of other factors and feedback loops.

At the very end of the article, the editor suggests perhaps “a small reduction in estimates of climate sensitivity would seem to be justified.” He hastens to add, however, that “if climate scientists were credit-rating agencies, climate sensitivity would be on negative watch. But it would not yet be downgraded.” The view here is that the IPCC and the alarmist community are on the verge of their own version of the 2008 financial crisis. Subsequent to that event, the major credit rating agencies were the subject of multiple lawsuits and were forced to review their ethics and business policies. Perhaps the IPCC is much closer to facing such a crossroads than the consensus now believes.

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Ezra Klein is a man of the left. Heartland’s Benjamin Domenech is a man of the right. Yet they proved in this WonkTalk spot at the Washington Post that it is possible for people who disagree to have a civil discussion about policy.

Last week, Klein wrote a lengthy analysis of the Republican plan to replace Obamacare. Ben Domenech responded with a lengthy rebuttal. Klein, tongue in cheek, promoted Ben’s appearance above as an “Epic health Wonk Smackdown ” …  ”or maybe it was a calm, slightly dull conversation about block granting. I’m not going to tell you what to think.”

It was anything but dull. Ben does a fine job explaining that there have long been market-based alternatives to government “fixes” to our health care system.

There were a couple of encouraging comments beneath this video at the Post, which is not exactly brimming with non-lefty readers. Here are two:

jkaren
4/9/2013 12:04 PM CDT
i think “wonktalk” is just wonderful.
thank you for this really essential discussion.
thanks to you and to benjamin domenech. i admire him also.
this is what discussions are supposed to sound like….and this is how people can learn from discussions.

John Mansor
4/10/2013 9:46 AM CDT
More Please! Enjoyed the in-depth debate and gives good understanding of the two sides. I just dislocated my shoulder and I wish getting it fixed was as easy as replacing a lightbulb!!

Watch the WonkTalk “smackdown”:

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As posted previously on this blog, a North Carolina bill that would repeal the state’s renewable energy mandate had passed it’s first legislative hurdle, and is now scheduled to be heard next week in the Environment committee.

While a lot of North Carolina lawmakers have already come out supportive of repealing the mandate, there are still quite a few Republicans who have been  squishy on the issue, despite many of them having campaigned as being staunch fiscal conservatives.

In the letter below, representatives from several leading state and national policy organizations tell members of the North Carolina General Assembly that if they care about being fiscal conservative, or in ideas like social equity, then they must stop picking winners and losers in the energy arena.

 

Senator/Representative _________,

 

The North Carolina General Assembly is considering a proposal to cap and end the current renewable portfolio standards (RPS) mandate in North Carolina. As you are aware, in 2007 the General Assembly adopted Senate Bill 3, which had an RPS mandate requiring utilities to provide customers 7.5 percent of their electricity through renewable sources of energy, such as wind, solar, or biomass. These sources are all significantly more expensive than conventional sources of power, which North Carolina’s utilities voluntarily choose when they are left free to pursue truly efficient and affordable energy for North Carolina state citizens.

North Carolina’s RPS mandate forces electric utilities — and therefore their customers, who are given no choice in electricity providers in the state — to purchase arbitrary amounts of electricity generated from wind and solar plants that is significantly more expensive than electricity generated from traditional sources. According to the Energy Information Administration, electricity from new wind installations is more than 30 percent more expensive than electricity from natural gas, and electricity from solar is 120 percent more expensive. But natural gas, coal, and nuclear are also more valuable than wind and solar because these traditional sources are reliable — after all, the wind does not always blow nor does the sun always shine. These higher costs affect North Carolina families, businesses, industries, and taxpayers who pay the bills for state and local governments.

These higher electricity costs are also hurting the state’s economy. According to the Beacon Hill Institute at Suffolk University, North Carolina’s renewable energy mandate will cost North Carolina ratepayers $1.8 billion by 2021. Because higher electricity costs increase the cost of doing business in North Carolina, they estimated that the mandate will lead to losses of 3,600 jobs, $43 million in investment,  and $140 million in GDP in the state. It will also reduce North Carolinians’ disposable income by $57 million.

Electricity is a basic household necessity, not a luxury item. Hiking electricity rates works as a highly regressive tax on poor households. Electricity costs have been eating increasingly larger portions of their budgets. For ratepayers earning $30,000 a year or less, electricity constitutes from one-tenth to as much as one-third of their after-tax income.

North Carolina leaders have a moral obligation to promote least-cost, reliable and efficient energy sources, letting competition and free enterprise work to refine, pursue, and discover better ways to produce energy through conventional and renewable sources. State subsidies and edicts stop those free-market innovations from happening and keep electricity rates artificially high.

The signed coalition of public policy research and grassroots organizations are opposed to the North Carolina government picking winners and losers in electricity generation and forcing its citizens to bear the higher costs. For the good of its citizens and economy, North Carolina policy should support least-cost, reliable, and efficient energy sources.

 

Phil Kerpen, President

American Commitment

 

Thomas Pyle, President

American Energy Alliance

 

Todd Wynn, Energy, Environment and Agriculture Task Force Director

American Legislative Exchange Council

 

Craig Rucker, Executive Director

Committee For A Constructive Tomorrow

 

Myron Ebell, Director

Freedom Action

 

Sabrina Schaeffer, Executive Director

Independent Women’s Forum

 

Francis X. De Luca, President

John W. Pope Civitas Institute

 

Brandon Arnold, Vice President of Government Affairs

National Taxpayers Union

 

Larry Hart, Director of Government Relations

American Conservative Union

 

James Valvo, Director of Policy

Americans For Prosperity

 

Grover Norquist, President

Americans For Tax Reform

 

Thomas Tanton, Director of Science and Technology Assessment

American Tradition Institute

 

William Yeatman, Center for Energy and Environment Assistant Director

Competitive Enterprise Institute

 

Joseph Bast, President

The Heartland Institute

 

Jon Sanders, Director of Regulatory Studies

John Locke Foundation

 

David Ridenour, President

National Center for Public Policy Research

Tweet[Editor's note: Listen to Steve talk The Take with Charles Butler about chained CPI and other aspects of President Obama's 2014 budget with the player above.]

 

President Obama today unveiled his budget proposal. Left-leaning groups are slamming it for aiming to cut Social Security and other entitlement benefits, mainly by using “chained CPI,” a new means of calculating inflation. I’m also slamming it for that . . . and for the additional harm chained CPI would do.

Reported inflation rates would drop under chained CPI because it adjusts for less expensive substitutes that people could buy to reduce the impact of inflation. For instance, if the price of butter rises, shoppers could buy less-expensive margarine. If the price of beef rises, people could switch to cheaper cuts or to other sources of protein, such as chicken. This leaves government bureaucrats with lots of leeway to toy with inflation numbers. Here’s how I described it in a Heartland media release a few days ago, tongue only a little in cheek:

Chained CPI is just another means for government to lie about the true rate of inflation. Basically, chained CPI says people can substitute lower-price items if other items go up in price, so there’s not really inflation – buying margarine if butter goes up in price, for instance. Following the logic of chained CPI, if the price of steak goes up, people can buy hamburger; if the price of hamburger goes up, people can buy chicken; if the price of chicken goes up, they can buy eggs. Eventually we’re down to no inflation as long as there are dead possums along the side of the road that people can bring home for dinner.

Chained CPI would do more than give government a way to fudge inflation calculations to reduce Social Security benefits. It would also reduce future incomes for working Americans because employers usually factor inflation into what they pay. Expect lower pay raises — raises that fail to keep up with true inflation — if the government starts reporting inflation based on chained CPI.

Personal exemptions and standard deductions in the personal income tax are also indexed for inflation. With lower reported inflation rates, the tax bite would grow, because the exemptions and deductions would fail to keep up with true inflation. Adjustments in the Earned Income Tax Credit, which millions of lower-income workers receive, also would shrink under chained CPI.

Rather than lie about inflation, people in government should declare the truth: The government cannot sustain these entitlement programs as they are structured, so they’re going to be cut. This would be a form of default but at least it would not be a form of deception.

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President Barack Obama released his 2014 budget proposal, which would spend $3.8 trillion. The budget contains a tax hike of some $800 billion, including a requirement that “millionaires” pay at least 30 percent of their income in taxes, and places a 28 percent cap on deductions for charitable giving for the top 2 percent. Spending cuts include reductions in payments to doctors via Medicare, and lower cost-of-living adjustments for Social Security recipients.

Obama’s budget also imposes a tobacco tax to pay for “universal preschool,” and the president pledged to invest in the building of infrastructure, “green jobs,” and alternative energy sources.

The following statements from public policy experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Director of Communications Jim Lakely at jlakely@heartland.org and 312/377-4000.

“President Obama declared when releasing his budget blueprint: ‘I will not agree to any deal that seeks to cut the deficit on the backs of middle class families.’ Yet he wants to cut Social Security, Medicare and other benefits, which would cut the deficit on the backs of those families.

“Obama also would raise spending another 6 percent over current spending levels. His 2014 budget would be 27 percent higher than when he took office. This increase exceeds economic growth, price inflation, wage inflation, personal income growth, population growth, and nearly every other measure of the country’s economic performance. At least President Obama’s spending increases have been smaller than the ones we saw under his predecessor, the compassionately conservative Republican, George W. Bush. I don’t know if this should encourage or discourage persons who believe in fiscal responsibility.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News
sstanek@heartland.org
312/377-4000

 

“The president claims he wants to improve the economy, yet he proposes a minimum wage increase that both economic theory and historical experience show will raise unemployment among teenagers and minorities. He also wants to raise regressive taxes that burden the poor to fund preschool programs that empirical evidence suggest have little positive impact, and in any case are a state and local responsibility.”

Richard Vedder
Professor of Economics
Ohio University
Policy Advisor, Economics
The Heartland Institute
vedder@ohio.edu
312/377-4000

 

“President Obama said that his proposed budget will make ‘targeted investments’ that will create jobs. By ‘investments’ he means more government spending.  By ‘targeted’ he means that the government will spend our money to distribute to businesses that the government favors. This is crony capitalism.

“He ‘invests’ in electric car makers that sell $100,000 vehicles for the rich and are now heading for bankruptcy. His administration is not very good at picking winners; it is very good at picking losers. Bankrupt businesses do not create more jobs, and his higher taxes will slow economic growth.”

Ronald D. Rotunda
The Doy & Dee Henley Chair and Distinguished Professor of Jurisprudence
Chapman University
rrotunda@chapman.edu
312/377-4000

 

“The president promises that more government spending will boost the economy. That is just more failed Keynesianism – the premise that government spending magically grows the economy. This caricature of Keynes’s thinking has been proven false time and again, most spectacularly in the United States by Obama himself. As government grows, the rest of the economy shrinks. Obama’s budget is a fine prescription for a recession.”

S.T. Karnick
Director of Research
The Heartland Institute
skarnick@heartland.org
312/377-4000

 

“Barack Obama’s 2014 budget, as with all of his prior budgets, is not serious. The only good thing to say about it is that he has broken the Democrat cone of silence about the need to curb the growth of entitlements.

“But when you see a budget which aims to limit the amount an American can accumulate in retirement accounts, or which aims to federalize the last private part of education in America, namely pre-kindergarten, and fund it by raising tobacco taxes, you know this is an ideological document first and foremost. The suggestion of going to chained CPI for Social Security cost-of-living adjustments is nothing but a smokescreen so he can claim to be offering a balanced approach.

“Yet Obama continues to call for upper-income earners to ‘begin to pay their fair share,’ despite that group carrying the weight for the nation under the most ‘progressive’ tax structure in America’s history. He continues to call for a higher minimum wage despite that being a sure recipe to worsen the already disastrous unemployment rates among the youth and among blacks. He calls for more stimulus and fighting climate change despite most of the public realizing that those are both nothing more than government-growing sinkholes for taxpayer money.

“Obama does one particularly clever thing, and one which unfortunately is likely to have some traction with economically illiterate Americans: He argues that his plan is deficit-neutral, as if that makes it OK. Putting aside the fact that liberal plans always end up with more spending and less revenue than forecast, supporters of limited government and liberty must remind Americans that the burden of government is not measured by the deficit, but rather by spending, perhaps most easily measured by federal spending as a share of GDP. Until we get that well below 20 percent, aiming for 15 percent, our country will be neither fiscally sound nor truly free.”

Ross Kaminsky
Senior Fellow, Finance
The Heartland Institute
rossputin@aol.com
312/377-4000

 

“We live in very Orwellian times, but anything that starts with a ‘t,’ as in trillion, does not deserve – even by Washington standards – to be called a ‘budget.’ It is instead a blueprint for the further destruction of the American Republic.

“What President Obama outlined in the Rose Garden today is simply another example of the ‘never let a good crisis go to waste’ mentality that pervades the constant campaign mode of the Obama administration. Like his predecessor, Franklin Delano Roosevelt, Barack Obama has persistently pushed policies that have deepened and worsened a recession, apparently for political purposes. Instead of ‘tax and spend,’ he now promotes ‘enhanced revenues’ and ‘investment’ – the former code words for raising taxes yet again on the most productive players in our economy, the latter code for paying off interest-group supporters like construction workers and teachers’ unions to help ensure voting support for his leftist agenda.

“The president is correct that ‘nothing shrinks deficits faster than a growing economy,’ but he has demonstrated for the last four years that he hasn’t a clue how to grow an economy. Whether this results from willful ignorance or malevolent intent remains to be seen, but the results remain the same: a stagnant economy in a country that slouches further and further in the direction of Greece.

“Senate Republican Leader Mitch McConnell has it right when he dismisses the Obama proposal as ‘not a serious plan; for the most part, just another left-wing wish list.’ Fortunately, like the president’s last four ‘budget’ proposals, this one is going nowhere in the Congress.

David L. Applegate
Policy Advisor, Legal Affairs
The Heartland Institute
media@heartland.org
312/377-4000

 

We’ve heard about not adding ‘one dime to the deficit’ before. Even if true this time, what does it do about the trillion dollars (10 trillion dimes) already added after the last such promise?

“Obama and the Democratic Congress and administrative agencies, especially the EPA, need to stop tearing down our infrastructure for generating electricity, and get out of the way of energy producers. They should stop looting industries that produce something useful, like oil and gas, to subsidize wind farms and other ‘green’ projects that go bankrupt as soon as subsidies stop, if not before.”

Jane M. Orient, M.D.
Executive Director
Association of American Physicians and Surgeons
janeorientmd@gmail.com
312/377-4000

 

“Everyone likes to tout the weak evidence that government preschool boosts poor children, but few people talk about the research that indicates large amounts of out-of-home child care hurts small children and parents. Kids separated from their parents are more insecure and likely to be aggressive. Parents who put their children in out-of-home care lose their parenting skills.

“Although one can argue children whose families will not teach them letters and colors would benefit from any mental enrichment of the type caring families naturally provide, this description does not fit all the children that would be eligible for the president’s preschool plan. And it is wrong to tax parents who sacrifice to care for their children to pay for parents who choose not to.”

Joy Pullmann
Research Fellow, The Heartland Institute
Managing Editor, School Reform News
jpullmann@heartland.org
312/377-4000

 

“President Obama’s 2014 budget arrived late. Both the Senate and the House, tired of waiting for him to fulfill this constitutional obligation, had created their own budgets. Predictably, the president’s budget, and the Senate’s, demonstrate Keynesian insanity – insisting on spending more in the face of a nearly $17 trillion national debt, and a deficit that suggests the need to spend less.

“The ‘foolish, across-the-board budget cuts’ Obama deplored in his Rose Garden rant were the result of his failure to heed the Simpson-Bowles Commission and his suggestion to implement the ‘sequestration’ option if the bipartisan commission could not come to agreement. The only thing we know for sure from his first term is that he has learned nothing and thus hobbled the recovery from the 2008 financial crisis.

“The only ‘solutions’ the president offers are higher taxes when the nation needs a steep reduction in taxes to truly stimulate the economy. It worked for John F. Kennedy and it worked for Ronald Reagan.”

Alan Caruba
Founder, The National Anxiety Center
Policy Advisor, The Heartland Institute
acaruba@aol.com
312/377-4000

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There will be numerous eulogies today from people who knew her well, and most  will focus on Margaret Thatcher’s tenure as Prime Minister, when her wit and skill made her a force to be reckoned with, one whose message extends beyond her time. But that doesn’t mean we should ignore how she got  there in the first place, and how it informs the decisions of our own day.

Consider the clash within the Conservatives in the mid-1970s. Ted Heath, the  Mitch McConnell of his day, had won the Prime Ministership stressing more free market views, but then embarked on all sorts of disconcerting steps: income and  price controls, dropping his labor union reforms like a hot rock, subsidies for  industry cronies, nationalizing Rolls Royce. Thatcher was originally seen as a Heath acolyte within the Tory wing, given a cabinet position in Education – but  the distance between them grew, and she became closer to fellow Cabinet member  Keith Joseph, forming a tiny band of back benchers disagreeing with the aims of  the party leadership. She did not oppose him or undermine leadership publicly,  but she was careful to keep this cronyist approach to industry-driven governance  at arm’s length.

Heath’s approach failed at the ballot box. After losing the election in 1974  and failing to form a coalition government with the Liberal Party (a No  Labels-esque “Government of National Unity), he took it as a sign that the  Tories had to move leftward in order to adapt to the opinions of the nation.  Thatcher disagreed, and that made all the difference. When Joseph announced that  he would challenge Heath for party leadership, Thatcher was the only Cabinet  member to endorse him; when Joseph was forced to withdraw (thanks to demography comments implying the working class really ought to consider using birth control  more regularly – the speech is here),  he was forced to withdraw. So Thatcher insisted she would run.

No one took this seriously. She had to be a stalking horse for a different candidate – new rules allowed candidates to enter after the first round of  voting if it was inconclusive. But Thatcher insisted she was in it to win. John O’Sullivan describes it: “At a meeting of sympathetic journalists, the Daily Telegraph’s Frank Johnson asked her what she would do after the leadership  election. “I shall be leader of the Conservative Party,” she replied. “No, I  mean, really,” said Johnson, slightly nettled at being treated like part of a  public press conference. “Frank,” she responded, “I would not run for this job  if I did not really think I could win it.” And she did, on the first ballot.

That’s all fine, the press said at the time. But this was leadership of a down in the dumps party, one out of step with the populace. The dominant assumption was that she would have to moderate to become acceptable to the  British people. She did not. Instead, she repackaged conservative principles  with a message of common sense and optimism, attacking nonsensical regulation,  union dominance, and high taxes with verve. She promised hope and growth, not dour austerity, and insisted that acceptance of a nation in decline was a  choice, not an inevitability.

She won. And the  world changed because of it. RIP.

[First published at Real Clear Politics]

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Former British Prime Minister Margaret Thatcher died today at the age of 87, and we here in the United States should take good note of her accomplishments. Thatcher’s life’s work is of immense relevance because today’s United States has more in common with the Great Britain that Thatcher took over in 1979 than with the United States of 1981 when Ronald Reagan assumed the presidency after the inept Jimmy Carter administration.

Today the United States is as far gone into statism as Britain was when Thatcher became Prime Minister—perhaps farther, in fact, when one considers the powerful surveillance tools today’s U.S. government has and its lack of scruples in using them. The contemporary U.S. entitlement crisis, government debt disaster, and power of government-employee unions are disturbingly similar to the woes Thatcher faced.

Undaunted by the huge challenge that faced her, Mrs. Thatcher transformed a socialized, backward, union-dominated British economy into a modern success story in just a few short years, through market-opening, individual-empowering policies. For this she was vilified as heartless and mean-spirited. But to those of us who really want the poor and underprivileged to have a chance to succeed and to benefit from a growing economy, she was and remains a true heroine.

Thatcher’s success shows that the state can be rolled back—even if only temporarily, as happened in Britain after Thatcher left office and the forces of big government returned to their arrogant, profligate, and reckless ways.

Margaret Thatcher achieved something very few politicians have ever done: She left her nation better off than she found it. In economic policy, fostering of social order, and national defense, Mrs. Thatcher was a true champion of liberty.

[First Published at The American Culture]

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The biggest political problem faced by so-called “liberals” and so-called “progressives” in President Obama’s second term is how to prevent voters from holding them politically responsible as the public comes to realize how badly they were lied to during the first Obama term to win passage of Obamacare.

Most supporters of Obamacare embraced it because of a principled belief that everyone should have access to essential healthcare.  But even the establishment, still Democrat dominated, CBO admits that after 10 years of implementation, Obamacare will still leave 30 million uninsured.

We will see below why that is a woeful underestimate.  Even worse, John Goodman and I explain how universal health care for all can be assured without Obamacare, with no coercive individual mandate, no job-killing employer mandate, and a savings to taxpayers of roughly $2 trillion over the next 10 years.  (Hint: true health care safety net, plus market incentives and competition.  See John C. Goodman and Peter Ferrara, Health Care for All Without the Affordable Care Act, Issue Brief No. 116, National Center for Policy Analysis, Dallas, Texas, October 17, 2012.  That has been explained in this column before.  But too many “progressives” see market incentives and competition as a fascist fraud against working people.)

Just wait until the broad realization dawns that the harsh reality of Obamacare is that tens of millions will lose their employer provided insurance because of the perverse incentives under the program.  Even the establishment CBO admits that at least 7 million, and as many as 20 million, will lose their employer coverage.  In February, CBO reported that “in 2019 [5 years after Obamacare is implemented], an estimated 12 million people who would have had an offer of employment-based coverage under prior law will lose their offer under current law [aka ‘Obamacare’].”

But that report is just the early breeze of the coming storm.  The Obamacare employer mandate requires all employers of 50 or more full time workers to purchase the expensive insurance for those employees that Kathleen Sebelius (“The Secretary shall determine”) specifies that they must buy.  But that mandate is enforced by a penalty of $2,000 per worker, which may be only 10% of the average cost of family coverage under the Sebelius requirements.

Moreover, workers who do not receive employer provided coverage are eligible to purchase their health insurance on the state Exchanges with extensive taxpayer subsidies to help cover the cost.  Indeed, in the Exchanges, low and moderate income workers can even get subsidies covering their out-of-pocket expenses.   Employers can terminate their employee coverage, give their workers a raise with part of the savings, and let the taxpayers bear the cost of subsidizing their coverage in the Exchanges.  Former CBO Director Douglas Holtz-Eakin estimated in a study for the American Action Forum that more than 40 million workers would lose their employer coverage due to these perverse incentives.  It’s going to be even worse than that, when all of the cost increasing impacts of Obamacare are realized.

So much for President Obama’s oft repeated first term promise that “If you like your health insurance, you can keep it.  No one is going to take that away from you.”

Obama campaigned in 2008 on a promise that Obamacare would reduce the cost of health insurance by $2,500 for average families.  But since Obamacare passed, the cost of an average family policy has already increased by $3,000.  That reflects the philosophical problem that so many “progressives” have with math, which they are certain is a fascist conspiracy against working people.  (Why must 2 +2 always equal 4?  That is just fascist authoritarianism.  Why can’t we be flexible so it can sometimes equal 3, or 5?)

But this again is just an early breeze from the coming storm.  If you require coverage of more benefits, such as “free” check ups, “free” preventive care, “free” contraceptives, “free” preventive care, and everything Kathleen Sebelius says must be covered to satisfy the individual mandate and the employer mandate, then fascist math says that means there must be higher premiums, just so those fascist insurance companies can have enough money to pay all their promised benefits.

Then there is the benevolent Obamacare regulation called “guaranteed issue.”  That requires all insurers to cover everyone who applies, no matter how sick they are when they first apply, without having ever paid any premiums to the insurer before.  That concept applied to fire insurance would require fire insurers to cover applicants who waited until their home caught on fire to call for coverage.

That regulatory requirement is then paired under Obamacare with the further compassionate regulation called “community rating,” which requires insurers to charge all applicants the same price, no matter how sick when they first apply, except for sharply restricted variances for age, geographic location, and smoking.  Applied to fire insurance, that concept would require the insurer to charge no more for the applicant that calls with his house already on fire than for other applicants.

Naturally, all these regulatory requirements are going to cause health insurance premiums to soar, especially for younger and healthier individuals, who are not going to be happy with Obamacare as a result.  The March 22 Investors Business Daily cites Aetna CEO Mark Bertolini as saying that Obamacare “will likely cause premiums to double for some small businesses and individuals.”  But he just represents a fascist insurance company trying to protect its rapacious, outrageous, exploitive, 4% profit margin.  A study of 5 major cities by Holtz-Eakins’ American Action Forum estimated premiums to climb there under Obamacare by an average of 169%.

Not to worry though.  The young and the healthy have a strategy available to them under Obamacare to avoid these costs.  They can refuse to buy any insurance until they get sick with some costly illness such as cancer or heart disease (or even just need some costly dental work).  Then they can sign up for the full product coverage under Obamacare, taking advantage of the compassionate, benevolent, guaranteed issue and community rating.  Until they recover.

The individual mandate, not to mention the employer mandate, was supposed to prevent this.  But we discussed the employer mandate above.  And individuals as well could just skip the insurance and pay the penalty at a savings of at least 50% to 75% or more.  But while Justice Roberts wisely concluded that it is precisely the individual mandate penalty that makes this whole socialist mess constitutional, when our Congressional representatives were put to a vote as to whether the IRS could enforce this penalty by garnishment or seizure, they equally wisely said, “Hell No!”

So millions, including myself, will pursue this strategy next year to avert the costs of Obamacare, which will mean millions more uninsured.  And that will mean more costly, sicker and older folks left covered in the insurance pool, which will cause premiums to soar further, which will cause still more individuals and employers to drop coverage, which means still more uninsured, and the chaos of a financial death spiral for private insurers.

“Progressives” will cheer this demise of the fascist, private insurance market, which was their goal all along, leaving all health care to be paid for by the “single payer” government.  But “liberals” never before cheered monopolies, all of whom are the single payers for their industries, maybe for good reason.  Maybe they knew something back then that today’s wise guys don’t.  We will see in any event whether the voting public enjoys the ride as much as the “progressives.”  And so much again for if you like your health insurance you can keep it, and no one is going to take that away from you.

All of this health insurance cost chaos will just further feed the labor market chaos that is already starting as the darkening cloud of Obamacare approaches.  Already employers are replacing full time employment with part time employment paying lower wages and no benefits.  Already small businesses with less than 50 employees are freezing hiring, and those with just above 50 workers have begun layoffs.  Moreover, under the Obamacare law, the employer mandate does not require employers to cover the family dependents of their workers.  So the trend towards losing that coverage is already beginning as well.

All of this is preparation to avoid the employer mandate.  But it will mean still more uninsured.  And still more declining incomes for the middle class and working people, which is the mark of Obamanomics, President Obama’s rhetoric deluding his “progressive” cheerleaders to the contrary notwithstanding.  Soaring health insurance costs, and failing health insurers, will just accelerate this labor market chaos even more.

But Obamacare is going to be causing chaos for seniors as well.  As NCPA President John Goodman points out in his health policy blog on March 25, almost half of Obamacare is paid for over the next decade by draining $716 billion out of Medicare.  While Democrats have been so aggressive about accusing Republicans of wanting to slash Medicare, it is Obama and the Democrats who have actually done it.

That leaves Medicare growing at only about half the rate of health care in the rest of the country, which, Goodman explains, has “been the trend for the past 40 years, and [contrary to “progressive” rhetoric] the United States is not unique. Our health care spending growth rate is in the middle of the pack among developed countries.”

That means that spending in the rest of the health care system, and health care spending in the rest of the developed world, will be growing at twice the rate of Medicare.  Goodman adds, “The Medicare Office of the Actuaries has included two graphs in the latest Medicare Trustees report showing what this will mean. These graphs — which have never appeared in the mainstream media or even been referred to by the mainstream media — show Medicare doctors’ fees dropping below Medicaid fees in the near future and falling progressively behind Medicaid and private sector payments, indefinitely into the future.”

As a result, “One out of seven hospitals will leave Medicare in the next seven years, say the actuaries, and beyond that things just get worse and worse. Access to care will become a huge issue as waiting times to see doctors and enter hospitals grows…. From a financial point of view, seniors will be less attractive to doctors than welfare mothers.”

Yet, “Time and again, the president, the vice president and every leading Democrat in Congress have referred to the Medicare spending reductions as ‘savings’ that will not harm the elderly in any way.”

Goodman concludes, “This is not leadership. This is not making tough choices. This is bait and switch. And if the administration won’t own up to what it has done today — when there is no obvious pain — what do you think future politicians are going to do when real seniors can’t find a doctor who will see them?” They are going to repeal the Medicare cuts, just like they never allow the SGR cuts to Medicare fees for doctors and hospitals to become effective.

President Obama promised us over and over that Obamacare would not increase the deficit by a single dime.  That is literally true, haha, sucker.  But repealing the Obamacare Medicare cuts will leave a $716 billion deficit hole in Obamacare, for just the next 10 years.  Into the future, that is trillions and trillions.

Moreover, in its original cost estimates for Obamacare, CBO assumed that only 30 million workers will obtain their health insurance through the Exchanges, with 162 million still receiving employer provided coverage.  Of those 30 million, CBO estimated that 19 million would receive the Obamacare subsidies for the cost of that insurance, at a total cost of $450 billion over the first 10 years, or actually first 6 years of implementation under Obamacare.

But adding Holtz-Eakin’s more than 40 million losing their employer health insurance on top of those 19 million CBO assumed would be subsidized by Obamacare would triple the $450 billion in estimated costs for the health insurance subsidies of Obamacare under the first 6 full years, adding nearly a trillion dollars to the costs and deficits of Obamacare during that time alone.  In future years, that added cost contributing to still higher deficits would soar further.  Which brings the Obamacare chaos to the federal budget, deficits and debt.

So in the end, President Obama is right after all.  Obamacare would not add a single dime to the deficit.  It’s all good.

[First Published at Forbes]

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President Barack Obama has for five-plus years said and done two contradictory things regarding the United States’ economy.

1)  He has repeatedly said that he wants the private sector to recover – and indeed thrive.

2)  He has repeatedly, dramatically grown government – in terms of spending, laws, regulations and taxes.  And rigidly insists that he be allowed to continue to do all of it.

But a Big Economy and a Big Government are mutually exclusive.

The wasteful federal government creates zero wealth.  Every penny it spends is at the expense of the productive private sector.  The former can only spend what it first takes from the latter – via taxation, or borrowing.

The more government taxes and borrows, the more limited the private sector is in its attempts to grow.  And expand the economy, hire people – and pay more taxes.

And the more time businesses spend complying with laws and regulations – including learning new ones – the less time they have to try to grow, expand the economy, hire people – and ultimately pay more taxes.

The wasteful federal government is draining the productive private sector of operational capital – and drawing its time and attention away from more worthwhile activities.

Imagine a tick that – in addition to bleeding the deer – can tell its host where, when and how it can move.

And the concern for an activist state continuing its over-activity freezes the private sector in amber – afraid to move, in dread anticipation of the next government anvil to fall.

So does President Obama want a Big Economy – or a Big Government?  The answer is best embodied in what he has done to the Internet.

Existing law prior to the Obama Administration left the Internet pretty much alone.  As always happens when the government removes itself, the Web has rapidly grown into a free speech-free market Xanadu.

“Technology Sector Found to Be Growing Faster Than Rest of US Economy”

Then came President Obama.  Who – despite the legal proscriptions and without any Congressional authority to do so – unilaterally imposed a host of new Web regulations.

The biggest being Network Neutrality – which places the government in charge of the entire Internet backbone.

Net Neutrality could lead to the loss of 1.5 million private sector jobs.  It will raise the cost for each and every consumer by about $55 a month.  Because it will raise Internet Service Providers (ISPs)’s costs by $20 to $40 billion per year.

It is egregiously damaging to continued investment – meaning the Web will slowly decay and deteriorate, rather than continue to rapidly improve and grow.

Not satisfied with that destruction, the Administration also imposed data roaming regulations.  Which require the companies who spend the tens of billions of dollars necessary to build their wireless networks to rent them to those that don’t.

Which raises a question: Why would any company spend said tens of billions of dollars, when they can just wait around for someone else to do it and then have the government force them to share?

Which raises a problem: If everyone is sitting around waiting for everyone else to build said networks, there’s a whole lot of nothing going on.

The Administration has done even more to derail the Tech sector – but you get the gist.

So too do you get that President Obama much prefers a Big Government to a Big Economy.

Because with the Internet, he inherited the latter – and has time and again insisted on imposing upon it the former.

[First Published at Red State]

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With the exception of Lech Walesa, the last of the great Cold War heroes has died.

Former Prime Minister of Great Britain Lady Margaret Thatcher, age 87, passed away Monday, April 8, 2013, following a stroke.

Along with Ronald Reagan, Pope John Paul II, and former Solidarity leader Lech Walesa, the Iron Lady is one of a small cadre of individuals personally responsible for the fall of the Berlin Wall and the demise of the former Soviet Union.  Like that of her American counterpart, former President Ronald Reagan, Lady Thatcher’s idea of Cold War strategy was simple:  “We win; they lose.”  She won, they lost.  And perhaps they knew they would:  it was the Soviets who dubbed Lady Thatcher “The Iron Lady.”

Her iron will, her steadfast vision, and her clear-headed sense of right and wrong not only proved her to be on the right side of history, but as former U. S. Secretary of State James Baker put it on the April 8, 2013, “PBS News Hour,” also helped to change the arc of history.  She was, as Chicago Tribune editorial cartoonist Scott Stantis characterized her in his tribute to her, “indomitable.”

Lady Thatcher’s biography is well-known, as is her late-in-life slide – like that of her hero Ronald Reagan – into dementia.  We write here not to repeat those details but solely to salute her life in the wake of her passing.

As another former Secretary of State, George Schultz, also put it, on the April 8, 2013, News Hour, the legacy of Margaret Thatcher’s, in one word, is “Freedom.”

Let us hope that she – and we – will achieve that for eternity.

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British Petroleum is still one of the world’s biggest oil companies. But as early as the late 1990s they didn’t want you think of them that way. CEO, Lord John Browne of Madingley, argued: “the transition to alternatives could be accelerated by changing industry practices today.” While other oil companies eschewed climate change alarmism, BP embraced it. In 2002, Lord Browne declared: “Climate change is an issue which raises fundamental questions about the relationship between companies and society as a whole, and between one generation and the next.”

As a result, in 2006, Mother Jones magazine reported: “BP vowed to cut its own CO2 emissions and invest heavily in solar, wind, and other alternative technologies; it even supported … the Kyoto climate treaty.”

BP jumped into renewables and the company’s moniker underwent an evolution from British Petroleum to BP, then to Beyond Petroleum. Between 2000 and 2005, BP invested $500 million into solar power and $30 million on wind and has invested more than $4 billion in alternative energy in the US since 2005. At the time, according to the Wall Street Journal, BP turned a profit on its solar business but not on wind. In 2005, Browne “decided that the energy giant should enter unknown territories of wind, solar and hydrogen power,” which began a “re-branding” designed to “capture public affection” by positioning “themselves as environmentally friendly enterprises.”

The switch seemed to be sound strategy. ExxonMobil didn’t agree.

Comments from a 2008 blog post on ExxonMobil’s position as “obstructive over climate change” included the following: “Given that oil isn’t going to last a whole heck of a lot longer, would not a good business strategy be to start investing in renewable energy?” and “Just from a corporate survival perspective, better start learning, and fast. Carbon is the low-hanging energy fruit and soon to become an economic dead end. What company wants to keep going down a dead end?” BP thought it was “prudent to start diversifying now as a kind of insurance policy.”

ExxonMobil took a different course. In 2005, then-CEO Lee Raymond, said: “What all these people are thinking about doing, we did 20 years ago—and spent $1 billion, in dollars of that day, to find out that none of these were economic.” “In the late 1970s, as oil prices skyrocketed, Exxon diversified into an array of fossil-fuel alternatives, including nuclear and solar energy.” “After several years, Exxon still couldn’t see prospects for renewable energy turning into a moneymaker, especially since oil prices were falling in the 1980s. In the mid-1980s, the company decided to get out of the business.”

Raymond had “an unabashed skepticism about the potential of alternative energy sources like wind and solar.” He saw “Spending shareholders’ money to diversify into businesses that aren’t yet profitable—and that aim to solve a problem his scientists believe may not be significant”—as “a sloppy way to run a company.”

Wall Street agreed. According to Mother Jones, in 2006, Wall Street “worried that even a small increase in investment in non-oil alternatives would distract BP’s focus from its core business—oil.” Commentators and analysts began mocking BP as being “Beyond Profits.”

Yet, critics of Exxon’s approach, in 2008, feared “that the company’s reluctance to explore alternative energy will prove to be bad business judgment in the long run.

Andrew Logan of Ceres, a Boston-based environmental group, sees two possible scenarios: “One is that all the scientists in the world are wrong, in which case there’s no climate change, in which case Exxon will do well.” He then says: “But if the scientists are correct and we have to find a way to transform the way we use energy, then Exxon is going to lag significantly behind its competitors.”

It is obvious now, nearly a decade later, which was the sound strategy. Global warming is not the manmade crisis it was sold to be in the mid-2000s, and we know that oil is “going to last a whole heck of a lot longer.” Today, innovation and imagination are producing record quantities of domestically produced oil and gas. Robert Bryce, author of Power Hungry, reports: “we won’t hit peak oil until we hit peak imagination.” And, Exxon’s Raymond made the right choice to get out of renewable energy.

On April 3, BP announced that it was selling its US wind assets—estimated to be worth $1.5-3.1 billion. The announcement stated that BP has decided sell the US wind energy business “as a part of our continuing effort to … re-position the company for sustainable growth” and that it would “unlock more value for shareholders.”  BP ended its venture in solar energy in 2011.

In a speech in late 2012, BP’s general manager for global energy markets, Mark Finley, praised the rapid growth of renewable energy—claiming it had increased by 18% over last year, “the tenth year in a row for double-digit growth.” However, he acknowledged “renewables make up such a small slice of the world’s energy portfolio now—only about 2%—that even at such a blistering growth rate they are unlikely to significantly displace fossil fuels in the next two decades.”

Addressing renewables’ growth, Finley said it was happening “most typically in places where the governments can afford the subsidies needed to help these fuels compete. The key challenge going forward is: when things grow fast, subsidies get expensive fast. So can these forms of energy achieve economies of scale that will allow them to compete without subsidies?”

“That is the real question.”

Yes, that is “the real question,” and apparently, BP got the answer. Without subsidies, renewables cannot compete—BP is bailing. Addressing wind energy’s future, Amy Grace, a New York-based analyst at New Energy Finance, said: “There’s limited visibility beyond 2014 about what the assets will be worth as a tax credit supporting turbines is set to expire at the end of this year.”

In a recent Wall Street Journal op-ed, Patrick Jenevein, CEO of Tang Energy Group—whose website lists developing wind farms as one of its projects, agrees: “Without subsidies, the wind industry would be forced to take a hard fresh look at its product. Fewer wind farms would be built, eliminating the market-distorting glut. And if there is truly a need for wind energy, entrepreneurs who improve the business’s fundamentals will find a way to compete.”

Additionally, having now actually lived with the presence of industrial wind turbines, people no longer want them “imposed on their communities.” On April 4, the Falmouth, MA, Board of Selectmen and the Falmouth Finance Committee held a joint meeting and unanimously stood by the selectmen’s prior vote to remove the town’s wind turbines. Residents say: “they’re suffering headaches, dizziness and sleep deprivation and often seek to escape the property where they’ve lived for more than 20 years.” Across the pond, more than 100 Conservative Members of Parliament urged Prime Minister, David Cameron, to block further expansion of onshore wind. Environment Secretary, Owen Paterson, called England’s onshore wind farms a “blight,” and while Minister of State at the Department for Energy and Climate Change (now the prime minister’s senior parliamentary advisor) John Hayes said: “We can no longer have wind turbines imposed on communities. … It seems extraordinary to have allowed them to be peppered around the country without due regard for the interests of the local community and their best wishes.”

As result of diminishing public support in the US, the revelation of extreme green-energy crony-corruption, tightening budgets, and a slow economic recovery, government support for renewable energy is under fire. The Daily Caller reports: “States across the country are aiming to scale back or eliminate laws that require certain amounts of power be purchased from renewable energy sources, including wind.”

Yes, the winds, they are a-changing—and BP decided to get out while the getting is good.

Robert Bradley, CEO and founder of the Institute for Energy Research, said: “BP put form over substance and took their eye off the ball” and called “Beyond Petroleum” “a failed corporate strategy. … BP went after an environmental fad, basked in the glow of the Left environmental movement, and now may have destroyed itself in the process.”

Even the “Left environmental movement” is no fan. Mother Jones cites an “industry observer” addressing a post-Valdez-disaster ExxonMobil: “It ‘is a company that does everything in a gold-plated manner. It’s purely a commercial decision: You never put in anything that might fail’—not for ethical reasons, but because as BP has discovered, failure is expensive.”

Now that BP is “back to petroleum,” perhaps now its moniker should be “Beyond Puff-power.

[First Published at OurMoney.net]

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Ironically six of the original European colonial powers of yesteryear, the UK, Germany, France, Italy, Spain and the Netherlands, have aligned to resist the new virtual-colonial-power — Google’s hegemony over online private data.

These six leading EU members, which comprise 75% of the EU economy, have jointly launched national investigations of Google’s privacy actions. That’s because Google has paternalistically rebuffed and ignored the EU belief that Google’s 2012 unification of its sixty privacy policies is a serious violation of European data protection law, because it does not allow any meaningful use transparency or user choice to opt-out of Google’s private data collection.

Just like the European colonial powers colonized and extended their power over weaker peoples and areas and established very unequal power relationships, in the virtual world of the Internet Google has effectively virtually colonized digitally-weaker Europe. Google has roughly 90% search market share among EU nations and commands about half of all European online advertising.

EU nations, including their citizens, businesses, and media, are for all practical purposes virtually-dependent on Google to an exceptional extent to find and monetize information online.  As effective digital colonies of Google, their exceptional online dependency on Google is in stark contrast to other nations with indigenous search engines like: the Czech Republic (Seznam has 45% share), South Korea (Naver has 72% share), China (Baidu has 76% share), and Russia (Yandex has 62% share).

In addition to believing that their citizens should not be the virtual vassals of a virtual sovereign Google – without any real rights to know, own or control their private data — the EU nations’ also believe that under EU law EU citizens’ private data only should be stored physically in the EU under their sovereign jurisdiction.

However, data is Google’s treasure. Google has already plundered most of the EU’s public and private information and shipped it back to their homeland datacenters.

Now EU countries are effectively saying we want our private data back, because it is ours, and Google has replied: “No.” Much like the European colonial powers have said “No” to many former colonies or conquests who have requested the return of national cultural antiquities that the colonial powers plundered in the past.

Apparently Google is maintaining the old adage here that “possession is nine tenths of the law.” Simply Google in proclaiming it’s “privacy policy respects European law,” is defiantly challenging the EU to prove otherwise, not only in court, but in the court of global public opinion, which Google is confident it can manipulate to take Google’s side.

Apparently, Google CEO Larry Page has adopted a virtual “realpolitik” approach to statesmanship based on power and not law or morality — much like Prussia’s Otto Von Bismarck’s “realpolitik” in the late 19th century.

Google understands this conflict’s outcome resides in the realm of power, specifically Internet power. Google has more Internet power than anyone, and the EU nations have very little.

Google practically has assessed the weaponry available to the virtual indigenous EU nations to fight back against Google and found that it is nothing to fear. Google smirks at the EU’s Lilliputian privacy fining authority, which looks like natives’ knives and fists next to Google’s virtual global navy; its state-of-the-art digital ship cannons and muskets of Internet dominance; and its hard-to-match regiments of the best privacy lawyers, lobbyists and media handlers that Euros can buy.

Moreover, Google has repeatedly challenged EU and European authorities over privacy and competition, and to date, they have always won decisively. When Google invaded EU nations with thousands of Street View cars and photographed and posted online most everybody’s home without homeowners’ or authorities’ knowledge or permission, many nations objected, but ultimately acquiesced giving EU citizens little opportunity or choice to opt out.

When a tenacious German regulator demanded to examine a Street View car in person, he discovered it was also collecting private WiFi data communications (emails, credit card numbers, etc.) emanating from people’s homes without users’ knowledge or choice to opt out. While many nations investigated this Google mass-invasion of EU citizens’ privacy, again there resulted no enforcement action of consequence to deter Google in the future.

Even after several authorities learned that Google did not destroy the private WiSpy data they recorded, when they promised to do so, once again Google suffered no sanction of consequence or of deterrence.

Last year, Google announced it was consolidating its sixty-odd privacy policies into one without meaningful transparency or opt-out choice, the EU authorities asked Google to halt. True to form, Google ignored them, while paternalistically informing the EU’s privacy authorities that they were in compliance with EU data protection law — implying that EU privacy authorities were not expert in their own privacy law.

As for EU antitrust enforcement, the evidence-to-date unfortunately suggests that the EU competition authority has been subordinated effectively by Google’s greater practical and political power.

No less than three times over the last year, the EU Competition authority has threatened publicly and firmly to enforce EU antitrust law against Google for four antitrust violations by issuing a Statement of Objections. Every time after the EU authorities have loudly threatened enforcement action against Google with a hard deadline, the EU has quietly backed down and given Google many months more to continue their illegal and anti-competitive behavior.

Once again, in Google’s world of realpolitik, Google has been taught by the EU authorities’ repeated actions that despite their bluster and threats, in the end, they are more bark than bite and no real match for Google’s greater practical and political power.

Interestingly there is also a “colonial era” power issue in competition policy in addition to privacy policy.

For the first few centuries of the European colonial period, the colonial powers were mercantilist, meaning the asymmetry of power between the colonial power and the colonies enabled them to enrich themselves at the colonies’ expense and to mandate that their products and services enjoy total supremacy over those of the colonies’ despite merit. They were mercantilists because they had the power to dictate terms. Might was right in that era.

Very interestingly, eleven European digital merchants in Google’s virtual colonies on the European continent recently issued an open letter to their authorities asking for an end to Google’s virtual mercantilist trade with Europe, where Google uses its virtual sovereign market power to regularly favor its own products and services over indigenous competitive European products and services — in order to enrich Google at the expense of the digitally-weaker European virtual colonies and their indigenous people. Apparently might is still right in this virtual era.

Just as the colonies increasingly demanded more free trade with their colonial powers over time, now these European digital merchants have a simple free trade expectation from the de facto virtual sovereign power of Google in search and search advertising in Europe — given Google’s ~90% market share in Europe and dominance of online advertising.

Simply, they petition their indigenous authorities: “Google must be even handed. It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display and penalty algorithms.” They only ask for the Golden Rule Ethic from Google: to be treated as Google wishes to be treated.

Google’s upcoming new challenge to the European privacy authorities will be Google’s promotion of Google Glass, Google’s cloud-tethered digital eyeglasses that can record and videotape everything in the wearers’ view without other people’s knowledge or permission by default.

This could be an exact repeat of Google Street View and Google Street View WiSpy privacy problems; where the virtual colonial power dictates another change in the privacy culture of Europe that everything everywhere is public for Google’s absorption and not private for EU citizens to control.

If Google is true to its consistent past privacy behavior, it will effectively operate in a stop-us-if-you-can mode, knowing that in the past the EU authorities always have backed down and submitted to their virtual colonial power’s realpolitik dictates.

(Interestingly, the homes of Google’s leadership are not available on Google Street View like most everyone else’s are, and one can expect that Google will not allow any outsider to wear Google Glass in Google’s offices. That’s because everyone that is permitted to enter the Google sanctum must sign a very strict confidentiality agreement that they will not disclose any private or confidential information that they may learn while visiting Google.)

In sum, this is all about Google as virtual colonial power establishing its virtual realpolitik power relationship over its weaker European digital colonies. EU practices and laws must bend to comport with Google  “law.” The EU’s digital “lingua franca” must change to lingua Google. And any form of EU Pax Romana must make way for Pax Google.

Simply this is a significant geo-political power struggle of the 21st century. The Czech Republic, South Korea, China and Russia are four different nations with very different approaches that have each maintained their digital sovereignty and independence in the virtual world by having a substantial indigenous search competitor to Google.

However, with no European indigenous competitor or counterweight to Google’s market and information power, will the EU surrender to full Digital-Colonialization, or will the EU assert their physical sovereignty and rule of law over the EU’s virtual world?

At bottom, this conflict is simple. Who is the digital sovereign in Europe – European authorities or Google?

[First published at The Precursor Blog, as part of the Google's Disrespect of Privacy Research Series]

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[This piece by Dr. Paul Kengor, professor of political science at Grove City College (and a former classmate of mine at the University of Pittsburgh), is used with permission. It was first published at the Center for Vision & Values.]

Margaret Thatcher, one of the greatest leaders of the Cold War, of the 20th century, and of British history, has died at the age of 87.

I’ve referred to her as one of my Cold War seven: Ronald Reagan, John Paul II, Mikhail Gorbachev, Lech Walesa, Vaclav Havel, Boris Yeltsin, and Margaret Thatcher. They were the seven figures who dissolved an Evil Empire, and only Walesa and Gorbachev still remain with us.

The world dubbed her the Iron Lady, a title that duly fits. Many, however, mistake the Iron Lady moniker as referring solely to her strength in the Cold War. There was much more to it. Consider:

Margaret Thatcher is arguably the most complete British leader of the last 100 years, surpassing even Winston Churchill. Like Churchill, she was tough and successful in foreign policy, taking on and vanquishing totalitarian evil. Churchill warned the world as the Iron Curtain descended across Europe. Decades later, the world celebrated as the Iron Lady helped break the Iron Curtain.

But unlike Churchill, Margaret Thatcher had enormous domestic successes that Churchill couldn’t touch, and didn’t dare try to touch. When World War II closed, the British people booted Churchill from the prime ministership in preference of Labour leader Clement Attlee, who gave the British populace Keynesian socialism. The masses wanted their welfare state, and Attlee, equipped with promises of “change” and “forward,” gave them a fundamental transformation. In no time, Attlee’s party was spending money unlike anything Britain had ever seen, nationalizing everything under the sun, including with the progressive left’s coup de grace: government healthcare. It was a giant government binge that would bury Britain for decades.

This fundamental transformation to welfare-statism was so thorough, and so imbibed by the electorate, that when Churchill later returned to office for another term (1951-55) the World War II hero couldn’t stand up to the sacred cows of Britain’s new nanny state. By the late 1970s, the United Kingdom was smothered not only by massive government expenditures and debt but by the enormous and disastrous government unions that the Labour Party had built and nurtured.

All of this came to a crashing head in the late 1970s, and fittingly under the Labour Party, this time led by Prime Minister James Callaghan. The signature event was the Winter of Discontent (1978-79). The economy was an utter train wreck, debt-ridden and hampered by a prolonged un-recovering “recovery.” Things were made far worse by continual work stoppages by striking public-sector unions. Given that the government ran just about everything, thanks to decades of the British left nationalizing everything, there was garbage literally rotting in the streets and dead people not being buried because of striking government refuse workers and gravediggers.

Things got so bad that the British electorate was willing to elect a bona fide conservative to run their government: Margaret Thatcher. This was not some squishy moderate that we in the United States would have called a Rockefeller Republican or (today) a RINO. This was the real McCoy; the genuine article. Here was a new leader who actually understood and could articulate what was wrong with Britain — and had the courage to do something about it.

And so, Margaret Thatcher, Britain’s first-ever female prime minister, embarked upon an extraordinary run from 1979-90 that featured three consecutive electoral victories, including the landslide that brought her to power. She then proceeded to take on not just the Soviets abroad, but, at home, the powerful government unions, the Keynesian spending, the bloated cradle-to-grave welfare state, the punitive taxes, the burdensome regulations, and decades of government nationalizations/seizures. As to the latter, Thatcher began a comprehensive campaign of privatization that returned freedom, solvency, and sanity to Britain.

It was an amazing performance. You can now expect a remarkable outpouring of emotion and appreciation in Britain, much like what America saw with the death of Ronald Reagan and what the world witnessed with the passing of John Paul II, her two Cold War partners and kindred souls. And like her two great Cold War allies, she fortunately lived to see the collapse of the Soviet empire.

Lady Thatcher outlived both Reagan and John Paul II. Her health, unfortunately, had been in decline for a long time. I recall that she recorded a video eulogy for Reagan’s funeral rather than address the audience live and directly. That was 2004, almost 10 years ago.

I also recall her parting words to Ronald Reagan: “Well done, thy faithful servant.”

And now, we can second that tribute. Well done, Lady Thatcher.

Dr. Paul Kengor is professor of political science at Grove City College, executive director of The Center for Vision & Values, and New York Times best-selling author of the book, “The Communist: Frank Marshall Davis, The Untold Story of Barack Obama’s Mentor.” His other books include “The Crusader: Ronald Reagan and the Fall of Communism” and“Dupes: How America’s Adversaries Have Manipulated Progressives for a Century.”

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I was reading the Chicago Tribune online this morning and came across a short Reuters article that should make us all tremble.

The article says the federal government has revoked the license of the gun store that sold a firearm to the mother of Adam Lanza, the 20-year-old who shot up the elementary school in Newtown, Connecticut, last December. The Bureau of Alcohol, Tobacco and Firearms will not say why the license was revoked just days after the shooting. The news has only just come out.

The article ends by noting the guns Lanza used “were all legally purchased and registered.” Does the government shut down car dealers who legally sell cars to people who later use them in drug dealing, murders, rapes, kidnappings, bank robberies, prostitution, and other crimes?

Why hasn’t the government shut down the car dealer who sold the car that Lanza used to drive to the school to commit his crime? It’s almost impossible to imagine Lanza would have been able to get to that school without a car. Almost surely he’d have been stopped if he had been walking down a sidewalk in broad daylight carrying an AR-15 rifle, two handguns, multiple magazines for the rifle and the handguns, and hundreds of rounds of ammo.

There is no indication the gun store did anything illegal. Does law protect us anymore? Or can government punish us if the right people in the right places want to punish us, even when we follow the law? Unless the ATF produces proof of illegal firearms transactions by the gun store, we must conclude the answer to the first question is “no” and to the second question is “yes.”

Here’s the Reuters story in its entirety:

(Reuters) – The U.S. Bureau of Alcohol, Tobacco and Firearms said on Friday it had revoked the federal license of a Connecticut gun retailer that sold a weapon to the mother of Adam Lanza, who killed 26 people at an elementary school in December.

The agency on December 20 revoked the license of Riverview Gun Sales in East Windsor, Connecticut, ATF spokeswoman Debora Seifert said. The revocation was reported in The Journal News, of Westchester County, New York, on Friday.

“We did revoke their federal firearms license,” she said. The agency did not publicly disclose a reason for the closure.

A woman who answered the telephone at Riverview on Friday, and did not give her name, confirmed the store had sold a weapon to Lanza’s mother, Nancy, and that its license had been revoked. She declined further comment.

Nancy Lanza was her son’s first victim in the December 14 attack. He shot her in their family home before driving to Sandy Hook Elementary School, Newtown, where he gunned down 20 young children and six adults before shooting himself dead.

The weapons Adam Lanza, 20, used in the attack were all legally purchased and registered.

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Ezra Klein has a lengthy piece taking apart my  post from last July concerning the media’s oft-repeated “Republicans Have No  Obamacare Replacement” myth.

I’m glad he’s engaged on this point, because I think it’s a sign of  seriousness and a positive development to have debates about what comes after Obamacare – because make no mistake, something will come after it – and the  discussion has been a long time coming.

The essential premise of Ezra’s piece is that Republicans have no plan for  replacing Obamacare because none of the Republican plans does the same things  Obamacare does, at least on paper. In other words, to qualify as an Obamacare replacement, your plan has to accomplish pretty much the same thing, with pretty much the same methods. This strikes me as a bit of a game, especially given the  conflation of ends and means: if I replace my Ford with a Honda, do I still have  a car? Or my desktop with my laptop – do I have a computer? Or sugar with  Splenda… you get the idea. But then Ezra goes on to spend 2400+ words criticizing Republican plans. This itself is a welcome acknowledgement that  these Republican plans must in fact exist, which was the whole point of my  original post. Ezra’s real contention is not “You have no plan”, but “Your plan  is all wrong.” Good! Now, four years later, we can have a debate.

The eight points that I noted as principles shared by the overwhelming  majority of Republicans approach health care from a different perspective than  Ezra and the Democrats. The accusation on Ezra’s part is that Republicans think  we have too much insurance. He’s basically right – but there is a difference  between saying “we have too much insurance” and saying “we have too many people  insured”. It’s important to be careful here, because we’re judging how a  Republican plan would work against how Obamacare’s supporters claim it would  work, or ought to work. Democrats see getting insured as an end; but for  Republicans, more healthy people is the end.

What most of the conservative health policy experts on the Right want is  greater access to quality, affordable care. They understand health insurance  does not guarantee quality health care any more than car insurance guarantees  you a mechanic who fixes what’s actually wrong with your car without  overcharging you. They want people getting insured because insurance is more  affordable, competing in a marketplace to provide people with what they  want – and thus Republicans are focused on cost, while Democrats are focused on coverage.

Ezra argued recently that it’s okay that we’re seeing premium hikes, because people are  paying for better insurance. But that’s a bait and switch. Obama didn’t promise that Obamacare would have people paying more for a better product – he promised premiums would go down $2500 and that most people would keep the same insurance  and the same doctor they had before. Affordability was how he led with it – it’s right there in the title: the Affordable Care Act! Yeah, about that. And it’s an open question, I think, about whether these plans are really any better. For those getting regular email updates from their insurer about the subtle tightening of the reins on access to certain procedures, it looks more like insurance is getting more expensive while covering things Washington deems more important than what they covered before – which may or may  not be what you need at an individual level.

Republicans are in this cost-focused position in part for populist reasons: cost is what most Americans care about. According to a March 2009 report released by Health and Human Services, a majority of Americans identified cost  as their top concern with American health care – not coverage. See U.S.  Department of Health and Human Services, “America Speaks on Health Reform:  Report on Health Care Community Discussions,” page 101. It used to be online here, but HHS has taken it down for some odd reason.

Unfortunately, today we have an insurance system that doesn’t work like an  insurance system. Megan McArdle just had a great  post on this the other day, following up on Kathleen Sebelius’s criticism of  catastrophic coverage as “not real insurance”:

“It’s why high deductibles are a good idea—for  small expenses, it’s better to self insure. And it’s why “catastrophic” health  plans, which only cover the sort of extremely expensive events that most people would have difficulty financing, are a much better deal than the soup-to-nuts  plans that most people get through their employers. Those plans are expensive,  both because they’re paying for a higher percentage of your expenses, and because they drive up utilization–which means that they drive up next year’s  premiums even more. Imagine what your car insurance would cost if it covered  gasoline, routine maintenance, and those little air freshener trees you hang  from the rearview mirror. Then stop asking why health insurance costs so much…Sebelius’ response is apparently that catastrophic insurance isn’t really  insurance at all—which is exactly backwards. Catastrophic coverage is “true insurance”. Coverage of routine, predictable services is not insurance at all;  it’s a spectacularly inefficient prepayment plan.”

I typically use the example of your homeowner’s insurance policy being used every time a lightbulb busts. Imagine if you had to go to a housing clinic that  was in your plan, wait for an advisor to tell you the proper lightbulb which you already know you need, go to another hardware store to pick up the lightbulb, pay a copay for the lightbulb, etc. Who would do that? And yet we do it all the  time in the health care space. Most spending is on the broken lightbulb equivalent of chronic diseases, and that’s exactly where things like Ken  Thorpe’s work come in.

The point is that insurance is one way to pay for health care services, but it is not the only way, and very often not the best way. It adds massive administrative costs to every transaction. These are costs not solely born by  the insurance company (or the employer), but includes costs on providers imposed  by insurance companies. It is far more efficient to pay directly for a service received whenever it is possible to do so (and as consumer driven coverage evolves and expands, the optimal cut-off line will become more apparent). The  presence of third-party payment always leads to overutilization, mistrust, and  lack of accountability. Who is your doctor working for, you or the payer? Who  cares what something costs if someone else is paying for it?

[WARNING, WONK LANGUAGE:] What’s more, if you favor global budgets and  capitated payments to providers (as most on the left do), it really amounts to a defined contribution by another name. [/WONK] What’s the difference between  that, conceptually, and premium assistance? The level of who receives the  payment – be it government entities, providers, or the individual. Don’t we  trust Americans to act more in their self-interest than people farther away from  it?

Republicans calculate that most people would rather have less insurance plus more freedom, with prices driven down by market forces, over more insurance and government-run health care with its attendant access problems, rationing, care denials, higher taxes, regulatory burden, etc. Having access to affordable health care is not the same as having comprehensive health insurance, and in fact the latter has undermined the former. Price transparency is key here (why do most Democrats want to bully health plans on their rate increases but don’t seem to think hospitals should have to publish prices for services?). CMS’ national health expenditure data over the last 30 years illustrates this: premiums go up as out of pocket costs plummet. Quality is important too, and we ultimately need both. But we have to  start with something and everyone understands price.

In part, Ezra acknowledges this. He never really challenges the view that having patients share more of the cost of health care leads to lower costs (and higher coverage). He implicitly endorses it when he opines that a $10,000 deductible is sufficient. Great! Now we can just negotiate over the amount of  the appropriate deductible.

While Ezra’s right that there will be lower-cost options in the exchanges  that have high deductibles at first, these lower-cost options are almost  assuredly going to be eliminated over time. Since my original post was from  July, if I was writing it today I’d add a modifier that Republicans will likely  push hard to exempt HSAs/HDHPs from Obamacare – preserve them, expand them, and  make them available to everyone, including seniors. Obamacare’s regulations are  already wrecking the individual market, and I expect future regs to limit these plans even  further given the left’s natural dislike for them (despite their increasing  popularity, or perhaps because of it).

Now, for the safety net: Republicans acknowledge the poor will always need to  be subsidized. We can subsidize them inefficiently by buying first dollar coverage, or we can subsidize them more efficiently through funded HSAs or direct delivery of services. For the truly miserable – those functionally  illiterate, drug addicted, mentally ill, etc. – the obsession with universal  health insurance does absolutely nothing. They need direct delivery.

Medicaid is simply not a good program, as it currently functions. Its outcomes range from the subpar to the atrocious; it is rife with access problems  and there’s a reason why so many of the uninsured who are currently eligible for  it simply don’t enroll. Yes, Medicaid block grants as currently proposed will  reduce the number of people covered by the program…but Republicans think that’s  a good thing, because it would be a step toward returning Medicaid to the role it was intended to have from the beginning: a program for the poorest of the  poor and the sickest of the sick. Fewer people means fewer access problems. But again, we can negotiate here: just increase the amount of the block grant.  Structure is more important than the dollar figure here.

I disagree that Republicans think Medicare is the driver of all that’s bad in  our health system. They just believe that bureaucrats in Baltimore aren’t smart enough to run 1/6th of the economy – I mean, we are talking about a program that will pay for penis pumps but not eye glasses. Because commercial health plans benchmark payments for good and services to some percentage of Medicare, all the  price distortions get imported into the system, even if tweaked a bit. This leads to overpaying for some things, and underpaying for others. Because the  nature of this fee for service + third party payer system has the incentives all  wrong, we end up with incredible fragmentation, waste, and even worse problems.

Somewhat counterintuitively, Democrats also give every indication of  believing that Medicare is a problem. They always say that “Medicare can be the model” of the direction toward a utopia of lower costs and coordinated care. But wait: If they say Medicare will be the driver of future improvement, aren’t they  implying that it hasn’t been in the past – that Medicare has helped lead our  system to its current dysfunctional state. When then-CMS head Donald Berwick was  on C-SPAN’s Newsmakers a few years back, he was asked if Medicare was going to become so good at reducing costs, why hasn’t it done so over the past half century? Here was his  answer.

For my part, the tax subsidies for employer-based care are a bigger part of  the problem. Republicans are divided about how to deal with this issue: some want 100% deductibility of medical expenses, others are in favor of a refundable tax credit (either flat or based on need). Either way, this is one of the most regressive tax policies on the books, and reforming it has got to be one of the primary goals of post-Obamacare policy. No, there isn’t Republican unanimity on the best approach, but there is unanimity on it needing to be fixed – and of course there wasn’t Democrat unanimity on health reform in the 2008 primaries, either, or even during the 2009 process of passing the bill.

So what do we have, at the end of the day? We have the major points of a replacement for Obamacare which looks to solve different problems, using different mechanisms, and bending responsibility and authority toward the individual, not the state. These proposals have the advantage of working  piecemeal towards these goals, rather than being lashed together into a single unified Rube Goldberg machine that only works if you’ve properly balanced all  the pieces at once – an impossibility in a system this big, complex and  bureaucratic. Yes, these points aren’t aimed at accomplishing the same goals as Obamacare. So that is a difference. There is another one, I suspect: unlike Obamacare, I think a replacement built on these principles will actually  work.

[First published at Real Clear Politics]

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I’m scanning headlines on the Internet. I see President Obama has announced he’ll agree to cut Social Security and other benefit programs in exchange for higher taxes. I think, “Take more, give less. This is what government has done to me my whole life.”

I jump to another headline. It reads, “Fisker Automotive lays off most workers, struggles to find investor.” Fisker Automotive sounds familiar. Didn’t the federal government give that company a boatload of money? I start reading the story. I read this:

“Fisker has been working for months to raise $500 million so it could restart production of the Karma, its only model, which was built in Finland. Fisker stopped making the $110,000 plug-in hybrid last year after A123 Systems Inc., the maker of its lithium-ion battery, filed for bankruptcy.

“The company ran into a cash crunch after the federal government froze an Energy Department loan. Fisker is supposed to make the first payment on some of $192 million it borrowed from the government later this month.”

That’s right! The feds loaned Fisker money. I go back and read again. A $192 million loan to build a $110,000 hybrid sports car! This from an administration that stresses solidarity with the middle- and lower-income groups who could never afford such a car — an administration that constantly harps on its desire for the wealthiest Americans to pay more taxes and that’s demanding higher taxes in exchange for cutting Social Security, Medicare and other benefits.

It’s late in the day and I’m tired and can’t think of anything to say. Is there anything to say beyond the facts as already stated? A president who wants to raise taxes and lower benefits, and whose administration gave a $192 million loan to build $110,000 sports cars that probably won’t be repaid. Just another day in federal government.

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The North Carolina House Commerce and Job Development Subcommittee on Energy and Emerging Markets narrowly passed a bill Wednesday that would slowly reduce and ultimately end the state’s renewable portfolio standard. A law currently adopted in 29 states and the District of Columbia that requires utilities to obtain a specified percentage of their power from renewable sources by a certain date.

Below are the results of the vote, which passed 11-10:

YES

Hugh Blackwell (R)

Robert Brawley (R)

Mark Brody (R)

Rick Caitlin (R)

Jeff Collins (R)

Mike Hager (R)

Bryan Holloway (R)

Chris Millis (R)

Dennis Riddell (R)

Jacqueline Schaffer (R)

Mike Stone (R)

NO

Becky Carney (D)

Carla Cunningham (D)

Elmer Floyd (D)

Susi Hamilton (D)

Edward Hanes (D)

Rodney Moore (D)

Tom Murry (R)

Ruth Samuelson (R)

Evelyn Terry (D)

Michael Wray (D)

 

Did Not Vote

Jason Saine (R) [Chair]

 

During the testimony, the wind and solar lobby each took separate turns touting the number of “green” jobs they’ve  created. Until a representative from the Civitas Institute rightfully pointed out the opportunity cost that rising energy costs have on the state economy, and called into question what total economic value the “green jobs” brought compared to the jobs that would have been created with greater energy affordability.

Representatives from the solar industry were also enthusiastic about mentioning how fast the price of solar has fallen. This is true, but ultimately a red herring. By 2016, the U.S. EIA projects the levelized cost of electricity using solar photovoltaic technology will still cost 234% more than using the most affordable source, so it’s not going to be competitive on its own anytime soon.

Furthermore, while solar is improving, other renewables are not, despite them having all the same advantages solar has.

As the Raleigh News & Observer - a supporter of the mandate themselves – recently reported:

Meanwhile, electricity generated by wind as well as poultry and swine waste have made almost no progress here despite being eligible for the same subsidies that are available for solar power. Those renewables continue to face significant economic and technological obstacles.

So even with guaranteed business and a regulatory fence to protect from competition, most renewables are still having trouble competing with themselves.

The bill now moves onto the Environment Committee, where one of the two republicans who voted against the measure, Ruth Samuelson, is Vice Chairman.

It’ll be interesting to watch if anyone points out the damage renewable power has done to wildlife, or the additional air pollutants renewable power has caused by misusing fossil fuel generators as backup sources.

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President Obama likes to pose as a martyred man, because when he entered office, the economy was in a recession. But the recession soon ended, following the pattern of the American economy for the entire previous two-thirds of a century, and more.

During that time before Obama, America suffered 11 recessions since the Great Depression. The average length of those previous recessions was 10 months, with the longest being 16 months, as I have reported in this column before. When Obama entered office, the recession was in its 13th month. So based on the previous, long-term pattern of the American economy, the recession would soon be over.

And it soon was. According to the National Bureau of Economic Research (NBER), a collection of top economists recognized as the authoritative body as to when recessions start and when they end, the recession ended in June 2009. So the rest of Obama’s entire first term was the recovery from the recession.

That should have been very promising for Obama, because the long-term historical pattern of the American economy was also the deeper the recession, the stronger the recovery. Economist John Lott, in his new book, At the Brink: Will Obama Push Us Over the Edge?, quotes Milton Friedman on this point as saying, “A large contraction in output tends to be followed on the average by a large business expansion; a mild contraction, by a mild expansion.”

That was true even during the Great Depression. From 1935 to 1937, the economy actually boomed, with real GDP growth peaking at an astounding 13.1% in 1936. Similarly, in 1946 to 1948, the economy also suffered a severe recession, as America powered down from the World War II economy. But the economy began a postwar boom in 1949, with real GDP growth reaching 8.7% in 1950.

The economy boomed over the 1950s and 1960s in further recovery from the Great Depression 1930s. And it boomed with the historic, 25-year Reagan boom from 1982 to 2007, in recovery from the disastrous 1970s, which suffered historic, double digit inflation, and four worsening recessions from 1969 to 1982.

But nothing like that happened during the Obama recovery from the Great Recession. Real GDP growth peaked at 2.4% in 2010, and has never again reached even that pitiful level for a recovery from a deep recession. All Obama had to do to be a hero was stay out of the way of the typical American recovery. But Obama couldn’t do it. He was too busy fundamentally transforming America, a goal that implies there was something fundamentally wrong with America before he came along.

But is Obama’s fundamental transformation making America better, or trashing it? Obama keeps trying to tell us what a great success he has been by comparing the recovery to the recession. But recoveries are always better than recessions, by definition, so that is no achievement.

The right measure and comparison for Obama’s record is to compare the recovery not to the recession, but to 11 previous recoveries since the Great Depression. In those recoveries, the economy recovered all jobs lost during the previous recession within 25 months after the prior jobs peak (or recession start). So the job effects of prior post-recessions have lasted an average of about two years. But under President Obama, at the end of his first term in January 2013, 61 months after the prior jobs peak, more than 5 years, we still had not recovered all of the recession’s job losses. In January 2013, there were an estimated 134.8 million American workers employed, still down more than 3.2 million jobs from the prior peak of 138 million in January, 2008.

That included the longest period since the Great Depression with unemployment above 8%, 43 months, from February 2009, when Obama’s so-called stimulus costing nearly $1 trillion was passed, until August 2012. It also included the longest period since the Great Depression with unemployment at 9.0% or above, 30 months, from April 2009, until September 2011. In fact, during the entire 65 years from January 1948 to January 2013, there were no previous months, before Obama’s reign of error, with unemployment over 8%, except for 26 months during the bitter 1981-1982 recession, which slew the historic inflation of the 1970s. That is how inconsistent with the prior history of the American economy President Obama’s extended unemployment has been. That is some fundamental transformation of America.

By this point in the Reagan recovery, 61 months after the recession started, jobs had grown 8.7% higher than where they were when the steep 1981-1982 recession started, representing an increase of about 10 million new jobs. By contrast, in January 2013, jobs in the Obama recovery from the 2008-2009 recession were still 2.3% below where they were when the recession started, at least 3 million less, or a shortfall of about 8 million jobs if you count population growth since the recession started.

Moreover, in the 11 post-Depression recessions before President Obama, the economy recovered the GDP lost during the recession within an average of 4.5 quarters after the recession’s start. It took Obama’s recovery 16 quarters, or 4 years, to reach that point. Today, 5 years, or 20 quarters, after the recession started, the economy (real GDP) has grown just 2.4% above where it was when the recession started. By sharp contrast, at this point in the Reagan recovery, the economy had boomed by 18.1%, almost one-fifth.

Worse Even Than Bush or Carter

Bush’s second term suffered the Great Recession for more than a full year, or more than 25% of Bush’s entire second term, while the recession covered only the first 5 months of Obama’s first term. Prior to Obama, Bush’s second term suffered the worst real GDP growth of any full Presidential term since the Depression, with an average of just 1.9%. But average annual real GDP growth during Obama’s entire first term was less than half as much at a pitiful 0.8%.

Indeed, not only was economic growth during Bush’s awful second term more than twice as high as during Obama’s entire first term. Even Jimmy Carter produced 4 times as much economic growth during his one term as Obama did during his entire first term. In fact, real GDP growth under Obama has been the worst of any President in the last 60 years, as observed by Jeffrey H. Anderson, a senior fellow at the Pacific Research Institute, in Investor’s Business Daily on January 13.

But it’s even worse than that. As Anderson further observes, Obama’s real GDP growth has actually been less than half as much as the worst of any President in the last 60 years. In other words, even if you doubled actual GDP growth under President Obama, it would still be the worst record of any President in the last 60 years!

By the fourth quarter of 2012, Obama’s economy basically stopped growing altogether. Even if the economy finally breaks out into some real growth this year, that is only because of the long overdue recovery that is still straining to break out inside this economy, as indicated by the data above for 1936, in the depths of the Depression, and the postwar boom that started in 1950. That and the startling Reagan recovery from the 1970s are the standard for Obamanomics. Don’t be fooled by some way overdue short-term growth spurt this year that just reflects the basic cycles of the economy. Unless the fundamentals of Obamanomics are changed, the result will be long-term stagnation compared to the historic, world-leading, booming economic growth of the American Dream, and probably another recession during Obama’s second term.

Where Obama Went Wrong

The real reason Obama’s recovery has been the worst since the Great Depression is that he went back to the Keynesian economics of the Great Depression, which didn’t work then and won’t work now, and has pursued exactly the opposite of every pro-growth policy illuminated by Reaganomics. Obama’s Keynesian economic policies have focused on increasing demand, particularly through increased government spending and deficits, and through easy monetary policy, as the key to restoring economic growth, rather than focusing on incentives to increase production, as in the new, modern, supply-side economics that Reagan adopted in 1981. Keynesian policies failed so thoroughly in the 1970s that it is puzzling as to why Obama returned to them, as if he were ignorant not only of what happened then, but of everything that happened after then, from 1980 on. That is why I have called Obama’s economic policies Rip Van Winkle economics, because Obama seems to have slept through the 25-year economic boom from 1982 to 2007, and to be totally unaware of everything that happened then, in his own country.

Keynesian economics first arose in the 1930s in response to the Depression. The doctrine holds that economic growth is stimulated by increased government spending, deficits and debt. That is supposed to increase aggregate demand, which is supposed to lead to increased production to satisfy that demand, restoring economic growth.

But if the government spends more, where does the money for that increased spending come from? Either from increased borrowing, or increased taxes, which both take an equal amount of resources and spending out of the private economy as they finance in increased government spending. So not only can there not be a net increase in aggregate demand from these policies. The result is a net drag on growth, as the private economy spends money more productively and efficiently than the government. That is why it never worked in the 1930s, as the recession of 1929 extended into the decade long Great Depression, and it hasn’t worked anywhere else since. This is also why Obama’s so-called “stimulus” from February 2009 failed thoroughly, just wasting nearly a trillion dollars, and adding that much more to the national debt.

But most fundamentally, economic growth is not driven by demand, which is insatiable, but by increased production or output (supply), which is driven by incentives for productive activity. In other words, just as an individual cannot spend himself rich, neither can a nation. Prosperity is determined by production, just as an individual increases his or her income by becoming more productive.

Demand can never be inadequate in a market economy. If the demand for any product or service is not strong enough, the price of the good or service will fall, until demand equals supply. The people can never spend more than they produce, increasing aggregate demand. And they will never spend less, leaving demand inadequate, for they will either consume or save every dime that they earn or produce. The consumption goes into consumer spending, and the savings goes into capital spending (which is actually what makes us richer and more prosperous over the long run).

Keynesian economics has survived so long in Western thinking not because it works, or even makes any sense, but because it justifies what liberal politicians already want to do – spend with reckless abandon, run bigger and bigger deficits so they don’t have to explicitly pay for the spending with higher taxes today, and run up the national debt, which will be someone else’s problem later.

Obama was sold to us as a progressive, forward-looking thinker. But he is actually taking America back to the thoroughly failed economics policies of the 1970s, and even the 1930s, and so ultimately to the same results. Obama should have known better, given the uniformly bad experience with Keynesian economics worldwide, and its fundamental, transparent illogic. Indeed, Obama had a responsibility to the American people to know better. This latest experience with Keynesian Obamanomics in producing the worst recovery since the Great Depression should be taken as the final failure of the transparently foolish Keynesian doctrine, which now needs to be put to bed, in American colleges and universities, and throughout the councils of government.

[First published at The American Spectator]