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The Policy and Commentary Blog of The Heartland Institute
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The Least Efficient Part of Government

April 27, 2014, 12:54 PM

Spectrum management is the least efficient part of the federal government.

That’s a big national problem because radio spectrum is the essential fuel of the mobile revolution of smart-phones, tablets, video streaming and the Internet of things.

The worst-resource management in the federal government unnecessarily burdens one of the most modern, dynamic and innovative parts of the American economy – mobile.

This is not a partisan issue, it’s a good government issue that badly needs fixing – fast. The status quo is indefensible.

Fortunately, Congress is listening.

The House Energy and Commerce Committee has asked all interested parties for input into how to best modernize U.S. spectrum policy as part of the committee’s broader legislative effort to update the Communications Act next Congress. Comments are due this week.

The inability of the federal government’s spectrum system to make available sufficient federal spectrum for auction, just to keep pace with skyrocketing mobile usage, threatens to become an unnecessary growth cap on the increasingly mobile-driven 21st century economy.

How did the government’s spectrum management system become the anachronism it is today?

It was designed for a bygone era – the analog 1900s, not the mobile broadband 21st century.

The obsolete 1992 law in question simply codified a 1978 executive order that established the National Telecommunications and Information Administration (NTIA), which only partially covered spectrum.

To put that in perspective, that means the federal government’s basic spectrum management approach predates the first commercialization of cell phones in the U.S. in 1982 – by four years.

At that time most all radio spectrum was used or controlled by government agencies with very little spectrum used directly by consumers or the private sector. That means that spectrum management was, and remains largely today, organized for the convenience of government agencies – not for the benefit of American consumers or the private sector.

The year after that 1992 law fossilized spectrum policy in the analog 1900s, Congress passed a provision in the 1993 Reconciliation Act that authorized spectrum auctions for about 120 MHz of spectrum for personal communications services. In perspective, that auction commercialized 4 percent of the most commercially valuable wireless spectrum between 400 MHz and 3 GHz.

That PCS auction catapulted wireless competition, consumer use, and growth forward. How much? The number of American wireless subscribers exploded more than 3,000 percent from 11 million connections then, to 335 million today.

Currently only about 15 percent of the nation’s choice spectrum suitable for commercial broadband is available to the private sector.

Unfortunately in the past few years, the government agencies that control the lion’s share of choice spectrum have largely refused to clear more spectrum for private auction. Their offer is to let the private sector “share” some of their spectrum scraps as second class spectrum citizens.

So why is spectrum management the least efficient part of government?

First, the system now can take 9-12 years to make spectrum available for auction. Contrast that with the speed of change in the private sector, where in less than seven years after the invention of the smartphone, about 200 million Americans use one of these new spectrum-hungry devices.

Second, there is no national policy that recognizes spectrum is a scarce valuable resource that must be put to its highest and best use for the nation.

Third, in the current ad hoc spectrum system, literally no one has the authority to ensure spectrum is efficiently and effectively utilized by the government.

Fourth, America’s spectrum system scandalously has none of the normal or standard government accountability processes – i.e., decision-making responsibility, budget, accounting, audit, etc. – that is required of every other valuable government resource like land, buildings, vehicles, personnel, money, telecom services, oil, etc.

Finally, it is obvious that no one is minding the government’s spectrum store because no one in government is requiring government agencies to share spectrum better among themselves.

The current claim of a “transformative” spectrum policy that promotes government-private sector sharing of spectrum is less a policy-improvement, and more akin to a policy-surrender to unaccountable government agencies who are unwilling to use their spectrum more efficiently so Americans may benefit.

America currently has a scandalously dysfunctional spectrum system that remains organized for the convenience of government agencies’ 1900s needs, not the 21st century needs of consumers, taxpayers and businesses, who need the spectrum as much or more than the government agencies do.

The bipartisan solution is simple – good government.

Like any other trillion dollar resource, someone must be responsible and accountable so that it is put to its highest and best use in both government and in the private sector, and also so that it is not vulnerable to waste, fraud and abuse like it is now.

Congress needs to update U.S. spectrum law to protect our nation’s mobile communications future. Without more spectrum available to the private sector, the mobile revolution of smartphones, tablets, video streaming and the Internet of things are at increasing risk of hitting an unnecessary wall in long-term mobile growth.

Congress must legislate to ensure that someone minds the nation’s trillion-dollar spectrum store.


[Originally published at Daily Caller]

Categories: On the Blog

It’s Groundhog Day: Government Taking Third Stab at Net Neutrality Power Grab

April 26, 2014, 12:40 PM

This is at once obnoxious and pathetic.

Wheeler Tees Up Net Neutrality for May Meeting

FCC Chairman Tom Wheeler said Wednesday that he would be circulating a draft of the FCC’s new network neutrality rules to the other commissioners Thursday (April 24).

This is their third attempt at this particular power garb.  It’s becoming fetishistic.

There was 2007.

Court Backs Comcast Over FCC on ‘Net Neutrality’

And there was 2010.

Verizon Wins Net Neutrality Court Ruling Against FCC

Yet here we remain – stuck in government overreach Groundhog Day.

We haven’t yet seen the Net Neutrality power grab order – but the fact that they’re trying again at all is at once obnoxious and pathetic.

Not yet having seen the order hasn’t stopped the Left from going apoplectic.  Because the Left never allows the facts to get in the way of a good beating.

The FCC Tosses Net Neutrality Out the Window

So This is How Net Neutrality Dies, Under a Democratic President

Thanks to the FCC Net Neutrality is Dead

Obama’s Second FCC Chairman Fails on Net Neutrality

Stop the FCC from Breaking the Internet

Not at all over the top.

To all of which I say:

It’s disappointing – but not surprising – that the Obama Administration is yet again going to impose the Internet power grab that is Network Neutrality.

The federal government is twice bitten – and not shy.  Having twice had their Net Neutrality impositions unanimously rejected by the courts – they remain undaunted in their desire to over-regulate the Web.

And it’s always a pleasure to watch the Leftist likes of Free Press and Public Knowledge preemptively freak out – over an order they haven’t even yet seen.

They are as always the perfect tool.  The Leftist screeching visual aides that allow an overreaching government to pretend “See, we’re finding middle ground – both sides are angry with us” as they grab even more Leviathan-sized hands-full of the once-private sector.

Don’t drive angry.

[Originally published at PJ Tatler]

Categories: On the Blog

Common Core and Communism

April 26, 2014, 12:28 PM

“A lie told often enough becomes the truth,” said Vladimir Lenin who led the revolution that imposed Communism on Russia.

When he wrote, ‘Mein Kampf’, Adolf Hitler said “whoever has the youth has the future.” In his vision for the Nazi Party, education would be the key that ensured that he had ‘the youth’ of Germany fully indoctrinated.

All dictators and authoritarian regimes know that what is taught in their schools offers the greatest opportunity to maintain control over their societies.

That is what has been occurring since the introduction of the Common Core standards that the Obama regime has imposed on our national education system and the good news is that protests against it from concerned parents and others are beginning to increase and gain momentum.

Teachers will tell you that “one size fits all” does not apply in the classroom and never has. Children learn at a different pace with some doing so rapidly while others need extra help and attention. Learning that is entirely dependent on ceaseless testing puts stress on every child and that is the most common complaint about Common Core.

Education in America has been in decline since the 1960s when the teachers unions gained control over the process, putting themselves between the local boards of education and parents. Would it surprise anyone to learn that the Department of Education was established by President Jimmy Carter who signed it into law in 1979? It began operation on May 4, 1980. You will find no reference, no mention of education in the U.S. Constitution and it should not be a function of the federal government.

In a recent commentary by Joy Pullmann in The Daily Caller, she said, “The latest scheme is the field testing of Common Core assessments. This spring more than four million kids will be required to spend hours on tests that have little connection to what they learned in class this year and will provide their teachers and schools no information about what the kids know.”

“Parents who object to this scheme,” said Pullman, “face bullying and harassment from public officials. From New York to Denver to California, some schools are responding by forcing kids who opt out to sit at their desks and do nothing during the several-hour tests. Normal people call that a ‘time out’ and it is a punishment.”

Wyoming has become the first State to block a new set of national science standards that address climate change. In Michigan last year a group of protesters stopped the State from adopting the science standards.

Here are some excerpts of what the science standards teach as “The Essential Principles of Climate Science.”

“The impacts of climate change may affect the security of nations. Reduced availability of water, food, and land can lead to competition and conflict among humans, potentially resulting in large groups of climate refugees.

“Humans may be able to mitigate climate change or lessens its severity by reducing greenhouse gas concentrations through processes that move carbon out of the atmosphere or reduce greenhouse gas emissions.

“The most immediate strategy is conservation of oil, gas, and coal, which we rely on as fuels for most of our transportation, heating, cooling, agriculture, and electricity. Short-term strategies involve switching from carbon-intensive to renewable energy sources, which also requires building new infrastructure for alternative energy sources.”

From “A Framework for K-12 Science Education” children are to be taught that “If Earth’s global mean temperature continues to rise, the lives of humans and other organisms will be affected in many different ways.” Only the Earth’s mean temperature is not rising! The planet is in a natural cooling cycle that is now seventeen years old, meaning that none of the students in today’s schools have ever experienced a single day of “global warming.”

By the end of grade 8, the Framework teaches that “Human activities have significantly altered the biosphere, sometimes damaging or destroying natural habitats and causing the extinction of many other species.”  This, too, is untrue. The U.S. Endangered Species Act, despite listing thousands of species, has not officially “saved” more than a handful at best and this assertion is questionable.

By the end of grade 12, students are expected to believe that “Changes in the atmosphere due to human activity have increased carbon dioxide concentrations and thus affect climate.” While it is true that there has been an increase in the amount of carbon dioxide this is a good thing because it is an essential factor in the increase of all vegetation that includes food crops and healthier forests. Moreover, this increase does not play any role in the Earth’s climate.

The central theme of these “science standards” is to teach that we should be reducing our use of fossil fuels, the primary energy sources our nation and the world requires. What these standards do in reality is repeat and reinforce federal government laws and regulations to justify its CO2 emissions regulations based on the current method of computing the Social Cost of Carbon, but these “costs” are pure fiction.

None of the computer models that have predicted global warming over the past four decades have been accurate. None are capable of representing the state of the Earth’s vastly complex climate.

The sooner Common Core is removed from the nation’s education system, the better.


[Originally published at Warning Signs]

Categories: On the Blog

The FCC Disincentive Auction

April 25, 2014, 1:28 PM

The Federal Communications Commission’s upcoming “incentive” auction of TV airwaves is already at war with itself.

Somehow the FCC imagines it can maximize the revenue necessary to incent TV broadcasters to sell their 600 MHz spectrum by minimizing actual revenue collection via dis-incenting, and even banning some wireless company bids.

Old habits die hard.

Apparently, in its zeal to solve a wish-list of secondary wireless goals, in one fell auction swoop the FCC has lost sight of first principles – the need to economically-align all participants’ market incentives in order to maximize auction revenues.

It is obvious the FCC has never attempted such a complex two-sided auction of sellers in a “reverse auction” and buyers in a traditional “forward auction.” If they had, they would give more than lip service to “economics” and focus much more on economically aligning the market incentives of both sellers and buyers.

If this was really to be a market “incentive” auction of spectrum, the collective incentive for broadcasters to sell their spectrum, would be matched by the collective incentive of the wireless industry to bid for the broadcasters’ licenses. It is not.

The FCC has created Rube Goldberg auction rules to mask that the FCC will effectively ban the two largest wireless providers, Verizon and AT&T, from bidding and winning badly needed spectrum in roughly two-thirds of the country.

This is a big problem for the potential success of the incentive auction and most Americans because Verizon and AT&T have the highest network utilization and hence the highest real consumer-demand for this spectrum. They also have the most financial wherewithal to bid.

Any entry-level economics student understands that if most demand is eliminated from a market by banning the biggest bidders, potential prices will plummet. Predictably, broadcasters will suffer from earning a fraction of what a real market incentive auction would generate.

And the FCC-chosen wireless beneficiaries permitted to bid will enjoy the bargain of a lifetime – the best spectrum possible at a multi-billion dollar discount, unwittingly paid for by the American taxpayer.

Since the FCC does have excellent economists, the only explanation for the FCC’s obvious misalignment of economic incentives is that the FCC is not trying to maximize revenues at all.

It is trying to maximize its regulatory power to pick market winners and losers and to tilt the competitive playing field by politically reallocating the foregone, multi-billion-dollar market-surplus largely to Sprint and T-Mobile.

Another big way this auction is at war with itself is that it is proposing to act anti-competitively to ostensibly promote competition.

Just over two years ago the Department of Justice and FCC blocked the AT&T/T-Mobile merger because they determined it would reduce a four-competitor market to three competitors because Verizon, AT&T, Sprint, and T-Mobile comprised over 90 percent of the U.S. wireless market.

Using the government’s own recent wireless market definition, the DOJ and FCC plan to reduce the effective bidding competition for this 600 MHz spectrum auction market from four existing national competitors effectively to two.

Ironically the DOJ and FCC are creating and blessing a de facto, “wireless duopoly” of auction bidders for low-band spectrum – Sprint and T-Mobile.

A large reason that the DOJ and FCC ostensibly argued for a four-competitor market is that they believe a market of just two or three players creates a much higher opportunity and incentive to collude and carve up markets.

So on what basis do the DOJ and FCC believe that their artificially-created wireless bidding duopoly, Sprint and T-Mobile, which are widely-reported to be in behind-the-scenes talks to merge, would not have substantial opportunity and “incentive” to collude to win spectrum at the lowest possible price?

This DOJ-sanctioned auction bidding duopoly is in stark contrast to standard DOJ policy and precedent that normally opposes bid-rigging of government auctions.

In prosecuting a company which attempted a scheme to rig bids on military contracts, then DOJ Antitrust Chief Thomas O. Barnett said,“The antitrust division is committed to protecting the competitive market for Americans. We will continue to bring to justice those who rig bids and thereby deprive the public the benefits afforded by a competitive bidding process.”

How does DOJ square the circle that it’s ok for government agencies to do what is illegal for companies to do? How do their purported pro-competitive ends justify their anti-competitive means?

The problem here is doubly simple – unfairness.

First, it is unfair to shortchange the American taxpayer of many billions of dollars of deficit reduction so the FCC effectively can steer unauthorized, multi-billion dollar, implicit-bidding subsidies to Sprint and T-Mobile, who don’t even need them to bid in this auction. Sprint is owned by the wealthiest person in Japan and T-Mobile is one-third owned by the German government.

Second, without due process, the DOJ and FCC are unfairly punishing Verizon and AT&T financially and competitively for having done nothing wrong under the law. It’s not their fault Sprint and T-Mobile chose not to bid in the last “low-band” auction for 700 MHz spectrum.

This new contrived bifurcation of the spectrum market into lower-than, and higher-than, 1GHz segments specifically for the purposes of this 600 MHz auction, arbitrarily and capriciously punishes only two companies for legal competitive success without the due process of a judicial proceeding.

Hopefully, the FCC will reconsider these uneconomic and unfair auction rules.

[Originally published at Daily Caller]

Categories: On the Blog

The Failure of Oregon’s Welfare Program

April 25, 2014, 1:05 PM

Oregon just became another example of how excessive hand-outs are hurting needy families. A recent audit released by the Oregon Secretary of State’s Office found the state made “little to no progress” in moving clients off welfare and towards self-sufficiency. The 2011 Legislature made the decision to cut funding for programs that helped parents move towards work and job training. This led case managers to have twice as many clients and very little time to help them.

Although Oregon officials are quick to blame a slow recovery from the recession, the state’s own recovery is significantly slower than the nation’s. In order to expand Temporary Assistance to Needy Families (TANF) and offer a lower threshold to receive checks, Oregon decided to cut the programs that would actually help people out of poverty. Oregon TANF clients now rank among the worst in finding and retaining jobs. The handouts were not enough to help the needy families and with the cuts to work-related support programs, clients had few options. The legislature’s actions actually forced organizations that promoted self-sufficiency to close—a clear step in the wrong direction.

Oregon’s blunder shows why we must promote work-related support for the needy. States across the country are using One-Stop Career Centers to reduce unemployment and welfare dependency. These centers offer programs on how to gain computer skills (using Excel, LinkedIn, etc.), draft an effective resume, and prepare for interviews. Many also offer extensive job search tools and ways to purchase or borrow work-appropriate clothing. Programs like this get people back into the workforce. It gives the unemployed the skills they need to find and keep a job, something monthly checks are unable to do. Most importantly, getting people back into the work force will reduce unemployment and welfare costs for the state.

Some of the most effective programs include non-profits that establish themselves in underserved communities. Connections to Success has set up offices throughout Kansas City and St. Louis that cater to the specific needs of those in the community. They understand what their clients need and work with them to become self-sufficient—exactly what Oregon is working against. The organization works to break the cycle of poverty rather than perpetuate it. Its clients tout exceptional success stories that could have never been reached with a monthly check and no personal support.

The audit on Oregon’s TANF program actually recommends that the state starts working with non-profits (like Connections to Success) to begin fixing their problem. The state’s extension and expansion of handouts has severely hurt those it was meant to help. Instead, Oregon must start following the lead of other states and begin prioritizing work-related support over cash assistance. By doing so, the state will be able to see long-term, permanent success.

Categories: On the Blog

The 2014 State of Wind Energy: Desperately Seeking Subsidies

April 25, 2014, 12:23 PM

With the growing story coming out of Ukraine, the ongoing search for the missing Malaysian jet, the intensifying Nevada cattle battle, and the new announcement about the additional Keystone pipeline delay, little attention is being paid to the Production Tax Credit (PTC) for wind energy—or any of the other fifty lapsed tax breaks the Senate Finance Committee approved earlier this month. But, despite the low news profile, the gears of government continue to grind up taxpayer dollars.

The Expiring Provisions Improvement Reform and Efficiency Act (EXPIRE) did not originally include the PTC, however, prior to the committee markup hearing on April 3, Senators Charles Grassley (R-IA), Michael Bennet (D-CO), and Maria Cantwell (D-WA) pushed for an amendment to add a two-year PTC extension. The tax extender package passed out of committee and has been sent to the senate floor for debate. There, its future is uncertain.

“If the bill becomes law,” reports the Energy Collective, “it will allow wind energy developers to qualify for tax credits if they begin construction by the end of 2015.” The American Wind Energy Association’s (AWEA) website calls on Congress to: “act quickly to retroactively extend the PTC.”

The PTC is often the deciding factor in determining whether or not to build a wind farm. According to Bloomberg, wind power advocates fear: “Without the restoration of the subsidies, worth $23 per megawatt hour to turbine owners, the industry might not recover, and the U.S. may lose ground in its race to reduce dependence on fossil fuels driving global warming.” The National Renewable Energy Laboratory released a report earlier this month affirming the importance of the subsidies to the wind industry. It showed that the PTC has been critical to the development of the U.S. wind power industry. The report also found: PTC “extension options that would ramp down by the end of 2022 appear to be insufficient to support recent levels of deployment. …extending the production tax credit at its historical level could provide the best opportunity to sustain strong U.S. wind energy installation and domestic manufacturing.”

The PTC was originally part of the Energy Policy Act of 1992. It has expired many times— most recently at the close of 2013. The last-minute 2012 extension, as a part of the American Tax Relief Act, included an eligibility criteria adjustment that allows projects that began construction in 2013, and maintain construction through as long as 2016, to qualify for the ten-year tax credit designed to establish a production incentive. Previously, projects would have had to be producing electricity at the time the PTC expired to qualify.

Thomas Pyle, the president of the American Energy Alliance, which represents the interests of oil, coal, and natural gas companies, called the 2013 expiration of the wind PTC “a victory for taxpayers.” He explained: “The notion that the wind industry is an infant that needs the PTC to get on its feet is simply not true. The PTC has overstayed its welcome and any attempt to extend it would do a great disservice to the American people.”

As recently as 2006-2007, “the wind PTC had no natural enemies,” states a new report on the PTC’s future. The Declining Appetite for the Wind PTC report points to the assumption that “all extenders are extended eventually, and that enacting the extension is purely a matter of routine, in which gridlock on unrelated topics is the only source of uncertainty and delay.” The report then concludes: “That has been a correct view in past years.”


The report predicts that the PTC will follow “the same political trajectory as the ethanol mandate and the ethanol blenders’ tax credit before it.” The mandate remains—albeit in a slightly weakened state—and the tax credit is gone: “ethanol no longer needed the blenders’ tax credit because it had the strong support of a mandate (an implicit subsidy) behind it.”

The PTC once enjoyed support from some in the utility industry that needed it to bolster wind power development to meet the mandates. Today, utilities have met their state mandates—or come close enough, the report points out: “their state utility commissioners will not allow them to build more.” It is important to realize that the commissioners are appointed or elected to protect the ratepayers and insure that the rates charged by the utilities are fair and as low as possible. Because of the increased cost of wind energy over conventional sources, commissioners won’t allow any more than is necessary to meet the mandates passed by the legislatures.

The abundance of natural gas and subsequent low price has also hurt wind energy’s predicted price parity. South Dakota’s Governor Dennis Daugaard (R), in Bloomberg, said: “If gas prices weren’t so cheap, then wind might be able to compete on its own.” David Crane, chief executive officer of NRG Energy Inc.—which builds both gas and renewable power plants—agrees: “Cheap gas has definitely made it harder to compete.” With the subsidy, companies were able to propose wind projects “below the price of gas.” Without the PTC, Stephen Munro, an analyst at New Energy Finance, confirms: “we don’t expect wind to be at cost parity with gas.”

The changing conditions combined with “wide agreement that the majority of extenders are special interest handouts, the pet political projects of a few influential members of Congress,” mean that “the wind PTC is not a sure bet for extension.” Bloomberg declares: “Wind power in the U.S. is on a respirator.” Mike Krancer, who previously served as secretary of the Pennsylvania Department of Environmental Protection, in an article in Roll Call, states: “Washington’s usual handout to keep the turbines spinning may be harder to win this time around.”

Despite the claim of “Loud support for the PTC” from North American Windpower (NAW), the report predicts “political resistance.” NAW points to letters from 144 members of Congress urging colleagues to “act quickly to revive the incentives.” Twenty-six Senate members signed the letter to Senate Finance Committee Chairman Ron Wyden (D-OR) and 118 signed a similar letter to Speaker John Boehner (R-OH). However, of the 118 House members, only six were Republicans—which, even if the PTC extension makes it out of the Senate, points to the difficulty of getting it extended in the Republican-controlled House.

Bloomberg cites AWEA as saying: “the Republican-led House of Representatives may not support efforts to extend the tax credits before the November election.” This supports the view stated in the report. House Ways & Means Committee Chairman David Camp (R-MI) held his first hearing on tax extenders on April 8. He only wants two of the 55 tax breaks continued: small business depreciation and the R & D tax credit. The report states: “Camp says that he will probably hold hearings on which extenders should be permanent through the spring and into the summer. He hasn’t said when he would do an extenders proposal himself, but our guess is that he will wait until after the fall elections. …We think the PTC is most endangered if Republicans win a Senate Majority in the fall.”

So, even if the PTC survives the current Senate’s floor debate (Senator Pat Toomey [R-PA] offered an amendment that would have entirely done away with the PTC), it is only the “first step in a long journey” and, according to David Burton, a partner at law firm Akin Gump Hauer and Feld, is “unlikely on its own to create enough confidence to spur investment in the development of new projects.” Plus, the House will likely hold up its resurrection.

Not to mention the growing opposition to wind energy due to the slaughter of birds and bats—including the protected bald and golden eagles. Or, growing fears about health impacts, maintenance costs and abandoned turbines.

All of these factors have likely led Jeff Imelt, chief executive officer of General Electric Co.—the biggest U.S. turbine supplier—to recently state: “We’re planning for a world that’s unsubsidized. Renewables have to find a way to get to the grid unsubsidized.”

Perhaps this time, the PTC is really dead, leaving smaller manufacturers desperately seeking subsidies.

Categories: On the Blog

Big Business’ Slush Fund Seeks Re-Authorization

April 25, 2014, 10:02 AM

Shortly, Congress will be debating the fate of the U.S. Export-Import Bank (Ex-Im). Its authorization — last extended in 2012 — will expire on September 30 unless reauthorized. Ex-Im was first incorporated in 1934 by President Franklin D. Roosevelt to finance trade with the Soviet Union. Under the Export-Import Bank Act of 1945, Congress established the bank as an independent agency. It provides loans and loan guarantees (as well as capital and credit insurance) to facilitate U.S. exports. Backed up by the full faith and credit of the U.S government, taxpayers are put on the hook.

According to Katherine Rosario writing for Heritage Action on April 1, 2014, “The United States Export-Import Bank is essentially a microcosm of some of Washington’s biggest problems, from the corruption it encourages, to putting taxpayers at risk, to the cronyism it facilitates.”

An example of the cronyism facilitated by Ex-Im to advance political ideologies was in the Bank’s backing of Solyndra, the ailing solar panel company, which received an Ex-Im Bank loan guarantee of $10.3 million. As such the Ex-Im Bank made possible the exchange of political favors under the guise of boosting the economy and growing American jobs.

Those who most benefit for Ex-Im financing are multinational corporations such as the construction and engineering firm of Bechtel (ranked by Forbes as the fourth largest privately held company by revenue), Lockheed Martin, and its biggest beneficiary by far, Boeing. In the banking industry, the U.S. Export-Import Bank is commonly referred to as Boeing’s Bank. According to some estimates, Boeing receives upwards of 80-percent of the Ex-Im Bank’s taxpayer-backed loan guarantees.

The claim is made that Ex-Im financing is essential to fill “gaps” that exist in financing when the economic or political risk to garner private property is too great. This excuse is contradicted with the fact that U.S. exports hit a record high of $2.2 trillion in 2013. This was up from $1.4 trillion five years ago, thus proving that there is no shortage of private export capital.

Because Boeing does not have to compete for financing and enjoys favorable terms, Boeing is able to sell more planes overseas.  The Ex-Im Bank gives money to foreign governments and airlines to buy Boeing products.  In 2013 85% of the Ex-Im bank’s guarantees made to Russian companies were centered around Boeing.  Specifically, $580 million was slated for the purchase of luxury airliners out of total of $639 Russia received.

Other countries like China benefited from Ex-Im bank transactions during 2013 to the tune of $636 million.  Australia’s richest person (reportedly worth $17.7 billion) was more than happy to accept $700 million in American taxpayer backing via the Bank for her company.

Supporters of Ex-Im claim that the bank is necessary to create a level playing field.  If so, how it is that only 2.2% of all U.S. exports last year received Ex-Im financing, while 98% of American exporter had to compete without the bank’s intervention.  And what about all the other domestic businesses that don’t get any Ex-Im funding?

A debate reauthorizing the Export-Import Bank is threatening to further escalate the tension between House conservatives and the Republican leadership.  Eric Cantor, who struck a deal with Democrats in 2012 to reauthorize the Export-Import Bank, is now wary of battling conservatives angered by a number of his recent legislative moves.  Cantor has privately told members of the House that he does not intend to get involved this time around.

In a recent private meeting of the conservative Republican Study Committee, Paul Ryan struck the right tone when pushing for the Ex-Im Bank charter to expire.  Why should Republicans support what conservatives consider corporate welfare programs, at the same time cuts are being advocated for individual welfare programs like food stamps?  And what about the earmark ban which Republicans agreed to honor once again in the 113th Congress?  Unfortunately establishment Republicans with upcoming primaries in Georgia, Kentucky and Mississippi seem increasingly willing to disregard the earmark ban and instead brag about bringing home the bacon.

Prior to the 2012 vote by the House reauthorizing the Ex-Im bank charter, Brian Darling set forth in writing “Top Ten Reasons to End The Export Import Bank.”In the same article Darling had the following to say why the Export-Import Bank is bad for America.

“There is nothing free market about the idea of the United States government providing loans to private companies for the purpose of completing against other private companies.  Especially when these large corporations are gaming the system with teams of lobbyists pushing Members of Congress to reauthorize this taxpayer funded slush fund or big business.  If the loans don’t pay off, taxpayers have to pick up the tab.”

Hear what Senator Obama had to say when on the Campaign Trail in 2008.

“I’m not a Democrat who believes that we can or should defend every government program, just because it’s there. There are some that don’t work like we had hoped…[like] the Export-Import Bank that has become little more than a fund for corporate welfare…If we hope to meet the challenges of our time, we have to make difficult choices. As President…I will eliminate the programs that do not work and are not needed.”

Corporate welfare to large private corporations is not an easy thing for Democrats to explain to their constituents in an election year, despite President Obama’s pre-election musings.  As for Republicans, should corporate welfare be blessed in an election year when earmarks serving the same purpose are frowned upon and have been theoretically banned?

Instead, Republicans should enact policies that are free market in nature to produce jobs and grow the economy through cutting taxes, reforming the tax code, deregulation, and opening up energy exploration.

Congress must now decide whether it will reauthorize billions of dollars in corporate welfare on the backs of taxpayers or to allow private investors to finance U.S. exports.  This is not a partisan issue. There are good reasons for both Democrat and Republican legislators to allow the crony capitalist Export-Import Bank to expire (sunset) when it comes up for re-authorization.


[Originally published at the Illinois Review]

Categories: On the Blog

VIDEO: Heartland Talks Earth Day with John Stossel

April 24, 2014, 1:15 PM

Last week John Stossel hosted a segment on Earth Day featuring Heartland Senior Fellow James Taylor and Paul Gallay from the Riverkeeper environmentalist organization. Taylor (with some backup from Stossel) crossed swords with Gallay on a number of environmental subjects.

The discussion started on Gallay’s topic of interest, namely clean water, and he, Taylor and Stossel all happily agreed that our nation’s water is getting cleaner, though Gallay argued that it was not happening swiftly enough and that further government action was needed. Taylor deflated this line of reasoning by pointing out that current policies are working out quite well in an incremental fashion and that increasing government spending and power to accelerate the process would be wasteful and dangerous.

The program then turned its attention to alternative energy and the “sustainable future” of green energy lauded by Earth Day supporters and environmentalists the world over. Gallay’s position was that the only sustainable solution to our energy needs was to rely on “smart” energy, in other words green, renewable energy. Taylor rightly pointed out that the current green energy favorites, solar and wind energy, are both energy intensive and often inefficient. Solar energy in particular, he explained, was “very land and water-intensive.” The water-intensiveness is a particular problem, due to the fact that solar farms tend to be built in high-heat, water-scarce environments.

Gallay tried to answer Taylor by saying that non-renewable energy is given more subsidies than is green energy. Taylor would not be trapped, however, answering that if one considers the subsidy per-kilowatt hour of energy produced, then wind and solar receive ten times the subsidies as natural gas, and fifty times that of coal.

What the program really served to highlight was the major flaw in the mainstream environmentalist movement’s attitude, namely its fixation on what it perceives to be the problem at the expense of critically assessing the proposed solutions. Anti-carbon activists sing the praises of solar and wind energy while trying to ignore or obfuscate the issues surrounding those methods’ costs and efficiency. If supporters of green energy hope to win over a reluctant public, they need to be willing to debate the facts, not just feelings.

If an honest, informative debate is going to be had about America’s energy future, then the costs of alternatives must be honestly addressed. The fact is that lavish subsidies (often given as political favors) are the only thing that keeps most alternative energy suppliers in business. If those alternatives are to have a future in the energy sector, they need to stop suckling at the government teat and learn to compete in the real world economy. Then we might consider them a worthwhile addition to American energy production.

Categories: On the Blog

Video: The Government is a Horrible Private Sector Prognosticator

April 24, 2014, 12:54 PM

We have before us – and the government – Comcast’s acquisition of Time Warner Cable.

Which the Leviathan and the Left view as an opportunity to outright blockade the free market.  Or, barring that, unilaterally impose many, many a la carte regulations – that they otherwise can’t get imposed – in exchange for Mother-May-I government-transaction-approval.

These are known as regulatory “concessions.”  Absurdly called that because we pretend the imposed-upon companies happily concede to these regulations – the same way I happily concede my wallet to the guys with the masks and the guns.

These “concessions” are imposed – they claim – to try to mitigate what they think will be market harm resulting from the transaction.

But really – who is LESS qualified to prognosticate what will happen in the market…than bureaucrats?

Sadly, this is where we currently stand.

In this video, we assess the situation – and implore the government to not yet again try to guess what’s going to happen, and preemptively regulate predicated thereon.

Soothsayers they ain’t.

[Originally published at PJ Tatler]

Categories: On the Blog

America’s Power Grid at the Limit: The Road to Electrical Blackouts

April 24, 2014, 10:00 AM

Americans take electricity for granted. Electricity powers our lights, our computers, our offices, and our industries. But misguided environmental policies are eroding the reliability of our power system.

This past winter, bitterly cold weather placed massive stress on the US electrical system―and the system almost broke. On January 7 in the midst of the polar vortex, PJM Interconnection, the Regional Transmission Organization serving the heart of America from New Jersey to Illinois, experienced a new all-time peak winter load of almost 142,000 megawatts.

Eight of the top ten of PJM’s all-time winter peaks occurred in January 2014. Heroic efforts by grid operators saved large parts of the nation’s heartland from blackouts during record-cold temperature days. Nicholas Akins, CEO of American Electric Power, stated in Congressional testimony, “This country did not just dodge a bullet―we dodged a cannon ball.”

Environmental policies established by Congress and the Environmental Protection Agency (EPA) are moving us toward electrical grid failure. The capacity reserve margin for hot or cold weather events is shrinking in many regions. According to Philip Moeller, Commissioner of the Federal Energy Regulatory Commission, “…the experience of this past winter indicates that the power grid is now already at the limit.”

EPA policies, such as the Mercury and Air Toxics rule and the Section 316 Cooling Water Rule, are forcing the closure of many coal-fired plants, which provided 39 percent of US electricity last year. American Electric Power, a provider of about ten percent of the electricity to eastern states, will close almost one-quarter of the firm’s coal-fired generating plants in the next fourteen months. Eighty-nine percent of the power scheduled for closure was needed to meet electricity demand in January. Not all of this capacity has replacement plans.

In addition to shrinking reserve margin, electricity prices are becoming less stable. Natural gas-fired plants are replacing many of the closing coal-fired facilities. Gas powered 27 percent of US electricity in 2013, up from 18 percent a decade earlier. When natural gas is plentiful, its price is competitive with that of coal fuel.

But natural gas is not stored on plant sites like coal. When electrical and heating demand spiked in January, gas was in short supply. Gas prices soared by a factor of twenty, from $5 per million BTU to over $100 per million BTU. Consumers were subsequently shocked by utility bills several times higher than in previous winters.

On top of existing regulations, the EPA is pushing for carbon dioxide emissions standards for power plants, as part of the “fight” against human-caused climate change. If enacted, these new regulations will force coal-fired plants to either close or add expensive carbon capture and storage technology. This EPA crusade against global warming continues even though last winter was the coldest US winter since 1911-1912.

Nuclear generating facilities are also under attack. Many of the 100 nuclear power plants that provided 20 percent of US electricity for decades can no longer be operated profitably. Exelon’s six nuclear power plants in Illinois have operated at a loss for the last six years and are now candidates for closure.

What industry pays customers to take its product? The answer is the U.S. wind industry. Wind-generated electricity is typically bid in electrical wholesale markets at negative prices. But how can wind systems operate at negative prices?

The answer is that the vast majority of U.S. wind systems receive a federal production tax credit (PTC) of up to 2.2 cents per kilowatt-hour for produced electricity. Some states add an addition credit, such as Iowa, which provides a corporate tax credit of 1.5 cents per kw-hr. So wind operators can supply electricity at a pre-tax price of a negative 3 or 4 cents per kw-hr and still make an after-tax profit from subsidies, courtesy of the taxpayer.

As wind-generated electricity has grown, the frequency of negative electricity pricing has grown. When demand is low, such as in the morning, wholesale electricity prices sometimes move negative. In the past, negative market prices have provided a signal to generating systems to reduce output.

But wind systems ignore the signal and continue to generate electricity to earn the PTC, distorting wholesale electricity markets. Negative pricing by wind operators and low natural gas prices have pushed nuclear plants into operating losses. Yet, Congress is currently considering whether to again extend the destructive PTC subsidy.

Capacity shortages are beginning to appear. A reserve margin deficit of two gigawatts is projected for the summer of 2016 for the Midcontinent Independent System Operator (MISO), serving the Northern Plains states. Reserve shortages are also projected for the Electric Reliability Council of Texas (ERCOT) by as early as this summer.

The United States has the finest electricity system in the world, with prices one-half those of Europe. But this system is under attack from foolish energy policies. Coal-fired power plants are closing, unable to meet EPA environmental guidelines. Nuclear plants are aging and beset by mounting losses, driven by negative pricing from subsidized wind systems. Without a return to sensible energy policies, everyone must prepare for higher prices and electrical grid failures.

[Originally published at Communities Digital News]

Categories: On the Blog

It’s Hard Being a Black Conservative

April 24, 2014, 9:41 AM

“We’re not being governed. We’re being ruled by incompetence.”

It is refreshing to read a book that reflects one’s own views and “Guardian of the Republic” by Allen West, a former Lieutenant Colonel in the U.S. Army for over twenty years and a former, one-term congressman from Florida, who is perhaps best known these days as a Fox News channel contributor, is such a book. He is a very conservative, articulate black American.

As he points out, “The Left must destroy black conservatives because it cannot afford to have freethinking, independent-minded black Americans. When the Left wins, our community loses. The result of such blind loyalty is that many black voters have come to resemble Vladimir Lenin’s ‘useful idiots.’ They make up an electorate that is completely taken for granted and no one even bothers to listen.”

It is ironic that the first black President will not only be remembered as our worst, but that his failure will reflect on the entire black community in America even while men like West and other blacks of real achievement exist.

For now, it is definitely an uphill struggle for black conservatives, particularly for those in public life. “The mainstream media,” says West, “have a clear tendency to recruit other blacks to denigrate and demean black conservatives” and have “sought to disrespect and deny the existence of black conservatives, but they’re losing the battle and they realize it. The big lie that has resulted in the twenty-first century economic plantation will be exposed and defeated, and our community will be restored.”

I don’t know when I first heard West, but I suspect it was during his run for Congress.  I do recall I was instantly and enormously impressed. He won that race and served from 2011 to 2013 representing Florida’s 22nd District. His race for reelection was a classic case of electoral tampering, misconduct, and political slander by those who wanted to defeat him.

“One of my biggest frustrations and concerns about America (is that) our electorate doesn’t have a clue about who we are or whence we came.” Much of his book is devoted to a mini-history lesson regarding the founders, the Constitution, and the principles that set America on the path to greatness among nations. West holds two masters degrees; one from Kansas State University in political science and the second from the U.S. Army Command and General Staff College in military arts and sciences.

He had just over twenty years to practice military arts, but he had set his heart on joining the Army early on, joining the ROTC in college and thereafter being recognized at every stage for his intellect and his leadership skills. He was deployed to Kuwait in 1991 and Iraq in 2003.

West is plain-spoken. He defines our fundamental governing principles as “limited government, fiscal responsibility, a free market, individual sovereignty, a strong national defense, and an understanding that all of man’s freedoms come ultimately from God.”

And then he says, “Measured against our fundamental governing principles, we clearly do not have good government—heck, we suck! We have excessive debt, growing poverty, exploding deficits, an expanding nanny-state, and an anemic economy.”

“The sad thing is,” says West, “there seems to be no reprieve in sight. Why? Because, as a nation, we have become uninterested, uninformed, and disengaged from the truth.”

Throughout his book, West mixes lessons regarding the system the Founders implemented and his fears about the present generations of Americans, given the last two elections. “I fear national-level elections have become nothing more than a version of American Idol,” says West at one point. He concludes his first book saying, “We have to turn off the brain-draining reality TV shows for a few hours and read, think, assess, and challenge ourselves to be better.”

West has had a remarkable life to this point and he could choose to make a lot of money in some corporate position or as an entrepreneur, but he wants to reach out, not just to the black community, but to all Americans because he is worried about where President Obama has taken the nation he loves and wants to see it saved from unimaginable and unconscionable debt.

We need a lot more men like Allen West. The black community needs to pay him and other black conservatives more attention. The rest of us should hope that a change in future administrations will bring his talent to bear on the restoration of America.


[Originally published at Warning Signs]

Categories: On the Blog

America’s Tax Confusion

April 24, 2014, 12:36 AM

On April 15, nearly 90 percent of American adults filed their income tax returns for the 2013 tax year. And at the end of that day, I finished drinking a glass of truly tremendous bourbon; 130 proof seems appropriate to numb the pain.

A big check to the state, and a much bigger one to the federal Treasury, reminds us of how little we get for the taxes we pay and how much the tax system is distorted to favor special interests and buy votes. (If you have to write a particularly egregious check to your state, you might want to consider this new and helpful Laffer Center calculator called “Save Taxes by Moving.” Those living in Tennessee get the best of both worlds: No earned-income tax but some very fine local whiskeys.)

With more than half of President Obama’s 442 proposed tax increases as well as some of the heftiest Obamacare taxes (since Chief Justice Roberts told us that that’s what they are) coming (or hoped by the administration to be imposed) in the next two years, we will soon look back on this tax season the way you fondly recall getting a filling when the dentist tells you that today you need a root canal.

But even now, the American people despite being woefully misinformed about our tax system — exactly as the left wants them — are adding the federal income tax to their many dissatisfactions with Obama administration.

According to a Gallup poll released on April 14, 10 percent more Americans now think their taxes are too high than think their taxes are about right. That level has only been matched once, and only briefly, since the Bush tax cuts of 2003 that Democrats hate with such a passion.

Not surprisingly, a majority of Democrats think their taxes are “about right,” whereas only 38 percent of Republicans share that view. Independents seem to be even more concerned about excessive tax rates (for their own taxes) than Republicans are — which should scare the bejesus out of Democrats going into the 2014 elections, as if they don’t have enough to worry about.

But beyond the expected partisan differences in satisfaction with taxes, this week’s polling also shows a remarkable cluelessness among the American population when it comes to “who pays what” in federal income tax. It proves, sadly, that class warfare rhetoric, as spouted by President Obama and the great unwashed of Occupy Wall Street and many others, is having an impact (because the well-off are apparently too ashamed of success to mount a credible defense of economic liberty).

Forty-nine percent of Americans, according to another Gallup poll, believe that the middle class pays too much in taxes. It is by far the highest number on this question since Gallup started asking it 15 years ago. A stunning 41 percent believe that lower-income Americans pay too much in taxes, this despite the fact that most of them are net receivers of tax dollars.

Yet 61 percent of Americans continue to believe that their upper-income friends pay too little.

A Rasmussen Reports survey released last year, offers an explanation: “68% believe middle-class Americans pay a larger share of their income in taxes than wealthy Americans do” and “only 24% think the wealthy pay their fair share.”

But it’s all BS.

Ronald Reagan, paraphrasing Civil War-era humorist Josh Billings, put it this way: “The trouble with our liberal friends is not that they are ignorant, but that they know so much that isn’t so.”

Like a noxious weed, Warren Buffett’s hypocritical ramblings about his secretary have taken root in the American psyche. Unfortunately, Republicans who should be the “Roundup” of economic debates, often act instead like weed fertilizer — allowing the unchecked spread of misinformation and bad policy by being too stupid or too timid to tell the public the truth they desperately need to know. Perhaps manure is a better metaphor since the GOP does such a crappy job where it’s needed most. (Did I mention how good this bourbon is?)

A few facts to consider, based on 2010 Congressional Budget Office data:

The bottom 40 percent of earners in this country, with average pre-tax earnings up to nearly $50,000, have a negative tax rate. The bottom 20 percent have a negative tax rate averaging more than 9 percent. In other words, if you earn $24,000, not only do you not pay income tax, you receive over $2,000 in income tax transfers (in addition to other forms of welfare) from those who do pay tax.

The average federal tax rate — individual income taxes, excluding payroll taxes — for those in the fourth quintile, meaning those between 60 percent and 80 percent of earners ranked by income (average pre-tax earnings of about $95,000) is about 5 percent. That is not a typo.

For those in the highest quintile (average earnings $239,000), the average tax rate is just under 14 percent, but even that understates how steeply “progressive” our tax code is: Breaking down the top quintile further, the average tax rate for those in approximately the 85thpercentile (income about $135,000) is 8 percent. Those earning about $275,000 pay 15 percent of their income to the Treasury. And the evil “top 1 percent” (average pre-tax income of $1.4 million) pay over 20 percent of their income in taxes.

On the other hand, the middle 20 percent of American earners, average income just over $65,000, had an average tax rate of — wait for it — 1.6 percent.

[If you wonder about why average tax rates are so low, a few considerations: First, the lowest levels of income aren't taxed. Second, there are large deductions and exemptions available. As a simplified example, imagine a scenario where there is zero tax until $15,000 of income with a tax rate of 10% above that threshold and a $7,500 personal exemption. Someone who earns $30,000 will have $22,500 of adjusted gross income, but no tax on the first $15,000, leaving a 10% tax on $7,500 for a tax due of $750, representing an average tax rate of 2.5% (one quarter of the marginal rate) on the total income. Additionally, upper-income earners can have a substantial percentage of their income derive from tax-free municipal bonds and from long-term capital gains which partially explains why their average rate is substantially lower than their marginal rate of approximately 40%. Their high marginal rate also encourages deductible charitable contributions.]

The idea that the rich pay less than the middle class is one of the most dangerous myths propagated by knowing leftists and their useful idiots throughout society, including among people like Warren Buffett who should know better and those like most Democrats in Congress and every talking head on MSNBC who have no clue nor an interest in getting one.

So what does all this mean in real money?

That the top 20 percent of earners paid (in 2010) 93 percent of all individual income taxes. Again, even that understates the penalty for success in the United States (which is not to say that it is a lot better in other places): The top 1 percent paid 39 percent of all taxes; the top 5 percent paid over 63 percent, and the top 10 percent paid 78 percent. Meanwhile, the bottom 40 percent collected 9 percent of income taxes paid by the more financially successful among us.

While the distribution of tax payments was slightly less “progressive” in 2011, America remains a society suffering — even if most people don’t know it — under steeply progressive taxes which former President of Estonia Mart Laar described (in a must-watch speech from 2006) as “the grand idea of Karl Marx.”

Liberals will argue, fact-free as always, that “the rich” who are funding approximately everything in this country should be doing so because they pay too little compared to their earnings. In fact, the top 1 percent pay nearly twice as big a share of all individual income taxes as their share of national income.

Others who still make very good incomes in this country, such as those earning $100,000, pay a lower proportion of the nation’s taxes than they earn of the nation’s wealth. The bottom 50 percent of earnings bring in (in 2011) 11.5% of the national income but pay less than three percent of the taxes, and — bear with me here — all of that 2.9 percent is among those at the top of the bottom 50 percent (because the bottom 40 percent have a negative tax rate.)

OK, enough numbers, especially because I’m well through my glass of bourbon.

When it comes to the changing views of Americans regarding income taxes, facts are useful intellectual ammunition but politicians must deal with the reality of an uninformed populace.

And that reality is a double-edged sword (which mostly cuts the wrong way): On one hand, the public has bought substantially into the view that the rich don’t pay enough, and that’s a recipe for extremely damaging public policy — attempting to “soak the rich” even more than our system already does and thereby damaging the incentive to be entrepreneurial, take risk, and create jobs and wealth for others.

Since the richest among us can often structure investments and income to delay paying the tax man, and since many of them can simply quit working (somewhere Ayn Rand is shouting “preach it, brother!”), raising income tax rates is unlikely to bring in more tax revenue. This is the message of the Laffer Curve and the lesser-known but even more on-point Hauser’s Law. (It’s also the reason the left so desperately wants to add a national sales tax.)

On the other hand, despite Barack Obama’s protestations that he hasn’t raised taxes, the public knows he is (how to put this politely?) a liar. When it comes to describing his tax hikes as anything but what they are, President Obama channels Humpty Dumpty: “When I use a word, it means just what I choose it to mean — neither more nor less.”

Still, the middle class is starting to feel resentful of their increasing tax burden. The problem is that those who are truly the median income earners in America pay almost nothing in tax so their focus will remain on going after the top quintile of earners — which is precisely the goal of Democrats in spreading their Through-The-Looking-Glass fabrications about tax fairness in America.

As our own Ben Stein’s brilliant father, Herb, noted, “If something cannot go on forever, it will stop.” Few things describe our nation’s fiscal path, including our tax policies, as accurately and as frighteningly.

Unless and until that message sinks in, as reality must eventually require but probably not before there is great national pain (and even then it does not necessarily lead to wiser political choices by voters), those who understand what is really happening in America can find a modicum of solace in knowing we’re right — though I also suggest a really fine glass of bourbon.

[First published at The American Spectator.]

Categories: On the Blog

How To Liberate America From The Poverty Trap That Is Enslaving Us

April 23, 2014, 8:12 PM

In the latest Bureau of Labor Statistics jobs report, for March, the Obama economy finally reached a long overdue milestone. More than six years after the latest recession began, in December, 2007, the economy has finally at long last recovered all of the jobs lost during the recession.

The gross failure is that in the 11 previous recessions since the Great Depression, the economy recovered all jobs lost during the recession after an average of 25 months after the prior jobs peak (when the recession began). So the job effects of prior post Depression recessions have lasted an average of about 2 years. But President Obama’s supposed recovery has taken three times longer than prior post-Depression recoveries on average to achieve that same result.

That is just further confirmation that President Obama has misled America into the worst recovery from a recession since the Great Depression. And, no, Obamabots cannot say the recovery was so bad because the recession was so bad. America’s historical record is the worse the recession, the stronger the recovery, as the economy races ahead during the recovery faster than normal, to catch up to America’s world leading, long term, economic growth trendline.

These extremely poor results are the direct consequence of Obama’s meticulously anti-growth economic policies. Instead of cutting tax rates, as both Kennedy and Reagan did to such astounding, historic success, Obama has raised the rates of every major federal tax, except for corporate income taxes, where the top marginal tax rate is now the highest in the world for any significant economy. Obama only postures as favoring corporate tax reform to lower those rates, which would be enacted with broad, bipartisan support in his absence.

Instead of deregulation to reduce unnecessary, stifling regulatory burdens and barriers, as both Carter and Reagan did to such fully documented success, Obama regulates mercilessly as if regulation is cost free to the economy, as the most interventionist President in American history.

Most destructively, Obama has stifled the still world leading American energy boom, still straining to completely break out, by shutting down exploration and development of oil and gas on federally controlled lands and seas, and constantly threatening the regulatory shutdown of exploding private energy development. Implementation of that has already begun in regard the coal industry, all of which evidences a President who seems to be at war with his own economy.

This punitive energy overregulation only barely beats out the massively destructive overregulation of Obamacare, which has long been causing havoc and chaos in America’s labor markets, and only threatens to get far worse, as Obama implicitly recognizes with his illegal delays in key components of his own legacy legislation. Exactly contrary to the dense fog of fascist style propaganda of the current times, unprecedented in American history, Obamacare health care overregulation has only sharply increased rather than reduced health costs, further stifling the economy.

The Fed’s wild-eyed monetary policies, which Obama has enthusiastically supported like a football coach orchestrates his team’s offensive and defensive game plans, only further discourage the capital investment that is the lifeblood of capitalism by destabilizing the currency, and planting the seeds for the return of double digit inflation. In a later column, I will explain why the Fed cannot engineer a soft landing from the years long flight of monetary policy fantasy with virtually zero interest rates and money printing to cover the Obama/Democrat record shattering deficits that exploded from the Democrat takeover of Congress in 2007.

Moreover, the revival of runaway federal spending, deficits and debt that exploded with the new Democrat Congress in 2007, further accelerated by Obama’s $1 trillion, so-called stimulus spending bill in 2009, is not pro-growth, as Keynesian witch doctors tell us, but anti-growth, as the real world record, and fundamental logic, tell us. Explaining the double counting illogic of Keynesian policies would just be excessively repetitive of prior columns. The only real question is whether there will be any accountability, and consequences, for blind advocates of these costly, fallacious policies, which have failed regularly for going on nearly 100 years now.

But while Obama’s recovery has at long last reached the jobs milestone of at least getting us back to where we were 6 years ago, America’s jobs market and economy are still deeply troubled. Unemployment at 6.7% nearly 5 years after the recovery began is way too high. Unemployment fell to 4.4% under President Bush in 2006 and 2007. The Bureau of Labor Statistics reports the U6 unemployment rate, which includes those marginally attached to the work force who still cannot find work, and those working part-time because they can’t find full time work, was still well into double digits in March, 2014 at 12.7%. Black unemployment was also still well into double digits, at 12.4%, where it has been during Obama’s entire time in office.

Moreover, the employment rate, which means the proportion of adult Americans who have a job, has fallen from 62.2% in 2007 to 58.9% today. That decline means 10 million Americans currently not working.

The labor force participation rate, which measures the portion of those of working age who are working or actively seeking work, stands today at 63.2%, the lowest level since August, 1978. That rate fell only a quarter of a point during the recession, but it has fallen an additional three percentage points since President Obama’s recovery began in the summer of 2009. Just as the unemployment rate falls during a recovery, the employment rate, and labor force participation, is supposed to rise. The Wall Street Journal in an editorial on April 4 asked why the latter has not happened during this supposed recovery.

Obama apologists are quick to point to the start of the retirement of the baby boom generation. But those born during 1946 and 1947, when the baby boom began, did not reach the full Social Security retirement age, currently 66, until 2012 and 2013. Yet, the recovery is officially dated as starting in the summer of 2009, according to the National Bureau of Economic Research. The Journal noted that it is still problematic if the weak economy is causing older workers to retire early.

Moreover, the declining employment rate and labor force participation have not been limited to older workers, but have declined sharply for those in the prime working ages of 25 to 54 as well. A 2012 study by the Federal Reserve Bank of Chicago estimated that only about one-fourth of the decline in labor force participation since the recession was due to retirements.

Part of the reason for the declining measures of work is simply that the recovery has been so weak. Real economic growth in 2013, the fourth year of the recovery, was still less than 2%, and during Obama’s first term it was the slowest of any Presidential term since the Great Depression.

But there is another predominant factor, going back to before Obama became President, though Obama has greatly added to the problem. Taxpayers are paying mostly the bottom 20% of the income ladder a trillion dollars a year basically not to work, through close to 200 federal means tested welfare programs. Those include Medicaid, Food Stamps, 27 low income housing programs, 30 employment and training programs, 34 social services programs, another dozen food and nutrition programs, another 22 low income health programs, and 24 low income child care programs, among others. The famous Seattle/Denver Income Maintenance Experiments (“SIME/DIME”) conducted from 1971 to 1978 confirmed the impact of such substantial, unconditional, welfare subsidies on the incentive not to work.

Even worse, when those in poverty try to go to work, they are effectively subject to extra, higher, marginal tax rates. Since welfare is phased out as income rises, the loss of welfare benefits is economically the same as a tax on the rising earnings. Art Laffer and Steve Moore call this “The Poverty Trap,” explaining:

Needs tests, means tests, and income tests exclude people [from welfare] as their incomes progressively increase, ensuring that funds are not squandered on those who are less in need. While ‘needs’ tests may be rationalized on both moral and budgetary grounds, when combined with payroll and income taxes, the phased reduction of welfare benefits has meant that spendable income actually rises very little as gross wages increase, and for some income thresholds, spendable income (total spending power) actually declines as wages increase.

Laffer examined the total effect of all the needs tests and taxes affecting an inner city family of four on welfare in Los Angeles. He found:

What was clear from this analysis is that marginal tax rates for inner city inhabitants were prohibitively high—in some cases, the poorest people actually faced the highest marginal tax rates of all income groups. Over the entire range from no wages to wages of $1,300 per month, the family in my analysis faced marginal tax rates that ranged from a low of 53 percent (a poor family gained only $47 in spendable income when its gross monthly wages increased from $0 to $100) to a high of 314 percent (a poor family lost $214 in spendable income when its gross monthly wages increased from $1,000 to $1,100 a month.)

A 1996 Urban Institute study by Linda Ginnarelli and Eugene Steuerle on the same issue similarly found that the poor faced effective marginal tax rates of 70% to 101%.

President Obama has only made this problem far worse. He has aggressively sought to sign up more and more Americans for these programs, running up the number dependent on them to close to 100 million. He has increased the number on food stamps by nearly 50%, close to 50 million, an all-time record, prompting Newt Gingrich to call him the “food stamp President.” CBO estimates that Obamacare will ultimately increase the number of Americans dependent on Medicaid to 100 million in less than 10 years.

Obamacare also includes new entitlement welfare to help with the high cost of government mandated health insurance for families earning soon as much as $100,000 a year. That subjects all of these families to poverty trap effective taxes as well, because the health insurance welfare is reduced as income rises. This is why CBO recently estimated that Obamacare would reduce the labor force.

The Journal editorial admonished that, “The Republican Party needs policies that address this erosion of work that go beyond the Federal Reserve’s easy money.” Republicans in fact have a readily available, comprehensive, reform alternative that can abolish the poverty trap entirely, building on bipartisan reforms of the past that they already led the way to enacting.

Former House Speaker Newt Gingrich led Congress to enact reforms of the old, New Deal, Aid to Families with Dependent Children (AFDC) program in 1996, which ultimately received more than 100 Democrat votes, and signature into law by Democrat President Bill Clinton. Under those reforms, the old AFDC rolls were reduced by two-thirds nationwide, even more in states that pushed work most aggressively, because the poor formerly on the program went to work, or married someone working. Because of all this renewed work effort, the total income of these low income families formerly on welfare increased by about 25% over this period, as Ron Haskins of the Brookings Institution reports in his 2006 book evaluating the 1996 welfare reforms, Work Over Welfare.

The resulting decline in poverty “was widespread across demographic groups…caused by increased employment and earnings of female headed families.” Poverty among these female headed households declined by one-third, which meant that nearly 4.2 million single mothers and children climbed out of poverty. Haskins cites a study by the liberal Isabel Sawhill of the Urban Institute and Paul Jargowsky concluding,“So great was the decline in poverty that the number of neighborhoods with concentrated poverty fell precipitously, as did the number of neighborhoods classified as underclass because of the concentration of poverty and the high frequency of problems such as school dropout, female headed families, welfare dependency, and labor force dropout by adult males.”

Yet, in real dollars total federal and state spending on TANF by 2006 was down 31% from AFDC spending in 1995, and down by more than half of what it would have been under prior trends. Consequently, poverty declined sharply, while taxpayers saved on 50% of the cost of the program.

These same block grant reforms can and should be extended to all of the remaining nearly 200 federal means tested welfare programs. The states could experiment with all this new power and control over funding by replacing the entire current, outdated, counterproductive, welfare system with a work safety net for the able bodied, where public assistance is provided only in return for work first. Those who report to their local welfare office before 9 am would be guaranteed a work assignment somewhere paying the minimum wage in cash for a day’s work, 8 hours. A private job assignment would be the top priority. But if that is not available for that day, the applicant would be assigned to some government directed and financed activity, serving the community in some way, city, county or state. The worker would be paid in cash at the end of the day. Those who needed more money would come back to work the next day.

The government would provide free day care for those with small children who desired it, which it has done under TANF since 1996. For those who come back regularly, the welfare office would find them a private job assignment. Indeed, states could contract out their welfare offices to private temp companies, in business to provide immediate job assignments to those who show up needing immediate work.

As a result, instead of taxpayers paying a trillion dollars a year to the bottom 20% not to work, as under the current welfare system, private employers would be paying them much more to work, and contribute to economic growth and prosperity for all. This new system would effectively eliminate the poverty trap and incentives for not working. Assistance would be provided only for working (for the able-bodied), so working and earning more would not reduce benefits. Rather, the incentive is to take whatever private sector job is available, since the able bodied will have to work to support themselves anyway, and in the private sector the worker will gain skills, raises, promotions, and new opportunities over time.

For those who do show up for work assignments, their need is likely to be short term, as the incentive is for them to take available private sector jobs that do open up. People are not going to show up for these day jobs for years, as many have done for free welfare. Moreover, for those who continue to show up, their public support will be minimized in any event, as the state agency and associates find them private job assignments that will provide the bulk of their support in place of the taxpayers. That private employment will grow into or lead to permanent employment growing the worker mostly and likely completely out of public assistance with wage gains due to experience, learned skills, promotions, and the new opportunities that work will lead to over time.

Arguably, by abolishing the Poverty Trap, such a new system would ultimately eliminate poverty in America. As I showed in a previous column, already under current law, the minimum wage, plus the Earned Income Tax Credit, plus the Child Tax Credit adds up to more than the poverty line for every possible family combination. The disabled who could not work would be provided assistance under separate programs designed for them, which would not cost much.

[First published at Forbes.]

Categories: On the Blog

IRS Rewards Tax Dodgers Who Work for IRS

April 23, 2014, 7:50 PM

This is the start of a story I just spotted on the Chicago Tribune website. Remember, this is not from The Onion or other spoof news site. This is real.

“More than 2,800 Internal Revenue Service workers who had been disciplined recently received millions of dollars in bonuses and time off as part of an employee recognition program, a new government audit shows.

“The IRS has a program that rewards its employees for a job well done, but a report released Tuesday by the Treasury Inspector General for Tax Administration found that, between October 1, 2010, and December 31, 2012, more than 2,800 recently disciplined IRS workers got more than $2.8 million in monetary awards and more than 27,000 hours in time-off awards.

“The employee infractions included not paying their taxes.

“’While not prohibited, providing awards to employees who have been disciplined for failing to pay federal taxes appears to create a conflict with the IRS’ charge of ensuring the integrity of the system of tax administration,’ J. Russell George, Treasury Inspector General for Tax Administration, said in a statement.”

Read the whole thing here.

This is our government — a government that punishes us if we’re even one day late paying our taxes while giving cash bonuses and other perks to Internal Revenue Service employees who fail to pay their taxes. Is this a great country or what!

Categories: On the Blog

Reflections on My 45th Earth Day

April 23, 2014, 5:02 PM

I remember the first Earth Day in 1970. I was a freshman in high school and we had an Earth Day Assembly. There was a play with Steppenwolf’s “The Monster” blaring. They changed the words, “America where are you now, don’t you care about your sons and daughters?” to “America where are you now, don’t you care about your parks and waters?” The young ladies from the drama club and the cheerleaders were dressed up as trees running around on stage. When I saw that, I wanted to become a tree-hugger, but alas, none of the trees were interested in hugging a 5 foot 2 inch, 160 lb. freshman nerd.

Years later this has grown into a borderline religious holiday for some. I thought Earth Day Eve caroling would be a good idea until I was pelted with recycled cans and organic waste. And getting dressed up as a tree was not a good idea since every dog in the neighborhood was howling at my lousy singing and trying to use me as a place to relieve themselves.

Thank you, thank you very much. I’m here ’till the editors get tired of me. Try the Tofu Veal.

Given the myth and reality of what is going on with our planet and the evolution of this movement into some kind of socio-political-economic-religious-intolerant machine, I thought I would infuse some humor into the situation while reminding people that the planet is not in danger of becoming a wasteland by what we hear from these people. Other things, perhaps, but not global warming.

There are far more pressing problems facing mankind today, chief among them the long standing one of man’s inhumanity to man, which seems to be the root cause of many ills. But when I look at some of the things that are being spouted as evidence of environmental disaster, it’s easy to see how this issue is far from the end of existence it’s portrayed as. The most visible high priest of Gaia is perhaps Nobel prize winner Al Gore. Yet the doom and gloom since his Academy Award-winning movie “An Inconvenient Truth” came out has burned up like paper in fire.

The movie was a major accomplishment, though whether you wish to admit it or not, it did for the global warming movement what “Triumph of the Will” did for Germany in the eyes of many in the 1930s. How ironic that we find people on my side of the AGW issue being demonized with terms that bring up memories of arguably the greatest case of man’s inhumanity to man by the very people that put out this movie recently. Yet the inconvenient truth in both cases is the missive was proved false.

But let’s try to keep a joyful warrior spirit. The use of facts is convenient for that.

I will use some of the more choice worries from “An Inconvenient Truth.”

The melting of the ice caps? Global sea ice is above normal.

The Southern Hemisphere is breaking daily records and threatening to reach all-time high anomaly records!

Earth does this back and forth act in all things. When some places are warm, others are cold. Because the oceans have been in their warm cycle and this affects most the northern ice cap, it has been well below normal. It does so by warming the land masses of the Northern Hemisphere which have greater temperature ranges, and by doing so, influences the Arctic, a land locked ocean. But notice how its heyday was at the time the Southern Hemisphere was below normal at the start of the satellite era. The testable theory is that once the Atlantic shifts to its cold cycle in the coming 5-10 years, the Arctic ice cap recovers. It’s then that AGW proponents will try to shift attention to the shrinking southern ice cap (at least it better be shrinking). That is the whole natural cyclical theory for ice caps – when one expands, the other shrinks. So it’s a test. And yes, the Arctic ice cap has decreased overall since 1978, but you don’t need to be a math major to understand that if global sea ice is above normal, it means that there is a greater compensating increase, counter to the missive we have heard for all these years.

Then there is the issue of hurricanes. Again, aren’t we looking at this globally? Since the movie and the dire pronouncements, global tropical activity has sunk to record lows! The chart below by Dr. Ryan Maue through the 2013 season shows the fall of the ACE index – the overall activity in the tropics – since the release of “An Inconvenient Truth.”

This should return toward normal and even go back above in the coming years. Why? The simple answer is because nature swings back and forth in cycles. You see in spite of trying to make this more complex (certainly the details are more complex) the main missive remains the same: The earth by its design has no “perfect” climate but is in constant search for a balance it can never attain – in spite of the people wishing to tell you regulating this or that will.

Then there are tornadoes. For the third year in a row, after the one major year of 2011, we see abnormally low tornado production. It should pick up next week, but as of this writing we are at record lows for the date.

Then there is the 10-year running global temperature since the Pacific started its change to a colder mode. The NCEP CFSR is regarded as perhaps the gold standard measurement of global temperatures. This is against a 30-year mean, or just a bit after the satellite era started, which means there is little anyone can do to adjust temperatures down in the pre-satellite era to make today look warmer. It’s an apples to apples comparison; before 1978 we did not have the kind of reliable satellite data we do now. So since the year of “An Inconvenient Truth,” the inconvenient truth is temperatures have started a jagged descent.

For the record, the National Centers for Environmental Prediction (NCEP), where this data is derived, is not a right wing think tank.

Regarding all those computer models that had so many in a tizzy about the impending doom of the planet, this chart from Dr. Roy Spencer shows plainly that basing policy on computer modeling is a fool’s errand. People that forecast every day understand that no event is true until it actually happens.

We can go on and on here. The fact is this: Given the actual geological record of earth’s temperatures vs CO2, it’s cherry picking to use the intervals of warming in the past century to claim it’s man causing it.

CO2 is in purple, temperature blue.

As far as the Hockey Stick, here is a list of all the scholarly articles that show the earth has been warmer before. By my count there are around 100. How is it we are to trust one without even being able to see the data behind it?

As I sit here writing this reflection of Earth Day, I will end with this. I believe the intent of the original Earth Day was good even if the cheerleaders dressed as trees would not allow me to become a tree hugger back in 1970 (they probably couldn’t get their arms around me anyway). I think that being good stewards of this garden called earth (I don’t believe it’s Gaia, but something that is given to us by God, and as such we should take care of it) is spot on. But to deal with reality, one must face reality, and there is demonstrable evidence that runs counter to the missive this has grown to now. And to show you what a good sport I am, I like the movie “An Inconvenient Truth.” But I like a lot of movies where fantasy is involved.

It’s up there with the Wizard of Oz, a movie in the day where tornadoes were not caused by man as they try to make you believe now. But given my love of the weather, saying I like “An Inconvenient Truth” the way I like the Wizard of Oz (I like Star Wars too!) is high praise indeed.

Hope you had a holly, jolly Earth Day.

[First posted at The Patriot Post.]

Categories: On the Blog

EPA’s Tower of Pisa Policies

April 23, 2014, 12:32 PM

Built on a foundation of sand, the Leaning Tower of Pisa would have toppled over long ago, if not for ingenious engineering projects that keep it from tilting any further. The same thing is true of ethanol, automobile mileage, power plant pollution and many other environmental policies.

Not only are they built on flimsy foundations of peak oil, sustainability, and dangerous manmade climate change. They are perpetuated by garbage in-garbage out computer models and a system that rewards activists, politicians, bureaucrats, and corporations that support the hypotheses and policies.

At the heart of this system is the increasingly secretive and deceptive U.S. Environmental Protection Administration. Among its perpetrators are two ideologically driven regulators who are responsible for many of today’s excessive environmental regulations. When the corruption is combined with the EPA’s history of regulatory overkill and empire building, it paints a portrait of an agency that’s out of control.

EPA’s culture of misconduct has already raised congressional hackles over the misuse of government credit cards (a recent EPA audit found that 93% of purchases were personal and contrary to agency guidelines); former regional EPA administrator (and now Sierra Club officialAl Amendariz wanting to “crucify” oil companies to make examples of them; and former EPA administrator Lisa Jackson, who masqueraded as “Richard Windsor” to avoid revelation and oversight of her emails with activists.

However, these sorry tales pale in comparison to damaging EPA malfeasance detailed in a new U.S. Senate Environment and Public Works Committee minority staff report about convicted felon and con artist John Beale. This guy was convicted of bilking taxpayers out of $900,000 – by convincing EPA bosses and colleagues that he was a CIA agent, failing to show up for work for months, but continuing to receive his six-figure salary. However, these were minor transgressions compared to what he was not prosecuted for.

Beale has admitted he had no legislative or environmental policy experience prior to being hired. Yet he became the lead official for the nation’s National Ambient Air Quality Standards for Ozone and Particulate Matter. He and Robert Brenner, his friend and immediate supervisor at EPA, concocted a nefarious plan that used manipulated scientific studies, faulty or even bogus regulatory cost assessments, “heavy-handed management of interagency review processes,” and evenillegal experiments on human test subjects to impose increasingly tougher, job-killing regulations on U.S. industries.

One of Beale & Brenner’s first actions was to work with the American Lung Association in 1997 in a sue-and-settle arrangement, which led to ozone and particulate matter standards. This underhanded practice enables EPA officials to meet with environmentalist groups behind closed doors and agree to new proposed regulations. Later, the group files a “friendly suit,” and a court orders the agency to adopt the pre-arranged rules. Meanwhile, EPA awarded the ALA $20 million between 2001 and 2010. (Had a business had such an arrangement, it would likely have been prosecuted as an illegal kickback.)

The EPW Committee’s report notes that Beale & Brenner fine-tuned the sue-and-settle idea – and then intentionally overstated the benefits and understated the costs of new regulations. As a result, Beale & Brenner successfully rammed the PM2.5 and ozone standards through the EPA’s approval process and set the stage for myriad additional regulations that likewise did not receive appropriate scientific scrutiny.

In the case of PM2.5 soot particles, the ALA worked with Beale & Brenner to claim tougher regulations would eliminate up to 35,700 premature deaths and 1.4 million cases of aggravated asthma annually. Scientists questioned the figures and said EPA’s flawed research merely “assumed” a cause-and-effect relationship between soot and health effects, but failed to prove one. Indeed, EPA’s illegal experiments exposed people to “lethal” doses of soot, but harmed only an elderly woman with heart problems.

Beale & Brenner pressed on. Not only were the initial PM2.5 and ozone regulations put into effect, but the questionable and non-peer-reviewed data has been used repeatedly as the basis for additional regulations. According to the Senate report, “up to 80 percent of the benefits associated with all federal regulations are attributed to supposed PM 2.5 reductions… [and] the EPA has continued to rely upon the secret science … to justify the vast majority of all Clean Air Act regulations issued to this day.”

As a House subcommittee has pointed out, the long and growing list of EPA regulations involves costly changes to automobiles, trucks, ships, utilities, cement plants, refineries, and gasoline, to name a few. The rules also raise consumer prices, eliminate jobs, and thus actually reduce human living standards, health, and welfare – all of which EPA steadfastly ignores, in violation of federal laws and regulations.

Just one EPA industrial boiler emissions regulation will put as many as 16,000 jobs at risk for every $1 billion spent in upgrade or compliance costs, IHS Global Insight calculates. The Administration’s regulatory War on Coal, amply illustrated by President Obama’s call to bankrupt the coal industry in the name of alleged manmade climate change, could eliminate up to 16,600 direct and indirect jobs by 2015.

Despite the economic damage, EPA applauded Beale’s regulatory success, and he quickly became one of the federal government’s most powerful and highest paid employees. Even Administrator Gina McCarthy had a hand in advancing his fraudulent and pernicious career, when she appointed him to manage the office of Air and Radiation’s climate change and other international work in 2010.

Then in June 2011, Beale stopped going to work. Despite having filed no retirement papers, under an arrangement with McCarthy, he was allowed to continue receiving his salary. When she finally met with him 15 months later, he said he had no plans to retire.  Two months later, Beale’s long-term unexcused absence was finally referred to the Office of Inspector General for investigation.

After McCarthy became the EPA Administrator in July 2013, Beale pleaded guilty to fraud and was sentenced to 32 months in federal prison. His partner-in-crime Brenner had retired in 2011 — before the agency could take action against him for accepting an illegal gift from a golfing buddy serving on the Clean Air Act Advisory Committee. But again, these crimes pale in comparison to the tens of billions of dollars that their junk science, sue-and-settle lawsuits and other actions have cost US businesses and families.

Now Republican members of the Senate Environment and Public Works Committee are trying to get to the bottom of the Brenner-Beale-EPA “secret science” that has been used to justify so many regulations. On March 17, Sen. David Vitter (R- LA) sent a letter to Dr. Francesca Grifo, EPA’s Scientific Integrity Official, asking for the original scientific data and voicing concerns about EPA’s apparent violations of international guidelines for ensuring best practices and preventing scientific misconduct. EPA thus far is claiming the research and data are proprietary or the agency cannot find them. Teachers demand that students show their work; we should demand the same from EPA – especially since we pay for it.

The agency’s onslaught of carbon dioxide and other climate change regulations – including proposed rules on cow flatulence (!)  – is similarly founded on fraudulent EPA and IPCC reports, false and irrelevant claims of scientific “consensus,” and computer models that bear no relationship to temperature, hurricane, drought and other planetary realities. Even worse, it is on this flimsy, fraudulent, lawless foundation that our government’s costly, intrusive environmental and renewable energy policies are based – threatening our economy, employment, living standards and families.

Meanwhile, Ms. McCarthy is conducting business as usual. She recently presented her proposed EPA’s FY 2015 budget to Congress. She says the increased funding should be viewed as an “investment in maintaining a high performing environmental protection organization.” You cannot make this up.

Governors, attorneys general, state legislatures, and private citizen groups need to initiate legal actions and demand full discovery of all relevant EPA documents. Congress too needs to take action. Along with one on the IRS targeting scandal, it needs to appoint a select committee or independent counsel to determine which data, computer models and studies EPA used – and which ones it ignored – in reaching its decisions.

Otherwise our nation’s downward economic slide, and distrust of government, will accelerate.


[Originally published at CFACT]

Categories: On the Blog

The Government Giving the Left What They Want: More Terrible Policy

April 23, 2014, 12:17 PM

The federal government is yet again acquiescing to the ridiculous anti-free market demands of the Left. We the People will yet again be forced to pay dearly for the resulting damage.

We have looming before us a wireless spectrum crunch. Spectrum being the finite airwaves we use for all things wireless – from cell phones to car key fobs.

More people are using more wireless data all the time. Video is an especially hay-yuge bandwidth devourer – and we’re watching ever more wireless video.  So things spectrum are getting uber-tight.

In an alleged attempt to address this problem, the Feds created the bass-ackwards Spectrum Incentive Auction Legislation. The purported objective of which is to get swaths of over-the-air broadcasters’ spectrum to cell phone companies.

But the Feds absurdly mandated that they be the middlemen. Broadcasters can’t auction spectrum directly to the cellular companies – they must instead sell to the Feds, who then auction it off to the cell cos.

A straight line between sellers and buyers would make too much free market sense – and prevent the Feds from messing with the process.

Getting Broadcasters to voluntarily give up their businesses’ lifeblood is tenable at best – under optimum conditions.  If the Feds decide to mess with the process – by, say, limiting auction bidders – the process will rapidly implode.

We the People need maximum bidder participation – because we need the cellular networks to keep up with our ever-increasing use.  Broadcasters need maximum bidder participation – because they understandably want to get maximum spectrum coin.

TV Broadcasters Remain Wary of Incentive Auction

(National Association of Broadcasters’ Executive Vice President for Strategic Planning Rick) Kaplan explained that TV broadcasters are worried that the (Federal Communications Commission) FCC will change or modify its auction rules during the 600 MHz auction or after it is completed.

He said such changes could imperil the revenues broadcasters are hoping to gain from the spectrum the FCC is asking them to give up in the auction….

(M)any worry that broadcasters might not give up their spectrum based on…uncertainty over how much money they will ultimately receive….

It ain’t just the Broadcasters – and we consistently free market-types – who are worried.

Dems Write Wheeler on Incentive Auctions

Almost 80 (Democrat) lawmakers signed onto a letter sent to (FCC) Chairman Tom Wheeler on Friday…directing regulators to do what they can to boost broadcaster participation and incentivize wireless industry bidding.

“In fact, inviting as many bidders as possible to compete in an open and fair auction on equal terms will allow for the full market price for spectrum to be realized and, in turn, lead to higher compensation to incent greater broadcaster participation resulting in more spectrum for the auction,” the letter reads.

The only people that want auction-and-market-damaging government-imposed bid limits?  The Media Marxist Left.

While no qualified entity should be barred from participating in the upcoming auction, clear, transparent, and fair limitations on how much low-frequency spectrum any one carrier can acquire do not bar participation.

So is the FCC listening to the full cadre of:

1.     Broadcasters they manifestly need to participate,

2.     We free marketeers and

3.     Even oodles of Democrats?

Or are they listening to the oh-so-lonely Media Marxist Left?  I’ll bet you’ve already guessed.

The (FCC) is expected to impose limits on an upcoming airwave auction….

The Media Marxists promised us that limiting bids wouldn’t limit bidders.  As usual, they are oh-so-wrong.

AT&T…warned that if the FCC adopts rules that restrict how many licenses AT&T can bid on, it will not participate at all.

Bad for the auction – means bad for the spectrum crunch.

Not only would it likely negatively affect how much revenue the FCC could raise from the auction, but it would also mean…less interoperability among LTE devices for wireless consumers.

Which means bad for the economy.  Which is why the Media Marxist Left wants it.

Why is the federal government about to give it to them?

[Originally published at Human Events]

Categories: On the Blog

Obama’s War on U.S. Energy

April 23, 2014, 12:04 PM

A nation without adequate energy production is a nation in decline and that has been the President’s agenda since the day he took office in 2009. He even announced his war on coal during the 2008 campaign even though, at the time, it was providing fifty percent of the electricity being utilized.

It’s useful to know that the U.S. has huge coal reserves, enough to provide energy for hundreds of years and reduce our debt through its export to nations such as Japan. It increased coal-fired power generation by ten percent in 2013 while Germany’s coal use reached the highest level since 1990. Both China and India are increasing the use of coal. So why is coal unwelcome in the U.S.? Because Obama says so.

On April 15, the White House held a “Solar Summit” to continue promoting subsidies for solar panels and the Obama Energy Department has announced another $15 million in “solar market pathways” to fund local government’s use of solar energy. Its “Capital Solar Challenge” is directing federal agencies, military bases, and other federally subsidized buildings to use solar power.

According to the Institute for Energy Research, “solar energy provides two-tenths of one percent of the total energy consumed in the United States. While the amount of solar electricity capacity in the U.S. has increased in recent years…it still only accounts for 0.1% of net electricity generated…the least among the renewable sources of hydroelectric, biomass, wind and solar.”

So, in addition to the millions lost in earlier loans to solar companies like Solyndra that failed not long after pocketing our tax dollars, Obama is using the power of the federal government to waste more money on this unpredictable—the Sun only shines in the daytime and clouds can get in the way—source of energy whose “solar farms” take up many acres just to provide a faction of what a coal-fired or natural gas powered plant does.

This isn’t some loony environmental theory at work although the Greens oppose all manner of energy provision and use whether it is coal, oil or natural gas. They always find an excuse to mine or extract it. This is a direct attack on the provision of energy, fueled by any source, that America needs to function and meeting the needs of its population, manufacturing, and all other uses.

The most recent example of this is the further extension of the delay on the construction of the Keystone XL pipeline from Canada to refineries on the Gulf Coast. That too is part of Obama’s war on energy for the nation, but it may also have something to do with the fact that the Burlington Santa Fe Railroad owns all of the rail lines in the U.S. connecting to western Canada. They haul 80% or more of the crude oil from Canada to the Midwest and Texas, earning a tidy sum in the process. It is owned by Warren Buffett’s Berkshire Hathaway, a major contributor to Democrat causes and candidates. The Keystone XL pipeline could divert more than $2 billion a year and if its delay is not crony capitalism, nothing is.

This is what the Sierra Club is telling its members and supporters as of Monday, April 21: “Keystone XL means cancer. It means wolf blood spilled. And it’s nothing short of a climate disaster.” It is a lie from start to finish.

Keystone has become a political issue and the announcement by the Obama State Department that is giving agencies “additional time” to approve its construction due to ongoing litigation before the Nebraska Supreme Court that could affect its route brought forth protests from red-state Democrats in Congress who even threatened to find ways to go around the President to get the project approved. Eleven Democratic senators have written to the President to urge him to make a final decision by the end of May. Some of them will be up for reelection in the November midterm elections.

Even Congress, though, seems incapable of over-ruling or overcoming Obama’s war on the provision of energy sources. In early April, the Bureau of Land Management (BLM) released new data showing that federal onshore oil and natural gas leases and drilling permits are at the lowest levels in more than a decade. Leases to companies exploring the potential of oil and natural gas reserves were down in 2013 from 1.8 million acres the year before to 1.2 million, the smallest area since records began to be maintained in 1988!

We have a President who gives daily evidence of his contempt both for those who voted for him and those who did not. His anti-energy agenda impacts on the creation of jobs, causes manufacturing to delay expansion or to go off-shore, reduces the revenue the government needs to reduce its debts and deficits, and drives up the cost of energy for everyone.

And he is doing this in one of the most energy-rich nations on the planet.


[Originally published at Warning Signs]

Categories: On the Blog

Why Government Grows, and How to Reverse It

April 22, 2014, 12:01 PM

Regardless of where someone may view himself along the political spectrum (conservative, libertarian, or modern liberal), there are always a variety of government programs and activities that they either think are not worth the money or should not be the business of government in the first place. Yet, it seems almost impossible to rein in government. It keeps growing in size and scope in one direction after another. Why? And is there any way to reverse it?

Growing Government Spending and Taxing

The federal government keeps getting bigger and more intrusive and more costly. In the 2013 fiscal year that ended on September 30, 2013, Washington spent a bit more than $3.4 trillion. This compares (in inflation-adjusted 2013 dollars) with 2.1 trillion in 1993. In other words federal spending has increased by 62 percent over the last twenty years.

The same dramatic growth has occurred on the revenue side. The federal government took in about $2.8 trillion in taxes in fiscal 2013, compared to $1.7 trillion in 1993 (in 2013 inflation-adjusted dollars), for a 65 percent increase in government revenues compared to two decades ago.

This increase in expenditures and revenues over the last twenty years is reflected in the tax burden on the American people. The average household paid $28,205 in taxes to the federal government in 2013, up from $22,230 (in inflation-adjusted 2013 dollars) in 1993, or a 27 percent increase in twenty years. While the population of the country has increased by around 22 percent during this time period, per capita federal government spending has risen by 33 percent.

Both “entitlement” spending (Social Security, Medicare) and “discretionary” spending (including defense) have significantly increased over these two decades. Discretionary spending went up about 50 percent over this period, while entitlement spending rose by 100 percent.

Special Interests and the Growth in Government

According to “public choice” theory, this growth in government transcends the political differences in modern democratic society. Rather, it is structured into the existing political system itself.

Public choice theorists are economists who argue that the political process should be studied in the same manner as markets are analyzed. Over the last several decades, they have attempted to explain the factors behind the growth of government in modern democratic society. They say that individuals in the political arena are motivated by self-interested goals (which can include ideological or ethical ends, as well as financial gains).

This self-interest prompts individuals and “special interest” pressure groups to weigh the costs and the benefits in deciding to be for or against various government policies; and they attempt to influence political outcomes through their votes, their campaign contributions, and their lobbying expenditures.

Their goal to obtain through either government regulations or income redistribution what they cannot or do not want to peacefully and voluntarily acquire on the open, competitive market: other people’s money.

Rather than earning the revenues or income they desire by offering the consuming public more, better and less expensive products, they turn to government to get anti-competitive domestic regulations, import restrictions against foreign rivals, or subsidies or government contracts to acquire the additional wealth they want — all at taxpayers — and consumers’ expense, of course.

If they are “non-profits” such as many environmental groups, they turn to government to restrict people’s use of their own private property through land use prohibitions or regulations, or through government control and ownership of land and wildlife they want preserved from private access and development. Unable to persuade enough of their fellow citizens to voluntarily contribute sufficient money to buy up and maintain the land they wish “untouched by man,” they turn to the coercive power of government to get what they want through taxes and regulations.

Politicians, Bureaucrats and the Growth in Government

Politicians, on the other hand, desire to be elected and reelected. They gain political office by “selling” programs, regulations, and spending taxpayer dollars for the benefit of various constituent groups whose campaign contributions and votes they hope to receive.

Why do they want to be elected or reelected? So they can impose on the citizenry — both supporters and those who may have voted against them — programs and spending and taxing that they arrogantly presume to be good for “the people,” under the presumption that they know what is good for others; and which those others would want of their own free will if only they were intelligent enough to have the wisdom and values that those holding political office believe they possess.

Of course, sometimes the desire for political office arises out of pure personal ambition, including the desire to “leave their mark on history,” their “legacy” that future generations of little children will learn about in government schools. And, sometimes, it is the simple desire for power over others, and any material wealth that can come their way through political plunder and manipulation.

Those who run the government bureaucracies desire larger budgets and greater administrative responsibilities over economic and social affairs. They hope to gain promotions, higher salaries, and more control through discretionary decision-making.

Larger budgets and expanded regulatory authority opens the door to promotions and higher salaries in the government pay grades. In addition, some of those in the government departments, bureaus, and agencies suffer from the “psychology of the petty bureaucrat” who craves power over others; others who deferentially have to come to them and plead for the regulatory and licensing permissions without which the honest men of the market place cannot go about their productive business.

Bureaucrat’s Incentive to Never Get the Job Done

There is also a perverse incentive mechanism within the halls of bureaucratic power. Those who manage and work in these government departments and agencies have little or no incentive to “solve” the problems for which their department or agency was originally created. If they do so they lose the rationale for maintenance of or increase in the budgets and authority without which they have neither their incomes nor positions.

This stands in stark contrast to the incentives for the private enterpriser in the competitive market. In the free market there is only one way to gain and retain the consumer business from whose purchases market-base enterprises earn their revenues: to solve people’s problems.

It may be a tastier coffee or frozen dinner; or a more wrinkle-free shirt or suit; or a longer-lasting chewing gum; or better fitting and lighter wearing prescription eye glasses; or a better quality and less expensive private education; or a wider covering and lower premium car insurance or health insurance policy. Whatever it may be, in the voluntary free market attracting customers and winning their repeat business requires private enterprisers to make people’s lives easier, more comfortable and less expensive.

There are no such incentives within the government bureaucracies, in which the “servants of the people” have monopoly control over certain services and regulatory rules and permissions. In addition, they acquire their incomes not through voluntary transactions but through compulsory taxation.

If this is the crude, but no less true reality behind the “public interest” and “general welfare” political rhetoric and ideology with which those in political power attempt to mesmerize citizens and taxpayers, then why, once it is understood, does the governmental system of paternalism and plunder persist?

Concentration of Benefits, Diffusion of Burdens

One of the core ideas of the public choice theorists is that there is a bias toward growth in government spending and redistribution that results from the pattern of a “concentration of benefits and a diffusion of burdens.” The logic of this process was actually explained more than a century ago, in 1896, by the famous Italian economist and sociologist Vilfredo Pareto.

Imagine that in a country of 30 million people, the government proposes to tax each citizen $1 more, and then redistribute the extra $30 million among a special interest group of 30 individuals. Each taxpayer will have one extra dollar taken away from them by the government for the year, while each of the 30 recipients of this wealth transfer will annually gain an extra one million dollars.

Pareto suggested that the 30 recipients would collectively have a strong incentive to lobby, influence, and even corruptly “buy” the votes of the politicians able to pass this redistributive legislation. Each individual taxpayer, on the other hand, will have little incentive to spend the time and effort to counter-lobby, influence, and petition members of the legislature merely to save one dollar off his or her tax bill.

Let’s look at the U.S. federal government’s budget. In 2013, the per capita amount of government expenditures was around $11,000 for every man, woman and child. Not everyone, of course, pays taxes. The average taxpayer burden of government spending in 2013 came to around $26,000. However, the cost of each of the government departments and bureaus and the specific line items in their respective budgets was only a fraction of the overall tax burden.

Big Government Spending, Individual’s Tax Burdens

Suppose a “conservative” is critical of the Department of Education, thinking that many of its activities are misplaced, or perhaps that the whole department should be abolished. While the Department of Education spent nearly $72 billion last year, the average taxpayer only shoulder $522 of this expense or on average only $43.50 in monthly taxes, which came to around $1.45 a day. This is far less than a latte at Starbucks or a lunch meal at a fast food establishment.

In most instances, it would be hard to interest a member of the general taxpaying public to learn enough about the pros and cons of the actual programs run by the Department of Education for him to make an informed decision as to whether nor not what the Education Department was doing was really worth it. After all, even if the Department of Education was abolished, it would save the average taxpayer less than two dollars a day, assuming taxes were cut by the full amount.

On the other hand, that $72 billion is concentrated on the incomes and activities of, at most, several hundreds of thousands of teachers, educators, school administrators, and textbook and school-supply providers. Those federal dollars represent a sizable portion of their administrative budgets, take-home pay, and business profits. The lobbying and voting incentives, therefore, will be heavily on the side of those who see financial and related gains from continuing and increasing federal spending on government-funded education.

Someone on the “liberal” side of the political spectrum might be equally critical of some of the line item spending in the Department of Defense budget, or on subsidies to corporate agri-businesses funded by the Department of Agriculture. But the same bias would work in these areas of government activity, as well, making it difficult to create the necessary political counterweights to lobby for the reduction or elimination of these federal programs.

The Defense Department’s spending on warplanes and battleships, uniforms and boots, ammunition and weaponry, spying devices and unmanned drones represents hundreds of millions, sometimes billions of dollars to the various contractors who win and fulfill these military contracts. They have a strong incentive to lobby and influence for the greatest amount of defense-related spending, and to know every detail and potential rationale to demonstrate that such expenditures are in the “national interest” and why they are the right ones to get the taxpayer-funded procurement deals.

But how many taxpayers will have the motive and incentive to wade through all the (unclassified) details concerning the various parts of Defense Department spending to make an informed decision about how much defense spending America needs and of what type, considering that even if some programs were to be cut back or eliminated it would maybe result in a cut in his personal taxes by the equivalent of a few dollars a day. For most individual citizens their time and attention have a higher value in doing other things.

Because of this, government tends to grow in many directions in the form of concentrated benefits for special interest groups of all types at the expense of the general citizenry and taxpayers. The dispersed financial burden that falls on each taxpayer as his “contribution” to fund these programs nonetheless adds up, of course, to hundreds of billions, indeed trillions, of dollars a year of government spending.

Division of Labor and the Bias Toward Producer Interests

Since the time of Adam Smith in the eighteenth century, economists have emphasized the productive benefits from specialization through the division of labor. Each of us will be materially far better off if we specialize in what we are relatively more productive at doing, and then trade away our particular good or service for what others are offering to sell us. This is really the basis for all the material, scientific, intellectual, and cultural advancements of modern civilization.

But near the beginning of the twentieth century, British economist Philip Wicksteed pointed out, in his The Common Sense of Political Economy (1910), that such specialization also tends to create a bias against the open, competitive market in which people need to apply themselves in the most productive and cost-efficient ways. This was also strongly emphasized by the free market, German economist Wilhelm R’pke, in his work, The Social Crisis of Our Time (1942).

Once individuals have divided their labors, each becomes the producer of one product (or at most a small handful of things) and the consumer of all the multitudes of goods that others in society produce. But it is impossible for any of us to buy the goods that others offer to us as consumers, unless we have first succeeded in earning an income from what we are selling on the market in our own role as a producer.

Because of this, our interest as a producer always tends to take precedence over our role as a consumer, it has been argued. If I oppose some special interest group that is trying to get a subsidy from the government, I may save a dollar in my role as taxpayer and consumer (to use the earlier example from Pareto). But is it worth the cost in time, effort and expenditure to do so?

On the other hand, lobbying and otherwise influencing the legislative process to win some favor or privilege for myself and the others in my sector of the economy may produce better financial results. A protective tariff to limit foreign competition, for example, or a regulatory or licensing rule that restricts new domestic rivals can increase my income per year by tens of thousands of dollars, in my role as a producer.

The Democratic Dilemma and the Need to Limit Government

This is, in a sense, the modern democratic dilemma.

Over the last one hundred years, there have been fewer and fewer restraints on what is viewed as the proper role of government in society. The arena in which government may take an active part, both in the United States and around the world, grows ever wider. This widening arena of government has become the playground of special interest politicking from both the political “left” and “right” by those hoping to gain something through government intervention at the expense of others in society.

In 2013, there were over 12,000 registered lobbying groups in Washington, D.C. They officially spent more than $3.2 billion in 2013 to influence legislation on behalf of special interest groups from across the political spectrum, and reflecting virtually every sector of the U.S. economy. Just since this century began in 2001, annual spending by Washington-based lobbying groups (in real inflation-adjusted dollars) has increased by nearly 50 percent.

How do we break out of this dilemma, and return to limited government? Unfortunately, there are no electoral “quick fixes” or political sleights-of-hand that can reduce or eliminate the political paternalism and plunder land of the modern interventionist welfare state.

A Return to the Idea of Individual Rights Inviolable by Government

It requires a sea change in the philosophical, ethical and political-economic premises upon which American society operates. In other words, those of us who believe in and desire liberty and a free society must return to “first principles” and articulate the same to others.

We must hone our own understanding of the ideas and ideals upon which the United States was originally founded, and most especially as enunciated in the Declaration of Independence, where it was clearly and explicitly stated that freedom is inseparable from the recognition and defense of those inalienable rights to “life, liberty, and the pursuit of happiness” that are universally possessed by each and every individual.

In more modern times, Ayn Rand expressed this concisely and insightfully in her essay, “Man’s Rights” (1963):

“If one wishes to advocate a free society — that is, capitalism — one must realize that its indispensible foundation is the principle of individual rights. If one wishes to uphold individual rights, one must realize that capitalism is the only system that can uphold and protect them.

“Rights are a moral concept . . . the concept preserves and protects individual morality in a social context … the link between the moral code of a man and the legal code of a society, between ethics and politics. Individual rights are the means of subordinating society to moral law . . .

“A ‘right’ is a moral principle defining and sanctioning a man’s freedom of action in a social context. There is only one fundamental right . . . a man’s right to his own life . . . The right to life is the source of all rights … and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means of sustaining his life. The man who produces while others dispose of his product, is a slave . . .

“The United States regarded man as an end in himself, and society as a means to the peaceful, orderly, voluntary coexistence of individuals . . . and that the only moral purpose of a government is the protection of individual rights . . .

“To violate man’s rights means to compel him to act against his own judgment, or to expropriate his values. Basically, there is only one way to do it: by the use of physical force. There are two potential violators of man’s rights: the criminals and the government.

“The great achievement of the United States was to draw a distinction between the these two — by forbidding to the second [government] the legalized version of the activities of the first [private plunder].”

As long as people believe that “society” or the “democratic majority” or some empty notion of the “general welfare” comes before and is above the rights and interests of the peaceful individual, then there will be no breaking out of the trend towards the growing size and scope of government’s controlling reach over all of us.

It must become “second nature,” a “habit of the mind” for Americans in general to once more take it for granted that certain things are, well, “just not done.” And more precisely, that it is the duty of government to protect the right of each individual to his life, liberty, and honestly acquired property, and not to violate that person’s rights.

For it to become “second nature” and a “habit of the mind” again, people must rediscover the reason for and rightness of an inviolable “right” of each individual to his own life, which should not be sacrificed to some mystical and imagined “higher good” or any collective entity called “the nation,” or the “state” or “society.”

This is why, in answer to her own question, “Philosophy, Who Needs It?” Ayn Rand once argued that each of us does; we must become intelligent students of the theory of individual rights based on reason and reality.

Changing the Course of Human Events with Right Ideas

Enough of us have to have sufficiently done so that we can explain to others the essentials of such a theory of individual rights, and with sufficient persuasiveness that those other, too, come to see the rightness in them. Then it won’t matter that most people never have an incentive to know enough to decide whether the U.S. Department of Education is spending too little or too much on a “common core” curriculum or whether the Defense Department has just the right number of aircraft or ocean vessels to “police the world.”

Enough people will enter the voting booth and think as “second nature” and as a “habit of the mind,” is this candidate for or against respect for and protection of individual rights? Does this party platform advocate or oppose private property and free market capitalism? Does this party and these candidates believe that the function of government is to defensively protect the citizens of the country from the clear and present dangers of foreign aggressors or do they wish to sacrifice the lives and fortunes of Americans in foreign adventures and wars?

Most people, if they see a person drop their wallet will pick it up and hand it back to them, because as “second nature” and “habit of the mind” they take for granted that taking what belongs to another is “wrong.” For a free society to prevail it is necessary for many people to no longer give even a second thought that it is ethically right for them to run to government and take by political power what they would never think of stealing in their private interactions with others.

It is not that advocacy of liberty should become a “prejudice,” that is, a preconceived idea not based on reasoned reflection or learned experience. A mere “faith” in freedom without a well-grounded set of reasons for advocating it will not sustain a free society in the long run.

What it does mean is the each generation must be encouraged to think about and learn the meaning of individual rights, and what they imply about the nature of man, human associations, and the role and place of a government in society.

If properly and effectively understood, it will become the generally accepted notion that, “Well, every thinking and reasonable person knows that . . . using the coercive power of the government to compel any man to sacrifice his life for others is as ethically not right as expecting others to be forced to sacrifice for him.”

Then, as a matter of implied “first principles” it will be impossible for some in the society to successfully coerce others through the tools of political power, because it will be culturally counter to the general “habit of the mind” that liberty is too precious as both a moral and practical matter to be forgone for even the most attractive short-run gains from political paternalism and plunder.

It is neither an easy nor a quick task to change, in this sense, the “climate of opinion” about the appropriate moral order to sustain a free, prosperous and ethically healthy society. But we have no tools other than our minds and our reason and an understanding that it is in our own self-interests to try.

If enough of us take on this task the growth in government can be both halted and reversed. The world of coercive plunder can be replaced with a human community of free men pursuing mutually beneficial peaceful production. The democratic dilemma of every growing government will be brought to an end.

[Originally posted at EpicTimes]

Categories: On the Blog

The New Downtown Los Angeles

April 22, 2014, 11:39 AM

There was a time when downtown Los Angeles was the commercial center of Southern California. According to Robert Fogelson, writing in his classic Downtown: Its Rise and Fall (1880-1950)“nearly half” of Los Angeles residents went downtown every day in the middle 1920s. A time traveler from 1925 might think that to still be the case, with the concentration of tall buildings, and the frequent press reports about downtown’s resurgence.

Downtown LA got a late start with high-rises. Until the middle 1960s, there were few buildings exceeding the 13 story height limit repealed in 1958 by city of Los Angeles. The most important exception is City Hall, opened in 1928, which is 454 feet tall (137 meters). By 1989, the city’s tallest building, Library Tower (First Interstate Tower), had been opened, topping out at 1,018 feet (310 meters). The under-construction Wilshire-Grand Towerwill soon rise 80 feet (25 meters) above Library Tower. From the flight path to Los Angeles International Airport (above) and many ground vistas, the vertical profile of downtown Los Angeles will continue to stand tall over the city.

Yet, far less understood is that downtown has declined in metropolitan importance for decades. Now, downtown has only 2.4 percent of employment the metropolitan area (Los Angeles and Orange Counties).  Between the 2000 Census and the 2006-2010 American Community Survey, employment in the central business district dropped approximately five percent. At least four other employment areas, all freeway oriented with lower employment density, equal or exceed downtown’s employment (these include the Airport-El Segundo area and nameless employment areas straddling the Santa Ana Freeway in Los Angeles County, the Harbor and San Diego Freeways in the South Bay and the Costa Mesa Freeway in Orange County). More important still, approximately two-thirds the metropolitan area’s employment is not in a large employment area at all. This dispersion of employment is one reason why Los Angeles –despite its reputation for horrendous traffic – has the shortest one-way commute time of any world megacity for which there is data.

Shifting Downtown

Following World War II, the heart of downtown Los Angeles shifted west from Broadway, Hill and Spring Streets, leaving a large stock of quality commercial buildings vacant. This was well before the end of their useful lives, yet decades of disuse followed. Most of these buildings rose to the 13 floors height limit, though one, the 18 story United California Bank headquarters at 6th and Spring, was completed not long before its competitors hired moving vans to move west. Soon after, the United California Bank built the UCB Tower (now Aon Tower) on Hope Street, with 62 floors (1973), which at the time was the tallest building in the world outside New York and Chicago.

Adaptive Reuse

The UCB Building and many more on the now more residential east side of downtown been converted to apartments and condominiums under the city’s creative “adaptive reuse” ordinance, which facilitates conversions from office to residential use. According to the city of Los Angeles, the ordinance has facilitated conversion of downtown commercial space into more than 3,000 residential units. Another 7,000 are either under construction or being considered.

The conversion of office buildings to residential has spread to post war structures, such as theMobil Oil Building (now the Pegasus Apartments). This building, on Flower Street, was one of the earliest examples of the more modern styles that were to proliferate throughout the downtown areas of the nation. The Signal Oil Building, also one of the first to exceed the 13 story limit has also become residential (1010 Wilshire). This building had been the subject of an unusual 1980s remodeling that enlarged the footprint and the floors, while materially changing the outside angles and the decor. Another nearby office building (1100 Wilshire) sat empty for two decades after construction, before being converted to residential use.

The shift to residential makes sense given that most downtown office buildings are having difficulty filling their space. Downtown’s glutted office market is indicated by a 19.2 percent vacancy rate in the fourth quarter of 2013. This is better than such market laggards as downtown Detroit or downtown Dallas, both over 20 percent, but higher than the Los Angeles suburban office vacancy rate, at 15.9 percent. Downtown’s vacancy rate is also approximately double or more those of dynamic downtowns such as San Francisco, Boston, New York, and Houston, which are all under 10 percent (Figure 1).

It appears likely that the Crocker Citizens Plaza, opened as the city’s tallest building in 1969 (42 floors), is slated for conversion to residential. After Crocker Bank moved to its new Crocker Center (now Wells Fargo Center) on Bunker Hill, Crocker Citizens Plaza became the AT&T Building. AT&T vacated the building and moved to the earlier 1960s Transamerica Building, which urban legend indicates was built well south of downtown because consultants convinced the developers that this would be the center of an even larger downtown. The Transamerica, now AT&T, is even more divorced from the commercial core than when it was built. By the time Crocker Citizens Plaza (now “611 Place”) is converted to residential, it could be the third tallest mixed use building in downtown.

The second tallest mixed use tower could well be the prestigious Library Tower, which stands half-empty. There are rumors that the new owners may convert a large part of the structure to condominiums and a hotel. No major office skyscraper has opened in downtown Los Angeles in the last 20 years. Nor will that change when the Wilshire Grand Tower is completed. Wilshire-Grand will only be partially an office tower and will include a hotel. Only 30 of the 73 floors will be offices. This is a climb-down from the original design, which included two buildings – a 60 story office tower and a 40 floor hotel and condominium project. The new building is little of an endorsement of downtown’s office demand.

Transitioning from Adaptive Reuse?

This conversions may be the tail end of trend. DT News reports that it has become more economical for many developers to construct new residential buildings, rather than to convert empty commercial buildings. As demand has increased, so have prices of existing buildings, which makes adaptive reuse   less attractive. Further, many of the structures on Broadway, which casual observation might indicate have potential for conversion, but the density of development may make offering enough natural light difficult for residences.

Ups and Downs of Downtowns

As employment has dispersed throughout the Los Angeles area, there has been less of a need for a central business district. Among the nation’s larger downtowns, only downtown Los Angeles has undertaken wholesale abandonment of its commercial core and built a new one. Perhaps this is, in part, because the 13-story height limit rendered the older buildings uneconomic for the second half of the 20th century.

New York (Manhattan), south of 59th Street also has seen its ups and downs. But New York did not abandon large swaths of development, only to move elsewhere. Downtown Chicago expanded northward along Michigan Avenue, but little if any of the Loop was ever abandoned and it has undergone continuous renewal. The West Coast’s premium downtown areas, San Francisco and Seattle, have interspersed new development along with the old, and remain more important to their metropolitan areas than downtown Los Angeles, accounting for from four to six times its employment share (though still less than 15 percent). Even Houston, which most resembles Los Angeles in its post war downtown rebuild, managed its transformation without abandoning the historic core. And, at the same time, all are enjoying increasing residential demand, like downtown Los Angeles.

Rising Demand

Downtown interests are rightly proud of the rising residential population. This has occurred in many downtowns across the nation. Between 2000 and 2010, areas within 2 miles of City Hall gained 206,000 residents in the major metropolitan areas (over 1 million population). However, within in the next ring, from 2 to 5 miles from City Hall the decline in population more than compensated for the core gains (minus 272,000).

The situation was the same in Los Angeles, where the Census Bureau reports that population within 2 miles of City Hall rose 12,000, while it declined 23,000 between 2 and 5 miles. The growth of downtown Los Angeles is impressive in part because it was stagnant for so many decades. In context, however, it is no “game-changer.” Overall in the last decade all growth in the Los Angeles metropolitan area was outside the 5 mile ring, and 75 percent of that was more than 20 miles from City Hall (Figure 2).

A New Species is Born

It would be a mistake to characterize the emerging downtown Los Angeles as reasserting any economic primacy. Its former function is beyond revival. This was indicated by UCLA Anderson Forecast economist David Shulman, who indicated that he was “not bullish on Downtown Los Angeles.” The report by public radio station KPCC continued:

“That view runs counter to the impression that downtown L.A. is staging an urban comeback. But the resurgence is more about sports and entertainment venues, restaurants and bars, loft conversions, and hotels than it is about companies that need a lot of floors in tall buildings. Nightlife and streetscapes trump florescent light and cubicles.”

This refers to the new entertainment venues, such as the Staples Center, the Walt Disney Concert Hall and “LA Live,” which may be joined by a new football stadium for a proposed National Football League franchise.

The transformation of downtown Los Angeles is not so much a renaissance of a business core, but a shift into a new, and different, function. The new downtown serves a function similar to that of Wilshire Boulevard’s more heavily residential high-rise district. But it’s not likely to ever resemble the Upper East Side or Upper West Side in New York, not only because its residential base will remain  small, but because downtown is hardly an ascendant business center. Downtown’s recovery as a residential district – with a population roughly equivalent to the suburb of Diamond Bar – is indeed impressive, but its role as a vital urban economic center remains relatively small.

[Originally posted at New Geography]

Categories: On the Blog