Free Markets, Free People
Robert Samuelson, writing in the Washington Post, correctly dissects the Obama decision to reject the Keystone Pipeline into its two proper constituent parts: politics and the net practical effect:
President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.
Aside from the political and public relations victory, environmentalists won’t get much. Stopping the pipeline won’t halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global-warming emissions. Indeed, Obama’s decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills.
The unions are in his pocket, or so this decision would seem to say. Not in his pocket and not particularly happy with him at the moment are the members of the radical environmentalist movement. He apparently thinks they’re important to his re-election. This was a political move designed to shore up that constituency with the implied promise of permanent rejection of the project after he’s re-elected. That’s the message to them (whether it is true or not, they’ll still vote for him now because they know a Republican will okay it). He most likely figures the unions will suck it up and support him and, my guess now, he’ll find a bone he can throw their way sometime between now and November.
That leaves the practical effect of his rejection to the overall environmentalist goal of “reducing greenhouse gas emissions”. The effect? It will likely mean even more emissions than running the pipeline through the US. As Samuelson points out the tar sands will be developed and exploited, the product will be transported through a pipeline and most likely that pipeline will now run to the west coast of Canada instead of our Gulf refineries. But unlike the trip by pipeline to the coast, there will then be an added step of transporting it by sea to China.
Great win there enviro-types.
But there’s even more damage done by this decision.
Now consider how Obama’s decision hurts the United States. For starters, it insults and antagonizes a strong ally; getting future Canadian cooperation on other issues will be harder. Next, it threatens a large source of relatively secure oil that, combined with new discoveries in the United States, could reduce (though not eliminate) our dependence on insecure foreign oil.
It’s not “relatively secure”, it is very secure. Canada is and has been our largest supplier of “foreign” oil for years. And they’re both a friend and a neighbor. How more secure – other than having the tar sands within our borders – can a supply get? What we have an opportunity to do here is displace the commensurate amount of foreign oil from unfriendly and insecure sources by the amount the tar sands would yield.
Sound like good policy? Sound like a smart move? Of course it does. So why the rejection of such a seemingly common sense decision. See reason one above: politics. This is all about election year politics. The president who claims to have the best interest of all Americans at heart has just demonstrated that that claim is nonsense. He’s catered to a particular election year constituency in deference to what is obviously best for the nation.
…Obama’s decision forgoes all the project’s jobs. There’s some dispute over the magnitude. Project sponsor TransCanada claims 20,000, split between construction (13,000) and manufacturing (7,000) of everything from pumps to control equipment. Apparently, this refers to “job years,” meaning one job for one year. If so, the actual number of jobs would be about half that spread over two years. Whatever the figure, it’s in the thousands and thus important in a country hungering for work. And Keystone XL is precisely the sort of infrastructure project that Obama claims to favor.
What has supposedly been the focus of Obama for some time – that’s right, jobs and infrastructure. His rhetoric has been all about how we need to create jobs and improve our infrastructure. Here you have a infrastructure project – an actual shovel ready one – that will provide jobs and he rejects it and, as usual, tries to shift the blame to Republicans for something he decided. The implication, of course, is he might have made a different decision if they’d have let him vote “present” until after the election. Because, you see, they’ve now forced him to tack this stupid decision on his less than impressive record as president – and now he’ll have to run on it. As usual, the blame-shifter in chief had decided it is someone else’s fault.
And in case you were wondering about the timeline on this project, it goes pretty much like this:
The State Department had spent three years evaluating Keystone and appeared ready to approve the project by year-end 2011. Then the administration, citing opposition to the pipeline’s route in Nebraska, reversed course and postponed a decision to 2013 — after the election.
By the way, the supposed primary excuses for the rejection was the opposition to the pipeline mounted by Nebraska. In fact, as POLITICO reports, the White House used the Republican governor there, Dave Heineman, as cover for its decision. Heineman takes exception to that:
"I want to say I’m very disappointed," Heineman told POLITICO. "I think the president made a mistake."
"Really what he was saying in denying the permit was ‘no’ to American jobs and ‘yes’ to a greater dependence on Middle Eastern oil," he said. "We want to put America back to work."
Why is Heineman disappointed? Because there was a way in the works to let the project go ahead while negotiations were finalized that would have satisfied Heineman and the states initial objections:
He said that his Legislature and his administration were working to get the final approvals in place and that the State Department should have approved conditionally while Nebraska worked out the final route. The company seeking to build the pipeline, TransCanada, was perfectly willing to begin construction at either end and finish in Nebraska, according to Heineman.
But the unilateral president, in a fit of political pique and in full political mode, decided to dump the project … at least for now. Those ready shovels could be breaking ground today. Instead, we have to hope, if and when the decision is reversed, that it hasn’t been overcome by events and Canadians aren’t loading tar sand oil on Chinese ships.
Naturally the administration thinks Heineman’s idea is just, well, inappropriate:
“It’s the responsibility of the State Department to grant this permit, which really looks at the crossing of the international boundary. … It’s important for us to look at the full pipeline and not move forward on such a major infrastructure project that will be a part of the country and the landscape for many years in pieces like that. I hadn’t heard about the governor proposing this, but we don’t really think that’s an approach that really deals with the national interest question in an appropriate way," Assistant Secretary of State Kerri Ann Jones said on a conference call.
Right. Of course. Naturally.
Say’s the governor:
"If you’re a decisive president and you want to put America back to work, you can find a way to get to yes," Heineman said about the administration’s response. "That’s what most governors do. So I’m just not buying that."
Yeah, neither am I. Neither are 70% of the voters.
Politics … pure and simple.
Jobs president? Don’t make me laugh.
National security first? Nope, politics first.
Concerned with all Americans? Seriously?
An “act of national insanity”? Spot on.
At least that’s what Robert Samuelson sees for us. I can’t really dispute his numbers either:
For the past half-century, federal spending has averaged about 20 percent of GDP, federal taxes about 18 percent of GDP and the budget deficit 2 percent of GDP. The CBO’s projection for 2020 — which assumes the economy has returned to “full employment” — puts spending at 26 percent of GDP, taxes at a bit less than 19 percent of GDP and a deficit above 7 percent of GDP. Future spending and deficit figures continue to grow.
What this means is that balancing the budget in 2020 would require a tax increase of almost 50 percent from the last half-century’s average. Remember, that average was 18 percent of GDP. To get from there to 26 percent of GDP (spending in 2020) would require an additional 8 percentage points. In today’s dollars, that would be about $1.1 trillion, a 44 percent annual tax increase. Even these figures may be optimistic, because CBO’s projections for defense and “nondefense discretionary” spending may be unrealistically low. This last category covers much of what government does: environmental regulation, aid to education, highway construction, law enforcement, homeland security.
Now, this should come as no surprise, really, to anyone with a passing knowledge of accounting. When you increase spending without increasing revenue, you end up with a deficit. And what we’ve seen the government doing for decades is exactly that. Now it’s in the midst of piling up massive deficits and planning huge increases in government.
And it’s not all the politicians fault. After all the average American keeps returning the same fiscally irresponsible people to the same place where they can continue doing what they’ve been doing for decades – spending us into bankruptcy.
Because, as Samuelson notes, Americans like the benefits even if they don’t like the taxes. So the formula has been a little different for each party but the result has been precisely the same:
Republicans want to cut taxes without cutting spending. Democrats want to increase spending without increasing taxes, except on the rich. The differences between the parties are shades of gray. Hardly anyone asks the hard questions of who doesn’t need benefits, which programs are expendable and what taxes might cover remaining deficits.
In fact, much harder questions are routinely ignored, such as “why is government getting into _________ at all?” To me that is the key question that is never asked. Name your program and tell me when anyone asks why government is involving themselves in such things?
It all comes back to the fundamental question which, over the centuries, has seen the answer change radically – “What is the basic function of legitimate government?”
Few are going to be able to argue successfully that the answer in 1781 was the same as it is today, are they? And you don’t really have to be an economist to understand what this direction we seem to be intent upon taking means for our future. It should also be clear by now that those who’ve have gotten us into this mess have little incentive to change their ways and certainly no stomach for the sort of work it would entail:
There is little appetite for any of this, and so we face the consequences of much bigger government. Certainly higher taxes for future Americans. Probably a less robust economy. The CBO notes that elevated deficits would penalize saving, investment and income, while unprecedented tax burdens could “slow the growth of the economy, making the [government's] spending burden harder to bear.” To such warnings, Americans’ collective response is: Go away.
You can go back to sleep now.
Warren Buffet on the economy and the effort of the government to “stimulate” it:
While praising efforts by Federal Reserve Chairman Ben Bernanke and others to stimulate the economy, he said the economy “can’t turn around on a dime” and that their efforts could trigger higher inflation once demand rebounds.
“We are certainly doing things that could lead to a lot of inflation,” he said. “In economics there is no free lunch.”
Funny how, when someone like Warren Buffet – who has been a supporter of Obama – says things like ‘trigger inflation’ and ‘no free lunch’, people who were previously playing the denial game (massive spending is necessary and good) suddenly figure there may be a problem. Meanwhile the laws of economics have continued to function despite the denial.
For the most part the press has ignored Buffet’s words and they’ve been downplayed by the administration. But perhaps if those who’ve been in denial are willing to consider Buffet’s warnings, they’ll be open to listening to others. Such as warnings about the double talk that’s been coming out of the Obama administration the past few weeks. For instance:
Confidence (too little) and uncertainty (too much) define this crisis. Obama’s double talk reduces the first and raises the second. He says he’s focused on reviving the economy, but he’s also using the crisis to advance an ambitious long-term agenda. The two sometimes collide. The $787 billion “stimulus” is weaker than necessary, because almost $200 billion for extended projects (high-speed rail, computerized medical records) take effect after 2010. When Congress debates Obama’s sweeping health care and energy proposals, industries, regions and governmental philosophies will clash. Will this improve confidence? Reduce uncertainty?
A prudent president would have made a “tough choice” — concentrated on the economy; deferred his more contentious agenda.
Instead he’s decided he’s not going to let a “good crisis” go to waste and pursue his very expensive agenda which has nothing to do with the economic crisis (or alleviating it). All the while he preaches about crisis, catastrophe, sacrifice, tightening belts and doing with less even as he plans to expand government beyond anything we’ve ever seen.
It is an amazing performance.