Free Markets, Free People

market


How can government help the economy? End the corn ethanol subsidy

The fixation of government on “alternate fuels” and its use of taxpayer money to subsidize some of them is, at least in one case, having a very negative effect on markets.  Again we have government market intrusion to hold responsible for rising food prices in an era of high unemployment and economic turmoil.

Again, this is Econ 101 stuff.  For a government so full of experts who feel they have the right (based one assumes, in their superior intellect … or something) to decide what we should be using for fuel rather than letting markets decide, they sure have screwed this one up.

Corn is a major food crop.  And, for the most part, markets have kept corn relatively cheap and plentiful.  Enter government and the mandate that ethanol be produced and mixed with gasoline in an effort, one supposes, to reduce the amount of oil consumed.

The result, however, has been to drive up the price of corn and the price of other commodity foods instead. 

Here’s how it works.  The set up:

Powerful agribusiness interests collect a 45-cent-per-gallon tax credit to convert this food crop into ethanol, an unnecessary and sometimes harmful additive to gasoline. Another 54-cent-per-gallon tariff is imposed to keep Brazil’s sugar-cane-based ethanol from entering our shores. Nor does the folly end there. The Food and Energy Security Act of 2007 mandates a massive increase in the production of ethanol by 2022 even though there is no demand.

While there’s no demand, there’s plenty of your money to be had.  And what do producers react too?  Incentive.  So what provides the best return on investment right now?   Corn.  Not for the consumer, but for the producer.  So what do producers of other commodity foods do?  They switch from growing wheat and soybeans to corn.   The result is inevitable:

The lure of free government money reduces the amount of corn available for other uses, primarily as feed for animals. This has a cascade effect, increasing prices down the food chain and for crops unrelated to corn. Farmers might switch from growing, say, soybeans, to corn to get hold of the extra subsidy. That makes soybeans scarcer and drives up their cost. This year, the price of wheat has increased as farmers have switched to corn to take advantage of high corn prices. In either scenario, the price of food increases, and that’s the last thing we need right now.

When the price of feed grain increases, what do you suppose happens to the price of meat?

Want ethanol?  Feel it is a necessary and good thing?   Drop the mandate, drop the subsidy and drop the tariff.   Let the market decide.  If it actually does what its champions claim and actually provide an additive to gasoline that increases performance (a dubious claim at best) and lessens our dependence on oil, that ought to be an easy idea to sell.

The fact is, without the subsidy and the mandate, the market would most likely reject ethanol completely.  And that would conflict with the ideologically driven agenda that our government has put in place – namely it has the responsibility to decide what we should or shouldn’t use to power our vehicles.  Each administration has its own take on how this should be done but make no mistake, this has been something which has survived both Republican and Democratic administrations.

It is another, in a long line of examples, of government intrusion, market distortion and wasting taxpayer money for a product with no demand.  It also has the effect of driving up prices in food in an era of high unemployment.  It is a disastrous policy and the proof is in the distorted markets.

Time to end the whole program and rescind the foolish government mandate.  The effect?  Food prices would again react to market pressures instead of government mandates.   And taxpayer money wouldn’t be used to distort those markets any longer.

Win win as I see it.

~McQ

Twitter: @McQandO


Is “Higher Education” more of a rip-off than a benefit today?

Well you have to ask yourself what you get for the money when you purchase anything don’t you?  I mean isn’t that how you make buying decisions for the most part?  You weigh the advantage the purchase makes in your life and you figure out whether or not parting with your money justifies the supposed benefits.

In the case of higher education in this country, it’s my guess we passed the point of diminishing returns eons ago.  A college degree just isn’t what used to be a few decades ago, but it costs a hell of a lot more.  Jack Kelly fills us in:

Tuition and fees at colleges and universities rose 439 percent between 1982 and 2007. Median family income rose just 147 percent during that period.

Median household income has fallen 6.7 percent since June 2009. The cost of attending the average public university rose 5.4 percent this year.

Student loan debt recently passed $1 trillion. It’s now more than credit card debt. The average graduate of a four-year college owes $27,000.

So you have a cost that has risen far and away faster than inflation and median family income for, well, no good reason that I know of.

Oh wait, I said “good reason”.  There is a reason.   Can you say “subsidy”?  That coupled with the myth that a college degree … any college degree … is worth its weight in future gold.  But it appears that gold may be fool’s gold. 

I love this description of what many institutions of “higher learning” have become:

College students don’t get much for their money. Nearly half learn next to nothing in their first two years; a third learn almost nothing in four, according to a report authored principally by Prof. Richard Arum of New York University.

"Students who say that college has not prepared them for the real world are largely right," said Ann Neal, president of the American Council of Trustees and Alumni. "The fundamental problem here is not debt, but a broken educational system that no longer insists on excellence."

Or even adequacy. "A college degree nowadays doesn’t necessarily signal that its holder has any useful work skills," said Charlotte Allen of the Manhattan Institute.

"For decades our schools have abandoned the teaching of basic facts and foundational thinking skills, and replaced both with leftish received wisdom and stale mythologies, all the while they have anxiously monitored and puffed up students’ self esteem," said classics Prof. Bruce Thornton of California State University Fresno.

I agree totally with Ms. Neal.  There is no insistence on excellence.  That’s not true of every institution out there, obviously.

However a look at the various new degree programs provides a peek into the priorities of the schools.  To broaden and accept as many students as they can to also broaden the revenue stream they’re provided.  The unique offerings are most likely not made to produce anything meaningful in academia and certainly not in the real world, but they do attract a certain type of student to such a degree program that is fully willing to buy into the myth that somehow a degree in gender studies is going to be useful and are willing to pay the big bucks demanded (even if that means borrowing them). 

And, of course, government subsidizes the purchase, so there’s certainly no reason for the school to back off such a useless program or lower it’s price to something roughly equivalent to its utility in the real world.

What happens?  Precisely what you’d think would happen.  Its much like the housing crisis.  Loans are given to people who aren’t really capable of college work.  They leave with nothing or some marginal degree and huge debt. 

Meanwhile:

Others graduate to find there are no jobs for them. Roughly 60 percent of the increase in the number of college graduates since 1992 work in low-skill jobs, Prof. Richard Vedder of Ohio University discovered. In 2008, 318,000 waiters and waitresses had college degrees, as did 365,000 cashiers and 18,000 parking lot attendants.

Because degrees have been so diluted and their worth so compromised over the years, they’re less and less of a guarantee of a good job and better wages.

But because government subsidizes education and distorts the market, guess what?

And, according to a study by the American Enterprise Institution and the Heritage Foundation, teachers are paid $120 billion over market value.

There is fraud at every level of the education system, thanks mostly to politics, said Herbert London, professor emeritus at New York University. Teachers and professors go along to save their jobs.

"They simply cannot say that college isn’t for everyone … or that rigorous exit requirements at any level do not exist," he said. "Hence, there is the clarion call for more money."

Of course they can’t.  The gravy train is just too rich to quit.

And, you also need to understand what is actually happening in colleges and universities across the nation to appreciate the full impact of this market intrusion by government.  Colleges, as mentioned, no longer demand excellence.  Instead, they spend an enormous amount of time and effort teaching what a college student should have mastered before ever showing up at a university:

We spend about $10,600 per pupil in public schools, 377 percent more, in inflation-adjusted dollars, than we spent in 1961. Yet among students who go to college, 75 percent require some remedial work.

If you managed to catch some of the protests in WI that included teachers and caught the spelling on some of their signs, the stats above wouldn’t particularly surprise you.  We spend more on education today and and get even less than in the past.  What you have to remember is that at every level it is either run by or subsidized by government.

Now at every level, we’re seeing the results of that sort of intrusion, aren’t we?  A dismal record of extraordinarily expensive non-achievement.  And nothing is going to change or improve in that regard as long as government stays in charge and subsidizes the growing bubble with your money.

But you’ll never hear that said, will you?

~McQ

Twitter: @McQandO


Health Care: When talking about liberty and rights is radical and extreme

The other day, Michelle Bachman said:

“We will always have people in this country through hardship, through no fault of their own, who won’t be able to afford health care,” Bachmann said. “That’s just the way it is. But usually what we have are charitable organizations or hospitals who have enough left over so that they can pick up the cost for the indigent who can’t afford it.”

That initiated the usual reaction from the left:

Before the advent of Medicare and Medicaid, charities did provide health care to those in need. But to suggest that they can do the same today is to misunderstand the enormity of the health care crisis, as charities simply do not have the capacity to handle the demand. As the number of uninsured creeps up to 50 million, for any politician to argue that government should outsource the task of keeping Americans healthy to charities is like saying that people should be punished with death if they are unfortunate enough to be poor or are priced out of insurance due to a pre-existing health condition.

And that’s one of the more family friendly reactions.

But let’s look at it.   First question, why is it that “charities simply do not have the capacity to handle the demand?”  Any takers?

Is it because there are no established charitable programs in place anymore because government usurped the need for them with Medicare and Medicaid?   Perhaps not wholly, but it certainly is one of the reasons.   Charities, like any other organization, focus their giving where there is a need.   And where no one else, usually, is helping.   No need, no priority, no charity.

Secondly, you see the insidious conclusion that “the demand” that would strain the capacity of charities can only be met by … government, of course.  Naturally there’s no way to really test that conclusion because government has destroyed the market for charitable health care giving.

So, as usual, government has helped create the problem (lack of charitable institutions focused on providing health care for poor) and now, according to the left, the government is the answer to the problem it created.  It may not be something you traditionally consider a market (charitable giving in health care) but there’s no question that government intrusion into the health care market changed the dynamic completely.

And finally the unspoken premise: Health care is a human right.  Sorry, but health isn’t even a “human right”.  Obviously health care requires the labor of others.   It requires their time and the abilities they’ve developed over the years.  It is their property to dispose of as they will. But bottom line, health care requires the labor of others in order to fulfill this assumed right.  

Clue: To be a right, the right must not violate the rights of others.  It cannot take precedence or priority over someone’s right to decide how to use their property – i.e. their developed and marketable abilities.   Period.  That’s slavery.   Here we see another twisting of a word that denotes a condition of freedom and liberty into one that demands virtual slavery from others.

You may or may not agree with Michelle Bachman’s statement.  But, in reality it is the way a truly free country should work.  Instead we seem to opt for “government is always the answer” (even when it is the entity that created the problem) and coercion is just fine for fulfilling utopian dreams.

Hard to call that “free” isn’t it?

~McQ

Twitter: @McQandO


Fed loan program that gave us Solyndra has created few jobs (update)

One of the center pieces of the Obama administration’s recovery plan has been its green jobs program.  It was touted by the President as an investment in the future.  And he even managed to snooker Congress into including $38.6 of your dollars in a federal guaranteed loan program in the Stimulus bill – a version, in this case, of the government going into the venture capitalism business.

The results, as they say, are predictable:

A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.

The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.

Half the money is gone and it has created 3,545 “new, permanent jobs”?  You do the math – pretty high cost of job creating wouldn’t you say?  Oh, and that number is actually down by 1,100 thanks to Solyndra.

So are green jobs, of the type to be found in alternative energy, the best way to approach easing unemployment?  Not really, say some experts:

Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-­energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.

“There are good reasons to create green jobs, but they have more to do with green than with jobs,” Princeton University economics professor and former Federal Reserve vice chairman Alan Blinder has said.

Which is a nice way of saying this is more about political agendas than putting Americans to work, and unemployment is an excuse, not  a reason, for pursuing this agenda.  And the cost of that agenda has been pretty prohibitive with no real worthwhile results in the ostensible problem it was supposed help solve – unemployment.  

Another example of government using your money to pick winners and losers and everyone coming out poorer in the bargain.

UPDATE: No, I didn’t see Dale’s post.  My bad.  I’ll leave mine, but now that Dale’s putting up a lot more stuff, I’m going to have to discipline myself to look first before I go popping something up (I use Live Writer, so unless I specifically look at the blog, I don’t see a list of what is up).

~McQ

Twitter: @McQandO


Obama touted solar technology company files for bankruptcy

But not before sucking down over half a billion dollars in federal loan guarantees that will now be exercised.

Solyndra was touted by the Obama administration as a prime example of how green technology could deliver jobs. The President visited the facility in May of last year and said  "it is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. And you guys all represent that. "

The federal government offered $535 million in low cost loan guarantees from the Department of Energy. NBC Bay Area has contacted the White House asking for a statement.

This is what happens when government tries to pick winners and losers economically with absolutely no understanding of the market in which they intrude.  What this clearly points out, unless there was true malfeasance by the company, is there is no market, at this time, for what they were selling.  Either that, or they were truly incompetent.

This was a “if we build it they will buy” project that apparently either misrepresented the market or misunderstood it. Either way, it failed.   And the Feds were apparently no more informed about the market potential of the product than the company.  Result – over half a billion in loans guaranteed by the Federal government are now being called in.  The taxpayer, as usual, is on the hook to pay off the mistake the government made.

One of the constant themes here is the government is way outside its charter when it engages in activities like this.  It is an example of what those Tea Party lunatics mean when they talk about government intrusion and call for smaller government.  Note, it has nothing to do with welfare reform or any other of the usual nonsense their opponents try to tag them with.   It has to do with out-of-control government and out-of-control spending in areas where none of the founders ever even hinted at envisioning a Federal presence.

It’s a pity this has to be constantly pointed out to Tea Party critics bent on stereotyping members of that group as racists.  But as usual, reality provides the perfect context and example to counter their baseless charges.

This is not what our government should be involved in, period.  And certainly not with tax payers money, exclamation point!

~McQ

Twitter: @McQandO


Green jobs? There’s just no market

If you don’t believe me, look at the California experience to this point.   If there’s any state in the union more amenable to and focused on providing green jobs, it has to be the Golden State.   Governor Jerry Brown pledged to create 500,000 of them by the end of the decade.

But as often the case when the central planners make their pledges, they are woefully ignorant of what the market wants.  And so rarely does what they envision ever come to fruition.  Green jobs in CA is a good example.

Remember Van Jones?  Well, when Jones left the Obama cabinet as his “Green Jobs Czar” he landed in California and has been what the NY Times calls an “Oakland activist” apparently pushing for the creation of green jobs.   And it’s not like California hasn’t tried.   It has simply failed.

For example:

A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.

Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.

So a “stimulus” program that spent over $93 million dollars to create 538 jobs.  Why so little in terms of takers?  Well it seems the market wasn’t interested.

The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.

“Companies and public policy officials really overestimated how much consumers care about energy efficiency,” said Sheeraz Haji, chief executive of the Cleantech Group, a market research firm. “People care about their wallet and the comfort of their home, but it’s not a sexy thing.”

You don’t say … the government didn’t have a clue at what the market potential of their boondoggle actually had, so they ended up spending $172,862 for each job.  And you wonder where the money goes?

Example two:

Job training programs intended for the clean economy have also failed to generate big numbers. The Economic Development Department in California reports that $59 million in state, federal and private money dedicated to green jobs training and apprenticeship has led to only 719 job placements — the equivalent of an $82,000 subsidy for each one.

“The demand’s just not there to take this to scale,” said Fred Lucero, project manager atRichmond BUILD, which teaches students the basics of carpentry and electrical work in addition to specifically “green” trades like solar installation.

Richmond BUILD has found jobs for 159 of the 221 students who have entered its clean-energy program — but only 35 graduates are employed with solar and energy efficiency companies, with the balance doing more traditional building trades work. Mr. Lucero said he considered each placement a success because his primary mission was to steer residents of the city’s most violent neighborhoods  away from a life of crime.

You see you can fund all the job training centers in the world and run umpthy-thousands through it.  But if there is no market for the jobs, you end up spending a whole lot of money for nothing.   Again, ignorance of the market and its demands means expensive mistakes.  Of course Mr. Lucero thinks the program is a success – he got to spend free money, was employed and it didn’t cost him squat.  It cost you.

Example three:

At Asian Neighborhood Design, a 38-year old nonprofit in the South of Market neighborhood of San Francisco, training programs for green construction jobs have remained small because the number of available jobs is small. The group accepted just 16 of 200 applicants for the most recent 14-week cycle, making it harder to get into than the University of California. The group’s training director, Jamie Brewster, said he was able to find jobs for 10 trainees within two weeks of their completing the program.

Mr. Brewster said huge job losses in construction had made it nearly impossible to place large numbers of young people in the trades. Because green construction is a large component of the green economy, the moribund housing market and associated weakness in all types of building are clearly important factors in explaining the weak creation of green jobs.

Market timing is pretty important too, isn’t it?  If you introduce a product into a market in the middle of a market downturn, chances are slim you are going to be successful.  While it may all look good on paper and sound good in the conference room, the “buy” decision is still made in the market place, and in this case it is obvious that the market has no room for these workers.  Something which should have been, well, obvious.  In fact, there is precious little market for traditional construction jobs in a “moribund housing market”.   Yet there they are spending money we don’t have on job skills that are simply not in demand.

Finally there’s this bit of word salad to feast upon:

Advocates and entrepreneurs also blame Washington for the slow growth. Mr. Jones cited the failure of so-called cap and trade legislation, which would have cut carbon pollution and increased the cost of using fossil fuel, making alternative energy more competitive. Congressional Republicans have staunchly opposed cap-and-trade.

Mr. Haji of the Cleantech Group agrees. “Having a market mechanism that helps drive these new technologies would have made a significant difference,” he said. “Without that, the industry muddles along.”

You have to admire someone who tries to cloak central planning jargon in “market speak”.  Imposing a tax on thin air to drive, from above, a behavior government wants is not a “market mechanism”.  And beside, California passed it’s own version of this “market mechanism” with AB 32 in 2006.  How’s that working out?

This is how:

A SolFocus spokeswoman, Nancy Hartsoch, said the company was willing to pay a premium for the highly-skilled physicists, chemists and mechanical engineers who will work at the campus on Zanker Road, although the solar panels themselves will continue being made in China. Mayor Reed said he continued to hope that San Jose would attract manufacturing and assembly jobs, but Ms. Hartsoch said that was unlikely because “taxes and labor rates” were too high to merit investment in a factory in Northern California.

Irony … central planning fails in CA while jobs end up in increasingly capitalistic China.  Again, ignorance of the market causes disappointing results.  Somehow I feel this came as a surprise to Mayor Reed … after he’d spent whatever of your money he’d committed to this project.

~McQ

Twitter: @McQandO


Michael Moore’s inner totalitarian peeks out

Michael Moore, the “documentary” film maker who has pushed various liberal causes with extraordinarily slanted films, has called on President Obama to “show some guts” and arrest the head of Standard & Poors.

“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.

Yes, it’s all S&P’s fault. Somehow the 100% of GDP debt, 4 trillion of which was heaped on the pile within the last 3 years, was an S&P plot. Apparently Moore is of the opinion that credit rating agencies ought to align themselves politically and if they don’t, or won’t, well they’re open to arrest. S&P obviously should have just kept to itself and supported the outrageous spending this administration has committed itself too.

It seems in Moore’s world the rating agency’s job is to turn a blind eye to actions and activities which, for any other country, would have earned a downgrade quite a while ago.

It it is telling that on the liberal side of things, the first inclination is to attack the messenger. And that inclination is driven by one primary thing – politics.  Specifically the politics of personal destruction.  The downgrade obviously hurts Obama politically. And all the spinning in the world doesn’t change that.

Because they see this as a desperate situation, the mask slips a bit and you see the true face of "liberalism". Imagine, in a Moore approved regime, how dissent would be handled if he’s now calling for the arrest of the CEO of S&P.

Mr. Moore went on to note that the “owners of S&P are old Bush family friends,” continuing a theme he has developed through several films about capitalism as essentially a crony system for the rich and Wall Street, especially the Bush family.

He went on to link approvingly to an article last week in the Guardian, a left-wing British newspaper, about a police raid in Milan against the offices of S&P and fellow ratings agency Moody’s. Italian police were searching for evidence on whether the rating agencies, in the words of a local prosecutor, “respect regulations as they carry out their work”.

Two more interesting points – somehow it is “Bush’s fault” (there’s a surprise).  Additionally it is “important to respect regulations” when these agencies carry out their work. Of course Italy was downgraded by Moody’s and the reaction there by government has been much the same as here – “what us? How dare you”.  Fallback?  Government regulations, of course. 

Naturally Moore doesn’t bother to point out that the government of Italy is run by a right-wing Prime Minister who, at any other time, he’d now be calling a “fascist” for doing that.

Vintage Moore. Vintage liberalism. Liberalism in very deep trouble. And that’s always when its inner totalitarian usually begins to show.

~McQ

Twitter: @McQandO


The death of the social democratic welfare state

Margret Thatcher boiled it down to its essence years ago – “the problem with socialism is you eventually run out of other people’s money”.

Janet Daley, writing the the UK’s Telegraph, hits a proverbial homerun with her macro look at the “situation” in which both the US and Europe find them selves.  It’s not a pretty picture, but quite accurate.   Per Daley, what we’re going through right now, at least on the European side of the pond, isn’t some esoteric debate about a crisis that will eventually be solved, it is the predictable endgame of the premise that a capitalist system can support an ever expanding social welfare state.  Per Daley, the  answer seems to be a pretty obvious “no”. 

Her reasoning for her conclusion is painful for those who want to believe that such a premise is actually attainable.  Let’s take a look:

The truly fundamental question that is at the heart of the disaster toward which we are racing is being debated only in America: is it possible for a free market economy to support a democratic socialist society? On this side of the Atlantic, the model of a national welfare system with comprehensive entitlements, which is paid for by the wealth created through capitalist endeavour, has been accepted (even by parties of the centre-Right) as the essence of post-war political enlightenment.

This was the heaven on earth for which liberal democracy had been striving: a system of wealth redistribution that was merciful but not Marxist, and a guarantee of lifelong economic and social security for everyone that did not involve totalitarian government. This was the ideal the European Union was designed to entrench. It was the dream of Blairism, which adopted it as a replacement for the state socialism of Old Labour. And it is the aspiration of President Obama and his liberal Democrats, who want the United States to become a European-style social democracy.

The left in this country can deny this all they wish, but Daley succinctly lays out the Democrat’s “ideal” in plain English.  Any attempt to deny that is simply counter-factual.  European-style social democracy has been the ideal of Democrats for years.   And the fight over entitlements makes the point.   The difference between the US and Europe is two-fold.   We thankfully began pursuing that ideal much later than did Europe and the basic difference in make up between Europe and the US is the primary reason:

But the US has a very different historical experience from European countries, with their accretions of national remorse and class guilt: it has a far stronger and more resilient belief in the moral value of liberty and the dangers of state power. This is a political as much as an economic crisis, but not for the reasons that Mr Obama believes. The ruckus that nearly paralysed the US economy last week, and led to the loss of its AAA rating from Standard & Poor’s, arose from a confrontation over the most basic principles of American life.

Contrary to what the Obama Democrats claimed, the face-off in Congress did not mean that the nation’s politics were “dysfunctional”. The politics of the US were functioning precisely as the Founding Fathers intended: the legislature was acting as a check on the power of the executive.

Precisely.  None other than Cokie Roberts noted the “problem” we have here that Europe doesn’t on one of the Sunday shows.  

 

That “problem” and a different but eroding view of the role of government.  And all though we’re on the precipice, that “problem” is  all that have kept us from sliding into the pit Europe has dug for itself over the decades. 

What is going on now is not the fault of the Tea Party, no matter how hard the spinners like David Axlerod and John Kerry attempt to make it so.  In fact, the Tea Party contingent actually represents that fundamental but eroding view of the role of government and the “problem” Cokie Roberts refers too.

The Tea Party faction within the Republican party was demanding that, before any further steps were taken, there must be a debate about where all this was going. They had seen the future toward which they were being pushed, and it didn’t work. They were convinced that the entitlement culture and benefits programmes which the Democrats were determined to preserve and extend with tax rises could only lead to the diminution of that robust economic freedom that had created the American historical miracle.

And, again contrary to prevailing wisdom, their view is not naive and parochial: it is corroborated by the European experience. By rights, it should be Europe that is immersed in this debate, but its leaders are so steeped in the sacred texts of social democracy that they cannot admit the force of the contradictions which they are now hopelessly trying to evade.

Facts are a stubborn thing.  They have a tendency to destroy beliefs and perceptions.  The belief and perception of the “premise” that a capitalist system could forever support an expanding social welfare state is in the throes of being dashed upon the rocks of economic reality.  That’s a harsh thing to see if it is your belief.  And we all know the various stages of grief.   Right now, the true believers are in the “denial” stage.  The only one’s dealing in reality are the Tea Partiers.  Like the canary in the coal mine, they’ve alerted us to a mortal danger that has been acted out in Europe and is now collapsing from within.  They’ve accurately pointed to our problem and how it will lead to the very same conclusion.  They’re demanding we stop pursuing that reckless and doomed “ideal” and return to our fundamental governing ideals – limited government, less costly government, less intrusive government.

And, of course, the true believers in the social welfare state, those who’ve gotten us into this mess and want to deny the problem and continue the pursuit of their destructive ideal are resisting with every fiber of their being and ironically, calling the Tea Partiers the radicals.

What the left can’t control though is the example of our future that Europe provides, like it or not:

No, it is not just the preposterousness of the euro project that is being exposed. (Let’s merge the currencies of lots of countries with wildly differing economic conditions and lock them all into the interest rate of the most successful. What could possibly go wrong?)

Also collapsing before our eyes is the lodestone of the Christian Socialist doctrine that has underpinned the EU’s political philosophy: the idea that a capitalist economy can support an ever-expanding socialist welfare state.

Phenomenally, while the problem becomes more and more undeniable, the solutions being considered are precisely the opposite of what is needed.

As the EU leadership is (almost) admitting now, the next step to ensure the survival of the world as we know it will involve moving toward a command economy, in which individual countries and their electorates will lose significant degrees of freedom and self-determination.

That’s right – those who, through the years, have managed to put us in this situation now think they need more control, intrusion and command, not less.  Those who’ve managed, through their policies and ideology, to wreck the best economies on earth, want more power.  They won’t let go of the belief, despite the reality.  Take for example the Democrats almost single focus on higher taxes.   They still believe they can have their cake (or your cake actually) and eat it too.

We have arrived at the endgame of what was an untenable doctrine: to pay for the kind of entitlements that populations have been led to expect by their politicians, the wealth-creating sector has to be taxed to a degree that makes it almost impossible for it to create the wealth that is needed to pay for the entitlements that populations have been led to expect, etc, etc.

The only way that state benefit programmes could be extended in the ways that are forecast for Europe’s ageing population would be by government seizing all the levers of the economy and producing as much (externally) worthless currency as was needed – in the manner of the old Soviet Union.

That is the problem. So profound is its challenge to the received wisdom of postwar Western democratic life that it is unutterable in the EU circles in which the crucial decisions are being made – or rather, not being made.

Daley speaks of the EU, but listen carefully to the left and the Democrats in this country.   They’re offering exactly the same “solutions” and this administration is attempting that solution by executive fiat through regulation.   Look at the health care grab as well.  We’re headed down exactly the same road Europe has traveled and the left in this country is telling everyone to ignore the road signs telling us so.

The Tea Party has figured that out as have many on the right.  But the left wants to go right on pretending it isn’t so:

We have been pretending – with ever more manic protestations – that this could go on for ever. Even when it became clear that European state pensions (and the US social security system) were gigantic Ponzi schemes in which the present beneficiaries were spending the money of the current generation of contributors, and that health provision was creating impossible demands on tax revenue, and that benefit dependency was becoming a substitute for wealth-creating employment, the lesson would not be learnt. We have been living on tick and wishful thinking.

Couldn’t agree more.  We ‘radicals’ who’ve been saying this for years have been proven to be factually correct.  It is an inconvenient truth the left doesn’t want to either accept or admit.   So the still hold on to the belief that if they could only make the ‘rich’ pay their fair share, they’d find utopia still achievable.  Reality, however, in the guise of the European experiment now imploding, already provides proof their theory has no basis in truth.

So what is the solution?  Well in the short term Daley prescribes some bitter but necessary medicine:

So what are the most important truths we should be addressing if we are to avert – or survive – the looming catastrophe? Raising retirement ages across Europe (not just in Greece) is imperative, as is raising thresholds for out-of-work benefit entitlements.

Lowering the tax burden for both wealth-creators and consumers is essential. In Britain, finding private sources of revenue for health care is a matter of urgency.

More importantly though:

The hardest obstacle to overcome will be the idea that anyone who challenges the prevailing consensus of the past 50 years is irrational and irresponsible. That is what is being said about the Tea Partiers. In fact, what is irrational and irresponsible is the assumption that we can go on as we are.

Dead on. Fundamental change.  Backing government out of our lives.  And we’re dead meat if we don’t heed and act on the fact that the social welfare state is a zombie (but doesn’t yet know it) and we need to finally and irrevocably kill it, never let it rise again, and return to the ways which made us great and are enshrined in our founding documents.

~McQ

Twitter: @McQandO


Global markets off after US credit downgrade

As expected global market reaction to the US credit downgrade has been anything but positive.

Global stock markets sank again Monday as worries over the downgrade of U.S. debt outweighed relief at a European Central Bank pledge to buy up Italian and Spanish bonds to help the two countries avoid devastating defaults.

European markets shed their early momentum and losses were heavy in Asia. Most stocks were trading sharply lower amid mounting fears over the opening of U.S. markets, when traders will have their first chance to respond to Standard & Poor’s momentous decision to lower its triple A rating for the U.S.

"The reverberations from S&P’s downgrade are still being felt across the globe," said David Jones, chief market strategist at IG Index.

The European Central Bank’s buy of Italian and Spanish bonds – two Euro countries in deep financial trouble – at first seemed to allay the expected downturn.  However that was later reversed and global markets saw a sharp downturn.

At this time one can only speculate what will happen in US markets, but the global sell off is not a good sign.

Monday’s trading came after one of the worst market weeks since the collapse of U.S. investment bank Lehman Brothers in 2008 – around $2.5 trillion was wiped off global stocks last week.

In Europe, Britain’s FTSE 100 index of leading British shares was down 1.7 percent at 5,157 while France’s CAC-40 fell 1.6 percent to 3,227. Germany’s DAX was 2.3 percent lower at 6,091.

Sentiment in Europe was hurt by an expected sell-off at the U.S. open – Dow futures were down 1.8 percent at 11,196 while the broader Standard & Poor’s 500 futures fell 2.1 percent to 1,173.

The one bright spot in an otherwise dismal picture is the US Treasuries market.  And “bright spot” is a relative term considering the rest of the markets:

So far, the S&P downgrade doesn’t seem to be having too much of an impact on U.S. government bonds, known as Treasuries. The worry has been that the downgrade would prompt investors to demand more, but the yield on ten-year Treasuries has actually fallen.

"Early market reactions suggest that the treasury market will remain well supported," said Jane Foley, an analyst at Rabobank International. "Even though there may be no sharp sell-off in treasuries this week, S&P’s decision should at least provide a signal to the U.S. government that it may be foolhardy to continue to take its creditors for granted indefinitely."

Two points.  One – yes, it should provide such a signal.  However, if that signal isn’t acted upon and acted upon swiftly, then two – the treasury market will not remain well supported.  Interest rates will rise on demand by investors and servicing our debt will cost more and more.

To add more fuel to the fire, there’s this:

"Investors are concerned about a rising risk of global recession, credit downgrades especially now in the eurozone, such as France, the threat of a major bank bust and a global liquidity trap as investors stay in cash," said Neil MacKinnon, global macro strategist at VTB Capital.

So much to watch and consider.   While this may not be the most interesting news to read about, none is more vital.  The problems in both Europe and the US have a far reaching effect on global markets.  And they will have an effect, at some point, on everyone’s wallet.  We’re in uncharted territory here, and unfortunately, there are no easy and painless ways to solve these problems.

~McQ

Twitter: @McQandO


The Obama Administration’s war on carbon-based energy

A little reminder:

 

We are currently in the middle of a war against carbon based energy being waged by the current administration to do precisely what Obama promised as a candidate.  Raise energy prices. The method is irrelevant to him.  No “cap and trade”?   Fine.  He’ll find other ways.   And that’s exactly what is happening as we speak. 

For instance, via the EPA.  Background – apparently the EPA released its new proposed “Cross-state Rule” on July 7th – a couple of weeks ago – after previously sending it around for comment.  The rule is scheduled to go into effect on January 1st of 2012.  It is 1,323 pages long.   It seems they threw a new requirement into the mix that was not in the original proposed rule and that none of the energy generating owners knew was coming. It would require many to shut down.  The Electric Reliability Coalition of Texas picks it up from there:

ERCOT’s May11 report to the Public Utility Commission on the impact of the proposed environmental regulations did not address the impact of SO2 restrictions on coal plants in ERCOT because these restrictions on Texas were not included as part of the EPA’s earlier rule proposal.  We have not had time to fully analyze the entire 1,323-page Cross-State Rule released July 7 or to communicate with the generation owners regarding what their intentions will be.  However, initial implications are that the SO2 requirements for Texas added at the last stage of the rule development will have a significant impact on coal generation, which provided 40 percent of the electricity consumed in ERCOT in 2010.

Our concern is that the timing of the new requirements – effective Jan. 1, 2012 – is unreasonable because it does not allow enough time to implement operational responses to ensure reliability.  We fear that many of the coal plants in ERCOT will be forced to limit or shut down operations in order to maintain compliance with the new rule, possibly leading to inadequate operating reserve margins with insufficient time to reliably retrofit existing generation or build new, replacement generation.

So the EPA pushes out a new reg with drastic limits on SO2 that were not in the original draft of the regulation.   If left unchanged it will, per ERCOT, cause many coal-fired plants to shut down or limit their generation.  And with 40% of electricity generated by coal in Texas, that will be a significant loss of generating power.  Texas will then have to buy what it can’t generate itself and consumer prices will do precisely what candidate Obama hoped – and planned- for them to do.  Now think of this and its effect across the country.

Right in the middle of a recession (he’s not the only one trying his best to shut down coal). 

Brilliant.

Of course that isn’t the only facet of the war on carbon based energy being waged by this administration.  Oil and gas also have seen what has now become to be called a “permatorium” on offshore drilling enforced by the administration.    Using the Deepwater Horizon blowout as its excuse, the administration has slowed permitting to a crawl and is dragging its feet as slowly as possible to, one suspects, fulfill Obama’s desire.

Study after study have shown that opening the process back up to at least the speed in which it was previous to the accident could create hundreds of thousands of jobs and billions in revenue.  A real step toward jumpstarting the economy.  Just yesterday another study made that very point:

Faster permitting of offshore oil and gas projects could create nearly 230,000 new jobs in 2012 and boost the economy by $44 billion, including a surge in tax revenue, according to an industry-funded study released Thursday.

The report by IHS CERA said job growth would extend beyond the Gulf Coast states, boosting employment indirectly as far away as California, New York, Florida, Illinois and Georgia.

The study, funded by the Gulf Economic Survival Team, a group of largely Louisiana-based energy and business interests, looks at data on the pace of permitting by the Bureau of Ocean Energy Management Regulation and Enforcement through April 30.

That’s six months after the end of a federal moratorium on offshore drilling, which the government imposed after last year’s Deepwater Horizon accident killed 11 workers and triggered a 5 million-barrel oil spill.

Permit approvals take 95 percent longer now than before the spill, the study says.

You can read the study for yourself here [pdf].  But that last number is telling.   There’s no reason for it.  The industry has stepped up and raised the bar significantly on safety.  The numbers quoted in the study projecting jobs and revenue are for 2012.  What administration concerned with jobs wouldn’t leap at such low hanging fruit?  This one.  Compared to historical trends, pending exploration plans are up by nearly 90%, approvals are down by 85% ,and the approval process has slowed from an average of 36 to 131 days.

And there’s no reason for it.

Meanwhile, what we have is tough to get to market.   Take West Texas Intermediate (WTI) oil

As for WTI, inadequate pipeline infrastructure makes it difficult to get the stuff out of North America — and that depresses its price, especially when demand is also weak. Its problems could also get worse before they get better. Output from North America is growing faster than expected. Canadian producers, for example, recently said output will grow from 2.7 million barrels a day to 3.4 million by 2014 and North Dakota production is surging. Meanwhile efforts to build new pipelines are mired in political controversy.

And they’ll remain mired in political controversy as long as this administration is in power.  Slowly, but surely, a nation with huge energy resources is being strangled by a government and President who want to intentionally raise energy prices.  Inadequate pipeline infrastructure means less product makes it to market.  Less product in the market place means higher prices for what does make it there.   Who pays?   Consumers.

However, proposals and applications to build pipelines, submitted in 2008, still await action:

In September 2008 TransCanada applied to build a new pipeline — the Keystone XL — to bring diluted bitumen from the oil-rich tar sands of Alberta to thirsty American refineries on the Gulf Coast. It is hardly a radical proposal. Canadian crude has been flowing to the U.S. for decades. Another Canadian company — Enbridge — operates the Clipper pipeline across the Canadian border to Chicago. In July 2010 TransCanada began operating its Keystone pipeline from Alberta to Cushing, Oklahoma, which is a major storage and pricing depot…TransCanada estimates that building the pipeline will mean more than $20 billion — $13 billion from TransCanada itself — in investment and 13,000 new American jobs in construction and related manufacturing. The company also expects more than 118,000 "spin-off" jobs during the two years of construction. TransCanada says it has signed building contracts with four major U.S. unions. It projects that construction will generate $600 million in new state and local tax revenue and that over its life the pipeline will generate another $5.2 billion in property taxes. The Energy Policy Research Foundation in Washington estimates that by linking to the XL, oil producers in North Dakota’s Bakken region will enjoy efficiency gains of between $36.5 million and $146 million annually. Lower transport costs will mean savings for Gulf Coast refiners of $473 million annually if the pipeline meets conservative expectations of shipping 400,000 barrels per day.

Jobs and revenue (in addition to those previously cited in the study), there for the taking, and this administration sits and waits.

And of course, the newest controversy to hit the energy community as to be used as an excuse not to act has to do with hydraulic fracturing, or “fracking”.   This is a 64 year old technology that has been used in the US on over a million wells.  Suddenly, after news of massive new findings of natural gas in shale formations, it is a problem.  And, of course, once it can be officially designated as a problem area, it must be investigated and regulated by the federal government.   Complaints of ground water contamination have derailed the exploitation of these energy assets while the politicians argue, dither and delay.  With those delays, again, go thousands upon thousands of potential jobs for Americans.

Name a reason for the sorry shape our economy is in and the government’s apparent refusal to aggressively move to help the energy industry create hundreds of thousands of jobs?  Review that video again.  It’s not long, but it plainly gives you the reason.

Is that what your government is there to do?

~McQ

Twitter: @McQandO

michael kors outlet michael kors handbags outlet michael kors factory outlet