Questions and Observations

Free Markets, Free People

Predicted vs. Actual

Here’s an interesting little chart I found at Innocent Bystanders.  The light blue line is the Obama administration’s prediction of how terrible unemployment would be if we didn’t pass the stimulus plan.  The dark blue line is the prediction of how much better things would be we did pass it.  The dark red triangles show the actual unemployment statistics.

The Amazing Effectiveness of Stimulus

The Amazing Effectiveness of Stimulus

So, how’s that recovery plan working out for us?  Not so good, apparently.

I merely provide the chart for informational purposes.  I know it’s useless to make any criticisms of the actual performance of the plan, just as it was useless to predict that this is pretty much what would happen.

Besides, saying, “I told you so”, is so churlish and mean.

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Podcast for 10 May 09

In this podcast, Michael, and Dale discuss the county’s failing energy and economic policies.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

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Energy Policy – “10 Inconvenient Truths”

Sometimes the little surprises life hands you are the most pleasant. While in Houston at the Offshore Technology Conference, my trip sponsored by API, I happened to meet another blogger who introduced himself to me as a “raging liberal”. In the course of three days and a few good beers, Chris Nelder and I had some very enjoyable and interesting conversations. And, interestingly, Chris and I agree on where the policy debate stands as it pertains to energy. Chris wrote an outstanding article detailing his observations about the current situation, and, for the most part, I agree completely with his well thought out assessment. Here is his list of “10 Inconvenient Truths” that he feels all policy makers must understand before they can effectively plan for the future:

1. We have extracted nearly all of the world’s easy, cheap oil and gas, and now we’re getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world’s oil and gas will be gone by the end of this century.

While I agree with Chris’s point about renewables, I’m not quite ready to buy into the idea that “most” of the world’s gas and oil will be gone by the end of the century, especially if we make progress developing cheap, renewable and clean alternatives. That’s not to say he might not be right, but I continue to look at the improvements in technology and the fact that the same sort of predictions have been made for decades and here we are. But on the main point of gearing up renewables, we agree completely. We must prepare for the possibility Chris is right and we need to do that now.

2. Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won’t come to market for 10 years or more. By that time, it probably won’t even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won’t make an ugly mess of the environment.

You see someone on the left here who has studied the problem, understands the processes used and has formed an opinion that is outside his side’s political mainstream. He understands that technology has advanced to the point that the oil and gas industry can drill for oil and gas safely and with a very small footprint. In fact, advances in sub sea technology are almost to the point where the entire process can be safely and productively located under the waves. So, in a “comprehensive” scheme, the left has got to drop its almost knee-jerk resistance to such drilling and understand it must be a part of an overall energy solution.

3. Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won’t even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world’s primary energy, and they will remain our primary fuels for a long time to come.

To believe “green fuels”/renewables are the immediate and total answer to today’s energy needs is to deny reality. We have to remember that there is going to be a growing energy gap as more and more nations come on-line in the first-world and demand more energy as a result. Oil, gas, nuclear and coal are going to play a large and significant part of bridging that gap even as we work to develop renewables. As a nation we cannot afford that sort of short-sighted thinking. It is critical that everyone understand that while the preference is for renewable, clean fuels, the reality is they’re still quite a ways off, while the energy demand continues to grow unabated and certainly with no concern for our personal energy preferences.

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Someone Has To Pay For Health Care “Reform”

Today’s “Health Care Reform” day.

One of the myths Democrats are going to try to continue to promote is that 95% of Americans are getting a tax cut. Of course that means they’re politically prohibited from raising income taxes. But that certainly doesn’t mean that they must refrain from other taxes and fees which will impact 100% of Americans and, by the way, if they’re like the following, will be highly regressive:

The Center for Science in the Public Interest, a Washington-based watchdog group that pressures food companies to make healthier products, plans to propose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks and ready-to-drink teas. It would not include most diet beverages. Excise taxes are levied on goods and manufacturers typically pass them on to consumers.

The proposal is also being touted as something which will help pay for “health care reform”:

The Congressional Budget Office, which is providing lawmakers with cost estimates for each potential change in the health overhaul, included the option in a broad report on health-system financing in December. The office estimated that adding a tax of three cents per 12-ounce serving to these types of sweetened drinks would generate $24 billion over the next four years.

Of course the article goes on to state that lawmakers aren’t considering the tax at present, but then the vast majority of our legislators don’t write or read the legislation they pass so saying they’re not considering it doesn’t mean it isn’t being considered by those who will write it (like the CSPI) or won’t be in legislation.

This sort of tax is also seen as a means of modifying behavior because a certain group considers the product it wants taxed as “unhealthy”.

Proponents of the tax cite research showing that consuming sugar-sweetened drinks can lead to obesity, diabetes and other ailments. They say the tax would lower consumption, reduce health problems and save medical costs. At least a dozen states already have some type of taxes on sugary beverages, said Michael Jacobson, executive director of the Center for Science in the Public Interest.

“Soda is clearly one of the most harmful products in the food supply, and it’s something government should discourage the consumption of,” Mr. Jacobson said.

Given that government is now seeking entry into the health care arena in a much bigger way than at present, and its stated goal is to make health care less costly, this fits supports the goal and gives the argument credibility that it wouldn’t otherwise enjoy. Note the phrase I’ve put in bold – it should send shivers down your spine. What sort of precedent would that set? And, what would be next?

Well, here you go:

Health advocates are floating other so-called sin tax proposals and food regulations as part of the government’s health-care overhaul. Mr. Jacobson also plans to propose Tuesday that the government sharply raise taxes on alcohol, move to largely eliminate artificial trans fat from food and move to reduce the sodium content in packaged and restaurant food.

And that’s the proverbial tip of the iceberg. The premise that it is the job of government to modify behavior through taxation (especially if it saves money) has obviously been swallowed whole.

Back to the original point about the myth of the tax cuts for 95% of Americans:

The beverage tax is just one of hundreds of ideas that lawmakers are weighing to finance the health-care plans. They’re expected to narrow the list in coming weeks.

But you can bet that the list won’t be too narrow – someone has got to pay for this. And, with mommy government deciding what you can and can’t eat, you might actually lose some weight. Not because you are necessarily eating healthy food, but because you can’t afford as much anymore. That’s because the one thing you can count on is your wallet will definitely lose weight as this “health care reform” abomination moves forward.

~McQ

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What Will Be The Real Cost Of Health Care “Reform”?

From a Washington Post editorial commenting on the health care industry proposal yesterday to try to save 2 trillion dollars over 10 years:

But it is important to note what wasn’t included yesterday. None of the interest groups signed up for a specific number; no one is saying who will sacrifice what, or how much. All are promising to “do our part,” but the actual share of the $2 trillion that would fall on each pair of shoulders was not laid out. What would make up the substance of the plan? That remains to be seen. How would the private sector be held accountable for this promise to reduce costs? That, too, remains to be seen.

Of course, Barack Obama’s promises to save money through the usual nebulous “waste, fraud, and abuse” rhetoric are no more specific than those proposed by the “interest groups” yesterday:

Make Health Coverage Affordable. The plan must reduce waste and fraud, high administrative costs, unnecessary tests and services, and other inefficiencies that drive up costs with no added health benefits.

As is obvious, the assumptions in this sentence are legion and that includes the savings.

The White House has emphasized repeatedly that health-care reform is entitlement reform — that is, an answer to the nation’s long-term fiscal challenge. Yet, so far, it is backing a plan to expand coverage that would cost taxpayers between $1 trillion and $1.5 trillion over 10 years, while it has proposed health-care savings of only $309 billion.

Calling it an entitlement reform and “an answer to the nation’s long term fiscal challenge” effectively lumps all health care under government auspices. An entity which has managed to mismanage the portion it has assumed over the years into a “fiscal challenge’ now wants the rest of the industry under its effective control with an initial price tag of 1.5 trillion (anyone who has ever monitored government estimates of cost know they are always low ball estimates which end up costing many more times the initial estimate).

I’d like to see the WaPo challenge that estimate and this:

Financing Health Care Reform. The reserve fund is financed by a combination of rebalancing the tax code so that the wealthiest pay more as well as specific health care savings in three areas: promoting efficiency and accountability, aligning incentives towards quality and better care, and encouraging shared responsibility. Taken together, the health care savings would total $316 billion over 10 years while improving the quality and efficiency of health care, without negatively affecting the care Americans receive.

You can read the specifics of the administration’s plan below the cited paragraph, but in essence it consists of curbing waste, fraud and abuse (as if that’s actually measurable in terms of savings) and increasing “quality” of care (an “efficiency” that assumes the present “quality” isn’t good enough), stressing preventive care (and assuming everyone will take advantage of that) and reducing drug prices (a form of cost control).

How anyone assumes even $316 billion in savings based on those assumptions is beyond me. But what one can fairly claim, given experience with government proposals and estimates, is that 1.5 trillion as a “cost” figure is probably well below its eventual or real cost. If anyone actually believes the government will be more efficient in the delivery of health care than a market based system (something we don’t have, even now, as government’s intrusion has distorted that market) will gladly buy into the claims being made. Those of us who have seen these sorts of grand programs and estimates before (check into the promised cost of Medicare and its eventual real cost) know that we’re being led down the primrose path to ruin by a bunch of smooth talking politicians who really haven’t a clue … again.

~McQ

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Is McCrystal the “Petraeus” Of Afghanistan?

There was no “nicety” to this very public change of commanders in Afghanistan. In command for only 11 months, Gen. David McKiernan has been fired. In his place will be LTG Stanley A. McChrystal. Secretary Gates made it clear:

“Our mission there requires new thinking and new approaches by our military leaders,” said Defense Secretary Robert M. Gates at a news conference this afternoon announcing General McKiernan’s dismissal.

Gates tried to smooth it over a bit (generals and admirals don’t like to be handled like this):

Mr. Gates and Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, offered few reasons for General McKiernan’s ouster beyond generalities that “fresh eyes” were needed. “Nothing went wrong and there was nothing specific,” Mr. Gates said. It was simply his conviction, he added, “that a new approach was probably in our best interest.”

The media will give you the boilerplate on McChrystal’s career including his recent stint as commander of the Joint Special Operations Command who ran all special operations in Iraq (and his part in the Pat Tillman investigation which wasn’t quite as sterling).

But there’s more to it than just the fact that he commanded JSOC in Iraq. As abu muqawama points out, there was a big improvement in JSOC after McChrystal took command and how that impressed a certain other commander:

I do know that many policy-makers and journalists think that McChrystal’s work as the head of the super-secret Joint Special Operations Command was the untold success story of the Surge and the greater war on terror campaigns. I also know that McChrystal and David Petraeus forged a close working relationship in Iraq in 2007 and have much respect for one another. (Prior to 2007, the relations between the direct-action special operations task force and the overall command in Iraq were strained at best.)

So my guess is that Gen. Petraeus had a hand in McKiernan’s new status as “former commander”. Apparently he wasn’t seeing in McKiernan the type of thinking Petraeus feels is necessary to win in Afganistan.  He may see in McChrystal the type of outside-the-box thinking he feels is necessary to turn the effort around there.

Abu again:

I do not know if the war in Afghanistan is winnable. But I do know that Stan McChrystal is an automatic starter in anyone’s line-up.

Game on.

Frankly, I’m pleased with the move. Time will tell if it pans out, but it shows me a seriousness about the war in Afghanistan that I wasn’t sure existed within this administration. This isn’t a half-hearted move.   Tip of the cap to the Obama administration for doing what I believe is necessary to move the war forward in a positive manner. Credit where credit is due and all of that.

~McQ

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The Troubles In Pakistan

The Taliban, as expected, have managed to endear themselves to another benighted people:

Up to 500,000 terrified residents of Pakistan’s Swat valley have fled or else are desperately trying to leave as the military steps up an operation using fighter jets and helicopter gunships to “eliminate” Taliban fighters.

As the military intensified what may be its most determined operation to date against militant extremists, the UN said 200,000 people had already arrived in safe areas in the past few days while another 300,000 were on the move or were poised to leave.

The escalation of the operation came after Pakistan’s Prime Minister, Yousaf Gilani, made a public appeal for unity. In a televised address on Thursday evening, Mr Gilani said: “I appeal to the people of Pakistan to support the government and army at this crucial time. We pledge to eliminate the elements who have destroyed the peace and calm of the nation and wanted to take Pakistan hostage at gunpoint.”

This is pretty much the style of the Taliban, certainly nothing very different than what they did in Afghanistan.

However, there is a difference between Pakistan and Afghanistan, and that difference is nuclear weapons. Now most seem to think that the Pakistani army is strong enough to prevent a deterioration of the situation to the point that the Taliban would gain control over the nukes. But that makes a lot of assumptions which may or may not be warranted. It is important to remember that the rise of the Taliban in Afghanistan and its eventual triumph there is irrefutably linked to support from Pakistan’s government, namely the ISI. Now it may be a stretch to believe the ISI would help the Taliban gain control of Pakistan, but it may not be to much to believe the organization may have mixed feelings about the present operations against the Taliban.

The Taliban needs to be destroyed as an effective organization. Like a type of cancer, the Taliban attacks the very religious core of countries. But only Islamic countries. Its extremist brand of Islam appeals to a certain element of Islamic countries and it is that portion of the population in which the Taliban embeds itself and attempts to exploit.

The very fact that Pakistan is treating the Swat valley takeover by the Taliban as an emergency in which drastic action must be taken to defeat them is an encouraging sign. Previously Pakistan’s government and army were content to give such opposition lip-service and some rather poor attempts to oust them from other territories. Now that the Taliban has all but declared war on the Pakistani nation, we may finally see a real and concerted effort by Pakistan to rid the region of the Taliban. In the end, the overreaching by the Taliban may end up being the best thing that could have happened. If Pakistan is successful in taking the Taliban out, the war in Afghanistan become much more winnable. The remaining Taliban based along the border may not enjoy the same safe-haven they’ve enjoyed for years.

However, should Pakistan fail in its attempt to destroy the Taliban, we may end up with two nations in jeopardy instead of one, and since one has nuclear weapons, we may have no choice but to intervene should it get to that point.

~McQ

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Rising Thugocracy?

First we have the “car czar” threatening investors with audits and vilification, and now we have a report that a union was inappropriately involved in matters in which it should not have been included:

Officials in the governor’s office say a politically powerful union may have had inappropriate influence over the Obama administration’s decision to withhold billions of dollars in federal stimulus money from California if the state does not reverse a scheduled wage cut for the labor group’s workers.

The officials say they are particularly troubled that the Service Employees International Union, which lobbied the federal government to step in, was included in a conference call in which state and federal officials reviewed the wage cut and the terms of the stimulus package.

The SEIU is of the opinion the state is “breaking the law” as it concerns the use of “stimulus” funds. The state sees it otherwise. But that doesn’t explain the inclusion of the union on the call. Said state officials:

During the conference call, state officials say, they were asked to defend the $74-million cut scheduled to take effect July 1. The cut lowers the state’s maximum contribution to home health workers’ pay from $12.10 per hour to $10.10.

The California officials on the call, who requested anonymity for fear of antagonizing the Obama administration, said they needed the savings to help balance the state budget.

Most know that California is a budgetary basket case, but they should also know that SEIU members are the one’s effected by the cut. The phrase which is most chilling in the last cite is that which indicates a fear of “antagonizing the Obama administration” among state workers.

Is that really the atmosphere that should exist between the states and the feds? And, given their inclusion in the call, isn’t it fair to claim that the SEIU has had “undue” influence with the administration?

So how is this different than the alleged inappropriate lobbyist influence the left liked to holler about during the Bush years?

~McQ

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How To Kill An Economic Recovery

Hugo Chávez is in the news again, appropriating and nationalizing more of the oil industry in his country.

That sort of move by him has become so routine that it almost isn’t news anymore. But this particular sentence caught my eye and reminded me of what we’ve seen here as well:

This move forms part of a broader assault against the private sector, which Mr Chávez has increasingly blamed as Venezuela slides into recession.

Vilification is a political tactic in use by a certain type of politician, and anyone paying attention to what has been going on in this country has seen it deployed in earnest against the wealthy and certain industry sectors in the US in the last few months. The health care industry is next. And, as in Venezuela, the government is being offered as the best alternative. Yet watching Venezuela, most understand the ramifications of moves such as Chavez is making on the long-term viability of Venezuela’s economy:

But analysts say that by shifting its problems onto its suppliers, PDVSA is storing up even bigger problems for the future. Not only does it lack the ability to operate as efficiently as the service providers, but it sends a grim signal to companies considering investing in Venezuela. Consequently, future oil production is under threat.

While the moves taking place here aren’t as drastic as those in Venezuela, they’re just as problematic. Government appointed board members on auto company boards and government calling the shots in the financial sector aren’t direct takeovers, but they portend a level of government meddling unseen here before. And health care and energy are next.

The key word in the quoted paragraph above is “investing”. Investors are very wary about both the auto and financial industries at this point. They’re wary of the auto industry because government is essentially throwing the bankruptcy procedures out of the window and those investors which should be guaranteed the first seat at the table for the recovery of their investment are now being vilified as “greedy” and pushed to the side. Any reason they or any other investor should take a monetary stake in either of the government controlled auto companies again? And given the experience with autos, don’t you suppose investors in the financial sector are having second thoughts?

Investment is the road to recovery in recessionary times. The moves Hugo Chávez is making in Venezuela are exactly the wrong moves in terms of economic recovery (not to mention being a complete violation of property rights). While not as drastic as Chávez, the moves the Obama administration have made are sending a similar signal to investors.  And that doesn’t bode well for a swift economic recovery.

Health care and energy are next.

~McQ

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