text:
Only Government Complains About Having More Customers
Every private sector company spends every waking second (and many sleeping ones) trying to get new customers. It's a relentless pursuit of improvement. Of their goods and services, customer service, marketing – whatever angles they can find to gain a better market share.
Then there's the government – which stinks on ice at just about everything it tries to do. And perhaps nothing better demonstrates this all-encompassing incompetence than the instances when the Feds complain about getting more customers. What the private sector tirelessly seeks – the government looks to avoid like the plague. For whom the private sector seeks always to do more – the government always angles to do less.
The examples of this government-customer-aversion are myriad. We'll look at just two – Social Security and Medicare.
The government has for both programs dedicated, conscripted revenue streams. Every American with a job has grafted from every paycheck 12.4% for Social Security and 2.9% for Medicare. But (for the most part) only Americans age 65 and over can collect on either program. Which should mean they both will be flush with cash in perpetuity. Instead:
Social Security Funding Shortfall Hits $134 Trillion Over Next 75 Years
Medicare's Deficit 7 Times Social Security's
The Baby Boomers – from whom the government has been collecting money for decades – are retiring. The Feds are woefully unequipped to handle it – because they have all along been woefully unequipped to handle it.
The government has had more than sixty years to build equity in Social Security, and forty-plus to do so in Medicare – and they are both instead on the verge of cataclysmic insolvency. So the government is looking to:
Cut payments to their customers – us:
Obama Cuts Social Security and Medicare by Much More Than the GOP
Make it harder for us to get our money:
Obama on Social Security: Raise Retirement Age or Cut Social Security Benefits?
And say that if you actually made some real money (and thus paid more into Social Security and Medicare) – the government won't give you back the coin it took:
Should Social Security and Medicare Be Means-Tested?
Social Security and Medicare are (really pathetic) retirement programs. How does the private sector do with retirement programs?
There are, of course, a wide array of companies offering a wide array of retirement plans – versus the government monopoly model. These companies aren't each hundreds of trillions of dollars in debt – almost all are instead doing extraordinarily well.
They aren't looking for ways to shirk and shed customers – they are looking to add them. By offering better plans, rates and services. (And running great ads – who doesn't love the E*Trade baby?)
All so that when you retire, these private companies can return to you much, much more – not less. And let you choose when you hang it up – not have the government decide for you, then keep moving the finish line further and further away. And let you have your money – plus decades of dividends and compound interest – no matter how much other money you've made.
In almost all things, the government "business" model is a Social Security-Medicare-esque unmitigated disaster. So of course the Feds are now expanding into the Internet.
Stimulus Bill Includes $7.2 Billion for Broadband
And how's that going?
The Internet 'Stimulus'-Just as Destructive as the Rest of the 'Stimulus'
Yet Another Terrible Internet 'Stimulus' Project
Update: The Utter Failure of Government 'Stimulus'
Has the government learned its lesson? What do you think?
Universal Service Fund (USF) Reform: Expanding (Government) Broadband Internet
FCC Expands USF-to-Broadband Transition
In 2010, the Universal Service Fund (USF) provided communities with close to $8 billion in telecommunications funding. Since 1999, the fund has distributed $71.7 billion dollars.
The government utterly imploded with $7 billion in Internet coin – and rather than bowing out gracefully, is looking to spend tens of billions more in the same failed fashion.
And when the money dries up – we're $17 trillion is debt, after all – you and your Internet access will get the Social Security-Medicare treatment.
Your service will drastically and inexorably diminish – and the government will look for any way possible to be rid of you.
When it comes to the Web – let's not become yet another ridiculously underserved forced-government-customer class.
[First published at Red State]
Fisker: Free to Make Flashy Cars in Finland
With nearly a year's worth of exclusive reporting on Obama's green-energy crony-corruption scandal, you might think we've covered them all—but the hits just keep on coming. This week Fisker is in the news due to its failure to meet a Monday payment on their Department of Energy (DOE) loan, with $10 million due, and Wednesday's House Committee on Oversight and Government Reform hearing: "Green Energy Oversight: Examining the Department of Energy's Bad Bet on Fisker Automotive."
Along with researcher Christine Lakatos, who writes The Green Corruption Files, I've addressed Fisker before. In last week's column, I harkened back to an October 2012 report we did on 2009 stimulus-funded projects that were in trouble. We highlighted two companies on that list: Suntech and SoloPower. Suntech was recently put into bankruptcy and, about SoloPower, we said: "SoloPower's power is waning." On April 22, the Oregonian's headline read: "SoloPower moves to power down Portland factory, gut remaining workforce."
Fisker, the stimulus-funded company making $100,000+ electric cars in Finland, was also on that October 2012 list. At the time, I wrote: "Though the company has balked at Solyndra comparisons, Fisker may well be on 'death's door.'"
Despite defaulting "on loans or investment conditions at least four separate times" and squandering more than $1.3 billion in investment capital and government loan money, the company's founder and former CEO, Henrik Fisker (Fisker left the company in March over "disagreements with management"), in testimony before the House Oversight Committee hearing on Wednesday, argued that the company was still viable. In both the opening and closing of his testimony, Fisker used the following statement regarding the company that bears his name: "Fisker still has the potential to build on these achievements if the company can secure financial and strategic resources."
While Fisker's testimony indicates that he is proud of the company's "many notable achievements," Subcommittee Chairman Jim Jordan (R-OH), declared in his opening statements: "Fisker should have never received taxpayer money; it was rated CCC+…it was a junk grade investment." So why did Fisker get the loan in the first place and continue to receive funding even after it "missed a crucial production target?"
While Wednesday's hearing didn't reveal any smoking gun, and Fisker claimed: "I am not aware and do not believe that any improper political influence was used in connection with the company's loan application or subsequent negotiations with the Department of Energy," experience in reporting on the various stimulus-funded loan guarantee programs, grants and tax credits indicates otherwise.
True, unlike many of the other stories, no one from the Fisker organization itself served on Obama's (now-disbanded) Jobs Council, nor is there an obvious connection such as a former DOE staffer sitting on the board. But, surprise, there are political connections nonetheless.
In the case of Fisker, the cronyism comes first in the form of the venture capital firm with private investments that needed government funds to make their 2008 investment good. The company in question? Kliener Perkins Caufield & Byers (KPCB)—which, according to New York magazine, "has both former Vice President Al Gore and John Doerr, a very big-ticket Obama donor, on its board of directors." Doerr has had roles inside the Obama White House since early 2009, from jobs, to economics, to crafting the energy sector of the 2009-Recovery Act, from which his firm—KPCB—has been rewarded handsomely. The Wall Street Journal (WSJ), in 2008, reported that the Fisker deal was "one of the first deals in which former Vice President Al Gore provided advice for Kleiner." KPCB's Managing Partner, Ray Lane, told the WSJ that their investment was more than $10 million and was "one of our bigger investments."
In an earlier report, I said: "Doerr jumped on the Climate Change bandwagon in 2005 and credits Al Gore for his 'environmental awakening'—though his conversion may have been more financial than spiritual, as he saw green-energy as the 'mother of all markets' and 'the largest economic opportunity of the 21st century.'"
Despite a green-energy push from the White House, these funds haven't "delivered the returns expected on the timeline expected for most venture capitalists." In fact, Doerr admitted in a November 2009 speech that the government funding saved them: "If we'd been able to foresee the crash of the market, we wouldn't probably have launched a green initiative, because these ventures really need capital. The only way in which we were lucky, I think, is that the government stepped in, particularly the Department of Energy. Led by this great administration that put in place these loan guarantees."
Clearly the Fisker "investment" wasn't going as well as KCBP expected. In Wednesday's hearing, a 2009 email from Bernhard Koehler, Fisker cofounder and COO was addressed. In it, he pressured someone inside the DOE, regarding the need for the taxpayer-funded loan, because they couldn't meet payroll.
The Fisker loan had three specific strikes against it: it had a dismal credit rating—a "junk bond" CCC+; it was initially rejected by the credit review board; and the loan was twice the value of the collateral. While the Advanced Technology Vehicle Manufacturing (ATVM) program received 150 applications, only 5 were awarded loans—and all had some political connections or ramifications: Fisker—$529 million; Ford—$5.907 billion, Nissan—$1.448 billion; Tesla—$465 million; and The Vehicle Production Group, LLC—$50 million.
Companies without connections didn't get approved. In November, I reported on XP Technologies, one of those companies whose loan application was rejected. Alleging that "criminal activities did take place by DOE staff and affiliates," XP Technologies has filed a lawsuit concerning the DOE's denial. Following the publication of my column on XP Technologies, another applicant, who also didn't have any political connections, contacted me. This applicant acknowledged that he really didn't know the system and, therefore, looking back, wasn't surprised that his application was denied. However, he told me that he received no help or encouragement from the DOE; they did nothing to make it easier for him. It was like they weren't really interested in anyone but the favored few. Accepting applications was, perhaps, just for cover.
Fisker's $529 million loan was approved in September 2009, and the first tranche was funded May 2010. But it took a lot of finagling to get there.
Vice President Biden stepped in to move the loan along—we don't know why, but we know he did. (We also know more about other green-energy projects in which Biden was involved.) In August 2009, Fisker visited in Delaware a GM factory, which was scheduled to be shut down. According to a 2009 WSJ report, once politicians in the state got wind of Fisker's possible interest, they ratcheted up the pressure. Saving the plant, according to officials involved in the decision, "gave fresh urgency to the DOE's quest for Fisker." However, by August, the December 2008 application still wasn't approved. "Delaware's governor and congressional delegation began peppering U.S. Energy Secretary Steven Chu with calls on Fisker's behalf. They also had repeated discussions with Vice President Biden and his staff." Five days after Governor Merkell had a September meeting with Secretary of Energy, Steven Chu, "Chu announced the government had signed a provisional agreement" for Fisker's loan. Part of the deal included, not just the $529 million DOE loan, but also $21 million in grants and loans from the State of Delaware.
On October 27, 2009, Biden toured Fisker's Delaware plant to tout the DOE's Loan Program. ABC News reported: "Standing in a shuttered General Motors plant in Wilmington, DE, Vice President Biden proclaimed that a half-billion-dollar Department of Energy loan would transform the idled site into a production line for electric cars. Biden heralded the Energy Department's $529 million loan to the start-up electric car company, called Fisker, as a bright, new path to thousands of American manufacturing jobs," and stated: "This is seed money that will return back to the American consumer in billions and billions and billions of dollars in good, new jobs."
Referencing Delaware's involvement, the state's chief of economic development, Alan Levin said: "We had in the vice president a secret weapon."
In addition to Doerr and Gore championing the Fisker Project, and the Biden "secret weapon," Fisker had a few other friends in high places. The National Legal and Policy Center reports that Fisker was receiving advice regarding their loan application from Debevoise & Plimpton LLC, a law firm with a history of donating to President Obama and other Democrats—which taxpayers also funded. Too bad XP technologies, and other applicants without connections, didn't know to hire Debevoise & Plimpton.
Now, we all know that Fisker never made one car in Delaware—or anywhere in the US. The Delaware plant is "absolutely empty." We know that Fisker lost $557,000 on each flashy sports car it sold and has laid off most of its employees. And we know that Fisker will likely be the next taxpayer-funded green-energy project to go bankrupt.
While we do not know all the political connections that got Fisker a free ride to make flashy cars in Finland, we do know there is crony-corruption. As the WSJ reports: "The Obama Energy Department is keeping tight rein on documents, so we don't know." We just don't know.
[First published at TownHall]
Heartland Daily Podcast: Crony Capitalism: By-Product of Big Government
Heartland's Steve Stanek speaks with Randall Holcombe, DeVoe Moore Professor of Economics at Florida State University and Senior Fellow at the James Madison Institute.
Economics professor and author Randall Holcombe explains how big government begets big increases in the amount of cronyism that rewards and protects politically connected businesses, individuals and interest groups at the expense of everyone else.
[Subscribe to the Heartland Daily Podcast free at this link.]Support Drilling, Fracking, Keystone…and Exports
The interminable war on drilling, fracking and the Keystone XL pipeline has taken some bizarre turns. Now it's getting worse, as opponents grow more desperate, and the moon again grows full.
Deepwater drilling, 3-dimension and 4-D seismic (the ability to visualize 3-D over many years), deep horizon horizontal drilling and hydraulic fracturing, and other technological marvels have obliterated environmentalist claims that the United States and world are running out of oil and gas – and therefore we need to switch to subsidized, land-hungry, job-killing wind turbines, solar panels and biofuels.
Thanks to free enterprise innovation on state and public lands – and no thanks to President Obama, who has made nearly the entire federal onshore and offshore estate off limits to leasing and drilling – US oil and natural gas production has set an all-time record. The world is on the verge of doing so, as well.
Long-running geopolitics have been turned upside down, as OPEC, Russia and other oil superpowers wonder what hit them. Plastic and chemical manufacturers, steel makers, bus and fleet vehicle operators, and now long-haul truckers are already cashing in on the natural gas bonanza. So are electric utilities, especially with EPA continuing its war on coal, with more unnecessary heavy-handed air and water rules.
Global warming / climate change hysteria is also foundering on the rocks of reality. Average global temperatures haven't risen in 16 years, seas aren't rising any faster than 100 years ago, and storms, floods and droughts are no more frequent or severe than over multi-decade trends during the past century.
Evidence and reality simply are not cooperating with IPCC and Mann-made climate models. "Trust the computer models!" the alarmists plead. "If reality doesn't comport with our predictions, reality is wrong."
The US State Department has (yet again) said the Keystone XL pipeline poses few environmental problems and should be approved, to bring Canadian oil sands petroleum to Texas refineries – creating thousands of construction and permanent jobs, and billions in economic growth and government revenue.
Unacceptable! rants the Environmental Protection Agency. "State underestimated KXL's potential impact on global warming and needs to do its studies all over again," says EPA. Never mind that oil sands production would add a minuscule 0.06% to US greenhouse gas emissions and an undetectable 0.00001 degrees C per year to computer-modeled global warming, according to the Congressional Research Service. Do it over, until you get the answers we want, demand EPA and environmentalist ideologues.
Some 70% of Americans and 60% of Canadians support Keystone – and energy security (and jobs) outrank greenhouse gas reduction as a national priority by a 2-1 margin among Americans – says Canadian pollster Nik Nanos.
However, haters of hydrocarbons, modern living standards, free enterprise and personal liberty are not ready to surrender. They've launched a blitzkrieg flanking attack. This time they are outraged that some Keystone oil could be refined into diesel and other products and exported! to Europe or Asia – while some frack-based natural gas might be converted to LNG and likewise exported! around the globe.
Well, yes. When US refiners transform crude oil into gasoline, diesel, jet fuel, heating oil, asphalt, waxes and petrochemicals, they ship some of these products overseas. Since Americans use less diesel than refineries manufacture (some parts of each barrel of crude can be converted only into diesel), refiners also export their excess diesel to Europe, which uses more diesel than gasoline, and Europeans ship their surplus gasoline to the USA, mostly to East Coast consumers. It's a win-win arrangement that will be buttressed and safeguarded by Keystone pipeline transport of Canadian oil.
And yes, Cheniere Energy and other companies want to ship liquefied natural gas to foreign markets. It's hardly surprising that anti-fracking activists would seize on this as yet another excuse for opposing this game-changing technology. It is hardly remarkable that Senator Ron Wyden (D-OR), Congressman Ed Markey (D-MA) and other far-Left legislators would sponsor bills to block LNG exports.
What is shocking is that Dow and Huntsman Chemical, Alcoa Aluminum, Nucor Steel and other companies are joining the no-export campaign. They have convinced themselves that such exports will hurt their own selfish economic interests – and for PR reasons have packaged that notion into assertions that exporting any US natural gas is against America's and the public's economic interests. Nonsense.
America has barely begun to tap its vast shale gas and conventional natural gas deposits. It has not yet touched its methane hydrates. Together, these deposits will likely last a century or more. In addition, other countries are racing to develop their own conventional, shale and hydrate deposits – while still others will eventually recognize the folly of keeping their own deposits off limits. All this will gradually reduce demand for US natural gas exports, slow and prolong extraction, and keep gas prices low.
This interplay will also help ensure that more factories and power plants in more countries burn natural gas, thereby replacing coal and providing the economic wherewithal to enable China, India and other nations to install modern pollution abatement technologies on their now dirty power plants. That will greatly improve air quality and human health in countless cities, while reducing carbon dioxide emissions and reducing consternation among steadily dwindling numbers of climate alarmists.
American oil and gas development – and exports – will also provide an opportunity for our nation to "give back" to the world community for all the petroleum that our anti-leasing, anti-drilling policies have caused us to take from the world's petroleum supplies for decades. All this activity will also spur further innovation in technologies to unlock still more energy. It will spur job creation, economic growth and government tax and royalty revenue collection here in the United States … and abroad.
Some 23 million Americans are still unemployed or underemployed; 128 million are dependent on various government programs, including 47 million on food stamps; and the United States is more than $16 trillion in debt. Unemployment in the construction trades is 14.7 percent. Black unemployment was 12.7% when President Bush left office; it soared to 16.7% by September 2011 under President Obama, and remains stuck at 14% today for black adults – and an astronomical 43% for black teenagers!
Drilling, fracking and exports can reverse these horrendous, intolerable, unnecessary statistics.
Misguided industrialists should stop railing against exports. They would do themselves and our nation far more good by putting their lobbyists and public relations staffs to work demanding an end to leasing, drilling and fracking bans that continue to dominate eco-liberal thinking, US energy policy (especially under the current administration).
Of 1.8 billion acres on our nation's Outer Continental Shelf, only 36-43 million are under lease. That's barely 2% of the OCS. Offshore territory equal to 78% of the entire US landmass (Alaska plus the Lower 48) is off limits! Even the 2010 Gulf of Mexico oil spill cannot justify that.
Onshore, it's just as bad. As of 1994, over 410 million federally controlled acres were effectively off limits to exploration and development. That's 62% of the nation's public lands – an area nearly equal to Arizona, Colorado, Montana, New Mexico, Utah and Wyoming combined. The situation has gotten progressively worse, with millions more acres – and vast energy, mineral and economic bounties – locked up in wilderness, park, preserve, wildlife refuge, wilderness study, Antiquities Act and other restrictive land use designations, or simply made unavailable by bureaucratic fiat or foot-dragging.
Drilling opponents claim to be protecting the environment. In reality, they simply detest hydrocarbons, modern living standards, free enterprise and personal liberty. Commonsense policies will rejuvenate our economy, put Americans back to work, and help fund government programs that Messrs. Obama and Reid profess to care so much about – while safeguarding ecological values we all cherish.
RE: The Internet Sales Tax Rush
I sent the letter below to the Wall Street Journal in response to an April 17 piece by economist Art Laffer. Though the editors did not print it, they did me one better: They used my arguments in their April 21 editorial "The Internet Sales Tax Rush." Now to my letter:
After a long series of insightful articles about how low taxes promote economic growth, Art Laffer gets the internet tax wrong. [The Wall Street Journal, April 18, 2013] The nexus requirement for imposing a state sales tax is rooted in the notion that in-state retailers receive state services, while out-of-state retailers do not. There are exceptions that justify a "use" tax. If the product, like an automobile, is purchased in one state but consumed in another state where the product receives extensive state services, then the tax is appropriate. However, that rationale is seldom if ever offered for goods bought over the internet. The internet tax is supposedly justified because "showrooming" exists. It is claimed to be unfair because it allows a potential buyer to inspect the product in a brick-and-mortar shop before purchasing it on line at a lower price. What this argument leaves out, is that the internet typically offers evaluations from other buyers. The local retailer can use these evaluations to help the purchaser make a selection right in the shop. Thus, the internet is in effect subsidizing the local purchase with relevant information. If the local shop has an inventory of several brands, then the buyer can take immediate possession of the product. By contrast, the internet buyer must wait for the product to be delivered and is charged a shipping fee that can be as much as a sales tax. Thus, the local shop has another natural advantage. To burden internet sales with a needless tax will make a large portion of the retail market less efficient and may impair economic growth. I am surprised that Art Laffer would support such a tax. And here is the WSJ editorial, my point made by them in red:The Internet Sales Tax Rush
Harry Reid and Wal-Mart hope nobody will notice their online revenue raid.
Every time Congress has taken a serious look at proposals to boost Internet sales taxes, it has rejected them. That's probably why pro-tax Senators are trying to rush through an online tax hike with as little consideration as possible.
As early as Monday, the Senate will vote on a bill that was introduced only last Tuesday. The text of this legislation, which would fundamentally change interstate commerce, only became available on the Library of Congress website over the weekend. And you thought ObamaCare was jammed through Nancy Pelosi's Democratic House in a hurry.
For Senators curious about what they're voting on, it is the same flawed proposal that Mike Enzi (R., Wyo.) introduced in February. It has been repackaged to qualify for a Senate rule that allows Majority Leader Harry Reid to bypass committee debate and bring it straight to the floor.
Mr. Enzi's Marketplace Fairness Act discriminates against Internet-based businesses by imposing burdens that it does not apply to brick-and-mortar companies. For the first time, online merchants would be forced to collect sales taxes for all of America's estimated 9,600 state and local taxing authorities.
New Hampshire, for example, has no sales tax, but a Granite State Web merchant would be forced to collect and remit sales taxes to all the governments that do. Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services.
Meanwhile, New Hampshire's brick-and-mortar retailers will bear no such burden. They will not be required to collect taxes on the many customers who drive across the Maine and Massachusetts borders to shop in New Hampshire. Bill sponsors say it would be too big a hassle to force traditional retailers to ask every walk-in customer where they live, but these Senators are happy to impose new obligations online.
The Enzi plan would require a centralized tax collector for each state or for a group of states that would gather both state and local levies from the online merchants. His office concedes that could still mean 27 or more different auditors of a Web-based business—which is better than 9,600 but hardly qualifies as simplicity.
The drivers of this rush to tax are Wal-Mart and other big retailers that can more easily absorb the costs of collection than can smaller competitors. Also supporting the bill is Internet giant Amazon, which coincidentally now sells its own tax compliance service to other merchants. Adding to the lobbying muscle are state and local governments. The politicians believe they'll collect tens of billions of dollars in taxes that are already owed by shoppers on remote sales but rarely paid.
So big business and big government are uniting to pursue their mutual interest in sticking it to the little guy. Any Internet seller with more than $1 million in annual sales would be forced to serve all of the nation's tax collectors. It's true that many small brick-and-mortar retailers in states with sales taxes support the Enzi bill. They say they're at a disadvantage as customers examine products in their showrooms and then go home to buy them tax-free. On the other hand, some customers use retail websites for research before buying at a local store.
But even if the goal is to "level the playing field" in favor of Main Street, it won't happen. Mr. Enzi cannot possibly force all the world's Internet businesses to collect local U.S. taxes. So instead of shifting sales from online to bricks-and-mortar, he might succeed in shifting them from U.S. online merchants to foreign ones.
This rush to tax is an attempt to overturn the Supreme Court's 1992 decision in Quill v. North Dakota that forcing businesses to collect and remit taxes to jurisdictions where they have no physical presence was too big a burden. Though that ruling applied to catalogs in the pre-Internet age, it established an important principle of cross-state tax accountability.
Congress does have the power to write new rules for interstate commerce. But for years even politicians who wanted to force remote sellers to collect taxes conceded that it would only work if states and localities dramatically simplified their tax systems. That has never happened. So now the tax collectors promise that software will figure out how every item is taxed in every town in America.
Perhaps software will flawlessly determine, for example, what is classified as candy for tax purposes and what is considered food in each jurisdiction. But the legislation itself contemplates confusion, as it spells out when a merchant is liable for errors and when a software vendor takes the blame. The way governments work, they'll penalize both merchants and the software vendors for mistakes.
Some of our conservative friends are backing this Internet tax raid as a way to raise revenue to avoid more state income-tax increases. More likely the new revenues will merely fund larger government. Republicans who are realists about government would be wiser to join Senators Ron Wyden (D., Ore.) and Kelly Ayotte (R., N.H.), who are leading the opposition.
A Win for Rational Policy and Cost-Effective Energy
You've heard the cliché: "Sometimes you win, sometimes you lose." Within the past month, I've experienced both sides of that adage—in reverse.
On April 2, I was driving from Albuquerque to Farmington, NM, where I spoke for the San Juan Country Tea Party group. During the three-hour drive, I listened to talk radio. That was the time of the Cyprus bank crisis and the middle of budget discussions in DC. By the time I got to Farmington, I felt defeated and hopeless. "Sometimes you lose." I wondered how I'd motivate and inspire the folks in Farmington. The speech worked. There was a lot of Q & A. It ended well.
On Thursday, April 18, I made virtually the same trip—ending in Durango, Colorado, where I spoke for the Rocky Mountain Coal Mining Institute's regional meeting. This time I had a totally different attitude. Just 2 days before, we'd had a big win. "Sometimes you win." I could hardly wait to share the good news! Gratefully for me, not one of the guys at the regional meeting had heard the news—which was good. If they'd all heard it already, they didn't need me (or I'd have had to come up with a new speech). It was great to be able to share the "win."
Maybe you haven't heard the good news. If you haven't read my Margaret Thatcher piece—where I chronicle some of the history of the global warming/climate change agenda, please stop and read it now.
In short, I posit that Europe has embraced the ruse and pushed it on other western economies (read the USA), as it would change the energy playing field by removing America's low-cost energy advantage. This, I believe, is why the European Union (EU) originally began espousing the narrative. They have been the leaders in so-called green energy. The EU is held up as the one to follow. It has actually implemented cap and trade—which Obama, with control of both houses, couldn't get through.
Now, add on the victorious news.
The win? The Economist magazine, historically a supporter of manmade climate change, phrased it this way: "On April 16th the European Parliament voted to reject an attempt to bolster Europe's flagship environmental programme, the Emissions Trading System (ETS)." The Wall Street Journal(WSJ), like this: "The European Parliament refused to save the EU's failing program, which is the true-believer equivalent of the pope renouncing celibacy." If the pope did renounce celibacy, it would throw the entire Catholic church into a tailspin as it would remove a basic tenant of the faith. Likewise, the April 16 vote, has removed the foundation from the religion of climate change.
In its coverage, the Financial Times (FT) affirmed my supposition: "The shale gas revolution in the US, which has lowered energy prices for the country's manufacturers, has heightened Europe's concerns about industrial competitiveness."
Regarding the European Commission's (EC) proposal to withdraw a large tranche of permits from the market to reissue later, Roger Helmer, a Member of the European Parliament, whom I met a year ago at the Heartland Institute's International Conference on Climate Change, posted the following on his blog: "It would also (though the EC doesn't mention this) make energy more expensive; undermine European competitiveness even further; drive even more businesses and jobs and investments offshore (known in the jargon as 'carbon leakage'); and force more households and pensioners into fuel poverty."
Add to this news the "climategate" email leaks that proved tampering with evidence and a repression of dissenting opinion; England's announcement that wind turbines are a "blight," and the Minister of State at the Department for Energy and Climate Change (now the Prime Minister's Senior Parliamentary Advisor) John Hayes' comment: "We can no longer have wind turbines imposed on communities. … It seems extraordinary to have allowed them to be peppered around the country without due regard for the interests of the local community and their best wishes;" BP's near-total retreat from renewable energy; and Europe's tree-thefts as a result of high-cost heating bills and increasing use of wood (often imported from the US and Canada) and coal for energy production—and you have the environmentalists on the ropes.
And, remember, the EU has been a leader in manmade climate change mitigation, and in demanding the same from us. The Economist states: "Over the past few years more than a dozen countries and regions have followed the EU in establishing or proposing cap-and-trade schemes." And from the WSJ: "Aided by Al Gore, Europe tried to turn cap and trade into a global policy." (Don't forget, Europe bestowed a Nobel Peace Prize on Gore for his scare tactics.) The FT reports: "The repercussions of Tuesday's vote are spreading far beyond the EU to other nations with carbon market plans, including Australia, Korea and China." And now they've realized, from the Economist: "In a new world of carbon trading, the ETS will not be the scheme that others copy."
Why the change in approach? According to the Economist, Europe's largest companies, especially energy-intensive ones such as chemical firms, opposed the reforms. "They complain that the ETS is imposing higher costs on them and they do not want carbon prices artificially raised." From the FT: "Complaints from business groups that the carbon market and other climate policies are contributing to higher energy prices at a time when they are already grappling with a weak economy appeared to be decisive in Tuesday's vote." The WSJ offers parallel comments. Regarding the collapse of carbon prices, it states: "The low price of carbon allowances is good for consumers who don't have to absorb the extra regulatory cost in what they pay for energy."
Bottom line? It is about low-cost energy. A cap-and-trade scheme—or a carbon tax—artificially raises the price of energy, at a time when inflation is nipping at the heels of individuals and industry.
Helmer observed: "For the first time in my recollection, the European parliament has faced up to reality, and voted for jobs and economic survival rather than climate alarmism. This is an early indication that we are starting to make progress in our campaign for rational energy policies, and for affordable energy."
Good news, eh? It is up to me—aided by you; it is up to you—aided by me, to spread this message.
You help me by forwarding my weekly column on to your friends and family and by talking up this story with your colleagues.
I help you by doing the research and providing you with the talking points in the form of my weekly column. I give you with the facts on America's energy issues—triggered by current news stories. I hope to motivate and inspire you to keep up the fight when you are tired of waving signs and, instead, feel like waving a flag of surrender. The EU parliament story should encourage you. It is a big win! It is a battle, not the war, but a victory for rational policy and cost-effective energy, nonetheless.
Additionally, my column from the week of March 24, is especially encouraging, as it addresses 6 specific non-energy news stories from March 11-20 and three recent energy stories where government overreach was smacked down.
Remember, the environmentalists are on the ropes; they feel cornered and are trying to strike back. Last week, the Sierra Club and 20 other environmental groups called for a moratorium on coal leasing in Montana and Wyoming's Powder River Basin—from which 40% of America's coal comes. Reports say: "They also want more attention given to the climate change impacts of greenhouse gasses emitted when coal is burned." Environmental activist and fading actress, Daryl Hannah's latest the film, Greedy Lying Bastards, is now playing. Forbes contributor Larry Bell says this about the disinfomercial: "It is premised on the notion that Big Oil is pouring lots of carbon-drenched money into pockets of climate crisis skeptics." Bell quoted my mentor, Ron Arnold: "Greedy Lying Bastards producers spent nearly $2 million to complain about climate skeptic money, in yet another Big Green attack on anyone who disagrees with the climate fanatic industry which is, itself, a multi-billion-dollar enterprise that seeks to impose anti-energy policies in the name of preventing climate change."
Together, I believe we can impact public opinion and prevent the USA from going down the same expensive path upon which the EU embarked. Celebrate this victory—they have been far and few between. Spread the word!
Administration Denies Reality at Fisker Congressional Hearing
As the Department of Energy seized the last of Fisker Automotive's reserves in lieu of an unknown amount that it was due to repay this week, what's left of the lame electric automaker clings to the slim hope it can survive.
While CEO Tony Posawatz and his team may need an intervention, a hearing before the House Oversight and Government Reform Committee yesterday revealed that DOE and committee Democrats (as well as those in the Obama administration) are hopelessly stuck in an alternate universe, where losing millions of taxpayer dollars is considered a good record. Republicans had called officials from the company – including founder Henrik Fisker, as well as administrators of DOE's loan program – to explain the logic that went into granting $529 million to a fledgling, unproven car company that targets an ultra-rich clientele.
Democrats attempted to dismiss the hearing as a "show trial" to embarrass the president, but the facts kept getting in the way of their trivialization efforts.
"The committee's efforts to stoke false controversy by selectively leaking a few out-of-context documents just do not stand up to scrutiny," said White House spokesman Jay Carney.
A Democrat committee member, Rep. Matt Cartwright of Pennsylvania, downplayed the loss of $192 million in taxpayer money (the amount Fisker received before DOE halted the loan payouts) compared to the overall $8 billion of stimulus money that backed the electric vehicle program.
"In the world outside the Beltway," Cartwright said, "anybody who exceeds expectations 98 percent of the time gets an A-plus."
That boast echoed one by DOE two weeks ago, when the hearing was scheduled.
"Despite Fisker's difficulties, our overall loan portfolio of more than 30 projects continues to perform very well, and more than 90 percent of the $10 billion loan loss reserve that Congress set aside for these programs remains intact," a spokeswoman told the Wall Street Journal.
Those remarks indicate it's probably impossible to shame the Obama administration and Congressional Democrats about the embarrassing performance of their management of the stimulus, especially when it comes to the green energy sector. Failures such as Solyndra, Abound Solar, A123 Systems, Ener1, Beacon Power, LG Chem and others already mar their record, but the spectacle of Fisker's failure reaches new levels. While Solyndra accounted for a far greater loss in terms of dollars, the tanking of the Anaheim-based maker of one lousy electric car – the Karma – represents an amazing fusion of futility and cronyism that may never be matched again.
Fisker is one of several molted feathers fallen from Energy Secretary Steven Chu's soon-to-be-removed cap. As NLPC has reported ad nauseum, the authorities over DOE's Loan Guarantee Program saw fit to grant Henrik Fisker a $529 million sum just because he 1.) designed cars for Aston Martin and BMW; 2.) was backed by hundreds of millions in private support from Democrat cronies; and 3.) was going to produce a "green" car, even though he'd never headed such a company in his life and Fisker hadn't built anything en masse to that point. Add to that the fact that he had celebrities Al Gore and Leonardo DiCaprio on board as early customers, and the powerhouse Silicon Valley investment firm Kleiner, Perkins, Caufield and Byers stroking DC egos with campaign cash and lobbying sway, and the DOE Loan Program Officers (DOELPOs?) couldn't resist the sizzle.
Then reality set in with mishaps such as recalls, production failures, vehicle fires and bad reviews. Yet despite this stunningly bad record, Obama and the Defender-crats chalked it up to routine losses in an investment firm's portfolio, rather than the coercively extracted resources that once belonged to taxpayers.
"Only in Washington would a $200 million loss be viewed as a success," said Republican Rep. Jim Jordan of Ohio, who chairs the Oversight subcommittee on economic growth and regulation.
"The Obama administration owes the American taxpayer an explanation as to why this bad loan was made in the first place," Jordan said at another point in the hearing yesterday, "and what they are going to do to minimize the loss that taxpayers face."
But the president's people don't think they did anything wrong, and therefore they consider the losses to the taxpayer acceptable. According to the Associated Press, former acting director of the Loan Program Office's electric vehicle program Nicholas Whitcombe said DOE acted "decisively" to protect taxpayer interests after Fisker Automotive failed to reach goals per its agreement.
Unfortunately the facts again prove the Obama administration wrong, as AP reported. Documents released yesterday showed that four months passed before DOE recognized that Fisker had fallen short of its milestones, which allowed the company to access an additional $32 million in taxpayer support before the loan's June 2011 suspension.
As for Mr. Fisker, he testified that an Energy Department official in 2008 invited him to apply for the government loan (thus inspiring Democrats to bellow "Bush did it too!"), which he said he didn't really need because he (and presumably Kleiner Perkins) had already raised millions of dollars in private investment.
"I am not aware and do not believe that any improper political influence was used in connection with the company's loan application or subsequent negotiations with the Department of Energy," Mr. Fisker told the committee yesterday.
So he's saying the taxpayer money was forced on him and his company. I guess that's why Fisker and Kleiner Perkins together spent nearly $900,000 in 2009 and 2010 to lobby Congress and the administration about the loan program and other renewable funding schemes. Once again, the facts undermine what comes out of the mouths of nearly every enthusiastic backer of President Obama's green energy "stimulus" program.
Meanwhile DOE on April 11 sucked $21 million out of the already-gasping company to pay back a portion of the $192 million. According to two Reuters sources, the amount due on Monday was $10 million, and Fisker had less than $30 million (a figure that had been reported previously) on hand after it had fired three-quarters of its work force, before DOE confiscated its reserves.
"Given the obvious difficulties the company is facing," said DOE spokeswoman Aoife McCarthy, "we are taking strong and appropriate action on behalf of taxpayers."
Failure is success; millions in financial losses are good; heavy lobbying and campaign contributions are disinterest; and weak and late really means "strong and appropriate" action. I'm sure it all makes perfect sense in the alternate world the Obama administration and renewable energy advocates dwell in.
[First published at National Legal and Policy Center]
Will the Number of Uninsured Rise Under ObamaCare?
It is cruelly ironic, but the massive law that was enacted to solve the problem of the uninsured in America is more likely to worsen it. This would be true even if the program is perfectly implemented and all the provisions come online on time and within budget.
How could this be? It is a multistep process. Stay with me for a second.
The more things change, The more they stay the same.
First, the simplest and most direct form of expanding coverage — Medicaid expansion — is likely to have very little effect. I'm not talking here of the states that refuse to do it after the Supreme Court made it optional, but of the entire program.
Remember that one-third of the uninsured have always been eligible for Medicaid and/or SCHIP coverage but don't bother to sign up. Actually, it is worse than that. A few years ago, William Sommers wrote in Health Affairs that one-third of all uninsured children had been enrolled in Medicaid or SCHIP within the previous year but their parents found so little of value that they didn't bother to re-enroll them.
Nothing about ObamaCare's Medicaid expansion is likely to change this dynamic. Yes, there will be more advertising, and yes a larger number of people will be eligible, but quite of a few of those newly eligible people are already getting coverage on the job, so any expansion of enrollment is likely to be a crowd-out of private insurance. One of ObamaCare's architects, Jonathan Gruber, has done extensive research on this subject and concluded that as much as 60% of the enrollment in expanded public programs is from people who had been privately insured. No doubt this effect grows bigger the higher up the income scale you go.
By the way, a recent example of this crowd-out phenomenon is revealed in a new study by the Robert Wood Johnson-funded State Health Access Data Assistance Center (SHADAC). Much has been made of the numbers of adult "children" covered under ObamaCare's mandate allowing people up to age 26 to stay on their parent's policies. This study shows that the number of such people covered as dependents on employer plans rose from 30.2% of the population group in 2009 to 36.5% in 2011. Sounds like a great success until you realize that the percentage of that age group that had employer coverage in their own names dropped from 21.8% in 2009 to 16.5% in 2011. So, virtually all of the people now covered as dependents were previously covered on their own.
Less studied is the stark reality that many of the people who might be eligible for Medicaid are simply too dysfunctional to enroll. They might be functionally illiterate, drug addicted, mentally ill, outlaws, or in the underground economy and not want to bring attention to themselves. They can't understand an insurance contract or make and keep appointments for services, but they know where the doctors are 24/7 — the hospital emergency department. When these people have a health problem they don't need insurance coverage. They need direct care.
Here is where the Supreme Court decision made a very big difference. It said there is nothing illegal about not enrolling in coverage; it simply exposes you to a tax. This removes many of the tools state and local government might have used to compel enrollment. All manner of government services might have been denied to people who do not have proof of insurance — school admission, public housing eligibility, fishing licenses, food stamps, job training, day care — all might have been denied to lawbreakers. But the Supreme Court shut down that possibility. So for low-income people there will be as little compulsion under ObamaCare as there was before and people will continue to behave as they always have.
We can't calculate what the net effect of all this will be. At best Medicaid expansion will have only modest impact on reducing the numbers of uninsured. But it is equally likely to have no effect at all.
Employment-Based Coverage
Next up is the mind-boggling assumption that employers will continue to provide coverage as they have in the past. No one actually believes this.
In fact, employers have been dropping coverage for at least the past ten years. There is no reason to think this will not continue and may dramatically accelerate under ObamaCare.
The study by the State Health Access Data Assistance Center (SHADAC) cited above finds that the nonelderly population with employer-sponsored coverage decreased from 69.7% of the population in 1999/2000 to 59.2% in 2010/2011. This is because fewer employers offer coverage, and of those that do, fewer employees accept the coverage that is offered. The drop-off is particularly acute for smaller firms with fewer than 50 employees. Only 37.5% of these companies now offer coverage, down from 47.2% ten years earlier.
Once ObamaCare kicks in, many more employers will drop coverage. The only dispute is over how many.
Two years ago the well-respected McKinsey Company conducted a survey of employers and found that 30% said they will "definitely or probably" drop their coverage. The survey was criticized by Obama's supporters because it wasn't an economic analysis. Odd, since the same folks seem to live or die according to survey results that are far less rigorous. Avik Roy noted in Forbes that the actual results were even worse than it seemed at first blush. He wrote that the more respondents knew about the law and the more directly involved they were in decision-making, the more likely they were to want to drop their coverage −
…primary decision makers were significantly more likely to drop employee health benefits: 36.5% of primary decision makers said they "definitely or probably" would drop benefits, compared to 22.4% of those who simply had some influence over the decision.
More recently, Douglas Holtz-Eakin, former CBO Director and currently with the American Action Forum, published a study with the economic features the McKinsey critics apparently prefer. He estimated that 35 million American workers will lose their coverage. He assumes most of these will go to the exchanges for subsidized coverage (more on this below), costing the federal treasury an additional $1.4 trillion over ten years.
The Congressional Budget Office is more constrained, but even they have upped their estimate of the number of workers losing coverage from a mere 3 million a few years ago to 7 million just last month.
The CBO number is almost certainly a gross under-estimate. CBO's ability to predict the future has long been constrained by two things:
- It is required to assume that current law will be in effect in the future. So, for example, its budget predictions always assume that the SGR cuts in physician payments will actually occur. But that never happens, so the predictions are never accurate.
- It tends to use "static scoring," which means it assumes that current behavior will be unchanged by new incentives. In this case it issued a 30-page justification for its estimate. As an example, part of that report said −
The fact that many firms currently offer health insurance coverage to their workers despite the high cost of premiums and rapid growth in those premiums for many years shows that many firms continue to find health insurance coverage to be a worthwhile element of their compensation packages. If firms could have attracted employees more cheaply by dropping health benefits and adding wages or other benefits that cost less, then they would have done so.
Good grief! This is about as shallow as you can get. Firms have been offering coverage despite the high cost because there has been no viable alternative, and they feel an obligation to ensure their workers can get coverage. The whole point of ObamaCare is to provide an alternative! Companies will now feel free to drop coverage in the belief that workers will now be able to get good coverage through the exchanges.
On top of actually dropping coverage, no one is estimating the effects of employers who convert full-time workers to part time, reduce the size of the workforce to stay under the mandate, out-source jobs to other companies or even other countries, or enter employee-sharing arrangements with other companies. There is no data for these developments (so they are invisible to policy researchers) but local daily newspapers are awash in stories about companies doing exactly this.
Whether it is McKinsey's 50 million or so, Holtz-Eakin's 35 million, or CBO's 7 million, there is no denying that some large number of workers will no longer have employer-based coverage and will be left to their own devices.
Why should this be the least bit surprising? Kaiser Family Foundation's 2012 employer benefits survey found that on average employer coverage costs $15,745 per family, of which the employer pays $11,429 (for single coverage it is $5,615, with the employer paying $4,664.) Holtz-Eakin finds that the federal subsidy for a $15,000 plan in the exchange will range from $14,176 for people with incomes of 133% to $2,935 for people with incomes at 400% of poverty ($94,800 for a family of four). For all income groups below 250% of poverty ($59,000), the federal subsidy is far greater than the employer subsidy is.
Employers will be doing their workers a favor if they stop offering coverage, pay the $2,000 fine, and send workers into the exchanges. This is especially true if the company pays out the savings in the form of higher wages. Holtz-Eakin doesn't even consider the enormous savings for the company if they no longer have to pay the Human Resources cost of finding and negotiating coverage, enrolling workers, explaining the coverage, answering questions, and intervening when there is a problem with a claim. Any CFO worthy of the title would take that trade in a heartbeat.
The Exchanges
So, the Medicaid expansion will make very little difference and some 35 million (perhaps more) people will lose their employment-based coverage. What is left to pick up the pieces? The much-vaunted "health insurance exchanges" (now referred to as "marketplaces" by the federal government). How will that work out?
Never mind for now the implementation problems (which are massive). Let's assume for the moment that they work as planned — they are up and running by October of this year, the hundreds of thousands of newly hired navigators" are competent and well-trained, plenty of insurance companies are participating, and the data-sharing arrangements between employers, state Medicaid programs, and the IRS all work flawlessly. With all of this behind us, what do we have?
Well, first we have the underlying assumption that people really want to have insurance coverage. That is the whole point of this exercise, after all — there are so many uninsured, not because they don't want it, but because they are deprived of it for one reason or another. One might think somebody would have tested that premise before enacting this boondoggle.
Oops! Three years after enactment, CMS decided to finally ask the question: just who are these poor wretched uninsured people and what are they looking for?
Turns out 92% of them can be divided into three segments:
- The biggest cluster (47.8% of all the uninsured) are "healthy and young." They are not much motivated to enroll and they take their health for granted.
- The next largest group (28.9%) are "sick, active and worried." These tend to be older and are pretty good candidates for coverage.
- Finally we have the "passive and unengaged" group (15.3%). I've tried to bring some attention to this population (see here). These folks tend to be older and have poor literacy skills.
All of these groups say cost is the main reason they are uninsured, but I expect that is just a throw away excuse. I doubt many of them have the slightest idea what insurance costs. They aren't interested enough to even look into it.
At best, two-thirds of these people will be hard to reach and even harder to sell (as any insurance agent could have told you years ago.) They are uninsured, not because they are deprived, but because they do not see value in it. The time to do this research would have been before passing the law, not afterwards. That way the law could have been tailored to meet their needs, instead of assuming they will comply with whatever Nancy Pelosi crams down their throats. So out of the 50 million or so currently uninsured we might get 15 million who sign up for coverage.
But what about the newly uninsured, whose employers no longer will offer coverage? Most of these people have been passive recipients of whatever coverage their employers offered. They never had to do anything to secure coverage. We have written about this population before.
For the most part they are very much like their uninsured brethren except they happened to have a job that provided coverage. Once again, one-third may be motivated enough to seek coverage on the exchange, the rest won't bother, knowing they can always get coverage later on when they need it. Meanwhile, they can save a whole lot of money that would otherwise go the premiums. So, out of 35 million newly uninsured possibly 12 million will get coverage on the exchanges.
But what about the mandate? Won't that persuade people to get coverage even if they don't particularly want it? Hardly. The mandate literally has no teeth. The only enforcement mechanism available to the IRS is to confiscate income tax refunds. The vast majority of the uninsured are lower-income (so they pay no federal taxes) and the rest can easily adjust their withholding at the start of the year to avoid sending excess money to the Treasury. No refund = no penalty.
So what are we left with? Medicaid expansion that will enroll few people and most of those will be people who were previously covered (crowd-out). Of the 50 million currently uninsured, possibly 15 million will get new coverage. But these will be offset by the 23 million who lose their employer coverage and don't bother signing up for exchange coverage. Net result — 8 million more uninsured than before ObamaCare was enacted.
[First published at John Goodman's Health Policy Blog]
The Global Warmists' Last Line Of Defense: The Warming Must Be In The Bermuda Triangle
Where is all the rapidly accelerating global warming that is supposed to be gripping the world?
It's not in the air. Atmospheric temperature readings show global temperatures have been flat for more than a decade.
It's not in the upper ocean. Sea surface temperature readings similarly show no recent warming.
It's not in the polar ice caps. National Oceanic and Atmospheric Administration satellite data show polar ice is currently more extensive than the long-term average.
Global warming activists have finally come up with a last line of defense they know nobody will able to prove wrong: The missing global warming is in the Bermuda Triangle.
No, I am not kidding. This is what they are claiming.
You see, the alarmists have been telling us for decades that rapidly accelerating global warming was imminent and unavoidable. The problem for the alarmists is the warming that has occurred has been modest and decelerating. In fact, it has ground to a complete halt for more than a decade.
So how do Al Gore, Michael Mann and the rest of the global warming Chicken Little's save face when their promised global warming apocalypse fails to occur? Easy, blame it on the Bermuda Triangle.
"Where did global warming go? The deep ocean, experts say," claimed NBC News in an April 11 headline.
"Where's the heat? In the oceans!" USA Today claimed in a headline the same day.
The headlines reflect a prominent global warming activist claiming that he developed a computer model by which global warming can bypass the atmosphere, bypass the upper ocean, and be entirely hidden in the deep ocean; you know, that part of our planet where we really can't measure or find anything. The missing global warming is apparently hanging out at the underwater space alien base in the heart of the Bermuda Triangle, along with the missing files proving the 9/11 Truthers are right that George W. Bush bombed the World Trade Center, along with the Vast Rightwing Conspiracy files proving that Bill Clinton really did not have sexual relations with that woman, Miss Lewinsky, and along with the missing film footage proving the seven Apollo astronauts and two Johnson Space Center directors who claim global warming is not a crisis really did stage their moon landings on a vacant lot somewhere in the Arizona desert.
The global warming activists, of course, do their best to make their Bermuda Triangle defense sound scientific. The paper claims all this phantom global warming really can directly bypass the atmosphere and the upper ocean if winds start blowing strangely enough and strongly enough to bury the warming deep in the ocean. Thankfully, we can spare ourselves the dizzying asserted logic of such claims by examining recent global sea surface wind data. As Bermuda Triangle-busting science would have it, NASA satellite instruments show global sea surface wind speeds have declined rather than increased during the past decade.
So much for the Bermuda Triangle….
Nevertheless, it has been quite interesting watching the alarmists go into conniptions imploring us to trust them on this final last line of defense. "No, you can't objectively verify our claims, but you can't objectively disprove the Bermuda Triangle either," the alarmists argue. "Just trust us. And if you do, as a bonus, we'll show you the secret undersea living quarters of Elvis Presley and Jim Morrison."
[First published at Forbes]
Heartland's Joe Bast on Running a Think Tank in the Information Age
Brent Hamachek and Tom Kuchan of Segueway Solutions invited President and CEO of The Heartland Institute, Joe Bast, to speak on their radio show, "Segueway to Success."
They talk about Heartland's mission, how Heartland goes about implementing that mission, the challenges of running a not-for-profit organization, and how that has changed over the last several years.
Joe goes into detail about the business of running a think tank and the challenges that go along with it. Heartland was founded during the Reagan years in Chicago, and tried to bridge the gap between the "Chicago School" and City Hall. In the beginning, the dominating free-market ideology meshed well with Heartland's mission, but as the years passed, much has changed. Now Heartland fights against the current, publishing educational materials for the public and politicians about controversial topics, such as climate change, school reform, the effects of Obamacare, and budget & tax policy.
It's especially interesting to hear about the challenges facing think tanks in the information age. There are a lot of advantages to being constantly connected to the Internet: quick communication, easy data manipulation, and being able to reach thousands of people with a single tweet. However, it's difficult to break through all the noise. There is so much information available, if your content doesn't appeal to the masses it will probably be lost in the shuffle. Nonprofits with small communications departments can't compete with public relations firms that are experts in creating and promoting viral media.
Joe also comments that think tanks may become obsolete. The traditional role of the think tank was to connect the ideas of academics in their ivory towers to the media and the minds of individuals. With the abundance of online classes, experts can reach their audiences without the help of a third party. Political parties have also become skilled at using the powers of the Internet and information manipulation to sway voters, and in turn, public policy.
The Lessons of Iraq and Obamacare
With the opening of the George W. Bush Library this week in Texas, plenty of journalists are writing long think-pieces about the man and his legacy, which basically amount to saying he was a terrible president but a pretty good guy, despite all those things we wrote about him at the time. The truth is that Bush himself has enjoyed a bit of a resurgence in personal popularity, and some are hoping his approach to governance will provide guidance to the GOP for the future.
My own view is that whatever Bush's personal qualities as a genuine, honorable fellow, his presidential legacy is of a lighter tax burden, a safer country… and a destroyed Republican Party. The last is not all his fault, but has more to do with who he picked for which jobs, and misplaced loyalty for those who served him ill. I view the entire second term of the Bush administration as a giant black hole for domestic policy: arguably, the only good thing the right got out of those four years was one reliable Supreme Court Justice, Samuel Alito, and they got that only after fighting tooth and nail against Bush's instincts to choose Harriet Miers instead. And as for politics: Bush's decisions, or the implementation thereof, destroyed the Republican brand as the adults in the room. The GOP cannot be the party of good governance, balanced foreign policy, and fiscal responsibility in the wake of Katrina, Iraq, the Bush deficits and the financial crisis – and the Republican Party's inability to recognize the degree to which these factors undermined their core case for existing remains a tangible problem.
Witness the debate this past week between Walter Russell Mead and Pete Wehner for how far apart these visions are:
"Wehner, who by all accounts is a thoughtful and sensible person with a lot to contribute to the national debate, is so caught up with angry defenses of the brilliance of policy making during the Bush era that he misses our point entirely… [E]xcept for a minority of true believers, the American public largely believes that Bush failed, and no matter how many blog posts ex-Bush officials write, that isn't going to change anytime soon. There are lots of intelligent people out there who think this is a gross injustice, and want the national conversation to focus on setting the record straight. For its own sake the Republican Party has to deafen itself to their piteous pleas; they are sirens luring the sailors to their destruction on the rocks. This will sound harsh and unfair to some, but it is true and it is real."
"Mr. Wehner's touching, honorable but politically toxic Bush loyalty is the kind of gift left-leaning Dems pray for night and day. Liberals want the Republican Party to spend the next four years defending the Bush record as strongly as possible. They want potential conservative presidential candidates to say as many things as possible that will tie them to Bush in the mind of the public. They want Mr. Wehner's approach to be mandatory for the next generation of Republican candidates; they want loyalty to the Bush legacy to be a litmus test for decades to come. They want to use President Bush the way their grandfathers used Herbert Hoover, and if Mr. Wehner has his way, they will."
A smarter approach, in my view, is understanding the primary lesson of the failure of Bush's administration: the essential need, in all administrations, of a healthy skepticism of the power of government to do good. My conversation on that point comes up in this friendly debate I recently had with Wehner, which you can see here:
How to Save the Republican Party
Central to the conversation this week will likely be another reconsideration of Iraq – what led Bush to undertake the war, what went wrong, and why it went wrong. Lost in the conversation will be what lessons the Democrats themselves, particularly President Obama, failed to learn from the case-making for Iraq in advancing his own signature policy. Ezra Klein responds to that comparison from me this morning, but along the way, I think he misses the point.
The Iraq war debacle shows us why it's important to make the case for policy on the actual grounds the principals believe in, instead of an argument based on building up fear or overpromising on outcome. Rather than resting the case for war on the moral argument for human freedom neoconservatives held, Bush advanced a case designed to bring along the realists, based on faulty intelligence, about the burgeoning threat of weapons of mass destruction. Instead of basing his case for his health care law on its true justification and the moral argument for universal coverage, Obama promised it would address problems it never will, resulting in lower premiums for all, better quality care, and keeping your doctor and plan if you like them.
For both parties, the trouble was in making these policies a reality, which proved far more challenging than either expected. Iraq remains a Republican millstone – Obamacare may be about to become one for the Democrats as well. Foreign policy failures and domestic policy failures are different in significant ways, but one consequence of the latter is that everything that breaks is blamed on the most recent big reform. For the foreseeable future, everything wrong with health care is going to get blamed on Obamacare, fairly or not, and its effects on doctors, providers, and systems across the country.
If Obamacare meets its promise to lower premium costs, let you keep your doctor and your plan, trim the deficit, and improve the quality of care, Democrats will be running on it for generations. If it doesn't, they will have to run away from it, or run by saying how they'll fix it. Though fixing it, as we saw with the surge, doesn't erase blame for the original mistake.
Among smart Democrats, concerns about implementation of the law are rising significantly. Senator Max Baucus, the powerful Finance Chairman who was the architect of much of the law, has announced his retirement mere days after voicing concerns with the problems of implementation as a potentially "huge train wreck". HHS is attempting to satisfy his concerns by throwing more money at marketing and promoting the law's exchanges. As Peter Suderman notes:
The Hill reports that [HHS] just announced that it signed an agreement to spend another $8 million—with the option to spend more—further promoting the exchanges… I'll give the folks at HHS this: They could probably use some effective marketing. But maybe they ought to consider scaling back a bit, and work more on trying to raise awareness about the law's benefits with Sen. Max Baucus? When you've already spent $3 million promoting ObamaCare's exchanges, and yet the senator who claims to have written the bill on which the law was based thinks those exchanges are about to be a "huge train wreck," you kind of have to wonder whether the agency is really getting much value out of its marketing budget.
But market they will have to, given the very real concerns about getting enough healthy people signed up for the exchanges. If only the sick do so (the healthy having less of an incentive), you're going to see premiums explode at an even faster rate than previously expected. Had you built Obamacare around approaches that were actually designed to address the number one problem according to most Americans – high premium costs – instead of that moral agenda for universal coverage, you wouldn't need to do all this spinning: people would want to buy a product because it's priced reasonably. But you didn't, it isn't, so you have to lean on the marketing and hope for the best.
The feeling during the second term among many in the Bush administration was that their problem was one of public relations, not policy ramifications. They rarely questioned their policy approaches. They felt, as Wehner still feels, that things were going well far past the point where they weren't. They blamed media reports, echo chambers, and partisan posturing for shifting public opinion. Today we see the same traits still in place in this administration: If only we promote this better, and more thoroughly, it will result in better outcomes. It's hardly a new trend in political governance, and whoever comes next to the White House will feel it, too.
A healthier lesson to take from the Bush and Obama years is that it's better to be honest with the American people than to approach them with false hope or false fear. They shouldn't count on policies or approaches which accomplishes all the missions, offering everything and delivering so much less. Politicians like to promise the world, but we'd be better off, and so would they, if they were honest about the limitations of their power to deliver.
[First published at Ricochet]
Privatize the Federal Aviation Administration!
If you flew somewhere this week, or know anyone who flew this week, you've likely either experienced or heard about flight delays due to President Obama's cynical strategy to make the sequester as painful as possible for everyone.
Below are three excellent pieces on what is going on here, one from The Wall Street Journal, one from Heartland Senior Fellow Peter Ferrara in the American Spectator, and one from Chris Edwards of Cato's DownsizingGovernment.org in the Daily Caller. Perhaps this purposeful pain and inconvenience to travelers will backfire and the public will come to advocate privatizing a cherished public agency. The arguments are compelling.
I recommend you read all three pieces, but on to some excerpts.
From the WSJ comes "The FAA Strikes Again, the FAA Brags: The bureaucracy revels in its own failures":
The Federal Aviation Administration claims the sequester spending cuts are forcing it to delay some 6,700 flights a day, but rarely has a bureaucracy taken such joy in inconveniencing the public.
Though the FAA says it is strapped for cash, the air traffic control agency managed to find the dollars to update its interactive "command center" tool on its website so passengers can check if their airports are behind schedule due to what it calls sequester-related "staffing" problems. Oklahoma Senator Tom Coburn noticed this rare case of FAA technological entrepreneurship and fired off a letter Wednesday protesting what he called the agency's "full blown media rollout" to hype the flight delays.
From Peter Ferrara, who is, as usual, quite passionate in "Fight Back! Privatize the FAA!: The flight-delaying Obama crowd is really asking for it this time":
If you are an air traveler this week, you might get a dose of how it feels to be deliberately abused by your government to score political points. President Obama and the Democrat Party are so adamantly opposed to any semblance of cuts in government spending that they cannot abide the sequester that cuts only 2% of federal spending, not out of actual spending, but out of the growth in spending, over the next 10 years. …
The portion of those cuts that the Obama Administration specified apply to the FAA is $600 million. They could cut instead the $500 million the FAA is spending on consultants, the $325 million it is spending on supplies and travel, and the Transportation Department's new $474 million grant program "to make communities more livable and sustainable," as reported in the Wall Street Journal yesterday. Republicans have also already passed legislation in the House, and introduced it in the Senate, to give President Obama complete discretion to make the 2% cuts in spending growth out of the most wasteful federal spending to be found.
But President Obama and the Democrat majority Senate oppose that. They don't want to make the sequester cuts out of government waste, or out of counterproductive federal spending. They are still on their original plan to get the Republicans to back down from the modest sequester spending restraint, by making those cuts as painful for the public as possible.
So pursuant to that plan, the Obama Administration is trying to manipulate the public by imposing artificial, unnecessary, abusive air travel delays, hoping the easily fooled, Twitter voters will rise in anger to force the Republicans to reverse the sequester cuts, and increase taxes yet again, after all. If this was still the real America of free and independent people, they would rise in fury instead and demand that the President be impeached for such abusive, dishonest manipulation of the public he is supposed to be serving. What President Obama is doing this week is an attack on the American people, for cynical political gain.
But the more fundamental solution is to eliminate the potential for such political manipulation and abuse through the long overdue, and increasingly urgent reform of privatizing the FAA. Incorporate the whole organization into a private, for profit, D.C. corporation with all the stock held by the federal government to start. Then auction off the stock to the highest bidder. Use the funds to pay down the national debt.
It would be up to the new FAA Corp. to negotiate its own contracts with each airport for air traffic control services. But there is no need for this to be a monopoly. Each airport would be free to contract with any alternative competitor that would arise. That competitive market would produce the best service at the least cost.
Moreover, air travel would then be entirely free of Washington political manipulation. It would no longer be a political football, with James Carville laughing on TV how the Democrats are going to manipulate the public by abusing it to get their way.
Finally we have Chris Edwards, who notes that our Canadian friends have privatized their air traffic control system … and we don't see planes falling from the sky, just falling prices for air travel:
The government wouldn't be very good at running Apple Computer, and so it's no surprise that the Federal Aviation Administration (FAA) has major problems running the computer-intensive ATC business. To run smoothly and efficiently, our ATC system should be given independence from the government. We should privatize the system, as Canada has done very successfully. …
Canada provides an excellent model for U.S. reforms. Canada's ATC system is run by the nonprofit corporation Nav Canada, which is separate from the government. Like any private business, it raises revenues from its customers to cover its operational costs and capital investments. The company's financial statements for 2012 show revenues and expenses of $1.2 billion, with $125 million allocated to capital expenditures. Unlike the U.S. system, Nav Canada is self-supporting and not subsidized.
The 1996 privatization of Canada's ATC system replaced a government ticket tax with direct charges on aircraft operators for services provided. Nav Canada's $1.2 billion in revenues comes from charges for en route and terminal services. Thus, airlines get charged for flying through Canadian airspace and for landing at Canadian airports. For example, an airline flying an Airbus A330 from New York to Frankfurt through Canadian airspace would be charged $1,756.
A privatized U.S. ATC system would be able to raise the revenue it needed to fund its operations free of the central planning that comes from politicians. As a private company with a monopoly, there would be a concern that the costs and charges of a privatized FAA would rise excessively. But that has not happened in Canada. Indeed, Nav Canada's customer charges have actually risen more slowly than inflation over the past decade. …
America has always been a global leader in aviation, which makes it all the more unfortunate that we are stuck with a backwards, government-run ATC system. We should have the best ATC system in the world, so it's time to privatize the FAA and give the Canadians some competition for all those prestigious Eagle Awards.
Read them all, and share with friends. Maybe something good will come from the sequester after all — genuinely less government. Privatize the FAA!
The Immigration Trap
The Democrats have gotten the great Republican hope, Marco Rubio, to sign on to a measure that accomplishes nearly all of their goals on immigration:
"The pre-bill marketing campaign — driven by leaks that seemed to come from Republican negotiators — focused on stringent new border-control measures and a long, difficult path to citizenship. The goal was to minimize conservative opposition by creating a first impression of the bill as a tough solution to the country's illegal immigration problem. But when Democrats got a look at the 844-page measure, they discovered that their negotiators extracted more concessions than they thought possible. Those include an expansive version of the DREAM Act and subtle but meaningful tradeoffs on all the major pieces of the system, from family reunification to legalization and border security… Republicans succeeded in making the path to legalization contingent upon the government meeting border security benchmarks, prohibiting undocumented immigrants from accessing federal benefits even as they pay taxes, blocking a provision to allow foreign spouses of same-sex couples to apply for visas, and creating a temporary worker program. But in return, Democrats got what Mary Giovagnoli, a former Kennedy immigration aide and director of the Immigration Policy Center, called an "extremely generous legalization program."
About the only thing they didn't get was their preferred cutoff date of December 31, 2012. Everything else is in there.
The problem for the Republican Party is that either path they follow on the immigration policy front leads to all sorts of bad things. Consider Conn Carroll's proposal here in this context:
"Why not give those found illegally in the United States a simple choice? You can stay and become legal by registering with the federal government, but if you do, you forfeit all chance of becoming an American citizen. This offer would depend, of course, on passing an extensive background check paid for by the immigrant in question. And if this policy was open not just to those in the country today, but also those found illegally in the country tomorrow, it would not be amnesty in any way. It would just be a new legal alternative to deportation. Considering that far less than half of those who were granted resident status in 1986 ever bothered to become citizens, why are Democrats so focused on guaranteeing citizenship this time around?"
Trying to find a middle path between amnesty and deportation sounds well and good – I don't share Peter Skerry's view that there needs to be a prohibition on eventual citizenship, but what Carroll proposes is certainly better than the status quo and the current proposal – the challenge is that neither side will find Carroll's position acceptable. There is no appetite for meeting the actual market needs for low-skilled labor – for legalizing people without making them citizens. The Michelle Malkins of the world will yell shamnesty (they will not be content until millions of people are packed into train cars and headed south), while on the other side, Marco Rubio's press secretary compared the idea outright to slavery.
What we have here is more than a failure to communicate, it's a failure of leadership. The immigration policy negotiation should've been an opportunity for Rubio to prove that he is more than just a biography staffed by the ambitious. Instead, he may have made an error that could prove crippling by jumping into this fractious policy arena before the base has been brought along to where the party elite is on the subject, provoking all sorts of backlash not just from Rush Limbaugh listeners but now getting into it with the Heritage Foundation, too. It's a classic big unwieldy bit of Washington pork barrel politics, with carveouts for state interests.
Or maybe the problem is that the bill just won't do what was promised. Byron York:
"One key trigger, they claimed, was the creation and empowerment of something called the Southern Border Security Commission. If within five years after the passage of the bill, the Secretary of Homeland Security has failed to increase border security to a level in which 100 percent of the border is under surveillance and 90 percent of those attempting to cross illegally are caught — if Homeland Security has not reached those goals, then the Commission would be formed. It wouldn't be the standard, do-nothing Washington commission, Gang sources argued. Instead, it would have real legal authority to actually carry out the border security measures that the Secretary of Homeland Security had failed to accomplish."
"It sounded tough, intended to convince skeptical conservatives that reform would be based on stringent border security. But as it turns out, the structure Gang sources described is simply not in the bill… The bill requires that the head of the Government Accountability Office then review the report to determine whether the Commission's recommendations are likely to work and what they will cost. And then — the process stops. "The Commission shall terminate 30 days after the date on which the report is submitted," says the bill. There is nothing about the Commission going from "being an advisory panel to a policy-making one." The strict trigger that Gang sources advertised as being in the bill just isn't there."
Mickey Kaus has more on that here.
The Gang will continue to try to emphasize the security portions of the law in the days ahead, in response to the backlash over Boston. But it remains to be seen if any of that will stick. Claims like this from Dick Durbin just don't make sense at all, and sound like the bluster they are. Waiting on the sidelines are hardliners like Ted Cruz, who could prove very problematic for Rubio. And none of the participants are operating from a position of real trust on the issue. It's just a great big mess.
This could all reach a boiling point in the days ahead, one that will only please the White House, given that they never wanted a policy to pass to begin with, as I noted back in January.
"The President apparently likes this situation just fine: he's now weighed in with his own framework for an immigration plan, which does absolutely nothing in terms of meaningful reform targeted at the root cause of the problem (the persistent black market in unskilled labor) and instead amounts to Simpson Mazzoli 2013. Why would the president do such a thing, making passage of an immigration plan less likely by coming out in favor of an even more obviously political ploy in lieu of a real policy solution? Isn't it obvious? … The mission isn't a reasonable solution for very real immigration policy problems, it's political destruction of the enemy. Thus, Democrats benefit either way, even if the nation doesn't."
So OFA will make a push, but it's a win-win for Obama even if that doesn't succeed. And so we end up with the Cesar Chavez world persisting, and none of the real problems
[First published at Real Clear Politics]
Heartland Daily Podcast: Internet Taxes
Heartland's Benjamin Domenech speaks with Curtis Dubay, Senior Tax Analyst at The Heritage Foundation, about Internet Taxes.
The proposed Marketplace Fairness Act would force Internet retailers to collect sales tax for the state and local governments of their customers, even if their business does not have a physical presence in those jurisdictions.
[Subscribe to the Heartland Daily Podcast free at this link.]What Do Dish-Sprint, Google Fiber, & T-Mobile's No Contracts, All Mean?
Competition is alive and well in the U.S. communications market.
Market forces have produced a barrage of big competitive developments in just a few weeks. Dish's disruptive $25b bid for Sprint could offer consumers a new choice of a lower-price, faster-speed, all-wireless platform for the first time. Google's disruptive ongoing expansion of Google Fiber from Kansas City to Austin Texas and Provo Utah signals more and new consumers could increasingly enjoy the choice of a new, much-faster, near-comprehensively-integrated broadband offering. And T-Mobile is disrupting in yet another major way with a new maverick wireless pricing model that offers no contract plans and relatively more a la carte pricing.
These developments are proof positive why competition is so far superior to regulation. Survival is a powerful motivator to disrupt, differentiate and innovate, just as the opportunity for large profit and market leadership are powerful motivators as well.
While regulators slowly fret over how they can solve yesterday's problems by fiat or opaque subsidy, competition is automatically devising alternative solutions to today's problems, and inevitably is working on different solutions to tomorrow's problems.
I. Dish-Sprint
Dish's $25b offer for Sprint spotlights a huge relative weakness in the Softbank-Sprint deal – no synergies. In the absence of a competing bid, Softbank could get away with the bluff of a no-synergies offer: a simple debt-capital-infusion and the "special sauce" of a billionaire's-price-cutting-acumen.
However, the Dish offer matches one billionaire's-price-cutting-acumen with another billionaire's-price-cutting-acumen, and matches one debt-capital infusion with another debt-capital infusion.
Then most importantly, Dish raises Softbank's bid substantially with a higher bid reflecting: real cost and marketing synergies, valuable 4G-ready fallow spectrum, and a uniquely-differentiated, lower-priced, more-mobile-video-friendly, all-wireless platform.
Real synergies are the mother's milk of deals. Real differentiation is the key to competing successfully. Spectrum is hugely valuable to an all-wireless platform. And combining different assets in new ways to meet new needs is innovation.
Even if Softbank raises its bid, Sprint would be foolish to not take the superior Dish offer. A Dish-Sprint offering would be much more competitively disruptive than a Softbank-Sprint deal; it's not even a close call.
This Dish-Sprint opportunity represents a real gut check for Sprint's board and management (and for regulators and antitrust authorities as well). Do they really want more vibrant competition in the marketplace that will increase competitive pressure on pricing, bundling, and innovation? If so, they will go with Dish and make it happen.
However, if they are more wedded to complaining about insufficient competition and pursuing industrial-policy regulatory-favoritism and subsidies, both will go with the Softbank deal, and what they think would be best for (government-managed) competition.
II. Google Fiber Expansion
Just the prospect of Google entering local broadband markets around the country quickly — like it has with Google Fiber in Kansas City, Austin and Provo, with a much faster, more comprehensive and commoditizing competitive offering — is highly disruptive competitively. In a fixed-cost, capital-intensive market, that traditionally requires long-lead times and substantial share to be profitable, Google knows it can compete in the provision of broadband, despite many financial naysayers, by changing the game.
Google is no traditional over-builder. Google's comprehensively-integrated service potentially offers more ways for Google to make money than any other competitor. Apparently Google is taking the concept of an integrated offering further than the "triple" or "quadruple play" of broadband, video, voice, pay-TV, and mobile; and further than the Apple-pioneered, integrated offering of hardware, software, and a store. Google Fiber can leverage the #1 search, Internet video, mobile operating system, and location services, the #2 social media platform, and competitive mobile devices, free full-service software, cloud services, content-store, shopping, payment mechanisms, etc.
Traditional subscription broadband service is an end in itself. For Google Fiber, it is both a subscription "end" but also a "means" to another business "end" – more web services advertising.
Just because current broadband providers can't make money from giving broadband service away for free does not mean that Google can't. Google is offering a 5MBs broadband service for free to anyone that will pay for the installation fee. This isn't charity, it is a shrewd investment in greatly expanding the market for Google's advertising, just like it has done before by offering a slew of services for free that people previously paid for – gMail, YouTube, Android, Maps, Voice, etc.
With Google Fiber's paid and free offerings, Google knows it will be identifying and developing an all-Google customer cohort based on low-cost/free connectivity, devices and services: i.e. Fiber, Chromebooks, low-cost smart phones, free software, free video, free communications, free maps, low-cost/free payments, low-cost/free cloud services/storage, etc.
Google Fiber will continue to roll-out shrewdly where it makes sense because Google Fiber enables Google to meet most all of a person's Internet needs in a way other competitors cannot.
And the competitive disruption of Google Fiber also continues because Google drives a hard bargain. Google is shrewdly entering markets selectively where regulators allow Google to control the extent of its build-out based on pre-orders, a freedom and massive cost savings that traditional broadband players have never enjoyed.
Kansas City, Austin, and Provo all have given Google substantial regulatory advantages, subsidies and benefits that were unavailable to their competitors. Simply, Google is enjoying a special national cherry-picking strategy, ultimately focusing on the ~20% of the markets it assesses that offer ~80% of the upside for Google.
Regulators must recognize that communications competition is going through a profound metamorphosis that is rapidly making existing communications law and regulation obsolescent, and at the same time creating new competitors and forms of competition like Google Fiber.
Regulators should focus on clearing away obsolete restrictions and micromanagement of a bygone era, so that there is modern system and a level-playing field, where similarly-situated competitors are treated similarly.
III. T-Mobile No Contracts
T-Mobile has made a big marketing splash recently by boldly differentiating its service by requiring no contracts and allowing users to pay installments for just a device not bundled with the wireless service plan. This maverick competitive pricing meets and satisfies a consumer need without the need for regulation. If there is sufficient demand for this type of pricing flexibility, other competitors will be compelled to offer it.
While regulators wring their hands that T-Mobile is not a strong enough competitor for their liking, they forget that competition works because it makes competitors that aren't fully succeeding adapt, change and disrupt the status quo in new ways. Rather than trying to stand on the scales to help smaller competitors like T-Mobile and Sprint to compete, regulators need to open their eyes and see that more motivated competitors make for more competition.
IV. Conclusion
In short, the U.S. communications marketplace is highly competitive and only becoming more so.
The big mistake that regulators can make now is imagining that competition should produce neatly-monolithic commodity price competition.
Real market competition in the communications marketplace is all about differentiation — meeting new and old needs in innovative ways. Market forces deliver this automatically, without Government.
Proof positive is the multiple major competitive disruptions we have witnessed in the last few weeks. Dish is disruptively proposing to redraw the boundaries of broadband facilities-based competition. Google is disruptively entering a high-fixed cost business via a non-traditional hybrid revenue model, and in doing so threatens to redraw the boundaries of broadband competition in yet another way. And T-Mobile's pricing disruptions remind us of the competitive truism: necessity is the mother of invention.
Competition is alive and well in the U.S. communications marketplace. Regulators should stay out of the way and let competitors compete on a level-playing field.
[First Published at The Precursor Blog]
Incompetence and Dysfunction Rampant at Energy Department
"Ineptocracy" is a new Internet-popularized word in wide circulation, which came to my inbox with the following definition:
"A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers."
Clearly the word's creation was inspired by the current presidential administration, where the ineptocrats abound. And as NLPC has documented for 4+ years, nowhere has that been more evident than in President Obama's Department of Energy, under the management of soon-departing Secretary Steven Chu.
Most of those stories have documented the foolishness, misjudgment and cronyism surrounding the distribution of stimulus funds. But another area of mismanagement and incompetence has been revealed at DOE, and this time it has security implications.
Inspector General Gregory Friedman, the internal affairs watchdog for DOE, reported last week that dysfunction infects the department's Office of Special Operations, which is tasked with the protection of the Secretary and other top officials within the branch. They are supposed to develop and implement policies and procedures for security both at headquarters and when officers are traveling, but the IG determined that simply getting along is a challenge within the division.
"During the course of our review, it became clear that morale among many members of the Special Operations staff was low and that there appeared to be a lack of trust between the agents and management," the IG wrote in his report. "Agents told us that there was an apparent unwillingness to work together to resolve differences of professional opinion. On these and other related issues, we were also provided information by the respective parties that was inconsistent and, at times, contradictory. Positions were often irreconcilable."
Friedman described the Executive Protection Program as a small group due to the limited number of officials in need of security. He cited numerous examples of agents who registered complaints about each other, many which he could not substantiate. But rather than appear like there's much ado about nothing, instead the picture is one of deep animosity of employees towards one another.
The antagonism is clearly getting in the way of everyone doing their jobs, despite recent attempts by DOE's Office of Health, Safety and Security – which oversees the security team – to address the morale and discord problems. Friedman outlined several examples in which agents: did not receive individual or collaborative training; did not know correct procedures; and were informed about performance tests on operations and procedures ahead of time when they were not supposed to be.
"The HSS evaluator administering the tests also reported to senior Special Operations officials that the agents had demonstrated competency in the tested areas, when in fact the agents had either not completed portions of the test or lacked the requisite knowledge," the Inspector General reported.
Friedman also documented several examples in which agents did not understand policies. Out of the 16-person Executive Protection team, on vital operations that included "active shooter response," "fire evacuation," "direct threats," and "medical emergencies," only one or two agents were familiar with policies. On "security room operations," "duress system response," "bomb threats," and "motorcade operations," no more than 6 or 7 of the 16 agents had an understanding of any of the policies.
Besides the lack of information and training, the security team apparently was ill equipped as well. According to Friedman, body armor was not acquired for agents between 2007 and 2012, until an anonymous complaint was filed with the Office of Safety and Health Administration in February 2012. In response Special Operations management purchased eight non custom-fitted vests in various sizes for 13 agents, rather than custom-fitted vests that optimize "comfort and ballistic stoppage capability." Management informed the inspector that the non-custom vests were purchased "due to the high attrition rates of agents and replacement costs for the vests."
Incompetence in dispensing taxpayer funds is one thing, but the compromising of security due to unprofessional conduct is disturbing. Secretary Chu certainly has allowed DOE to fall into a moribund condition.
As mentioned above, the administration of DOE's allocation of stimulus funds has been careless and wasteful. NLPC has documented billions of dollars blown on Recovery Act grants and loans, many of which the Inspector General has reported. He testified in November 2011 before a House regulatory affairs subcommittee that "the Loan Guarantee Program had not properly documented, and as such could not always readily demonstrate, how it resolved or mitigated relevant risks prior to granting loan guarantees."
Friedman also painted a picture of a cabinet agency entirely unprepared for the flood of stimulus money it was suddenly given to distribute, and incapable of tracking it both administratively and ethically.
"To date, our Recovery Act-related investigations have resulted in over $2.3 million in monetary recoveries as well as five criminal prosecutions," he testified at the time. "This includes a series of cases involving fictitious claims for travel per diem resulting in the recovery of $1 million alone in Recovery Act funds."
In a hearing back in March before another House investigative committee, Friedman also told of "fraudulent claims for rebates," "weatherization fraud to include mischarging," and "the directing of contracts and grants to friends and family."
Friedman has investigated numerous other DOE stimulus recipients, including electric vehicle battery maker LG Chem, which received a $151 million grant but had little for its employees to do. Reports last year told of workers on the clock playing Texas Hold 'Em and video games, doing Sudoku and crossword puzzles, and volunteering at nonprofits like Habitat for Humanity – all of which Friedman confirmed. He reported that DOE "did not always take sufficient action to ensure adequate oversight of project progress" and said monitoring was so poor that – despite the obvious evidence in early 2012 of employee furloughs, construction delays and cost overruns – no red flags were raised.
And in January 2012 Friedman discovered the rush to distribute stimulus money also may have compromised national security. In an audit report of the department's management of the Smart Grid Investment Grant Program, which received $3.5 billion to modernize and improve the reliability of the U.S. power grid, the IG found that grant recipients' plans to prevent "malicious cyber attacks" were often inadequate.
Steven Chu has been in way over his head for years, and the Obama administration should have relieved him of his duties long ago. But that doesn't happen when you blithely run an ineptocracy.
[First Published at National Legal and Policy Center]
Americans Bothered By The Way The Government Spends Taxes
Every year, April 15 is tax day. The morning's news shows featured last minute tax tips and other tax-related information. A new poll was discussed. When asked: "Thinking about paying taxes, which one of the following bothers you the most?" Surprisingly, "What you pay" received the lowest response, while the "Way the government spends taxes" was the highest. "Feeling that some don't pay fair share" was near the top and "Complexity of system and forms" was near the bottom." So people understand that it takes money to run the government and generally don't object to paying their taxes. It is what the government does with that money that frustrates us.
When asked about the way government spends taxes, responders were likely thinking of the green-energy crony-corruption spending on flawed ventures like Solyndra and the, now, fifty-plus other green-energy embarrassments that received taxpayer dollars as a result of President Obama's 2009 Stimulus Bill (as well as other green-energy funds) that poured nearly $100 billion into the pet projects of his donors.
Solyndra filed for bankruptcy in September 2011. It was just the bellwether; the first of many to come.
A year later Christine Lakatos and I profiled nearly 20 green-energy stimulus-funded companies that had gone bankrupt. The next week, we highlighted the other bookend: "companies/projects that received funding from various loan guarantee programs (LGP), grants, and tax incentives. These are projects that are still functioning, but are facing difficulties." One of those troubled companies was A123 Systems. One week after our report, A123 filed for bankruptcy. Nearly two months later, A123 was purchased by a large Chinese auto parts maker that has renamed the lithium-ion battery company B456. (Note: A123/B456's biggest customer is another company on our troubled list: Fisker Automotive—manufacturer of the $100,000+ electric sports car made in Finland—is now facing bankruptcy itself after efforts to find a Chinese investor "stalled.")
Wait. In his 2008 campaign, didn't Obama promise to "create five million new energy jobs over the next decade––jobs that pay well and can't be outsourced"? But our tax-payer dollars created jobs in Finland and have benefitted a Chinese company—Obamanomics outsourced. No wonder the "way the government spends taxes" tops the list. And most have no idea that the Obama administration is responsible for steering billions of our tax dollars from the stimulus and other clean energy programs to foreign-owned entities, of which big chunk was doled out in the form of free cash via the 1603 stimulus grant program.
But there's more—new news the poll respondents probably didn't even know about.
One day after the poll was taken, CNN Money reports: "China's Suntech Power has put its largest subsidiary into bankruptcy." What they don't mention is that China's Suntech Power benefitted from Obama's 2009 Stimulus Bill—receiving a $2.1 million credit from the Energy Department's stimulus-funded Advanced Energy Manufacturing (48C) Tax Credit. (Suntech was included in our 2012 "troubled" list.) In her blog, The Green Corruption Files, Lakatos states: "according to the Heritage Foundation, in November 2012, Suntech shed some employees, claiming that it was the 'U.S. International Trade Commission's 35.95% tariff on Chinese solar panels that was partially responsible for the 50 impending layoffs at its Arizona production facilities.'" Suntech was even blamed for the Solyndra debacle. In December 2011, The Pittsburgh Tribune-Review reported: "China's major solar panel companies—whose low-cost products led some American factories to close, helped create the Solyndra controversy, and spawned talk of a trade war—were bankrolled in the United States by the world's largest investment banks." Those "investment banks" include some the same ones we have profiled in our previous reports that have deep ties to the Obama campaign and administration, and many green-energy projects that received loans, grants, and special tax breaks representing billions in stimulus money.
Suntech has more interconnections. Arizona's Mesquite Solar Project, which received $337 million in taxpayer money despite its non-investment grade rating by Fitch, was to be built with Suntech's solar panels and the power was to be sold to Pacific Gas & Electric—which has strong political presence in Washington, DC, and connections to billions in stimulus funds. California's PG&E, a company with "an extensive network of former high-ranking employees holding influential positions in government agencies at the federal and state level, has benefitted handsomely from government financing of green energy projects." The most controversial former PG&E employee to hold an influential government post is Cathy Zoi, a former energy analyst for the company, who we profiled in our report on George Soros.
There is much more that can be found in Lakato's Suntech report.
Another sparsely reported solar-power embarrassment was covered by Fox News on the same day the aforementioned poll was taken. "SoloPower, which makes thin-film solar panels at a new plant in Portland, OR, opened September 27 with an upbeat ribbon-cutting ceremony. Local and state politicians gushed about the company eventually operating four production lines and creating 450 well-paid green jobs." After its grand opening just months ago, SoloPower's power is waning: "The first production line was never completed," and "in January, the company had a round of layoffs."
This is not a surprise to those of us who watch the green-energy crony-corruption scandal. SoloPower was one of the worst-rated loans. One month before it received a $197 million loan guarantee to "support the retrofit of an existing building to operate a thin-film solar panel manufacturing facility in Portland, OR," Standard and Poors (S&P) gave SoloPower a credit rating of CCC+.
On March 29, 2012, U.S. House of Representatives Committee on Oversight and Government Reform released a report titled "The Department of Energy's Disastrous Management of Loan Guarantee Programs" which states: "S&P predicted that SoloPower will fail to meet its debt obligations." DOE emails, released on October 31, 2012, reveal that James McCrea, Senior Credit Advisor Loan Programs, called SoloPower "a completely uninspiring project."
Yet, in addition to the $197 million of US taxpayer money SoloPower was given from the DOE through the 1705 LGP, this European firm also received $40 million from Oregon taxpayers. Then in December 2012, "despite unfulfilled job and production promises and signs the Portland solar panel factory was sliding even further behind," Oregon officials tripled the "taxpayer's stake," said the Oregonian. Business Oregon approved a $20 million tax credit for SoloPower—which SoloPower then exchanged for $13.5 million in cash. After a management shake-up, Fox News reports, SoloPower is "trying to raise money by selling some of its equipment through a third party and is attempting to restructure its $197 million federal loan guarantee."
With the bad credit rating, the "uninspiring" label, and poor performance, why did SoloPower receive federal, state, and city funding—ultimately paid by the taxpayers? Because as the Oversight Committee report states: "What SoloPower lacked in economic value, it made up for in political connections."
Suntech and SoloPower are just two recent stories, part of a long list of bankrupt and/or "troubled" politically connected green-energy projects.
When President Obama released his FY2014 budget, it included new spending of nearly $1 billion "to support deployment and long-term development in the clean energy industries." Renewable Energy World appears gleeful. "It's been said before and it bears repeating that Obama has done more for solar than any previous US President." And: "The support of the federal government has led to an explosion in the amount of solar across America." Do you think?
In contrast, Tom Pyle, President of the American Energy Alliance, pointed out that the budget "represents the administration's desire to double down on bad energy policy." And, "calls for fast-track permitting for renewables" while never mentioning the Keystone pipeline. Pyle concludes his comments by saying: the President "hopes that the American people will forget the failures of the past four years, higher gasoline prices, skyrocketing electricity rates, bankrupt renewable firms, and billions in wasted taxpayer money on politically connected industries."
No wonder the "way the government spends taxes" tops the list of taxpayer's frustrations. Perhaps if "government's inability to learn from its mistakes" had been on the list, it would have been the number one choice.
Green Crusade a Threat to Economic Growth
One definition of "gangrene" offered by Webster's Dictionary, "pervasive decay or corruption," appropriately characterizes the work of the EPA, given its continued push to the edges of the Constitution in implementing costly regulatory requirements that thwart our national economic growth. Thus, the agency has assumed greater powers over the last several years while increasingly demonstrating a willingness to act outside the law in pursuit of its ends.
Furthermore, its unnecessary interventions in our national economy have yielded pernicious consequences. Today, the EPA punch list is long, and there is legitimate concern that the president could circumvent Congress to enact tough environmental regulations. In fact, should a presidential approval of the Keystone XL pipeline antagonize the environmental lobby, we could see more aggressive executive support for the green agenda as a quid pro quo.
With his most recent nomination of EPA activist and climate-change alarmist Gina McCarthy, Barack Obama has pledged to fulfill his State of the Union promise for aggressive policies addressing purported climate change. A brief review of McCarthy's work while heading the EPA's Air Board suggests a disconcerting willingness to provide misleading testimony in order to achieve her policy goals ("EPA Nominee Gina McCarthy Has a History of Misleading Congress," Lewis & Ward, Forbes, 3/12/13).
She is also known for having deliberately circumvented existing rules to promulgate the draconian New Source Performance Standards limiting emissions from new power plants ("Carbon Power Politics," WSJ, 3/5/13). In short, there is good reason to be concerned that McCarthy will implement unwieldy regulations that increase businesses' operating costs, resulting in employee layoffs and/or cost pass-through to the consumer.
A second area where the EPA would like to exert greater regulatory oversight is hydraulic fracturing. By all accounts, states legally responsible for enforcing fracking regulations have capably performed their duty. Nonetheless, movies such as "Gasland" and "Promised Land" have generated a plethora of myths regarding the fracking process and its impact on groundwater supplies via methane gas and chemical infiltration. Moreover, groundwater contamination claims by the EPA for gas producing basins in Pavillion, Wyo., and Dimock, Pa., have proven to be without merit.
Constructive voices such as Phelim McAleer have, meanwhile, been helpful in providing more grounded documentation (FrackNation) of industry practices. So while economically vibrant areas such as Texas, North Dakota and southwestern Pennsylvania generate ongoing robust economic growth, we should realize that efforts by the EPA to impose unnecessary regulations on hydraulic fracturing would have a deleterious impact on our economy. Such regulations would likely discourage further domestic exploration and production, result in higher gas prices for the consumer and jeopardize our chances of domestic energy security.
One last EPA-generated boondoggle that may soon result in higher prices for gasoline is the agency's requirement for ethanol blending. The EPA sets quotas for gasoline pool blending by domestic refiners every year. Unfortunately, if the quota is too high and above the 10 percent "blend wall" beyond which refiners are reluctant to add ethanol to their gasoline pool (for fear of lawsuits due to engine damage from ethanol blending greater than 10 percent), they are required to buy credits, or in industry parlance, RINs (renewable identification numbers).
These credits allow them to satisfy their blending quota, but due to the illiquid nature of the RINs market, their price per gallon has recently spiked from 10 cents to more than $1. This is likely to lead to fuel price increases of 5 cents a gallon or more for consumers. Other secondary effects of this EPA requirement will be increased gasoline exports by domestic refiners and declining oil product imports from Europe, both of which will exert more upward pressure on gasoline prices.
All these areas of EPA involvement are likely to continue to threaten the vibrancy of the U.S. economy should it be allowed to continue on its green crusade. We are fighting a battle against scientific ignorance and environmental nihilism that we cannot afford to lose. And as is the case in dealing with gangrene, the only solution here may be a partial "amputation" of the powers of an increasingly toxic EPA that have grown well beyond those its creators originally intended.
[First Published at PhillyBurbs.com]
Google Lands Sweet Deal, Taxpayers Are the Suckers
This piece in the Heartlander, "Google Goes Shopping at a Dollar Store" by Randolph May of the Free State Foundation makes for some infuriating reading.
It is probably the best example I've ever seen as to why municipal broadband systems are a bad deal for citizens of cities with the hubris to think they can compete in the digital economy by offering "free" and "cheap" Internet service.
May's report on what's happening in Provo, Utah, would be very hard to top — though we should expect to see it repeated again and again. He cites this Associated Press story from April 18:
Google Inc. will pay $1 for a municipal fiber-optic system that cost $39 million to build, according to terms of the Internet company's agreement with Provo. … Even as Google takes ownership of the municipal network, Provo will have to pay off loans for its construction for another dozen years, according to agreements released Thursday by city officials.
So … one of the most heavily capitalized companies in the history of civilization swoops in and purchases a $39 million state-of-the art fiber-optic "muni broadband" system in Provo for one dusty sawbuck. Google will maintain that network (and maybe improve it) via access fees they will charge the good citizens of Provo, while offering a "free" service that is so slow, no one would likely use it. (My now-dinosaur 3G iPhone 4 probably downloads stuff faster than the "free" network every Provo resident pays to keep afloat).
And, here's the kicker [emphasis mine]:
Even as Google takes ownership of the municipal network, Provo will have to pay off loans for its construction for another dozen years, according to agreements released Thursday by city officials.
For nearly as many years, households have been paying $5.35 a month on their utility bills for a system that provides Internet, television and phone service — whether they use it or not.
But Provo officials say Google's deal is a good one for the city and its residents because the system hasn't been able to support itself. Google Fiber will offer residents something in return for the utility fee — basic Internet service at no charge if they pay a $30 hookup fee.
Got that? Provo's taxpayers will be paying off the loans and interest on the $39 million network they hardly used — because it offered such poor service and was incompetently run by the city — until 2025. Hell, I'll bet Google's $1 that by 2025 the whole system will be obsolete, and another $5.35 Google will have bailed out on the whole project by then. The time between now and 2025 is an eternity in the digital economy. To put that 12-year time frame in perspective, Google was still run out of a garage just 15 years ago. Now it earns $3 billion every quarter.
"But, Jim," you say. "Google will give the good folks of Provo free Internet after they pay a $30 hook-up fee." Whoop-dee-doo. The "free" Internet will be just as unused as the network run for "free" by the city because those speeds are already obsolete. From the story:
In Kansas City, Google charges $70 a month for a gigabit connection, which is 1,000 megabits per second. Google's free Internet service will run at 5 megabits a second.
For another $50, Kansas City customers can sign up for Google Fiber TV, which features 200 channels, many in high-definition and featuring mainstays such as ESPN, Nickelodeon, FOX News and MTV, as well as recent newcomers HBO and Cinemax.
Wow! 5 megabits a second! Is that a joke? Like I said. If you like the speed of 3G phone for your entire home Internet experience, this is the deal for you. If you don't, and you shouldn't, it'll cost you — in this case it'll probably cost residents of Provo $70 to $120 a month on top of the taxes and fees they'll pay to settle that $39 million "free Internet for everyone" investment by the city.
And it's not like Provo is some underserved backwater that the city had to drag into the digital age. A metropolitan area of more than 500,000 people is a great market for broadband, and Provo is already being served by every high-speed broadband competitor in the business. Now Google gets to enter the market for free — and on the backs of taxpayers who did the hard part: building the infrastructure.
Let's sum this up:
- Colossal investment in "free broadband" by a municipality? Check
- Poor management of the network due to lack of expertise? Check
- Few customers for the "paid" service, and few piggy backers on the crappy "free" service? Check
- Ultimate failure of the project, but taxpayers still be forking out money to pay it off for decades? Check
How lucky is Google?! They don't have to invest a single dime into building the infrastructure, but get to own it for $1, and then turn around and charge the public that paid to build it a fee to get on its network at market speeds. That's like taxpayers forking over the money to build me a restaurant and stock it with food and a great staff. Then I buy the place for a buck and start running the joint and collecting all the profits.
That's not exactly "crony capitalism," but … what … "sucker capitalism"? "Dummy capitalism"? As I was expressing my outrage about this via email with various Heartlanders, Sam Karnick emailed me to call it "last-ditch capitalism." Any of those monikers will do. Where do I sign up to get some of that?
One last quote from the story; one last kick to the taxpayers of Provo:
"Clearly, we think there's a good business opportunity here," Google Fiber spokeswoman Jenna Wandres said Thursday.
No kidding.
Check out some of Heartland's extensive, years-long work fighting back at these muni broadband schemes at PolicyBot. Can't say we haven't tried to warn folks, including people in Utah.
Someone Cares Enough to Write
Sometimes I wonder if our work does any good. Then we receive letters like this one, from a reader in Independence, Mo., and I know we are touching people's lives.
I was going to send my response only to our correspondent. Then I decided to send it only to a few people inside The Heartland Institute. Now I've decided to share it with you all.
This letter comes in response to an article quoting someone here at The Heartland Institute who opposes the Internet taxation bill, now moving through Congress:
You guys suck on your position on the Market Fairness Act [sic]. The article I read calls your group "conservative." I say bullshit to that.
I say you guys are "on the take" from the online merchants. How much money does Amazon, Ebay, etc give you guys? There is no other possible reason you would oppose this legislation unless it is just not tough enough.
You guys sound like crooks to me.
Independence MO
Here is my response:
Dear Mr. H . . . . . . :
Thank you for your thoughtful letter.
May I ask . . . if we were in favor of this bill, would you accuse us of being "on the take" for Wal-Mart, Target and other big-box retailers?
Also, you apparently are under the mistaken impression that online merchants such as Amazon oppose the bill. Amazon in fact supports it. See here, for instance:
The biggest online retailer backs the bill because the company has the resources to crush small competitors who will struggle to comply with the bill if it becomes law. Does it make sense that we'd be "on the take" for Amazon when we oppose Amazon's position?
Life is not always as cut and dried as we like to think, a lesson you no doubt will learn with age and experience.
Best regards,