Category Archives: Economics

We need climate change—in the House of Representatives

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I didn’t have the energy to post on this Friday night, and it’s taken a while to get back to it, but I can’t help thinking that we’ve seen the definitive moment of the Democratic leadership of this Congress: they were in such a hurry to ram through their energy tax, they passed a bill that didn’t even exist. Seriously. As David Freddoso put it,

Through a series of parliamentary inquiries, the Republicans learned that the 300-plus page managers’ amendment, added to the bill last night in the House Rules Committee, has not even been been integrated with the official copy of the 1,090-page bill at the House Clerk’s desk, let alone in any other location. The two documents are side-by-side at the desk as the clerk reads through the instructions in the 300 page document for altering the 1,090 page document.

But they cannot be simply combined, because the amendment contains 300 pages of items like this: “Page 15, beginning line 8, strike paragraph (11)…” How many members of Congress do you suppose have gone through it all to see how it changes the bill?

Global Warming is apparently so urgent that we can’t even wait until members of Congress know what they’re voting on.

There’s supposed to be a section of the bill establishing and regulating a financial derivatives market (that’s the “trade” part of “cap-and-trade”); as of the time the bill was passed, that hadn’t been written yet—there was only a “placeholder.” Barney Frank said it was OK because he was sure they’d put a good system in place, and that was apparently good enough. Somehow, the thought of Barney Frank presiding over a sub-prime carbon market, when herefused to see the collapse of the sub-prime housing market coming, isn’t encouraging.

More than that, the purpose of this haste is to keep people from thinking about the economic effects of this bill, which aren’t going to be good. Bloomberg, the Heritage Foundation, andInvestor’s Business Daily have all laid it out:

As we’ve said before, capping emissions is capping economic growth. An analysis of Waxman-Markey by the Heritage Foundation projects that by 2035 it would reduce aggregate gross domestic product by $7.4 trillion. In an average year, 844,000 jobs would be destroyed, with peak years seeing unemployment rise by almost 2 million (see charts below).

Consumers would pay through the nose as electricity rates would necessarily skyrocket, as President Obama once put it, by 90% adjusted for inflation. Inflation-adjusted gasoline prices would rise 74%, residential natural gas prices by 55% and the average family’s annual energy bill by $1,500.

Hit hardest by all this would be the “95% of working families” Obama keeps mentioning as being protected from increased taxation. They are protected, that is, unless they use energy. Then they’ll be hit by this draconian energy tax.

Of course, the Democratic majority has been clever enough to make sure that the bill won’t actually take effect until 2012, so that it won’t mess up their chances for re-election in 2010; but once it does, as the Heritage Foundation notes, people will notice:

For a household of four, energy costs go up $436 that year, and they eventually reach $1,241 in 2035 and average $829 annually over that span. Electricity costs go up 90 percent by 2035, gasoline by 58 percent, and natural gas by 55 percent by 2035. The cumulative higher energy costs for a family of four by then will be nearly $20,000.

But direct energy costs are only part of the consumer impact. Nearly everything goes up, since higher energy costs raise production costs. If you look at the total cost of Waxman-Markey, it works out to an average of $2,979 annually from 2012-2035 for a household of four. By 2035 alone, the total cost is over $4,600.

That’s not the only cost, though; Bloomberg notes that this bill will drive a lot of jobs overseas and give foreign energy producers a competitive advantage over American companies. At a time when we’re trying to reduce American dependence on foreign oil, this bill will onlyincrease it.

America’s biggest oil companies will probably cope with U.S. carbon legislation by closing fuel plants, cutting capital spending and increasing imports. . . .

“It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment,” Mulva said in a June 16 interview in Detroit. . . .

The same amount of gasoline that would have $1 in carbon costs imposed if it were domestic would have 10 cents less added if it were imported, according to energy consulting firm Wood Mackenzie in Houston. Contrary to President Barack Obama’s goal of reducing dependence on overseas energy suppliers, the bill would incent U.S. refiners to import more fuel, said Clayton Mahaffey, an analyst at RedChip Cos. in Maitland, Florida.

“They’ll be searching the globe for refined products that don’t carry the same level of carbon costs,” said Mahaffey, a former Exxon Corp. refinery manager.

In short, this is going to blow a large hole in our economy. And to what purpose? Well, that’s still very much up for debate, as I’ve pointed out a few times. As the IBD editorial continues,

According to an analysis by Chip Knappenberger, administrator of the World Climate Report, the reduction of U.S. CO2 emissions to 83% below 2005 levels by 2050—the goal of the Waxman-Markey bill—would reduce global temperature in 2050 by a mere 0.05 degree Celsius.

Doesn’t sound all that impressive, does it? It’s partly because the countries to which we’ll be shipping all those jobs have significantly poorer environmental records than the US, as Rep. Fred Upton (R-MI) notes:

If one truly cares about the planet, why do we want to make steel in China rather than in the United States where our carbon emissions are one-third that of the Chinese per ton of steel produced? One Arkansas refinery recently testified that under a cap-and-tax regime, they would be forced to close their 1,200-employee plant while India builds the largest in the world to ship fuel to the United States with nowhere near the environmental protections we have. We’re not helping the environment by sending industries that operate cleanly and efficiently in the United States to a regulation-free China or India.

That’s probably partly why even within the EPA, there are those who question the value of this bill—but the EPA is unwilling to listen, even to the point of trying to suppress the study challenging global-warming dogma, because “the administration has decided to move forward”and nothing is to be allowed to get in the way (not even the facts). This is a classic example of that “triumph of ideology over science” that the Obama Administration was supposed to be against. Apparently they don’t mind it when it’s leftist ideology. (Or when it gives them the opportunity to pump money to special interests.)

Now, it seems to me there’s hope that the Senate defeats this bill—Sen. Jim Inhofe (R-OK) certainly expects that to happen, and he has a reasonable case—but there was never much for the House, since the House Republicans are functionally irrelevant. That said, I have to give House Minority Leader John Boehner (R-OH) credit for making the most of irrelevance; he didn’t have the votes to back him up, but he did a grand old job of carving up this turkey anyway, in what some dubbed a “mini-filibuster.” The reason for his speech? Informing the House as to what was in that 300-page “managers’ amendment,” so that no one who voted for the bill could claim they didn’t know. Bravo, Mr. Minority Leader. Bravo.

 

Sarah Palin talks policy

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Two good interviews for Gov. Palin today, with Matt Lauer this morning and Wolf Blitzer this evening; they did want to talk about David Letterman’s vile behavior as well (Blitzer only briefly, Lauer at greater length), but beyond that she got substantial time to talk about the progress on the Alaskan natural-gas pipeline, the state of American politics, and the political future. Both Lauer and Blitzer did their jobs very well, I think, conducting interviews that were respectful without merely being puffballs, and Gov. Palin did well in answering their questions and making her points.

 

Some people are slow learners

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and some people just aren’t willing to let the truth get in the way of taking down a political opponent. It appears that Conor Clarke of The Atlantic fits in at least one of those categories; less than a week after one memorably inept attempt at a hatchet job on Sarah Palin, he’s taken another wild, factually-impaired swing. I’m not sure what he’s trying to prove, but if it’s that he’s a complete tool, he’s managed that much, anyway.

Links and thoughts on Obamanomics

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Here’s a video comparing and contrasting the media’s economic reporting during the Bush administration with their approach now that their man is in the White House:

The creator of that video writes,

By the middle of 2003, a mild recession had ended and the economy turned around big-time, with the creation of hundreds of thousands of new jobs and whopping GDP growth of 7.5% in the third quarter. Yet month after month, the national media downplayed the good economic news with the dreaded “but,” as in “Positive economic indicator X was released today, but the economy is still in the toilet . . .” (Oh, by the way . . . George W. Bush was President back then.)

Of course, with President Obama now in the White House, the media’s economic coverage is the mirror opposite. As the unemployment rate skyrockets and hundreds of thousands of jobs are lost every month, the bad economic news is spun by Obama’s friends in the media: “Negative economic indicator Y was released today, but it’s not nearly bad as we’d expected, and besides,unemployment can be fun!”

But hey, at least the Pelosi/Obama super-duper extra-special economic stimulus package has softened the blow, right? At least job losses aren’t as bad as projected, right? . . . Well, actually, it hasn’t worked out that way:

All in all, I’d say that’s not exactly the recovery we were promised. I know Newsweek called Barack Obama our first Vulcan president, but offhand, I’d say the media coverage of his economic policy is more likely the result of a few Jedi mind tricks. As Randall Hoven says, I think it’s about time to call this “the Obama recession.” (HT: Shane Vander Hart) Most people aren’t to that point yet, but The Nation is now predicting that if and when the official unemployment rate goes above 10%, they will be.

When the federal government actually acknowledges that the country has a double-digit unemployment rate, when a figure that is above 10 percent becomes that official number—something that the trend lines suggest could happen this summer—the country reaches an emotional and political tipping point. . . .

Politically, it is the point at which people start looking for someone to blame. . . .

If the country is socked with a double-digit unemployment rate, and if the actions of the administration that is in charge are seen as feeding the increase in joblessness, that’s the political point of no return.

Of course, we’d be at that point (and beyond it) already if it weren’t for the way the government calculates things, since as John Nichols points out in that article, the real number is a lot worse than the official one:

America already has double-digit unemployment.

In fact, the real unemployment rate, as opposed to the official rate, is well over 15 percent.

That’s because the official unemployment rate—which as of Friday stood at 9.4 percent, following another leap in jobless claims for May—is not, as economist John Williams has noted, “figured in the way that that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression.”

What happens when we include people who have stopped looking for work because they do not believe there are jobs to be found, along with part-time workers who would like to be working full-time?

Then, we start looking not at the unsettling 10 percent figure but the far more frightening 20 percent number.

Ed Morrissey gives Nichols “high marks for intellectual honesty” in coming right out and saying this;

Normally, the Left likes to trot that out during Republican administrations and leave it in the barn during Democratic presidencies.

Morrissey agrees with Nichols’ conclusion even as he rejects his prescriptions:

Even if we wildly disagree on economics, we agree that Obama will own this unemployment cycle, and soon. The 10% mark is a psychological barrier that Obama simply cannot avoid. Even without it, blaming Bush has a shelf life whose expiration date is rapidly approaching. Bush didn’t spend trillions of dollars in 2009 and promise that it would create “or save” jobs. Voters will get tired of hearing how many jobs Obama thinks he’s “saved” while unemployment continues to rise.

Obama has been in charge for almost five months and got every single bit of economic policy he wanted from Congress. If the economy remains mired and debt keeps skyrocketing, people will start to ask what they got for all of their great-grandchildren’s money.

This will only be exacerbated if the president gets his way, since he’s pushing a change to our nation’s tax structure that will drive more jobs overseas. Don’t believe me? Maybe you’ll believe Steve Ballmer, who ought to know:

Last week, Microsoft Chief Executive Officer Steve Ballmer came to Washington to announce what Microsoft would do if Obama’s multinational tax policy is enacted.

“It makes U.S. jobs more expensive,” Ballmer said, “We’re better off taking lots of people and moving them out of the U.S.” If Microsoft, perhaps our most competitive company, has to abandon the U.S. in order to continue to thrive, who exactly is going to stay?

In surveying the issue—President Obama’s proposal to end the deferral of multinational taxation—Kevin Hassett (a former advisor to the McCain campaign) asks,

Why does Obama advocate a policy that so flies in the face of everything that economists have learned? How could Obama possibly say, as he did last month, that he wants “to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens?” Further, how could Treasury Secretary Tim Geithner call a practice that top scholarship has shown increases wages and employment in the U.S. “indefensible?”

I have to admit I am at a loss. Maybe it is good politics to bash American corporations, and Obama isn’t really serious about making this change happen. But if the change is enacted, and domestic corporate taxes aren’t reduced to offset the big tax hike, the result will be a flight from the U.S. that rivals in scale the greatest avian arctic migrations.

Incidentally, that scholarship includes “the same James Hines who recently wrote a sweeping review of international tax policy with Obama’s top economist, Larry Summers,” so the president’s economic team has to be well aware of what the unintended consequences of his proposal would be.

I’ve said this before, I think, that the great flaw in leftist economic theory is that it assumes that people’s economic behavior doesn’t change when tax laws change—and that’s just not true. Make something more expensive, people will buy less of it; make doing business in your jurisdiction more expensive, people will go where it’s cheaper. The Left understands this when it comes to things like tobacco and gasoline, which is why they’re all for higher taxes on both and were unbothered by last summer’s $4-a-gallon gas, but when it comes to taxes, they just don’t seem to be able to see it.

This is particularly problematic since the richer a person is, or a company is, the more they can do to avoid paying taxes if taxes are high enough to make it worth the effort. The more you raise taxes, the more the elite dodge them, and the more the burden falls on the middle class and below; the result is a tax structure which is functionally much more regressive and unfair, regardless of how it appears on the surface. Throw in the fact that under such circumstances, the folks who have the money are much less likely to use it to create jobs in this country, meaning less growth and less money in the economy, and most people get hit coming and going. We’re already seeing that under this administration; from where I sit, I think the economy’s likely to recover somewhat anyway, but the recovery will be weaker and slower and less complete because of this administration’s actions and policies.

And if, as I’m still very much afraid, al’Qaeda pulls off another major attack in the middle of all this, all bets are off.

 

Why GM is doomed

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Not to put too fine a point on it, GM is doomed (probably, anyway) because the Obama-Pelosi administration has put them in a position in which the kind of bold leadership that could produce a turnaround is impossible. Though Barack Obama might declare that he is “not running GM,”

The President is so busy not running GM that he had time the night before to call and reassure Detroit Mayor Dave Bing about the new GM’s future location. GM is being courted to move its headquarters to nearby Warren, Michigan. And Mr. Bing told the Detroit News that he had received a call Sunday evening from the President “informing me of his support for GM to stay in the city of Detroit with its headquarters at the Renaissance [Center].” . . .

We don’t know whether GM should stay in Detroit. But we do know that the location of a company’s headquarters is one of those decisions typically not made by people who are busy not running the company.

This is exacerbated by the fact that, whether President Obama is interested in running GM or not, there are 535 members of Congress who are most certainly interested in micro-managing GM—since, after all, GM plants, dealerships, distribution centers, etc. now qualify as some of the pork they can bring home to, or at least keep in, their districts.

The latest self-appointed car czar is Massachusetts’s own Barney Frank, who intervened this week to save a GM distribution center in Norton, Mass. The warehouse, which employs some 90 people, was slated for closure by the end of the year under GM’s restructuring plan. But Mr. Frank put in a call to GM CEO Fritz Henderson and secured a new lease on life for the facility.

Mr. Frank’s spokesman, Harry Gural, says the Congressman discussed, among other things, “the facility’s value to GM.” We’d have thought that would be something that GM might have considered when it decided to close the Norton center, but then a call from one of the most powerful Members of Congress can certainly cause a ward of the state to reconsider what qualifies as “value.” A CEO who refuses the offer can soon find himself testifying under oath before Congress, or answering questions from the Government Accountability Office about his expense account. To that point, Mr. Henderson spent Wednesday with Chrysler President Jim Press being castigated by the Senate Commerce Committee for their plans to close 3,400 car dealerships. Every Senator wants dealerships closed in someone else’s state.

As Mr. Gural put it, Mr. Frank was “just doing what any other Congressman would do” in looking out for the interests of his constituents. And that’s the problem with industrial policy and government control of American business. In Washington, every Member of Congress now thinks he’s a czar who can call ol’ Fritz and tell him how to make cars.

Given Congress’ track record, and given the way leadership by committee normally works out, I don’t think it’s too much to predict that GM isn’t going to survive this.

Update: People are noticing, Mr. President . . . (HT: The Anchoress)

Another Alaskan energy solution

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While drilling in ANWR is on the shelf with this administration, Investor’s Business Daily points out that another potential Alaskan energy source has turned out to be far more significant than first thought:

Back in July, when IBD first interviewed the then-little-known governor, [Sarah] Palin emphasized developing Alaska’s Chukchi Sea resources. . . .

At the time, it was thought that Chukchi’s waters northwest of Alaska’s landmass held 30 billion cubic feet of natural gas.

Today, Science magazine reports that the U.S. Geological Survey now finds it holds more than anyone thought—1.6 trillion cubic feet of undiscovered gas, or 30% of the world’s supply and 83 billion barrels of undiscovered oil, 4% of the global conventional resources.

That’s enough U.S. energy to achieve self-sufficiency and never worry about it as a national security question again.

Of course, as with ANWR, there are those who will object, claiming environmental reasons; but here, the calculus is a bit different.  Leaving aside the strong proven safety and environmental record of our offshore drilling operations, the fact is that this isn’t a choice between drilling in the Chukchi Sea or not drilling there.  As the IBD points out, Russia also has territorial rights in the Chukchi Sea, and they won’t be restrained by our environmental niceties—they’re bound to drill there whether we do or not.  The question, rather, is this:  do we want Russia to take all that oil and natural gas, or do we want to take our fair share?

HT:  Ron Devito

The Obama administration strong-arming continues

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A few weeks ago I posted on reports that the White House had intervened with some of Chrysler’s creditors to force them to give up their rights for the benefit of the UAW, changing the rules after the fact to pay off a political debt; I got a couple responses from liberals saying, in essence, “What’s the problem here?”  I posted at greater length answering that question, though I got no comments that time.  Now, in the parallel situation with GM, even the Washington Post has been forced to take notice of the rancid favoritism being shown by the White House,

declaring,

GM’s new owner (the Obama administration) should stop bullying the company’s bondholders. . . .

While the Obama administration has been playing hardball with bondholders, it has been more than happy to play nice with the United Auto Workers. How else to explain why a retiree health-care fund controlled by the UAW is slated to get a 39 percent equity stake in GM for its remaining $10 billion in claims while bondholders are being pressured to take a 10 percent stake for their $27 billion?

I realize that liberals don’t see anything wrong with this—after all, it’s a liberal Democratic president funneling money to a liberal organization that’s practically a wing of the Democratic party—but I can just imagine the ear-splitting shrieks we’d be hearing about “the rule of law” and “undue influence” and “political thuggery” if a Republican administration had tried anything of this sort.

Nor is this the end of the administration’s blatant manipulation of the process.  Last week, I took note briefly of a case in Florida where a Dodge dealer in Florida had his dealership taken away from him without due process for no good reason whatsoever; now it comes out that there’s reason to suspect partisan manipulation in Chrysler’s dealership structure.  A blogger named Doug Ross writes,

A cursory review by that person showed that many of the Chrysler dealers on the closing list were heavy Republican donors.

To quickly review the situation, I took all dealer owners whose names appeared more than once in the list. And, of those who contributed to political campaigns, every single one had donated almost exclusively to GOP candidates. While this isn’t an exhaustive review, it does have some ominous implications if it can be verified. . . .

I have thus far found only a single Obama donor (and a minor one at that: $200 from Jeffrey Hunter of Waco, Texas) on the closing list.

James Taranto of the Wall Street Journal rightly notes that “Ross’s evidence is suggestive, not conclusive. It does not appear that anyone has yet conducted a complete analysis of Chrysler dealers’ political contributions “; but it’s mighty suggestive indeed, especially as it fits right in with an emerging pattern.  But then, as Taranto says, “Political intervention in private business is an invitation for the most brazen sort of corruption.”

Gas prices: onward and upward

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I argued in a post last Wednesday that gas prices will be Barack Obama’s Achilles heel, but that post was incomplete.  I argued that speculation in oil futures (which played a major role in the surge in gas prices after Nancy Pelosi took the speaker’s chair in the House of Representatives) will once again be a major factor, given that the Democratic Congress and administration have foreclosed the possibility of expanded domestic drilling, which was the most important element in driving the price of oil futures down.  I left out a couple other reasons, though.

First, tied to this, one reason why the current administration and congressional leadership are opposed to energy development (aside from, as noted, wind, solar, and the like) is that they don’t think higher gas prices are a bad thing.  Ideologically, they’re committed to reducing fossil-fuel consumption by whatever means they can find to hand, and they recognize that higher prices mean lower usage; therefore, while they’ve been chary about coming out and saying it where people can hear them, they’re all in favor of gas prices going up.  If they weren’t, they wouldn’t be pushing their “cap and trade” bill (that Rep. Henry Waxman, who’s leading the charge on this, hasn’t even read) so hard; after all, let’s call a spade a spade here, what is this thing?  It’s an energy tax, and when it passes (it might take a while, but they’ll figure out a way to get it through Congress), it’s going to boost the price of gas even more.

Second, President Obama has allies in this effort to push gas prices up—allies with names like Mahmoud Ahmadinejad and Hugo Chávez.  It is very much in the interests of oil-producing states like Iran and Venezuela to see gas prices go back up so that they will have more money—which their tin-horn-tyrant rulers will then use, not to better the lives of their people, but to fuel their geopolitical ambitions (which is, not so incidentally, not in the interests of America).  As such, they’re going to do whatever they can to return oil prices to the highs they saw last summer.  It’s an effort in which they will no doubt be grateful for the help they get from the U.S. government; one wonders how long it will be before they start channeling Lenin and talking about “the useful idiots in the White House.”

Barack Obama’s Achilles heel

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I commented earlier today on the latest attempt by the OSM (Obama-stream media), in the person of New York Times gossip columnist Maureen Dowd, to pre-emptively defend their adored idol, Barack Obama, by asserting that any terrorist attack during his time in office won’t be his fault, it will be Dick Cheney’s fault. This is, as I noted, not an isolated thing, but part of a broader campaign to ensure that any bad event or outcome is blamed on the Republicans, and primarily on the Bush administration; though a superficially appealing approach, I argued that it infantilizes President Obama and renders him unworthy of respect, because it essentially says that he can’t be held to the same standard as other presidents.  It makes him less effectual, powerful, influential, and important than his predecessor (and even his predecessor’s VP!), and thereby makes him a lesser figure.

Fortunately or unfortunately, I also don’t think people will buy it; we’re too accustomed to the Harry S Truman (“The buck stops here”) approach for many people to swallow “It’s not my fault” coming from our president.  We’ll take a lot of things, but I don’t believe avoidance of responsibility will be one of them.  However, let’s suppose for a moment that I’m wrong.  Let’s suppose that when the first batch of folks the Obama administration releases from Gitmo turn around and help nuke the World Series, or turn a superbug loose on the Washington Mall on the Fourth of July, or whatever they do, that the American public in fact exonerates the president and buys the line that it’s all Dick Cheney’s fault.  Let’s suppose that a year from now, the voters still pin the problems in our banking system on the Bush administration and hold Barack Obama blameless for the failure of his programs.  Let’s suppose that the polls reveal the attitude that if things are getting worse, it’s just because George W. Bush did such a lousy job.

There’s still one thing that the president won’t be able to duck, and it’s something no one seems to be thinking about:  gas prices.  For whatever reason, all the prognostications I’ve seen are ignoring them, effectively assuming that they’ll remain where they were at the beginning of the year—and they won’t.  Indeed, they already haven’t.  Three or four weeks ago, gas prices here were below $1.90 a gallon; right now, they’re sitting at $2.459, and they’re only going to keep going up.  It won’t be long before they’re back over $3 a gallon, and I wouldn’t be surprised to see them back over $4 a gallon by Labor Day.

Why?  Because gas prices were driven up in large part by speculation in oil futures, and the biggest thing that drove the price of futures down was Congress’ action in letting the offshore-drilling ban expire.  The prospect of a dramatic expansion in American domestic oil production exerted considerable downward pressure on oil futures, which brought down the price of oil, and thus the price of gas.  That prospect is no longer in place, thanks to the policies of the new administration, which is resolutely opposed to any sort of energy development except for those forms which are supposedly “green.”  That means that the conditions are back in place for oil and gas prices to rise, which they’re already doing; that in turn means that speculating in futures, betting on them to continue to rise, will once again be a profitable activity.  With so many people who are now a lot poorer than they used to be and so few means available for them to correct that situation, it seems likely to me that we’ll once again see speculation start to drive up the price of oil futures, and that the price of gas will once again follow suit.

And if I’m right, there will be no earthly way for Barack Obama or any of his media stooges to blame George W. Bush, Dick Cheney, or anyone on the Republican side of the aisle for that—but there will be a great many Republicans, led by Sarah Palin, to say “I told you so.”  It will be all on him, and Nancy Pelosi, and Harry Reid, and the rest of the Democratic cabal now running this country, and no way for them to avoid the blame.