Monthly Archives: December 2014

Sony’s Fold

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Sony made a movie about two journalists scoring an interview with northern Korea’s Bébé Doc, Kim Jong-un, the CIA convincing the journalists to assassinate Kim, and the comedic aspects of such a thing.

This offended Baby Kim and his sycophants, and they threatened mayhem against Sony’s executives and those US movie theaters with the temerity to show the movie.

Rather than letting us Americans make up our own minds about whether to go see the movie, rather than letting movie theater managers determine for themselves whether to show the movie (some had), those threatened Sony executives collapsed like yesterday’s tissue and made the executive decision to not release the movie at all.

This decision can’t even be masqueraded as empathizing with our enemies.

This abject, craven surrender by Sony executives can only encourage terrorists: make threats, get their way. This abject, craven surrender by Sony executives has exposed American companies and American citizens to further terrorist extortion and mayhem.

Way to go, Sony. I’ve lost interest in any more of your movies.

Technology, Oil, and Government

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Falling oil prices are a good thing. Except when they’re not. Or….

The irony in the falling prices is that the success of US producers using hydraulic fracturing and horizontal drilling technologies is partly responsible, along with slowing demand by struggling Asian and European markets. Now that success could come back to bite the so-called fracking industry and other drillers in America.

[Wyoming Governor Matt, R] Mead acknowledged that in the short term, lower gas prices will benefit businesses and residents in his sparsely populated state, where distances between towns are often calculated in hours instead of minutes.

But, he pointed out, “If we see low prices continue for some time, we’ll see rigs start to lay down. And it’s not just the direct revenue. It’s the hotels, restaurants and all that goes with that.”

Not to mention jobs.

This is normal in a free market economy, though. New technologies, or old technologies like fracking whose time has come, are always disruptive. Recall the stereotypical, but no less accurate for that, impact on horse-drawn buggy and whip manufacturers with the advent of the horseless carriage and then the assembly line for making those automobiles cheap.

So it is with fracking. Not only does it make hard-to-get oil and natural gas (much) easier and (much) cheaper to get, it drastically increases the supply of these commodities, each of which individually drastically lowers the price of these, and together they synergistically do.

But when supply overshoots demand, and the price obtainable for oil and gas cannot cover even the lowered cost of extraction, many of the suppliers, extractors, stop producing, stop extracting. This has negative effects on both fracking jobs and the ancillary jobs Mead mentioned.

However, in a free market, supply and demand quickly match each other, and prices—and jobs—stabilize. With the technological advances associated with this commodity, too, as with any technological advance, the new pricing equilibrium will be lower than the prior equilibrium. It’s uncertain whether oil and gas pricing in particular will stabilize at their current levels, continue a little lower, or go a little higher. But it’s virtually certain we’re done with $100 oil for the foreseeable future, which is to the good of utilities, manufacturers, consumers, and anyone and anything that uses energy.

And those jobs? They’ll recover with the stability and predictability of the new normal in oil and gas extraction. The widespread use of fracking and related technologies also will lead to a net increase in employment when all is said and done, just like in those early automobile days.

The kicker here is identified by Kathleen Sgamma, Western Energy Alliance Vice President of Government and Public Affairs [emphasis added]:

There is a point at which the lower commodity price combined with the increased regulatory cost will put new wells out of business—they just won’t be drilled[.]

And [emphasis added]

whether a well is on private, state, or federal land, “because the regulatory environment is such that it makes it more expensive to develop on those federal or tribal lands.”

Government’s intrusive regulation wasn’t a factor in Henry Ford’s disruption.

Taxes and Congress

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The 113th Congress, in its last days, has passed and sent to President Barack Obama for signature (or veto) a bill extending expired tax breaks through the end of this year. It’s retroactive because the expiration occurred at the end of last year. And the extension is good only for a couple more weeks. The breaks are an amalgam of exemptions that

benefit big corporations and small businesses, as well as struggling homeowners and people who live in states without a state income tax.

A couple things about this. First, notice that phrase “tax breaks.” These represent special carve outs for selected businesses and selected individual Americans, and they’re a mix of crony capitalism and social engineering.

The other thing is the end-of-year decision making regarding the tax code. This isn’t unique to this Congress; Congresses have been pulling this stunt for decades.

If we had real tax reform, say a tax code that eschewed social engineering, that had a single, low, flat rate without loopholes, carve outs, subsidies, credits, and so on, and that everyone with an income paid, there’d be no need—no opportunity—for this late year, late night, wrangling. And there’d be no need for tax breaks, loopholes, carve outs, subsidies, credits, and so on.

This also would both reduce the breadth of influence of special interests and reduce the availability of our tax code—and our tax money—for government-determined social engineering.

This is a thing the 114th Congress should take up with some urgency—”on day one.” It’s highly likely that Obama would veto real tax reform, but that in itself would be not so bad. At worst, that would help shape the 2016 elections and clarify differences between those who understand and respect the wisdom of American citizens and those who think government must be involved in our lives for our own good.

This is a test of both camps.

Congress’ Productivity

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Gerald Seib had an interesting piece in a recent Wall Street Journal, not so much for what he said as for the mindset from which he said it. To wit:

We have learned in recent days that both President Barack Obama and Republican leaders in Congress seem to want to pull their parties together in the middle to get some things done in Washington.

To many in the capital, this is a long overdue development. But it also raises a question: What if the leaders get to the middle and find there’s nobody there to join them?

Well, not nobody, exactly, but fewer people than there used to be, and not enough to make the middle a consistently productive place.

Notice that: to be productive, Congress has to get things done.

Congress already has gotten too many things done, and it’s allowed the Executive Branch, through compliant funding, to get too many things done.

It passed Obamacare and Dodd-Frank to the very great detriment of millions of Americans—Americans who lost their preferred health insurance plans, who lost access to their preferred doctors, all for the privilege of paying higher premiums—and to the very great detriment of American businesses, who face overregulation and excessive taxes and so are reluctant to expand their operations, to hire, to repatriate the trillions of dollars they hold overseas.

It has taken control of States’ aid the poor through the addiction of Medicare grants, placing the States’ programs under effective Federal control.

It has rejected efforts to reform either our Social Security system, which will empty its trust fund in just four or five more Presidential election cycles, or our Medicare system, which will run out of money even sooner (to those addicts’ and their citizens’ detriment).

It has allowed the Executive Branch to explode consumer energy prices and degrade our power grid with carbon regulation, even though this same Congress rejected the measures legislatively, by continuing to fund an EPA that’s enacting these things regulatorily.

It has allowed the Executive Branch to encourage American businesses to hire millions of illegal aliens by offering the businesses tax credits to do so, with the labor force participation rate of our citizens at historic lows.

It has allowed the Executive Branch to attempt to seize control of our education system through a network of subsidies, grants, and regulation.

The list is legion; these are just a few examples.

No.

To be productive, Congress must undo most, if not all, of that, and then it must make use of the opportunity to be quiet and stop legislating.

Trust and the PRC

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Having finally, and successfully, crushed a pro-democracy movement in Hong Kong, the People’s Republic of China has declared null and void its treaty with Great Britain, the Joint Declaration that turned Hong Kong over to PRC control.

China’s deputy ambassador to Britain, Ni Jian, told the committee’s chairman, Richard Ottaway, that the Joint Declaration “is now void and only covered the period from the signing in 1984 until the handover in 1997.”

Never mind that the treaty the PRC signed was agreed by the PRC to run for 50 years from 1997, the year of the turnover.

This follows the PRC’s naked aggression in the South and East China Seas, as it looks to occupy those seas under falsified legal pretenses.

This government cannot be trusted. We—and the Brits—must govern our interaction with it accordingly; we can never know when the PRC will decide that another of its agreements with one of us has become inconvenient to it and so will welch on it.