Tag Archives: political economy

Government Shortfall

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Here is another example of the failures inherent in government intrusion into the market.  The Wall Street Journal describes a solar energy project that is about to founder at great cost to at least one of the investing private enterprises.

It seems that First Solar, Inc., a solar panel manufacturer, had sold a 230-megawatt plant to Exelon Corp, an electricity generating company, with the sale contingent on Department of Energy execution of a loan it had made to finance the deal.  No money has flowed from DoE, though, because the Department cannot proceed until “all applicable permitting issues are resolved,” and there is “an issue with a construction permit that First Solar obtained from Los Angeles County.”

The items underlying the “issue” are both unclear and not relevant in this context.  What matters is that the problem exists; therefor, DoE cannot proceed with its loan; so the project, starved of these funds in particular, is in jeopardy.  Since time is short for getting everything finalized, First Solar may end up having to buy the plant back from Exelon, and the project may die on the vine.

This is not a failure of the present administration, in particular, or of the preceding one, though.  It’s not a failure of any particular administration.  This sort of failure is inherent in any government involvement in private markets because of the necessarily different imperatives inherent in government efforts vs those of private enterprise.  In particular, this failure is driven by government’s necessary concern for the use of the citizens’ tax money, its equally necessary caution in committing that money, and its equally necessary concern for not intruding into other governments’ jurisdictions (here the jurisdiction of Los Angeles County).

Even in an ideal world where these concerns could be taken as effectively and efficiently satisfied by government, these three are enough to make labyrinthine any governmental efforts to commit the money.  Private enterprises in a free market, on the other hand, are free to handle these imperatives among themselves according to their own readings of the risks involved—including ignoring them altogether, using Alexander’s bronze tangle-separating implement on the knots, or not structuring the deal in this kind of way in the first place.

Taxes, Again

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Once again, a tax cut for Americans is being held hostage against a demand to offset that cut by a commensurate tax increase imposed on a government-disfavored group.  Senate Majority Leader Harry Reid (D, NV) has announced, at this late date,

We know there’s gonna have to be mandatory cuts, we understand that but also going to have to be something done with tax incentives, enhancements, revenues[.]

Unfortunately, this also is the wrong fight.  Both Democrats and Republicans are agreed that a two per centage point reduction in individuals’ taxes (or a three per centage point reduction both for individuals and businesses, if President Obama can be believed) is good for Americans.  Economists are agreed that temporary tax cuts, such as the proposed payrolls cuts, are not at all stimulative for the economy as a whole—a stimulus effect requires the cuts to be permanent.

The discussion, then, shouldn’t be a debate at all, nor should it concern payroll tax reductions, which serve only to further gut, and so to hasten the demise of, the Social Security system.

This discussion should be about a permanent income tax reduction for both individuals and businesses of two to three per centage points.  This much seems doable within the month since the idea of a tax cut and its present size already are agreed by all.  And who can understand the logic of “paying for” a tax cut with a tax increase (leaving aside the fact that there’s no need to pay for a reduction in the government’s receipt of something—our money—which doesn’t belong to it in the first place)?

This cut then should be followed by further discussion with a view to deeper income tax cuts.

Contradictions

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In an energy policy article in The Daily Caller, Deneen Borelli raises some interesting disconnects between President Obama’s rhetoric and his actions.  She points out the failures engendered by his contradictions:

Despite his class-war rhetoric, Obama’s command-and-control energy policy drains our budget to reward crony capitalists such as General Electric CEO Jeff Immelt and his fellow presidential jobs panel member and billionaire venture capitalist John Doerr.

Ironically, the Obama war on fossil fuels hurts hard-working Americans because high energy prices have a disproportional impact on middle- and lower-income households and jeopardizes U.S. manufacturing.

And although Obama has called for fairness and a level playing field, the mandates and subsidies for renewable energy he favors would stifle competition by picking winners and losers.”

Then she gets specific.

on energy

Obama’s call for more oil and gas drilling in his State of the Union address was meant to deflect attention away from his failure to approve TransCanada’s Keystone XL pipeline.

Obama’s energy policy excludes coal. Coal now provides approximately 45 percent of our electricity, but regulations generated by the Obama EPA are imposing significant costs on utilities, costs that are forcing some power plants to close and others to spend billions of dollars in order to comply. Those compliance costs will be passed on to consumers in the form of higher electricity prices.

Fossil fuels — coal, oil and natural gas — provide roughly 85 percent of America’s energy needs. Yet, despite the failure of companies such as Solyndra, Obama is doubling down on renewable energy by calling for a national renewable energy mandate, forcing the Department of Defense to buy enough renewable energy to power a quarter of a million homes

on jobs

The president’s refusal to allow construction of the Keystone XL pipeline, at a cost of an estimated 20,000 jobs….

Hypocrisy, Part II

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Health and Human Services Secretary Kathleen Sebelius has an opinion piece in USA Today.

In her apologia for an Obamacare regulation that requires health insurance programs provided by a vast range of Catholic, Protestant, Jewish, and so on institutions to provide contraception, sterilization and abortifacients in direct, open contravention of the teachings and beliefs of those institutions (and that requires those institutions to offer those insurance plans exclusively), she writes

One of the key benefits of the 2010 health care law is that many preventive services are now free for most Americans with insurance. … So is the full range of preventive health services recommended for women by the highly respected Institute of Medicine, including contraception.

So, no one is paying any taxes, or being forced to change their existing health insurance policies, to pay for this.

Nor is there any cancellation of religious teachings or thought or fundamental tenets by this Federal government, which used to be on the other side of a “wall of separation between Church & State.”  There’s an interesting view of “free.”

That’s why in the rule we put forward, we specifically carved out from the policy religious organizations that primarily employ people of their own faith. This exemption includes churches and other houses of worship, and could also include other church-affiliated organizations.

Umm, no.  Not hospitals, not doctors’ offices, not clinics.  These employ (quite properly) far too broad a range of employees to be able to fit within the carefully and deliberately narrowly drawn limits of this rule.

In choosing this [extremely narrow religious] exemption, we looked first at state laws already in place across the country. Of the 28 states that currently require contraception to be covered by insurance, eight have no religious exemption at all.

The religious exemption in the administration’s rule is the same as the exemption in Oregon, New York and California.

Of course, far be it from the Federal government to set an example.  Oh, wait….

The Coming Economic Situation

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Doug Elmendorf, the CBO Director, was talking to the House of Representatives’ Budget Committee the other day.  What he presented was a demonstration of the level of understanding of economics possessed by the present administration.

Congressman Tom McClintock (R, CA) asked Elmendorf whether more or fewer people were working today than at the start of 2009.    Elmendorf’s answer was unequivocal:

I believe the answer to that is there are fewer people, Congressman.

That was just one item.  The CBO director had lots more to say:

The pace of the recovery has been slow since the recession ended two and a half years ago.  And we project that it will continue to be slow for the next two years.

Elmendorf went on:

[E]conomic growth will be only 2 percent this year — and 1.1 percent next year. … [T]hat will leave the unemployment rate at 8.9 percent at the end of this year, well above current the current rate of 8.5 percent….  [I]n 2013, CBO estimates unemployment will be even higher — at 9.2 percent.

And

“…the fundamental fiscal challenge during this decade and beyond remains the aging of the population and rising costs for health care.  The number of people aged 65 or older will increase by one-third in the coming decade, substantially raising the costs of Social Security, Medicare and Medicaid.”

In addition, he said, the new federal health care overhaul will significantly increase the number of non-elderly people receiving assistance through federal health care programs, such as Medicaid.

All of that is likely to balloon current levels of debt.

Despite this, though, Progressives refuse to allow Social Security, Medicare and Medicaid to be fixed, or altered in any way.  President Obama, for instance, has said through his Press Secretary Jay Carney, the Republican effort to reform Medicare contained in the House-passed budget would “end Medicare as we know it,” as if that’s a bad thing.

The CBO did forecast a shrinking budget deficit over the coming years “under existing law.”  But existing law has the Bush tax cuts ending next year—for everyone, including those of us and small businesses with incomes under $250 thousand per year.  Existing law also has the that required 30% reduction in doctor reimbursement under Medicare reimbursement schedules.

And the Progressives are attempting to spin this coming disaster with distortion.  Congressman Bill Pascrell (D, NJ) insists

…there are people here that want to destroy the government, that it has no responsibility and it can’t live up to the obligations….

Of course, this elides the destructiveness toward our individual liberties from an ever expanding, ever intruding government.  This elides the destructiveness of government’s arrogating to itself responsibilities that ought to be ours, decisions that ought to be ours.  And it ignores the fact that among those obligations that government “can’t live up to” are those Social Security, Medicare and Medicaid programs that the Progressives won’t allow to be altered.

Congressman Chris Van Hollen (D, MD) has his distortion, also.  He insists that absent Progressive policies and President Obama’s “stimulus” plan, things would have been much worse.

The Recovery Act did serve its purpose.  It’s kind of like when you’re walking up an escalator that’s going down very quickly.  If you take no action you will go down very fast[.]

This would be amusing under other circumstances.  It ignores the fact that our economy now would be much better off had it not been for Big Government’s interference with it.  Indeed, in Van Hollen’s terms, if you’re walking up the down escalator, it might actually be better to get off that one and get on the up escalator.

No wonder the Progressives are running away from their records, away from our country’s future.