Right now, a federal court in Louisiana is wrapping up the penalty phase of the trial against BP to determine the oil company’s negligence under the federal Clean Water Act for the 2010 Deepwater Horizon oil spill. The case is particularly noteworthy because, under the terms of the 2012 RESTORE Act, proceeds of the civil penalties assessed in the trial are to be divided up between the five Gulf Coast states.
Yet based on a recent ruling in the case, states may end up seeing a lot less money than they originally anticipated:
Two years ago, the Gulf states thought BP might pay as much as $21 billion in CWA penalties, based on a maximum $4,300 per barrel spewed in 2010. But on January 15, before this trial’s phase three began, Barbier ruled that 3.19 million barrels of oil were discharged into the Gulf, versus the feds’ 4.2 million estimate. That count makes BP’s highest possible CWA penalty $13.7 billion. An expected smaller fine affects Louisiana’s ability to fund its $50 billion, 50-year 2012 coastal master plan.
Whether or not this ruling ultimately stands, it’s a good reminder for states not to get ahead of themselves when it comes to allocating RESTORE Act funds. But that doesn’t mean states shouldn’t be prepared for when a final judgment is reached and the money starts to flow. If anything, the smaller pool of funds means states should be even more vigilant to ensure the money isn’t wasted on inappropriate or frivolous projects.
In Texas, the House Committee on Natural Resources has been studying this matter, and recently released a report highlighting the issues involved. The report, which quotes extensively from R Street’s research, focuses on the need for greater transparency in deciding who gets RESTORE Act funds.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
From the James Madison Institute:TALLAHASSEE – A hurricane has not made landfall in Florida for nine years; however, a new report from The James Madison Institute (JMI) warns this nearly decade long respite should not be considered the norm, but rather a fortuitous anomaly. In its Backgrounder: “Lasting Reforms for Florida’s Property Insurance Market,” JMI adjunct scholar and R Street co-founder, R.J. Lehmann explores solutions that could reasonably be considered during the 2015 legislative session to shield Florida from economic hardship in the event of a major storm or series of storms…
Congress has been in session for only a couple weeks and the new Republican majority in the U.S. Senate already has surpassed the number of roll call amendment votes that were cast in the entire 113th Congress.
Today, the new majority looks to extend that streak, as the chamber is expected to embark on a “marathon session” that will include an expected 18 amendment votes related to the Keystone XL Pipeline. If you are an avid fan of C-SPAN 2, the senatorial Super Bowl has come early.
While there are many important votes on the docket, one of the more unfortunate proposals is the amendment from Sen. Heidi Heitcamp, D-N.D., which would extend the Wind Production Tax Credit for five years. If approved, the measure would perpetuate a failed economic policy that has increased consumer electricity prices unnecessarily, costs taxpayers millions and that hinders genuine energy innovation.
The Wind PTC expired temporarily at the end of 2013, but it received a one-year reinstatement for projects already operating or under construction as part of the tax extender deal.
R Street scholars have written extensively on the problems with the Wind PTC. We hope the Senate will resist the call to once again extend this wasteful credit for even one more day, and work instead for real energy solutions that benefit both taxpayers and American consumers.
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Ahead of his State of the Union address, President Barack Obama went to Cedar Falls, Iowa to tout municipal broadband. Despite a landscape littered with missed goals, incomplete build-outs and outright financial ruin, Obama still thinks local governments should saddle themselves with millions in debt to fund broadband systems that would compete with service providers that have been there for years.
To press the point, the Obama administration is pushing for federal legislation to pre-empt states from blocking municipal broadband projects, even though, as ultimate guarantors of the bonds, they have full right to. A number of states, after seeing the financial damage these projects do, have done so already.
The principal argument for municipal broadband is market failure: Internet service providers are entrenched duopolies that have no interest in serving residents without the financial means to pay upward of $100 a month for a broadband package. Yet while touting the wonders of the 10 Gb/s fiber to the home access the City of Cedar Falls is providing, Obama neglected to mention that it costs $275 a month. Broadband for the people, indeed.
Let’s say it one more time: municipal broadband doesn’t work. Even systems that are operating — such as those in Lafayette, La., and Chattanooga, Tenn. — have not achieved their goals of providing ubiquitous fiber-to-the-home, higher-quality service and cheaper rates than incumbents. While the may boast positive cash flow, they are still losing money and behind their revenue plans.
It’s only going to get worse. Current municipal systems followed the “triple-play” model, bundling phone, cable and high-speed Internet into a package that could generate the average revenue per user necessary to meet operating costs and service debt.
Ten years ago, these business plans made some sense, although in most cases, the consultants who wrote them played down the competitive threat of satellite TV and the high cost of programing acquisition.
But what the feasibility studies didn’t foresee was the rise of over-the-top (OTT) video networks that bypassed cable TV systems. First came Netflix and Hulu, then Showtime and CBS announced plans to stream programming. Then came the real game-changer—ESPN’s plan, announced in January, to stream live sports.
This was significant because live sports is one of the main reasons people retain cable TV. Make the Super Bowl an OTT option, and suddenly, cord-cutting becomes attractive not just for twentysomething renters content to watch movies on their tablets, but for entire households. (Thanks to devices like Google’s Chromecast, video programming downloaded from phone or tablet can be routed directly the family widescreen TV.)
This trend has the major ISP/cable concerned. An estimated 7.6 million U.S. households have scrapped pay TV over the past several years. Nearly one-fifth of Americans who have Netflix or Hulu Plus accounts don’t subscribe to a cable or satellite TV service, according to research from Experian Marketing Services. These consumers may be holding onto Internet service only, or using 4th generation wireless service. But for large wireline ISPs that banked on bundling, these numbers present a bleak outlook.
How much more a problem is this going to be for munis? For example, Lafayette’s $140 million broadband bond issue anticipated it would see 3 to 6 percent annual growth in cable TV revenue for next 15 to 20 years. That’s just not going to happen. These operations face a major reckoning.
UTOPIA, a fiber-based broadband network financed by a group of 11 Utah cities, provides a grim preview. After failing to reach the threshold of customers needed to pay the debt on construction, the project was turned over to Australia-based Macquarie Capital. As part of the agreement for Macquarie to fund completion of the network, the UTOPIA cities proposed assessing residents a $20 a month utility surcharge for the next 30 years. Who knows what broadband will be like in 2045, but Utah homeowners will still be paying off a technology platform that, by then, will be as old as a Commodore 64 is to us. Is it any wonder that five of the UTOPIA communities have balked at this deal?
Despite the president’s continued cheerleading for municipal broadband, it’s hard to see, given the pressure on conventional ISP wireline bundling, even a conservative municipal broadband project plan getting the necessary underwriting—at least at rates below junk status.
Google Fiber, which prices 1 Gb/s access with TV at $120, is expanding into more cities. Now the company has plans to enter wireless with a new business model. New market developments like these make the cries of monopoly less and less credible. Municipal broadband is hardly the “necessity” for digital inclusion Obama claims it is.
Rather than sink millions into building a system that will never come close to paying for itself, cities can do more for broadband investment by revisiting the franchise fee process, streamlining the wireless tower siting process and reducing right of way fees. This has helped attract disruptors like Google, and overall, will do more to foster private investment and development far better than the government-funded approach.
For more about market-friendly ways cities can spark broadband investment, see my R Street paper, “Alternatives to Government Broadband.”This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Fifty million Americans who live in the northeast will experience what is predicted to be a historic blizzard from Monday evening through Tuesday. Cities and towns will virtually or literally close down. People will be told to stay indoors for their safety and to facilitate the crews that will labor to clear the roads of snow.
In other words, welcome to Alaska, a place that is plenty cold most of the year and which is no stranger to snow and ice.
Alaska, however, has something that the whole world considers very valuable; oil and natural gas. Lots of it. In 1980 a U.S. Geological Survey estimated that the Coastal Plain could contain up to 17 billion barrels of oil and 34 trillion cubic feet of natural gas.
In 1987, the U.S Department of Interior confirmed the earlier estimate, saying that “in place resources” ranged from 4.8 billion to 29.4 billion barrels of oil. Recoverable oil estimates ranged from 600 million barrels at the low end to 9.2 billion barrels at the high end.
A nation with an $18 trillion debt might be expected to want to take advantage of this source of revenue, but no, not if that debt was driven up by the idiotic policies of President Barack Obama and not if it could be reduced by the same energy industry that has tapped similar oil and natural gas reserves in the lower 48 states by drilling on private, not public lands.
Instead, on Sunday President Obama referred to the Arctic National Wildlife Refuge (ANWR) as “an incredible place—pristine, undisturbed. It supports caribou and polar bears” and other species and, guess what, tapping its vast oil and natural gas reserves would not interfere in any way with those species despite the whopping lie that “it’s very fragile.”
At Obama’s direction, the Interior Department announced it was proposing to preserve as wilderness nearly 13 million acres of land in ANWR’s 19.8 million-acre area. That would include 1.5 million acres of coastal plains that Wall Street Journal reported to be “believed to have rich oil and natural gas reserves.”
Not a whole lot of people choose ANWR as a place to vacation. It is a harsh, though often beautiful, area that only the most experienced visitor might want to spend some time. I would want to make every environmentalist who thinks any drilling would harm the area have to take up residence in its “pristine” wilderness to confirm that idiotic notion.
They would find plenty of caribou, polar bears and other species hanging out amidst the oil and gas rigs, and along the pipe line. The Central Arctic Caribou Herd that migrates through the Prudhoe Bay oil field, just next to ANWR has increased from 5,000 animals in the 1970s to more than 50,000 today. There is no evidence than any of the animal species have experienced any decline.
The Coastal Plain lies between known major discovery areas and the Prudhoe Bay, Lisburne, Endicott, Milne Point and Kuparuk oil fields are currently in production In 1996, the North Slope oil fields produced about 1.5 million barrels of oil per day or approximately 25% of the U.S. domestic production. Alaska is permitted to export its oil because of its high levels of productivity.
So why has Obama’s Department of the Interior decided it wants to shut off energy exploration and extraction in a whopping 13-million acres of what is already designated as a wildlife refuge and along its coastlines on the Beaufort and Chukchi seas? The answer is consistent with Obama’s six years of policies to deny Americans the benefits of the nation’s vast energy reserves, whether it is the coal that has previously provided 50% of our electrical energy—now down by 10%–or access to reserves of oil and natural gas that would make our nation energy independent as well as a major exporter.
The good news is that only Congress has the authority to declare an area as wilderness. It has debated the issue for more than 30 years and in 12 votes in the House and 3 votes in the Senate it has passed legislation supporting development and opposing the wilderness designation.
And guess who is the new chairman of the Senate Energy and Natural Resources Committee? Sen. Lisa Murkowski, an Alaskan Republican. She also heads up the appropriations subcommittee responsible for funding the Interior Department!
This latest Obama ANWR gambit is going to go nowhere. It does, however, offer the Republican Congress an opportunity to demonstrate its pro-energy credentials.
“I cannot understand why this administration is willing to negotiate with Iran, but not Alaska,” said Sen. Murkowski when informed of Obama’s latest attack.
Research Fellow H. Sterling Burnett interviews Jim Steele, ecologist, director emeritus of the Sierra Nevada field campus of San Francisco State University, in today’s podcast. Steele is the author of Landscapes & Cycles: An Environmentalist’s Journey to Climate Skepticism.
In the podcast, Jim discusses how climate alarmism is undermining legitimate conservation goals by misdiagnosing the cause of environmental problems by diverting resources away from direct solutions to those problems. He also discusses lies that climate alarmists have told concerning moose declines, butterfly and mangrove population expansions, problems with Emperor Penguins and in general how climate alarmism is undermining science as an endeavor in the pursuit of knowledge.
There was no climate change where I live in a suburb of Newark, N.J. if by “climate change” you meant a dramatic blizzard with high winds and several feet of snow. It’s winter and you get the occasional, rare blizzard every few years, but more often you get snowstorms. That’s not “change” by any definition.
Listening to WABC radio follow events with callers from around the Tri-State area calling in with far more accurate reports than the meteorologists was an education in the way those trained in meteorology and the rest of us have been conditioned to believe that something is happening to planet Earth that, quite simply, is not happening.
The meteorologists spent their time trying to figure out the difference between a European computer model and one generated here in the U.S. The former predicted far worse conditions. The latter fell victim, along with the rest of us, to the mindset that the conditions the computers were interpreting did not reflect what was actually happening.
At this early morning hour, it is clear that Long Island, parts of Connecticut, and generally along the coastlines, there has been a heavier snowfall. A few miles inland however it is a far different story. Callers who had been out in the midst of the storm described light, powdery snow and perhaps two to four inches at most.
Why, they asked, did the Governors of New York and New Jersey, along with the Mayor of New York City close down the metropolitan area? They speculated on the millions of lost income for everyone involved in a storm that was not posing a significant traffic or other problems, but who had seen businesses, schools, bus lines, and other public facilities shut down. When a significantly incorrect weather prediction does that, it demonstrates how important it is to correctly interpret the data being provided by the satellites—the best source.
When, earlier in January, NOAA and NASA reported that 2014 had been “the warmest year” it should have raised far more questions and media coverage given the sheer absurdity of such a report. Remember, though, these are two federal government agencies we expect to get it right. They didn’t just get it wrong, skeptical scientists were quick to note how they had deliberately distorted the data on which they based the claim.
That is the heart of the issue surrounding the endless claims of “global warming” or “climate change.” The planet has not been warming for 19 years at this point because the sun has been in a perfectly natural cycle of low radiation.
Centuries ago, it was noticed that when there are few sunspots, magnetic storms, the Earth got colder. Thus, “climate change” is not an unusual event, but rather a reflection of the well-known cycles of warmth or cold that the planet has passed through for billions of years.
At this writing it is too early in the morning hours to know what the rest of the East Coast looks like, but the indications are that, as one moves westward the “blizzard” has been far less than the one predicted and will likely be downgraded to a standard winter snowstorm.
That’s the good news. The bad news was the over-reaction of meteorologists and politicians. No doubt they wanted to be “safe than sorry” but they inadvertently taught us all a lesson about the way environmental organizations and a government led by a President telling us that “climate change” is the most dangerous challenge facing us have been deliberately lying about the true meteorological record in order to drag us all back to a time in which we burned wood for heat and rode horses for transportation.
The Greens don’t like humans much and that is why they have been lying about “man-made” climate change when the climate has nothing to do with human activities.
Listen to the skeptics, often maliciously called “deniers”, when they tell you the truth about the meteorological science that has been deliberately distorted since the United Nations established the Intergovernmental Panel on Climate Change in 1988. It has been lying to us ever since.
Depending on where you live in the area in which the snow fell and the winds blew, trust your eyes. Trust your commonsense. Be more skeptical because the blizzard that wasn’t is not a lesson you want to forget anytime soon.
New York Times op-ed columnist Joe Nocera today knocks Portland State University researchers’ claims that e-cigarettes produce higher levels of formaldehyde than cigarettes – bogus findings that I slammed last week.
Lead author of the research paper, Dr. David Peyton, told Nocera that his study had been mischaracterized:
It is exceedingly frustrating to me that we are being associated with saying that e-cigarettes are more dangerous than cigarettes. That fact is not in evidence.
What is not in evidence is the researchers’ credibility. On Jan. 22, Dr. Peyton was quoted in his university’s press release:
Our research shows that when heated at higher temperatures, e-cigarette juices can vaporize and form large amounts of ‘hidden formaldehyde,’ five to 15 times higher than the amount of formaldehyde in traditional cigarettes.
Kudos to columnist Nocera.
First they came for the coal mining and power plant industry, and most people did not speak out because they didn’t rely on coal, accepted Environmental Protection Agency justifications at face value, or thought EPA’s war on coal would benefit them.
In fact, Chesapeake Energy CEO Aubrey McClendon gave the Sierra Club $26 million, and New York City Mayor Michael Bloomberg gave the Club $50 million, to help it wage a Beyond Coal campaign. The Sierra Club later claimed its efforts forced 142 U.S. coal-fired power plants to close, raising electricity rates, threatening grid reliability, and costing thousands of jobs in dozens of states.
Mr. McClendon apparently figured eliminating coal from America’s energy mix would improve his natural gas business. The mayor likes renewable energy and detests fossil fuels, which he blames for climate change that he tried to finger for the damages “Superstorm” Sandy inflicted on his city.
Now the Obama EPA is coming after the natural gas industry. Hopefully many will speak out this time, before more costly rules kill more jobs and damage the health and welfare of more middle class Americans. The war on coal, after all, is really a war on fossil fuels and affordable energy, and an integral component of President Obama’s determination to “fundamentally transform” the United States.
Proposed EPA regulations would compel drilling and fracking companies to reduce methane (natural gas or CH4) emissions by 40-45% by 2025, compared to 2012. Companies would have to install technologies that monitor operations and prevent inadvertent leaks. The rules would apply only to new or modified sites, not existing operations. However, Big Green activist groups are already campaigning to have EPA expand the rule to cover existing gas wells, fracking operations, gas processing facilities and pipelines.
But companies already control their emissions, to avoid polluting the air, and because natural gas is a valuable resource that they would much rather sell than waste. That’s why EPA data show methane emissions falling 17% even as gas production increased by 37% between 1990 and 2014, and why natural gas operations employing hydraulic fracturing reduced their methane emissions by 73% from 2011 to 2013. The rules are costly and unnecessary, and would bring few benefits.
The Obama Administration thus justifies them by claiming they will help prevent “dangerous manmade climate change.” Methane, EPA says, has a warming effect 50 times greater than carbon dioxide. This assertion is wildly inflated, by as much as a factor of 100, Dr. Fred Singer says. Atmospheric water vapor already absorbs nearly all the infrared radiation (heat) that methane could, and the same radiation cannot be absorbed twice. The physics of Earth’s surface infrared emission spectrum are also important.
More importantly, to borrow a favorite Obama phrase, let me make one thing perfectly clear. There is no dangerous manmade climate change, now or on the horizon. There is no evidence that methane or carbon dioxide emissions have replaced the complex, powerful, interconnected natural forces that have driven warming, cooling, climate and weather fluctuations throughout Earth and human history. There is no evidence that recent extreme weather events are more frequent or severe than over the previous 100 years.
Indeed, planetary temperatures have not budged for more than 18 years, and we are amid the longest stretch since at least 1900 (more than nine years) without a Category 3-5 hurricane hitting the United States. If CO2 and CH4 are to be blamed for every temperature change or extreme weather event, then shouldn’t they also be credited for this lack of warming and deadly storms? But climate hype continues.
We are repeatedly told, “Climate change is real, and humans are partly to blame.” The statement is utterly meaningless. Earth’s climate fluctuates frequently, and human activities undoubtedly have some influences, at least on local (especially urban) temperatures. The question is, How much of an effect? Are the temperature and other effects harmful or beneficial, especially when carbon dioxide’s enormous role in improved plant growth is factored in? Would slashing U.S. CO2 and CH4 emissions mean one iota of difference, when China, India and other countries are doing nothing to reduce their emissions?
Nevertheless, the latest NASA press release asserts that 2014 was “the hottest since the modern instrumental record began,” and again blames mankind’s carbon dioxide emissions. This deliberately deceptive, fear-inducing claim was quickly retracted, but not before it got extensive front-page coverage.
Let me make another fact perfectly clear. The alleged global temperature increase was 0.02 degrees C (0.04 degrees F). It is not even measurable by our most sensitive instruments. It is one-fifth the margin of error in these measurements. It ignores satellite data and is based on ground-level instruments that are contaminated by urban heat and cover less than 15% of Earth’s surface. Even NASA admitted it was only 38% confident of being correct – and 62% certain that it was wrong. Analyses by Dr. Tim Ball, Marc Morano, Anthony Watts and other experts provide more details eviscerating this bogus claim.
In the end, though, all these real-world facts are irrelevant. We are dealing with a catechism of climate cataclysm: near-religious zealotry by a scientific-industrial-government-activist alliance that has built a financial, political and regulatory empire. They are not about to renounce any claims of climate catastrophe, no matter how much actual evidence debunks their far-fetched computer model scenarios.
Their EPA-IPCC “science” is actively supported by most of the “mainstream media” and by the World Bank, universities, renewable energy companies and even some churches. They will never willingly surrender the political influence and billions of dollars that CAGW claims bring them. They won’t even admit that wind and solar facilities butcher birds and bats by the millions, scar landscapes, impair human health, cannot exist without coal and natural gas, and are probably our least sustainable energy option. They want gas prices to rise again, so that heavily subsidized renewable energy is competitive once more.
Meanwhile, polls reveal that regular, hard-working, middle-income Americans care most about terrorism, the economy, jobs, healthcare costs, education and job opportunities after graduation; climate change is always dead last on any list. Regular Europeans want to end the “energy poverty” that has killed countless jobs, and each winter kills thousands of elderly people who can no longer afford to eat their homes properly. The world’s poorest citizens want affordable electricity, higher living standards, and an end to the lung infections, severe diarrhea, malaria and other diseases of poverty that kill millions of children and parents year after year – largely because alarmists oppose nuclear, coal and gas-fired power plants.
But federal regulators, climate chaos “ethicists” and “progressives” who loudly profess they care deeply about the poor and middle classes – all ignore these realities. They focus on methane, because they view it as a clever way to inject federal oversight and control into an energy sector that had been largely free of such interference, because the fracking revolution has thus far taken place mostly on state and private lands governed effectively by state and local regulators. (Federal lands are mostly off limits.)
The proposed methane rules would generate more delays, paperwork, costs and job losses, to comply with more federal regulations that will bring no detectable benefits – and much harm, at a time when plunging oil and gas prices are forcing drillers to reduce operations and lay people off.
President Obama devoted 15 lines of his 2015 State of the Union speech to climate fables and propaganda. His goal is steadily greater control over our lives, livelihoods, living standards and liberties, with little or no transparency or accountability for regulators, pseudo-scientists or activists.
It won’t be long before EPA and Big Green come for farmers and ranchers – to curtail “climate-wrecking” methane emissions from cattle, pig and sheep flatulence and dung, and exert greater control over agricultural water, dust and carbon dioxide. By then, there may be no one left to speak out.
I don’t remember the last time I heard the term “ANWR” – the Alaskan National Wildlife Refuge – before this weekend. I think I recall some controversy over it during the Bush administration, around the same time Jennifer Lopez divorced her second husband, and then there was the time Sarah Palin declared that the caribou would be just as happy toddling around oil rigs as they are currently. But before Barack Obama declared that America’s highest priority this week is to preserve the pristine Alaskan wilderness from the mere prospect of economic stimulation, the issue had lain dormant for approximately my entire adult life.
But, of course, that was until the Obama presidency became more about goading Republicans into fights that might damage them ahead of a 2016 contest, and less about preserving the American economic machine. Cynical as that observation may be, it’s important to remember that shale oil drilling in the Dakotas quickly increased after the president declared a halt to drilling on federal lands nearby, though his commitment to preserving the natural beauty of the Badlands ended when he wanted to take credit for lower gas prices in his State of the Union speech. And state permitting ahead of the federal declaration, even in Alaska, is expected to continue unabated (and may even increase if they think the Department of the Interior is about to wall off the oil fields as a polar bear sanctuary).
And, you can tell the president isn’t super serious about his environmental commitment because he taped the video announcement from a giant, gas-guzzling military airplane.
Air Force One, which is a specially outfitted Boeing 747, burns approximately five gallons of gasoline per mile. The flight between Ronald Reagan Washington International Airport and Indira Gandhi International Airport in New Delhi, where the president currently is, is about 8,000 flying miles. On a regular United Airlines flight that stops briefly in Newark, N.J., that’s a flying time of around 22 hours. In one round trip, the president will, by himself, burn 80,000 gallons of climate change-inducing fossil fuels, conveniently close to the atmosphere, where the gaseous byproducts will chew up the ozone layer to practically nothing.
Now, obviously, Obama’s behavior is right in line with the behavior of other world-leading environmental stewards – 1,700 private jets descended on Davos, Switzerland just last week to address the global fuel consumption crisis and heal the world’s environmental wounds – but that doesn’t make the irony of announcing an environmental policy change on a massive airliner any less hilarious.
The European Central Bank has announced its intention to create out of thin air over one trillion new Euros from March 2015 to September 2016. The rationale, the monetary central planners say, is to prevent price deflation and “stimulate” the European economy into prosperity.
The only problem with their plan is that their concern about “deflation” is a misguided fear, and printing money can never serve as a long-term solution to bring about sustainable economic growth and prosperity.
Europe’s High Unemployment and Economic Stagnation
The European Union (of which the Euro currency zone is a subset) is experiencing staggering levels of unemployment. The EU as a whole has 10 percent of the work force unemployed, and 11.5 percent in the Euro Zone.
But breaking these numbers down to the national levels show just how bad the unemployment levels are in the different member countries. In Greece it is nearly 26 percent of the work force. In Spain, it is 24 percent; Italy and Portugal are both over 13 percent. France has over 10 percent unemployment, with Sweden at 8 percent. Only Germany and Austria have unemployment of 5 percent or less out of the 28-member countries of the European Union.
Youth unemployment (defined as those between 16 and 25 years of age unable to find desired work) is even more catastrophic. For the European Union as a whole it is an average of over 22 percent, and more than 23 percent in the Euro Zone.
In Greece, its almost 60 percent of those under 25; in Spain, it is nearly 55 percent, with Italy at 43 percent, and over 22 percent in both France and Sweden. Only in Norway and Germany is youth unemployment less than 8 percent. Almost all the other EU countries are in the double-digit range.
At the same time, growth in Gross Domestic Product for the European Union as a whole in 2014 was well below one percent. Only in the Czech Republic, Norway, and Poland was it above 2 percent among the EU members.
Consumer prices for the EU averaged 0.4 percent in 2014, with most of the member countries experiencing average consumer price increases between 0.2 and 2 percent for the year. Only in Greece was the average level of prices calculated as having absolutely declined by a minus 1.3 percent. Hardly a measured sign of dramatically suffered price deflation in the EU or the Euro Zone!
Fears of Price Deflation are Misplaced
The monetary central planners who manage the European Central Bank are fearful that the Euro Zone may be plagued by a prolonged period of generally falling prices if they do not act to push measured price inflation towards their desired target of around two percent a year.
(It is worth pointing out that if the Euro Zone monetary central planners were to succeed with their goal and maintain two percent average annual price inflation, this would mean that over a twenty-year period the purchasing power of a Euro would decline by around 50 percent.)
Many commentators inside and outside of the European Union and the Euro Zone have insisted that price deflation needs to be prevented or reversed at all costs. The implicit premise behind their arguments is that deflation equals economic depression or recession, and therefore any such decline in prices in general must not be allowed.
In all these discussions it is often ignored or forgotten that annual falling prices can well be an indication of economic prosperity and rising standards of living. For instance, between 1865 and 1900, prices in general in the United States declined by around 50 percent, with overall standards of living in general estimated to have increased by 100 percent over these 35 years. This period is usually recognized as America’s time of rapid industrialization in the post-Civil War era that set the United States on the path to becoming the world’s economic giant through most of the 20th century.
Falling Prices and Improved Standards of Living
A hallmark of an innovative and competitive free market economy is precisely the never-ending attempt by entrepreneurs and enterprisers to devise ways to make new, better and less expensive goods to sell to the consuming public. The stereotypes in modern times have been pocket calculators, mobile phones, DVD players, and flat-screen TVs.
When pocket calculators first came on the market in the 1980s, they were too big to fit in your shirt pocket, basically performed only the most elementary arithmetic functions, and cost hundreds of dollars. Within a few years they fit in your shirt pocket with space to spare, performed increasingly complex mathematical functions, and became so inexpensive that many companies would give them away as advertising gimmicks.
The companies that made them did not proclaim their distress due to the lower and lower prices at which they sold the devices. Cost efficiencies were developed and introduced in their manufacture so they could be sold for less to consumers to expand demand and capture a larger share of a growing market.
In a dynamic, innovative and growing free market economy there normally would be a tendency for one product after another being improved in its quality and offered at lower prices as productivity gains and decreased costs made them less expensive to market and still make a profit.
Looking over a period of time, a statistical averaging of prices in general in the economy would no doubt show a falling price level, or “price deflation,” as one price after another experienced such a decline. This would be an indication of rising standards of living as the real cost of buying desired goods with our money incomes was decreasing.
Europe’s Problems are Due to Anti-Market Burdens
Relatively stagnant economies with high rates of unemployment like in the European Union and the Euro Zone are not signs of deflationary forces preventing growth and job creation. Indeed, since 2008, the European Central Bank has increased its balance sheet through monetary expansion by well over one trillion Euros, and prices in the Euro Zone, in general, have been rising on average between 0.5 and 2 percent throughout this period. Hardly an indication of “deflationary” forces at work.
The European Union’s problems are not caused by a lack of “aggregate demand” in the form of money spending. Its problems are on the “supply-side.” The EU is notorious for rigid labor markets in which trade unions limit worker flexibility and workplace adaptiveness to global market change.
Above market-determined wages and benefits price many who could be gainfully employed out of a possible job, because government policies and union power price these potential employees out of the market. Plus, the difficulty of firing someone once a worker is hired undermines the incentives of European companies to want to expand their work forces.
Even a number of international organizations, usually culprits in fostering anti-free market policies, have pointed out the need for European governments to introduce workplace reforms to free up labor markets in their countries, along with general reductions in regulations on business than hamper entrepreneurial incentives and prevent greater profit-oriented competitiveness.
Creating a Trillion Euros will only Imbalance Europe More
Creating a trillion more Euros cannot overcome or get around anti-competitive regulations, cost-price mismatches and imbalances due to government interventions and union restrictions, or the burdensomeness of taxes that reduce the willingness and ability of businessmen to undertake the enterprising activities that could lift Europe out of its economic malaise.
Furthermore, to the extent to which the European Central Bank succeeds in injecting this trillion Euros into the European economy it will only set in motion the danger of another future economic downturn. Not only may it feed an unsustainable financial and stock market run-up. The very manner in which the new money is introduced into the European-wide economy will inevitably distort the structure of relative prices and wages; wrongly twist the patterns of resource and labor uses; and induce forms of mal-invested capital.
Thus, the attempt to overcome Europe’s stagnant economy through monetary expansion will be the cause of a misdirection of labor, capital and production that will inescapably require readjustments and rebalances of supplies and demands, and price relationships that will mean people living through another recession at some point in the future.
A Market-Based Agenda for Growth and Jobs
What, then might be a “positive” pro-market agenda for economic recovery and job creation in the European Union, and in the United States, as well, for that matter? Among such policies should be:
- Significantly reduce marginal personal tax rates and corporate taxes, and eliminate inheritance taxes; this would create greater incentives and the financial means for private investment, capital formation and job creation;
- Cut government spending across the board by at a minimum of 10 percent more than taxes have been cut so to move the government in the direction of a balanced budget without any tax increases; this would take pressure off financial markets to fund government deficits, and end the growth in accumulated government debt, until finally government budgets would have surpluses to start paying down that debt;
- Reduce and repeal government regulations over the business sector and financial institutions to allow competitive forces to operate and bring about necessary adjustments and corrections for restoring economic balance;
- Institute real free trade through elimination and radical reduction of remaining financial and regulatory barriers to the competitive free flow of goods among countries;
- End central bank monetary expansions and manipulation of interest rates; interest rates need to tell the truth about savings availability and investment profitability for long-run growth that is market-based and sustainable. Monetary expansion merely sends out false signals that distort the normal functioning of the market economy.
A market-based set of policies such as these would serve as the foundation for a sound and sustainable real “stimulus” for the European and American economies. It also would be consistent with the limited government and free enterprise principles at the foundation of a free society.[This first appeared at Epic Times]