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Transportation reform debate is out of gas

Out of the Storm News - July 16, 2014, 12:52 PM

With the impending shortage in the U.S. Highway Trust Fund, claws have come out across the political spectrum. Grassroots activists decry what they see as wasteful spending on many highway projects, while governors on both sides of the aisle, as well as union and business interests, fear what they believe would happen if the federal dollars begin to dry up.

Harsh rhetoric abounds, with Jay Timmons, president of the National Association of Manufacturers, calling the grassroots threatening Republican lawmakers:

…fringe elements who are using intolerant social propaganda and distorting the records of honorable men and women, driving them into the wilderness of defeat.

Meanwhile Dan Holler at Heritage Action responds that:

America is not facing ‘a transportation government shutdown’ and lawmakers should stop trying to create an artificial crisis which they can use as an excuse to raise taxes or increase spending.

The fight hinges mainly on the gas tax, which many lawmakers are keen to raise to address the shortfall. The House passed legislation to plug the hole yesterday, and the Senate will take up the issue later this week. Alternate plans are continually bandied about, including Rep. Kerry Bentivolio’s Repairing Our Aging Roads Act (the ROAR Act, unfortunately introduced without any references to bringing our roads “roaring” back). The opposing sides have dug in, with many interest groups favoring an increase, while conservative activists press lawmakers to refuse until all wasteful spending is rooted out.

Like many political fights in D.C., it’s quite plausible that both sides are correct – while we should be fighting unnecessary spending and artificially inflated costs, it could also be very possible that a gas tax increase is necessary to modernize our nation’s infrastructure. The American Society of Civil Engineers rated America’s roads a “D” and our bridges a “C+.” The Federal Highway Administration estimates that $170 billion is needed annually to improve road performance, but the gas tax falls short. While these studies should be taken with a grain of salt, even Richard Geddes of the conservative American Enterprise Institute questions the ability of the gas tax to bring in the amount necessary to fix the problems.

On July 8, Americans for Prosperity released a coalition letter signed by 17 conservative and libertarian organizations laying out a set of principles to address the issue. These principles include limiting fuel tax revenue to fund federal roads and bridges only; giving control over state interests back to the states; and reforming regulations like the Davis-Bacon Act’s “prevailing wage” requirements and redundant environmental impact studies that increase costs. Each of these principles have merit, and should be considered seriously by any fiscally responsible lawmaker also interested in improving America’s infrastructure.

However, it could be true that even if all those principles were adhered to, an increase in the gas tax may still be necessary to deal with our nation’s aging infrastructure. Unfortunately, the heated nature of these debates obscures any real discussion over our country’s needs and how to best address them. For unions, the money is a sacred pot in an age of declining membership and opportunity. For business, the specter of aging roads and failing transportation networks incites deep fears. And for politicians, the money represents real dollars for their districts.

But for government watchdogs, the spending is rightfully another example of waste and abuse. In today’s age of bitter partisanship, thoughtful conversation seems unlikely, which is unfortunate, as it will likely result in more dollars wasted and less actual infrastructure improvement. We should be considering a wide variety of alternatives, as fuel efficiency increases and Americans drive less. In this vein, Geddes and Brookings’ Clifford Winston have put forward several innovative solutions. But with elections pending, Congress’ ability to consider real alternatives seems to be out of gas.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

The Case for Six Californias

Somewhat Reasonable - July 16, 2014, 11:04 AM

It began as the idea of one eccentric entrepreneur, but now has 1.3 million signatories backing it: the case for breaking California up into six separate states is gathering steam. When the Six Californias campaign began, most serious commentators thought it was crackpot scheme, a pipe-dream of a few people that had no hope of gaining traction. They have been proved wrong. To an extent anyway.

The idea driving Six Californias is that the state is too large and its politics to disparate to be managed by the incompetent and venal state government in Sacramento. Anyone who knows anything about California knows it is choked with regulations to the point where running a business, let alone starting one, is desperately difficult. Indeed, California has recently been placed in the top three least friendly states for small businesses. For a state that relies on start-ups to stay afloat at all, that is a pretty bad sign for things to come.

And it’s not just business that suffers. Public utilities are being stretched to the limit thanks to grossly inefficient investments by the state government. Other public services, like education, have deteriorated in recent decades to being among the worst in the nation.

Conceived and bankrolled by billionaire Timothy Draper, who has been described as one of the world’s most successful venture capitalists, Six Californias is seeking to radically alter the status quo. Draper is famous for making big bets on new technologies, and clearly his betting nature is turning political. His stated aim is to break California into six states that would be better administered and more politically harmonious in their internal affairs.

California is a massive state. With 38 million citizens and the 8th largest economy in the world, California has come to be ungovernable in the traditional model of states. This has not been helped by Sacramento’s attempts to micromanage the affairs of Californians.

Six Californias argues that six smaller states would be far more representative and responsive to their constituents. That is music to the ears of any supporter of liberty. After all, the larger and more centralized the government, the less accountability to the citizens it has. The breakup would divide California into states somewhat closer in size to other states in the union, and would no doubt be much easier for new state government to manage.

The project has succeeded in gaining ballot access. The 1.3 million signatures recorded far exceed the 808 thousand that was necessary to trigger a state-wide referendum. The vote will likely be scheduled for 2016.

What would happen if Californians voted for the breakup? That is a knotty constitutional question already being addressed by scholars and politicians. The Constitution does not allow for the instantaneous inclusion of new states carved out of old ones, so some suggest that each successor state of California would have to petition to be readmitted to the union as full states. However, there is a degree of precedent, albeit a rather old one. During the Civil War, part of Virginia refused to secede from the United States, declaring itself West Virginia in 1861 and was recognized by the federal government as a full state in 1863. Such a process might lie in the future for California.

Other sticky issues persist. The questions of how debt would be divided and the rights over public works and resources would all be disputed by the successor governments. Such disagreements will no doubt be extremely rancorous, probably carrying on for years after the referendum.

The question of what to do in the event of a breakup may, however, be moot since it seems, at least for now, that voters would not choose to break up their home state. For all its flaws, California is still considered home to millions of people, and many of them do identify with the state as a real polity of which they are a part. To sever those bonds and to shatter a state is an exceptionally difficult thing to accomplish. In all likelihood the referendum will fail.

But the prospect of failure to create six Californias does not make the project a waste of time. Indeed, it is extremely valuable whether it succeeds or not. There is clearly an appetite among many Californians for government that is more decentralized and more responsive to the needs of citizens. That can be accomplished without anything so radical as breaking the state apart. Devolution of power to regions, counties, and cities would go a long way toward creating the accountability and better, leaner government Six Californias is after.

The momentum from the Six Californias project should be carried through, no matter what the referendum results in. If the state is to continue to be an important part of the nation’s economy it must be willing to change.

Categories: On the Blog

Supreme Court to Obama Administration: Congress Writes Laws, You Don’t!

Somewhat Reasonable - July 16, 2014, 10:21 AM

Now that the dust has settled on the Supreme Court’s 2014 session, we can look at the decisions and conclude that the Administration received a serious smack down. Two big cases got most of the news coverage: Hobby Lobby and the National Labor Relations Board’s (NLRB) recess appointments. In both cases, the Administration lost. At the core of both, is the issue of the Administration’s overreach.

Within the cases the Supreme Court heard, one had to do with energy—and it, too, offered a rebuke.

You may not have heard about Utility Air Regulatory Group (UARG) v. Environmental Protection Agency (EPA).

The UARG v. EPA decision came down on June 23. The decision was mixed—with both sides claiming victory. Looking closely, there is cause for optimism from all who question the president’s authority to rewrite laws.

A portion of the UARG v. EPA case was about the EPA’s “Tailoring Rule” in which it “tailored” a statutory provision in the Clean Air Act—designed to regulate traditional pollutants such as particulate matter—to make it work for CO2. In effect, the EPA wanted to rewrite the law to achieve its goals. The decision, written by Justice Antonin Scalia for the majority, stated:

“Were we to recognize the authority claimed by EPA in the Tailoring Rule, we would deal a severe blow to the Constitution’s separation of powers… The power of executing laws…does not include a power to revise clear statutory terms that turn out not to work in practice.”

Had the EPA gotten everything it wanted, it could have regulated hundreds of thousands of new sources of CO2—in addition to the already-regulated major industrial sources of pollutants. These new sources would include office buildings and stores that do not emit other pollutants—but that do, for example, through the use of natural gas for heating, emit 250 tons, or more of CO2 a year.

The Supreme Court did allow the EPA to regulate CO2 emissions from sources that already require permits due to other pollutants—and therefore allowed the EPA and environmentalists to claim victory because the decision reaffirmed the EPA does have the authority to regulate CO2 emissions. However, at the same time, the decision restricted the EPA’s expansion of authority. Reflecting the mixed decision, the Washington Post said the decision was: “simultaneously very significant and somewhat inconsequential.”

It is the “very significant” portion of the decision that is noteworthy in light of the new rules the EPA announced on June 2.

Currently, the Clean Air Act is the only vehicle available to the Administration to regulate CO2 from power plant and factory emissions. However, the proposed rules that severely restrict allowable CO2 emissions from existing power plants bear some similarities to what the Supreme Court just invalidated: both involve an expansive interpretation of the Clean Air Act.

Tom Wood, a partner at Stoel Rives LLP who specializes in air quality and hazardous waste permitting and compliance, explains: “Although the EPA’s Section 111 (d) proposals cannot be legally challenged until they are finalized and enacted, such challenges are a certainty.” With that in mind, the UARG v. EPA decision sets an important precedent. “Ultimately,” Wood says, “the Supreme Court decision seems to give more ammunition to those who want to challenge an expansive view of 111 (d).” Wood sees it as a rebuke to the EPA—a warning that in the coming legal battles, the agency should not presume that its efforts will have the Supreme Court’s backing.

Philip A. Wallach, a Brookings fellow in Governance Studies, called the UARG v. EPA case “something of a sideshow,” and sees “the main event” as EPA’s power plant emissions controls, which have “much higher practical stakes.”

In his review of the UARG v. EPA decision, Nathan Richardson, a Resident Scholar at Resources For the Future, says: “In strict legal terms, this decision has no effect on EPA’s plans to regulate new or existing power plants with performance standards. … However, if EPA is looking for something to worry about, it can find it in this line from Scalia:”

When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy” . . . we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign an agency decisions of vast “economic and political significance.”

The UARG v. EPA decision is especially important when added to the more widely known Hobby Lobby and NLRB cases, which is aptly summed up in the statement by the American Fuel & Petrochemical Manufacturers’ General Counsel Rich Moskowitz: “We are pleased that the Court has placed appropriate limits on EPA’s authority to regulate greenhouse gases under the Clean Air Act. By doing so, the Court makes clear that an agency cannot rewrite the law to advance its political goals.”

Justice Scalia’s opinion invites Congress to “speak clearly” on agency authority. It is now up to our elected representatives to rise to the occasion and pass legislation that leaves “decisions of vast ‘economic and political significance’” in its hands alone. Such action could rein in many agency abuses including the heavy-handed application of the Endangered Species Act and public lands management.

The decision—while “somewhat inconsequential”—is, in fact, “very significant.” The Supreme Court has, perhaps, outlined the first legislation of the new, reformatted, post-2014 election Congress.

Categories: On the Blog

The Climate Change Truth in Vegas

Somewhat Reasonable - July 15, 2014, 1:38 PM

Having recently returned from The Heartland Institute’s 9th International Conference on Climate Change held in Las Vegas from July 7-9, “Just Don’t Wonder About Global Warming, Understand It,” I was privileged to hear some of the world’s hundreds of leading climate scientists and researcher discuss the latest state of global warming science, all who question whether manmade global warming” will be harmful to plants, animals, or human welfare. Eight hundred participants were on hand to hear 64 speakers from 12 different countries (14 countries if counting the moon with Astronaut Walter Cunningham and Washington, D.C.) despite the fierce heat of Las Vegas in July. At one point 4,000 individuals were listening to the conference as it was streamed live from the conference website in Las Vegas.

This year’s delegates’ speeches showed how the myths of the climate alarmist are false, which shatters the often quoted 97% consensus figure given for those who believe most of the warming since 1959 was man-made. On the contrary, only 0.5 percent of the authors of 11,944 scientific papers on climate and related topics over the past 21 years have said they agreed that most of the warming since 1950 was man-made. Furthermore, according to the RSS satellite record (Remote Sensing Systems), there has been no global warming for 17 years and 10 months.

Obama’s statements conflict with scientific findings:

The above conclusions conflict with the statements made by President ObamaOn Tuesday, May 6, when he warned that “people’s lives are at risk” because of man-made climate change proclaimed during a series of interviews with National and Local television meteorologists. “Not only is climate change a problem in the future, it’s already effecting Americans,” Obama told CBS News, warning that the phenomenon was “increasing the likelihood” of floods, droughts, storms and hurricanes.

Even the U.N.’s International Panel on Climate Change (IPCC) has said in its last two reports that there has seen no particular change in the frequency or severity of floods worldwide. Neither are droughts getting worse (the fraction of the world’s land under drought has fallen for 30 years), nor are hurricanes getting worse (combined frequency, severity and duration has been at or near the lowest in the 35-year satellite record).

There was an element of truth, however, to be found in President Obama’s remarks on Tuesday, May 6, but as happens time and again, Obama’s spoken version of the truth amounted to fantasy.  Instead of putting people “lives at risk” by failing to take drastic measures to curb CO2, millions of people are dying because Western policies seem more interested in carbon-dioxide levels than in life itself. Such  was the topic of the final panel discussion, “Panel 21:  Global Warming as a Social Movement,” on Wednesday afternoon before adjournment of Heartland’s 9th Annual International Conference on Climate Change   The distinguished panelists included E. Calvin Beisnert, Ph.D., Founder and National Spokesman of the Cornwall Alliance; Paul Driessan, J.D. senior policy advisor with the Committee For A Constructive Tomorrow and Center for the Defense of Free Enterprise; and Peter Ferrara, J.D., general counsel of the American Civil Rights Union at the Heartland Institute.  Minnesota State Rep. Pat Garofalo was the Moderator, a Republican member of the Minnesota House of Representatives representing District 588.

Panelists Beisnert, Driessan and Ferrara laid out a convincing message how climate alarmists, as environmentalists, view people primarily as polluters and consumers who use up Earth’s resources and poison the planet in the process, rather than being good stewards.  It might even be said that environmentalism is the new face of the anti-human, “Pro-Death” agenda.  Through the bogus “crises” of man-made global warming, affordable and reliable energy and other modern blessings are being denied to the developing world.  This despite the $3.5 billion spent around the world to combat climate change.  Worth reading is an opinion piece by Caleb S. Rossitger, updated May 4, 2014, “Sacrificing Africa for Climate Change.” Change.”

Social Impacts of Reducing Carbon Emissions:

  • 90% of the people living in sub-Saharan Africa do not have electricity and lack light to study and work by, refrigeration to prevent food spoilage and power to operate equipment that could multiply their productivity.  Environmentalists’ oppose building large power plants and electric grids.  Each American accounts for 20 times the emissions of each African.  With 15% of the world’s population, Africa produces less than 5% of carbon-dioxide emissions.  Shouldn’t real years added to real lives trump the minimal impact that African carbon emissions could have on a theoretical catastrophe?
  • Because of the lack of electricity, two to three million women and children die annually from lung disease around the world from burning wood and dried dung to cook their food or heat their huts.
  • Another one to two million people die annually from malaria since the banning of DDT.
  • Where energy is available, regulation of greenhouse gas and other environmental regulations drive up the cost of basic necessities such a food, fuel and electricity, stifling economic growth and costing jobs.
  • America’s ethanol policy alone is estimated to cause nearly 200,000 premature deaths every year in the developing world by limiting the amount of corn for human consumption, which, in turn, raises its purchase price.
  • Golden corn seeds could end Vitamin A deficiency in millions of children.  Genetically produced rice with Vitamin E is also available.  Even so, eight million children have died since the invention of this life-saving rice out of fear of using genetically enhanced food items.
  • Proposed caps on emissions, and so-called renewable energy mandates, would cost our nation millions of jobs and hundreds of billions of dollars per year.  Even though Americans are wealthy by world’s standards, poor and single-income families in the U.S. would be hardest hit, while much poorer people around the would suffer even more if required to restrain greenhouse gas emissions.
  • A carbon tax on Cap and Trade is a regressive tax which would hit hardest the poor among us. The poor already pay a higher proportion of their income for energy, plundering the poor, as would state mandates for wind and solar power, which would result in higher energy costs over what is currently being provided by power plant now under fire by the EPA for CO2 emissions linked to Global Warming.
  • Wealth increases more when the overall global temperature is warmer and furthermore correlates with happiness, better health, and longevity. The more we do to fight Global Warming, the less off the poor will be in poorer nations, with higher rates of disease and death.

For Reflection: 

If this nation really cared about the poor, our government would stay off the Global Warming bandwagon and use the billions currently being spent to combat EPA fuel emissions standard, which have no effect, and instead put the billions to where it would do the most good fighting disease and poverty.  Building fossil fuel plants and a grid to provide electricity to all the houses around the globe where dung and wood are still burnt in the absence of electricity, would cost 1/2 billion a year less than compliance with EPA’s fuel emission standards.

Evident is that those who control carbon control our lives.  Shutting down power plants could carry some health benefits by reducing the risk of asthma and heart attacks in areas near the plants, but will cutting carbon emissions from existing power plants by about 25% from 2012 levels by 2020 make the planet healthier?  Greenhouse gasses would still escape into the atmosphere from around the world?  Hence, cutting carbon emissions would be a drag on this nation’s economy.  See this article by Sally Deneen for National Geographic,“One Key Question on Obama’s Push Against Climate Change:  Will It Matter”, for further clarification.

Global Warming could rightly be called a social movement, a big green and government movement, not unlike the “Population Bomb” which warned of mass starvation of humans in 1970′s and 1980′s due to overpopulation, and which advocated immediate action to limit population growth.

The emphasis on Climate Change as a urgent threat, propagated by President Obama and being carried out through the EPA, is in actuality a weapon of mass destruction and a war on women and children.  Alarmists use threats as a way to justify their power to decide how much energy is available for use by humanity throughout the world.  As such, big green with its eco-friendly measures appears callous to human destruction.

In Conclusion: 

It is not being denied that global temperature have risen over the last 150 years or more, but it is mostly a natural occurrence, and certainly within the range of natural climate variability over the centuries; i.e. the Medieval Warm Period, an interval from approximately AD1000 to AD1300.  During that time many places around the world exhibited conditions that seem warm compared to today. Heartland and the scientists it works with have never promoted “denial of a changing climate.”  The climate is always changing. The question is whether man’s contribution to climate change rises above statistical noise and whether it is a crisis.

The issue of Climate Change is the greatest moral and ethical battle of our time.  We must stand up for the tyranny resulting from the seizure of that which powers our civilization, sufficient energy production at an affordable cost.  Without this availability, the global death toll will rise before is decreases due to the dark forces of a Climate Change fantasy.

View here videos of all Speakers and Panel Discussions at Heartland’s 9th International Conference on Climate Change.

Categories: On the Blog

The twisting tale of the CVT

Out of the Storm News - July 15, 2014, 10:18 AM

Would you think that an unexpected ban of a disruptive technology, particularly a ban imposed 20 years ago by a private race car administrative organization, could retard timely availability to consumers of sophisticated, high-performance automotive technology? Please hold that question while I digress for a few moments.

Car culture lives at the intersection of innovation, industry and regulation. From this spot, enthusiasts develop preferences and prejudices alike.

A kernel of axiomatic truth among many who drive their cars exuberantly is that, when possible, a manual transmission is essential. There are three elements undergirding this preference. The first is a belief that manual transmissions provide a driver with greater control over the drivetrain. The second is that, until very recently, manual transmissions tended to be more efficient, allowing for lighter engines that accelerate faster and get slightly better mileage.

The third element is not mechanical at all, it is cultural. In an era in which manual transmissions represent only a small fraction of all vehicles sold in the United States, a buyer’s preference for manual transmissions oft arises from a condition we will call “throwback authenticity.” This makes a very satisfying and low-budget snobbery available to anybody who chooses to drive a manual.

As a self-styled car enthusiast, one with a snobby history of seeking out manual transmissions whenever possible, I was dead-set on continuing to select my own gears. Then, last week, a sudden need for a new vehicle emerged. After ticking through my mental shortlist of desirable vehicles, I took a ride to my local Subaru dealership. Upon arrival, I was delighted to see, sitting front and center, the blue 2015 WRX for which I had made the trip.

I experienced utter disappointment upon finding that it was not a manual. Worse…it was not just any automatic, it was a nearly universally despised form of automatic known as CVT (continuously variable transmission).

My snob sense went off the chart and I became peevish. CVTs are known for being slow, unresponsive, dull and generally antithetical to all things performance. Still, I was coaxed into test driving the vehicle by the person who had given me a ride to the lot.

The test was brief but transformational. Impossibly, I was forced to reconcile myself to a new reality when, as I accelerated out of a corner, the transmission responded to inputs from the steering wheel-mounted paddle shifters as fast as my fingers could muster a tug. When I hopped out of the car I was left wondering how in the world such a powerful anti-CVT narrative could ever have taken hold in my head.

Back to the intersection point of “innovation, industry and regulation”:

The innovation: CVTs do not have gears. Instead, inside of a CVT, there is a drive-belt positioned between a pair of pulleys. The significance of this is that there are an infinite combination of power-delivery settings between the two pulleys, hence the name “continuously variable.” By not having to change gears, there is less parasitic loss between the engine and the tires. The associated savings can manifest themselves in the form of increased miles per gallon. Further, a CVT is capable of keeping an engine operating in a specific manner (be it for economy or performance) all of the time, because there are no set gear ratios, allowing the engine to operate at peak efficiency for whatever purpose it is being used at that time.

Like many novel technologies, CVTs were temperamental in their initial applications. Early adapters were beset by frequent drive-belt failures, because the belt was made from rubber. Subsequent adapters found the CVT both reliable and economical, but unrewarding to drive, because of their prevalence in low-powered vehicles. By pairing the CVT to the Prius, the transmission became a lodestar of enthusiast disdain.

Industry’s role: CVTs found their first automotive application in a small Dutch make named DAF, an abbreviation of Van Doorne’s Trailer Factory (in Dutch: Van Doorne’s Aanhangwagen Fabriek). DAF was gobbled up by Volvo, which allowed the technology to gain widespread exposure.

In the early 1990s, CVTs came to the attention of teams competing at the highest level of racing in the world, Formula 1. Teams recognized that, since an engine is constantly accelerating and decelerating, it is rarely operating at its full potential. For an engine to operate at its full potential, it is necessary for it to hold its speed at the peak of its power – a feat that a CVT is uniquely suited to accomplish. To this end, a number of well-financed Formula 1 teams began to develop CVT transmissions with a belt strong enough to withstand the phenomenal power loads of a Formula 1 engine.

Racing regulation: By 1993, a number of teams were testing CVTs in their cars under race conditions. Unsurprisingly, because the engines were not wasting time or power revving up and down the unprofitable parts of their power-curves, the cars were fast…several seconds a lap faster than traditional transmissions.

The CVT cars were arguably too fast. Not because the cars or the drivers could not sustain the pace, but because they were able to seriously upset the competition’s ability to compete without them. For this reason, to preserve competitive balance, Formula 1′s governing body decided to ban the use of CVTs.

Banning the use of CVTs at the highest level of racing competition retarded the development of the technology. Formula 1 teams enjoy an unparalleled level of factory funding and support because the cars are excellent platforms from which speculative technologies may be proven and refined. Arguably, without a fair trial in the crucible of motorsports, CVTs were unable to realize their potential until decades later. The intervening decades of mediocrity spawned a legion of detractors, hence the existence of an anti-CVT narrative among the automotive press corps and the enthusiast crowd for whom they write.

The generally applicable lesson that can be induced from the CVT story is that the shadow cast by regulation, even by non-governmental bodies, can be long and profound. By prohibiting the use of a particular technology, as opposed to introducing regulations designed to shape outcomes more globally, Formula 1 sought parity in an overbroad and ineffective way (fittingly, Team Williams, the first team to develop a racing CVT, enjoyed an uninterrupted period of dominance even without the transmission).

An enthusiast, I remain. But, now I proudly drive a technology that was able to overcome the heavy hand of regulatory shortsightedness. I drive a CVT.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Blowing Our Dollars in the Wind

Somewhat Reasonable - July 15, 2014, 9:12 AM

Wind energy produces costly, intermittent, unpredictable electricity. But Government subsidies and mandates have encouraged a massive gamble on wind investments in Australia – over $7 billion has already been spent and another $30 billion is proposed. This expenditure is justified by the claim that by using wind energy there will be less carbon dioxide emitted to the atmosphere which will help to prevent dangerous global warming.

Incredibly, this claim is not supported by any credible cost-benefit analysis – a searching enquiry is well overdue. Here is a summary of things that should be included in the analysis.

Firstly, no one knows how much global warming is related to carbon dioxide and how much is due to natural variability. However, the historical record shows that carbon dioxide it is not the most important factor, and no one knows whether climate feedbacks are positive or negative. Also, in many ways, the biosphere and humanity would benefit from more warmth, carbon dioxide and moisture in the atmosphere.

However, let’s assume that reducing man’s production of carbon dioxide is a sensible goal and consider whether wind power is likely to achieve it. To do this we need to look at the whole life cycle of a wind tower.

Wind turbines are not just big simple windmills – they are massive complex machines whose manufacture and construction consume much energy and many expensive materials.  These include steel for the tower, concrete for the footings, fibre glass for the nacelle, rare metals for the electro-magnets, steel and copper for the machinery, high quality lubricating oils for the gears, fibre glass or aluminium for the blades, titanium and other materials for weather-proof paints, copper, aluminium and steel for the transmission lines and support towers, and gravel for the access roads.

There is a long production chain for each of these materials. Mining and mineral extraction rely on diesel power for mobile equipment and electrical power for haulage, hoisting, crushing, grinding, milling, smelting, refining. These processes need 24/7 reliable electric power which, in Australia, is most likely to come from coal.

These raw materials then have to be transported to many specialised manufacturing plants, again using large quantities of energy, generating more carbon dioxide.

Then comes the construction phase, starting with building a network of access roads, clearance of transmission routes, and excavation of the massive footings for the towers. Almost all of this energy will come from diesel fuel, with increased production of carbon dioxide. Moreover, every bit of land cleared results in the production of carbon dioxide as the plant material dozed out of the way rots or is burnt, and the exposed soil loses its humus to oxidation.

Once the turbine starts operating, the many towers, transmission lines and access roads need more maintenance and repair than a traditional power plant that produces concentrated energy from one small plot of land using a small number of huge, well-tested, well protected machines. Turbines usually operate in windy, exposed, isolated locations. Blades need to be cleaned using large specialised cranes; towers and machinery need regular inspection and maintenance; and mobile equipment and manpower needs to be on standby for lightning strikes, fires or accidents. All of these activities require diesel powered equipment which produces more carbon dioxide.

Even when they do produce energy, wind towers often produce it at time when demand is low – at night for example. There is no benefit in this unwanted production, but it is usually counted as saving carbon fuels.

Every wind farm also needs backup power to cover the +65% of wind generating capacity that is lost because the wind is not blowing, or blowing such a gale that the turbines have to shut down.

In Australia, most backup is provided by coal or gas plants which are forced to operate intermittently to offset the erratic winds. Coal plants and many gas plants cannot switch on and off quickly but must maintain steam pressure and “spinning reserve” in order to swing in quickly when the fickle wind drops. This causes grid instability and increases the carbon dioxide produced per unit of electricity. This waste should be debited to the wind farm that caused it.

Wind turbines also consume energy from the grid when they are idle – for lubrication, heating, cooling, lights, metering, hydraulic brakes, energising the electro-magnets, even to keep the blades turning lazily (to prevent warping) and to maintain line voltage when there is no wind. A one-month study of the Wonthaggi wind farm in Australia found that the facility consumed more electricity than it produced for 16% of the period studied. A detailed study in USA showed that 8.3% of total wind energy produced was consumed by the towers themselves. This is not usually counted in the carbon equation.

The service life of wind towers is far shorter than traditional power plants. Already many European wind farms have reached the end of their life and contractors are now gearing up for a new boom in the wind farm demolition and scrap removal business. This phase is likely to pose dangers for the environment and require much diesel powered equipment producing yet more carbon dioxide.

Most estimates of carbon dioxide “saved” by using wind power look solely at the carbon dioxide that would be produced by a coal-fired station producing the rated capacity of the wind turbine. They generally ignore all the other ways in which wind power increases carbon energy usage, and they ignore the fact that wind farms seldom produce name-plate capacity.

When all the above factors are taken into account over the life of the wind turbine, only a very few turbines in good wind locations are likely to save any carbon dioxide. Most will be either break-even or carbon-negative – the massive investment in wind may achieve zero climate “benefits” at great cost.

Entrepreneurs or consumers who choose wind power should be free to do so but taxpayers and electricity consumers should not be forced to subsidise their choices for questionable reasons. People who claim climate sainthood for wind energy should be required to prove this by detailed life-of-project analysis before getting legislative support and subsidies.

Otherwise we are just blowing our dollars in the wind.

Categories: On the Blog

Virginia residents, businesses split over Internet sales tax

Out of the Storm News - July 14, 2014, 5:33 PM

From WVTF Public Radio:

Both sides of the issue want to sway Virginia Congressman Bob Goodlatte, who chairs the House Judiciary Committee, to their side. The R Street Institute’s Andrew Moylan says a new poll reveals that most Virginians don’t want their goods purchased through sites such as eBay to be taxed. He also says the process is burdensome because on-line businesses would be required to pay varying taxes based on each state and purchase point. He says there’s another option.

“The sort of technical term for it is origin sourcing, but in practice what that means is allowing online retailers to utilize the same collection scheme that brick and mortar retailers use, which is based on where they are physically present – where they are physically located. Then they only have to know one sales tax code – they only have to be accountable to one revenue agency.”

The New Rent Seeking?

Somewhat Reasonable - July 14, 2014, 3:33 PM

According to data released this week, Samsung and Apple make up the majority of the top 20 global smartphone models sold in the first quarter of 2014. While that success demonstrates the robust market prowess of these smartphone manufacturers, the real winners are the customers, getting more services, better products and lower prices. Almost the exact opposite happens when companies resort to lawsuits to gain market advantage, a sort of rent seeking via the courts.

Apple’s long-running lawsuits against Samsung continue despite, or perhaps because of, their mixed results. In the first Apple-Samsung lawsuit, Samsung was forced to pay its rival nearly $1 billion in damages, plus an International Trade Commission exclusion order imposed an importation ban. Apple also sought a full-sales ban on the Samsung products in question, which a judge ultimately blocked.

In a second trial, Apple sought sky-high damages of $40 per device for all Samsung devices sold in the U.S. that were named in the lawsuit, and sought to block the sales of Samsung products. While substantial, that dollar figure likely paled in comparison to the opportunity costs incurred by this fixation on legal action.

In the end, the jury decided that Samsung relied on some of Apple’s patented technology, but Apple too was caught using Samsung’s patented technology. The jury awarded Apple financial damages but not nearly the amount the company sought, which was further offset by an award to Samsung. The decision has been appealed both by Apple and Samsung, with Apple still trying to block Samsung sales, and with Samsung appealing the verdict in total.

If this litigious acrimony continues unabated, consumers, mobile innovation, and perhaps even the companies themselves will suffer. One sign that such damage has already occurred is that technology industry news increasingly seems to be about litigation rather than about new technological advances. And according to observers, Apple innovation may already be flagging.

Moreover, courtroom victories do not necessarily translate into benefits for consumers because they could drastically limit competition in the mobile marketplace. Instead of gaming the courts for potential advantages or trying to ban certain products, mobile device makers should compete in the open marketplace.

The ongoing dispute also raises broader questions about damages awarded in patent cases, particularly for design patents, and especially when the infringement is unknown. In real time, the courts are actively issuing new rulings guiding what is and is not patentable, such as abstract ideas tied to computer systems. Are awards that are so large that a company’s ability to compete is hampered good for consumers or the marketplace?  Are absolute bans on the products in the marketplace best for the free market?

When disputes do arise, companies should put their customers first by negotiating in good faith with their rivals, going to court only as a last resort. Of course, legitimate disputes, including important claims such as intellectual property infringement, may still need a judicial remedy, just not as a first option to hamper one’s competition.

[Originally published at The Institute for Policy Innovation]

Categories: On the Blog

Media Ignorance Is Worse When It’s Intentional

Somewhat Reasonable - July 14, 2014, 1:57 PM

I hope you all took time to read Mollie Hemingway’s piece this week concerning the problem of media ignorance. The really troublesome aspect of it, as I see it, is not when people are unintentionally ignorant of the matters they cover, which is of course excusable. No one is expected to be an expert on everything they write about, and in practice, it just serves to foster the Gell-Mann Amnesia effect, which you have surely experienced regularly if you are an expert in something and a consumer of media. Yes, it’s a problem when those youngsters in media who got promoted because they are really good at the Instagram don’t know about something because it’s on the second page of the Google results. But leaving something you didn’t know out of a story is more excusable than asserting something inaccurate out of ignorance, which is still more excusable than purposefully putting on blinders and ignoring anything that conflicts with your thesis because you’d rather not engage it. It’s one thing to not know another perspective exists – it’s another to purposefully pretend it doesn’t exist.

I know this is a minor complaint in the scheme of things, but if you want an example of this in practice, I’d draw your attention to the recent staff changes at the Washington Post’s Wonkbook, which has been dramatically reduced in usefulness since Ezra Klein pulled a great deal of their talent into Vox. To his credit, Klein has always understood that even media in pursuit of an ideological agenda gets boring very quickly if it’s entirely one-sided. Good political media requires conflict – it needs someone to take the other position in a debate, which is why his criticisms of Paul Ryan would be followed with an interview with the subject and the like. The overall effect was to provide people with a fairly consistent look at what the major Washington think tanks were doing, and while the reporters obviously leaned in a direction, I’d argue they rarely pretended conservative views didn’t exist or lacked legitimacy.

Unfortunately, ever since Klein, Evan Soltas, and others departed Wonkbook, replaced by Puneet Kollipara, Matt O’Brien, and a new crop of writers, the once-useful morning email has very obviously felt the impact. It has drastically reduced the number of right-leaning links, diminishing them to the point of nonexistence or only featuring critiques of conservative views. It regularly reaches the point of laughability in the context of multi-day debates, in which you can only learn the existence of a perspective through the frame of a liberal critique, or only learn of something gone wrong with Obamacare through a piece explaining why it doesn’t matter.

To pick one recent example: On the day the reform conservatives released their Room to Grow agenda at AEI (a development of significance whatever you think of the actual agenda), Wonkbook didn’t link a single thing about it – not one oped or post in favor of it or any of the source materials. Over the course of the next few days, they gave a few scant nods to pieces in favor of it, while linking a litany of pieces from liberals reacting to the proposals, criticizing something that they hadn’t even acknowledged existed.

A purposefully cloistered attitude, where the only good conservative is the one making the case for lefty ideas, is a real disservice to debate. If most of your links are to a conservative making the case for a universal wage subsidy or a carbon tax or immigration reform, it’s simply not an accurate depiction of where the other side is. And it leads to your site and email sounding less like a fair-minded left-leaning traditional media outlet and more like, well, ThinkProgress.

The impression you get is of a place with an ideological perspective that overwhelms its ability to fairly depict policy debates. The other day, after the GOP announced that it would hold its 2016 convention in Cleveland, Wonkbook sent out their afternoon update with the subject line and first piece headlined “How the Republican platform fails Cleveland”, which to me sounds more like a DNC press release header than an evenhanded evaluation. The piece has since been renamed. But the first title is a more accurate reflection of their perspective, which is disappointing to say the least.

As a postscript: it’s not as if you need to be a younger writer to play pretend and ignore the legitimacy of a different perspective. Back in 2012, I had a particularly frustrating interaction with Post fact-checker Glenn Kessler in which he outright refused to consider an alternate perspective on a question. Kessler gave “Four Pinocchios” to then-Mississippi Gov. Haley Barbour for some testimony the governor gave about Medicaid fraud in his state, noting that people were driving BMWs while claiming they couldn’t afford copays. Kessler’s rationale was so twisted that I still can’t believe he advanced it: his view was that Barbour had to be lying, because BMWs are too expensive for people who qualify for Medicaid to afford. I’m serious – he even did the Cars.com search. Despite citing a half dozen news stories to him from that very week of people being arrested for Medicaid fraud who owned flashy cars and McMansions, and pointing out that people can easily go onto Medicaid after buying BMWs earlier in life, Kessler refused to consider a world in which it is possible for Medicaid fraud or downward social mobility to exist, and got more than a little testy when challenged with the idea there was any gap in his logic.

Perhaps now that his own publication has run a piece about someone driving a Mercedes to pick up food stamps, he’ll reconsider his perspective. But I doubt it. Blinders can be awfully effective once you wear them long enough.

Update: Kessler has since offered a mea culpa.

Subscribe to Ben’s daily newsletter, The Transom.

 

[Originally published at The Federalist]

Categories: On the Blog

Lyft’s insurance move a first step toward regular TNC coverage

Out of the Storm News - July 14, 2014, 12:55 PM

Even as it faces new regulatory headaches in New York, transportation network company Lyft is making news this week with a major announcement today that should quiet at least some of its vocal critics: the company has begun offering primary commercial auto insurance coverage for its drivers.

Lyft already provided a $1 million excess liability policy, generally designed to kick in once a driver’s private passenger auto policy limits were exhausted, typically at $50,000 of coverage. However, given that some standard private passenger policies may exclude coverage for a driver while acting in a commercial capacity (or, at least, given general legal uncertainty about whether such coverage would be upheld in a dispute) Lyft’s policy had a unique structure that would allow it to “drop down” to cover the first dollar of loss in case the primary policy did not respond.

But given concerns from regulators in places like Virginia, New York, California and Seattle (largely egged on by local taxi associations) that even this “drop-down” coverage wasn’t sufficient, Lyft is just going all the way to offering primary coverage:

In response to that feedback from leaders in markets such as New York, California and Seattle, Lyft has voluntarily converted its policy from excess to be primary to a driver’s personal policy during the period from the time a driver accepts a ride request until the time the ride has ended in the app. This major change is part of our continued effort to set the highest standard for trust and safety in transportation.

The coverage is provided via James River Insurance Co., a Richmond, Va.-based surplus lines writer that is ultimately owned by Bermuda-based Franklin Holdings Ltd. According to statutory filings, the company had $165.0 million of policyholder surplus as of the end of the first quarter, and it hold an A- financial strength rating from A.M. Best Co.

It makes sense that this new kind of risk would require looking to the surplus lines market for a solution. But over the longer term, if car-sharing does indeed take hold as a major transportation option across a broad swath of American cities, we would expect admitted market insurers will be able to craft their own products to meet this emerging consumer need.

Though “hybrid” products could either from personal lines or commercial lines insurers, full-scale commercial auto insurance policies would likely be a bit of overkill for the limited amounts of commercial activity in which most car-sharing drivers engage. A far simpler solution would be for personal lines insurers to come forward with riders or endorsements that offer coverage for a nominal amount of commercial activity, provided they could appropriately price the coverage.

That’s where it is crucial that insurance regulators remain flexible to permit insurers to innovate and bring new products to market in a reasonable time frame.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Tuesday: Cárdenas, Mulvaney host briefing on worker relocation legislation

Out of the Storm News - July 14, 2014, 8:50 AM

WASHINGTON (July 14, 2014) – Tomorrow, U.S. Reps. Tony Cárdenas (D-San Fernando Valley, Calif.) and Mick Mulvaney (R-South Carolina) will host a bipartisan discussion regarding continuing long-term unemployment in the United States and one potential solution, the American Worker Mobility Act.

A recent report by the World Bank indicates that decreased labor mobility is slowing our economic recovery and stalling employment. As a partial solution, the American Worker Mobility Act, introduced by Mulvaney and Cárdenas, would create relocation vouchers for American workers to move from areas of high unemployment to parts of the nation where job openings are more prevalent.

The bipartisan proposal has been supported by economists on all sides of the political spectrum, some of whom will be represented at the discussion. Panelists will include:

  • Lori Sanders, Outreach Director and Senior Fellow at the R Street Institute and author of “Moving to Work” in National Affairs’ Winter 2014 issue
  • Michael Shank, Senior Fellow at the JustJobs Network and the Associate Director for Legislative Affairs at the Friends Committee on National Legislation
  • Michael Strain, Resident Scholar for the American Enterprise Institute
  • Marshall Steinbaum, Research Economist at the Washington Center for Equitable Growth

 

The panel discussion will take place at 4 p.m. TUESDAY, July 15, in 210 Cannon House Office Building. Mulvaney, Cárdenas and the panelists will be available for interviews before the discussion, as well as following the event.

   WHO: U.S. Rep Tony Cárdenas

                  U.S. Rep Mick Mulvaney

      Economic Experts

                                                   WHAT: Bipartisan Discussion of Long-Term Unemployment

 WHEN: Tuesday, July 15 at 4 p.m.

                 WHERE: 210 Cannon House Office Building

Greenpeace Co-founder Patrick Moore: I Left When They Became Anti-Science, Anti-Human

Somewhat Reasonable - July 14, 2014, 8:30 AM

Greenpeace founder Patrick Moore trying to save a baby seal in the 1970s.

One of the best keynote presentations at The Heartland Institute’s Ninth International Conference on Climate Change, held last week in Las Vegas, was by Greenpeace co-founder Patrick Moore.

Moore was with Greenpeace from the beginning in the 1970s, and he literally helped change the world. The whaling and seal-fur industry barely exist today because Moore and others at Greenpeace put their lives on the line on the open seas.

Moore’s “green” credentials are impeccable. But, as he explained at our conference, the eco-movement — and Greenpeace, in particular — was co-opted by radicals … and liars.

A movement that started out with the best of intentions came to dedicate itself to attacking humans — especially those in the developing world, who need cheap and abundant energy to lift themselves above a level of poverty the West barely understands.

That’s why, Moore said, he left Greenpeace.

You must watch AND SHARE the July 8 presentation by Patrick Moore at Heartland’s latest climate conference. Moore’s presentation is so entertaining — and scientifically based for one’s open mind — that I will not excerpt any text. You really need  to watch it below:

 

Broadcast live streaming video on Ustream

Categories: On the Blog

Overwhelming opposition to Internet sales tax scheme continues in week 2 of multi-state poll tour

Out of the Storm News - July 12, 2014, 7:59 PM

WASHINGTON (July 11, 2014) - The second week of the National Taxpayers Union (NTU) and R Street Institute’s 20-state tour to announce poll results relating to the Marketplace Fairness Act’s (MFA’s) brand of Internet sales tax scheme wrapped up today at the State House in Virginia – having previously visited South Carolina, North Carolina, Wisconsin, Minnesota and Pennsylvania.

In these six states, polling results have shown that the MFA, which “would allow tax enforcement agents from one state to collect taxes from online retailers based in a different state,” is a toxic issue for voters, with respondents rejecting such legislation by margins as high as 26 points.

Even in blue states like Pennsylvania, Minnesota and Wisconsin, voters have overwhelmingly indicated their belief that the Internet should remain as free from regulation and taxation as possible. Additionally, Independent voters have polled as strongly against a federal Internet sales tax law, including by a 25-point margin in the Keystone State.

“Taxes of any kind will rarely be popular in opinion polls, but our survey shows citizens want an Internet that prospers without excessive government interference,” said Pete Sepp, NTU executive vice president. “If a candidate had polling numbers like this Internet tax collection scheme, I suspect the political consultants would take notice and seek a different path.”

“We’ve seen a universal response from residents of these states that they believe the Internet should exist to enrich their lives, not the treasuries of other states,” said Andrew Moylan, executive director and Senior Fellow of the R Street Institute. “Voters have strong misgivings about proposals pending before Congress, and are equally strong in their support for an Internet free from oppressive taxation and regulation. Lawmakers should pay attention to what their constituencies are saying loud and clear.”

The tour continues in the following weeks with visits to another 14 states. All polling results and detailed information can be found atwww.rstreet.org/donttax or www.ntu.org.

 

“Free” College is a Dangerous Pipe-Dream

Blog - Education - July 12, 2014, 6:04 PM

College education has more and more been described by the political left as a right to which citizens ought to be entitled. This view has been popularized among left-leaning students, many of whom are energized by ruinously expensive college loans. They clamor for the “fair solution”, namely that the government should pay for all of it. The effort to make college a right is a disastrous proposition. It is a dangerous pipe-dream that could devastate an already rickety higher education sector. There are problems with the way student loans and college fees operate at present, but this is not the way to fix it.

There is no fundamental right of individuals to be allowed to take four years free of charge to learn new skills that will benefit them or how to be better citizens. The state’s duty is to provide a baseline of care, which in the case of education secondary school more than provides. If individuals want more they should pay for it themselves.

Higher Education is a Service

College education, like any professional skills-development undertaking, is a service, one that people should pay for. Rights exist to provide people with the necessities of life. Some people may never have the “opportunity” (ie. wealth) to visit Hawai’i, yet that is not unfair and the state should not be expected to fund every citizen’s tropical vacation.

Yet even in the presence of fees, access to scholarships and loans make it possible for people from disadvantaged economic backgrounds to find their way into university. In this way there is a degree of equality of opportunity in so far as those who are able are afforded the opportunities financial incapacity would deny them. If people want to take advantage of the networking opportunities available in university and the employment benefits available to graduates, then they may pay for it.

Endless Entitlements, Endless Costs

Every action has an opportunity cost. If people are willing to take loans to pay for the education that will likely allow them to earn far more than they would without one, then they should be willing to pay for the privilege.

Furthermore, it can actually be quite beneficial to society at large, to an extent, that university graduates seek swift employment due to debt, since it forces them to become productive members of society more rapidly than they might have done. For example, in Ireland where higher education is free graduates often take a year or two to travel and “find themselves” while giving little or nothing back to the society that has financed their degrees. It is good that people begin contributing to the economic life of society after graduating from university, rather than frittering away their youths in unproductive pursuits.

The social-democratic model, most prevalent in Europe, is a failure. The system of paying for universal healthcare, education, pensions, etc. threatens to bankrupt the countries maintaining them; it is simply unsustainable. The cost of paying for free university education is ruinously high. The government money needed to be channeled into universities to provide for free education, as well as into various other generous social welfare benefits, has been a case of borrowing from future generations to finance current consumption. For these countries to survive, and lest other countries attempt to follow suit with similar models, they must rethink what they can afford to provide freely to citizens.

In the case of education, it seems fair to say that all states should offer access to their citizens to primary and secondary education opportunities, since the skills acquired during such education are absolutely necessary for citizens to function effectively within society; reading, writing, basic civics, etc. are essential knowledge which the state is well-served in providing.

University, on the other hand, is not essential to life in the same way. People can be functional and responsible citizens without it; it can be nice to attend, but one can live effectively and prosper without it. For this reason, the government ought to consider university in the same way it does any non-essential service; people may pay for it if they wish to partake, but they cannot view it as an entitlement owed by the state that will simply provide it to everyone. The cost is just too high, and the state must act from a utilitarian perspective in this case. Instituting fees will place the cost of education upon those wishing to reap the benefits of education, and not on the taxpayer.

Inevitable Inefficiency

When the state offers a universal service, inefficiencies inevitably arise with its provision. There are four principal economic problems that arise from free university education.

First, there is a major problem of resources being lost to bureaucracy. In a state-funded university system, tax money is wasted on paying civil servants to deal with procurement questions with regard to funding for universities, as well as in misallocation of funds due to bureaucrats’ lack of expertise and specialist knowledge necessary to know the correct funding decisions, which independent universities would be able to make on their own more efficiently.

Second, when the state funds all university education for free, funding will be allocated to unprofitable courses. As there is no profit motive or price mechanism driving these decisions, there is no way of reaching an efficient decision except by guesswork.

The funding of students who are not really interested in attending university or who are apathetic toward higher education creates the third problem. Such students only attend because it is free to do so, and it would be much better to enact a system whereby such students cannot claim a trip to university as an entitlement. A moral hazard problem emerges among such students. They are allowed to reap all the benefits of education, while needing to incur none of the costs. The student who goes to university to waste three or four years and study an easy liberal arts course imposes an unjust cost on society, who has to pay for these students who are not in university to gain from it, but merely to waste time and not work hard.

The fourth problem of free university education is saturation of degree-holders in the market. In order to have value, a degree must be a signal of quality. When everyone has a degree, the value of such a qualification plummets. The ability for employers to ascertain high quality potential employees is thus presented with greater difficulty in making a selection. The flipside of this is that graduates end up serving in jobs that do not require a degree-holding individual to do them. Thus, a system of fees is superior to free education because it allows for more efficient allocation of resources to universities and to individuals.

Reforming Higher Education

The way forward for higher education demands serious consideration. We are living in the midst of what could well prove to be a true bubble in the higher education market. What will happen when the bubble bursts is an open question.

Reform must focus on removing existent distortions on the incentives of students and education-providers alike. The answer lies in restoring sanity to the marketplace, not increasing the influence of an already over-mighty government in education.

“Free” College is a Dangerous Pipe-Dream

Somewhat Reasonable - July 12, 2014, 6:04 PM

College education has more and more been described by the political left as a right to which citizens ought to be entitled. This view has been popularized among left-leaning students, many of whom are energized by ruinously expensive college loans. They clamor for the “fair solution”, namely that the government should pay for all of it. The effort to make college a right is a disastrous proposition. It is a dangerous pipe-dream that could devastate an already rickety higher education sector. There are problems with the way student loans and college fees operate at present, but this is not the way to fix it.

There is no fundamental right of individuals to be allowed to take four years free of charge to learn new skills that will benefit them or how to be better citizens. The state’s duty is to provide a baseline of care, which in the case of education secondary school more than provides. If individuals want more they should pay for it themselves.

Higher Education is a Service

College education, like any professional skills-development undertaking, is a service, one that people should pay for. Rights exist to provide people with the necessities of life. Some people may never have the “opportunity” (ie. wealth) to visit Hawai’i, yet that is not unfair and the state should not be expected to fund every citizen’s tropical vacation.

Yet even in the presence of fees, access to scholarships and loans make it possible for people from disadvantaged economic backgrounds to find their way into university. In this way there is a degree of equality of opportunity in so far as those who are able are afforded the opportunities financial incapacity would deny them. If people want to take advantage of the networking opportunities available in university and the employment benefits available to graduates, then they may pay for it.

Endless Entitlements, Endless Costs

Every action has an opportunity cost. If people are willing to take loans to pay for the education that will likely allow them to earn far more than they would without one, then they should be willing to pay for the privilege.

Furthermore, it can actually be quite beneficial to society at large, to an extent, that university graduates seek swift employment due to debt, since it forces them to become productive members of society more rapidly than they might have done. For example, in Ireland where higher education is free graduates often take a year or two to travel and “find themselves” while giving little or nothing back to the society that has financed their degrees. It is good that people begin contributing to the economic life of society after graduating from university, rather than frittering away their youths in unproductive pursuits.

The social-democratic model, most prevalent in Europe, is a failure. The system of paying for universal healthcare, education, pensions, etc. threatens to bankrupt the countries maintaining them; it is simply unsustainable. The cost of paying for free university education is ruinously high. The government money needed to be channeled into universities to provide for free education, as well as into various other generous social welfare benefits, has been a case of borrowing from future generations to finance current consumption. For these countries to survive, and lest other countries attempt to follow suit with similar models, they must rethink what they can afford to provide freely to citizens.

In the case of education, it seems fair to say that all states should offer access to their citizens to primary and secondary education opportunities, since the skills acquired during such education are absolutely necessary for citizens to function effectively within society; reading, writing, basic civics, etc. are essential knowledge which the state is well-served in providing.

University, on the other hand, is not essential to life in the same way. People can be functional and responsible citizens without it; it can be nice to attend, but one can live effectively and prosper without it. For this reason, the government ought to consider university in the same way it does any non-essential service; people may pay for it if they wish to partake, but they cannot view it as an entitlement owed by the state that will simply provide it to everyone. The cost is just too high, and the state must act from a utilitarian perspective in this case. Instituting fees will place the cost of education upon those wishing to reap the benefits of education, and not on the taxpayer.

Inevitable Inefficiency

When the state offers a universal service, inefficiencies inevitably arise with its provision. There are four principal economic problems that arise from free university education.

First, there is a major problem of resources being lost to bureaucracy. In a state-funded university system, tax money is wasted on paying civil servants to deal with procurement questions with regard to funding for universities, as well as in misallocation of funds due to bureaucrats’ lack of expertise and specialist knowledge necessary to know the correct funding decisions, which independent universities would be able to make on their own more efficiently.

Second, when the state funds all university education for free, funding will be allocated to unprofitable courses. As there is no profit motive or price mechanism driving these decisions, there is no way of reaching an efficient decision except by guesswork.

The funding of students who are not really interested in attending university or who are apathetic toward higher education creates the third problem. Such students only attend because it is free to do so, and it would be much better to enact a system whereby such students cannot claim a trip to university as an entitlement. A moral hazard problem emerges among such students. They are allowed to reap all the benefits of education, while needing to incur none of the costs. The student who goes to university to waste three or four years and study an easy liberal arts course imposes an unjust cost on society, who has to pay for these students who are not in university to gain from it, but merely to waste time and not work hard.

The fourth problem of free university education is saturation of degree-holders in the market. In order to have value, a degree must be a signal of quality. When everyone has a degree, the value of such a qualification plummets. The ability for employers to ascertain high quality potential employees is thus presented with greater difficulty in making a selection. The flipside of this is that graduates end up serving in jobs that do not require a degree-holding individual to do them. Thus, a system of fees is superior to free education because it allows for more efficient allocation of resources to universities and to individuals.

Reforming Higher Education

The way forward for higher education demands serious consideration. We are living in the midst of what could well prove to be a true bubble in the higher education market. What will happen when the bubble bursts is an open question.

Reform must focus on removing existent distortions on the incentives of students and education-providers alike. The answer lies in restoring sanity to the marketplace, not increasing the influence of an already over-mighty government in education.

Categories: On the Blog

Liberty and Freedom Under Fire

Somewhat Reasonable - July 12, 2014, 5:48 PM

Most Americans would agree that liberty and freedom are values fundamental to our nation, but, if questioned, do they really know the intent of their meanings, or have they changed through time?  David Hackett in his book,Liberty and Freedom: A Visual History of America’s Founding Ideas, shows how liberty and freedom form an intertwined strand that runs through the core of American life. But like DNA, liberty and freedom have been transformed and recombined with every generation. Hence, the earliest colonies shared ideals of liberty and freedom may have evolved into different meanings today.

According to David Hackett, a historian at Brandeis University:

“Most Americans do not think of liberty and freedom as a set of texts, or a source of controversies or a sequence of controversies or a system of abstractions.  They understand these ideas in another way, as inherited values that they have learned early in life and deeply believe.”

The words themselves have differing origins: the Latinate “liberty” implied separation and independence, while the root meaning of “freedom” speaks of attachment, such as the rights of belonging in a community of free people.  In that the root meanings of freedom and liberty are not merely different, but instead are of two opposing concepts — separation vs. connection — it stands to reason that tension between the two values has been a source of conflict and creativity throughout American history.

In “Lincoln about freedom”, Lincoln, when speaking in Chicago in July of 1858, voiced how two different but incompatible ideas could be called “liberty”, further noting the second definition as tyrannical in nature.  Lincoln viewed liberty as the cornerstone of the Republic as enshrined in the Declaration of Independence.  To Lincoln, liberty, work and justice were closely connected concepts.  Lincoln reflected that the world has never had a good definition of the word liberty.  Lincoln believed that each individual is naturally entitled to do as he pleased with himself and the fruits of his labor, also realizing that others used liberty to mean for some men to do as they pleased with other men and the product of their labors.

Seventy eight years prior to Lincoln’s Chicago liberty remarks, on Christmas Day, 1780, Thomas Jefferson, author of the “Constitution,”  proclaimed his “Empire of Liberty” concept, thus laying out the principle foundations of a very important concept of liberty.

Jefferson believed it was the United States of America’s responsibility to the world to promulgate freedom and liberty wherever possible.  America’s example would assure all people everywhere that they have the ability and right to determine their own lives and commerce without being coerced by brutal despots.

Although Jefferson’s “Empire of Liberty” laid out a vision of an internationalist America as opposed to a provincial one, Jefferson did warn against America becoming involved in “entangling alliances”, an argument often invoked by American politicians when they oppose aiding those seeking to democratize their countries.

Present day obstacle to Liberty and Freedom

Liberty allows each of us to achieve what we might of our lives.  As stated by Lord Action:  “Liberty is not a means to a higher political end, it is itself the highest political end.”  Matt Kibbe in his book, “Don’t Hurt People and Don’t Take Their Stuff,” takes a stand for individual liberty, laying out what we must do to preserve our freedom.  In a nutshell, simple and straightforward, Kibbe describes liberty as:  “Don’t hurt people, and don’t take their stuff.”

Continual decisions made in Washington, D.C. about what to do for us, to us, or even against us, are having an adverse impact on the lives of the American people, young and old. Gradually our freedoms are removed, one intrusive law after another, and always with the excuse it is for our own good.  Men must be able to have the liberty to make their own choices, without a “nanny” government deciding what is best for everyone.  We must wean those in society who have become entrapped in a “cradle to grave” dependence upon government.   James Madison proclaimed, “There are more instances of the abridgment of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpation.”

Young people can’t find jobs, millions of Americans are losing their health care plans; ones they were promised have not materialized.  We are all being targeted, monitored, conscripted, induced, taxed, subsidized, regulated, and otherwise manipulated by someone else’s agenda, all based on someone else’s decisions made in some secret meeting or closed-door legislative deal.

Usurping of Constitution threatens Liberty and Freedom

Obama wasn’t bluffing when he smugly declared, “I’ve got a pen, and I’ve got a phone.”  President Obama has already acted unilaterally on a wide range of issues, both domestic and foreign, with or without constitutional authority or congressional approval. It was never the intent that any president have the authority to ignore Congress or make and change laws through Executive Orders, and certainly not out of frustration due to an opponent’s refusal to roll over and approve his agenda.

Obama’s actions constitutes an alarming rise of one-man rule and the erosion of the once cherished concepts of liberty and freedom as envisioned by our Founding Fathers.  More than in prior times, Democrats are invariably placing their party’s interests above those of the nation and also above the law. Illinois Senator Dick Durbin noted that a year had passed since the Senate passed a sweeping immigration reform bill, and urged House Speaker John Boehner (R-Ohio) to bring a similar bill to the floor of the House with the warning:  if he does not, the president will borrow the power that is needed to solve the problems of immigration.”

Senator Durbin seems to have forgotten it is the duty of the different branches of government to be independent in their judgments when they examine bills, so that each bill is thoroughly examined from different perspectives before being approved into law.  Rushing through an important and controversial bill such as changing our immigration law invites problems. The Affordable Care Act, among other recent examples, provides the proof.  Could many of the resulting problems we are experiencing today be the result of our elected officials not even reading the bills they sign, but instead “rubber stamping” them depending upon their political party leaders’ orders?

The present crisis of children from Central America crossing over our southern border, is an example of the President’s abuse of authority, with heartbreaking results.  Congress refused to pass the DREAM Act, and rather than work with those who had different opinions, Obama side-stepped Congress and issued an executive order to implement important provisions of it.  That sent a signal to Central American countries that children would be allowed sanctuary when they crossed over into America.

In a victory for religious freedom, the Supreme Court ruled on Monday, June 30, 5-4 in favor of Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp. in the case Burwell v. Hobby Lobby (formerly named Sebelius v. Hobby Lobby). The case was the strongest legal challenge to Obamacare since 2012.  However, before Conservatives become too excited, it must be noted the decision was a “one vote” victory demonstrating the strong division within the Supreme Court.

As education involves children and America’s future, under Common Core liberty has been scrubbed as a founding principle.  How could this be when liberty has such a strong, historical significance for Americans. Liberty equates to personal freedom and the right of citizens to live their lives without the intrusion of tyrannical government.

Why the concern?

It is not surprising that according to a Gallup international poll released Tuesday, July 1, Americans have become significantly less satisfied with the freedom to choose what they want to do with their lives. This is a 12-point drop from 2006, which pushes the United States from among the highest in the world in terms of perceived freedom to 36th place.

What has caused this alarming change in our population?  There are many causes to consider.  The federal government has gradually taken power from the states, while giving more authority to the federal government and even the United Nations.  We see the evidence of that in the changes United Nations Agenda 21 has brought to our states.  Individual American freedoms are being forfeited based on a United Nations agenda.

The erosion of our freedoms has concerned citizens searching for ways to reverse that trend by examining the reasons for the changes.  Some blame our elected officials, as many of them seem to lack the courage and convictions of our forefathers.  Rather than make decisions they know are best for America, they choose to take the easy course and follow the crowd.  They should consider this quote from John Quincy:  “Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.” Others blame liberal professors dominating classrooms across American with their socialist/communists socialist/communist doctrine, infecting their students with anti-American rhetoric.

An interesting suggestion for the decrease in America’s love for freedom, comes from writer Kenneth Minogue, who in his book “The Servile Mind:  How Democracy Erodes the Moral Life”, says that “traditional societies and totalitarian states in the twentieth century suggested that many people are, in most circumstances, happy to sink themselves in some collective enterprise that guides their lives and guarantees them security.”  That is believable knowing that almost half of our nation now receives some type of government assistance. Having left a corrupted government, our forefathers fled to America in a quest and passion for freedom, the chance for every man to make his own way; to be a master of his own life.  We must not let that spirit die.

Calling all patriots to make voices heard!

Independence Day is the perfect time to remind ourselves of the amazing history of our country, to consider the men and women who allowed America to prosper.  Let us reflect upon the wise patriots who have dotted our history and changed our lives through their devotion to America.  We would do well to heed their wisdom, because not all of the changes we have recently seen in America have been profitable.   We may need to reflect upon our past for examples of courage and self-reliance.  Our schools must promote the ideals of patriotism, and allow students to know and value our history.  Our children should be proud of our nation, and that will happen as they review our history and recognize the gift they have been given; a gift that must be guarded for our future.

Dinesh D’Souza’s new film, “America,” released in theaters on July 2nd, has a real chance to help shape the future of our nation.  It is a movie that all should be encouraged to see, young and old alike, to be reminded that America is the world’s brightest hope for the future.  The film combats the destructive progressive ideology that seeks to undermine and abolish some of America’s founding ideas.  Check out the trailer here for “America.”

Will this nation remain great?  Can it even be saved.  It is up to Americans who love their country to make their voices heard.  This nation stands at a crossroads.  Will liberty and freedom remain alive and be enjoyed by Americans now and in our future, or will we wander into the dangerous territory of a tyrannical government?  Americans must be vigilant; seek, find, and vote for the candidates who best represent their ideals and those of our forefathers.  Do not be fooled by rhetoric over actions or promises over facts.  America’s future depends upon the actions of patriots, who are vigilant.  Patriots can be found from sea to shining sea, and we suspect all who read and agree with the points in this article are a part of that prestigious group.  Together, we can make a positive difference.

 

[Originally published at Illinois Review]

 

Categories: On the Blog

Food Prices Are Soaring And Washington Doesn’t Care

Somewhat Reasonable - July 12, 2014, 1:26 PM

Today’s economy is driven by Washington in more than just determining the location of Maserati dealerships. We see the ramifications of current government policies in numerous obvious ways. Make full-time employment more expensive with required benefits, and suddenly there are more part-time jobs; provide ample benefits and low eligibility standards for defining disabled workers, and suddenly there are more long-term unemployed going on SSDI; keep interest rates at zero, and suddenly there are more elderly workers; end unemployment insurance, and suddenly you see people accepting jobs they were reluctant to take; and as we’ve seen at the state and local level, raise the minimum wage, and suddenly teens are struggling to find work.

In all the debates over these policies, interested parties go back and forth over how and when to use the knobs and levers of government to achieve certain ends, concerning mobility and inequality and job growth and a host of other goals. But lost in these debates over statistics and trendlines are the ramifications of government policy when it comes to the (less politically sexy) burdens faced by most middle and working class Americans. In these arenas, policy debates are almost completely divorced from the experiences of most Americans – particularly on the right, where Republicans talk over and over again about the burdens of taxes without addressing the costs of energy, food, and health care, all of which are squeezing household budgets.

We have a perfect example of this within the current debate over rising food prices, where a bunch of policy elites are currently debating the question: when is food inflation real?

U.S. food prices are on the rise, raising a sensitive question: When the cost of a hamburger patty soars, does it count as inflation? It does to everyone who eats and especially poorer Americans, whose food costs absorb a larger portion of their income. But central bankers take a more nuanced view. They sometimes look past food-price increases that appear temporary or isolated while trying to control broad and long-term inflation trends, not blips that might soon reverse…

The consumer price of ground beef in May rose 10.4% from a year earlier while pork chop prices climbed 12.7%. The price of fresh fruit rose 7.3% and oranges 17.1%. But prices for cereals and bakery products were up just 0.1% and vegetable prices inched up only 0.5%. The U.S. Department of Agriculture predicts overall food prices will increase 2.5% to 3.5% this year after rising 1.4% in 2013, as measured by the Labor Department’s consumer-price index. In a typical supermarket, shoppers are seeing higher prices around the store’s periphery, in the produce section and at the meat counter.

Now, a rational person might conclude that measuring food inflation without counting meat, fruit, and vegetables is like measuring the unemployment rate without counting men. Here are the increases in a number of food costs, as well as the average hourly earnings, since the end of the recession (June 2009) through May 2014.

Ouch. The increases since June 2009 are: Beef and veal: +35.2%, Pork: +27%, Fish and seafood: +20.1%, Eggs: +33.1%, Dairy: +16.1%, Fresh Fruits: +13.8%. At the same time, Average Hourly Earnings have increased by 10.1%.

So why aren’t politicians talking about this? It’s absolutely clear that Fed, farm, energy, and trade policy have all served to drive up these costs. Well, tearing down those policies runs contrary to the interests of Washington interest groups heavily invested in controlling those knobs and levers. But a bigger part of the problem is priorities driven by a linguistic trap. Politicians who are small businessmen or attorneys by training talk about the marketplace as a place full of entrepreneurs, and talk about government in terms of its size and tax burdens and barriers to job growth. They’re caught in the trap of viewing all these things in aggregate.

But that’s not how the middle or working class think about the economy. A politician talking about “creating new jobs” or “spurring investment” of “increasing exports” sounds nice, but that’s all it is – nice-sounding. Most Americans worry generally about the lack of jobs and growth, sure, but they are far more worried about what they perceive as a higher cost of living at a time of stagnant wages. They have expectations for the life they can provide for their families and children, and they’re worried they won’t be able to meet those expectations. This is all about delivering the life they want to those they care for. But when they look to government, they don’t see interest in that. Politicians insist that inflation is under control, just so long as you don’t include food, education, health care, housing, or energy, so it’s time to start focusing on More Important Things. You wanted cheeseburgers? Well, the Fed thinks it’s fine if you settle for chicken.

The opportunity is there to change the conversation. In so many of the areas where we’re seeing price inflation, government policy is contributing to the trendline, raising the costs not just of food, but of education, health care, energy, and housing, and putting pressure which multiplies for those with kids. All it takes is a willingness to go after those policies, and for a few smart politicians to start rejecting the priorities of the boardroom table in favor of the kitchen table.

Subscribe to Ben’s daily newsletter, The Transom.

 

[Originally published at The Federalist]

Categories: On the Blog

Update on the Lyft/NYC dispute

Out of the Storm News - July 11, 2014, 3:20 PM

Since I wrote about the Lyft/New York City fight for The Weekly Standard this morning, it has come out that state Attorney General Eric Schneiderman is suing the company for daring to offer free rides to the residents of taxi-starved outer boroughs.

On its face, this resembles something out of an Ayn Rand novel, minus the purple prose, 100-page lectures and violent sex. As best as I can tell, the practical argument against letting Lyft operate and provide rides for free seems to come down to because…reasons.

I can’t really find any of those reasons and a few things that sound scary—the attorney general claims that Lyft started operating in other cities across New York State without official permission—should actually be comforting to those worried about the company’s safety record. Since it’s operated incident-free in these places, that’s a good sign that nothing serious is going to go wrong in New York City either.

For now, however, there’s an easy enough compromise that everyone should be able to live with: let anyone else who wants to, offer rides for free. If there are real regulatory questions to be answered, the two weeks that Lyft has already committed to providing free service should be way more than enough to get them answered and fulfill whatever bureaucratic requirements the city wishes to impose.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

New York threatens to fine car service $2,000 for giving free rides

Out of the Storm News - July 11, 2014, 12:20 PM

UPDATE: New York state Attorney General Eric Schneiderman is indeed now suing Lyft for daring to offer free rides. See the update here.

As anyone who has visited New York City knows, getting a taxicab in the city can prove very, very difficult. And finding a driver that speaks English, has working air conditioning, will let a visitor pay by credit card and knows directions to major landmarks can be even harder. That’s why it’s utterly bizarre that the city is trying to stop drivers from offering taxi-like rides in the city for free.

The underlying cause of the cab shortage, of course, is the city’s antiquated system of taxi medallions that limits a city of 8.4 million people and few parking spaces to about 13,000 cabs—about 4,000 fewer than existed in in 1937 when the city had a million fewer residents.

To their credit, the city’s elected leaders have moved to remedy that situation by slightly increasing the supply of medallions, creating new, green-colored taxis to serve outlying areas, and letting Uber, a trendy company best known for its high-end “black car service,” operate. (Albeit with constant bureaucratic meddling.)

But the city’s bureaucratic mandarins don’t seem to want to allow their subjects too many new options. Exhibit A is their treatment of a newcomer to the market, the San Francisco-based company called Lyft, which puts giant pink mustaches on the front of its cars and encourages drivers and fares to fist-bump. The company, scheduled to debut in taxi starved Brooklyn and Queens on July 12, was planning to offer its services for free to build market share during its first two weeks in operation.

The city’s response: If drivers so much as dare to give people free rides, they’ll face $2,000 fines and might have their cars impounded if they, say, fail a spot engine emissions check. Given that Lyft and its competitors (Uber’s UberX service and Sidecar) largely rely on people driving their personal cars, this is a draconian penalty, to say the least. Indeed, there really doesn’t seem to be a limiting principle that would stop the city from applying the same logic to people who give rides to friends. After all, they’re competing with taxis too.

The city does, of course, have some legitimate interest in overseeing the safety of companies that offer rides for money. But given that Lyft, Uber, Sidecar and some smaller players have all already compiled better-than-taxis safety records in dozens of markets where they already operate, i’’s difficult to figure out why the process should be complicated or involved. In the end, if a private company wants to offer the city’s resident something for free, the bureaucrats really need to think about getting out of the way.

Taxing The King

Somewhat Reasonable - July 11, 2014, 12:11 PM

Anyone that is remotely a sports fan, or has even glanced at ESPN for more than 15 seconds over the past few days, is well aware that the basketball world is holding its collective breath waiting for LeBron James and Carmelo Anthony to make their decision on what jersey they will be suiting up in next year.

As of this writing the Twittersphere, and most likely the universe itself, is still waiting on “King James” in particular to make the decision that most likely will open the floodgates and cause the rest of the free agency dominoes to fall. In light of the media circus surrounding this ordeal The Heritage Foundation’s newly launched news site, The Daily Signal, published a graphic and story last week that showed the differences in state income tax James would incur depending on which team he selected of the ones he was considering:

I found it to be an interesting view of a factor in James’ decision that may not be as publicized as “The Letter” or the supporting cast of teammates, but one that James may be seriously considering like many other professional athletes in recent memory.

As the buzz around “Decision 2.0” has grown over the past several days, I felt intrigued to take the numbers a little further and see how much James would owe in state income taxes based on every team in the NBA. To do so I utilized the same factors as Heritage; an estimated $20,700,000 annual salary, no city tax or deductions, and the highest income tax bracket possible. The rates I used in my calculation were the state income tax rates for 2014 listed by the Tax Foundation. Before getting into the numbers, yes, I am aware that he would never go play for Milwaukee:

NBA Teams

Team Owed Taxes Tax Rate Team Owed Taxes Tax Rate Atlanta $1,242,000 6 Golden State $2,753,100 13.3 Boston $1,086,750 5.25 L.A. Clippers $2,753,100 13.3 Brooklyn $1,825,740 8.82 L.A. Lakers $2,753,100 13.3 Charlotte $1,200,600 5.8 Sacramento $2,753,100 13.3 Chicago $1,035,000 5 Portland $2,049,300 9.9 Cleveland $1,116,144 5.392 Minnesota $2,038,950 9.85 Dallas $0 0 Brooklyn $1,825,740 8.82 Denver $958,410 4.63 New York $1,825,740 8.82 Detroit $879,750 4.25 Milwaukee $1,583,550 7.65 Golden State $2,753,100 13.3 Atlanta $1,242,000 6 Houston $0 0 New Orleans $1,242,000 6 Indiana $703,800 3.4 Charlotte $1,200,600 5.8 L.A. Clippers $2,753,100 13.3 Cleveland $1,116,144 5.392 L.A. Lakers $2,753,100 13.3 Boston $1,086,750 5.25 Memphis $0 *0 Oklahoma City $1,086,750 5.25 Miami $0 0 Chicago $1,035,000 5 Milwaukee $1,583,550 7.65 Utah $1,035,000 5 Minnesota $2,038,950 9.85 Denver $958,410 4.63 New Orleans $1,242,000 6 Phoenix $939,780 4.54 New York $1,825,740 8.82 Detroit $879,750 4.25 Oklahoma City $1,086,750 5.25 Indiana $703,800 3.4 Orlando $0 0 Philadelphia $635,490 3.07 Philadelphia $635,490 3.07 Dallas $0 0 Phoenix $939,780 4.54 Houston $0 0 Portland $2,049,300 9.9 Memphis $0 *0 Sacramento $2,753,100 13.3 Miami $0 0 San Antonio $0 0 Orlando $0 0 Utah $1,035,000 5 San Antonio $0 0

The obvious observation here is that James has saved himself quite a nice chunk of change by spending the last 4 years in South Beach as opposed to any of the 22 teams that reside in states which levy state income taxes.

Now on a statistically less conclusive path, is it a coincidence that the past 4 NBA championships have been won by teams that reside in states with no income tax? Maybe. Is it a coincidence that of the ten teams with the highest state income tax burden only the Lakers have won a championship since the 1977 Portland Trailblazers? I will let you decide.

Also, I know that Toronto was not included, but as the Canadian province of Ontario is not part of the greatest country on earth I hope you will understand why I omitted the Raptors.

After finding the state income tax hit James would take for all NBA teams, I wanted to go a little further again, so I went ahead and did the calculation for an imaginary world where all 50 states had an NBA team. Yes, I am aware that there will never be an NBA franchise in Alaska, Hawaii, Maine, etc., but let’s see what it would look like if joining the Alaska Quake was an option:

State Owed Taxes Tax Rate State Owed Taxes Tax Rate Alabama: $1,035,000 5 California: $2,753,100 13.3 Alaska: $0 0 Hawaii: $2,277,000 11 Arizona: $939,780 4.54 Oregon: $2,049,300 9.9 Arkansas: $1,449,000 7 Minnesota: $2,038,950 9.85 California: $2,753,100 13.3 Iowa: $1,858,860 8.98 Colorado: $958,410 4.63 New Jersey: $1,856,790 8.97 Connecticut: $1,386,900 6.7 Vermont: $1,852,650 8.95 Delaware: $1,366,200 6.6 New York: $1,825,740 8.82 Florida: $0 0 Maine: $1,645,650 7.95 Georgia: $1,242,000 6 Wisconsin: $1,583,550 7.65 Hawaii: $2,277,000 11 Idaho: $1,531,000 7.4 Idaho: $1,531,000 7.4 Arkansas: $1,449,000 7 Illinois: $1,035,000 5 South Carolina: $1,449,000 7 Indiana: $703,800 3.4 Montana: $1,428,300 6.9 Iowa: $1,858,860 8.98 Nebraska: $1,415,880 6.84 Kansas: $993,600 4.8 Connecticut: $1,386,900 6.7 Kentucky: $1,242,000 6 Delaware: $1,366,200 6.6 Louisiana: $1,242,000 6 West Virginia: $1,345,500 6.5 Maine: $1,645,650 7.95 Georgia: $1,242,000 6 Maryland: $1,190,250 5.75 Kentucky: $1,242,000 6 Massachusetts: $1,086,750 5.25 Louisiana: $1,242,000 6 Michigan: $879,750 4.25 Missouri: $1,242,000 6 Minnesota: $2,038,950 9.85 Rhode Island: $1,239,930 5.99 Mississippi: $1,035,000 5 North Carolina: $1,200,600 5.8 Missouri: $1,242,000 6 Maryland: $1,190,250 5.75 Montana: $1,428,300 6.9 Virginia: $1,190,250 5.75 Nebraska: $1,415,880 6.84 Ohio: $1,116,144 5.392 Nevada: $0 0 Massachusetts: $1,086,750 5.25 New Hampshire: $1,035,000 5 Oklahoma: $1,086,750 5.25 New Jersey: $1,856,790 8.97 Alabama: $1,035,000 5 New Mexico: $1,014,300 4.9 Illinois: $1,035,000 5 New York: $1,825,740 8.82 Mississippi: $1,035,000 5 North Carolina: $1,200,600 5.8 New Hampshire: $1,035,000 5 North Dakota: $666,540 3.22 Utah: $1,035,000 5 Ohio: $1,116,144 5.392 New Mexico: $1,014,300 4.9 Oklahoma: $1,086,750 5.25 Kansas: $993,600 4.8 Oregon: $2,049,300 9.9 Colorado: $958,410 4.63 Pennsylvania: $635,490 3.07 Arizona: $939,780 4.54 Rhode Island: $1,239,930 5.99 Michigan: $879,750 4.25 South Carolina: $1,449,000 7 Indiana: $703,800 3.4 South Dakota: $0 0 North Dakota: $666,540 3.22 Tennessee $0 *0 Pennsylvania: $635,490 3.07 Texas: $0 0 Alaska: $0 0 Utah: $1,035,000 5 Florida: $0 0 Vermont: $1,852,650 8.95 Nevada: $0 0 Virginia: $1,190,250 5.75 South Dakota: $0 0 Washington: $0 0 Tennessee $0 *0 West Virginia: $1,345,500 6.5 Texas: $0 0 Wisconsin: $1,583,550 7.65 Washington: $0 0 Wyoming: $0 0 Wyoming: $0 0

As interesting as the figures may be to look at and compare, there are not too many surprises. Income taxes are high in states such as California, Oregon, Minnesota, New Jersey, and New York.

However, after looking at this chart I will tell you this, if I was a player for Sacramento back in May 2013 I would have done everything in my power to grease the wheels for that move to Seattle.

The latest report seems to be that James will be heading back home to Cleveland, although that seems to change by the minute from various “sources”, and these sources seem to be as reliable as the Obamacare website. The truth of the matter is that for someone whose net worth is estimated at nearly $270 million, taking the $1.1 million annual hit of income taxes may not matter a whole lot. With that being said  I must mention that signing with my hometown Pistons over the Cavaliers would annually save him $236,394 a year (I am just saying that could buy him one of these).

As I am writing this James could be making his decision  over Twitter, on Good Morning America, or at a UN Global Council Meeting, but will we ever know if taxes played a role? Probably not, but based on the statistics I think the main takeaway is that legislators in states such as Oregon, Minnesota, New York, and Wisconsin should really consider repealing or lowering (or at least make it flat!) their state income tax rates if they want to bring home some Larry O’Brien trophies in the future. California should be included on that list as well, but I guess that makes the success of the Lakers even that much more impressive.

While the factor of state income taxes may not matter as much to the true megastars such as James and Anthony, it very well could play a crucial role in the decision making process of lower level players with less money to work with.

So good luck to James wherever he ends up, but it will still be hard for me to understand how he could pass up the chance to save $1.1 million a year in taxes if he chooses to leave Florida for Ohio.

 

*While James would not have to pay state income tax on his salary in Tennessee, he would on investments because of the state’s Hall Tax.

 

Categories: On the Blog
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