Quotulatiousness

November 16, 2018

The political wrangles ahead over the federal carbon tax

Andrew Coyne — for once not beating the drum for electoral reform — discusses the challenge facing the federal government in the wake of provincial resistance to their carbon tax plans:

But the real test, of course, is yet to come. The provinces cannot stop the tax on their own. The court challenges are likely to fail. Provinces that refuse to implement carbon pricing will simply find the federal “backstop” tax imposed in its place. It is the election that will decide the issue, not duelling governments. Or so Conservatives hope.

Certainly there are abundant grounds to doubt the political wisdom of the Liberal plan. A tax, or anything that resembles it, would be a hard enough sell on its own. But a tax in aid of a vast international plan to save the earth from a scourge that remains imperceptible to most voters, to which Canada has contributed little and against which Canada can have little impact, while countries whose actions would be decisive remain inert? Good luck.

What seems clear is that voters’ support for carbon pricing is shallow and tentative. The Conservative strategist who chortled to the National Post that the Liberals are asking Canadians “to vote with their hearts, not their wallets” — an impossibility, he meant — was correctly cynical. Just because people want to save the planet doesn’t mean they want to pay for it.

The best way to read the public’s mood is in the positions of the political parties, who are in their various ways each trying to assure them that it won’t cost them a dime. The Liberal version of this is to promise to rebate the extra cost of the federal tax to consumers — indeed, they pledge, 70 per cent of households will make a profit on the exchange.

The Conservatives have been less forthcoming, but it would appear their plan is to hide the cost, substituting regulations, whose effects are largely invisible to consumers, for the all-too-visible tax at the pump. Here, too, I suspect they may have a better (i.e. more cynical) read on popular opinion. The public often prefer to have the costs of government hidden from them, even if they know they are paying them — even if they know they are paying more this way, as indeed they are in this case. Do what you want to us, they seem to say, just don’t rub our faces in it.

So I would be skeptical about polls showing majority support for the federal plan: 54 per cent, according to Angus Reid, while Abacus finds 75 per cent would either support or at least accept it (versus 24 per cent opposed). These were taken shortly after the announcement of the federal rebates. Yet it is far from evident the rebates will still register with people a year from now. Indeed, the Conservatives barely paused to acknowledge them as inadequate before going on to pretend they had never been mentioned.

November 15, 2018

The Romance of the Rails

Filed under: Cancon, History, Railways, USA — Tags: , , — Nicholas @ 05:00

Randal O’Toole’s new book on North American railways goes straight to my “wish list”. He’s also a long-time fan of railways, but has been forced to admit that attempts to bring back the golden age of rail are wasted effort because railways — especially US and Canadian lines — are built to carry bulk freight efficiently and economically but attempts to also carry large numbers of passengers quickly cannot be successful without building entirely separate (high-speed) lines. This is from the introduction to The Romance of the Rails [PDF]:

Amtrak’s
Eastbound Empire Builder crossing Two Medicine Trestle at East Glacier MT on 20 July 2011.
Photo by Steve Wilson via Wikimedia Commons.

Early in my career, I joined the National Association of Railroad Passengers (NARP) and supported more funding for Amtrak. Later, I realized Amtrak was poorly managed and supported Amtrak reform. More recently, along with NARP founder Anthony Haswell — who is sometimes called the Father of Amtrak — I became completely disillusioned with the idea of government-run trains and have argued for abolishing the heavily subsidized federal passenger rail corporation.

My attitudes toward urban transit have also undergone a transition. In 1972, as an undergraduate student, I wrote a paper for the Oregon Student Public Interest Research Group (OSPIRG) advocating low-cost transit improvements in Portland aimed at attracting people out of their automobiles and reducing air pollution. When the director of OSPIRG later became general manager of TriMet, Portland’s transit agency, he implemented some of those improvements, and transit ridership surged. To be honest, I didn’t propose rail transit reform in 1972 simply because I didn’t think there was much chance of that happening. However, I later became more skeptical of rail transit when Portland built an expensive light-rail line, followed by more lines that were even more expensive.

That skepticism has led some people to call me “anti-transit” and “anti-passenger train.” But I’m not. If someone could design a rail system that attracted riders and efficiently moved them from place to place, I’d be the first to endorse it. As this book will show, however, this is no more likely to happen than the freight railroads converting back to steam power. The next technology replacement will not be people trading in their cars for high-speed trains and light rail. Rather, it will be people trading in their human-driven cars for increasingly autonomous cars that drive themselves.

The short answer to the question of why passenger trains and streetcars have been replaced by planes, cars, and buses is that rails are more expensive and less flexible than the alternatives. To understand why, the first 10 chapters of this book will delve deep into the history of rail to show how passenger rail transportation once worked, who it worked for, and what has changed so that it no longer works today. This history demonstrates why statements such as, “High-speed trains have faster downtown-to-downtown times than flying” or “Light rail provides an alternative to congested roads going to work” are not relevant. Chapter 11 discusses the question of why passenger rail seems to work in Europe and Asia but not in North America.

Chapters 12 through 17 will each focus on a different kind of passenger rail, from streetcars to high-speed rail. Finally, Chapter 18 will demonstrate why we love trains, but also why we can’t expect them to do for us what they did in the 19th century.

Passenger rail was once an important part of our history, but today it represents a drag on our economy. I still love passenger trains, but I don’t think other people should have to subsidize my hobby.

Amazon’s HQ$2Bn decision

Filed under: Business, Economics, Government — Tags: , , , , , — Nicholas @ 03:00

If you had any doubt that the Amazon HQ2 competition was about anything other than trolling for economic bribes, this should banish the thought:

Amazon is getting some prime real estate.

In exchange for more than $2 billion in economic incentives, the online shopping giant will locate a pair of new corporate headquarters just across the Potomac River from Washington, D.C., and just across the East River from Manhattan. Tuesday’s much-anticipated announcement of the locations for Amazon’s “HQ2” also included details — which had previously been kept from the public — about the economic incentives that successfully lured the Seattle-based firm to the east coast’s political and economic hubs.

Amazon says it will invest $5 billion and create more than 50,000 jobs across the two new locations, with at least 25,000 employees at each of its new corporate campuses, to be located in Virginia’s Crystal City and New York’s Long Island City. Nashville wins a consolation prize: a new supply chain and logistics center that promises 5,000 jobs in exchange for $102 million in economic incentives.

In New York, Amazon will receive $1.2 billion in refundable tax credits through a state-level economic development program and a cash grant of $325 million that’s tied to the construction of new buildings at the Long Island City location over the next 10 years. In Virginia, the state is ponying up $573 million in tax breaks tied to the creation of 25,000 jobs, and the city of Arlington will provide a cash grant of $23 million over 15 years funded by an existing tax on hotel rooms.

Yes, the numbers are staggering — New York state’s pledge of $1.52 billion for 25,000 jobs works out to more than $60,000 in taxpayer support per new job created — but Amazon appears to have selected New York and the D.C. area based on more than just how many zeroes local officials agreed to put on the giant cardboard check.

After all, New Jersey offered Amazon $5 billion (with another $2 billion from Newark), and Maryland offered $8.5 billion. Yet Amazon passed them both over to pick their neighbors.

October 5, 2018

A quick way for Doug Ford to reduce Ontario’s electrical rates

Filed under: Business, Cancon, Economics, Government — Tags: , , , — Nicholas @ 03:00

Ross McKitrick, Elmira Aliakbari and Ashley Stedman outline one of the fastest ways for the Ontario government to get Ontario electricity rates back down toward the national average:

The Ford government seems to want to repair Ontario’s electricity market. It recently moved to scrap the Green Energy Act and reportedly plans to eliminate or alter the so-called Fair Hydro Plan.

While these moves will mitigate future price increases, they won’t reduce current electricity prices. In fact, according to a Fraser Institute study being released today, to lower existing prices the government must reduce what’s known as the “Global Adjustment” — an extra charge on electricity. It won’t be easy, but reducing the global adjustment could bring down electricity prices by about 24 per cent.

This would be welcome news for Ontarians, as electricity prices increased 71 per cent from 2008 to 2016, far outpacing electricity-price growth in other provinces.

[…]

Between 2008 and 2017, the GA grew from less than one cent per kilowatt-hour (a common billing unit for energy) to about 10 cents, accounting for the entire increase in Ontario electricity commodity costs over that time. Therefore, the key to lowering power prices in Ontario is to reduce the GA.

In our study, we use reports published by the Ontario Energy Board to breakdown the GA to better understand where the money goes and provide specific recommendations on how to lower electricity prices. We found that the largest component of the GA charge — nearly 40 per cent — funds subsidies paid to renewable energy sources (wind, solar, etc.) under feed-in-tariff contracts, yet these sources only provide seven per cent of Ontario’s power output.

And notably, the GA provides almost 90 per cent of revenue earned by renewable generators, with only 10 per cent coming from actual power sales. This overwhelming reliance on government subsidies (paid by ratepayers) rather than actual electricity sales reveals how distorted the pricing structure has become in Ontario.

September 14, 2018

A sensible post-Brexit farming policy

Filed under: Britain, Bureaucracy, Business, Economics, Europe, Government — Tags: , , , — Nicholas @ 05:00

Tim Worstall linked to his 2016 post at the Adam Smith Institute that nicely summarizes the best post-Brexit farm policy for Britain:

We have an alternative policy framework to suggest. Let’s just not have a policy. No subsidies, no payments, no department, no Minister, nothing, nowt, zippedy dooh dah. The New Zealand option. You’ve had it good for a century or more now there’s yer bike and have a nice ride.

We would not swear that this is true but we have heard that it is so — British farming has long passed Parkinson’s Event Horizon. There are now more bureaucrats “managing” farming than there are farmers farming. Let’s not pay the farmers anything and thus we don’t need the bureaucrats paying it — a double saving. Instead of £2 to £3 billion a year in taxes going to the farmers, plus whatever the amount again to pay it to them, we could just keep that what, £5 billion? And go and buy food from whomever.

Sounds like a plan really and we recommend it to all. Let’s use Brexit to right some of the wrongs of our current system. One of those wrongs being the incessant whining and demands for bribery from the farming sector.

The correct design of the new domestic agriculture policy is that there isn’t one. And nor is there any funding for either it or its absence. In short Meurig, go away.

September 11, 2018

The tiny, airless, self-censoring world of Canadian literature

Jonathan Kay on a recent thought-crime, show-trial, and tentative rehabilitation of a part-First Nations poet in the minuscule, suffocating world of Canadian literature:

While I rarely like to concede defeat in a Twitter smackdown, I had to admit that this festival’s social-media people had me dead to rights — for it’s absolutely true that Webb Campbell wasn’t censored in any formal sense. None of the events I am describing here involve the government. Nor was Webb Campbell muzzled in any way by Book*hug, which presumably would have been only too happy to have her publish her book elsewhere. Webb Campbell could have put the controversial poem on Facebook, or Tweeted it out line by line. But she did none of this. Instead, she swallowed her pride, signed the confession that had been placed in front of her, and prayed that she would be readmitted into CanLit’s good graces — which, in fact, now seems to be happening, following what seems to have been an elaborate months-long display of performative contrition on Webb Campbell’s part. (The festival’s flacks also were correct that Webb Campbell never asked for my help or advice. Just the opposite in fact: I suspect that the poet would have opposed my involvement, since my views on free speech (and a dozen other topics) mark me as an outsider to her caste, and one badly tainted by cultural wrongthink.)

One thing about Nineteen Eighty-Four that does still ring true about the current age of crowdsourced censorship is the reverse classism at work. In Orwell’s Oceania, the intellectual class is scrutinized relentlessly for the slightest deviation in thought or speech, while “proles” are free to wallow in astrology, smut and sentimental storytelling.

    There was even a whole sub-section — Pornosec, it was called in Newspeak — engaged in producing the lowest kind of pornography, which was sent out in sealed packets and which no Party member, other than those who worked on it, was permitted to look at.

The same principle applies in broad form today. Canadian tabloids publish material every day that would be deemed offensive to Ottawa Writers Festival types in all sorts of ways. But with rare exceptions, it gets a pass, because it is seen, in effect, as a sort of ideological Pornosec. The world of Canadian poetry, on the other hand, is a tiny rarefied world run by, and for, a few hundred Canlit Party members — all relentlessly scrutinizing one another for ideological heresies through the panopticon of social media. In this environment, Webb Campbell’s status as a reliably leftist, thoroughly woke poet who proclaimed her guiding light to be “decolonial poetics” was not a mark in her favor. Just the opposite: It confirmed her status as a full Party member, and therefore strictly subject to all the ideological strictures applicable thereto. When the scarlet letter is sewn upon such a specimen by one publisher within the tiny incestuous world of Canadian poetry, it is sewn upon her by all. And while it was once imagined that artists and writers had a special duty to speak out against censorship, dogma and speech codes, they are now conditioned to believe that their highest duty is toward avoiding offense and staying in their lane.

This, in capsule form, is how crowdsourced censorship works in the literary field. And analogous stories could be told about academia and other creative métiers. It is up to the government to maintain a free marketplace of ideas. But freedom from government censorship doesn’t mean much when the stall-owners in the marketplace of ideas organize their own ideological protection rackets to drive one of their own out of business. Venerable groups that once led the fight for free speech and freedom of conscience, such as PEN and the ACLU, seem completely unequipped to deal with the new threats. Their entire organizational culture always has been directed at pushing back against government monoliths, not decentralized mob subcultures.

But the fact that government has no direct role in this new kind of censorship does not mean that public policy can’t be part of the solution. For while it’s true that government isn’t directly engineering these newly emergent forms of crowdsourced speech suppression, the current public funding model can indirectly encourage them.

The reason Book*hug can pulp Shannon Webb Campbell’s book without worrying much about lost readers or earned revenue is that, to a rough order of magnitude, they don’t have any readers or earned revenue. Like most small, high-concept book publishers in Canada, Book*hug is overwhelmingly dependent on government subsidies, which are what allow it to publish obscure manifestoes and poetry volumes that, outside of copies assigned to review, libraries, friends and family, might be expected to sell a few hundred copies.

Or fewer.

I recently consulted an online index that tracks Canadian book sales. For the latest Book*hug releases, the average number of books sold, per title, for the 15 most recently published books seems to be about 60. The tracking service does not claim to capture all book sales, estimating its accuracy at about 85%. (Direct sales at book-launch events, for instance, may escape capture in the data.) So let us be generous and assume that the average book sells 100 copies, or even double that. It doesn’t matter: In commercial terms, this is a non-entity. Which means there really is little or no financial penalty to be suffered if Book*hug publishes, or doesn’t publish, Shannon Webb Campbell instead of some other author. Everyone in this heavily subsidized subculture is playing with house money — as are the niche literary journals run by charitable entities (including one where I briefly served as editor). And the real asset to be husbanded in all these places isn’t the affection of readers — there often aren’t any — but rather the editors’ reputation for ideological purity among peers, donors and Twitter followers.

It’s the CanLit version of Sayre’s Law: “Academic politics is the most vicious and bitter form of politics, because the stakes are so low.”

September 7, 2018

QotD: Government distortion of the housing market

Filed under: Economics, Government, Quotations, USA — Tags: , , , — Nicholas @ 01:00

Behind the veneer of free-market governance is a deep expanse of government involvement in massive areas of the economy, such as the housing market and health care. People don’t make decisions on housing and health-care concerns every day, but when they do, they would benefit from the information that markets provide about whether they can afford a large house or whether a particular drug is worth the price. Government distortion of these key markets has scrambled these signals.

An annual congressional report, “Estimates of Federal Tax Expenditures,” gives insight into how Washington manipulates supply and demand in these sectors. Consider house prices. This year, Washington will pay homeowners $99 billion in forgone taxes to borrow money to purchase or refinance a house or to sell that house and reap the profit. Americans will buy or sell about $600 billion worth of houses this year. Government subsidy, then, represents nearly one-sixth of this market. The federal government also provides a guarantee for most mortgages, thanks to Fannie Mae and Freddie Mac, the two government-supported mortgage companies that benefited for decades from an implicit government guarantee before they got an explicit guarantee during the 2008 financial crisis.

These subsidies have fired the growth of the housing industry. Between 1975 and 1979, the U.S. Treasury paid out $102.6 billion in mortgage-interest breaks in today’s dollars. Between 2015 and 2019, the Treasury will pay out $419.8 billion in such tax favoritism — a more than fourfold rise, nearly ten times the population increase. The hike is particularly extraordinary, considering that in the late 1970s, the annual interest rate on a mortgage was 9 percent, twice what it is today. Taking today’s lower rates into account, Washington has increased the mortgage subsidy more than eightfold.

It’s no surprise that mortgage debt has soared, to $9.5 trillion, from $2.6 trillion in inflation-adjusted dollars in 1981. Back then, mortgage debt constituted 31 percent of our nation’s GDP. Today, it makes up nearly 53 percent. [Dierdre] McCloskey, who thinks that free markets are generally healthy, acknowledges that “there are examples of the price signal not coming through.” The mortgage-interest deduction is “a silly idea,” she says, yet “very hard to change.”

Indeed, government subsidy is a critical factor in whether families can afford to purchase a home, and what kind of home, how large, and in what zip code. The home-mortgage deduction, then, helps determine how people live — yet we barely notice. Few of us consider how the government shapes one of the biggest decisions we’ll ever make, or how the U.S. government’s presence in the housing market maintains the value of our homes.

Nicole Gelinas, “Fake Capitalism: It’s not free markets that have failed us but government distortion of them”, City Journal, 2016-11-06.

September 6, 2018

Trans-partisan planning

At Coyote Blog, Warren Meyer offers a plan to address man-made climate change, pitched to avoid being dismissed as “typical” of one or the other side:

While I am not deeply worried about man-made climate change, I am appalled at all the absolutely stupid, counter-productive things the government has implemented in the name of climate change, all of which have costly distorting effects on the economy while doing extremely little to affect man-made greenhouse gas production. For example:

  • Corn ethanol mandates and subsidies, which study after study have shown to have zero net effect on CO2 emissions, and which likely still exist only because the first Presidential primary is in Iowa. Even Koch Industries, who is one of the largest beneficiaries of this corporate welfare, has called for their abolition
  • Electric car subsidies, 90% of which go to the wealthy to help subsidize their virtue signalling, and which require more fossil fuels to power than an unsubsidized Prius or even than a SUV.
  • Wind subsidies, which are promoting the stupidist form for power ever, whose unpredictabilty means fossil fuel plants still have to be kept running on hot backup and whose blades are the single largest threat to endangered bird species.
  • Bad government technology bets like the massive public subsidies of failed Solyndra

Even when government programs do likely have an impact of CO2, they are seldom managed intelligently. For example, the government subsidizes solar panel installations, presumably to reduce their cost to consumers, but then imposes duties on imported panels to raise their price (indicating that the program has become more of a crony subsidy for US solar panel makers, which is typical of these types of government interventions). Obama’s coal power plan, also known as his war on coal, will certainly reduce some CO2 from electricity generation but at a very high cost to consumers and industries. Steps like this are taken without any idea of whether this is the lowest cost approach to reducing CO2 production — likely it is not given the arbitrary aspects of the program.

These policy mess is also an opportunity — it affords us the ability to substantially reduce CO2 production at almost no cost.

August 15, 2018

QotD: State economic intervention in theory and practice

The economic theory: the state intervenes in the economy in order to prevent free-riding – in order to internalize externalities – in order to better ensure that all private parties pay the full marginal costs of their activities, and that all private parties reap the full marginal benefits of their activities – in order to promote competition – in order to protect the weak from the strong.

The political reality: the state intervenes in the economy in order to promote free-riding – in order to externalize costs and benefits that the market has reasonably internalized – in order to better ensure that politically powerful private parties escape the full marginal costs of their activities, and that politically disfavored groups be stripped of much of the marginal benefits of their activities – in order to promote monopoly – in order to render some people weak who are then pillaged by the strong.

Don Boudreaux, “Economists’ Normative Case for Government Intervention is a Very Poor Positive Theory of that Intervention”, Café Hayek, 2016-09-26.

August 10, 2018

The tough part of selling a national carbon tax … is the “tax” part

Filed under: Cancon, Economics, Environment — Tags: , , — Nicholas @ 05:00

As Colby Cosh points out, you can find all sorts of economists to explain why a properly constructed and applied carbon tax is the least harmful way to reduce carbon output, but Canadians typically focus on the “tax” part and not the claimed environmental efficiency benefits:

In yesterday’s Financial Post, the Calgary economist Jack Mintz asked the question “Why are carbon taxes so unpopular?”, pointing out that plenty of countries and jurisdictions have commitments to climate progress and energy efficiency but that few use this particular policy instrument. I guess Jack wouldn’t have had much of a column if he had just adopted the spirit of an auto mechanic explaining a breakdown to a naive car owner and jabbed directly at the problem. “See that word ‘taxes’? There’s your problem right there.”

And, truly, it is not quite as simple as that. But, as Mintz suggests, it is a big part of the difficulty. As a means of helping reduce carbon output, carbon taxes are competing with subsidies and regulations. Pervasive carbon taxes are, as a general principle, a less costly way of eliminating freely exhaled carbon, pound for pound or ton for ton.

If the tax is well designed, you are slapping a uniform unit price directly onto the thing you are trying to prevent; and you are leaving people and businesses to make decentralized judgments, based on their knowledge of their own circumstances, about whether to avoid the tax, and when, and how to do it. Even though the initial level of the tax must be something of a guess, you can adjust it by arbitrarily small increments until you have eliminated just as much carbon output as you wish to.

Economists will recognize that last paragraph as a grocery list of the relative advantages of carbon taxation. But voters are predisposed to hate taxes, and are very sensitive to their size and their side effects. They may not like government subsidies for windmills or carbon-capture schemes or certain species of light bulb either; but subsidies can usually be sold on the basis of local job creation or business incubation, and they can be — let’s face it, inevitably are — adjusted for maximum electoral benefit.

For my part, I don’t disbelieve the economists on the efficiency arguments … I just don’t trust the government to design and implement such a tax without rigging the system to benefit favoured corporations, regions, and donors.

July 7, 2018

The bad economics of rooftop solar installations

Norman Rogers points out where the numbers don’t add up for many jurisdictions’ domestic solar power schemes:

Photovoltaic panels on a roof, 28 April, 2015.
Photo by Antonio Chaves, via Wikimedia Commons.

A modest proposal:

We’ve all heard about “shop local” and “get your food from local farmers, not distant corporate farms.” Lots of people have apple trees in their backyards. Often they can’t begin to eat or give away all the apples. In the meantime, big supermarkets sell corporate apples for one dollar a pound and up. I propose that people with backyard apples be able to take them to the supermarket and sell them to the supermarket for the same price at which the supermarket is selling apples. Furthermore, they should be able to take them at any time and receive payment. If the store gets too many local apples, it can reduce its purchase of corporate apples.

My apple proposal may seem ill advised, but that is exactly how rooftop solar power works. The homeowner gets to displace power from the power company, and if the homeowner has more power than he needs, the power company is obligated to purchase it, often for the same retail price at which it sells electricity. That policy is called net metering. In order to accommodate the homeowner’s electric power, the utility has to throttle down some other power plant that produces power at a lower wholesale price.

The exact arrangements for accepting rooftop solar vary by jurisdiction. In some places, net metering is restricted in one way or another.

A large-scale natural gas-generating plant can supply electricity for around 6 cents per kilowatt-hour. Rooftop solar electricity costs, without subsidies, around 30 cents per kilowatt-hour, or five times as much. Average retail rates for electricity in most places are between 8 cents and 16 cents per kilowatt-hour. Yet, paradoxically, the homeowner can often reduce this electric bill by installing rooftop solar.

It is actually worse than forcing the power company to take 30-cent electricity that it could get from a natural gas plant for 6 cents. When the company throttles down a natural gas plant to make room for rooftop electricity, it is not saving six cents, because it already has paid for the gas plant. All it saves is the marginal fuel that is saved when the plant is throttled down to make room for the rooftop electricity. The saving in fuel is about 2 cents per kilowatt-hour. So 30-cent electricity displaces grid electricity and saves two cents.

July 6, 2018

“That’s what governments are for — get in a man’s way”

Filed under: Bureaucracy, Business, Government, USA — Tags: , , , , , — Nicholas @ 03:00

Veronique de Rugy says that the 4th of July is a good time to reflect on the American Founding Fathers fighting to gain independence from a distant tyrannical government … and the rest of the year is devoted to coping with a less-distant but no-less tyrannical government in Washington:

Consider the oil and gas industry. Over the years, the federal government has adopted many regulations meant to hinder the industry. As Nick Loris, an energy policy analyst at the Heritage Foundation, reminds me, one such regulation is the Merchant Marine Act, also known as the Jones Act, which makes it more expensive to ship oil and natural gas from coast to coast. Then there are the past administrations’ outright moratoriums on drilling in certain areas of America’s coasts, which massively increases the cost of doing business. As Loris notes, there are many costly bureaucratic delays in issuing leases and processing applications for permits to drill (APDs), which stalls production on federal lands. On average, the federal processing of APDs in the last year of the Obama administration was 257 days, while state processing is typically 30 days or less.

Since Uncle Sam has a lot of regulations in place to make the operations of domestic oil and gas companies more costly, why is the biggest beneficiary of loans from the federal government export credit agency (the U.S. Export-Import Bank) the gigantic Mexico state-owned oil and gas company Pemex? Between 2007 and 2013 (the most complete data set we have), Pemex received over $7 billion in loans backed by American taxpayers to buy U.S. goods. Thanks to Uncle Sam, this discounted borrowing power gives Pemex a leg up on its competition with domestic oil and gas companies.

Then there’s the Trump administration tariffs. These import taxes on foreign goods coming from Europe, China, and other countries have not only raised the cost of doing business but also triggered retaliatory measures from foreign governments. For instance, the farm industry is paying a steep price from the tariffs on steel because they increase the cost of farm machinery, lowering profit margins. Farmers are also hurt by the European, Mexican, Canadian, and Chinese governments that have imposed retaliatory export restrictions on U.S. farm products. Many small farms are calling for help to survive. It’s so bad that the entire Iowa congressional delegation sent a letter to President Trump on June 25 in which it called the tariffs “catastrophic for Iowa’s economy.”

Quote in the headline from Firefly episode “Serenity, Part 1”.

July 1, 2018

Over-generous subsidies encourage fraud and waste

Filed under: Britain, Economics, Environment, Government — Tags: , , , , , — Nicholas @ 03:00

At Catallaxy Files, Rafe Champion continues discussing Matt Ridley’s book Climate Science: The Facts:

Ridley went on to criticise biodiesel programs and the promotion of diesel cars. Then he mentioned one of the most outlandish schemes – the clearing of forests on the west coast of the US to convert into wood pellets to burn in British furnaces instead of coal to generate electricity. The Daily Mail reported that this was one of the legacies of Energy Secretary Chris Huhne.

    Mr Huhne, who served in the coalition government and was later jailed for perverting the course of justice, championed the energy source in office and is now European chairmen of Zilka Biomass, a US supplier of wood pellets.

Nice work if you can get it.

And then there are the household biomass furnaces in Britain, promoted by Huhne under the Renewable Heat Incentive (RHI) scheme whereby businesses and households pay for a renewable energy boiler upfront then receive payments for up to 20 years depending on the amount of heat they produce.

    Some unscrupulous homeowners can double the amount they produce by using heat generated under the RHI to dry wood or other materials.

    This can then be fed back into the boiler to burn it and generate even more heat – and money from the public purse.

    The scheme was started in 2011 by Chris Huhne, then Liberal Democrat energy secretary, for businesses then extended to domestic customers three years later. Households and firms can apply for grants to switch from fossil fuel heating systems to renewable ones such as biomass boilers, which burn wood pellets, chips or logs.

As the scheme is open to applications until 2021, final payments to participants will run to at least 2041. By this time, the bill for taxpayers is expected to hit £23billion.

Closely related is the the Irish “Cash for Ash” scandal that paid more than the cost of the fuel. An orgy of corruption was sparked by renewables in Spain and there was the strange phenomenon of solar power generated in the dark because the Spanish subsidy was initially so generous is was worthwhile to shine diesel-powered lights on the panels overnight.

June 30, 2018

QotD: In government regulations, complexity is a subsidy to existing companies

One of the major themes of the book I’m working on should be familiar to longtime readers of this “news”letter. It boils down to a simple insight: Complexity is a subsidy. The more complex you make the rules, the more you reward people with the cognitive, material, or social resources necessary to get around them. Big corporations tend not to object to more burdensome regulations because they can afford to comply with them. Dodd-Frank was great for the “too big to fail” crowd. But it has been murder on community banks that don’t have the resources to comply. As Lloyd Blankfein, the CEO of Goldman Sachs, put it:

    It’s very hard for outside entrants to come in and disrupt our business simply because we’re so regulated. We hear people in our industry talk about the regulation, and they talk about it with a sigh about the burdensome of regulation. But in fact in some cases the burdensome regulation acts as a bit of a moat around our business.

But you’ve been hearing this stuff from me for years. Let’s get back to the arrogance thing. It seems to me a big part of the problem with progressive elites these days is that they lack self-awareness. That elites arrange affairs for their own self-interest is an insight that was already ancient when Robert Michels penned his Iron Law of Oligarchy. But ever since the progressives concocted their theories of “disinterestedness,” they’ve convinced themselves that they are not in fact a self-serving elite. Give feudal aristocrats their due: They were a self-dealing crop of rent-seekers and exploiters, but at least they were open about the fact that they believed they had a divine right to sit atop the social pyramid. Today’s progressive aristocracy is largely blind to the fact that their cult of expertise isn’t really about expertise; it’s about organizing society in a way that reinforces their status and power.

Well, most of them are blind to it. Occasionally the mask slips. Jonathan Gruber, one of the chief architects and financial beneficiaries of the health-care “reform,” told audiences that Obamacare was designed “in a tortured way” to hide the fact that “healthy people pay in and sick people get money.” They had to do it this way to get around the inconvenient “stupidity of the American voter.” A feudal lord who talked this way about his serfs wouldn’t get any grief for it. But in America such honesty gets you rendered an un-person.

Jonah Goldberg, “The Consequences of Overpromising on Obamacare”, National Review, 2016-10-08.

June 15, 2018

Looking at US farm subsidy claims

Filed under: Economics, Government, USA — Tags: , — Nicholas @ 03:00

On Twitter, Chris Auld, an economics professor at the University of Victoria explains why Canadian journalists should stop using the $22 billion figure for US farm subsidies to justify Canada’s unjustifiable supply management regime:





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