Archive for May, 2012
Investments and the Two Minutes’ Hate
Posted by Joshua Sharf in Business on May 30th, 2012
I’m smart enough to realize that there’s no power on earth, aside from maybe Frank Capra, that can make a bank an object of sympathy. But yesterday’s Two-Minutes’ Hate outside Wells Fargo’s main Denver office sure came close:
When the call went out, this was the focus on ProgressNow’s email:
Over the last four years, Wells Fargo’s federal income tax rate was just 3.8%–less than what nurses, firefighters, teachers and janitors pay–despite making some $69.1 billion in profit. If Wells Fargo had paid their fair share in federal taxes, Colorado would have received an extra $53 million–money to hire hundreds of teachers, nurses and firefighters.
The source for this claim seems to be a Citizens for Tax Justice report, claiming to show that Wells Fargo actually got back $680 million, on $49.4 billion in profit, from 2008-2010, and then applying the same methodology to 2011.
There are many flaws in the CTJ’s study, beginning with the idea that while the tax expense isn’t real, somehow its “current” component is more real than its “deferred” component. It’s a mistake that they have a history of making, especially in years following recessions and election years, when the difference between financial accounting and tax accounting depresses apparent tax rates. It’s a mistake that Megan McArdle and Fortune have caught the New York Times making as well.
Cash, on the other hand, is real. Cash represents an actual check that Wells Fargo wrote to the Federal government. So while the IRS wasn’t writing Wells Fargo a $4 billion check in 2009, the company’s Statements of Cash Flows do say that on $64 billion of net income, it wrote checks to the government for $11.7 billion over those four years. To the extent that this represents “real” taxes paid, it constitutes an 18% tax rate.
But here’s one of the most revealing claims:
“…’accelerated depreciation’ is technically a tax deferral, but so long as a company continues to invest, the tax deferral tends to be indefinite.”
And the problem with that is…? Evidently “investment” only counts if it’s government “investment” in Solyndra, or if it’s the result of shakedowns by community “organizers,” like the ones on the streets yesterday, or the one the White House. Wells Fargo claims a quarter-billion dollars a year in charitable and community giving, but of course, that’s them deciding what to do with their money, and if it doesn’t satisfy the avarice of SEIU organizers, or fall under their control, then it doesn’t count.
Remember: Progressively More Expensive, Progressively More Intrusive, Progressively More Restrictive.
What I Saw At The Open Negotiations
Posted by Joshua Sharf in Colorado Politics, Education, PPC on May 25th, 2012
Last night I attended the Douglas County teachers union contract negotiations conducted under the county’s new Open Negotiations policy. This was the first meeting which teachers were able to attend, and the Douglas County Federation of Teachers – the local for the American Federation of Teachers – had called for teachers to show up in force. There was the hope that a large, unruly audience might prove more entertaining than a philosophically incoherent negotiating team.
In the event, I had to settle for the incoherence, but it was illuminating enough.
The crowd itself was large – eventually reaching about 350 people – but well-fed, and thus, well-behaved. Nobody tried to start a drum circle in the back of the room, for instance. After some early applause, one of the union negotiators reminded the group that they were there are spectators, not participants, and more like spectators at the Masters or Wimbledon than the Super Bowl, at that. The teachers resorted to mass waving a couple of times, but that’s the sort of thing that comes with hanging around grade-schoolers all day, I suppose, and the novelty quickly wore off. No Pinkertons were needed.
Aside from the 1% – no, not that 1% – the 1% pay raise that the Board had proposed, the two most contentious issues were the district’s desire to stop collecting union dues, and the desire to stop paying the salaries of union heads who aren’t in the classroom.
The union tried to turn the first issue into a 1st Amendment fight, essentially arguing four things: 1) the union speaks for the teachers, so stopping the collections amounts to trying to squelch free speech, 2) the union is being singled out for this treatment because 3) it opposed the election of the current Board members, even though 4) it didn’t contribute dues money to their opponents’ political campaigns.
It should be fairly easy to ridicule these arguments and dispose of them. A union, recognized by the district or not, is just an organization, and it should be responsible for contacting its own members and collecting its own dues. There’s no good reason to spend taxpayer resources doing that, and the fact that the dues money goes right back into political campaigns to determine the unions’ negotiating partners and (evidently) collections agents, is just all the more reason to put that burden on the union itself. It’s not a free speech issue, any more than Denver’s reluctance to come by and put a lein on my property against my shul dues is a free exercise issue.
Unfortunately, a federal judge in Wisconsin disagrees. Thus the reason for Jed Palmer’s claim that this issue had been “extensively litigated in Wisconsin,” and the specific line of questioning trying to establish the same facts in Douglas County. Unfortunately for the union, the Board showed that dues money had been used in campaigns, and also said that since each contract was negotiated separately, if they found evidence of similar activity on the part of, say, the bus drivers, they’d try to negotiate the same disengagement from them. (You can see some of the raw video of this exchange.)
Since this is a negotiation, and not legislation, the union was basically arguing that they didn’t have the power to bargain away their members’ 1st Amendment rights, and claimed that this was an issue of working conditions. There are, of course, all sorts of restrictions on teachers’ 1st Amendment rights when they’re working. They get fired all the time for pushing their political views in the classroom, for instance. They were trying to find legal backup for their position, claiming that not only was the district wrong, but that the negotiators couldn’t concede the point even if they wanted to. Whether this is setting the stage for a strike or a lawsuit remains to be seen.
More interesting, although probably a slightly lower priority for the teachers, was to stop having the union heads be district employees, as they are no longer in the classroom, but have as their sole job representing the teachers. The union has already offered to reimburse the district for all of the salary, and all of the PERA contribution costs, of those positions, which run to several hundred thousand dollars a year.
What’s the issue here, since the union has offered to reimburse all the expenses, and the salary will get paid whether or not the union leader is working for the union or for the district? It seems as though either side could give way without any loss.
Not so fast. The key here is the PERA benefits, which are calculated by a formula based on earnings, which are set by the union. Making a union head leave PERA for the duration of his service would certainly make union leadership a less desirable task. But it’s also unfair on the face of it to put taxpayers on the hook for benefits they can’t limit, for services not being rendered to them. (Somehow, and I’m really not sure how, this issue got tied up with the national AFT’s Education Research & Dissemination program, sort of a classroom best-practices training that they run. But it appears that that, too, is paid for by dues and not by the district.)
At one point, in the middle of the discussions, Jed Palmer decided to launch an all-out blitz on the American Legislative Exchange Council, a national organization of conservative state legislators, and its supposed marionette-like control over the board. While hypocrisy is always one of the easiest political charges to level, it’s worth pointing out that teachers unions – including the AFT – have a long history of collaborating with outside groups, as well.
Van Jones and other assorted fellow-travelers have attempted to make ALEC toxic, with a little success, mostly because it’s a very successful way for conservatives to coordinate legislative policy nationally, as the left has done for decades. I doubt that ALEC’s toxicity extends to the general public, though, and it seemed to be more of a way of both building on that campaign, and rallying the troops.
Therein lies one of the dangers of open negotiations, but also one of the opportunities. The crowd Thursday night was well-behaved. But it’s still early. If the union finds that it has over-stated its position on, say dues collection, it’s going to find it more difficult to walk back a public position than a private one. Even when teachers were well-informed of what was going on behind closed doors, while the public wasn’t, they weren’t a physical presence in the negotiating room. The presence of a large number of angry teachers – and if things drag out, they could get angry – could serve to intimidate their own negotiators as much as the school board.
On the other hand, assuming that the sessions don’t have to move behind shatter-proof glass, the open sessions will allow an interested public to see what positions are taken, what justifications are used, and may ultimately, over time, have the effect of forcing both parties to engage in more persuasion, less posturing.
UPDATE: I tweeted as much of the proceedings as I could stay for; once the negotiations moved into salaries and benefits, I just didn’t have the numbers or understanding of the issues to be able to comment intelligently. You can see the thread, my tweets, and the very illuminating tweets from @parentLEDreform.
UPDATE II: From someone more familiar with the FTE issue than I:
Here is the ironic thing. Earlier this year, the administration realized that although we were paying half the union leadership’s salary (actual compensation for particular individuals varies), they were not doing anything that we could see for the District. Dr. Fagen asked them to be accountable for the half we were paying, i.e. spend time with an assigned administrator completing special projects. Initially, the president agreed, but then she backed off the statement. She said she was not interested in such an arrangement. Dr. Fagen sent her an email documenting their conversation, reiterating their understanding that the union would now be paying 100% instead of participating in a collaborative relationship for partial pay. The union agreed… then backtracked again, calling in attorneys. Eventually the Board thought we might be better off divesting ourselves of this torturous relationship. We would not be talking about union salary reimbursement, PERA, etc. right now if they had simply agreed to accountability for the 50% of pay.
Bridge Over Troubled Financial Waters
Posted by Joshua Sharf in Budget, Colorado Politics, PPC, Taxes, Transportation on May 24th, 2012
Transportation funding in Colorado has been a problem for, like, ever. Typically, capital spending is funded by what’s left over after the general fund expenses have been taken care of, but in recent years, to quote Geoffrey Rush from Shakespeare In Love, “There’s never any profits.” Which means that highway maintenance has been suffering. In 2005, the voters adopted Referendum C, but rejected Referendum D, which would have put a substantial pot of money at the disposal of the government for unspecified road projects.
So in 2009, the legislature passed FASTER. FASTER did a number of things, but primarily is raised vehicle fees in order to pay for bridge repair. Much of the debate at the time centered around the claim that fees are not taxes, and that this was simply a re-interpretation to get around TABOR’s requirement that tax increases be subject to a vote of the people.
The reality is a little more subtle than that, and it shows that when the state is bound and determined to get its hands on your money, there are almost no lengths to which it will not go, no manipulations in which it will not engage. (Just consider Obamacare’s fluctuating claims that the money you’ll have to pay is either a tax or a penalty, depending on the legal theory it happens to be operating under at the time.)
In fact, what the state did was to create a TABOR Enterprise, the Colorado Bridge Enterprise, which is exempt from a number of TABOR restrictions. It can, for instance, issue revenue bonds. Enterprises can also raise their fees-for-service without TABOR limits, but they can’t collect generalized taxes. They also must get less than 10% of their annual revenue from the state. This is how, for instance, the University of Colorado can continue to raise tuition year after year. So while the argument rested on a fee not being a tax, that was mostly because Enterprises can only collect fees, not taxes, and it was essential that the bridges be transferred to the Enterprise.
That 10% revenue limitation was also a problem, since in the first year, the bridges themselves would be the bulk of the Enterprise’s income. So the state depreciated all the bridges to $0. No salvage value, no remaining years of useful life, nothing. A claim that’s risible on the face of it, one that would get a private company and its auditors clapped in irons, but a dodge that the state felt perfectly comfortable resorting to.
The other details are equally unsavory. While the assets are supposed to be owned by the state, there is supposed to be an arms-length relationship between the state and the Enterprise. The members of the Enterprise Board are the members of the Colorado Transportation Commission. The fee itself is collected not by the Colorado Bridge Enterprise, but by the state Department of Revenue, which charges no fee for this service. And the revenue bonds are the Stimulus’s Build America Bonds, whose interest is subsidized by you, the federal taxpayer.
The difficulty is that since the Enterprise owns only bridges, the only fee that it can reasonably assess is for the use of those bridges. But since it’s not a toll, out-of-staters, and most trucks don’t pay the fee. And the fee is assessed as part of the vehicle registration, whether or not your vehicle is road-worthy and anywhere near any of the bridges in question. Suddenly this fee begins to look an awful lot like a tax, or at least a fee that the Bridge Enterprise doesn’t have the power to collect, since it’s not on bridge use, but on auto use.
That’s the basis for the lawsuit against FASTER. The plaintiffs are rural farmers who have vehicles that don’t go far from home, or even off the farm, and yet are charged a usage “fee” for a bridge they can’t even see, never mind drive over.
“How many legs does Cobalt have, if you call the tail a leg?”
“Four. Doesn’t matter what you call the tail, it’s not a leg.”
There’s a legitimate discussion to be had – and a vast literature – about the best way to fund roads. They do constitute a “system” from which all of us benefit. They’re the paradigm of platforms that government ought to be building, rather than products that try to dictate end results. As Rep. McNulty pointed out in the debate, roads lower the cost of commerce for everyone, save lives, and enhance freedom. To that extent, general fund money, or a vehicle fee, a gas tax, a mileage fee, a usage fee, a toll, or peak usage tolling – in order of increasing specificity – are all reasonable means. The economic effects of each are different, and they each make sense for different kinds of roads.
If the legislature had gone to the people and asked them for $31 a year, hell, even index it for inflation, in order to repair bridges that could become homicidal, they might well have voted for it. (Although the 2004 incident resulted from workers’ error, not the age of the bridge).
What’s clearly unfair is to creatively interpret the rules in order not to have to ask.
An Evening With Arthur Brooks
Posted by Joshua Sharf in Business, Economics, PPC on May 23rd, 2012
Also last night, Susie and I went to go hear Arthur Brooks of the American Enterprise Institute speak, at the Young Americans Center for Financial Education. The Center is truly a wonder, set up to teach grade schoolers about business, finance, and economics. Brooks spoke in Young Ameritowne, a large hall set up like a town square, ringed by mock storefronts – sponsored by actual businesses – that the kids role-play at operating. Go see it. (Now if they could only devise a program targeted at state legislators, we’d be golden.)
The failure of conservatism and free-market forces to arrest the country’s leftward drift for almost a century now should be of profound concern, and should be a puzzle to those of us fighting the fight. AEI was founded in 1938. Go back and read some of the Intercollegiate Studies Institute’s journals from the 1950s, 60s, 70s, and you’ll see two types of articles. One it the neo-confederate and near-neo-confederate type, of which we are well rid, and which come from a world as alien as Gilbert & Sullivan.
The others are those that could have been written any time in the last four years, changing only the names of the programs and actors. Those arguments didn’t carry the day back then, yet we expect that they’ll work this time.
Why, when all the empirical evidence is that socialism doesn’t work, capitalism does, that less freedom produces greater misery, why have we been losing the fight for 100 years, since Wilson’s election? This despite poll after poll that shows that Americans continue to embrace capitalism under that name, and reject redistributionism, by overwhelming margins?
This question has been bothering me for well over a year now, because even with all the intellectual ammunition at our disposal, it doesn’t bode well for this fall, or for what comes afterwards, with so much at stake. And too few conservatives and libertarians seem to be asking it at all.
What a relief, then, that someone with Brooks’s intellect has recognized the same problem, and what a pleasure that he’s actually got a persuasive answer.
Brooks is such a clear thinker and gifted speaker that I can reproduce the bulk of his argument from memory a day later, and I have a terrible memory. He gives you just what you need to remember, and he gives you the pegs to hang it on. When Susie and I saw him speak at the Western Conservative Summit in 2010, we thought his was far and away the best talk of the weekend.
Brooks contends that both the liberal answer – that Americans secretly want socialism – and the conservative answer – that all we need is better data – are flawed, because they don’t address the moral arguments that people find persuasive.
What we’ve been missing is a moral defense of capitalism, one that doesn’t take an 1137-page hardback “novel” to summarize. Moral arguments deal with people, and arguments that deal with people are always more persuasive than arguments that deal in numbers. Too often we dismiss that sort of thinking as “feelings over facts,” but Brooks contends, correctly, I think, that that’s a mistake. It’s how people actually come to conclusions and make decisions, and winning the argument means reaching people on their terms, not making it necessary for them to come to us.
Brooks’s case consists of three parts:
1) Earned Success. That is what truly defines happiness, not mere wealth. Earned success means linking success and its rewards to talent and effort. When results are decoupled from action, you get, “learned helplessness,” a recipe for unhappiness and frustration, since you’ve learned that you can’t really control your future.
2) Fairness. Conservatives like Milton Friedman resist talking about fairness, largely because we think it’s too subjective. But it’s also persuasive, and those same polls that show people love capitalism also show that they crave fairness. Well, what could be more fair than letting people keep what they earn, and decide how to use their own wealth? It’s a critical battlefield, one we can own, but not if we don’t show up for the fight.
3) Capitalism is good for the poor. Mere wealth may not be the measure of happiness, but poverty is a pretty good measure of misery. And it’s capitalism that reduces the misery that is a hand-to-mouth existence, not socialism, not all the good intentions in the world.
Moral defenses of capitalism abound. From Michael Novak’s The Spirit of Democratic Capitalism, to Hayek’s The Road to Serfdom, people have been thinking for generations about why a free system is a better system. But Novak is an academic, and neither Americans nor Europens feel tyrannized by the welfare state. The Greeks may yet provide a contemporary illustration, but thus far, most people see serfdom coming from the barrel of a gun, not a food stamp debit card.
The beauty of Brooks’s defense is that it not only speaks about people, it speaks to people, on terms that relate to their lives. It does it without policy prescriptions that strike people as weird, or re-opening arguments that were dealt with 170 years ago, when we decided we didn’t like polygamy and did like internal improvements.
The YA Center promptly violated 1) and promoted learned helplessness by giving out copies of Brooks’s new book, The Road to Freedom, which promises to tighten up the argument, and explain, for instance, why direct help with the best of intentions can have very bad results.
I’m looking forward to reading it, and reviewing it.
Health Care, Religion, Government, and The Left – Part II
Posted by Joshua Sharf in Economics, Health Care, PPC, Property Rights, Regulation on May 23rd, 2012
Last night, I posted some audio of lawyers at a loss for words at a panel discussion on religion and government. This morning, I’d like to post another clip from the Q&A, one that I think is particularly revealing about the left’s attitude towards religious liberty. The commenter is Ed Kahn, the lawyer for the Colorado Center on Law and Policy, and he’s discussing to what extent a hospital’s association with a religious body should matter. Shorter answer: none. But let him tell you himself.
(The audio quality here is markedly worse than the clip last night from Ms. Hart. I think it’s a combination of Mr. Kahn’s voice and the fact that he was sitting farther away from the mike, but there’s a persistent hiss. I ran it through the noise reduction algorithm, and while it got rid of most of the hiss, there’s a residue that makes it sound like he’s talking from the engine room of a starship, if the engine were powered by boilers, but I think it’s easier to hear than the raw sound.)
They can close shop on Saturday, but that doesn’t make them like a church or synagogue in my view. And if they’re going to hold out their product or their service to the public, then they should not be able to mandate that their religious beliefs to which they subscribe, that the results of that belief should be visited on the people who are entitled to sign up for that service.
If there’s a market where comprehensive health care is available without restriction, and people understand that, then maybe it’s ok for somebody to say that we’re a Catholic health insurer and our hospital is going to be open six days a week, but our emergency room will be open on the Sabbath. But in general, I think that if you’re providing a public service that is a necessity, especially, that it ought to be provided across the board, and the law ought to require it as a condition of licensing.
Some states do say to Catholic (unintelligible) hospitals, “You cannot restrict (unintelligible) abortion, you cannot restrict contraception services or tubal ligation,” and that, I think, is the better standard. So I start there. I think the concept that these organizations are health care, providing what’s a necessity, not simply a good like a candy store, overrides the ability to finesse what services they will or won’t provide, given an economic necessity or need, especially in monopoly situations.
There’s almost too much here to unpack, but let’s give it a try. It embodies almost all the current liberal assumptions about having a right to other people’s work product, and the inconsequentiality of others’ religious beliefs, to the extent that they differ from your own.
The phrase that really popped out at me was this: “…people who are entitled to sign up for that service.” Who talks this way, about people “signing up for a service?” The Left, apparently. Remember when Michael Moore rolled up to congressmen, asking them if they would be willing “sign their kids up to serve in Iraq,” as though it were a particularly violent venue for sleep-away camp. Seventh-graders are “entitled to sign up for” band. Adults purchase products and services with their own money. Seventh-graders buy things, too, generally with their parents’ money, which leads them to feel entitled.
The statement provides a case study of the inevitable intersection between social issues and economic ones. The Left feels entitled to sign other people up to do things for them, without realizing that at a minimum, there’s an opportunity cost. Grant the dubious proposition that All Hospitals Are Created Equal, that you can require anything calling itself a hospital to provide a menu of services at all times, in all places. They still can’t pay for the staff, facilities, and equipment to be perpetually on-call for every conceivable service or procedure. They will have to make choices. And since they are the ones providing the services, their own priorities and values will and ought to guide those choices.
That’s really the only fair way to decide.
If Charles Bronson were still around, he might reprise his scene from The Magnificent Seven where he throws the Mexican child over his knee and whacks him a couple of times for ingratitude, reminding him that his parents don’t do everything for him because they have to. (Hey, you want to be treated like a child?) Nobody makes the church or churches run these hospitals in the first place, except themselves from their own religious conviction. If that same religious conviction prevents them from providing other services, Planned Parenthood should just see that as a market opportunity.
Of course, the same law that enables the HHS Mandate also makes it virtually impossible to open new, specialized, physician-owned hospitals, thus providing further justification for commandeering existing facilities.
The Sound of Silence
Posted by Joshua Sharf in Health Care, PPC on May 22nd, 2012
This evening, I attended a panel discussion at one of the local synagogues on the topic of religion and government. It was sponsored by the very liberal National Council of Jewish Women, and featured four attorneys: Melissa Hart, Assoc. Prof. of Law and Director of the Byron White Center for the Study of Constitutional Law at CU, Ed Kahn, Special Counsel for the Colorado Center on Law and Policy, Dan F. Lynch, Attorney, Teacher and Author, and Rebecca T. Wallace, Staff Attorney, ACLU of Colorado. (In case you’re wondering whether Mr. Lynch was there for balance, I can assure you he was not; his primary concern seemed to be the imminent threat of Christian Zionists manipulating our government into starting WWIII to hasten the Apocalypse, or something like that.)
The panel was somewhat interesting, as these things go. The audience was mostly liberal, and the panelists were never really challenged. Most of what they said would be pretty unremarkable to anyone familiar with the leftist cant about religion in the public schools, public square, and private hospitals.
Until the last question, submitted by yours truly. It’s a question that was inspired by a Spengler column a couple of months back, at the height of the HHS Mandate controversy, and let me hasten to assure you that except for cropping out Mr Kahn’s basically non-responsive answer at the end, and bumping up the volume, I have not edited this clip at all:
The silence – finally ended by Mr. Kahn wishing aloud that someone else would take the question – is 9 seconds long.
Nine seconds long.
That’s roughly an eternity, when you have four lawyers on a panel. There is no charitable interpretation of this silence, the only explanation being that they simply hadn’t considered the question before. (Ms. Hart’s answer, that kosher slaughter is central to the Jewish religion, at least relieves us of the fear that they don’t really care about kashrut; like most Conservative or Reform Jews, they’re happy to have it around, even if they don’t practice.)
Ms. Hart’s response, that she has “faith” that the legal system would never do such a thing will be of slight comfort to conservatives who’ve seen the courts do many previously unthinkable things in the last half-century, but I will admit that I was only partially successful in hiding a wry smirk.
Like so many who inhabit the lefty echo chamber for a living, the panelists simply fail to consider that the results of their activism might one day be turned against something they care about, and have no good answers when their assumptions are challenged in a constructive, rather than confrontational, way.
Maybe they should have just stayed silent.
UPDATE: I’ve filtered out some of the noise from the sound clip, and attached the following transcript:
Moderator: OK, I have maybe a technical question. Assuming the HHS Mandate – and if you answer this question you can tell us what that is – is allowed to stand, suppose that a government office were to decide that kosher slaughter violated the relevant animal cruelty statues. How would you persuade them, or persuade the judge, to continue to permit kosher slaughter?
[9 seconds of silence]
Mr. Kahn: I hope someone else will take this.
Moderator: Now we see which of them has studied the Talmud.
Ms. Hart: So, one of the things that gets harder when politics gets stranger, as it is right now, but one of the things that I say to all of my first-year Civil Procedure students is that I have a very deep faith in law. I believe that to practice law and to love law, as I do – civil law – you have to have a great deal of faith in law and in the (unintelligible) practice in law, including the courts.
HHS is Health and Human Services, and I assume the question is referring to the provision – to the question about the abortion and contraception provision.
I – (2 second pause) have faith that no court would find that a state could outlaw rules of kosher under animal cruelty provisions, that the centrality of the kosher rules to the Jewish faith, and the lack of any kind of question of that is so clear, that even a law that seemed to be neutral, and animal cruelty law, would not pass (unintelligible) as a way of forbidding the laws of kosher. I don’t believe that because of any precedent that tells me that that’s definitely true. I believe that because I have faith in the courts not to go to that extreme.
If if you’re looking for precedent and the arguments you would make from precedent, I would go back to the law that I talked about briefly in the beginning, the Lukumi Babalu Aye case, that actually was the state’s, the community’s ban on animal sacrifice was an animal cruelty provision. And the courts were willing to look behind it and say there are other ways to prevent cruelty to animals than this kind of prohibition. So I think that courts have addressed animal cruelty provisions in the context of religious laws before – this is a quite different kind of religious law – and have found that they’re able to separate these things out and should separate these things out and I believe that they will continue to do that.
The DenPo Hits the Campaign Trail
Posted by Joshua Sharf in PPC on May 21st, 2012
The Denver Post this morning continues its fine tradition of election year in-kind contributions to Democrats with two pieces, one an editorial and one a blog post that may as well be.
Allison Sherry’s blog post (“Travel perks pervasive for Colorado lawmakers“), about Congressional travel perks, leads with Representative Doug Lamborn’s exciting life as a Congressional t0urist, and goes on to give more than twice the ink to Republicans as to Democrats, despite the fact that, including Senators, Democrats outnumber Republicans 5-4 in our Congressional delegation. Why?
Democratic Reps. Ed Perlmutter and Jared Polis filed extensions for 2011’s financial disclosures. They will be available this summer. On the Senate side, trips are not reported with the personal financial disclosures, but separately, and were not immediately available.
There’s nothing the matter with filing for an extension, I suppose, but if the congressmen can wait until summer to tell us where they’ve been on whose dime, one wonders about the urgency of the report in the first place.
The other piece is an editorial complaining about filibusters in the U.S. Senate. Such complaints have become fashionable, now Majority Leader Harry “Digger O’Dell” Reid (D-NV) has begun making noise about ramming through changes to the rules. It’s hard to say whether this is a signal that Reid is more or less confident of retaining control after November’s elections, but at a minimum, it dovetails nicely with the President’s efforts to blame his failures on the house of Congress that his party controls.
The problem is the DenPo bill of particulars:
This is the body that hasn’t passed a budget in three years, where dozens of judicial and executive appointments have been delayed for purely political purposes, where even measures with bipartisan support run into unnecessary opposition.
The editorial staff apparently still don’t have access to the Internet, where they’d find out that the budget is passed under something call Reconciliation rules, and thus not subject to a filibuster. Even if they can’t find the telegraph operator, carrier pigeon, or owl to get a question through to their research service, they might at least remember that the Senate Dems considered trying to pass Obamacare under Reconciliation in order to avoid the need for 60 votes.
As for judicial appointments, it’s old news that it’s only Democrat appointments that the Post worries about. Back in 2005, they objected to Republican suggestions of limiting filibusters of judges -who can’t be sent back to a committee for amendment – and referred to the so-called Gang of 14 Compromise as “sanity” and “cooler heads.”
Well, if it’s insanity at the DenPo, it must be an even-numbered year.
Colorado’s Windy Senator
Posted by Joshua Sharf in Colorado Politics, Energy, PPC on May 18th, 2012
In our last post, we looked at Sen. Mark Udall’s claims that Colorado’s renewables mandate had been a “great success.” This time, let’s look at his claims that “…wind, now, competes with coal and some would argue is actually cheaper than coal.”
The only way that someone could make that claim is if they ignored the subsidies that wind gets in comparison with anything we get electricity from today (that CBO report was issued just a few weeks ago at the behest of the very committee in which Udall serves and made his remarks):
The jobs that Bennet brags about include those from Vestas, which the company admits only exist because of those subsidies.
The proof, of course, is in the markets. The energy that could successfully compete with a power source that has its capital expenditures almost completely amortized – most coal plants were built decades ago – would seem to be a natural for investors. Unfortunately, well…
Proponents of wind energy will point to the various externalities associated with coal. Of course, wind has a few externalities of its own, like bird kills, higher local temperatures, and downwind crop & building damage.
Sorry, Mr. Udall. Wind isn’t competitive with coal, and although the Obama administration seems hell-bent on driving up the cost of coal, they’ve got a way to go, notwithstanding all the damage they’ll do to your wallet in the process. It’s not even close, and they still try to cheat.
Colorado’s Diminished-Capacity Senator
Posted by Joshua Sharf in Colorado Politics, Economics, Energy, PPC on May 18th, 2012
Yesterday, the Senate Committee on Energy and Natural Resources took up the Clean Energy Standard Act of 2012, which would “require covered electricity retailers to supply a specified share of their electricity sales from qualifying clean energy resources.” The target would start at 24% in 2015, climbing to its final, and permanent level of 84% by 2035. Senator Mark Udall (D-CO) made the following comments:
“With that, let me just say that this bill would be a step in the right direction. I also want to emphasize that I still support, as I know do many of my colleagues, a renewable electricity standard nationally. We’ve had great success in the State of Colorado with the renewable electricity standard, and I would argue in fact, we felt less of the effect of this Great Recession because of our energy sector’s capacity to innovate, create jobs, and provide power that’s less and less expensive. We all know for example that wind, now, competes with coal and some would argue is actually cheaper than coal.”
There’s enough material to keep us occupied for a week – and it may – but we’ll start with the idea that Colorado’s Renewable Electricity Standard has been a “great success.”
It may have been a great success for Xcel and its shareholders, but for the ratepayers, it’s a slowly building vacuum, sucking more and more of their decidedly non-renewable dollars. In 2011, the RES was responsible for something like 4.5% of Coloradoans’ electricity bills, and number that is only going to grow over time, as the RES ramps up to its final 30% requirement in 2020:
According to the Public Service Company’s 2010 RES Compliance Plan, the ECA is projected to be $6.3 million this year, before it balloons to $141 million in 2012. It then increases exponentially to $738 million in 2020, or almost 23 percent of total retail electricity sales—none of which would count against the 2 percent retail rate impact.
Assuming 1.5 million ratepayers in Colorado (current figure is 1.3 million) in 2020, and the mandated 20 percent renewable standard, the ECA cost alone will average nearly $500 per year per ratepayer.
The ECA is the Electric Commodity Adjustment, and it’s the means by which Xcel gets around the 2% per year rate limit that is supposed to protect consumers from the fact that renewables are, contra, Sen. Udall, much more expensive than traditional sources of electricity. More about that in a succeeding post.
The Colorado plan, if extended to the country as a whole, will have the same deleterious effects on peoples businesses and homes. That link at the top of the page was to an Energy Information Agency study showing the effects of the proposed standard. Not only would the BCES cost dozens of gigawatts of capacity by 2035:
It would also raise the cost of electricity by about 18%:
If you look closely, you see that the EIA assumes that nuclear will take the place of coal’s baseline capacity, but in fact, the extremely large up-front capital expenditures may make that prohibitively expensive, in which case we’ll have no choice but to cover as much as we can with solar and wind. The result of that little dream scenario? We have more capacity, but the price is 20% higher, rather than 18%. The increase in supply still isn’t enough to make up for the extra cost of wind and solar as sources.
Coloradans have excellent reason to wonder why their senator thinks that paying more than neighboring states for their electricity constitutes a “great success,” and Americans should run like the wind from any effort to replicate the experiment nationally.
EPA “Doesn’t Live In The Energy World”
Posted by Joshua Sharf in Colorado Politics, Economics, Energy, PPC, Regulation on May 14th, 2012
In a recent hearing of the U.S. House of Representatives Energy and Commerce Committee, EPA administrator Gina McCarthy said under questioning by U.S. Rep. Cory Gardner, R-Colo., and Committee Chairman Ed Whitfield, R-Ky., that her agency – despite issuing regulations that will have a profound affect on electricity production in the United States – “doesn’t live in the energy world.”
“Tri-State is a wholesale electric power supplier in Colorado that is owned by the 44 cooperative, generating – transmitting electricity and has come to my office multiple times trying to talk about their compliance with EPA’s Utility Max standards and…their estimate is that it would likely cost them $1 million …I’m asking you to comment on the rural co-ops which are non-profits.
Ms. McCarthy confirmed that some ratepayers would see their rates increase by about 3%, which the EPA calculated to be about $3 a month for the average family, there was this exchange between the panel and her:
Rep. Gardner: “And so that – the only way they can do that is to pass those increased costs on to their ratepayers?”
McCarthy: “I have trouble answering that question because I don’t live in the energy world, but my understanding is that compliance can be achieved by lower demand, as well as increased generation, fuel switching, and a number of techniques.”
Whitfield: “I think that’s the point that we’re trying to drive home. You’re right, Ms. McCarthy, you do not live in the energy world. But then you make extrapolations on gigawatt issues that are a reliability concern based on the chart I saw. DOE rolls over in acceptance of your electricity generation, or lack thereof, analysis, and when you have the people in the field who are disputing that analysis on the gigawatt issue, we’re debating with an environmental agency, not our Department of Energy. And if the analysis was close to what industry, financial people, FERC (Federal Energy Regulatory Commission), EEI (Edison Electric Institute) say then, we would cut some leeway.
“But the administrations proposal – actually, the environmental rules – and the effect on the electric grid, of 10 gigawatts, is laughable. And so, you can do all the analysis on emittants you want, but we reject the premise that you are experts in electricity generation, the cost of building plants, and developing those.”
Rep. Whitfield’s point is that the opinions of actual experts – which seem to be in broad agreement that the EPA rules run the risk of reducing the US’s overall electricity output – are being subordinated to the judgments of the EPA, which, by its own administrator’s admission, doesn’t live “in the energy world.”
Is it true? Well, the EPA estimates a loss of 10 gigawatts (GW) of electrical generation nationwide as a result of its new rules. This estimate is indeed not only out of line, but well out of line, with a variety of other estimates from Credit Suisse (50 GW realistic, 60+ GW possible), Friedman Billings Ramsay (45 GW), the North American Electric Reliabiliy Corporation, or NERC (33-70 GW), the Midwest Independent Transmission System Operator, or MISO (13 GW immediate, up to 61 GW retrofitted), and the Institute for Energy Research (34 GW).
It’s one thing to be independent of the industries you’re supposed to be regulating. But even independent regulatory bodies shouldn’t be making rules based on assumptions and models whose results virtually nobody in the field takes seriously. Maybe the EPA should live a little more “in the energy world,” a world it so closely regulates.
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