Hewitt Blog
From Clark Judge:
SOTU: Did I hear that right?
By Clark S. Judge: managing director, White House Writers Group, Inc.; chairman, Pacific Research Institute.
It sounded like such a soft, even conservative speech.
But let me get this straight: 1) banks will be punished (do I understand this right, by a committee headed by Eric Holder?) if their lending is too risky, 2) and they will be required (by the same committee) to give more home loans (meaning, it must be, to people who would otherwise not qualify for the loans, or else the government would not have to be involved) at lower rates (which means rates that do not compensate them as much as the market says they need to be compensated for the risks they are taking, all of which sounds like a new edition of the policies that brought on the financial collapse), 3) which must mean that they will have to pull back on risky lending someplace other than homes, 4) the only place that most banks would be able to pull back on riskier customers would be loans to small and new businesses, 5) but these are the businesses that have created just about all the jobs over the last 20 years and he said early in the speech he wants to encourage them, 6) so maybe their growth capital will come from selling stock to the kinds of people who invest in new and small businesses, 7) but through the Buffet Rule he’s going to double the tax rate on investment income for those people, meaning that, like the banks, they can’t be fully compensated for the risk of backing small and new businesses, 8) so they will not invest more in small and new companies but in big established firms, 9) so more of those small and new firms will have to turn to the government for capital, 10) which luckily he said would up its investing in early stage businesses with “the best” ideas, 11) “the best” ideas meaning, I guess, as with Solyndra, ideas that advance his agenda through companies whose owners support his candidacy), 11) or maybe it would be companies that agree to invite unionization (since the unions have failed to organize the new and dynamic sectors of the economy, which is why they have been shrinking), 12) but then with the big businesses, he wants to punish American companies if they invest overseas, 13) and he wants to increase exports, 14) but being competitive in the global markets often means having part of your production near your markets, which is why many companies have opened production facilities abroad and many foreign companies (BMW and Honda, for example) have opened their facilities here, 15) so he’ll make these companies less competitive, meaning less able to export anything that might be paired with some other product the company makes abroad in order to attract buyers, 16) and it also means he’ll have the U.S. ignoring many of the international trading rules of which we have been the principal sponsor since the end of WWII, rules that have led to an incredible growth in widely shared wealth all over the planet, 17) which means that, if he follows through, he’ll blow up the post-WWII global economic system, 18) which in the very short run may help the uncompetitive American labor unions but in the not-so-long run would devastate every economy on earth, 19) but it would also mean he would be in a position to decide where big companies could invest, and when, just as he’ll be in control of all new and small businesses, too, 20) meanwhile he is going to tell states and localities what their budget priorities should be, 21) and make them adopt his policies for running their schools, leaving me to wonder, when he’s through, what won’t he control?
I believe that’s what I heard the president advocate last night. But one term I didn’t hear, maybe I missed it: “The Constitution.” Then again, wasn’t he suggesting that, in brave times like these, we need to put aside those old rules. Do I have this straight?
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Mark Landsbaum: Taxpayers getting sunburned again
Despite history – and current events involving alternative energy companies – many Americans buy into the notion that for good things to happen, the government needs to be involved, even in charge.
How many Solyndras is too many?
America was shocked to find President Barack Obama's prize example of a subsidized alternative-energy company laying off its 1,100 employees. Then America was staggered that the Bay Area company went bankrupt last summer, despite being propped up with half a billion taxpayer dollars.
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The shocks kept coming as we learned this solar panel-making scheme not only got special treatment other companies didn't, it got a government go-ahead despite a host of red flags raised early about its financial riskiness. As if not disillusioned enough, voters and taxpayers were told the FBI raided the company, and Congress was investigating. Then there was that inconvenient fact that Solyndra's looming disaster was foreseen before the 2010 midterm elections, but government higher-ups kept it quiet until after the ballots were cast.
By the time it became widely known that Obama campaign donors had invested heavily in Solyndra, people probably weren't too surprised to learn that, in bankruptcy, the same investors were allowed to go to the front of the line to get money back, ahead of those to whom Solyndra actually owed money, quite unlike most normal bankruptcies.
Who knew such things could happen in America, the land of free enterprise founded by small government advocates who didn't want Washington meddling in their affairs, let alone forcibly extracting unnecessary taxes from them to hand out to freeloaders and cronies?
Amid it all, the Obama administration insisted nothing was amiss. Indeed, the Solyndra debacle was just a good idea that hadn't worked out. So they said.
"This was a merit-based decision made by expert staffers at the Department of Energy," insisted White House spokesman Eric Schultz.
If we give them the benefit of the doubt, the most charitable conclusion must be that the Department of Energy really stinks at determining what's meritorious.
But wait, as they say in late-night television. That's not all.
CBS News' Sharyl Attkisson reported a week ago that there are 11 more Solyndra-type clean-energy companies having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk-bond-rated Beacon, Evergreen Solar, SpectraWatt, AES' subsidiary Eastern Energy and Solyndra. According to CBS News, Beacon Power, a "green-energy storage company," received $43 million from the government despite its Standard and Poor's debt rating of "CCC-plus."
If, and at this point "if" is being overly generous, but if these calamities are evidence of "merit-based decision[s] made by expert staffers at the Department of Energy," our earlier assessment was far too generous. Based on this track record, it's clearly Loonie Toon time at the Energy Department. Or could it be something worse than gross incompetence?
Just for fun, think fast. What's one country that comes to mind when you think about how government tried to pick economic winners and losers? If you thought of the Soviet Union, go to the head of the class. Or maybe to a job with responsibility in the Energy Department.
In the 1920s, New York Times reporter Walter Duranty infamously told us that Soviet dictator Vladimir Lenin's New Economic Policy implemented elements of a market economy controlled by the state. An economic genius, Duranty was not. The fact that a market economy controlled by the state is an oxymoron apparently never occurred to him. Or maybe it did. Duranty also reported there was no ongoing genocide in Russia, even though he and his editors knew otherwise. Final body count: upward of 10 million, probably more.
For his quite-slanted reports, Duranty won a Pulitzer Prize: "Mr. Duranty's dispatches show profound and intimate comprehension of conditions in Russia and of the causes of those conditions. They are marked by scholarship, profundity, impartiality, sound judgment and exceptional clarity and are excellent examples of the best type of foreign correspondence." Duranty, by the way, considered Josef Stalin "a really great statesman."
You know how that Soviet economic experiment worked out. Apparently the bureaucrats at the Department of Energy, to say nothing of the occupant of the White House, missed that lesson in school. The federal government virtually never has done a better job than the private sector at anything, particularly in commerce. Do they even teach this truism anymore?
Despite history – and current events – many Americans buy into the notion that for good things to happen, the government needs to be involved, even in charge. How else can the private-sector bumpkins who made America the most prosperous nation on Earth possibly succeed?
We lay this misguided thinking not just to left-wing fanaticism. It's also the fault of human nature. Who wouldn't take something for nothing to improve one's lot, or to increase chances of success, or to insure against loss?
Politicians know this, and that's why nearly every one campaigns on giving you more, not less, of someone else's money, oblivious that the money will run out, and of the myriad unintended consequences that lay ahead. Think "Greece."
So, what's wrong with the government picking winners and losers using taxpayer money and the coercive power of law? Here's a short list:
Political not profit motives: Sellers are motivated to serve buyers and make a profit so they can continue doing so. Political motives introduce perversions into the transaction. Bankruptcy means less if you're losing someone else's money, like the taxpayers', or if taxpayer money refunds your loss.
Political payoffs paid by taxpayers: In commerce, business owners weigh costs against value. You might hire your nephew, but not if it means the company will make substantially less money. Politics inverts this value system. Nephews, campaign contributors and cronies all are elevated in esteem, and commensurately rewarded.
Politics punishes: Favoritism cuts two ways. When the Democratic Obama administration took over Chrysler Motors and closed dealerships, why were those closed disproportionately owned by contributors to Republican candidates?
A dime diverted is a dime lost: Every dime the government gives a company to "help" gives that company an unfair advantage over competitors. That's the whole idea behind the government picking winners and losers.
Appearances count: The government playing favorites is offensive enough. But even if there were no political motivations, the bell cannot be unrung. When government chooses one and not another, no amount of explanation can wipe away the taint of perceived preference. If government drew from a lottery to choose its beneficiaries, the public would no doubt suspect the lottery had been rigged by the government-hired contractor. And with good reason. The spoils system may have been invented by warriors but it was perfected by politicians.
Distortions kill: When artificially lowering product costs with taxpayer subsidy, products become more desired by buyers. Once the subsidy runs out, as it must in a government of limited resources, buyers retreat. Jobs sustained by sales based on artificially low prices disappear. Plants close. Economic plans collapse for buyers, who may have made long-term investments based on the artificially lower prices. Waste abounds. What will happen to $50,000 electric cars when their $5,000 and $10,000 tax subsidies evaporate?
Limited resources: Unsubsidized companies have less access to capital when lenders loan to companies that wouldn't be operating if it were not for government's assistance. Companies that could succeed without taxpayer assistance are denied some measure of success because the loans they need are made instead to other companies that couldn't operate in the black without tax subsidy.
Chain reactions: When a company that shouldn't be operating operates thanks to tax subsidies, it spawns new companies to buy from and sell to. The network is indirectly reliant on the first company's government subsidy. When political winds change, and funding is yanked, a domino effect of failures can be set in motion that has nothing to do with genuine supply and demand.
How many Solyndras is too many? One.
Contact the writer: mlandsbaum@ocregister.com
Contact the writer: or 714-796-5025
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Keystone Madness
By Robert Samuelson
WASHINGTON -- President Obama's rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn't often that a president makes a decision that has no redeeming virtues and -- beyond the symbolism -- won't even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his re-election that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.
Aside from the political and public relations victory, environmentalists won't get much. Stopping the pipeline won't halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global warming emissions. Indeed, Obama's decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills.
Now consider how Obama's decision hurts the United States. For starters, it insults and antagonizes a strong ally; getting future Canadian cooperation on other issues will be harder. Next, it threatens a large source of relatively secure oil that, combined with new discoveries in the United States, could reduce (though not eliminate) our dependence on insecure foreign oil.
Finally, Obama's decision forgoes all the project's jobs. There's some dispute over the magnitude. Project sponsor TransCanada claims 20,000, split between construction (13,000) and manufacturing (7,000) of everything from pumps to control equipment. Apparently, this refers to "job years," meaning one job for one year. If so, the actual number of jobs would be about half that spread over two years. Whatever the figure, it's in the thousands and important in a country hungering for work. And Keystone XL is precisely the sort of infrastructure project that Obama claims to favor.
The big winners are the Chinese. They must be celebrating their good fortune and wondering how the crazy Americans could repudiate such a huge supply of nearby energy. There's no guarantee that tar-sands oil will go to China; pipelines to the Pacific would have to be built. But it creates the possibility when the oil's natural market is the United States.
There are three things to remember about Keystone and U.S. energy policy.
First, we're going to use lots of oil for a long time. The U.S. Energy Information Administration (EIA) estimates that American oil consumption will increase 4 percent between 2009 and 2035. The increase occurs despite highly optimistic assumptions about vehicle fuel efficiency and bio-fuels. But a larger population (390 million in 2035 versus 308 million in 2009) and more driving per vehicle offset savings.
The more oil we produce domestically and import from neighbors, the more we're insulated from dramatic interruptions of global supplies. After the United States, Canada is the most dependable source of oil -- or was until Obama's decision.
Second, barring major technological breakthroughs, emissions of carbon dioxide, the main greenhouse gas, will rise for similar reasons. The EIA projects that America's CO2 emissions will increase by 16 percent from 2009 to 2035. (The EIA is updating its projections, but the main trends aren't likely to change dramatically.) Stopping Canadian tar-sands development, were that possible, wouldn't affect these emissions.
Finally, even if -- as Keystone critics argue -- some Canadian oil were refined in the United States and then exported, this would be a good thing. The exports would probably go mostly to Latin America. They would keep well-paid industrial jobs (yes, refining) in the United States and reduce our trade deficit in oil, which exceeded $300 billion in 2011.
By law, Obama's decision was supposed to reflect "the national interest." His standard was his political interest. The State Department had spent three years evaluating Keystone and appeared ready to approve the project by year-end 2011. Then the administration, citing opposition to the pipeline's route in Nebraska, reversed course and postponed a decision to 2013 -- after the election.
Now, reacting to a congressional deadline to decide, Obama rejected the proposal. But he also suggested that a new application with a modified Nebraska route -- already being negotiated -- might be approved, after the election. So the sop tossed to the environmentalists could be temporary. The cynicism is breathtaking.
Copyright 2012, Washington Post Writers Group
Page Printed from: http://www.realclearpolitics.com/articles/2012/01/20/keystone_madness__112829.html at January 20, 2012 - 06:30:34 AM PST
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