Glimpse at a Costly Energy Future from Nebraska

It is simply mystifying how assorted elected officials relentlessly push public policy measures that inevitably raise energy costs for consumers, entrepreneurs and businesses.

The latest example comes from Nebraska. Governor Kathleen Sebelius (D) apparently is set on waging war against coal-generated electricity.

An April 4 Wall Street Journal editorial – “The ‘No, Nothing’ Democrats” – is right on target. The Journal explained:

Governor Kathleen Sebelius calls it "a moral obligation," as though she were opposing crimes against humanity. This is a reference to coal companies guilty of nothing more than attempting to provide power to consumers. But their misfortunes include emitting carbon dioxide into the current political atmosphere, and also the presence of Ms. Sebelius, who recently invented another way of enacting her preferred global-warming policies without legislation.

No one disputes that Kansas needs more baseload energy capacity to meet growing demand, especially at peak times and in the more rural west. In 2006, Sunflower Electric proposed to add two new generators to one of its existing coal facilities. The plans met or exceeded every federal and state air-quality and environmental regulation, and included the latest pollution control technologies.

But in October, one of Ms. Sebelius's cabinet secretaries, Roderick Bremby, denied Sunflower its permits. Using "emergency" discretion, he creatively ruled the expansion an imminent danger to the public – because the estimated 11 million tons of greenhouse gases it would emit each year might contribute to climate change. It was the first time ever that such reasoning formed the sole basis for blocking a power project; and, in the absence of any state laws relating to carbon control, it amounted to a public policy putsch.

The editorial goes on to note that the state legislature passed a measure fixing this mess, but Sebelius vetoed the measure.

The Lawrence Journal-World reported on April 3:

The Kansas Senate today voted to override Gov. Kathleen Sebelius’ veto of a bill that would allow the construction of two coal-fired power plants in southwest Kansas. The vote was 32-7 — five votes more than the 27 votes, or two-thirds majority in the 40-member Senate needed to overturn a veto…

The effect of the veto override, however, was cloudy. There are still not enough votes in the House to overturn the veto. Instead, House Speaker Melvin Neufeld, R-Ingalls, is trying to put together a veto-proof margin on a similar bill. That would require 84 votes in the 150-member House.

Nebraska House action is scheduled for today (April 4).

If the Sebelius action holds, it would be bad for consumers and businesses in Nebraska, who need more affordable energy. It’s also a national concern. As the Journal wrote: “Ms. Sebelius joined the green regulatory lobby that wants to unilaterally classify CO2 as an ‘air pollutant,’ though it has none of the qualities that have always defined the term under federal or state law. Her effort is also an opening charge for a national moratorium on new coal plants, which is backed by the likes of Democrats Harry Reid, Ed Markey and, needless to say, Al Gore.”

Here is another case of energy and environmental policies being generated with absolutely no regard for the dire economic effects.

Where Are Those Tax Dollars Going?

Small business owners keep a close eye on expenses. But, of course, a big chunk of change gets sucked away in taxes, and lost in the big, wasteful mess known as government.

To get a better idea of how our hard-earned money is being wasted, a handy book published each year from Citizens Against Government Waste is the Congressional Pig Book.

The 2008 edition is out. In the press statement, the group noted: “In fiscal year 2008, Congress stuffed 11,610 projects (the second highest total ever) worth $17.2 billion into the 12 appropriations bills. That is a 337 percent increase over the 2,658 projects in fiscal year 2007, and a 30 percent increase over the $13.2 billion total in fiscal year 2007. Alaska led the nation with $556 in pork per capita ($380 million total), followed by Hawaii with $221 ($283 million) and North Dakota with $208 ($133 million). CAGW has identified $271 billion in total pork since 1991.”

A few highlights – or more accurately, lowlights – were:

• $3 million for The First Tee;

• $1,950,000 for the Charles B. Rangel Center for Public Service; 

• $460,752 for hops research; 

• $211,509 for olive fruit fly research in Paris, France; 

• $196,000 for the renovation and transformation of the historic Post Office in Las Vegas;

• $188,000 for the Lobster Institute in Maine;
•
 $148,950 for the Montana Sheep Institute.

Nonetheless, some in government have the nerve to say budgets have been cut to the bone. Oh please!

Trade, Small Business and Colombia

Entrepreneurs and smaller enterprises have benefited significantly from free trade agreements brokered between the U.S. and other nations. Such agreements, and increased global trade in general, have produced greater choices in products and services (often at lower prices) for all consumers. More significantly, they have created more favorable access to overseas markets for small firms.

Lest you believe that trade and these trade deals only benefit big business, the numbers belie that assumption. According to the U.S. Small Business Administration (SBA) Office of Advocacy, small businesses "made up 97 percent of all identified exporters and produced 28.6 percent of the known export value in FY 2004."

The power of technology and the “shrinking of the globe” have enabled more small firms to go global. Yet, while geographic and logistical barriers are rapidly decreasing -- making it easier for entrepreneurs to conduct business globally – tariffs, complexity and an uneven playing field remain obstacles for U.S. firms in many countries. Trade pacts – such as the pending U.S.-Colombia Trade Promotion Agreement (TPA) – are critical initiatives that create better conditions for small firms to do business in specific markets.

Already, trade between the U.S. and Colombia amounted to $18 billion in 2007. The pending trade pact will eliminate tariffs on more than 80 percent of U.S. exports of industrial and consumer goods immediately. Over time, 100 percent of U.S. exports will be duty-free. Duty-free access to a growing market is a god-send to small business owners in search of new markets, particularly against the back-drop of sagging U.S. economic conditions.

So, you might ask, why isn’t Congress moving on the agreement? Probably for the same reason they haven’t moved on many other issues for more than a year and a half -- lack of leadership and the dynamics of the presidential elections. Yes, politics as usual.

The anti-trade rhetoric on the campaign trail has crept into the corridors of Capitol Hill. Democrat leaders are holding up the agreement citing labor, environmental and other concerns with the Colombia pact. However, the Colombia agreement includes almost the same language and provisions as the Peru agreement that passed in December 2007.

The U.S.-Colombia agreement was signed almost 500 days ago. The Colombia legislature approved the agreement first in June 2007, and again in October 2007 with amendments (at the behest of the U.S.) that enhanced labor and environmental provisions. The U.S. Congress has regularly extended duty-free treatment for virtually all Colombia goods and services that enter the United States. So, why not give U.S. businesses that same treatment in pursuit of the Colombia market?

Not only will the U.S.-Colombia PTA present substantial economic opportunities for the U.S., the political stabilization of the country is another key benefit. Impatience has set in with trade supporters, and President Bush is looking to send the agreement to the Hill as early next week. The Congress will then have 90 days to approve or disapprove the agreement.

If political leaders in Washington want to do something meaningful for the economy, and strengthen our standing around the globe, they will move without haste and approve the U.S.-Colombia TPA.

Immigration: All About Economics

The reality about immigration is what the anti-immigration forces in politics choose to simply ignore. They either don’t understand the economics of immigration, or they simply choose to disregard that reality.

The economics of immigration are really quite simple. First, there are jobs in this nation that need to be done that native-born workers simply are not interested in doing, or there are not enough native born workers to fill those positions. Second, as a result, immigrants overwhelmingly do not take jobs from the native born, but instead, compliment the work done by those born in the nation. Third, various studies have shown that immigrants have a greater propensity for entrepreneurship than do the native born. That makes sense, as anyone willing to move to another country is a risk taker. Fourth, illegal immigrants in this nation who work hard and do not get into trouble are contributing to our society and economy, not taking away from it. Fifth, if we reduce or cut off the supply of immigrant workers, businesses and consumers will suffer accordingly.

To sum up, immigration is good for the U.S. economy.

What happens when immigrant workers are reduced or cut off is illustrated by a story in the April 2 New York Times titled “Immigration Issues End a Grower’s Season.”

The entire article warrants reading, but it is important to highlight the following here:

For 35 years, Keith Eckel, 61, one of the largest tomato growers in the Northeast, had the workers and the timing down to a T: seven weeks, 120 men, 125 trailer loads of tomatoes picked, packed and shipped. This year, however, the new politics of immigration — very much on the mind of many of Pennsylvania’s voters, even if overlooked by the presidential candidates campaigning in this state and around the nation — has put him out of business. State, local and federal crackdowns on illegal immigration have broken his supply chain of laborers…

This is the crux of a tense, if largely unspoken, conflict between politics and reality in a state with 40,000 commercial farms. On many of those farms, crops requiring hand-picking are either not being put in this year, or are being planted by farmers who cannot be sure they will have the workers to harvest them, farm experts say. Yet, in more than a half dozen state legislative races, getting tough on illegal immigration has become the premier issue in this state, as it has in many others…

“Over the last couple of growing seasons, farmers have been feeling a tremendous amount of stress over the way this issue has been playing out,” said Gary Swann, governmental relations director for the Pennsylvania Farm Bureau. “And if people think all we have to do is raise wages and hire local workers, they are simply mistaken.” Local workers will not do the job, Mr. Swann said…

A temporary federal guest worker program, which briefly made hiring migrant farm workers easier, was not renewed by Congress last year in the rancorous debate over border security…

“This is all about economics,” added Mr. Eckel, who served as president of the state farm bureau for more than a decade until the mid-1990s, and whose office walls are decorated with photos of himself shaking hands with Ronald Reagan and the two presidents Bush. “I’m not trying to make some political statement.”

But, of course, economics and politics often cross paths. And that most certainly is the case with immigration. The question is: Which wins out in the end – sound economics that changes the law to reflect reality, or bad politics that changes the law while ignoring economics and doing real damage to U.S. businesses and consumers?

And what kind of immigration reform acknowledges economic reality? While tightening up the borders for security reasons, it makes sense to expand legal avenues for immigration and offer a path to legalization for undocumented workers, who are working and staying out of trouble.

Oil and Gas Policymaking: U.S. vs. Russia

In Congress on April 1, oil and gas company executives were called to testify before the House Select Committee on Energy Independence and Global Warming. Of course, this was largely about politicians having the opportunity to posture against big, bad energy companies.

But the executives had a few good points to make.

The Washington Post reported: “But the oil executives turned some of the blame back on Congress, complaining that Congress and past administrations had barred oil companies from drilling in much of the Outer Continental Shelf. John Hofmeister, president of Shell Oil Co., noted that U.S. oil and gas production has been dropping steadily for two decades. ‘Why?’ he said, ‘Because government policies place domestic oil and gas resources off-limits.’ The oil executives also criticized a tax package passed by the House that would extend tax breaks for solar and wind projects and pay for that by eliminating a tax break for the five biggest international oil companies. ‘Raising taxes on oil and gas production to subsidize alternatives will likely lead to less energy production not more,’ said J. Stephen Simon, senior vice president at Exxon Mobil Corp.”

MarketWatch.com noted: “Stephen Simon, senior vice president of Exxon Mobil Corp., said raising taxes on oil and gas companies will discourage investment to increase supply. He said oil should be about $50 to $55 a barrel, but it's now $100 or more because of the weaker dollar, geopolitical risk and speculation. ‘We depend on high earnings over the up-cycle to sustain investment over the long term, including the down-cycles,’ Simon said in his prepared remarks. ‘Our worldwide profits have grown, but taxes have grown even more.’ He said Exxon Mobil's tax rate is about 44%, compared to 30% for other large U.S. corporations.”

Meanwhile, Russia apparently has a different oil and gas agenda. Reuters reported: “The Russian Finance Ministry unveiled on Monday a series of tax break proposals for oil and gas industries as part of its fiscal policy strategy for 2009-2011. The draft document, which will be reviewed by the government on April 3, includes proposals to cut the mineral extraction tax, change excise duties on high quality oil products and introduce tax breaks for exploration on the continental shelf.”

Raising costs or reducing costs for energy exploration and development? Seems like Russian policymakers have a better grasp of energy economics than do some in Congress.

More Dumb Economics in New York

New York has gained national political attention in recent weeks for all kinds of shenanigans perpetrated by its previous and current governor. This might cause people to forget the economic shenanigans perpetrated by politicians on residents and businesses in the Empire State.

New York elected officials are racing to pass a state budget on time. What tops the agenda? Well, naturally, it’s all about more government spending and higher taxes with little regard for the state’s economy, consumers and businesses.

Here’s how a March 31 report in the New York Sun sums up matters:

The budget appears to stand at $124 billion, about $200 million less than what Mr. Spitzer proposed in January. The tentative deal calls for raising spending $500 million beyond what Mr. Paterson advised this month, a total funds increase of 4.8% over last year's spending levels. The increase comes amid warnings of a recession and expectations that state revenue will shrink further, threatening to create midyear deficits. To help close what is already a $5 billion budget gap, lawmakers are set to approve an increase of the state cigarette tax to $3 a pack, bringing the total tax in New York City to $4.50, the highest in the nation. They are also expected to change the tax code so that Amazon.com and other online retailers are required to charge state and local sales taxes on all purchases from New York.

The higher cigarette taxes will further incentivize underground, criminal activity, and raise costs and decrease business for small, retail firms. Meanwhile, the online tax faces obvious constitutional issues, and sends a clear signal that New York is hostile to the cutting-edge, high-tech, Internet economy.

It’s the same old economic shenanigans in high-tax, anti-business New York.