Voice For Liberty

Tag: Barack Obama

  • For President Obama, internet is just another job-killer

    John Hinderaker of Powerline Blog seems to understand just where President Barack Obama thoughts come from.

    Hinderaker writes: “This is one more reminder — as if we needed it — that President Obama has no understanding of the economy. He is, at heart, a Luddite. He doesn’t understand that when work is made more efficient, as by the internet, our economy becomes more productive and we are all better off.”

    Luddites were 19th-century English textile artisans who smashed mechanical looms because they felt the machines were destroying jobs. Here’s the full article, including video: Welcome to Texas!

  • The true size of the Obama stimulus

    When we think of the “Obama stimulus,” most people are referring to the American Recovery and Reinvestment Act of 2009. This legislation called for a variety of fiscal stimulus measures estimated to cost $787 billion at the time the law was passed.

    The reasoning behind the stimulus comes from a school of thinking known as Keynesian economics, which holds that government should actively and aggressively manage the economy, most importantly by stepping up spending when demand is low. Through this deficit spending, it is said that government action can increase employment. This government spending purportedly accomplishes this through a multiplier effect, as dollars are spent again and again.

    What’s often lost in the discussion is that all deficit spending ought to be included in the amount of stimulus the economy has received. When President Obama took office, the national debt — the accumulation of all deficits — was $10.626 trillion, according to CBS News.

    Just recently this figure passed $15 trillion, meaning that there has been over $4 trillion dollars of deficit spending under President Obama. That’s $4,000 billion in deficit stimulus spending, or about five times the “official stimulus” amount.

    Now, we’re starting to understand why Keynesian economics doesn’t work. Writing in the Wall Street Journal, Stanford economist Michael J. Boskin summarizes recent research that finds that the spending multiplier that Keynesian economists rely on is small, and actually turns negative by the start of the second year. Furthermore, the government spending crowds out private sector spending. The effect of Obama’s 2009 stimulus bill is estimated at 0.2 percent of GDP, an amount described as “puny.”

    Tax cuts, however, are estimated to have a multiplier of 3.0, with “substantial tax cuts” having a multiplier of up to 5.0.

    In context, Obama’s economic advisers, at the time he took office, estimated that the spending multiplier for government purchases was 1.57, while the multiplier for tax cuts was 0.99.

    Of the new studies finding a small spending multiplier, Boskin writes: “These empirical studies leave many leading economists dubious about the ability of government spending to boost the economy in the short run. Worse, the large long-term costs of debt-financed spending are ignored in most studies of short-run fiscal stimulus and even more so in the political debate.”

    In conclusion, he writes: “The complexity of a dynamic market economy is not easily captured even by sophisticated modeling (an idea stressed by Friedrich Hayek and Robert Solow). But based on the best economic evidence, we should reject increased spending and increased taxes.” He calls for reductions in personal and corporate marginal tax rates and an “enforceable gradual phase-down of the spending explosion of recent years.”

    We should note that Obama and many of those in government are easily seduced by the allure of Keynesian deficit spending. It’s government, after all, that gets to spend the money. Republicans, even those who consider themselves conservative, have been seduced in this way, too.

    Tax cuts, on the other hand, leave money and spending decisions in the private sector.

    Why the Spending Stimulus Failed

    New economic research shows why lower tax rates do far more to spur growth.

    By Michael J. Boskin

    President Obama and congressional leaders meeting yesterday confronted calls for four key fiscal decisions: short-run fiscal stimulus, medium-term fiscal consolidation, and long-run tax and entitlement reform. Mr. Obama wants more spending, especially on infrastructure, and higher tax rates on income, capital gains and dividends (by allowing the lower Bush rates to expire). The intellectual and political left argues that the failed $814 billion stimulus in 2009 wasn’t big enough, and that spending control any time soon will derail the economy.

    But economic theory, history and statistical studies reveal that more taxes and spending are more likely to harm than help the economy. Those who demand spending control and oppose tax hikes hold the intellectual high ground.

    Continue reading at the Wall Street Journal (subscription not required)

  • Unemployment is worse than if there had been no stimulus

    Many people remember that President Barack Obama promised that the unemployment rate would not top eight percent if the stimulus was passed. The actual rate has been around nine percent or higher for the past two years, reaching 10.1 percent in October 2009.

    What’s really telling about the ineffective Obama stimulus — in fact, the futility of his entire economic program — is that unemployment has been worse than what his administration predicted it would be if the stimulus had not been passed.

    The following chart from e21 illustrates, showing the predicted path of the unemployment rate with and without the stimulus, and what actually happened. The accompanying article is Revisiting unemployment projections.

  • Obama’s executive orders

    Americans for Limited Government has commented on President Barack Obama’s recent use of executive orders to step around the will of Congress:

    “These unilateral executive orders, whether on government-backed student loans and mortgages or FDA oversight, are intended to sidestep the consent of the governed, and as a result they overstep the President’s constitutional boundaries. Obama can rhetorically dress this up however he likes, but his actions are not predicated on the consent of the governed, they are fueled by his desire to maintain and expand power. This is not the rule of law, but the rule of man.

    “Obama is just following the playbook of the Center for American Progress, which had argued for the White House to use executive orders and other regulations to advance its agenda after Democrats lost control of the House of Representatives in the November elections. This is all designed to get around the political process, and has occurred repeatedly under Obama’s watch, whether with the EPA’s carbon endangerment finding or the unilateral implementation of management-labor forums for the federal civil service.”

    The full press release is at Obama’s executive orders overstep.

    Phil Kerpen’s recent book Democracy Denied: How Obama is Ignoring You and Bypassing Congress to Radically Transform America — and How to Stop Him holds other lessons of how presidents — from both political parties — overstep. In the introduction Kerpen gives us a history lesson on a topic that doesn’t receive much discussion in public: the grab for executive power by presidents through the use of “signing statements.”

    Elizabeth Drew made the case against Bush’s abuse of executive power in a lengthy New York Review of Books piece called “Power Grab.” She specifically highlighted Bush’s use of signing statements (a technique to object to elements of a law while signing it, and refusing to enforce those elements), the detention of foreign combatants at Guantanamo, and warrantless wiretaps. She concluded that Bush was a tyrant.

    Kerpen explains how the view from the oval office can make one forget campaign promises:

    Even the Bush practice that raised the most ire — the use of signing statements — was embraced by Obama just weeks after he took office, when he said: “it is a legitimate constitutional function, and one that promotes the value of transparency, to indicate when a bill that is presented for presidential signature includes provisions that are subject to well-founded constitutional objections.” Contrast that with what Obama had said about signing statements on the campaign trail: “This is part of the whole theory of George Bush that he can make laws as he is going along. I disagree with that. I taught the Constitution for 10 years. I believe in the Constitution and I will obey the Constitution of the United States. We are not going to use signing statements as a way of doing an end run around Congress.”

    Later in the chapter Kerpen describes another critic of Bush’s use of executive power and how things would change with the election of Obama:

    One of the harshest critics of executive power under Bush, Yale law professor Bruce Ackerman, dismissed the overly simple view of many on the left regarding Obama ending abuse of power. After a warning about an authoritarian takeover, he says:

    This grim prognosis depends on structures, not personalities, permitting us to move beyond knee-jerk reactions to the politics of the day. Most obviously, the election of President Obama has, for many, sufficed to dispatch any serious doubts about the system: Good-bye, imperial presidency; hello, Americas first black president, and the nation’s remarkable capacity for constitutional renewal!

    But a paragraph later he falls into the very trap he warned against, absurdly writing of Obama:

    He may be charismatic, but he is no extremist: there is little chance of his running roughshod over congressional prerogative, even those as indefensible as the filibuster. But the next insurgent president may not possess the same sense of constitutional restraint.

    Sadly, contrary to the ideologically blinded analysis of most observers from the left, all of the elements of excessive executive power that they feared from Bush have continued — or worsened — under Obama. On top of which he has used the financial crisis as an excuse to seize control — without Congress’s approval — of the energy supply, industrial activities, the Internet, and labor policy.

    Some of the loudest voices opposing Bush’s use of executive power are now cheering for Obama to push things much further. It’s different when its your guy in charge.

    Or: the more things change, the more they stay the same.

  • Kansas and Wichita quick takes: Monday October 17, 2011

    Government job creation. Reason editor Matt Welch introduces the magazine’s November issue, which contains articles on free-market job creation. After citing the litany of failures, he concludes: “Such persistence in the face of repeated failure suggests that some powerful myths continue to hold sway among politicians and many of the people they represent. Among the most stubborn of these is the notion that passing a bill to fix a problem is the same as actually fixing the problem. This assumption — which reaches its illogical conclusion during times of national panic, when do-something busybodies like Michael Bloomberg will say that it doesn’t matter what Washington does, it just needs to do something — is oblivious to the law of unintended consequences, to the reality of corporatist lobbying, and to the limitations of government power.” … Then having done something, government is oblivious to what it has actually done: “A curious flip side to the myth of government omnipotence is near-complete incuriosity about government side effects. That is, people remain convinced that the state can and should look a problem squarely in the eye and fix it, but they are rarely moved by daily examples of the harm caused by earlier fixes.”

    Wichita City Council. Tomorrow the Wichita City Council considers these items: The city will consider revisions the ordinances governing municipal court bondsmen. The agenda packet reports “Currently, six departments are involved in the licensing and oversight of bail bondsmen.” The goal, says the city, is a more efficient process. … Johnson Controls asks the city for a forgivable loan of $42,500. It is proposed that Sedgwick County do the same. The State of Kansas is contributing $1,168,000 through various programs. Worldwide, Johnson Controls has 137,000 employees, sales of $39,080,000,000, and profits of $1,540,000,000. Yet, corporate welfare is still required, it seems. … As always, the agenda packet is available at Wichita city council agendas.

    Kansas tax plans. “In the coming months, Brownback and state legislators are expected to deal with at least three major proposals to change Kansas’ tax structure.” More from Kansas Reporter at Competing tax plans head for Kansas Legislature .

    Repealer on tour. “Government regulation is costing businesses valuable time and opportunities and denying state and local government millions in tax revenue from business activity and development, according to business leaders speaking at the ‘Drowning in Regulation’ tour stop in Wichita Wednesday.” The event was part of the Office of the Repealer seeking input from Kansans. More, including video, from Kansas Watchdog at Legislators Hear Examples of Businesses Drowning in Regulations. The Repealer (Dennis Taylor, Secretary of Kansas Department of Administration) will make a public appearance in Wichita on Tuesday, November 1st at 11:30 am, in the Wichita Public Library Patio Room (223 S. Main).

    Sowell: And then what will happen? Last week I quoted at length from a book by Thomas Sowell (Applied economics: thinking beyond stage one) where he writes about “thinking beyond stage one.” Later that day the great economist was interviewed by Sean Hannity, and he told the same story. Video is at Thomas Sowell on ‘Hannity’.

    Zuckerman on Obama. James Freeman of the Wall Street Journal interviews Mortimer Zuckerman, who is a Democrat and an Obama voter. He has been openly critical of President Barack Obama and his leadership, and that again is expressed in this article. Zuckerman told of the real unemployment numbers: “Mr. Zuckerman says that when you also consider the labor-force participation rate and the so-called ‘birth-death series’ that measures business starts and failures, the real U.S. unemployment rate is now 20%.” … Zuckerman is pessimistic about the Obama Administration, writes Freeman. An example: “At that time he supported Mr. Obama’s call for heavy spending on infrastructure. “But if you look at the make-up of the stimulus program,” says Mr. Zuckerman, ‘roughly half of it went to state and local municipalities, which is in effect to the municipal unions which are at the core of the Democratic Party.’ He adds that ‘the Republicans understood this’ and it diminished the chances for bipartisan legislating.”

    The fall of California. “California has long been among America’s most extensive taxers and regulators of business. But it had assets that seemed to offset its economic disincentives: a sunny climate, a world-class public university system that produced a talented local work force, sturdy infrastructure that often made doing business easier, and a record of spawning innovative companies. No more. In surveys, executives regularly call California one of the country’s most toxic business environments, while the state has become an easy target for economic development officials from other states looking to lure firms away.” Reasons: “a suffocating regulatory climate,” “California taxes are high and hit employers and employees hard,” and “the state’s legal environment is a mess.” Complete article by Steve Malanga of the Manhattan Institute for Policy Research in the Wall Street Journal at How California Drives Away Jobs and Business: The Golden State continues to incubate cutting-edge companies in Silicon Valley, but then the successful firms expand elsewhere to avoid the state’s tax and other burdens.

    Public Sector Inc. Speaking of the Manhattan Institute, its project PublicSectorInc is a great resource for learning more aboout the issues of public sector employment. Says the site: “PublicSectorInc.org is a one-stop-shop for the latest news, analysis and research about the issues facing the public sector and the American taxpayer. It provides a national forum to probe problems and develop solutions at the state and local level. With a critical focus on the urgent topics of pension reform, employee compensation, bargaining and retirement health benefits for public employees, PublicSectorInc.org is shaping the national debate unfolding in state capitals and city halls across America.” … An example article of value is Valuing Job Security as a Public Employee Benefit.

    Markets and trade help all. James Otteson explains the motivations and concerns of Adam Smith, one of the earliest economists and author of The Wealth of Nations. In a short video, Otteson explains: “One of the main concerns is … how do we raise the estates of the least among us? He’s deeply concerned about the poor in society.” Continuing: “His investigation of centuries of data … shows that, empirically, the way to help people who are the least among us, the bottom rungs economically of society, is by allowing for commerce: free trade, free migration, limited government. To the extent that you can encourage those policies, their estates will be raised tremendously. … What he’s interested in is those people at the bottom, and his endorsement of markets and of trade is because he thinks they’ll help the people at the bottom, not because they’ll help the people who are already rich.” Over the centuries since Smith, we’ve learned many times that economic freedom is good for everyone, especially the poor. … The video is from LearnLiberty.org, a project of Institute for Humane Studies.

  • Kansas and Wichita quick takes: Thursday October 13, 2011

    Wichita city leaders too cozy with developers? Yesterday I participated in a KAKE Television news story where I explained the need for pay-to-play laws in Wichita and Kansas. These laws generally restrict officeholders from participating in votes or activities that would enrich their campaign contributors. In the story I said “What I, and some of my political allies object to, is what is happening in plain sight: In that there is a relatively small group of people — and their spouses and people who work at their companies — who regularly contribute to a wide variety of city council members, both political liberals and political conservatives, because they know that they are going to be coming to the city council and asking for taxpayer money.” Officeholders and the developers who contribute deny there is a connection between contributions and votes. Curiously, these developers generally don’t make contributions to school board members, county commissioners, state legislators, or federal representatives. Actually, it’s not so curious: It’s primarily the Wichita City Council that is able to vote to give them money. I would say the contributors are acting rationally. … If there is no connection between contributions and votes or consideration, there should be no problem in getting the council to agree to some form of pay-to-pay law for Wichita. An example is a charter provision of the city of Santa Ana, in Orange County, California, which states: “A councilmember shall not participate in, nor use his or her official position to influence, a decision of the City Council if it is reasonably foreseeable that the decision will have a material financial effect, apart from its effect on the public generally or a significant portion thereof, on a recent major campaign contributor.” … KAKE correspondent Deb Farris reported that Wichita Mayor Carl Brewer doesn’t look at the list of campaign contributors. I wonder: does he send thank you letters to his contributors? … Video and story at Wichita City Leaders Too Cozy With Developers?

    Obama economic strategy questioned. This year’s Nobel prize in economics went to Thomas J. Sargent of New York University and Stanford University’s Hoover Institution, and Christopher A. Sims of Princeton University. In its reporting, the Wall Street Journal explained (A Nobel for Non-Keynesians: People’s expectations about government policy make it difficult for officials to affect the economy in the ways they intend to): “The Swedish economists announcing the award emphasized, correctly, the importance of Messrs. Sargent’s and Sims’s thinking about the role people’s expectations play in economic decision making and the larger economy. But what they failed to mention is that their work has also offered empirical evidence that the school of thought known as Keynesian economics — which believes that government can turn a flagging economy around with the right combination of fiscal ‘stimulus’ (generally government spending) and monetary policy — is fallible.” In further explanation, the Journal writes: “One of Mr. Sargent’s key early contributions, along with University of Minnesota economist Neil Wallace, was the idea that people’s expectations about government fiscal and monetary policy make it difficult for government officials to affect the economy in the ways they intend to. If, for example, people get used to the Federal Reserve increasing the money supply when unemployment rises, they will expect higher inflation and will adjust their wage demands higher also. The result: The lower unemployment rate that the Fed was trying to achieve with looser monetary policy won’t happen. This conclusion was at odds with the Keynesian model, which dominated economic thinking from the late 1930s to the early 1970s. The Keynesian model posited a stable trade-off between inflation and unemployment.” The 1970s however, saw stagflation — both high unemployment and high inflation at the same time, a danger that some feel will grip us in the near future. Keynesianism, of course, is the basis of the economic policy of President Barack Obama and the reason why the economy has not recovered. … While these economists worked on national economies, does the theory of rational expectations apply to state and local governments, meaning that it is very difficult for local government officials to micro-manage their economies through intervention? I think so.

    Public vs. private. One of the curious statements in Rhonda Holman’s Sunday Wichita Eagle editorial (Say ‘no’ to naysayers, October 9, 2011) was where she wrote of the “crowds increasingly assembling downtown for concerts and events.” Curious because not long ago she begrudgingly realized the cool down at the Intrust Bank Arena, writing: “Intrust Bank Arena’s strong performance during its inaugural year of 2010 couldn’t last. And it didn’t.” (Make case for arena, August 19, 2100 Wichita Eagle) I don’t know if these two editorials are at odds with each other. … I have noticed one downtown Wichita venue that seems to have a lot of concerts, that being the Orpheum Theater. That venue doesn’t suffer from government genesis and ownership as does the arena, although the arena’s management is in the hands of the private sector. As part of its restoration the Orpheum may qualify for historic preservation tax credits, a government spending program that I oppose. That subsidy, if obtained, is quite small compared to the total taxpayer funding of the arena.

    Kansas tax policy. Several news outlets have reported on how hard Kansas state officials are working on crafting a new state tax policy. That worries me. The best tax policy is one that is simple and fair to all. The more tax policy is worked on, the more likely it is to contain measures designed to manage the behavior of people and business firms. This would be a continuation of the conceit that the state can manage economic growth, and contrary to the concepts of economic dynamism for Kansas, where fertile ground is created for all companies.

    Petition drive is on. Last Friday citizen activists started the petition drive to give the people of Wichita a chance to vote on crony capitalism or free markets. See Our Downtown Wichita (motto: “Limited government and free markets in Downtown Wichita benefit everyone. Centralized planning and crony capitalism benefit only a few.”) for more information.

    Kansas education scores mixed. From Kansas Reporter: “Kansas students’ performance on reading and math proficiency improved for the 11th consecutive year, according to Kansas State Department of Education’s latest State Report Card for schools released Tuesday. Some 87.6 percent of the students tested turned in scores in the top three of five performance levels for reading and 84.7 percent achieved similar scores in math. But two other performance yardsticks show different results. Statewide Kansas test scores on ACT college entrance exams, which are averaging 22 points out of a perfect 36, have been flat for the past five years. … Most Kansas statewide reading, writing and math scores on the National Assessment of Educational Progress, or NAEP, tests have changed little since 2000, according to the U.S. Education Department, which counts the test results as the broadest national measure of how school systems compare state by state. ‘Fourth-grade math tests have improved significantly, but that’s about it,; said Arnold Goldstein, program director for the federal Education Department’s National Center for Education Statistics.” Complete story on Kansas Reporter at Kansas education scores proved mixed picture of schools’ success.

    ‘Federalists’ author to appear in Wichita. On October 25th Kansas Family Policy Council is hosting an event in Wichita featuring Joshua Charles, a recent KU graduate who has teamed up with Glenn Beck to write the book The Original Argument: The Federalists Case for the Constitution Adapted for the 21st Century. The book debuted at the top of the New York Times Bestseller List in July. … KFPC says “The event will be at Central Christian Church (2900 North Rock Road in Wichita) on Tuesday October 25th at 7:00 pm. Doors will open at 6:30 pm. This is a free event and dessert will be provided for attendees.” RSVP is requested to 316-993-3900 or contact@kansasfpc.com.

    Kansas gas wells appraisals. Some Kansas counties use different methods of gas well valuation for tax purposes, writes Paul Soutar in Kansas Watchdog: “The method used to appraise the tax value of gas wells in Stevens County is ‘not correct or appropriate’ according to a report commissioned for Stevens County and released at their latest meeting. The method is or has been used for at least nine years, possibly since the early 1990s, in nine Southwest Kansas counties covering much of the Hugoton gas field, the ninth highest producing field in the U.S. in 2010.” … The complete investigate report is at Report Says Gas Well Appraisal Method ‘Not Correct or Appropriate’.

    Lieutenant Governor in Wichita. This week’s meeting (October 14th) of the Wichita Pachyderm Club features Lieutenant Governor Jeff Colyer, M.D. speaking on “An update on the Brownback Administration’s ‘Roadmap for Kansas’ — Medicaid Reform” … Upcoming speakers: On October 21st: N. Trip Shawver, Attorney/Mediator, on “The magic of mediation, its uses and benefits.” … On October 28th: U.S. Representative Tim Huelskamp, who is in his first term representing the Kansas first district, speaking on “Spending battles in Washington, D.C.” … On November 4th: Chris Spencer, Vice President, Regional Sales Manager Oppenheimer Funds, speaking on “Goliath vs Goliath — The global battle of economic superpowers.” … On November 11th: Sedgwick County Commission Members Richard Ranzau and James Skelton, speaking on “What its like to be a new member of the Sedgwick County Board of County commissioners?” … On November 18th: Delores Craig-Moreland, Ph.D., Wichita State University, speaking on “Systemic reasons why our country has one of the highest jail and prison incarceration rates in the world? Are all criminals created equal?”

    Urban renewal. “The goal was to replace chaotic old neighborhoods with planned communities.” Planned by government, that is, with all the negatives that accompany. The fascinating video from Reason.tv is titled The Tragedy of Urban Renewal: The destruction and survival of a New York City neighborhood. Its introduction reads: “In 1949, President Harry Truman signed the Housing Act, which gave federal, state, and local governments unprecedented power to shape residential life. One of the Housing Act’s main initiatives — “urban renewal” — destroyed about 2,000 communities in the 1950s and ’60s and forced more than 300,000 families from their homes. Overall, about half of urban renewal’s victims were black, a reality that led to James Baldwin’s famous quip that “urban renewal means Negro removal. … The city sold the land for a token sum to a group of well-connected Democratic pols to build a middle-class housing development. Then came the often repeated bulldoze-and-abandon phenomenon: With little financial skin in the game, the developers let the demolished land sit vacant for years.”

  • Kansas and its own Solyndra

    At this moment, we can’t say that Kansas has its own version of Solyndra, the subsidized and politically-connected solar energy firm that recently shut down its operations and declared bankruptcy. But as far as absorbing the important lessons from Solyndra, we may have another chance to learn them in Kansas.

    Solyndra is a failure in several ways. Much money was lost. It may be that corrupt or criminal activity was involved; we don’t know that yet. It appears that Solyndra will be a useful political scandal for Republicans to exploit, especially in the upcoming election campaign against the president. We can be sure that Republicans will keep us informed on this.

    But the largest and most important lesson from Solyndra is one that many politicians — Democrats and Republicans both — don’t want to recognize: Government intervention in the economy is wrong for the health of the country.

    The problem is that when government intervenes in the economy, it almost always gets it wrong. It’s not that Obama and other politicians aren’t smart. It’s the problems inherent in government interventionism: There will be both routine and spectacular examples of waste, as people — politicians and bureaucrats, especially — are not spending their own money. Decisions will be made to benefit the well-connected and for political, not market-based reasons. Cronyism and corruption flourish, as many will find it easier to compete in the marketplace for politicians rather than in the free market where fickle consumers rule with their fleeting tastes and preferences.

    But politicians and bureaucrats love to intervene. For bureaucrats, intervention — government programs, that is — provides jobs, and well-paid jobs, too. Since much government intervention in the economy is in the form of subsidies, it allows politicians to dispense other peoples’ money and take credit for having “created” jobs or having built a bridge, probably to be named for them later on.

    Other government intervention is in the form of creating unneeded regulations or tax loopholes that favor politicians’ friends or harm their competition.

    All of this means that economic activity is directed according to political, not economic, considerations. It’s wasteful. It’s harmful. It diminishes market-based investment, that is, investment made according to what people really want and need. It reduces the freedom, liberty, and prosperity of everyone.

    Back to Kansas: Last week the Department of Energy announced the award of a $132.4 million loan guarantee to Abengoa Bioenergy Biomass of Kansas, LLC. This is the same federal agency and the same loan guarantee program involved in the Solyndra matter. The difference is that it’s an even newer so-called green energy technology involved: cellulosic ethanol production.

    The plant in Kansas is to be at Hugoton, in southwest Kansas. The press release from DOE promotes the number of jobs that will be created.

    Cellulosic ethanol is produced from plant material that is usually considered waste, such as corn stalks or wheat straw. That’s different from the usual input to ethanol production in America, which is corn that would otherwise be used as animal or human food. Because of this, cellulosic ethanol is thought of by many as the “silver bullet” that will dramatically improve the path of America’s energy future. That may be the case, or it may not be. Because of the reasons listed above, government is particularly unsuited to make that decision and to participate in the scientific and entrepreneurial experimentation that will produce the answer.

    At one time President George W. Bush praised the potential of this fuel. A Reuters analysis from July opens with: “The great promise of a car fuel made from cheap, clean-burning prairie grass or wood chips — and not from expensive corn that feeds the world — is more mirage than reality. Despite years of research, testing and some hype, the next-generation ethanol industry is far from the commercial success envisioned by President George W. Bush in 2006, when he pledged so-called cellulosic biofuels would be ‘practical and competitive’ by 2012.”

    That hints at the problem: despite much effort, scientists haven’t been able to demonstrate cellulosic ethanol production on a commercially-successful scale. According to the Wall Street Journal, as of this summer, no commercial cellulosic ethanol has been produced.

    The loan guarantee is not the only form of government subsidy and boost ethanol producers received. There is a tax credit for each gallon produced and a tariff that protects producers from cheaper imported ethanol.

    Despite these very large measures of government intervention, cellulosic ethanol backers blame the government for lack of progress in the industry, citing the government’s failure to mandate production levels and provide assurances that the industry would receive subsidies. And the loan guarantees are not made fast enough, they add to the list of complaints. An analysis by ClimateWire that appeared in the New York Times in January had industry boosters blaming the federal Department of Energy for its slow pace in issuing loan guarantees.

    We won’t know the success or failure of the Abengoa plant in Kansas for some time, and now we taxpayers are placed in the position of hoping that it succeeds. But it has the pedigree of a government plan to correct a perceived market failure, and that’s a danger sign.

    Both Kansas Senators Pat Roberts and Jerry Moran have spoken approvingly of this plant despite the government intervention involved; Moran in a statement after the announcement, and Roberts in previous years as plans were being made. U.S. Representative Tim Huelskamp, who represents the district where the plant is located, has not commented on this plant, and offered no comment for this story.

  • Kansas and Wichita quick takes: Wednesday September 28, 2011

    Obama’s intercontinental railroad. Burton Folsom notices a recent speech by President Barack Obama that mentioned how America built the “intercontinental railroad.” Folsom grants Obama some slack for the gaffe — we all make them, after all — and explains to readers the most important lesson that should be learned from our experience building the transcontinental railroad: “… the story of the transcontinental railroads really is a great teaching tool for today. If we study the Union Pacific, the Central Pacific, and the Northern Pacific Railroads, we learn they all went broke after receiving a combined total of 61 million acres of land. And they ran the nation deep into debt, too. … federal spending on transcontinentals meant corruption, land grabs, and wasted taxpayer dollars. But wait. The Great Northern Railroad, which went from St. Paul to Seattle, never went bankrupt and was one of the best-built railroads in the United States. Why did the Great Northern succeed when the others failed? Because James J. Hill, the president, built his railroad with no federal subsidies. He built the Great Northern slowly and made each part profitable before expanding it further. … Hill made profits and never went bankrupt. Here is the lesson: that which is privately owned is properly cared for and is best positioned to create jobs and profits. When the government gets involved, profits vanish and quality declines. Therefore, the president is right. Let’s discuss railroad history and apply what we learn to the present day.” The article is Interfacing with Obama’s Intercontinental Railroad.

    Alain festival starts. Today marks the first day of Jehan Alain, 1911-1940 — The American Festival, a three-day event celebrating the music of the French organist and composer, who died at the age of 29 fighting for his country against Germany in World War II. This three-day event is organized by Lynne Davis of Wichita State University. If you can attend only one event, I would suggest the opening recital to be performed by Davis at 7:30 pm tonight. The location is Wiedemann Recital Hall (map) on the campus of Wichita State University. … For more about Davis and WSU’s Great Marcussen Organ including photographs I took while climbing around the interior of the massive instrument, see my story from last year.

    How business loves regulation and hates markets. In a chapter of the book Back on the Road to Serfdom: The Resurgence of Statism edited by Thomas E. Woods Jr., Timothy P. Carney writes about the cultural costs of corporatism: “Despite the widespread assumption that a free market is the ideal economy for big business, and that regulation checks the power of big business, more often the opposite is true. Regulation, by adding to the cost of doing business, disproportionately hurt smaller business and acts as a barrier to entry, keeping out new competitors. Likewise, government subsidies can be far more valuable, or at least more reliable, then income for consumers, for which businesses must continually fight with competitors. The dynamics of the lobbying game are crucial here. Bigger companies enjoy a greater advantage in Washington than they do in the market. Not only can bigger companies hire the better lobbyists — former lawmakers are top administration aides — and handout more in campaign contributions, but they also matter more to lawmakers. The more workers you employ and the more taxes you pay, the more lawmakers care about your well-being, desires, and wishes.” … Carney goes on to explain that big government enables political entrepreneurs to succeed over market entrepreneurs. And big companies are better equipped to be political entrepreneurs. So while the standard account is that Walmart kills small-town retailers, the reality is that Walmart is effective at political entrepreneurship in ways that mom-and-pop retailers can’t be. “An unbridled free market isn’t killing Mom and Pop; an untethered state is.” The effect of this is, he writes: “And so reading the market is no longer as valuable as reading the polls. Research and development is not as good an investment as political connections. A good lobbyist is now worth more than a good idea.” … While Carney is writing about the situation at the federal level, we see the same dynamic at work in Wichita, where the city Council and its surrogates such as the Wichita Downtown Development Corporation and Greater Wichita Economic Development Coalition have large power over the granting of government favors. Connections to the politicians and bureaucrats that control these organizations replaces market allocation and market decisions.

    The Buffet rule won’t work. In a Cato daily podcast, Cato Institute Senior Fellow Alan Reynolds says “It doesn’t work. We tried it.” He’s referring to raising tax rates to collect more revenue from high-income earners. Reynolds explains that starting in 1986 and for the next 10 years the capital gains tax rate was 28 percent. But then President Bill Clinton lowered the rate to 20 percent, and Reynolds said that the stock market soared and the government was flush with cash. This, he said, was an example of lower tax rates increasing tax revenue. … Reynolds also explained that Berkshire Hathaway — the company Warren Buffet formed — was a tax avoidance device until 2003. As a holding company, it purchased companies that paid dividends, but Berkshire didn’t pay dividends itself. This practice avoided the higher dividends tax by converting dividends into capital gains. (Prior to 2003, dividends were taxed as ordinary income, which for most taxpayers was higher than the capital gains tax rate. Plus, capital gains can be deferred.) This purposeful design by Buffet belies his current contention that the wealthy should pay higher taxes.

  • Pompeo announces reelection bid

    In what he described as an informal setting before a small group of supporters on Tuesday, U. S. Representative Mike Pompeo announced his bid for reelection to represent the fourth district of Kansas. Kansas Governor Sam Brownback appeared beside Pompeo and offered his endorsement.

    In his endorsement, Brownback praised Pompeo’s work on sensible federal regulations and controlling federal spending. Brownback said the upcoming election is very important, with the budget and the economy being the most important issues.

    In his remarks, Pompeo said that top-down direction of the economy from Washington hasn’t worked, citing high unemployment numbers specifically. He said that the good ideas he’s seen have come from governors. The requirements of states to have balanced budgets — a constraint not in effect at the federal level — is a factor, he said.

    Pompeo said he’s been doing the things that he promised to do when he campaigned for office — working for small government and controlling regulation, mentioning the Environmental Protection Agency specifically.

    Pompeo has been critical of President Barack Obama for his criticism of corporate jet owners not paying their fair share of taxes. Asked if Obama is getting the message, Pompeo said no, the president’s not getting the message. “I don’t think this president understands that just his rhetoric alone is doing tremendous damage to the aviation industry and its suppliers.”

    On the tone in Washington, Pompeo said the dialogue in Washington has changed. In the past, he said the thought was: “Can we take this agency, and instead of growing it by eight percent, grow it by three. That talk is gone. It is now about does this agency have any usefulness? Is there a functionality that remains? Should we keep it, keep it at a smaller level, can we make it more efficient, or is it something that we ought to get rid of? We have truly changed the discourse. We are now talking, for the first time in a very long time, about the proper role of our federal government, and what Americans can afford.”

    He said this change in attitude was not just his own, but that the large incoming class of new conservative representatives elected last year has shifted the conversation in this way.

    Pompeo said it it is important for voters to elect people who are willing to be specific in their plans for shrinking government. Too often candidates run on a platform of smaller government, but won’t specify the methods they will use to cut government, he said, adding that changes in the role of the federal government will affect us all.

    On Governor Brownback returning the grant for the formation of a Kansas health insurance exchange, Pompeo said that he voted to overturn Obamacare in its entirety, so he’s not in favor of spending money to implement it. He also said he’d like to see the returned money used for deficit reduction, and that he has introduced legislation that would require this.

    Pompeo’s announcement was not unexpected — photos of organizational meetings for 2012 campaign volunteers have been spotted on Facebook and he’s been successful in fundraising — so the real news will be the announcement (or rumors) of opponents. The filing deadline is in June, with the primary election in August followed by the general election in November.