Friday, December 31, 2010

Taxation in spite of representation

From the Wall Street Journal (requires registration):
The Midwest Wind Surtax
You'd think poor Michigan has enough economic troubles without the Federal Energy Regulatory Commission placing a $300 million to $500 million annual surtax on the state's electric utility bills. But on December 16 FERC Chairman Jon Wellinghoff announced new rules that would essentially socialize the cost of transmission lines across 13 states in the Midwest...

Let's be very clear on what's happening here: Mr. Wellinghoff and FERC are trying to establish by regulatory fiat a national energy policy that Congress has refused to endorse. Last summer Congress rejected the Obama Administration's renewable energy standard law because it would have inflated power costs. So the fiefdom at FERC is unilaterally moving ahead to require that industries and homeowners pay a surtax on their utility bills for a nonexistent renewable energy policy. This is similar to the EPA's initiatives to regulate carbon even after Congress rejected cap and trade.
Because Iowa and the Dakotas want to build windmills, you (and taxpayers in Illinois, Indiana, Minnesota and Wisconsin) are going to pay to build new power lines to distribute the intermittent windmill electricity. This should become known as the "Dumb Grid."

Without billions of dollars in new power line infrastructure, the windmills are uneconomic. However, like the health care individual mandate, I'm sure we will hear a defense of this based on the Commerce Clause: Michiganders must pay for windmill transmission lines they neither need nor want, because not to do so is a restraint of interstate commerce.

Imminently-former-Governor Granholm's desire to manufacture windmills now moves from merely stupid to surreal. You are subsidizing the manufacture of windmills so they may be sold to people who have just arranged to tax you in order to enable distribution of electricity from the windmills. That electricity will charge the batteries Ms Granholm has also subsidized, in cars the Feds have forced you to pay for, built by a company whose union you were made to bail-out. All with no law being passed.

FERC may, justifiably, have assumed Michigan would be happy to cough up half a billion annually to subsidize other States' crackpot energy schemes. "Green" - the hue of Frankenstein's monster - "jobs."

Fred Upton, call your office. And don't return to this state unless you spike this taxation by the unelected of people they do not represent.

Saturday, December 25, 2010

Tuesday, December 21, 2010

Energy policy checklist

Fuel ethanol is the perfect illustration of statist ability to pick economic winners. That is, fuel ethanol is an economic and environmental disaster.

Ethanol may be passé on the merits, but, philosophically, it precisely represents what our once and future governors consider to be an ideal "public/private partnership." Practically speaking, our federal representatives think it still is.

Legislators claim to support ethanol subsidization in order to "save jobs and the planet." In reality, once they started on this gateway drug, more appropriations became the only way to avoid admitting the withdrawal symptoms: Stupidity and venality.

Engine Makers Sue to Block E15 Fuel
Read that and come back.

So here's the government energy policy of the last 30 years:

1- Prevent drilling for new US petroleum supplies.

Result: Less US petroleum supply.

2- Subsidize giant corporations like Arthur Daniels Midland to produce ethanol.
2a- Encourage Governor Granholm to subsidize other minor players who go bankrupt.

Result: Wasted taxpayer dollars and a glut of ethanol. No environmental improvement. Likely environmental degradation.

3- Pass a law requiring an increase in the use of fuel ethanol.

Result: ADM is happy. Jenny learns nothing.

4- Continue a 54 cent per gallon tariff on Brazilian ethanol.

Result: Encourage Brazil to sign a deal with China for oil extraction.

(Good thing we've got that tariff to keep nasty foreign ethanol out. We wouldn't want a glut of a liquid that is going to save the planet. Good thing gas prices are up. We wouldn't want a glut.)

5- Subsidize electric cars built by a failed union and pay people to buy them.

Result: $40,000 Chevy Cobalt Volt.

6- Mount bird killer windmills on 5 ton concrete platforms all over the fruited plain.

Result: Tiny amount of intermittent power. Exemption for the Kennedys' view.

7- Blame the dead birds, high oil prices and ethanol glut on unregulated capitalism.

Result: Demand regulation. It's all the fault of big business.

(True, but not an iota of that truth is the result of a free market.)

8- "Fix" the ethanol glut by forcing people to buy 50% more of it.

Result: ADM is HAPPY!  Half of American's cars will have to drive farther to find usable gasoline.

9- Future tasks: Subsidize gas stations who were forced to install new underground tanks for a 3rd type of fuel.

Result: Blame capitalism. Reset. Look for a new winner. Like lithium batteries.

10- Continue the ban on drilling on the US continental shelf and in ANWR. Choke off drilling in the Gulf of Mexico.

Result: Dependence on foreign oil higher than necessary.

11- Blame capitalism for high gasoline prices.

Rinse. Repeat.

Monday, December 20, 2010

The Road to Lithiumdumb

Once again Michigan Capitol Confidential nails it. "It" being the foolishness of our present governor, and what I fear to be the fatal conceit of the former MEDC czar who is about to become governor: Picking economic winners. Given his history, it may be even harder for Rick Snyder to resist the Sirens of Corporatism than it was for Jenny. Statism is very much a characteristic of "moderates." Just look at George Bush.

Projections vs. Reality
An article in the July 24 Detroit Free Press reported, "Companies are searching for a billion-dollar breakthrough in battery design. General Dynamics is working on a zinc-air cell battery. Ford is actively interested in a sodium-sulfur cell. Gulton Industries and General Motors are tinkering with lithium…All the activity is bound to pay off probably within the next five years..."

The promise sounds so bright that readers might imagine that the Michigan Legislature’s recent authorization of $500 million worth of subsidies and tax breaks for car battery makers is a good investment. Unfortunately, that article appeared on July 24, 1967.
Read the whole thing.

I will note that 1967 was contemporaneous with envirostatist predictions of a new ice age. From "Ice Age" we went to "Global Warming" and have arrived, temporarily, at "Climate Change." Credit where it is due, while the labels have been contradictory, scientifically corrupt and consequently increasingly ephemeral, the economic instincts have been unwavering.

Paul Ehrlich, call your office.

Wednesday, December 15, 2010

Find the porker

A list of Senators in descending order of earmark requests in the $trillon omnibus spending bill: The Omnibus Arrives

If your Senator appears, make a note of the name and then look up when they next stand for election. Start campaigning against them now, whenever that may be.

Find an earmark

Taxpayers Against Earmarks

Tuesday, December 14, 2010

Two Reasons

"Erin Brockovich" Town Shows No Cancer Cluster
Erin Brokovich is no Rachel Carson. But multiplying Brokovich's celebrity quotient by her misconception ratio shows she at least equally damaged the reputation of science. Carson convinced the developed countries that condemning millions to suffer and die was good for the planet. Brokovich (through the movie about her) led hundreds of millions to believe a "scientific" conclusion more flawed than Carson's.

Evil Bush Tax Rates Made Rich Bastards Pay More Taxes!
You would think those who want to tax the "rich" would rejoice when the rich paid more in taxes. They don't. An old joke Russians tell about themselves offers a clue as to the the motivation of statists in this country.
Boris and Ivan are neighboring farmers, who differ only in that Boris owns a cow and Ivan does not.

Ivan is interviewed by the newspaper, and is asked, “Wouldn’t you like to own a cow like Boris does?”

To which Ivan responds, “No, I want Boris’s cow to die!”

Monday, December 13, 2010

Only Congressional Republicans contemplate compromise


Regarding the potential temporary failure to prevent a tax increase: Tax deal: purists vs. dealmakers

Me, I'm a purist until they can demonstrate they aren't making corrupt, sleazy deals. Which means never. Isn't that the point of the recent election?

So. No pork because of The Dems' Crackup The Democrats don't want any compromise, so let's not give it to them.

Taxes? Up or the same? If the GOP doesn't say "You pick Nancy. On the merits," then they should be replaced in 2012 along with Obama.

Sunday, December 12, 2010

Ethically consistent

Compared to Crony Car Capitalism grafting 5 billion in ethanol pork onto a tax-increase prevention bill is almost ethical. Of course, it's habituation to that sort of thinking that makes it easy to give the UAW hundreds of billions when the opportunity arises. Don't Waste It. It is the Right Thing to do.

The slope is not so much slippery as it is non-existent. That's what statists mean when they say "level playing field."

Read the link.

Saturday, December 11, 2010

Stop spending. Stop Spending!

The AP reported yesterday that the deal between the President and the GOP to maintain a taxation status quo is being modified to include load of pork. The pork is designed to bring reluctant Democrats on board.

Why? Let them vote no. Let them raise taxes; Just Stop Them From Spending.

The $5 billion dollar ethanol subsidy, by itself, demands a No vote. Just last week envirostatist, Nobelist, Oscar winner and former Tipper Dipper Al Gore called it a scam and a stupid idea.

The inconvenience of waiting until January to vote to preserve tax rates is well worth the message it sends: We are not going to buy votes for ethanol, windmills, transit subsidies, or any other unrelated items. If you want to preserve the current tax regime, lower payroll taxes and extend unemployment benefits - vote for it. If you don't, vote against it. We're done handing out billions of dollars to whiny political district-pimps at the behest of their lobbyist mobs. We don't need your damn vote.

If you vote no, we'll propose a bill you'll like a lot less in January. If the Senate stops it, or the President vetoes it, we'll bring it up again. And again. Until 2012. Higher taxes for the next 2 years will actually be a small price to pay for 5 decades or so of control of all 3 branches of government.

Every Republican should vote no if the tax-maintenance deal isn't voted straight up-an-down on the merits. Make ethanol the poster child. If the GOP is going to eschew earmarks, why pander to Democrats' earmarks?

Thursday, December 09, 2010

Our first clue should have been that they didn't name it 'MichiganWatt'

GlobalWatt Sells Someone Else’s Solar Panels – on eBay 

Saginaw-based GlobalWatt, beneficiary of soon-to-be-former Governor Granholm's "green jobs" subsidies, has this to say about their solar panels,
"These are Made in India. But they are using very high content of US made material. The cells are from Suniva, from Georgia."
To be sure, someone should check whether Suniva, Georgia shares a border with Florida or with Russia.  In either case, no manufacturing occurred in Michigan.

I'm all for free trade, and if the Indians can make solar panels that save money for Americans, good for them. What I'm not so much in favor of is subsidizing those Indian manufacturing workers via Michigan tax credits.

I'm also all in favor of creating jobs in Michigan, but by the unsubsidized private sector. Rather than tax credits, let's just eliminate corporate income tax and pass right to work legislation. I am confident GlobalWatt would be able hire more people under such conditions. Some of them maybe even in manufacturing positions.

Governor Granholm is taking a last kick at the catastrophe by revealing an utter inability to learn. Remember, she's the Governor who poured money into the "green jobs" ethanol revolution. The favored Michigan companies in that instance are now all bankrupt. Hopefully, we can arrange some damage to federal corporatist ethanol bandits like ADM, too. 

Despite bad reviews of ethanol and an unrequited flirtation with windmills, the Governor thinks she has a clue about THE NEXT BIG THING: How to win the race for jobs
In Michigan, we are trying our own version of this race — focused on the lithium-ion advanced battery for electric cars, a high-tech product previously manufactured almost exclusively in Asia.

We offered irresistible state tax incentives for manufacturers of “advanced energy storage.” We pancaked our state incentives on top of the competitive federal Department of Energy grants to advanced-battery companies and suppliers. We also created robust public-private partnerships.
Next it would be 'irresistible' subsidies to some genetic engineering startup who promise to create a goose that lays golden eggs. But, if there are golden eggs, why would anyone need a subsidy?

Monday, December 06, 2010

The country is in the very best of hands

First, the corruption:
Then the incompetence:
The Fed Has a $110 Billion Problem with New Benjamins
A significant production problem with new high-tech $100 bills has caused government printers to shut down production of the new notes and to quarantine more than one billion of the bills in huge vaults in Fort Worth, Texas
The good news is that that $100 billion is fiat currency in any case. The biggest cost of producing it was labor, and that stimulated the economy in the same way broken windows do.

And hey, it looks like EU script. Maybe we can recycle it to bail out Ireland.

Wednesday, December 01, 2010

Recycling electrons & some ideas

I was searching the "accumulated wisdom of TOC" today (;)) on a slightly different topic.  Serendipitously, this June-09 post struck me as worth repeating: 

Taxes and the economy

Some comments on Sunday's post, Health care notes, were interesting to me and resulted in this post. Here are the comments:
Janet Brown said...

This is just one more reminder that the only real way to keep our economy strong is not by raising taxes, but by keeping taxes low, fair and simple.

We need to take action and contact our legislators and sign petitions like the ones the U.S. Chamber of Commerce backs (here).
1:08 PM EDT

Life Insurance Broker said...

@Janet Brown

Explain to me how keeping taxes low will help anything? With no tax money there will be no money in the government thus no money for the economy.

Take care, Lorne
12:00 PM EDT

Paladin said...


By "money in the economy" let's presume you mean the value created in the economy. Almost all of this value is created by private productive individuals and organizations. The allocation of that value is properly vested in free markets. The government's legitimate role is to take a very small portion of that value and use it to provide its legitimate services. High taxes reduce "money in the economy". Low taxes increase it.

Thomas Sowell has written an excellent overview titled "Basic Economics". Henry Hazlitt's "Economics is One Lesson" is good too, but maybe not quite as accessible.
12:55 PM EDT


There are so many very basic, common, and erroneous assumptions packed into your short comment that I am not sure if you are serious. I will respond as if you are, however, because you would be far from alone in such thinking, and I hope addressing these ideas may be useful to others as well.

You seem to be confused about how wealth is created. We may call it money, but that is just a proxy. I think Paladin well addressed this issue, but there are other questionable memes he left unanswered.

One of your problematic assumptions is that without “the government” there wouldn’t be an “economy.” This begs the question of what "the economy" is, and we don’t have time for that here. Suffice it to say that, historically, good government has assisted economic activity by providing a stable and trusted medium of exchange, i.e., money, in a stable environment. This is not to say government must do this, it has just been convenient. It is also not to say that government can be trusted to be a good steward. Recent events prove this.

As to what is “money,” it has ranged from Cowry shells to tulip bulbs to tobacco to limestone wheels 12 feet in diameter. All of these things were a medium of exchange (could be traded for something else), a unit of account (could be traded at a standard value), and a store of value (could be put aside and used later at a similar exchange rate). Whenever they lost any one of those characteristics, they ceased to be money.

Government, then, has hardly been the sole source of money. At one time banks issued their own currency. Gold and silver have themselves served as money without any government’s imprimatur. Not so long ago, our national paper currency was backed by those precious metals. Paper was simply easier to transport.

So, it is not necessary to have government to have either money or an “economy.”

Money, today, in the US, is not backed by any commodity with intrinsic value. What used to be silver certificates, redeemable for the actual metal “payable to the bearer on demand”, are now Federal Reserve notes backed by the “full faith and credit of the United States government.” The intrinsic value is zero, or at best equal to the value of a good counterfeit. The value of a Federal Reserve note is psychological.

As to money supply, to over-simplify, good government should provide a psychologically acceptable currency in sufficient volume so as to allow for the orderly exchange of goods and services. The volume of money in circulation should keep pace with the value of productivity: It should grow at the same rate as productivity. Too much growth in the money supply begets inflation, too little means deflation.

Inflation is itself a tax, and therefore a conflict of interest for your government, because when that government issues (prints) money in excess of the requirement, the money you got paid yesterday suddenly buys less. It becomes diluted, and the real value of your savings shrinks. The Weimar Republic and modern Zimbabwe are extreme examples. As a thought experiment, imagine what would happen if the government decided to wipe out its deficit by the simple expedient of printing money equal to the amount of the deficit. Don't laugh, in a similar vein Zimbabwe declared inflation to be illegal while printing new money at a ratio of a million to one to the old. Zimbabwean inflation in July 2008 was 40-50 million percent.

Lorne, you seem to think that government may actually create wealth. It does not. Not even when it owns General Motors. If General Motors could produce cars people wanted to buy at a profit, what role does government have? If General Motors cannot produce such cars at a profit, how can government fix that? Certainly not by simply taking your money and giving it to General Motors. That does not create wealth, it destroys it by robbing you.

Government, at least in Western democracies, has typically reasonably well performed one function beneficial to the economy. It provides a mechanism for the enforcement of contracts – the rule of law. Not that this could not be done privately, but we have generally ceded the responsibility to government because we trust the process (even so, special entities exist for arbitrating disputes). If we were to cease to trust the government process it would be a serious problem.

So, what does this say about a government, like the Obama administration, willing to quadruple the deficit and to abrogate legal contracts? Quite simply, it erodes the faith and confidence necessary to assign value to the money that government produces. The Chinese have noticed.

Further, it damages the economy by misdirecting resources for political purposes. Resources taken from you. Higher taxes is the government taking more of those resources. From you.

So, when that same government raises taxes what is it doing? [It is] Illustrating another misconception in your comment. Taxes do not create jobs or products or the economy. The jobs that money could have created, and the investment in productivity and innovation that could have been made, are stopped in favor of tattoo removal among Los Angeles gangstas, or propping up a failed auto workers union.

Without economic freedom you cannot have political freedom. All of this economic discussion should be framed with that reference. Specifically, the loss of political freedom represented by government intervention in the form of excessive direct taxation, or in indirect taxation through regulation and inflation. You are not free to choose.

On that note, I will add three other books to the ones Paladin mentioned in his comment (Thomas Sowell’s Basic Economics and Henry Hazlitt's Economics in One Lesson) that could also help you understand this better. I assume you would like to.

  1. Eat the Rich, P.J. O’Rourke. A really fun read. Pay special attention to the chapter on Hong Kong under John Cowperthwaite.
  2. Free to Choose and Capitalism and Freedom, Milton Freidman. Classics, easily understood, but take them in that order.
  3. The Road to Serfdom, Freidrich Hayek. Heavier going and appropriate for more advanced study.
Thanks for stopping by and inspiring this post.