A new Pew poll finds that three out of four “consistent liberals” would rather live in a community “where the houses are smaller and closer to each other” but within walking distance of schools, stores, and restaurants. Conversely, three out of four “consistent conservatives” would rather live in a larger home on a large lot even if it means driving to schools, stores, and restaurants.
Pew says this shows that “differences between right and left go beyond politics,” which Pew claims is one of the seven most important things to know about polarization in America. Yet the left has turned the choice between a traditional suburb and a so-called walkable community into a political issue, so it is no wonder that people’s views on this choice are polarized.
Disappointingly, Pew’s report on polarization defines everything in terms of liberal vs. conservative. Pew’s big news is that the share of Americans who are consistently conservative or consistently liberal has more than doubled since 1994–yet you have to read deep into the report to learn that these groups make up just 21 percent of the country. The report says little about the other 79 percent of Americans, yet you’d think they would be important since they outnumber the consistent ones by almost four to one.
Pew does say that 39 percent of Americans “take a roughly equal number of liberal and conservative positions,” while the information that 22 percent are “mostly liberal” and 18 percent are “mostly conservative” is buried in an appendix. Most of the the body of the report seems to focus on the “consistent” extremists.
It seems likely that most of the mixed group, and many of the “mostlies,” are libertarians who are fiscally conservative and socially liberal. Yet the term “libertarian” isn’t once mentioned in the Pew report. Probably fewer are socially conservative and fiscally liberal, a group so small that it has no agreed-upon name, though some call them “liberal conservatives.”
Libertarians should have been discussed because issues of personal freedom help explain much of the polarization that the report documents. For conservatives, the decision to live in a drivable vs. a walkable community is a mere lifestyle choice. For liberals, it is matter of life and death, making them eager to impose their preferences on others.
This attitude is the source of the increasing polarization which, Pew believes, began growing in the 1970s. Consistent liberals and consistent conservatives both frighten their opponents for the same reason: they are both quite willing to sacrifice your freedom in order to attain their goals.
Social conservatives believe, for example, that an embryo is human, and they are willing to sacrifice a woman’s freedom to terminate her embryo or fetus in order to achieve their idea of a moral society. Of course, the key Supreme Court decision on abortion was made in 1973.
Liberals believe that all life on earth depends on us reducing greenhouse gas emissions, and they are willing to sacrifice other peoples’ freedom to drive or live in a big house in order to save the planet. Of course, the whole climate change issue grew out of environmental issues that first hit public awareness in about 1970.
Abortion and climate change aren’t specifically mentioned in the ten questions used in the Pew poll, but they include proxies for those issues. The questions are listed in full on page 79 of the report, but briefly they are:
- Is government wasteful or efficient?
- Is government regulation harmful or helpful?
- Do government benefits help or hurt the poor?
- Should government do more or less to help the poor?
- Is the failure of more blacks to get ahead the result of racism or self-inflicted?
- Do immigrants burden or strengthen society?
- Is peace achieved through military strength or diplomacy?
- Do corporations make too much profit?
- Are stricter environmental laws worth the cost?
- Should society accept or discourage homosexuality
A libertarian would say that at least seven of these questions are really about freedom. Questions 2, 6, 8, 9, and 10 specifically deal with freedom. Questions 3 and 4 have to do with freedom in the sense that confiscating money from you to give to someone else infringes on your freedom (and besides can give the recipients the wrong incentives). Similarly, libertarians might say question 5 should have asked, “Is the failure of more blacks to get ahead the result of racism or bad incentives created by the welfare state?”
Libertarians would respond to question 1 by arguing that government is both wasteful and infringes on people’s freedom, and even if government were efficient they would object to it because of its tendency to reduce freedom. And another way of asking question 7 would be, “Is it appropriate to use our military to impose our will on other nations, taking away their freedom?”
Almost all of these issues go back to the 1960s and 1970s, a period that started encouraging sexual freedom, minority rights, environmental protection, and a federal “war on poverty,” while questioning foreign policy. Only the immigration and corporate profit issues date to another time.
Since so many issues trace back to the 1960s and 1970s, it is no wonder that America has become more polarized since then. Some argue that polarization has resulted from a perceived decline in income equality, but I think this is less important, partly because many of the liberals who make the most of the inequality issue tend to have higher incomes than many of the conservatives who just want government to leave them alone.
Instead, the real source of polarization is this: do I have the right to curtail your freedom to achieve a goal I believe is important even if you don’t share that goal? Those who want to end polarization need to to find ways for people to achieve their goals without reducing other peoples’ freedom.
Daniel J. Mitchell
This past April, I augmented that list with some commentary about whether Walgreen’s might become a Swiss-based company.
And in May, I pontificated about Pfizer’s effort to re-domicile in the United Kingdom.
Well, to paraphrase what Ronald Reagan said to Jimmy Carter in the 1980 presidential debate, here we go again.
Here’s the opening few sentences from a report in the Wall Street Journal.
Medtronic Inc.’s agreement on Sunday to buy rival medical-device maker Covidien COV PLC for $42.9 billion is the latest in a wave of recent moves designed—at least in part—to sidestep U.S. corporate taxes. Covidien’s U.S. headquarters are in Mansfield, Mass., where many of its executives are based. But officially it is domiciled in Ireland, which is known for having a relatively low tax rate: The main corporate rate in Ireland is 12.5%. In the U.S., home to Medtronic, the 35% tax rate is among the world’s highest. Such so-called “tax inversion” deals have become increasingly popular, especially among health-care companies, many of which have ample cash abroad that would be taxed should they bring it back to the U.S.
It’s not just Medtronic. Here are some passages from a story by Tax Analysts.
Teva Pharmaceuticals Inc. agreed to buy U.S. pharmaceutical company Labrys Biologics Inc. Teva, an Israeli-headquartered company, had an effective tax rate of 4 percent in 2013. In yet another pharma deal, Swiss company Roche has agreed to acquire U.S. company Genia Technologies Inc. Corporations are also taking other steps to shift valuable assets and businesses out of the U.S. On Tuesday the U.K. company Vodafone announced plans to move its center for product innovation and development from Silicon Valley to the U.K. The move likely means that revenue from intangibles developed in the future by the research and development center would be taxable primarily in the U.K., and not the U.S.
So how should we interpret these moves?
From a logical and ethical perspective, we should applaud companies for protecting shareholders, workers and consumers. If a government is imposing destructive tax laws (and the United States arguably has the world’s worst corporate tax system), then firms have a moral obligation to minimize the damage.
Writing in the Wall Street Journal, an accounting professor from MIT has some wise words on the issue.
Even worse, legislators have responded with proposals that seek to prevent companies from escaping the U.S. tax system. The U.S. corporate statutory tax rate is one of the highest in the world at 35%. In addition, the U.S. has a world-wide tax system under which profits earned abroad face U.S. taxation when brought back to America. The other G-7 countries, however, all have some form of a territorial tax system that imposes little or no tax on repatriated earnings. To compete with foreign-based companies that have lower tax burdens, U.S. corporations have developed do-it-yourself territorial tax strategies. …Some firms have taken the next logical step to stay competitive with foreign-based companies: reincorporating as foreign companies through cross-border mergers.
Unsurprisingly, some politicians are responding with punitive policies. Instead of fixing the flaws in the internal revenue code, they want various forms of financial protectionism in order the stop companies from inversions.
Professor Hanlon is unimpressed.
Threatening corporations with stricter rules and retroactive tax punishments will not attract business and investment to the U.S. The responses by the federal government and U.S. corporations are creating what in managerial accounting we call a death spiral. The government is trying to generate revenue through high corporate taxes, but corporations cannot compete when they have such high tax costs. …The real solution is a tax system that attracts businesses to our shores, and keeps them here. …The U.K. may be a good example: In 2010, after realizing that too many companies were leaving for the greener tax pastures of Ireland, the government’s economic and finance ministry wrote in a report that it wanted to “send out the signal loud and clear, Britain is open for business.” The country made substantive tax-policy changes such as reducing the corporate tax rate and implementing a territorial tax system. Congress and President Obama should make tax reform a priority.
Here’s some info, by the way, about the United Kingdom’s smart moves on corporate taxation.
For more information on territorial taxation, here’s a video I narrated for the Center for Freedom and Prosperity.
And here’s my futile effort to educate the New York Times on the issue.
And if you want some info on the importance of lower corporate taxation, here’s another CF&P video.
P.S. You may be asking yourself whether it would have been better to say that America’s corporate tax is “sadistic” rather than “masochistic.”
From the perspective of companies (and their shareholders, workers, and consumers), the answer is yes.
But I chose “masochistic” because politicians presumably want to extract the maximum amount of revenue from companies, yet that’s not happening because they’ve set the rate so high and made the system so unfriendly. In other words, they’re hurting themselves. I guess they hate the Laffer Curve even more than they like having more money with which to buy votes.
Juan Carlos Hidalgo
Today, the U.S. Supreme Court inflicted a major blow to Argentina in its decade-long legal struggle with some of its creditors since it defaulted on its debt in 2001—the largest sovereign default in history.
While in 2005 and 2010 most of Argentina’s creditors settled to swap their old bonds with heavily discounted new bonds, a group of holdout creditors challenged Buenos Aires in the courts. In October 2012, the U.S. Court of Appeals for the Second Circuit sided with plaintiffs to rule that Argentina must treat all its creditors equally and pay owners of defaulted bonds that were issued under New York law. Today, SCOTUS rejected Argentina’s appeal to that ruling. Buenos Aires now faces three options:
- Comply with the ruling and pay the holdout creditors the $1.33 billion it owes them. Argentina can afford this. According to the most recent estimates (June 6), the country has $28.6 billions in Central Bank reserves. Paying the holdouts would send a strong signal that Argentina is willing to play by the rules and honor its debts. However, the government of Cristina Fernández de Kirchner has made a political crusade out of its struggle against the holdouts (whom she calls “vultures”). Unfortunately, most voices in the opposition share her distaste for paying the holdouts.
- Ignore the ruling. If it does so, Argentina will be legally prevented from paying the other 93% of creditors that agreed to the previous bond swaps of 2005 and 2010 because the ruling requires Argentina to pay holdouts along with those who accepted the swaps. If this happens, Argentina would enter into a technical default. The economic consequences are uncertain. The central government is already mostly shunned out of international markets. But Argentine provinces and businesses could face a more difficult time servicing their debts.
- In an effort to avoid a technical default, Argentina could offer the bondholders who agreed to the 2005 and 2010 debt swaps new bonds issued under Argentina’s jurisdiction. Thus, the bondholders would face a terrible choice: either they stick to their U.S.-issued bonds and risk an almost certain default, or accept Argentina’s offer of new bonds issued under the “protection” of its shaky legal and political institutions. The chants of “Argentina, Argentina!” in the chambers of Congress in 2001 when the country opted for defaulting should be in the bondholders’ minds when considering this option.
Clearly, the best option for Argentina’s long-term economic prosperity is the first one. But it requires the country’s political class to swallow its pride and agree to play by the rules. That would be a first in a very long time.
If a state’s truth ministry has threatened to prosecute you for something you said during an election campaign, can you sue? Of course, said the unanimous Supreme Court, with what would undoubtedly have been a guffaw if one could be conveyed in a legal opinion. While the Court left it to its lesser brethren to deal further with a law that criminalizes making “false statements” – whatever that means: too many Pinocchios? – about political candidates, the satirical graffiti is clearly on the wall for that Buckeye bunkum.
As Cato’s brief alongside P.J. O’Rourke made clear, allegations, insinuations, “truthiness,” smears, and all that other rigamarole have been part and parcel of American political discourse since time immemorial. Indeed political speech – including lies, so long as they’re not defamatory (for which there are clear legal standards) – resides firmly in the throbbing heart of the First Amendment. It’s farcical to think that a legislature could charge a panel of bureaucrats (like the state election commission here) with enforcing some sort of Marquis of Queensbury debate rules.
While standing is often hard to come by, even the most curmudgeonly jurisprudential sticklers can see that political advocates have to be able to challenge a law that restricts political advocacy – one that’s already been used against them, no less! At the end of the day and in the fullness of time, today was a banner morning for free speech and judicial engagement.
The U.S. government is driving some of its most productive citizens abroad. The only beneficiaries are countries such as Singapore and Switzerland, which offer sanctuary to Americans fleeing avaricious Uncle Sam.
Three years ago Eduardo Saverin, one of Facebook’s founders, joined 1780 other Americans in renouncing their citizenship. Heading overseas allowed him to reduce the federal government’s take when his company went public.
Just 231 people gave up their citizenship in 2008. Last year the number was 2999. The first three months of 2014 was 1001, up from 679 for the first quarter of last year.
Tax flight is not an option for most people. However, the rich have more choices internationally. And they increasingly are telling Uncle Sam goodbye.
So are big corporations, such as Pfizer, which is seeking to buy the British pharmaceutical company AstraZeneca. The acquisition would allow Pfizer to move its headquarters to the United Kingdom, which employs a “territorial” tax system, with taxes collected only where the income is earned, in contrast to Washington’s worldwide levy.
About 50 firms have moved their headquarters over the last three decades, half of them since 2008. Last month the Obama administration decried the practice and proposed to increase the share of foreign ownership required for inversions.
Traditionally the entrepreneurial and productive wanted to come to America. Many still do. But the choice is no longer so clear-cut.
Some lawyers admit that they counsel foreign businessmen to consider carefully before seeking American citizenship. Washington’s increasingly greedy and petty behavior appears to be having an impact. Hong Kong tax attorney Timothy Burns argued: “Fifteen or 20 years ago there was a big rush to make sure your kids became U.S. citizens, for access to U.S. schools for example. Now we’re seeing just the opposite.”
There are high, progressive rates at home on top of a comically complicated tax code. The U.S. alone among major industrialized states taxes Americans living overseas. America also is one of the few countries to use worldwide corporate taxation—claiming a cut of money earned everywhere, no matter how little a connection to the U.S.
Moreover, as I point out in my article on fee.org: “U.S. citizens overseas must file foreign bank account reports, backed by big civil and criminal penalties. In 2010 Congress passed the Foreign Accounts Tax Compliance Act, which attempts to turn every foreign financial institution into an IRS agent. The results are significant compliance costs and fearsome legal risks.”
Increasingly banks and other companies are telling Americans to go elsewhere. Complained tax attorney Brad Westerfield, the rules have “become so complicated—the increased filing obligations over the years. You see more people giving up their citizenship or relinquishing their Green Cards.”
Not that it’s easy to escape. Washington hits up departing wealthy citizens for a tax on unrealized capital gains. Yet Senators Chuck Schumer and Bob Casey have introduced legislation to double the levy to 30 percent for those leaving America.
Of course, most people are likely to think about more than money before giving up their citizenship. But current policy creates powerful pressure for some. Increasing tax flight should serve as a wake-up call for Washington politicians. Unfortunately, they insist on blaming everyone but themselves. Heading overseas to save money is “immoral,” asserted Sen. Charles Grassley (R-Iowa).
But what is moral about the looting and pillaging that goes on every day in Washington? Politicians are among the greediest people in America, acting at the behest of the envious who are determined to use government to live at everyone else’s expense. Today’s political overseers promise much, take more, and deliver little.
America once was a land of opportunity. As it loses that distinction more people are tempted to go elsewhere. Instead of seeking to punish those who desire to move, policymakers who are real patriots would change the punitive policies which are pushing people abroad.
Congratulations to the San Antonio Spurs on their fifth non-consecutive NBA championship. Back in 2007, when they won their third, Washington Post sports columnist Mike Wise praised the resilience of the Spurs, who kept coming back to win the NBA championship without ever being quite a Bulls-style dynasty. He said the Spurs “had their crown taken away twice since 2003 and got it back both times.”
I noted at the time that his comments reminded me of Ron Paul, who was then the only current member of Congress to have been elected three times as a non-incumbent. Given the 98 percent reelection rates for House members, it’s no great shakes to win three terms — or 10 terms — in a row. It’s winning that first one that’s the challenge. And Ron Paul did that three times.
He first won in a special election for an open seat. He then lost his seat and won it back two years later, defeating the incumbent. After two more terms he left his seat to run unsuccessfully for the U.S. Senate (and thereby did his greatest disservice to the American Republic, as his seat was won by Tom DeLay). Twelve years later, in 1996, after some redistricting, he ran again for Congress, again defeating an incumbent, this time in the Republican primary. Some political scientist should study the political skills it takes to win election to Congress without the benefit of incumbency — three times.
Now the Spurs have won five times as the “non-incumbent,” to Ron Paul’s three. But then, Paul won 12 congressional elections in total, and the Spurs are still a long way from that.
An implicit principle in a democracy is that the officials who decide how your taxes are spent represent you, the taxpayers, and not the bureaucracies that receive your taxes. But Congress violated this principle when it wrote MAP-21, the 2012 transportation law. As detailed in a proposed rule earlier this month, the law gives transit agencies in major urban areas a vote on how much of each region’s transportation dollars are spent on transit.
State legislatures are made up of people elected by various voting districts, not representatives selected by the state departments of transportation, justice, welfare, fish & wildlife, parks, and other bureaucracies. Similarly, city councils are made up of people elected by the voters in that city, not by representatives selected by the various water, transportation, fire, and other bureaus.
In 1962, Congress mandated that urban areas of 50,000 people or more create metropolitan planning organizations (MPOs) that would decide how to spend federal transportation and housing funds. At that time, it recognized this principle, specifying that the governing board of each MPO consist of elected officials from the various cities and counties in that urban area. While this was one step removed from the voters, it at least insured that the voters had an indirect say over how their money is spent.
However, MAP-21, the 2012 law reauthorizing federal transportation funding (including funding for MPOs), departed from this principle by requiring that transit agencies in all urban areas with 200,000 or more people be given representation on the MPO boards. In other words, the bureaucrats themselves will get to vote on their own budgets.
Some might think that it is unfair that transit agencies get a vote on MPO boards but highway and street agencies don’t. In fact, it is unfair for any agency to have votes on the boards that help determine their own budgets.
Others might argue that transit agencies are a part of the community and deserve to have a say on the future of that community. But they already have a say through the city councilors and county commissioners elected by the people of the urban area, which includes most transit agency staff and employees (except those who commute from outside the region). Giving transit agencies their own seat on the MPO board violates the one-person, one-vote rule established by the Supreme Court in the 1960s.
We wouldn’t be happy if the NSA got to have a seat on a Congressional committee investigating NSA spying on American citizens or one determining NSA budgets. We wouldn’t be happy with oil companies having a seat on Congressional energy committees, or if university athletic departments got an automatic seat on a state higher education committees, or if a pavement company got an automatic seat on a city council’s transportation committee. Why should transit agencies get an automatic seat on the board determining transit’s share of federal and regional funding?
MAP-21 specified that the requirement that transit agencies have a seat on MPO boards go into effect by October 1, 2014. But MAP-21 itself expires on September 30, 2014. So Congress has the opportunity to redress this problem when it writes a new law to replace the current one.
Given a divided Congress, observers expect Congress will simply extend the current law with a few minor changes. But MAP-21 itself was simply an extension with, supposedly, a few minor changes.
If those who believe in the principles of representative government demand it, Congress could easily remove this provision from the law and specify that any transit (or other) agency officials already on MPO boards be taken off those boards immediately. Removing this conflict of interest is a small change compared with what fiscal conservatives might like to see done with federal transportation law, but it needs to be done to maintain the integrity of public decision making.
The claim for physician licensure is that it protects consumers from “quacks;” it is just a coincidence that licensure also reduces competition and raises doctors’ incomes! In this case, the strength of licensing should be similar across states, and licensure requirements should determine whether a prospective doctor is competent, not whether a U.S. native or a migrant.
Recent research by Brenton Peterson, Sonal Pandya, and David Leblang (University of Virginia), however, finds the opposite:
Licensure regulations ostensibly serve the public interest by certifying competence, but they can simultaneously be formidable barriers to entry by skilled migrants. From a collective action perspective, skilled natives can more easily secure sub-national, occupation-specific policies than influence national immigration policy. We exploit the unique structure of the American medical profession that allows us to distinguish between public interest and protectionist motives for migrant physician licensure regulations. We show that over the 1973–2010 period, states with greater physician control over licensure requirements imposed more stringent requirements for migrant physician licensure and, as a consequence, received fewer new migrant physicians. By our estimates over a third of all US states could reduce their physician shortages by at least 10 percent within 5 years just by equalizing migrant and native licensure requirements.
Little evidence suggests that professonal licensure promotes quality or protects the public, but arbitrary discrimination against migrant physicians (many trained in the United States!) is particularly insane. As are all restrictions on high-skill (or other) immigration.
On Wednesday, President Obama stated an irrefutable fact: the state of humanity is better than any time before. He said,
…if you had to choose any moment to be born in human history, not knowing what your position was gonna be, who you were gonna be, you’d choose this time. The world is less violent than it has ever been. It is healthier than it has ever been. It is more tolerant than it has ever been. It is better fed than it has ever been. It is more educated than it has ever been. Terrible things happen around the world every single day but the trend lines of progress are unmistakable.
This is merry news, especially since he is helping to spread the message of Cato’s new website, HumanProgress.org. And who could help to spread it faster than the leader of the free world?
His understanding of the reasons for improvements in human well-being is unclear, though he seems to imply that people, left to their own devices, will try to improve their lot:
(T)he trend lines of progress are unmistakable. And the reason is because each successive generation tries to learn from previous mistakes and push us, the course of history, in a better direction.
The President is correct in recognizing that progress is most commonly realized when people are left free to pursue their enlightened self-interest. Consider the following examples:
Life expectancy and economic freedom were both higher in Venezuela than in Chile in the 1970s. As Venezuela became less economically free and Chile became more economically free, Chile caught up with Venezuela and eventually overtook it. Today, life expectancy in liberal Chile is higher than in socialist Venezuela.
Consider also China’s reforms: As China embraced free market policies, its poverty rate has plummeted.
Obama did his young audience a service in teaching them that the world is the best it has ever been. These massive improvements were the result of no one’s intention, other than the intention to better one’s own life through free markets. Look no further than North and South Korea, East and West Germany, and Taiwan and pre-reform China for evidence of the power of free markets to create sustainable development.
Daniel J. Mitchell
Imagine how weird it would be if the Cato Institute and Americans for Tax Reform praised Barack Obama for fiscal responsibility. And think how inconceivable it would be for the Heritage Foundation and the National Taxpayers Union to applaud Tim Geithner for economic stewardship.
The Canadian version of that happened while I was at the conference of the World Taxpayers Association in Vancouver two weeks ago.
The event was organized by the Canadian Taxpayers Federation and the main speaker was Paul Martin of the Liberal Party, who served as finance minister from 1993 to 2002, and then as prime minister from 2003 to 2006. I should add, for context, that the Liberal Party in Canada is not a classical liberal party with a track record of free markets and small government.
But Paul Martin was honored because he was responsible, while finance minister, for one of the best records of fiscal restraint of any policymaker in recent history (click here for international comparisons).
I’ve pointed out that the burden of spending fell under Bill Clinton, and I’ve even acknowledged that the federal budget hasn’t grown much under Obama, at least once you get past his first couple of years. But Paul Martin was far more frugal. And since Canada has a parliamentary system, there’s no ambiguity about who deserves credit. He restrained spending when his party had control.
What happened to generate the good results? For all intents and purposes, he imposed a spending freeze. And I’m talking a nominal spending freeze, not the kind of fake fiscal discipline you get when politicians make “cuts” off an inflated baseline. Because the budget was successfully restrained, that addressed both the problem of too much spending and the symptom of red ink.
In his speech, Martin won me over when he bragged that the burden of government spending fell to its lowest point in 50 years. My man-crush on him became even more pronounced when he said his administration allowed agencies to ask for more funds, but only if they identified offsetting cuts elsewhere. What a novel concept! A government that actually looked at tradeoffs and prioritized outlays. Sort of like a household or business.
I asked the former prime minister a couple of questions. I was specifically interested in why the Liberal Party didn’t behave like other left-wing parties and raise taxes to enable bigger government. Martin said there were some in his party who wanted that approach, but that there were two reasons why he instead chose to follow good policy.
First, enough people understood that Canada has a spending problem rather than a revenue problem. And second, there was concern that financial markets would react poorly if policymakers simply pushed for higher taxes and ignored the size of government. I wish the average Republican had the same sophisticated understanding of fiscal policy.
No wonder Canada got such good results. They imposed austerity on the public sector, rather than trying to squeeze the private sector (a distinction that seems to escape Paul Krugman).
To give you an idea of what Paul Martin accomplished, here is a video, prepared by the Canadian Taxpayers Federation, that features laudatory comments by representatives of major market-oriented think tanks. At the risk of stating the obvious, I don’t think there will ever be a video like this about Obama.
The video is very well done, even though I think it focused too much on red ink and not enough on the real accomplishment of spending restraint. On that issue, Chris Edwards has produced some very good data on what’s happened to the burden of government spending is his home country. And for further information on the topic, here’s my video on international examples of spending restraint. Canada, you’ll notice, is one of the prominent case studies.
P.S.: If you know any Keynesians, you can have some fun by asking them why Canada’s economy grew when the burden of government spending was reduced.
P.P.S.: It’s also very impressive that Canada has one of the lowest levels of welfare spending of any developed nation.
P.P.P.P.S.: To end on a humorous note, Canada should fortify its border to avoid an influx of American leftists.
Steve H. Hanke
As Peter noted, M.A. “Morry” Adelman—a great economist, mentor, and friend—passed away last month at the age of 96. The first paragraph of The New York Times obituary (June 8, 2014) had this to say of Professor Adelman’s passing.
Morris A. Adelman, an energy economist who marshaled free-market principles and hard data in arguing that the world’s oil supply was not running out, died May 8 at his home in Newton, Mass. He was 96. The Massachusetts Institute of Technology, where he taught and researched for 65 years, announced the death on May 15.
I first had the pleasure of meeting Morry in June of 1967, shortly after I had joined the faculty at the Colorado School of Mines. The Rocky Mountain Petroleum Economics Institute had convened a meeting at Mines; Morry was one of the speakers on a star-studded program. I had been invited to edit a book, Essays in Petroleum Economics, of the conference papers.
As a rookie facing what was, at the time, an array of the most notable petroleum economists in the world (Adelman, Richard Gonzalez, Minor Jameson, John Lichtblau, Milton Lipton, Wallace Lovejoy, Stephen McDonald, James McKie, and Frank Young), I was, to put it mildly, anxious. But, thanks to the likes of Adelman, that problem was quickly put to rest.
Morry knew how to mentor young rookies. He also knew more about the oil industry–even the institutional details–than most of the conference representatives from the industry. He was not only a master of applied economics and detailed, sharp pencil work, but was an economist with a personality–a very sharp wit, very sharp indeed. This wit and his personality come through loud and clear in his writings. So, Morry remains with us, fortunately.
As I reread “Trends in Cost of Finding and Developing Oil and Gas in the U.S.”, which was Adelman’s chapter in Essays in Petroleum Economics, I am struck by just how careful he was to protect his text–a master of rhetoric, too. He paid the most careful and anxious attention to stressing that he was not making predictions, but only presenting short-term projections. As for intermediate projections, beyond 1980, Adelman thought (in 1967) they “only were of minor interest.” And “projections past the year 2000 are funny because it is better to laugh than to weep in the vain presumption of thinking we can see that far ahead.”
That said, Adelman’s chapter does suggest that he had what turned out to be very clear ideas about the possible long-run scenarios:
Nobody can tell what will happen either to energy demand or supply. All we need mention are a decisive breakthrough on: shale oil extraction, or direct finding of conventional crude oil, or coal conversion to liquids, or nuclear power, particularly the fast breeder reactor, or the fuel cell and other methods of energy conversion, not to mention the electric automobile. A major change in any one of these would put altogether new perspectives on developments in oil supply and cost.
Ever since my first encounter with Morry, I benefited from his generous mentoring and his many writings on petroleum economics. This really came home to roost in 1985, when, while retaining my post as a professor of applied economics at The Johns Hopkins University, I became the chief economist at the Friedberg Mercantile Group in Toronto. By late 1985, we were very short crude, as well as the Saudi riyal and the Kuwaiti dinar. We predicted that OPEC was about ready to collapse and that the price of crude would fall to below $10 per barrel. We ended up being right in a big way, when oil collapsed to below $10 per barrel in April of 1986 and both the Saudi riyal and the Kuwaiti dinar devalued shortly thereafter. My writings supporting those trades: “The Unravelling of OPEC: Crude Calculations” (Nov. 17, 1985) and “A Crude Roller Coaster” (Dec. 15, 1985) appeared in Friedberg’s Commodity and Currency Comments, a monthly publication. My analyses rested firmly on Adelman’s pioneering works.
A few years later, I wrote another Friedberg’s piece that was pure Adelman. It illustrates how property rights can be worked into the analysis of extractive industries like oil and gas (“Crude Oil: Take the Money and Run”, Friedberg’s Commodity and Currency Comments, Feb. 15, 1987). This, in part, is what I wrote:
Governmental spokesmen and financial analysts have been oversupplying us with atmospherics about the new OPEC agreement. To redress this imbalance, we offer some crude analytics.
The economic production rate for oil is determined by the following equation: P – V = MC, where P is the market price of a barrel of oil, V is the present value of a barrel of reserves, and MC is the marginal recovery cost of a barrel of oil.
With this simple model for the economics of depletable resources, we demonstrate that for Saudi Arabia–which has 35% of OPEC’s capacity and holds the key to any viable cartel arrangement–oil in the ground is not worth more than money in the bank. In fact, for the Saudis to maximize the value of their oil resources, they should dramatically increase the rate at which they liquidate their oil reserves.
To understand the economics that might force the Saudis to increase their production, we must understand any forces that might tend to raise the Saudis’ (and other producers’) discount rates. To determine the present value of a barrel of reserves (V in our production equation), we must forecast the price that would be received from liquidating a barrel of reserves at some future date and then discount this price to present value. In consequence, when the discount rate is raised, the value of reserves (V) falls, the gross value of current production (P – V) rises, and increased rates of current production are justified.
When it comes to the political instability in the Middle East, the popular view is that increased tensions in the region will reduce oil production. Economic analysis suggests that the tensions will actually work to increase oil production.
Let’s suppose that the real risk-adjusted rate of discount, without any prospect of property expropriation, is 20% for the Saudis. Now, consider what happens to the discount rate if there is a 50-50 chance that a belligerent will overthrow the House of Saud within the next 10 years. In this case, in any given year, there would be a 6.7% chance of an overthrow. This risk to the Saudis would cause them to compute a real risk-adjusted rate of discount, with the prospect of having their oil reserves expropriated. In this example, the relevant discount rate would increase to 28.6% from 20% (See the accompanying table for alternative scenarios). This increase in the discount rate will cause the present value of reserves to decrease dramatically. For example, the present value of $1 in 10 years at 20% is $0.16, while it is worth only $0.08 at 28.6%. The reduction in the present value of reserves will make increased current production more attractive because the gross value of current production (P – V) will be higher.
Thank you Morry. We miss you.
An important local story in Washington, D.C. this week is the D.C. City Council’s proposed tax overhaul package. The package would restructure the tax code and reduce revenue by $67 million a year. Unfortunately, special interests may be poised to defeat generally good, pro-growth reform.
The proposal passed 11–2 on its first reading. It was the byproduct of months of study and debate. Under the plan, income tax rates would be cut, which would benefit middle-income residents. The standard deduction would be increased, particularly benefiting lower-income residents. The DC Fiscal Policy Institute estimates that middle-income families with incomes between $50,000 and $75,000 would save an average $400 annually.
It also would lower the corporate tax rate from 9.975 percent to 8.25 percent by 2019, while cutting the “death tax” and eliminating some wasteful tax credits.
These changes would provide much needed relief to D.C. residents and businesses, and make D.C. a little more competitive with its neighbors.
To partly offset the loss in revenue, the city council decided to expand the sales tax base to include some currently untaxed services, such as carpet cleaning, beautician services, and storage facilities. It would keep the sales tax rate at 5.75 percent, lower than Maryland and Virginia.
However, one particular service industry is trying to sink the entire deal. The sales tax base expansion would include fitness services, such as gym and yoga studio memberships. One gym, Vida Fitness, is leading the charge against the “D.C. Fitness Tax,” urging customers and D.C. residents to sign a petition opposing treating fitness services like most other retail goods and services. Contrary to what Vida Fitness and others say, this isn’t a new tax only affecting their industry; it is simply the expansion of the general sales tax base to include their industry’s products.
I’m not in favor of new taxes, but it is also not fair that gyms are exempt from sales taxes that hit most other retailers and their customers. As Wes Rivers of the DC Fiscal Policy Institute described it, “D.C. residents already pay sales tax on exercise equipment, running shoes, and yoga mats.” Twenty-two states include fitness services in their sales tax bases.
Middle-income residents will save more in income taxes than people will pay in increased sales taxes on gym memberships. Many of those taxpayers likely belong to gyms and yoga studies, so Vida Fitness’ opposition may hurt its customers more than it helps.
The city council should go further in cutting tax rates, but this package is a good first step. It moves D.C.’s tax code a little away from the income tax and towards the consumption tax, which is a more fair and efficient tax structure. Hopefully, policymakers won’t let special interests derail a generally pro-growth reform in D.C.
Christopher A. Preble
It is good to know that President Obama is opposed to sending U.S. troops into Iraq, though hardly surprising. (I was shocked to hear a reporter ask the president after his remarks if he was reluctant to do so. How could he not be?)
As Chuck Todd noted today on MSNBC, and here, 59 percent of Americans believe that the war in Iraq was not worth it. Does anyone seriously believe that a well-crafted Obama sales pitch could convince a majority of Americans to change their minds? I don’t.
Among the many maddening aspects of this story—and there are many—I’m most frustrated by the claim that the United States should have left a residual force in Iraq after 2011. There are actually three problems with this claim. First, it is NOT a partisan issue. Bush attempted to negotiate a deal that would have left forces in Iraq, and failed. Obama tried, and failed. The claim that one or the other failed because he didn’t try hard enough is just foolish. A sufficient number of Iraqis didn’t want U.S. troops to stay there (albeit for different reasons) that the failure to achieve a status of forces agreement (SOFA) can hardly be blamed on either Bush or Obama for a lack of effort.
So what these people are really saying is that we should have left U.S. troops in Iraq without a SOFA, in the face of Iraqi opposition. We are told that the troops left behind wouldn’t be engaged in combat, so they really wouldn’t have been in danger. That is what Sen. John McCain (R-AZ) said on MSNBC just after the president’s statement. I think this ignores that the U.S. presence was a source of violent resistance in the first place, so it is hard to see how U.S. troops wouldn’t have been subject to at least the risk of regular attacks.
Besides, SOFAs do not protect U.S. troops from security threats, but rather from the vagaries of foreign justice systems. So it is easy to see how a peaceful, non-threatening, U.S. military operation–e.g., a roadblock searching for bad guys–can turn south in a hurry. Maybe a husband and wife fail to stop at the roadblock, and they are shot. Maybe they are killed. Without a SOFA that extends standard legal protections to U.S. servicemen, the troops manning that roadblock would be subject to Iraqi justice, forced to stand accused of murder before Iraqi judges. Is that really what Senator McCain and others want? We don’t leave U.S. forces in foreign countries without a SOFA for a reason.
Lastly, the claim that a residual force would have convinced Iraqi Prime Minister Nouri al-Maliki to govern better/more inclusively, and that a residual force today might do the same (although McCain allowed today that Maliki might simply need to be replaced; by whom he did not say) ignores that a far larger force, including some of the largest concentrations of U.S. troops in 2008 and 2009, did NOT convince Maliki to cut deals with his political opponents and stab his political supporters in the back. So why would anyone think that a smaller force would have succeeded, or would succeed now?
The breakup of Iraq that many predicted before the war may now be happening. Maybe the country will be partitioned—an idea that previously was ridiculed. Maybe the Iraqi military will turn things around and crush the insurgency. I don’t know whether any of these things will happen. But I will go out on a limb and predict that the U.S. military won’t be sorting out these things. And for that, we should all be grateful.
Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
A week ago, the White House released a report on the health consequences of global warming that was meant to supplement and reinforce the heath benefit claims made during the roll-out of new Environmental Protection Agency regulations aimed at reducing carbon dioxide emissions from existing power plants.
Those claims, which border on the bizarre, were met with a great deal of pushback—and deservingly so.
The supplemental White House report didn’t make things better. Take for example, how they handle extreme heat events and heat-related mortality.
To say that we are disappointed with how the White House/EPA presents the data on heat-related mortality is an understatement. No matter how many times we point out—through official means, op-eds, blogs posts, etc.—that they are mishandling the data to such an extent that they present the opposite conclusion from that reached in the scientific literature, it never gets better.
In fact, it seems to be getting worse.
Below the jump, in its entirety, is the section on heat waves from the new White House report, The Health Impacts of Climate Change on Americans:
Figure 1. Observed U.S. temperature change (source: White House report).
Notice that there is not a single study cited that links changes in heat waves to changes in heat-related mortality. Instead, it is strongly implied that increasing heat will lead to increasing deaths. We can’t think that any reader would reach the opposite conclusion given the White House discussion and presentation. And yet, that is precisely the case that scientific study after scientific study finds. Despite rising heat, fewer American’s die from heat-related causes (when properly adjusted, of course, for population increases and changes in age stricture).
But such information is nowhere to be found in the White House report. Instead, the section on extreme heat events shows a map of temperature trends across the United States and then goes on to say that extreme heat causes death, leading the readers to a false conclusion.
Here is a similar but more complete presentation from a scientific study looking at trends in temperature and trends in heat-related mortality across the United States.
Figure 2. Annual heat-related mortality rates (excess deaths per standard million population on days in which the decadal-varying threshold apparent temperature (AT) is equaled or exceeded) by city and decade, and long-term trend in summer afternoon AT. Each histogram bar indicates a different decade: from left to right, 1960s–1970s, 1980–1989, and 1990–1998. Decades without histogram bars exhibit no threshold ATs and no heat-related mortality. Decades with gray bars have mortality rates that are statistically significantly different from the decades indicated by black bars. The average excess deaths across all 28 cities is shown at the lower left. AT trends are indicated beneath each city abbreviation (from Davis et al., 2003).
The map in Figure 2 shows trends in summer time apparent temperature (AT)—a combination of heat and humidity—indicated by the small symbol under each city and explained by the right-hand legend. It indicates basically the same thing as the White House map—that summer temperatures are on the rise across the country. But this map also superimposes the trends in heat-related mortality on the trends in temperature (the bar charts for each city).
What it shows is that annual heat-related mortality was on the decline across the United States from the mid-1960s through the late 1990s (the end of the data used in this study). More recent studies confirm that the downward trend in heat-related mortality has continued even in the face of rising temperature (can you say “adaptation”?).
This more complete presentation of the data tells the exact opposite story than the one that the White House (mis)leads you to believe.
You have to ask yourself why the White House finds it necessary to lead you away from the best science in order to drum up support for its energy policies (another example here).
Bobb, J.F., R.D. Peng, M.L. Bell, and F. Dominici. “Heat-Related Mortality and Adaptation in the United States.” Environmental Health Perspectives, 2014. Online at http://dx.doi.org/10.1289/ehp.1307392.
Davis, R.E., P.C. Knappenbergre, P.J. Michaels, and W.M. Novicoff. “Changing Heat-Related Mortality in the United States.” Environmental Health Perspectives 111: 1712–18 (2003).
Kalkstein, L.S., Greene, S., Mills, D.M., and Samenow, J. “An Evaluation of the Progress in Reducing Heat-Related Human Mortality in Major U.S. Cities.” Natural Hazards 56(1): 113-29 (2011).
The Senate voted 93-3 on Wednesday to expand health care spending for veterans. Under the Senate bill, veterans would be able to access health care services from facilities outside the Department of Veterans Affairs (VA) system.
The headlines from the last few weeks clearly illustrate the need to reform this massive system, but the Senate’s rushed plan would dramatically increase veterans’ health care spending without tackling needed fundamental reforms.
Just before the vote, the Congressional Budget Office (CBO) released a preliminary estimate of the bill’s costs. Because of the hurried nature of introduction and debate, CBO was not able to fully review and estimate costs.
CBO says that the new program would increase spending by $35 billion over 10 years. But that doesn’t tell the full story. CBO expects initial set-up of the new program would take several years with veteran enrollment ramping up over time. And the bill just authorizes the new spending until 2016. So it appears that the CBO estimate of $35 billion just includes the cost over the first three years.
Over the longer term, CBO estimates that added annual spending would be $50 billion a year. So if the current bill is enacted and the added spending extended in the future, it would raise federal spending by about $385 billion over the next decade, as illustrated in the chart below the jump.
The $385 billion figure is likely conservative because it assumes that costs stay flat over time. But as more veterans enroll and health care costs increase, the figures could grow larger. CBO says that its estimates are “highly uncertain,” which is one reason why the Senate’s rush to push the bill through was so irresponsible.
The VA is already the fifth largest federal agency. If the new spending is made permanent, VA’s total budget would grow by about one-third and VA health care spending would roughly double.
During debate on Wednesday, several senators raised concern over the dramatic increase in VA spending without any offsetting cuts, but 75 senators swiftly brushed it aside. Allowing any debate about large expansions of government is apparently out of style in the Senate. But what’s needed in the VA is fundamental restructuring, not an ill-planned gusher of new spending.
Political crises are always the most dangerous time for the growth of government. The VA crisis is proving to be no different.
1) In the city of Detroit, more than one violent crime per day now takes place at a gas station. Specifically, reports the Detroit News, “Police have investigated nearly 700 violent crimes at Detroit gas stations during the past year, prompting city officials and citizen patrol groups to try to quell the steady beat of murders, carjackings, shootings and armed robberies.”
2) The Detroit city government does an astoundingly poor job of protecting gas stations, their customers, and pretty much everyone else from crime. It suffers from notoriously poor police response times (58 minutes for serious crimes) and closure rates on crime investigations (8.7 percent rate of solving cases). According to Motor City Muckraker, the Detroit Police Department has quietly discontinued putting out its “Major Crime Summary Report” and instead now puts out a summary report of cases that have resulted in arrests, which is better for its image.
3) The city council’s response? It’s to load new legal burdens on the gas stations, specifically by way of “a recent ordinance requiring owners to install security cameras by Aug. 31.” While some stations say they’re already doing that, Auday Arabo, the head of a dealer association, says the requirement “would present a financial hardship for many station owners”: “Is this what government is supposed to do? Mandate you become the surveillance company for the government?”
That’s certainly what Detroit seems to be doing. Strange how when governments fail utterly at their claimed core function of preventing violence, they so often can be found muscling into entirely new areas of coercion at the same time.
The programs, regulations, and laws that define most federal activities are so numerous and complex that it strangles effective governance. The Department of Homeland Security (DHS) is no exception. During the Hurricane Katrina disaster, DHS officials were in a fog of confusion, overwhelmed by events and all the complicated emergency rules and procedures.
A key marker of excess bureaucracy is the generous use of acronyms. In government, acronyms are used to identify the building blocks of bureaucracies, such as agencies, committees, programs, job titles, procedures, rules, and systems.
Recently, I’ve looked at aid-to-state programs run by the Federal Emergency Management Agency (FEMA), which is part of DHS. Acronyms abound at FEMA. To get a sense of the bureaucracy, I looked for acronyms in this 84-page Funding Opportunity Announcement (FOA) for one of FEMA’s many aid programs.
Below is a list of all the bureaucratic structures that were capitalized and had acronyms in this document for one program. Actually, I left out some common acronyms that many people already know, including OMB, FBI, CDC, CBP, EIN, DOT, EMS, IED, FTE, MSA, DOL, GIS, FCC, TDD, and NIST. So the list below mainly includes specialized acronyms that workers in this policy area would need to know. Many of the acronyms refer to government structures that have their own lengthy documents full of acronyms.
H.L. Mencken said “The true bureaucrat is a man of really remarkable talents. He writes a kind of English that is unknown elsewhere in the world, and he has an almost infinite capacity for forming complicated and unworkable rules.”
DHS must be full of “true bureaucrats” because by the time I read to the end of this document, I had counted 113 acronyms. That is an impressive achievement in True Bureaucratic Excellence (TBE).
Bureaucratic Structures with Acronyms in the FOA for the HSGP
Homeland Security Grant Program (HSGP)
State Homeland Security Program (SHSP)
Urban Areas Security Initiative (UASI)
Operation Stonegarden (OPSG)
Threat and Hazard Identification and Risk Assessment (THIRA)
State Preparedness Report (SPR)
National Preparedness Report (NPR)
Information Bulletin (IB)
Investment Justification (IJ)
State Administrative Agency (SAA)
Emergency Management Assistance Compact (EMAC)
National Incident Management System (NIMS)
Federal Emergency Response Official (FERO)
Federal Information Processing Standards (FIPS)
Comprehensive Preparedness Guide (CPG)
Post-Katrina Emergency Management Reform Act (PKEMRA)
Law Enforcement Terrorism Prevention Activity (LETPA)
Environmental Planning and Historic Preservation (EHP)
Border Patrol (BP)
Federal Financial Report (FFR)
Biannual Strategy Implementation Report (BSIR)
Initial Strategy Implementation Plan (ISIP)
Strategic Implementation Plan (SIP)
Planning, Organization, Equipment, Training, and Exercises (POETE)
Grants Program Directorate (GPD)
Grant Adjustment Notice (GAN)
Centralized Scheduling and Information Desk (CSID)
Unified Reporting Tool (URT)
Data Universal Numbering System (DUNS)
System for Award Management (SAM)
Grant Reporting Tool (GRT)
Statewide Communication Interoperable Plan (SCIP)
Statewide Interoperability Coordinator (SWIC)
Statewide Interoperability Governance Board (SIGB)
State Hazard Identification and Risk Assessment (HIRA)
Critical Operational Capability (COC)
Enabling Capability (EC)
Information Sharing Environment (ISE)
Training and Exercise Plan (TEP)
Homeland Security Exercise and Evaluation Program (HSEEP)
Training and Exercise Planning Workshop (TEPW)
National Exercise Scheduling System (NEXS)
After Action Report/Improvement Plan (AAR/IP)
Public Health Emergency Preparedness (PHEP)
Assistant Secretary for Preparedness and Response (ASPR)
Hospital Preparedness Program (HPP)
Senior Advisory Committee (SAC)
Port Security Grant Program (PSGP)
Nonprofit Security Grant Program (NSGP)
Transit Security Grant Program (TSGP)
Area Maritime Security Committee (AMSC)
Regional Transportation Security Working Group (RTSWG)
Homeland Security Advisor (HSA)
Emergency Management Agency (EMA)
Emergency Medical Services for Children (EMSC)
Cities Readiness Initiative (CRI)
Baseline Assessment and Security Enhancement (BASE)
National Capital Region (NCR)
Community Emergency Response Team (CERT)
Integrated Planning Team (IPT)
Emergency Systems for Advance Registration (ESAR)
Volunteer Health Professional (VHP)
Metropolitian Medical Response System (MMRS)
Cyber Security Framework (CSF)
Citizens Corps Program (CCP)
Core Capabilities Tool (CCT)
National Terrorism Advisory System (NTAS)
National Emergency Communications Plan (NECP)
Logistic Management Directorate (LMD)
Operational Pack (OPack)
Western Hemispheres Travel Initiative (WHTI)
Driver’s License Security Grant Program (DLSGP)
National Infrastructure Protection Plan (NIPP)
High Intensity Drug Trafficking Area (HIDTA)
National Crime Information Center (NCIC)
Integrated Automated Fingerprint Identification System (IAFIS)
Fusion Liaison Officers (FLO)
National Disaster Recovery Framework (NDRF)
National Emergency Family Registry and Locator System (NEFRLS)
National Emergency Medical Services Information System (NEMSIS)
Regional Resiliency Assessment Program (RRAP)
Communications Assets and Mapping (CASM)
Nationwide Public Safety Broadband Network (NPSBN)
National Counter-IED Capabilities Analysis Database (NCCAD)
Multi-Jurisdictional IED Security Planning (MJIEDSP)
Corrective Action Plan (CAP)
Continuity of Operations/Continuity of Government (COOP/COG)
Medical Reserve Corps (MRC)
Volunteers in Public Service (VIPS)
National Preparedness Directorate (NPD)
Technical Assistance (TA)
Authorized Equipment List (AEL)
Center for Domestic Preparedness (CDP)
Critical Infrastructure Protection (CIP)
Field Intelligence Group (FIG)
Joint Terrorism Task Forces (JTTF)
Office of Emergency Communications (OEC)
Personnel Reimbursement for Intelligence Cooperation and Enhancement (PRICE)
Bomb-Making Materials Awareness Program (BMAP)
Responder Training Development Center (RTDC)
National Training and Education Division (NTED)
National Domestic Preparedness Consortium (NDPC)
Rural Domestic Preparedness Consortium (RDPC)
Emergency Management Institute (EMI)
Point of Contact (POC)
Single Point of Contact (SPOC)
Training Point of Contact (TPOC)
Maritime Security Risk Analysis Model (MSRAM)
Transportation Worker Identification Credential (TWIC)
Urban Area Working Groups (UAWG)
Emergency Operation Plan (EOP)
Tactical Interoperable Communications Plan (TICP)
When I’m out at trade events, people in the trade world often ask me, as a Cato person, what the tea party thinks of free trade (libertarians are unfamiliar to many of my friends in the trade world, and I’m their only link to such views, so they come to me with anything vaguely related to these issues). I usually say something along the lines of: it’s complicated and nuanced, there are a range of views, and that I’m still trying to find out myself!
Dave Brat, who is associated with the tea party, just made headlines by defeating House Majority leader Eric Cantor in a Republican primary. I was thinking about ways to ask him his views on trade, but then Chuck Todd beat me to it (starts at 4:02 of the video):
Chuck Todd: Let me ask you about trade agreements. There’s a couple of big ones likely to come for you to vote on…A big one with Europe, and a big one with Asia. In general, what are your views of trade agreements, are you open to big free trade agreements or not?
Dave Brat: Yeah, I’m a free trader. After World War II, the GATT brought tariffs roughly from 50% down to about 4% or less today. And that’s been good for European trade with us. We set up our arch-enemies Japan and Germany after the war, started trading with them, and it enriched all of us. I have a win-win positive view about relationships with other countries that respect the rule of law. So we have to move forward on that front.
A couple noteworthy things about this response.
First, he doesn’t leave much doubt about his view that free trade, in the form of lower tariffs, is good. That’s not too surprising, given his background as an economics professor. (Although on immigration, his economics fails him.)
Second, he focuses his discussion on tariffs. But trade agreements go far beyond tariffs these days. What does he think about provisions in trade agreements that strengthen intellectual property protection, set binding labor and environment rules, and allow foreign investors to sue governments in international tribunals? I’m curious about his take on the nuances of today’s trade agreements. The question from Chuck Todd does refer to the trade talks with Europe and Asia, which have all these new rules in them, so you could take his response to mean he is fine with everything that might be in the Pacific and European trade agreements under negotiation. But I wouldn’t be sure until he gets asked more directly.
And third, he does note that these views apply to “countries that respect the rule of law.” I’d like to know who he thinks fits that description and who does not.
0.02°C Temperature Rise Averted: The Vital Number Missing from the EPA’s “By the Numbers” Fact Sheet
Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
Last week, the Obama Administration’s U.S. Environmental Protection Agency (EPA) unveiled a new set of proposed regulations aimed at reducing carbon dioxide emissions from existing U. S. power plants. The motivation for the EPA’s plan comes from the President’s desire to address and mitigate anthropogenic climate change.
We hate to be the party poopers, but the new regulations will do no such thing.
The EPA’s regulations seek to limit carbon dioxide emissions from electricity production in the year 2030 to a level 30 percent below what they were in 2005. It is worth noting that power plant CO2 emissions already dropped by about 15% from 2005 to2012, largely, because of market forces which favor less-CO2-emitting natural gas over coal as the fuel of choice for producing electricity. Apparently the President wants to lock in those gains and manipulate the market to see that the same decline takes place in twice the time. Nothing like government intervention to facilitate market inefficiency. But we digress.
The EPA highlighted what the plan would achieve in their “By the Numbers” Fact Sheet that accompanied their big announcement.
For some reason, they left off their Fact Sheet how much climate change would be averted by the plan. Seems like a strange omission since, after all, without the threat of climate change, there would be no one thinking about the forced abridgement of our primary source of power production in the first place, and the Administration’s new emissions restriction scheme wouldn’t even be a gleam in this or any other president’s eye.
But no worries. What the EPA left out, we’ll fill in.
Using a simple, publically-available, climate model emulator called MAGICC that was in part developed through support of the EPA, we ran the numbers as to how much future temperature rise would be averted by a complete adoption and adherence to the EPA’s new carbon dioxide restrictions*.
The answer? Less than two one-hundredths of a degree Celsius by the year 2100.
0.018°C to be exact.
We’re not even sure how to put such a small number into practical terms, because, basically, the number is so small as to be undetectable.
Which, no doubt, is why it’s not included in the EPA Fact Sheet.
It is not too small, however, that it shouldn’t play a huge role in every and all discussions of the new regulations.
* Details and Additional Information about our Calculation
We have used the Model for the Assessment of Greenhouse-gas Induced Climate Change (MAGICC)—a simple climate model emulator that was, in part, developed through support of the EPA—to examine the climate impact of proposed regulations.
We analyzed the climate impact of the new EPA regulations by modifying future emissions scenarios that have been established by the United Nation’s Intergovernmental Panel on Climate Change (IPCC), to reflect the new EPA proposed emissions targets.
Specifically, the three IPCC scenarios we examined were the Representative Concentration Pathways (RCPs) named RCP4.5, RCP 6.0 and RCP8.5. RCP4.5 is a low-end emissions pathway, RCP6.0 is more middle of the road, and RCP8.5 is a high-end pathway.
The emissions prescriptions in the RCPs are not broken down on a country by country basis, but rather are defined for country groupings. The U.S. is included in the OECD90 group.
To establish the U.S. emissions pathway within each RPC, we made the following assumptions:
1) U.S. carbon dioxide emissions make up 50 percent of the OECD90 carbon dioxide emissions.
2) Carbon dioxide emissions from electrical power production make up 40 percent of the total U.S. carbon dioxide emissions.
Figure 1 shows the carbon dioxide emissions pathways of the original RCPs along with our determination within each of the contribution from U.S. electricity production.
Figure 1. Carbon dioxide emissions pathways defined in, or derived from, the original set of Representative Concentration pathways (RCPs), for the global total carbon dioxide emissions as well as for the carbon dioxide emissions attributable to U.S. electricity production.
As you can pretty quickly tell, the projected contribution of U.S. carbon dioxide emissions from electricity production to the total global carbon dioxide emissions is vanishingly small.
The new EPA regulations apply to the lower three lines in Figure 1.
To examine the impact of the EPA proposal, we replace the emissions attributable to U.S. power plants in the original RCPs with targets defined in the new EPA regulations. We determined those targets to be (according to the EPA’s Regulatory Impacts Analysis accompanying the regulation), 0.4864 GtC in 2020 and 0.4653 GtC in 2030. Thereafter, the U.S. power plant emissions were held constant at the 2030 levels until they fell below those levels in the original RCP prescriptions (specifically, that occurred in 2060 in RPC4.5, 2100 in RCP6.0, and sometime after 2150 in RCP8.5).
We then used MAGICC to calculate the rise in global temperature projected to occur between now and the year 2100 when with the original RCPs as well as with the RCPs modified to reflect the EPA proposed regulations (we used the MAGICC default value for the earth’s equilibrium climate sensitivity (3.0°C)).
The output from the six MAGICC runs is depicted as Figure 2.
Figure 2. Global average surface temperature anomalies, 2000-2100, as projected by MAGICC run with the original RCPs as well as with the set of RCPs modified to reflect the EPA 30% emissions reductions from U.S power plants.
In case you can’t tell the impact by looking at Figure 2 (since the lines are basically on top of one another), we’ve summarized the numbers in Table 1.
In Table 2, we quantify the amount of projected temperature rise that is averted by the new EPA regulations.
The rise in projected future temperature rise that is averted by the proposed EPA restrictions of carbon dioxide emissions from existing power plants is less than 0.02°C between now and the end of the century assuming the IPCC’s middle-of-the-road future emissions scenario.
While the proposed EPA plan seeks only to reduce carbon dioxide emissions, in practice, the goal is to reduce the burning of coal. Reducing the burning of coal will have co-impacts such as reducing other climatically active trace gases and particulate matter (or its precursors). We did not model the effects of changes in these co-species as sensitivity tests using MAGICC indicate the collective changes in these co-emissions are quite small and largely cancel each other out.
I was as surprised as everybody else by David Brat’s defeat of Eric Cantor yesterday. But I’m not really surprised that Tea Party-type voters were tired of Cantor’s voting record. In 2010, I noted that Cantor, Rep. Kevin McCarthy, and Rep. Paul Ryan had published a book, Young Guns, which cast the Republican congressional leaders who preceded them as a group that “betrayed its principles” and was plagued by “failures from high-profile ethics lapses to the inability to rein in spending or even slow the growth of government.”
But, I wondered, how credible were the messengers? Once you ruin a brand, it can take a long time to restore it. And part of the solution is owning up to your own errors, not just pointing the finger.
Sadly, I discovered at the time that the authors didn’t have very clean hands when it came to the overspending and overregulation of the Bush years. Most relevantly for today, I found that Rep. Cantor voted for the Bush administration’s No Child Left Behind Act in 2001, expanding federal control over education. He voted for the costly Iraq war in 2002. He voted for the Medicare Prescription Drug, Improvement, and Modernization Act in 2003, which was projected to add more than $700 billion to Medicare costs over the following decade. He voted for the Emergency Economic Stabilization Act of 2008, which included the $700 billion TARP bailout.
To be fair, he did get A’s and B’s in the annual ratings of Congress by the National Taxpayers Union, which means he had a better record on spending than most of his colleagues. But as the Tea Party’s been complaining, that’s not saying much.
David Brat, a professor of economics, promised in his campaign to “fight to end crony capitalist programs that benefit the rich and powerful.” While I’m disappointed in his opposition to sensible immigration reform, I hope that if he does get to Washington he’ll bring a revitalized Tea Party message of fiscal responsibility and opposition to big business cronyism.