Archives: July, 2013

Oregon Libertarians to Obamacare: Don’t Fence Me In

Ben Nanke, a 20-year-old aspiring songwriter and filmmaker from Salem” was none-too-pleased to see the glossy odes to Obamacare that will run in Oregon at a cost to taxpayers of some $9.9 million. Who can blame him? The videos claim Obamacare will make you healthier and live longer, even though there is zero reliable evidence that’s the case, and much evidence to suggest it won’t. Also, that had better be his own guitar that Matt Sheehy is getting wet.

 So the libertarian Nanke and his friends composed and cut a video for “Don’t Fence Me In,” their own love letter to Oregon, and freedom. Here’s what Nanke wrote at the video’s YouTube page:

As native Oregonians, we found it strange that a large-scale, federally-funded ad campaign is trying to twist the meaning of “the Oregon Spirit.”

Quoting the Oregonian - “Mark Ray, co-owner and creative director of North [who created the ad campaign], said the initial ads are to ‘create almost a hello’ sort of vibe, while stressing an ‘Oregon pride, Oregonians take care of themselves kind of thing.’”

We agree, and believe that “Oregonians take care of themselves” means exactly that. We take care of ourselves. No government mandates, no tax penalties, and no manufactured marketplaces. We love seeing our fellow Oregonians happy, healthy, and strong, which is why we don’t want to see our state fenced in by government-controlled health care.

A sampling of the lyrics, and the full video follow.

Long ago the wagons traveled past the cliffs of the Gorge

We watched the sagebrush trails become I-84

It’s not that I don’t care, it’s that I’ve seen it before

We say “oh, don’t fence me in.”

You say, “ooh, it looks mighty innocent”

but follow the trail, you know it’s gonna derail

I say “ooh, we’re all going to pay for this”

We’ve travelled quite a long road, and we know where this goes

You say it’s time for a change from the Oregon range

Rugged individuality gives way to rain and trees

So don’t tell the people of Oregon that we don’t care

Don’t fence me in. (Don’t fence me in)

Oklahoma D.A. Hires Private Firm To Assist In Forfeitures

Outrage of the moment: Oklahoma District Attorney Jason Hicks hired a private firm to assist in stopping motorists on the interstate and grabbing their belongings for forfeiture. Under the deal, he would pay the firm a share of assets seized on a sliding scale from 10 to 25 percent. Trampling of due process ensued–as, I think, should have been predicted–including the seizure of money found in a vehicle after a drug-sniffing dog alerted, even though no drugs were found. I’ve got more details at Overlawyered.

Is Education Nationalization Falling Apart?

While the fight against nationalizing education has focused primarily on the Common Core, the nationalization offensive seems to be falling apart on the testing front; a classic, it’s-the-one-you-don’t-see-that-gets-you situation. Yes, several states have seen recent, serious resistance to the Core–I just testified about this in Arkansas–but no state that officially adopted the Core has unadopted it.

Then there’s the testing.

Two days ago, Georgia declared that it would be leaving the Partnership for Assessment of Readiness for College and Careers–one of the two testing consortia chosen by the U.S. Secretary of Education to receive big federal grants–and would pursue its own tests. Georgia joins Pennsylvania, Alabama, Oklahoma and Utah heading out the exits, with strong rumblings that Indiana and Florida will be joining them. (I wrote about Florida “padding” school assessments yesterday.) Why is this important? Because as Chester Finn of the Thomas B. Fordham Foundation has written, for standards-based reform to work, there must be a “tripod of standards, testing, and accountability.” And for national standards to work, there must be a national tripod: all schools must use the same standards and tests to compare how all kids are doing, and there must be uniform punishments for schools that do not do well. As Finn is quoted in the Washington Post as saying, if states use their own tests, “We won’t be able to compare their test scores—it’s almost as simple as that.”

This raises the crucial question: who must be in charge of constructing and maintaining the tripod to get everyone uniformly on board? It’s a question nationalizers have been loath to tackle because the answer is obvious (at least if you ignore that no level of centralized government is likely to maintain high standards and accountability): Washington. Only the federal government has the ability, by taking taxpayers’ money then offering it back with rules attached, to coerce all states into doing the same things. See, for instance, drinking ages. Or adopting the Common Core, which Washington got almost all states to do very quickly through the $4.35 billion Race to the Top program.

Ironically, it is perhaps because Common Core supporters have devoted huge amounts of their time and resources to denying that Washington had a major role in advancing the Core–a role they quietly called for–that may have caused them to miss the cracking in the tripod’s testing leg. Or perhaps they knew, because most states wouldn’t do so on their own, that they would need Washington to force states to adopt uniform tests, while understanding that openly stating that necessity would prove toxic to their cause. They knew that Americans, largely, do not want overt federal control over what their schools teach and how their kids are tested. So they continued to downplay the need to establish any sort of governing structure to keep their tripod together, lest simple logic make clear to the public that only Washington could accomplish what the standardizers need.

In other words, the need to stay hush-hush about the federal role–in order to protect national standardization–ultimately may be what kills it.

U.S. Drifting into Troubled Waters Near China

Secretary of State John Kerry recently reiterated that the United States remains neutral regarding disputes between China and several neighbors over islands in the South China Sea and between China and Japan over an island chain in the East China Sea.  If his statements reflected actual U.S. policy, that would be reassuring.  Unfortunately, as I write here, U.S. actions belie Washington’s protestations of neutrality.  That is worrisome, because U.S. officials risk entangling the United States in an assortment of messy quarrels in which this country has few legitimate interests at stake.

Regarding the South China Sea disputes involving China, Vietnam, the Philippines, Taiwan and other claimants, Washington’s attitude seems to be “anybody but China.”  At various times the United States has shown an unsubtle bias, especially in favor of the Philippines and Vietnam.  The breathtaking scope of China’s claims (well over half the South China Sea and the islands dotting it) understandably agitate Washington.  Key sea lanes pass through the area, and as the world’s leading maritime power, the United States certainly does not want any nation to get a chokehold on those routes.  But that danger is many years away, if it ever emerges.  In the meantime, Washington’s anti-China bias is angering both the Chinese government and the Chinese public, and that is too high a price to pay for taking an uncompromising stance regarding uninhabited islets in a body of water half-way around the world.

The quarrel between China and Japan over the chain of East China Sea islands (called Senkaku in Japan and Diaoyu in China) is potentially far more dangerous to the United States than the South China Sea squabbles.  Secretary of State Hillary Clinton stated in 2010 that Washington’s 1960 defense pact with Japan covers the Senkakus.  Assistant Secretary of State for East Asia, Kurt Campbell, was equally definitive in September 2012, stating bluntly that the disputed islands were “clearly” covered by the treaty, which obliges the United States to come to Japan’s aid if attacked.  And earlier this month, Secretary Kerry renewed the pledge of solidarity

The Obama administration’s policy is both contradictory and foolhardy.  Even as they applied the defense treaty to the Senkakus, U.S. officials insist that the United States takes no position on the substance of the dispute.  But that stance makes no sense.   By affirming that the mutual security treaty includes the Senkakus, Washington clearly regards the islands as Japanese territory, so U.S. officials are prejudging the issue—a point that the Chinese have noted.

And by indicating that Japan could invoke the 1960s treaty in the event of a military incident involving the Senkakus, the Obama administration is encouraging, whether deliberately or not, the Japanese government and public to be more uncompromising regarding the dispute.  Not surprisingly, the government of Prime Minister Shinzo Abe has done just that. 

Washington is playing a dangerous game by implicitly backing certain parties regarding emotional territorial disagreements.  Except for the preservation of navigation rights through the relevant bodies of water, the United States does not have important interests at stake in these disputes.  Strict neutrality is appropriate—in deeds as well as words.

Give Me Your Engineers, Yearning to Breathe Free

The final segment of last Sunday’s McLaughin Group dealt with U.S. immigration reform, which is currently stuck in legislative limbo on Capitol Hill. In five minutes, the segment deteriorated from a few sensible comments on both sides of the issue, to bad reasoning and uninformed misstatements of the basic facts. More disappointing, it was the ostensibly pro-immigration side of McLaughlin panel that made the worst flubs.

The segment (which starts at 22:38 of the video below the jump) opened, promisingly, with a simple yet sound package on immigration, followed by some good remarks from panelist Clarence Page on the long-term economic benefits of immigration and a reasonable concern by panelist Pat Buchanan and host John McLaughlin that increased immigration could hurt wages for low-income Americans. So far so good—those arguments, along with cultural benefits and concerns, are the right issues to raise on both sides of the debate.

Unfortunately, Page and panelist Mort Zuckerman then took the discussion downhill. Here’s my transcription, beginning at the 26:45 mark:

MCLAUGHLIN: What about existing high-tech workers and engineers? Are their salaries being driven down?

PAGE: No…. Those are the kind of people we need right now, whether they come from overseas or here—skilled workers.

ZUCKERMAN: We have a huge shortage of people like that. We had 195,000 H-1B visas in the year 2000. It was cut down to 65,000. We have a tremendous shortage of these kinds of engineers in this country.

Forget, for the moment, Page’s dismissal of the Law of Supply. Focus simply on his and Zuckerman’s claim that there’s a “need right now” for high-skilled workers. If there is such a “huge shortage,” the employment and wage data don’t showing it. In the fall issue of Regulation (out in late September), labor economist Daniel Kuehn examines the argument for increasing high-skilled immigration. He writes:

The data suggest that occupations commonly filled by high-skilled visa-holders … failed to exhibit any of the major indicators of labor shortage… Inflation-adjusted programmer salaries as well as the salaries of a broader group of computer and IT occupations have remained essentially flat since the end of the dot-com bubble in the early 2000s, only increasing or decreasing by a few percentage points each year with no discernible upward trend. … In the period before the Great Recession, the ratio of unemployed workers to job openings in the PSTS [professional, scientific, and technical services] industry was relatively modest, averaging 0.8 from 2004 (after the recovery from the dot-com bust) to the end of 2007. After the Great Recession this ratio increased to 2.8 unemployed PSTS workers for every PSTS job opening. Not surprisingly, the recession has been associated with a loose labor market, but this is the opposite outcome of what we would expect in a workforce plagued with shortages.

Feds and the States Tag-Teaming on Corporate Welfare

In a recent op-ed for the Indianapolis Star I discussed the symbiotic relationship between federal and state government when it comes to doling out corporate welfare subsidies. The focus was primarily on Indiana, but the issue is a national concern. 

A good example is the $2 billion Shepherd’s Flat wind farm in Oregon that was largely financed with federal and state taxpayer support. Ted Sickinger, a reporter for the Oregonian, has done an excellent job of digging into details behind the project (see here then here then here) and it appears that Shepherd’s Flat was one big taxpayer handout. In fact, the Obama administration signed off on the federal government’s share of the subsidies even though it knew the project didn’t need any support from taxpayers: 

In 2010, Shepherd’s Flat attracted national notoriety for its subsidies. In a briefing memo for the President leaked to the media, Obama’s top advisors worried that the U.S. Department of Energy’s loan guarantee program was subsidizing projects that didn’t need it. 

Shepherd’s Flat was their case in point. 

Treasury Secretary Larry Summers, energy czar Carol Browner, and Vice President Joe Biden’s chief of staff Ron Klain said Shepherd’s Flat was “double-dipping” on $1.2 billion in federal and state subsidies – 65 percent of its projected cost. The incentives included a $500 million federal grant, $200 million in federal and state tax benefits from accelerated depreciation, $220 million in premium power prices attributed to state renewable energy mandates, and a $1 billion loan guarantee with a value of $300 million to the developers. 

They concluded that Caithness has “little skin in the game” – about 10 percent of the project’s cost – but stood to earn a 30 percent return on its investment. It also speculated that Shepherd’s Flat would likely go ahead without the federal loan guarantee because “the economics are favorable for wind investment given tax credits and state renewable energy standards.” 

Caithness Energy is the wind farm’s owner and operator. General Electric supplied the wind turbines (a $1.4 billion contract with Caithness) and part of the financing – financing backed by the federal loan guarantee. Both companies made sure they had Washington’s attention: 

Nationally, powerful interests were pushing in the same direction. A new president’s desire to build environmental credibility became an economic keystone to restore the collapsed economy. The Obama administration fast tracked loan guarantees to pump stimulus money into job-generating projects. Meanwhile, deep-pocketed companies with powerful lobbying arms were busy greasing the skids. 

The political action committee, employees and affiliates of General Electric - Shepherds Flat’s turbine supplier and an equity investor - gave more than a half million dollars to Obama’s 2008 campaign. The PACs for both GE and Caithness also have sprinkled sprinkled money among Oregon’s congressional delegation during the last five years, including Sens. Ron Wyden and Jeff Merkley, Reps. Earl Blumenauer, Greg Walden and Peter DeFazio. 

According to e-mails released by the House Oversight Committee investigating federal subsidies after the bankruptcy of solar startup Solyndra, the Obama administration pushed hard on incentives for Shepherds Flat. Months before officials at the U.S. Department of Energy approved a loan guarantee for the project, General Electric was being told it was a done deal. 

In April 2010, Kevin Walsh, managing director of GE’s renewables business, emailed the director of the U.S. DOE’s loan program: “We have been advised by the White House and other sources that we are likely to get the “green light” this week to move forward with the Shepherds Flat wind project…Les Gelber (a partner at Caithness Energy) and I will be in DC tomorrow and would like to stop by any time between noon and 2pm to briefly discuss.” 

The deal took more time to fully bake. Four months later, DOE Loan Program Office Credit Advisor Jim McCrea emailed a contractor: “Pressure is on real heavy on SF due to interest from VP.” 

Later that day, McCrea sent staff an all points bulletin to promptly provide answers on Shepherds Flat: “To do otherwise would leave us firmly on the political path and give agencies an opportunity to blame us when they are pressures (sic) to make decisions. As you all know, the pressures to make decisions on this transaction are high so speed is of the essence.” 

But the shenanigans don’t stop at the federal level. 

Even though the wind farm is clearly a single entity, it somehow managed to qualify for three separate $10 million state tax credits after the Oregon Department of Energy (ODOE) agreed with Caithness’s claim that Shepherd’s Flat was three separate entities. According to Sickinger, the ODOE’s decision was bogus: 

Yet limited and often non-responsive information about the review provided to The Oregonian suggests it was neither rigorous nor consistent with state rules governing tax credits. In its review, ODOE ignored clear evidence in its own files and additional records identified by The Oregonian that should have disqualified $20 million of the $30 million in tax credits. It failed to ask for contracts or other documentation to answer fundamental questions that state rules pose about ownership, financing, construction, operation and maintenance.

Instead, ODOE made assumptions, relied again on statements made by developers before the project was built, and reversed its own analysts’ earlier conclusions. Its review apparently tapped only one new source: a report by ODOE’s own staff for an entirely different purpose and largely irrelevant regarding tax credit eligibility. In the end, ODOE failed to apply its rules on separate and distinct facilities to Shepherd’s Flat. 

The result: “free” money for Caithness: 

The company, like many other tax credit recipients, received approval to sell the credit in exchange for cash. The pass-through option will net Caithness $20 million, but leave the state’s general fund out the full $30 million. 

There are more stories like the crony Shepherd’s Flat deal out there waiting to be uncovered. More state and local reporters should follow Sickinger’s example and start digging into these shady government-private collaborations that politicians and the financially-benefitting interests want the public to believe are so critical for “creating jobs.”     

Wall Street Journal Condemns OECD Proposal to Increase Business Fiscal Burdens with Global Tax Cartel

What’s the biggest fiscal problem facing the developed world?

To an objective observer, the answer is a rising burden of government spending, which is caused by poorly designed entitlement programs, growing levels of dependency, and unfavorable demographics. The combination of these factors helps to explain why almost all industrialized nations—as confirmed by BIS, OECD, and IMF data—face a very grim fiscal future.

If lawmakers want to avert widespread Greek-style fiscal chaos and economic suffering, this suggests genuine entitlement reform and other steps to control the growth of the public sector.

But you probably won’t be surprised to learn that politicians instead are concocting new ways of extracting more money from the economy’s productive sector.

They’ve already been busy raising personal income tax rates and increasing value-added tax burdens, but that’s apparently not sufficient for our greedy overlords.

Now they want higher taxes on business. The Organization for Economic Cooperation and Development, for instance, put together a “base erosion and profit shifting” plan at the behest of the high-tax governments that dominate and control the Paris-based bureaucracy.

What is this BEPS plan? In an editorial titled “Global Revenue Grab,” The Wall Street Journal explains that it’s a scheme to raise tax burdens on the business community:

After five years of failing to spur a robust economic recovery through spending and tax hikes, the world’s richest countries have hit upon a new idea that looks a lot like the old: International coordination to raise taxes on business. The Organization for Economic Cooperation and Development on Friday presented its action plan to combat what it calls “base erosion and profit shifting,” or BEPS. This is bureaucratese for not paying as much tax as government wishes you did. The plan bemoans the danger of “double non-taxation,” whatever that is, and even raises the specter of “global tax chaos” if this bogeyman called BEPS isn’t tamed. Don’t be fooled, because this is an attempt to limit corporate global tax competition and take more cash out of the private economy.

The Journal is spot on. This is merely the latest chapter in the OECD’s anti-tax competition crusade. The bureaucracy represents the interests of
high-tax governments that are seeking to impose higher tax burdens—a goal that will be easier to achieve if they can restrict the ability of taxpayers to benefit from better tax policy in other jurisdictions.

More specifically, the OECD basically wants a radical shift in international tax rules so that multinational companies are forced to declare more income in high-tax nations even though those firms have wisely structured their operations so that much of their income is earned in low-tax jurisdictions.