Topic: Government and Politics

Another Indictment of the Bush-Obama Years

Here’s a depressing little blurb from the New York Times about the disparity between anemic job growth in the private sector and rising payrolls in the bureaucracy.

For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring. …For the decade, there was a net gain of 121,000 private sector jobs, according to the survey of employers conducted each month by the Bureau of Labor Statistics. In an economy with 109 million such jobs, that indicated an annual growth rate for the 10 years of 0.01 percent.

At some point, of course, the rising number of people dependent on government will overwhelm the shrinking number of people producing real wealth in the private sector. Nations such as France and Italy may be perilously close to that tipping point. Yet since politicians rarely think beyond the next election cycle, they have little incentive to arrest the downward slide. Instead, as the current health care debate demonstrates, they seek to add more fuel to the dependency fire.

Congress Passed TARP for What?

I thought it was to clear up so-called toxic assets.  But apparently no toxic assets have been cleared up.

Reports ABC News:

Signs abound that the worst of the recession is over: Stocks have been surging, the rate of job losses has slowed, so it seems that the economic apocalypse has been averted.

Government programs such as the $787 billion stimulus and last fall’s $700 billion Troubled Asset Relief Program have so far been successful, the Obama administration says.

Except, the Congressional Oversight Panel warns in its August report, TARP never actually bought any troubled assets.

“It is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today,” the panel’s report says.

Those bad assets are still there, rotting away on banks’ books, making banks reluctant to ratchet up lending, and maybe, the watchdog warns, paving the way for another financial meltdown.

Isn’t American government great?!  The executive branch stampedes Congress into authorizing the former to spend an enormous amount of money allegedly to save the nation from economic calamity.  The executive branch changes its mind and uses the money in other ways.  The original problem remains — while the taxpayers are  far poorer — presumably still threatening economic calamity.  Now what?

TARP II.  Don’t be surprised if the Obama administration eventually unveils a massive new program to clear up toxic assets.

The lesson?  Beware government officials promising to help you by seizing your money and distributing it to a gaggle of grasping individuals and companies.  Especially beware government officials demanding a second chance after wasting your money the first time!

About This Year’s $2 Trillion Deficit: Don’t Worry, Be Happy!

Certainly the House leadership believes, along with Bobby McFerrin:  “Don’t worry, be happy.”  What else to make of the plan to spend $550 million on another eight planes to fly legislators and their families around the world?

Reports the Wall Street Journal:

Bipartisan opposition is emerging in the Senate to a plan by House lawmakers to spend $550 million for additional passenger jets for senior government officials.The resistance to buying eight Gulfstream and Boeing planes comes as members of both chambers of Congress embark on the busiest month of the year for official overseas travel. The plan to upgrade the fleet of government jets, which was included in a broader defense-funding bill, has also sparked criticism from the Pentagon, which has said it doesn’t need half of the new jets.

Well, what’s a few hundred million dollars among friends?  I always say:  “it’s only money.”  In this case, “it’s only the taxpayers’ money,” which means that it doesn’t really count at all.

‘Cash for Clunkers’ Is a Lemon

Jerry Taylor and I published an op-ed criticizing the Cash for Clunkers program on Friday. We weren’t alone in our evaluation of the program.

Two interesting critical analyses of the Cash for Clunkers program were published over the weekend. The first by New York Times reporter Matt Wald examines the energy savings that would result from the program.  If a clunker traveling 12,000 miles at 16 miles per gallon (consuming 750 gallons per year) were traded in for a new car getting 25 mpg while traveling the same distance (480 gallons a year), the the trade-in would save the driver 270 gallons per year. Multiply that by the roughly 245,000 vehicles that had been traded in under the program as of last Friday, before Congress extended the program, and you get 1.6 million barrels  saved each year. That sounds great until you realize it’s only about two hours’ worth of our daily consumption, which is about 18.6 million barrels per day so far in 2009.  But the savings is probably much less than that because old cars are not driven 12,000 miles per year.

The second critical analysis, examining the program’s effect on carbon emissions, appeared as a figure in the Outlook section of this weekend’s Washington Post.  Over 10 years, the new cars will reduce emissions by 7 million metric tons, which is about 0.04% of the 16 billion metric tons that U.S. cars will produce over that time. That is, taxpayers will pay $147 per ton of CO2 reduction ($1.03 billion dollars divided by 7 million tons). In comparison, the economic literature estimates that the cost of the marginal damages of carbon emissions is between $15 and$50 per ton (see, e.g., this and this).

Tax Tax Tax at the Washington Post

A banner headline at the top of the Washington Post Sunday Metro section reads

It’s Time for Deeds to Step Up to the Plate on a Tax Increase

Columnist Robert McCartney, for years the top editor of the Metro section, says that Virginia’s Democratic gubernatorial nominee should “Propose to raise taxes to fix the roads. Yes, you read that correctly. Raise taxes.”

No doubt a lot of Republicans are hoping that Deeds will take the Post’s advice.

McCartney goes on to say that taxes must go up because (in bold) “The public sector needs to expand.” Because, you see, the infrastructure is failing in Virginia and also in D.C., and “Virginia’s roads clearly require extra revenue.”

Well, let’s see. Virginia’s state budget doubled between 1996 and 2006, from $17 billion to $34 billion. And the governor’s office estimated last December that the state would spend $37 billion in 2009 and $37.6 billion in 2010. Thanks to the recession, and to the state’s habit of spending during good years as if the party would never end, those numbers may drop slightly. But even with the current shortfalls, the budget’s gone up by $20 billion in the past 14 years, and they can’t find enough to fix the roads? What have they spent that extra $20 billion on?

Do Mr. McCartney, Mr. Deeds, and other tax-hikers ever think about prioritizing state spending? The Virginians who call themselves the Tertium Quids do. They urge the legislators to review the recommendations of the Wilder Commission and the Virginia Piglet Book to find some opportunities for savings.

But as usual, state governments spend with abandon while the money rolls in, and then when the lean years hit, they declare that they’ll need more money to teach math and fix the roads. It’s called the Washington Monument Syndrome — never cut the waste, the fat, the golf courses, the layers of bureaucracy, the fringes, the frills; threaten to cut the most basic or traditional or popular functions of government in order to pressure the voters to go along with a tax increase. Journalists shouldn’t play along.

Meanwhile, the Post’s Outlook section fronts a column by economist Gregory Clark declaring that we need to

Tax and Spend, or Face the Consequences

Specifically, he says, there will be no jobs for the stupid people in the new dynamic economy, so those of us with jobs are going to have to be taxed to the bone to support a huge class of nonworkers — or face revolution, I suppose. Which is even worse than congested highways.

Other Post writers have joined the tax-hike chorus recently: Steven Pearlstein, “Health Reform Threatened by Conservatives’ Anti-Tax Fantasy”; constant editorials on “the transportation funding problem”; Ruth Marcus on Obama’s need to display “political courage” by raising taxes so he can keep on spending; etc.

Alas, it is a constant frustration to the Post that, as Gregory Clark puts it, “The United States was founded, essentially, on resistance to taxes, and to this day, an aversion to the grasping hand of the state seems fundamental to the American psyche.”

Do Industrialized Countries Have a Responsibility for the Well-Being of Developing Nations?

Conor Clarke’s second comment at The Atlantic blog on the study, “What to Do About Climate Change,” was that:

Goklany’s estimates are based on global aggregates that hide the unequal distribution of the climate change burden. Yes yes, I know Manzi will say that’s not decisive: As long as global GDP is higher, we can redistribute our way out of the problem more effectively tomorrow than we can today. I would be more comfortable with that debate if I thought vast international restributions of income in the name of global equity were more likely tomorrow than they are today.

RESPONSE:

Global greenhouse gas controls will also have uneven consequences. First, cost of controls will vary from country to country, and sector to sector. Second, because the impacts of climate change will also vary from area to area, the benefits of control will necessarily be uneven. They will also vary over time. In fact, for some sectors, some areas may benefit even under the IPCC’s warmest scenario, at least through the foreseeable future.  For example, through at least 2085, climate change would increase the global population at risk of water stress (see Figure 2, here).  Therefore controlling climate change would exacerbate the global population at risk of water stress. So both the costs and benefits of climate change controls will also be distributed unevenly. Third, as noted here, implementing climate change controls that go beyond no-regret actions requires that today’s poorer generations  delay solving the real problems they face here and now and instead put resources into solving the hypothetical problems that may (or may not) confront tomorrow’s far wealthier — and technologically better-endowed — populations. Nothing equitable about that.

Conor Clarke’s third comment was:

… I’m suspicious of the ethical calculus that says we should not focus on one large global problem because larger global problems might exist. [Emphasis in the original.] That kind of moral math rarely corresponds to the political reality. (Do you think the average congressperson opposed to Waxman-Markey has trouble sleeping at night over new cases of malaria or global hunger?) Nor does it correspond to the historical responsibility: Industrialized nations are more responsible for the global problems created by climate change than the problems of population growth.

RESPONSE:

I am puzzled as to why Conor suggests we should focus on one large global problem — presumably climate change — when larger global problems might exist. Why should we focus on any problem when other larger ones are unresolved?

Nevertheless, Conor is correct, political decisions are rarely based on ethical calculus — the more’s the pity.

In any case, my paper doesn’t advocate twiddling our thumbs when it comes to climate change. Yes, it doesn’t advocate aggressive action (going beyond no-regret actions) to control climate change in the near to medium term. Instead it focuses on increasing adaptive capacity, technological prowess, and sustainable economic development which would enable society to respond to whatever problems it may face in the future, including climate change. As the paper shows, aggressive mitigation would not be the best approach to advance human well-being and deal with today’s urgent problems while advancing the ability to address tomorrow’s problems (see Table 5, here).

Specifically, it would reduce vulnerability to today’s urgent climate-sensitive problems — e.g., malaria, hunger, water stress, flooding, and other extreme events — that might be exacerbated by climate change.  Second, it would strengthen or develop the institutions needed to advance and/or reduce barriers to economic growth, human capital, and the propensity for technological change. Together, these two elements would improve both adaptive and mitigative capacities, as well as the prospects for sustainable economic development. Third, my paper advocates implementing no-regret mitigation measures now, while expanding future no-regret options through research and development of mitigation technologies. Fourth, it would let the market pick winners and losers among the various no-regret options. Fifth, it would continue research into the science, impacts and policies related to climate change, and monitoring of impacts to provide early warning of any “dangerous” impacts were they to be manifested.

Although Conor is probably correct in suggesting that politicians rarely undertake any ethical calculus in arriving at their decisions, many have nevertheless asserted that reducing greenhouse gas emissions is a moral imperative. See, e.g., here. But what is the basis for this claim?

These claims are never accompanied by any analysis that compares the magnitude and urgency of climate change versus other problems that humanity faces today or in the foreseeable future. The only such comparative analyses that have been undertaken are those done as part of Lomborg’s Copenhagen Consensus exercise and my Cato paper [and their prior versions, see, e.g., “Potential Consequences of Increasing Atmospheric CO2 Concentration Compared to Other Environmental Problems.” Technology 7S (2000): 189-213 and Copenhagen Consensus 2004.].  And these provide no support for the oft-repeated but unsubstantiated claim that climate change is a moral imperative given the many other real problems that exist today.

Finally, Conor raises the issue of historical responsibility of industrialized nations for global warming.  As Henry Shue, an Oxford ethicist, notes, “Calls for historical responsibility in the context of climate change are mainly calls for the acceptance of accountability for the full consequences of industrialization that relied on fossil fuels.” [Emphasis added.] But a fundamental premise behind these calls is that the “full consequences of industrialization” are negative. This is one more unsubstantiated claim.

In fact, by virtually any objective measure of human well-being — e.g., life expectancy; infant, child and maternal mortality; prevalence of hunger and malnutrition; child labor; job opportunities for women; educational attainment; income — humanity is far better off today that it was before the start of industrialization, due to the cycle of progress and economic surpluses fueled for the most part by fossil fuels. In addition, hunger and child labor are as low — and job opportunities for women as high — as they are today partly due to the direct effect of fossil fuel powered labor saving technology.  This is clearly true for industrialized countries. Figure 1 shows that life expectancy — perhaps the single most important indicator of human well-being — increased for the U.S through the 20th century, even as CO2 emissions, population, affluence, and material, metals, and organic chemical use increased. Matters have also improved in developing countries. And global life expectancy increased from 31 years in 1900 to 47 years in the early 1950s to 69 years today.

Goklany 

Notably, much of the improvement of human well-being in developing countries is due to the transfer of technology (including knowledge) from industrialized countries to developing countries. Moreover, a substantial share of the income of many developing countries comes directly or indirectly from trade, tourism, aid, and remittances from industrialized countries.  Consequently, developing countries are far ahead of today’s industrialized countries at equivalent levels of economic development.

For instance, as noted here (pp. 20-21):

in 2006, when GDP per capita for low income countries in PPP-adjusted terms was $1,327, their life expectancy was 60.4 years, a level that the U.S. first reached in 1921, when its GDP per capita was $5,300. Surprisingly even Sub-Saharan Africa, the world’s developmental laggard, is today ahead of where the U.S. used to be. In 2006, its per capita GDP was at the same level as the U.S. in 1820 but the U.S. did not reach Sub-Saharan Africa’s current infant mortality level until 1917 when, and life expectancy until 1902, by which time the U.S. was far wealthier. [All GDP figures are in terms of real 1990 dollars, adjusted for purchasing power.]

Thus, empirical data do not support the underlying premise that industrialization of today’s developed countries has caused net harm to developing countries.

So what is it that industrialized countries have a “historical responsibility” for?  For the diffusion of knowledge and technology that they developed and which helped developing countries improve their well-being, and for helping increase incomes in the latter through trade, aid, remittances, and tourism?

As noted at Reason on-line: “Who knows, in accounting for both benefits and damages [associated with greenhouse gas emissions], Bangladesh would not end up owing the United States!”

Government-Run Health Care Will Cost Much More than the Politicians Are Telling Us

As my Cato colleague Chris Edwards has documented, government programs and contracts inevitably cost much more than first projected. This pattern of inaccuracy exists for several reasons, one of which is that politicians have an incentive to lowball cost figures. But a big reason for the mistaken numbers is that government budget estimators do not understand the degree to which people will alter their behavior to get their hands on other people’s money.

I explained recently on Fox Business Network that this means any government-run health care scheme will be much more expensive than we are being told today.

 

Our friends at Reason TV address this issue in a very compelling three-minute video that looks at how government programs — especially for health care — have cost several times more than politicians claimed when the legislation was first adopted.