We’re Not in Kansas Anymore, Toto

The latest installment in the ongoing ”welfare for the wealthy” series:

Today’s Washington Post has an excellent front-page investigative story on the tens of billions of dollars in federal Department of Agriculture aid that go to projects that, well, aren’t so agricultural.

A snippet:

All told, the USDA has handed out more than $70 billion in grants, loans and loan guarantees since 2001 as part of its sprawling but little-known Rural Development program. More than half of that money has gone to metropolitan regions or communities within easy commuting distance of a midsize city, including beach resorts and suburban developments, a Washington Post investigation found.

More than three times as much money went to metropolitan areas with populations of 50,000 or more ($30.3 billion) as to poor or shrinking rural counties ($8.6 billion). Recreational or retirement communities alone got $8.8 billion.

Among the recipients were electric companies awarded almost $1 billion in low-interest loans to serve the booming suburbs of Atlanta and Tampa. Beach towns from Cape Cod to New Jersey to Florida collected federal money for water and sewer systems, town halls, and boardwalks. An Internet provider in Houston got $23 million in loans to wire affluent subdivisions, including one that boasts million-dollar houses and an equestrian center.

Great Moments in Government

In the private sector, there is a bottom-line incentive to obtain the best supplies at the cheapest price. In government bureaucracies, by contrast, there is little incentive to be frugal. Instead, the focus is on mindless paperwork and onerous regulation.

The process for obtaining paper towels on Capitol Hill is a good example. Even the Washington Post is unable to resist a tongue-in-cheek tone in an article about the search:

The office of the Architect of the Capitol, which is responsible for stocking paper towels in bathrooms throughout the Capitol complex, recently released its requirements for paper supplies to potential vendors.

…The specifications, written with the detail only your massive federal bureaucracy could provide, spell out eight requirements for towels fit for the Capitol. Among them: “C-fold paper towels provided shall have a minimum unfolded width of 10.25 inches, with a permissible variance of plus .25 or minus .50 inches, and maximum length of 14 inches. Each towel shall have a minimum area of 130 square inches. The folded width of each towel shall be 3 inches, with a permissible variance of plus .25 or minus .50 inches. The rate of absorption of paper towel material provided shall not be greater than 20 seconds for the absorption of 0.1 milliliter of water on any representative sample of paper towel as submitted. The color of the paper towel shall be white, with a minimum brightness rating of 70 when measured in accordance with the requirements of test method T-452 of the Technical Association of the Pulp and Paper Industries. The minimum thickness of 12 single plies of the paper towel material provided shall be 0.070 inch when measured under an applied pressure of 0.5 psig.”

And we won’t even get into the “average bursting strength” requirement of the two-ply toilet paper. 

The Sound of No ‘Peak’ Story Popping

Last week, in a Capitol Hill press conference featuring congressmen Roscoe Bartlett (R-Md.) and Tom Udall (D-N.M.),  the Government Accountability Office unveiled a new report on the looming catastrophe the United States faces from “peak oil.” With gas prices up and environmental stories popping in the press, Bartlett, Udall, and the GAO had to be thinking they’d have a hit on their hands.

So, if a GAO report falls on Capitol Hill and the media ignores it, does it count as news?

I can find no coverage of the press conference or the report in either the New York Times or the Washington Post. The only mention of it on either of those papers’ websites is in a transcript of an online chat session with Post politics reporter Lois Romano, wherein a reader asks if the Bartlett-Udall press conference will generate buzz.  Romano’s response (in essence): What press conference?

In fairness, the report did get a bit of play: the AP moved a short story on it and the WSJ briefed it. But no one is interviewed in either story, and the two pieces have the whiff of being quickly typed up from a press release. In other words, the media decided the report didn’t merit any real attention.

Peak oil, if you’ve never heard the term, is the theory that oil, as a finite resource, will grow increasingly difficult and expensive to extract over time. At some point, the global extraction rate will peak and then decline because of the increasing cost and difficulty.

The GAO report investigates the theory and comes up with three scintillating conclusions (I’m paraphrasing):

(1)  The world will indeed reach an oil peak — in the next few years, or the next 15 years, or the next 35 years, or the next 70 years, or sometime in the 22nd century.

(2)  It’s currently unclear how the United States will adjust to declining production rates when they do occur.

(3)  We’re all doomed, doomed I tellz ya’!

OK, (3) is hyperbolic — but just a tiny bit.

The notion of peak oil gained currency back in the early 1970s, a little more than a decade after geophysicist Marion King Hubbert correctly predicted that (Lower-48) U.S.-produced oil would peak around 1970. (Peak oil theory is often referred to as “Hubbert’s peak.”)

But Hubbert wasn’t the first person to come up with the concept. The notion dates at least to 1875 (yes, 1875) when John Strong Newberry claimed the oil peak was imminent. From then on, there’ve been many versions of the same refrain: The End (of oil) is nigh.

In respect to Newberry, Hubbert, Bartlett, Udall, and all the other “end is nigh” guys, there is validity to their theory. At some point in the future, the rate of global oil production will max out and then begin to decline. And it’s quite possible that we may not have cheap and easy substitutes for oil when that occurs, so there’ll be some significant changes for the world. But it’s also quite possible that we’ll develop substitutes for oil long before the cost of extraction, by itself, produces an oil peak; instead, the peak would result from our preferring — and thus shifting to — the substitutes. After all, that’s what has produced many previous natural resource shifts.

But let’s assume the former scenario plays out. Does that mean we are, indeed, doomed? And should we thus adopt the GAO report’s two policy recommendations that the U.S. government (1) carry out a massive global information-gathering effort to determine when the oil peak will occur, and (2) orchestrate a bold, unified national program to prepare for the peak oil transition to substitutes?

Let’s consider the policy recommendations first. Given the U.S. government’s track record on determining Iraq’s supply of weapons of mass destruction, how wise would it be to rely on the government to estimate the future supply of known and unknown sources of oil in Iraq, Iran, Saudi, Nigeria, Russia, Kuwait, Syria, Venezuela, China, Cuba, under the world’s oceans, etc.? How reliable would be government projections of the future technological developments that will increase human abilities to access that oil? Moreover, given that the U.S. government’s only great success in developing and broadly implementing an alternative energy program is nuclear power, do we really want it to be orchestrating a national program for a major transition to new energy sources? (I won’t mention the risk that the government, in carrying out these policies, would “fix” its findings and efforts around various politicians’ agendas.) If we are solely dependent on government to save us from the ruination of peak oil, then we probably are doomed.

So, does this mean that we should do nothing? Quite the opposite, quite the opposite — we should, and already are, acting boldly on energy. There are countless scientists, engineers, business executives, economists, and others, both in the United States and abroad, exploring and developing all sorts of transition strategies and technologies to substitute for oil. And there are countless scientists, engineers, business executives, and others, both in the United States and elsewhere, who are exploring and developing strategies and technologies to extend the life of the oil we have yet to extract. And we consumers have the best (and only necessary) incentive to utilize those developments when it makes sense to do so — we have to pay for the oil and alternative energies that we use. Those dynamics are far broader, more powerful, and more effective than any government Great (Energy) Leap Forward would be.

Bartlett, Udall, and the GAO are correct to be thinking about peak oil. But realizing that oil will peak one day is only the beginning of a thoughtful policy discussion, not the clinching demonstration that immediate government action is necessary. The only necessary (and sufficient) government energy policy is to allow consumers, innovators and entrepreneurs the degrees of freedom to make their own energy choices and to experience the costs and benefits of those choices.

Government is not the sole enlightened, rational actor on the planet. (Some might say the word “sole” should be removed from the previous sentence.) Somehow, we need to get the politicians to discover that.

Politicians — You Gotta Love ‘Em

Of what other group can it be said that you really can’t trust anything they say? Sure, Mary McCarthy said of Lillian Hellman that “every word she writes is a lie, including ‘and’ and ‘the.’ ” But she didn’t say that about writers as a group.

Mitt Romney’s newfound deep commitment to social conservatism has drawn lots of skepticism. But now he’s rewriting his life story in the fashion of lifelong Yankees fan Hillary Clinton and coal miners’ boy Joe Biden:

Former Massachusetts governor Mitt Romney (R) is taking some heat for not packing it.

Campaigning in New Hampshire this week, the candidate for the Republican presidential nomination told an audience that he is a “lifelong hunter,” according to the Associated Press. “I’ve been a hunter pretty much all my life,” the news service reported.

But the campaign now acknowledges that the former governor has been hunting twice in his life — once when he was young and lived on a ranch in Idaho, and more recently on a quail-hunting trip in Georgia with GOP donors.

Politicians — you gotta love ‘em.

High-Tech Welfare for High-Tech Billionaires

Voters in a New Mexico county appear to have approved a tax increase to build the nation’s first commercial spaceport. Two other counties will also hold tax referendums before the project can proceed. British billionaire Richard Branson and his company Virgin Galactic have signed a long-term lease to use the spaceport.

But why should the taxpayers of rural New Mexico be paying for facilities for billionaire space entrepreneurs? If the spaceport is going to be profitable, then businesses could pay for it. And even if it weren’t profitable, the space business has attracted the attention of a lot of people with a sense of adventure and billions of dollars, from Branson to Microsoft cofounder Paul Allen, the seventh richest man in America.

The argument to spend tax dollars on the spaceport is very similar to the argument for tax-funded stadiums and convention centers. Proponents say it will bring jobs and tax revenues to the three rural counties. But apparently it isn’t a sure enough thing for businesses to invest their own money.

Cato scholars have argued for years against corporate welfare. The spaceport is a classic example of corporate welfare, though in this case it might better be called billionaire welfare. It will transfer money from middle-class and working people to subsidize businesses and billionaires who won’t have to invest their own money — just like the typical stadium deal, paid for by average taxpayers to benefit millionaire players and billionaire owners.

At least in this case the voters get to decide, which rarely happens with stadium subsidies. The vote pitted “political, business and education leaders” against retirees and groups representing the poor.

“I’m not opposed to the spaceport, but I think it’s a terrible idea to tax poor people to pay for something that will be used by the rich,” said Oscar Vasquez Butler, a county commissioner who represents many of the unincorporated rural colonias where the poorest New Mexicans live, often without proper roads and water and sewage systems. “They tell us the spaceport will bring jobs to our people, but it all sounds very risky. The only thing we know for sure is that people will pay more taxes.”

Using Markets to Solve Water Shortages

South Florida is suffering a water shortage, but the shortage only exists because politicians are unwilling to allow market-based pricing. There is no shortage in the markets for air conditioners, automobiles, and haircuts, but that is because prices are allowed to rise and fall to reflect market conditions.

An article posted at TCSDaily.com offers a first-hand account of living with government-imposed price restrictions and draws an appropriate analogy to the price controls that caused gasoline shortages in the 1970s:

So here we are, in the spring of 2007, with rain below average, with a low lake level, little else in the way of reservoirs, and a water shortage. What is the response? Well, a rational response might be to price a scarce commodity such that people will use it only as they need it, and not frivolously. …Instead, we get the response of the local commissars. So, not allowing the market to work, and not allowing prices to provide signals to the participants, they have decided to run our lives for us.

…I live at an odd numbered address. That means that if I want to water my lawn, I can only do it on Monday, Wednesday and Saturday mornings, from four to eight AM. I can water my plants with a hose on the same days, but only between five and seven PM. My neighbors across the street, and behind my house on the next block, get Sunday, Tuesday and Thursday.

…Over thirty years ago, in the first OPEC oil embargo, the government, rather than allowing prices to rise to account for the reduced supply, told people when they could purchase gas based on the parity of their license plate — even one day, odd the next. My recollection was that this did nothing to alleviate the shortage — the lines remained. The problem was only solved when Nixon-era price controls on oil were lifted, the market was allowed to work, and oil prices eventually (and it didn’t take all that long) fell to historical lows.

…[H]ere’s a radical concept. How about pricing the commodity to the market? Maybe, if people had to pay more for water to water their lawn, they’d use less of it? Yes, I know that it’s hard to believe, but there really are some people out there who buy less of something if the price is higher.