Nobody should have to choose between the two.

A funny thing happened in 2012, Congress actually passed a bill that intentionally cut subsidies. In this case subsidies given to homeowners under the National Flood Insurance Program (NFIP). The Biggert-Waters Act of 2012, if fully implemented, would eliminate almost half of the annual billion in estimated subsidies under the NFIP. Now before your opinion of Congress suddenly improves, its important to remember that subsidies reductions were done only because the NFIP had expired and some responsible members objected to extending the program without reform. Now that the program is up and running again, beach front homeowners and their friends in the real estate industry want their subsidies back.

The Senate is currently moving towards that goal. Not even wanting to bother with the normal process of hearings and a Committee vote, Senate Majority Leader Harry Reid has brought S.1926 directly to the floor for a vote, likely to occur this week. S.1926 would indefinitely delay the premium increases passed in Waters-Biggert, effectively hitting the taxpayer for $100s of millions annually. But hey there’s a close Senate race going on it Louisiana, so regular order can wait.

Now I have every sympathy for households facing rate increases under NFIP. They’ve been getting a subsidy for years and have grown used to it. Given the sometimes high cost of NFIP, it might not even feel like a subsidy. But then part of that is because almost a third of the premium income is pocketed by the insurance companies (at no risk to them I might add). The solution is to let those households either get out of NFIP altogether or to purchase private insurance, that would likely be cheaper given the inefficiencies of the NFIP. If one feels that maintaining flood coverage is vital for these households, yet they cannot bear the higher raters, another option would be a significantly higher deductible. Rolling back the premium reforms in Biggert-Waters is simply short-sighted and irresponsible, but then that’s nothing new for Washington.

In honor of School Choice Week, I’ll be answering questions on Facebook tomorrow (4:00pm, Eastern) about the evidence regarding free education markets. When I began studying education policy back in the early 1990s, parent-driven education markets were generally thought of as a new, radical and speculative adventure—uncharted waters where, heaven help us, “thar be monstars.” That was a mistaken view then, and it’s positively absurd now.

As I wrote in Market Education, The Unknown History, the education market of classical Athens, in the 5^th century BC, was the first time and place on Earth in which education reached beyond a tiny ruling elite. There was no government participation in education. Teachers competed in the town square to attract paying customers, families called the shots, and the city ended up building a thriving economy and the highest literacy rate in the ancient world. During their heyday, the Athenians invented democracy, most forms of Western literature, and some pretty enduring art and philosophy. Simultaneously, 100 miles away, Sparta established a highly organized system of public boarding schools. It’s legacy? One decent action movie and a name for high school football teams.

Over the next 2,500 years, markets continued to outshine state-run school systems in their ability to serve the needs of families, and they also reduced the social tensions created by state schooling. Near-universal literacy and elementary enrollment among the free population were achieved in the United States by the mid-19th century—before the rise of state school systems—chiefly through private and home schools financed by a combination of parent fees and philanthropy. Even the semi-public “district” schools of the early 19th century charged most parents fees, reserving free and subsidized places for the poor.

Granted, historical evidence is subject to interpretation and charges of selectivity, and so it might not be universally persuasive. But, since 1990, scores of within-country scientific studies have compared education systems ranging from state-run monopolies such as our public schools, to state-funded and regulated private schools, to truly market-like systems in which regulation is minimal and parents choose their schools, as well as paying at least some of the cost directly themselves. I reviewed that body of research a few years ago for the Journal of School Choice and found that it shows private schools tend to outperform state-run schools. More specifically, it shows that the freest and most market-like education systems have the most consistent advantage over state schooling.

There is no credible case against this body of research. I could not find a single study that found a public school system to be more efficient than a market system in terms of student achievement per dollar spent. There weren’t even any insignificant findings for this comparison. Every single study that looked at the efficiency question found statistically significant results favoring education markets over state schooling. It’s rare to see such clear results in the social sciences, but perhaps that’s because there are few areas of life that are still under the thrall of state-run monopolies.

Education markets, when coupled with a mechanism to ensure universal access (such as education tax credits) are a better way to serve our individual needs and to advance our shared ideals. Compulsion and state provision are not only unnecessary, they are counterproductive to our most cherished educational ideals.

Earlier this month I noted that despite sporadic attacks on the present Supreme Court as supposedly gripped by a result-oriented and pro-business majority, “much of its work [in business law] consists simply of trying to keep the law on a logically coherent and predictable course,” often by unanimous vote. Today we can add another example: a unanimous Court (with Justice Sotomayor withholding consent from one footnote) ruled that U.S. Steel does not owe workers back pay for time spent donning and doffing protective gear in a context where the union representing the workers had specifically bargained away any right for them to be paid for that time. 

If it seems bizarre for employees to claim a right to pay that their union has elected to waive during contract negotiations, read on. Like some others before it, this case illustrates a tension I described in my book The Excuse Factory between the old and mostly stagnant field of labor law — in which unions and their strike threat had been envisaged as the driving and potent force, and progress is measured by contracts for future higher pay — and the newer, perennially self-energizing employment law, in which private attorneys and their lawsuits act as the driving force, with the goal being big backward-looking settlements and the associated attorneys’ fees. So the first point about Sandifer v. U.S. Steel Corp. is that the steelworkers’ union was not the plaintiff, and that we shouldn’t assume unions necessarily wish suits of this kind to succeed.

Private employment-law attorneys do well enough from discrimination and harassment law, but their fastest-growing field of activity in recent years has been wage-and-hour law. Together with several associated statutes, the New Deal-era Fair Labor Standards Act (FLSA) creates many openings to sue in class or collective actions over large retroactive pots of pay for allegedly mischaracterized work — salary vs. hourly-wage, tipped vs. off-tip, employee vs. independent-contractor, and many others. That a particular company policy was well explained to workers at the time, and met with no objection, is no defense, since contracting around the rules is mostly not allowed. For example, an up-and-coming theme in wage-hour lawsuits is that employees should be able to claim retroactive on-the-clock pay for time spent away from the workplace using (or simply being available for) company cellphones, pagers, or email — a form of liability to which many employers have begun reacting by forbidding use of company cellphones or email outside work hours. 

While many of the dictates of wage-hour law are appallingly obscure — a quarter century ago Judge Frank Easterbrook eloquently decried the high cost of its tendency to leave the fact of liability uncertain until long after employers have acted — Congress had actually come very near addressing the question at issue in 1949 when it enacted a relatively narrow legislative fix declaring that it would be up to unions to decide whether to seek or waive pay for time spent “changing clothes.” 

This still left a crack of ambiguity wide enough to try to slip a suit through (the legal, if not the apparel, kind). Lawyers for Sandifer argued that the task of donning metal-tipped boots, flame-retardant jackets and leggings, and other steel-mill gear did not qualify as “changing clothing” because, among other reasons, many of the protective garments were donned on top of (rather than substituting for) street clothes. That meant, they argued, that the union had no power to bargain away the entitlement to the time, and Sandifer and others could seek back pay. The Court unanimously disagreed. It conceded that some types of technical gear, such as safety goggles and wearable electronics, will not qualify as “clothing,” but the overall activity of donning steel-mill protection still more closely resembles “changing clothes” than anything else. 

So there’s a bit of clarity for the law, at long last. Now if only Congress felt any responsibility to clarify — or better yet, move to repeal — the hundred other ambiguous demands of wage-hour law. 

For years people have been told to expect a dismal energy future. But because of rapid market innovation Americans now can look forward to an abundant energy future. The U.S. could even become a leading exporter—if Washington gets out of the way. 

An energy revolution currently is underway, with increasing supplies and falling prices. Even more could be done if Washington expanded access to federal lands and waters and freed producers to make best use of what they extract.

Arbitrary restrictions bedevil energy exports. For instance, natural gas licenses are granted automatically for nations with free trade agreements—in this case Canada and Mexico—but otherwise the review process is lengthy and approval is rare. Last year Energy Secretary Ernest Moniz announced that he was delaying decisions on a score of applications for political reasons even though the department had already concluded that such exports would benefit the U.S. economy. 

The ban on oil is even tougher, with only small amounts being shipped to Canada. Few licenses have been issued under the law’s “national interest” exception, and none since 2000.

As I point out in my latest Forbes online column:

Forbidding petroleum exports does not make additional oil available to Americans. Rather, the ban prevents energy companies from saving money. For instance, it would be cheaper to sell Alaskan crude to Asia and purchase more oil from Latin America.

The export ban also risks halting the increase in domestic energy production. U.S. oil production is at a quarter century high, but the greatest supply increases have been of crude oil that is “lighter” and “sweeter” than usual. Most domestic refineries, especially in the Gulf Coast, are designed to handle “heavy” oil. 

It is difficult to get the lighter oil to the right refineries, and there are not enough of them. Creating a domestic glut depresses prices in America, which means they have less incentive to invest more to produce more. 

If supplies exceed refining capacity, there will be no incentive for more production. Maria van der Hoeven, executive director of the International Energy Agency, similarly worried that the export ban “could threaten the economic viability of these new supplies, potentially stopping the boom in its tracks.” 

Supporters of the prohibition contend that it helps consumers and reduces foreign dependency. In fact, exporting natural gas and oil does not increase America’s dependence on foreign imports, but merely reshuffles global supplies. Today Americans are wasting money on extra transportation costs and failing to collect from higher-priced sales.

Lifting the export prohibition would have little impact on consumer prices. The ban most directly benefits refiners, who are exporting record amounts of products. Today a few lucky firms gain billions from an unfair and arbitrary subsidy courtesy Uncle Sam.

In fact, argued van der Hoeven, “American end-users do not benefit from this production windfall since U.S. retail product prices are still heavily influenced by international markets.” Energy remains a global marketplace. The best way to reduce consumer prices would be for Uncle Sam to reduce domestic barriers to production and allow international markets to function. Economists believe that unleashing U.S. exports would have a noticeable impact on the price of light, sweet crude.

Anyway, trying to artificially hold down prices always has been bad energy policy. For years below market prices encouraged consumption and discouraged production. 

Last month Secretary Muniz expressed the administration’s interest in relaxing the ban. Congress should eliminate energy export controls, or at least make licensing automatic. Second best would be to streamline the process, with a presumption in favor of granting licenses. At least the administration should approve applications before it using existing authority. 

The energy boom is a great boon for Americans. Innovative markets have erased decades of rhetoric about shortages and scarcity. America’s energy future will grow even brighter if only Uncle Sam stops getting in the way.

Until recently, President Obama’s December 4 “Remarks on Economic Mobility” were thought to preview his State of the Union address by defining “dangerous and growing inequality and lack of upward mobility” as “the defining challenge of our time.” 

That downbeat and divisive theme polled badly. As a result, the President is expected to recast the same story as “ladders to economic opportunity” (which is just another way of describing upward mobility). Obama’s passionately misinformed perceptions about rising inequality and falling mobility, however, are surely unchanged.

In his December 4 address, the President could find no official statistics to support his overblown claims about “growing inequality.” The Census Bureau and Congressional Budget Office report that the top 20 percent earns about half of all income. The CBO finds the top 20 percent received an average of 47.6 percent of all after-tax income since 1983, and roughly the same percentage (48.1) in 2010 and 2011. Yet the President insisted on claiming, “The top 10 percent [not the top 20 percent] no longer takes in one-third of our income — it now takes half.”

Unless the President thinks all affluent people are thieves, the top 10 percent never “take” any fraction of “our” income. On the contrary, they earn 100 percent of their own income.

Eschewing all official data, President Obama relied instead on estimates of pretax, pre-transfer income (which are clearly irrelevant to issues concerning taxes or transfers) from Thomas Piketty and Emmanuel Saez. Among many other problems with these figures, documented in my recent paper, growth in top incomes is exaggerated by including a rising share of business income formerly reported on corporate returns, and also by counting realized capital gains as income (in fact, selling assets does not make anyone richer). Lower incomes, by contrast, are grossly understated by completely excluding the huge and rising share of income from government transfer payments, now approaching $3 trillion a year.

“The combined trends of increased inequality and decreasing mobility,” said President Obama, “pose a fundamental threat to the American Dream, our way of life, and what we stand for.” As the title of his talk suggested, Obama was primarily focusing on decreasing mobility (since repackaged as decreasing opportunity), not increasing inequality per se. As he put it, “the problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years.”

Two major studies by U.S. Berkeley’s Emmanuel Saez, Harvard’s Raj Chetty and others, find the President entirely wrong about diminished mobility. Their newest paper shows that, “children entering the labor market today have the same chances of moving up in the income distribution relative to their parents as children born in the 1970s.” Moreover, a narrowing “gap in college attendance between children from the lowest- and highest- income families… suggests that mobility in the U.S. may be improving.” The authors conclude that, “if one defines mobility based on relative positions in the income distribution – e.g., a child’s prospects of rising from the bottom to the top quintile – then intergenerational mobility has remained unchanged in recent decades. If instead one defines mobility based on the probability that a child from a low-income family (e.g., the bottom 20%) reaches a fixed upper income threshold (e.g., $100,000), then mobility has increased…” As for the President’s rhetorical effort to link top income shares with declining mobility, the authors find “little or no correlation between mobility and… top 1% income shares – both across countries and across areas within the U.S.” The biggest actual barrier to upward mobility, in fact, turns out to be single parenthood.

President Obama’s revealing December 4 lecture relied on irrelevant pretax, pre-transfer estimates to assert that the top 10 percent have been “taking” half of “our” income, and he used no evidence whatsoever to assert that upward mobility has been declining.

The defining challenge of our time may be to discover ways to stop politicians from using made-up numbers to excuse destructive and demoralizing economic policies.

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 few weeks have now passed since the end of last year, giving enough time for various data-compiling (and “data-adusting”) agencies to get their numbers in order and to release the sad figures from 2013.

U.S. Annual Average Temperature

We pointed out, back in this post in mid-December, that there was an outside chance—if December were cold enough—that the average annual temperature for the U.S. in 2013 would fall below the 20th century average for the first time since 1996. Well, despite how cold it seemed in December, it turned out to not quite be cold enough to push the January-December 2013 temperature anomaly into negative territory. Figure 1 below shows the U.S. temperature history as compiled by the National Climatic Data Center from 1895 through 2013.

Figure 1. U.S. annual average temperature as compiled by the National Climatic Data Center, 1895–2013 (data: NCDC Climate at a Glance).

Please be advised that this history has been repeatedly “revised” to either make temperatures colder in the earlier years or warmer at the end. Not one “adjustment” has the opposite effect, a clear contravention of logic and probability. While the US has gotten slightly warmer in recent decades, compared to the early 20th century, so have the data themselves. It’s a fact that if you just take all the thousands of fairly evenly-spaced “official” weather stations around the country and average them up since 1895, that you won’t get much of a warming trend at all. Consequently a major and ongoing federal effort has been to try and cram these numbers into the box imposed by the theory that gives the government the most power—i.e., strong global warming.

What immediately stands out in 2013 is how exceptional the average temperature in 2012 (the warmest year in the record) really was. In fact, the recovery in 2013 from the lofty heights in 2012 was the largest year-over-year temperature decline in the complete 119 year record—an indication that 2012 was an outlier more so than “the new normal.”

Billion Dollar Weather Disasters

Each year the National Oceanic and Atmospheric Administration (NOAA) puts together a list of “billion dollar weather disasters.” NOAA started doing this a few years ago so as to try to paint a picture that human-caused global warming was leading to ever more weather-related “disasters” in the United States. We dutifully pointed out that NOAA just as well could compile a list of “billion dollar weather disasters averted by global warming,” but for some reason they don’t. Maybe the same reason that the raw temperature data is continually adjusted to show more warming.

Anyway, NOAA’s annual announcement is usually accompanied by a lot of press fanfare as the powers-that-be at NOAA revisit the damage done by severe weather events during the past year, usually ending the presser with some grand total that shows the past year was the worst one record, or very near to it.

This year, NOAA dropped the number in silence. You can guess the reason… even under their cockeyed accounting system (where, for example, no compensatory benefits occur when a damaging rainstorm also rescues the corn crop, as has happened several times in history) it turns out there were only seven billion-dollar weather disasters in 2013, down from 11 in 2102 and 14 in 2011. And most of 2013’s billion dollar disasters were near the low end of the cost scale, and in total, amounted to somewhere in the 15–20 billion dollar range (final numbers for damages are not in yet)—near the average of the past 34 years (beginning in 1980 when the NOAA compilation begins (Figure 2)). But, even this is an overestimate as the NOAA damage numbers do not factor out changes in population and wealth. If you divide the total damages from all billion-dollar weather events NOAA has complied since 1980 by the levelized GDP for each year, the 2013 total comes in at less than half the 34 year average and the overall apparent upwards trend largely disappears. While this method is less than ideal (e.g., it does not examine the changes in the local environment where the damages occurred), it provides a better indication of what has been going on than does the NOAA compilation.

Figure 2. Total annual damage from billion-dollar weather events, 1980–2013. The original (CPI-adjusted) data from NOAA is in red, while our GDP-adjusted data is in blue (data from NOAA).

U.S. Carbon Dioxide Emissions

We are fond to point out that while the current Administration insidiously plots ways of trying to force U.S. carbon dioxide emissions downward, carbon dioxide emissions have been dropping for the past 10 years or so largely as a result of factors other than direct emissions-limiting regulations (etc.) imposed by the federal government. The year 2013 was an exception to this trend. The Energy Information Agency reports that preliminary numbers indicate that carbon dioxide emissions in the U.S. rose by about 2% between 2012 and 2013 (Figure 3). This occurred largely as a result of rising natural gas prices which allowed coal to regain some market share of power production that it had lost to natural gas in recent years. But even with this small increase in emissions, the 2013 carbon dioxide emission were still more than 10% below the 2005 emissions total and still on target to meet the President’s goal of a 17% reduction from 2005 to 2020.

We reiterate our oft-posed question: Since emissions are largely dropping without a great deal of government intervention, why the continued push from the Administration for more regulations?

Figure 3. Energy related-carbon dioxide emission from the U.S., 2005–2013 (figure adapted from the EIA).

Global Temperatures

And we’d be remiss not to review the global temperature for 2013.

The liberal-leaning press reports the 2013 global temperature as the seventh (or fourth) highest on record, while the conservative-leaning press reports it as another year in which the global temperature has refused to rise (Figure 4).

Figure 4. TOP: Annual global surface temperature history, 1880–2013, as compiled by NOAA (blue) and NASA (red) (figure source, NOAA/NASA Joint Briefing). BOTTOM: Monthly global surface temperature anomalies, 1997–2013 (source: U.K. Hadley Center).

But all can agree that the temperatures in 2013 further extended the “pause” in the global surface temperature record-which now stands at some 17 years. A lot of people are at work trying to explain what’s behind the “pause,” but no matter the cause the longer that it continues, the further from reality climate model projections become (Figure 5).

Figure 5. Observed (blue) and projected (red) temperatures, 1980–2013. The projected temperatures are the annual mean of 106 climate runs (data source, Climate Explorer).

The most viable explanation that ties everything together is that the climate sensitivity-that is, how much the earth will warm in response to a doubling of the effective carbon dioxide concentration-is much larger in the climate models than it is in reality.

If this is indeed the case, and there is plenty of evidence to suggest that it is, than the urgency to “do something” about climate change is reduced and so too the level of support for federal regulations aimed at limiting carbon dioxide and thus limiting our energy choices.