Alternative is a word that always sounds cool. It means you’re different from everyone else and you aren’t afraid to embrace it. It means you have another way to accomplish the same thing. It means you’ve broken out of the same old thinking and you’re living a new paradigm. Isn’t that the American dream? So when we hear discussion of alternative fuels, it just seems like the next evolution in the world of energy. But is this sentiment genuine?
Alternatives should have some value, relative to the norm. For example, disinfectant spray is an alternative to bleach if you want to kill germs. Bleach works better in most cases, but the spray is safer and easier to use. So you can trade off one advantage for another. If, however, one trades the norm for a so-called alternative that has no advantage to weigh out, it’s not really an alternative. This would be like eliminating bleach from your disinfecting regimen and replacing it with vanilla ice cream. Sure it’s different, but it’s not really a viable alternative. The same is true of many proposals to replace petroleum.
There are a few things to bear in mind when considering any discussion of fuels, energy, and transportation. Energy is energy, regardless of its source or form. So, whether one is considering petroleum, electricity, biofuels, or fuel cell technology, the same amount of energy is required to perform the same amount of work. So, for our purposes, let’s compare apples to apples and see the comparative benefits. This topic will take up more than one article, but we’ll keep the methodology as consistent as we can throughout the series.
We’ll start with the most popular alternative out there now – corn ethanol. This is a biofuel, made by fermenting corn. The most common ethanol fuel is E85, which is 85% ethanol and 15% gasoline. This is considered the “summer blend”, while E70 (70% ethanol) is the winter blend. It is touted as a prime and immediate petroleum alternative because it can be derived from domestic sources, it is renewable, and current automotive technology will support it, as seen in flex-fuel vehicles (FFVs). These arguments sound good, but what is the rest of the story?
The first thing to note about ethanol is that is has a lower energy content than gasoline. According to the Department of Energy, a given volume of ethanol contains less than 70% the heat energy of the same volume of gasoline. Put another way, to get the same heat energy as a gallon of gas, one would have to burn about a gallon and a half of ethanol. This speaks to a decline in fuel economy in the same engine. The EPA says that FFVs get an average of 25-30% lower fuel mileage when running on E85 than on gasoline.
The translation is that an FFV will burn 25-30% more fuel when that fuel is E85. All things being equal, one would expect 25-30% more emissions with E85. The EPA asserts that E85 releases 15-20% less greenhouse gases (GHGs) than gasoline. Even so, the reduced emissions balanced with the increased consumption means more emissions overall. Furthermore, the 15-20% figure includes the refining and distribution processes. Since there are significant GHG savings in the fact that ethanol can be sourced locally and that photosynthesis absorbs GHGs, the emissions released at the vehicle are likely even higher.
The question of ethanol’s renewability is somewhat outside my expertise, but some sources indicate that corn cannot be grown indefinitely on the same land. The crop depletes certain minerals and nutrients from the soil and, even with good crop rotation strategies, arrives at a point of diminishing return. I will research this further and include my findings in a follow-up. Whatever the case, agricultural capacity is at a premium, and devoting this capacity to biofuels has already increased food prices around the world. And, while the decision between producing corn for fuel or corn for food comes down to simple economics, the amount of corn needed for 25 gallons of ethanol would provide the average person enough calories for a year.
Finally, instead of fuel economy, one must look to financial economy. Provided one has an FFV and can purchase E85 (there are less than 2000 E85 pumps open to the public in the US, with a literal majority of those in a few Midwestern states), she will find it selling for a national average of $3.02 per gallon. Compared with the current national average for a gallon of gasoline – $3.70 – this is a savings of 18.3% (see e85prices.com). To go 1000 miles in a mid-sized sedan, she would need 50 gallons of gasoline ($185) or 63 gallons of E85 ($190.26). So the prices are comparable, right? Wrong. The price at the pump for E85 is after a government subsidy program has taken its toll. According to The Economist, US ethanol subsidies are equal to $1.90 per gallon. Take that into account, and the price for a consumer (after all, federal subsidies are paid by the American taxpayer) to fuel 1000 miles’ worth of driving rises to a blistering $309.96. That’s an increase of over two thirds over the price of gasoline. It would be like paying $6.20 a gallon for gas.
With these facts in mind, it is clear that E85 is not the answer. It cannot match gasoline in cost, emissions, or fuel economy. The sustainability is questionable, and the impact of food vs. fuel debates cannot be overlooked. Clearly, petroleum supplies are finite and the transition to renewables is inevitable. Still, this transition must be made to a genuine alternative, which ethanol is not.
Saturday, September 20, 2008
Wednesday, September 17, 2008
The Fundamentals of Our Economy
John McCain took heat this week for saying the fundamentals of our economy are strong. In light of the drop in the stock market Monday and the ongoing crises with Fannie Mae, Freddie Mac, and a few large financial services firms, Barack Obama seized on the opportunity to portray McCain as out-of-touch. The upshot of Obama's comments are that the fundamentals of our economy are not strong.
That's an interesting sentiment from Senator Obama, who has repeatedly called for raising capital gains taxes, implying that stocks are solely a rich man's game. Yet, when the stock market dips, suddenly this is a crisis for everyone in America. Which is it, Senator Obama?
As for the mortgage issues, the Democrats need look no further than their own mirror to see where much is this problem came from. If the push for urban redevelopment with little to no oversight leads a private company to fail, what makes us think the same company with a blank check from the American taxpayer will ever be solvent?
And as for our economy, the potential loss of AIG and others should be seen as a serious issue, since these companies employ thousands and have ongoing obligations. But to equate this with a weakness in the general state of our economy is ridiculous. Are we to believe that losing a few firms (which is by no means a certainty at this point) will plunge the US into the Third World? That unemployment will rise from its current level of 6.1% to rival France (7.5%), Germany (8.4%), or the world average (30%)? That profitable businesses and organizations will grind to a halt? That entrepreneurs will stay home? That tomorrow I'll lose the ability to buy gas, food, clothes, and other necessary items? That our very system for buying and selling goods will cease and grow cold?
I think not. The strength of our economy even in slow times shows that the fundamentals are just fine. And to accept analysis from Senator Obama - who proves repeatedly that he has no grasp of economic principles - is as daunting as accepting his plans for economic growth. We can't afford to do either.
That's an interesting sentiment from Senator Obama, who has repeatedly called for raising capital gains taxes, implying that stocks are solely a rich man's game. Yet, when the stock market dips, suddenly this is a crisis for everyone in America. Which is it, Senator Obama?
As for the mortgage issues, the Democrats need look no further than their own mirror to see where much is this problem came from. If the push for urban redevelopment with little to no oversight leads a private company to fail, what makes us think the same company with a blank check from the American taxpayer will ever be solvent?
And as for our economy, the potential loss of AIG and others should be seen as a serious issue, since these companies employ thousands and have ongoing obligations. But to equate this with a weakness in the general state of our economy is ridiculous. Are we to believe that losing a few firms (which is by no means a certainty at this point) will plunge the US into the Third World? That unemployment will rise from its current level of 6.1% to rival France (7.5%), Germany (8.4%), or the world average (30%)? That profitable businesses and organizations will grind to a halt? That entrepreneurs will stay home? That tomorrow I'll lose the ability to buy gas, food, clothes, and other necessary items? That our very system for buying and selling goods will cease and grow cold?
I think not. The strength of our economy even in slow times shows that the fundamentals are just fine. And to accept analysis from Senator Obama - who proves repeatedly that he has no grasp of economic principles - is as daunting as accepting his plans for economic growth. We can't afford to do either.
Wednesday, September 10, 2008
Conservative AND Christian
Harry Reid is my senator. He's my representative in Washington. Not because I asked him to be; in fact, I asked him not to be. Hilariously, his 2006 campaign billboard said "Harry Reid - Independent Like Nevada". Since when is the guy who stands to become the Democratic Leader in the US Senate independent? But I digress. In 2001, Senator Reid gave the following quote: "I think it is much easier to be a good member of the Church and a Democrat than a good member of the Church and a Republican." Senator Reid is a Mormon, and, despite all propaganda to the contrary, that's not the same as being a Christian. Still, his quote is timely, since I've heard the same sentiment from liberal Christians - that the liberal ideology is more in line with the Bible. Is it true?
In order to answer that question honestly, we have to define "liberal ideology". One could easily dismiss a claim like Senator Reid's by saying the greatest example of liberalism in the world is communism, which traditionally eschews all religious exercise. But I will concede that's not what Senator Reid or my liberal friends meant. By the same token, I'll avoid the obvious arguments that involve school prayer, the display of the Ten Commandments in public buildings, publicly funded Christmas displays - these are not the argument either. The discussion, in order to have any value, has to relate to the secular.
Probably the greatest secular issue dividing the Left and the Right is taxation. Democrats tend to favor higher taxes to support more government programs. According to Senator Reid's sentiments, these programs are the biggest reason a man of faith would vote Democrat, as they benefit the "least of these" as described by Jesus in Matthew 25. And, after all, Jesus told his disciples in Matthew 22 that they should pay taxes - "Then render to Caesar the things that are Caesar's; and to God the things that are God's." On the surface, it's hard to argue against this chain of thinking. Still, a little scrutiny (as we've seen time and time again) might tell a different story.
Confiscatory tax laws may seem like a violation of the Commandment against stealing, but Jesus' words clearly uphold a government's right to tax. But what of those receiving government money? The government pays subsidies to able-bodied men and women not to work. And many of these subsidies are not limited to a certain timeframe or situation. They may not even be to the people you would envision. We can all conjure up ideas of welfare babies and public funding of free housing projects. But what about farm subsidies? Urban redevelopment? Social security benefits that punish recipients for earning too much on a job? Post-Kelo eminent domain transfers? Clearly, the government gives out a lot of money every year to benefit people who are not working for it. Ephesians 4:28 is clear that one should "work, doing something useful with his own hands, that he may have something to share with those in need."
Beyond the simple command to work and share benefits with those in need, one also must consider the stewardship issue. Throughout the New Testament, there are exhortations to be a good steward of the money, time, talents, and resources entrusted to the believer by God. This means that resources must be put to the best use. If there were a needy person, the most efficient way to put my resources to use for his benefit would be to let him move in with me. Slightly less efficient - but sometimes more practical - would be to give him money to use for his needs. Either way, nothing is lost in the transfer. A step removed from this would be to give money to a local charity organization or church. The organization would then cover its own expenses and dole the money out to help needy folks in my community. So a little money is lost in the transaction, but the organization would likely have a better mechanism to help the needy, so the arrangement still works well. How far removed is it from those options to get involved with a federal bureaucracy that is far from my community and has no incentive to trim expenses? To count on a distant government to force me into paying into a system that is inherently ineffective and corruptible seems like the opposite of good stewardship - particularly when there are real and effective non-profit organizations in every community in America.
Could it be that this drive to tax our way out of poverty is a form of slacktivism? A way of trying to attack a problem without really getting one's hands dirty? Just like an Internet petition or a phony donation plan for every forwarded e-mail, this solution hasn't worked yet. But what about the opposite? What could be accomplished by lowering taxes? Lowering taxes puts more money in people's pockets. Consider the GDP (gross domestic product) model of measuring economic growth. The four components of GDP - gross domestic product - are consumption (what consumers spend), investment (money spent to build capacity in a business), government spending, and net exports (exports minus imports). Liberals tend to seize on the third component, government spending, and use this as a rationalization for taxing, since a government would have to raise the money in order to spend it. But think of it like this: government spending is the opposite of taxation. Lower taxes are like government spending, in the same way that a penny saved is a penny earned. In fact, a penny not sent to the government to spend doesn't have to pay for administrative costs that will send it back into the community. On the other hand, increased consumption leads to economic growth, which is of far more benefit to the needy than a government check in the mail.
To look at it from another perspective, when people have more money in their pockets, they either spend it or save it. Spending it immediately benefits the business who receives this money. This benefit, when aggregated over the whole economy, leads to businesses expanding to keep up with demand. This means more people can find jobs, since more jobs are available. Saving it immediately benefits the savings institution. When a bank has more money on deposit, it has more flexibility to loan it out. A stronger money supply in the lending market means increased home ownership, better ability to expand business, and stronger figures in the durable goods markets. Again, these benefits flow to businesses, consumers, wealthy, and poor. That's why President Reagan called this phenomenon "trickle-down economics". He cut the top marginal income tax rates from some 70% to 28% by 1986. During this time, the economy, weak after the stag-flation of the Carter years, rebounded to the point that tax revenues actually increased. This economic framework was a large part of the prosperity during the Clinton years.
Finally, and this has been touched on already, there are plenty of opportunities to give and share personal wealth with those in need. Private charities - both secular and religious - are in a position to do a far more complete job than a simple check in the mail. We have a local organization that offers temporary housing, food service, counseling, job help, transportation, and many other services to the poor in our community. This organization reaches thousands, based on the financial support of donors. No one is forced to give anything, and yet the needy are served. Incidentally, Syracuse University Professor Arthur Brooks, said of charitable giving, "When you look at the data, it turns out the conservatives give about 30 percent more. And incidentally, conservative-headed families make slightly less money." Brooks gave this quote after completing the study detailed in his book Who Really Cares.
Don't believe it? Ask Senator Joe Biden why, despite being a Democrat and a Roman Catholic to boot, he's given less than a quarter of one percent of his income to charity for the past ten years. The national average is 2%, and Biden was certainly above-average in his income level.
So, my liberal friends, put away the tired class-ism. Lay aside the misguided - if well-intentioned - socialist agenda. It's easy to call for the "rich" to be taxed more when, as the director for the non-partisan Tax Policy Center puts it, "95% of people think they are middle class." It's easy to push for the government to force others to use their resources to solve social problems. It's easy to promote stereotypes of uncaring conservatives while making yourselves out to be the saviors of the poor. But maybe, just maybe, it's better to look in the mirror, take one's hard-earned money or precious time, and put it toward real help for the needy. Real help - not a feel-good moment or a money-toss. Let the government fill the role it should fill. Let's work so we, too, can have something to share with the needy. That's my responsibility as a man of God.
In order to answer that question honestly, we have to define "liberal ideology". One could easily dismiss a claim like Senator Reid's by saying the greatest example of liberalism in the world is communism, which traditionally eschews all religious exercise. But I will concede that's not what Senator Reid or my liberal friends meant. By the same token, I'll avoid the obvious arguments that involve school prayer, the display of the Ten Commandments in public buildings, publicly funded Christmas displays - these are not the argument either. The discussion, in order to have any value, has to relate to the secular.
Probably the greatest secular issue dividing the Left and the Right is taxation. Democrats tend to favor higher taxes to support more government programs. According to Senator Reid's sentiments, these programs are the biggest reason a man of faith would vote Democrat, as they benefit the "least of these" as described by Jesus in Matthew 25. And, after all, Jesus told his disciples in Matthew 22 that they should pay taxes - "Then render to Caesar the things that are Caesar's; and to God the things that are God's." On the surface, it's hard to argue against this chain of thinking. Still, a little scrutiny (as we've seen time and time again) might tell a different story.
Confiscatory tax laws may seem like a violation of the Commandment against stealing, but Jesus' words clearly uphold a government's right to tax. But what of those receiving government money? The government pays subsidies to able-bodied men and women not to work. And many of these subsidies are not limited to a certain timeframe or situation. They may not even be to the people you would envision. We can all conjure up ideas of welfare babies and public funding of free housing projects. But what about farm subsidies? Urban redevelopment? Social security benefits that punish recipients for earning too much on a job? Post-Kelo eminent domain transfers? Clearly, the government gives out a lot of money every year to benefit people who are not working for it. Ephesians 4:28 is clear that one should "work, doing something useful with his own hands, that he may have something to share with those in need."
Beyond the simple command to work and share benefits with those in need, one also must consider the stewardship issue. Throughout the New Testament, there are exhortations to be a good steward of the money, time, talents, and resources entrusted to the believer by God. This means that resources must be put to the best use. If there were a needy person, the most efficient way to put my resources to use for his benefit would be to let him move in with me. Slightly less efficient - but sometimes more practical - would be to give him money to use for his needs. Either way, nothing is lost in the transfer. A step removed from this would be to give money to a local charity organization or church. The organization would then cover its own expenses and dole the money out to help needy folks in my community. So a little money is lost in the transaction, but the organization would likely have a better mechanism to help the needy, so the arrangement still works well. How far removed is it from those options to get involved with a federal bureaucracy that is far from my community and has no incentive to trim expenses? To count on a distant government to force me into paying into a system that is inherently ineffective and corruptible seems like the opposite of good stewardship - particularly when there are real and effective non-profit organizations in every community in America.
Could it be that this drive to tax our way out of poverty is a form of slacktivism? A way of trying to attack a problem without really getting one's hands dirty? Just like an Internet petition or a phony donation plan for every forwarded e-mail, this solution hasn't worked yet. But what about the opposite? What could be accomplished by lowering taxes? Lowering taxes puts more money in people's pockets. Consider the GDP (gross domestic product) model of measuring economic growth. The four components of GDP - gross domestic product - are consumption (what consumers spend), investment (money spent to build capacity in a business), government spending, and net exports (exports minus imports). Liberals tend to seize on the third component, government spending, and use this as a rationalization for taxing, since a government would have to raise the money in order to spend it. But think of it like this: government spending is the opposite of taxation. Lower taxes are like government spending, in the same way that a penny saved is a penny earned. In fact, a penny not sent to the government to spend doesn't have to pay for administrative costs that will send it back into the community. On the other hand, increased consumption leads to economic growth, which is of far more benefit to the needy than a government check in the mail.
To look at it from another perspective, when people have more money in their pockets, they either spend it or save it. Spending it immediately benefits the business who receives this money. This benefit, when aggregated over the whole economy, leads to businesses expanding to keep up with demand. This means more people can find jobs, since more jobs are available. Saving it immediately benefits the savings institution. When a bank has more money on deposit, it has more flexibility to loan it out. A stronger money supply in the lending market means increased home ownership, better ability to expand business, and stronger figures in the durable goods markets. Again, these benefits flow to businesses, consumers, wealthy, and poor. That's why President Reagan called this phenomenon "trickle-down economics". He cut the top marginal income tax rates from some 70% to 28% by 1986. During this time, the economy, weak after the stag-flation of the Carter years, rebounded to the point that tax revenues actually increased. This economic framework was a large part of the prosperity during the Clinton years.
Finally, and this has been touched on already, there are plenty of opportunities to give and share personal wealth with those in need. Private charities - both secular and religious - are in a position to do a far more complete job than a simple check in the mail. We have a local organization that offers temporary housing, food service, counseling, job help, transportation, and many other services to the poor in our community. This organization reaches thousands, based on the financial support of donors. No one is forced to give anything, and yet the needy are served. Incidentally, Syracuse University Professor Arthur Brooks, said of charitable giving, "When you look at the data, it turns out the conservatives give about 30 percent more. And incidentally, conservative-headed families make slightly less money." Brooks gave this quote after completing the study detailed in his book Who Really Cares.
Don't believe it? Ask Senator Joe Biden why, despite being a Democrat and a Roman Catholic to boot, he's given less than a quarter of one percent of his income to charity for the past ten years. The national average is 2%, and Biden was certainly above-average in his income level.
So, my liberal friends, put away the tired class-ism. Lay aside the misguided - if well-intentioned - socialist agenda. It's easy to call for the "rich" to be taxed more when, as the director for the non-partisan Tax Policy Center puts it, "95% of people think they are middle class." It's easy to push for the government to force others to use their resources to solve social problems. It's easy to promote stereotypes of uncaring conservatives while making yourselves out to be the saviors of the poor. But maybe, just maybe, it's better to look in the mirror, take one's hard-earned money or precious time, and put it toward real help for the needy. Real help - not a feel-good moment or a money-toss. Let the government fill the role it should fill. Let's work so we, too, can have something to share with the needy. That's my responsibility as a man of God.
Free Trade
A few months back, John McCain talked free trade with people in Ohio. Didn't Senator McCain know, you can't talk free trade in Ohio? It's bad politics. The Left has claimed free trade as an enemy to life, liberty, and all we hold dear. Never mind the fact that this is the same Left that, under President Clinton, cheered the passage of NAFTA back in 1993. The steady drum beat of the Left is now that free trade is bad because it takes jobs away from Americans and, if you believe Senator Obama, causes them to cling to religion, guns, and antipathy toward those who are different. But is free trade such a bad thing?
When we're discussing economics, we have to take the discussion back to supply and demand. Competitive markets mean that people will buy at the best personal value. In other words, if two firms are selling identical products but one is offering it at a lower price, that company will sell more units. The competition will force the other company either to lower prices and compete or go out of business. So, if a consumer can buy a DVD player, a pair of shoes, or a laptop computer for less money, why wouldn't she? If the quality is good, she would buy, even if it came from another country. That is, until governments attempt to tie the invisible hand up.
Tariffs, a tax imposed on imported goods, have always been a sticky issue. The Smoot-Hawley Tariff Act of 1930 was supposed to protect American jobs by charging a higher tax on imported goods. However, the other nations of the world retaliated with their own tariffs, making it more difficult for US goods to be sold abroad. This cut US exports in half and was a major cause of the Great Depression. In fact, since talk of the Act was ongoing for months prior, there are those who speculate it contributed to the Great Crash of '29. Whatever the case, tariffs attempt to protect one group of sellers by artificially inflating the prices of another. Consumers are punished with higher prices, foreign sellers are punished with less business, and the domestic sellers are exempted from the forces of competition. Without competition to drive down prices, there is no incentive to innovate, reduce costs, or change for the better. While this may help them in the short run, competition catches up over time.
Innovation is really the key to the power of free trade. If the US economy were not so vibrant and capable of imagining new industries, free trade could be a detriment. But the American tradition is finding new ways to run, and this is part of our national identity today. Let's look at an example. There is really no such thing as an American television set. Way back in 1974, Motorola sold off the manufacturing wing for the old Quasar TV group. These TVs were still marketed as Quasars, but they were completely manufactured by Matsushita in Japan. In this way, an entire industry was outsourced. According to the stereotypical view of the Left, there should be throngs of unemployed TV manufacturing employees. But, mysteriously, there aren't. Why is this? Because as jobs are outsourced and industries go offshore, new jobs and new industries are created. The dynamic nature of the American economy is what has kept it strong through the years. One can see this individualism and innovative spirit as far back as the 1790s (see USS Constitution). The model of outsourcing has repeated itself time and time again. American ingenuity develops new industry, industry thrives in US for a while, and then the industry is picked up in places where operating costs are lower. Then the cycle starts over again. And again, and again, and again.
While we're talking trade in a global market, it makes sense to bring up outsourcing as well, since they have a lot of the same effects and motivations. John Kerry in 2004 and Barack Obama this year both promised to take away tax incentives for companies who move jobs offshore. This raises two questions in my mind. First, what direct incentives are offered by the IRS to build a plant in Indonesia? Is there a box to check on a corporate tax return for a job outsourcing deduction, exemption, or tax credit? If there is, I haven't been able to find any information on it. Secondly, will raising taxes on corporate profits provide more or less incentive for companies to earn money outside the US? Raising taxes in itself (which Obama promised to do) creates the opposite incentive.
The other argument against offshoring is that it exploits the Third World as US companies hire local workers for a fraction of what they would be paid in the US. This thinking is absurd, because it fails to take into account local cost of living standards. We see this phenomenon domestically, where firms are moving out of high-rent areas and settling in places where wages, rent, utilities, and transportation are less expensive. This is probably the biggest source of growth for the Reno area, as companies have moved out of the Bay Area in favor of a better tax structure, plentiful labor, cheap real estate, and access to good distribution. Moving to countries with lower costs is just an extension of this idea. Furthermore, when a US company opens a plant in the Third World, it provides jobs for the poorest of poor who often have no opportunity to find work. Yes, of course there are potential chances for abuse, bad working conditions, and other undesirable situations. But a great many companies, large and small, operate businesses in Third World countries that provide a valuable service to the local people.
I suppose the danger of free trade comes when the tax and political environment are not favorable to the development of new industries and growth in existing ones. When taxes are high, businesses large and small have less operating capital to invest in new ideas and products. For those who have never run a business, it's no small thing to come up with something new. It requires creativity, yes, but also analysis of the market, development of supply chains, and sufficient capital to cover operating losses until it takes off. It's a risk, and less capital available - to say nothing of reduced buying power for an over-taxed consumer - means that risk is less likely to be taken.
Here's an example of the misguided thinking of the Left where free trade is concerned. The Colombian Trade Protection Agreement would allow for free trade between the US and Colombia. The Democrat-controlled US Legislature is blocking this treaty from coming to a vote, saying it will harm US workers. While this posturing makes for great soundbites on the six o'clock news, it is, as Shakespeare said, "sound and fury, signifying nothing." The idea is that, by signing such an agreement, the US would have low-price Colombian merchandise flooding the market and putting good American working folks out of work. While that is a poignant image, it just doesn't hold up to scrutiny. First, many Colombian products already enter the US market duty-free, thanks to the Andean Trade Promotion and Drug Eradication Act (ATPDEA). This deal was made to help encourage South American countries to transition away from the sale of narcotics by strengthening other industries. However, the ATPDEA is one-sided. It allows Colombian product into the US duty-free, but US goods are still subject to tariff when sold in Colombia. There are many mining operations in South America, and the US heavy equipment industry sells a lot of tractors, trucks, and other machinery into countries like Colombia. By signing a free trade agreement, it would allow companies like Case and Caterpillar to have a strong advantage over companies like Mitsubishi and Komatsu. In my estimation, that helps the American worker. Yet the Democrat-controlled Congress will not vote on the Agreement, despite the fact it has been in their hands since April of 2007.
In essence, free trade is a good thing. It's good for the consumer, because she can buy products at the lowest possible price and is not punished for where the goods come from. It's good for exporters, because free trade agreements mean that US goods sold in other countries can be brought in without adding burdensome tariffs. The risk of US industries being buried by foreign competition over time is legitimate. However, the strength and innovation of the market has overcome this countless times, and will continue to do so as long as the environment for job creation is preserved. So, rather than spending time fighting the iron horse of the free market, we should be tuning up the engine of our economy by removing obstacles to developing new ideas and new industries.
When we're discussing economics, we have to take the discussion back to supply and demand. Competitive markets mean that people will buy at the best personal value. In other words, if two firms are selling identical products but one is offering it at a lower price, that company will sell more units. The competition will force the other company either to lower prices and compete or go out of business. So, if a consumer can buy a DVD player, a pair of shoes, or a laptop computer for less money, why wouldn't she? If the quality is good, she would buy, even if it came from another country. That is, until governments attempt to tie the invisible hand up.
Tariffs, a tax imposed on imported goods, have always been a sticky issue. The Smoot-Hawley Tariff Act of 1930 was supposed to protect American jobs by charging a higher tax on imported goods. However, the other nations of the world retaliated with their own tariffs, making it more difficult for US goods to be sold abroad. This cut US exports in half and was a major cause of the Great Depression. In fact, since talk of the Act was ongoing for months prior, there are those who speculate it contributed to the Great Crash of '29. Whatever the case, tariffs attempt to protect one group of sellers by artificially inflating the prices of another. Consumers are punished with higher prices, foreign sellers are punished with less business, and the domestic sellers are exempted from the forces of competition. Without competition to drive down prices, there is no incentive to innovate, reduce costs, or change for the better. While this may help them in the short run, competition catches up over time.
Innovation is really the key to the power of free trade. If the US economy were not so vibrant and capable of imagining new industries, free trade could be a detriment. But the American tradition is finding new ways to run, and this is part of our national identity today. Let's look at an example. There is really no such thing as an American television set. Way back in 1974, Motorola sold off the manufacturing wing for the old Quasar TV group. These TVs were still marketed as Quasars, but they were completely manufactured by Matsushita in Japan. In this way, an entire industry was outsourced. According to the stereotypical view of the Left, there should be throngs of unemployed TV manufacturing employees. But, mysteriously, there aren't. Why is this? Because as jobs are outsourced and industries go offshore, new jobs and new industries are created. The dynamic nature of the American economy is what has kept it strong through the years. One can see this individualism and innovative spirit as far back as the 1790s (see USS Constitution). The model of outsourcing has repeated itself time and time again. American ingenuity develops new industry, industry thrives in US for a while, and then the industry is picked up in places where operating costs are lower. Then the cycle starts over again. And again, and again, and again.
While we're talking trade in a global market, it makes sense to bring up outsourcing as well, since they have a lot of the same effects and motivations. John Kerry in 2004 and Barack Obama this year both promised to take away tax incentives for companies who move jobs offshore. This raises two questions in my mind. First, what direct incentives are offered by the IRS to build a plant in Indonesia? Is there a box to check on a corporate tax return for a job outsourcing deduction, exemption, or tax credit? If there is, I haven't been able to find any information on it. Secondly, will raising taxes on corporate profits provide more or less incentive for companies to earn money outside the US? Raising taxes in itself (which Obama promised to do) creates the opposite incentive.
The other argument against offshoring is that it exploits the Third World as US companies hire local workers for a fraction of what they would be paid in the US. This thinking is absurd, because it fails to take into account local cost of living standards. We see this phenomenon domestically, where firms are moving out of high-rent areas and settling in places where wages, rent, utilities, and transportation are less expensive. This is probably the biggest source of growth for the Reno area, as companies have moved out of the Bay Area in favor of a better tax structure, plentiful labor, cheap real estate, and access to good distribution. Moving to countries with lower costs is just an extension of this idea. Furthermore, when a US company opens a plant in the Third World, it provides jobs for the poorest of poor who often have no opportunity to find work. Yes, of course there are potential chances for abuse, bad working conditions, and other undesirable situations. But a great many companies, large and small, operate businesses in Third World countries that provide a valuable service to the local people.
I suppose the danger of free trade comes when the tax and political environment are not favorable to the development of new industries and growth in existing ones. When taxes are high, businesses large and small have less operating capital to invest in new ideas and products. For those who have never run a business, it's no small thing to come up with something new. It requires creativity, yes, but also analysis of the market, development of supply chains, and sufficient capital to cover operating losses until it takes off. It's a risk, and less capital available - to say nothing of reduced buying power for an over-taxed consumer - means that risk is less likely to be taken.
Here's an example of the misguided thinking of the Left where free trade is concerned. The Colombian Trade Protection Agreement would allow for free trade between the US and Colombia. The Democrat-controlled US Legislature is blocking this treaty from coming to a vote, saying it will harm US workers. While this posturing makes for great soundbites on the six o'clock news, it is, as Shakespeare said, "sound and fury, signifying nothing." The idea is that, by signing such an agreement, the US would have low-price Colombian merchandise flooding the market and putting good American working folks out of work. While that is a poignant image, it just doesn't hold up to scrutiny. First, many Colombian products already enter the US market duty-free, thanks to the Andean Trade Promotion and Drug Eradication Act (ATPDEA). This deal was made to help encourage South American countries to transition away from the sale of narcotics by strengthening other industries. However, the ATPDEA is one-sided. It allows Colombian product into the US duty-free, but US goods are still subject to tariff when sold in Colombia. There are many mining operations in South America, and the US heavy equipment industry sells a lot of tractors, trucks, and other machinery into countries like Colombia. By signing a free trade agreement, it would allow companies like Case and Caterpillar to have a strong advantage over companies like Mitsubishi and Komatsu. In my estimation, that helps the American worker. Yet the Democrat-controlled Congress will not vote on the Agreement, despite the fact it has been in their hands since April of 2007.
In essence, free trade is a good thing. It's good for the consumer, because she can buy products at the lowest possible price and is not punished for where the goods come from. It's good for exporters, because free trade agreements mean that US goods sold in other countries can be brought in without adding burdensome tariffs. The risk of US industries being buried by foreign competition over time is legitimate. However, the strength and innovation of the market has overcome this countless times, and will continue to do so as long as the environment for job creation is preserved. So, rather than spending time fighting the iron horse of the free market, we should be tuning up the engine of our economy by removing obstacles to developing new ideas and new industries.
Friday, September 5, 2008
The Right to Life
Florida is the fourth most populous state in the US. The most populous city in Florida is Jacksonville, with a 2007 number of 805,605. That's more than twice the size of the Reno/Sparks area from which I'm writing. It's bigger than Denver by a third, about 5% bigger than San Francisco, and some 15 times larger than my current home of Carson City. Most parts of the country have no concept of that many people living in one place. That's over eight times the full capacity of the LA Coliseum. It's twice as many people as were at the Million Man March.
But, you know, it's actually less than the number of abortions that take place in the US every year.
Perhaps the abortion debate in this country is heading in the right direction. From 2000 through 2003, the number was around the Jacksonville, FL, level. Back around 1990, it was more along the lines of San Antonio or Philadelphia. Put another way, in 2003, there was one abortion for every 500 people or so. In 1990, it was one for every 200. Still, counting that as a moral victory is like the construction foreman who said, "Only 4 people died on this job, and we had projected 6."
Abortion, for the record, has nothing to do with choice. I do not have the right to choose to rob a convenience store, beat up my neighbor, or run down a traffic cop. Why not? Because these choices interfere with other people's rights. As members of a free society, we are protected from one another's choices by the rule of law. The Fourteenth Amendment gives us equal protection under the law. Equal, that is, unless you are talking about the unborn.
The argument here is that a fetus, as a non-viable mass of tissue, does not have any rights. It would be like a tumor or a wart - an alien presence worthy of disposal. But wait. She's not another species or lower form of life. She's distinctly human, based on her genetic makeup, her developmental pattern, and her potential to become. She's also not part of mom, as she has a unique set of DNA. In the legal system, a fetus can sue for share in an estate. In the criminal justice system, a driver can be booked for two counts of vehicular manslaughter if he kills only a pregnant mother. Clearly the law allows for the fetus as a citizen worthy of rights. The difference seems to be whether or not the baby is wanted. I can't think of another area where we may choose to disregard someone's rights based on the feeling of another.
But she's not viable, the argument goes. Viable? That would indicate she can live on her own. True, a newly conceived fetus has no chance of survival outside the womb. But at what point does she become viable, under that argument? Is it when the chance of survival hits 50%? 25%? With technology improving all the time, that nebulous viability argument becomes a moving target. In other words, what was inviable ten years ago would be viable today. It's very dangerous to take a human individual and put her rights against someone's interpretation of medical science.
The argument that seems to have the most traction in our society is that abortion should be legal in cases of rape, incest, or where the mother's life is in jeopardy. (As a Christian, I believe all life has value, that God has a plan for even children conceived in evil. But wait... some 70% of aborting women identify themselves as either Catholic or Protestant. Clearly, the idea that abortion is unbiblical does not take hold in the actions of everyone.) Before we get into that discussion though, how many abortions actually take place because of rape, incest, or the mother's health? In all reality, data on abortion is not 100% reliable, since many jurisdictions do not require accounting for each abortion performed. And of course, not every aborting mother will declare a reason. But there are some statistics. For example, a 2002 study by the Alan Guttmacher Institute found that 1% of women who had abortions did so because of rape or incest. The Institute also found that some 2.8% of abortions were due to some concern for the mother's health. Leaving out the possibility for rationalization or exaggeration of medical conern, that means that, at best, less than one in 25 abortions fall into the most compelling categories. The rest? Here are the top 5 reasons:
1. I'm not ready for a baby.
2. I can't afford a baby.
3. There are issues with the father.
4. My parents (or others) say I'm too young.
5. I don't want to disrupt my job/schooling.
These reasons account for approximately 21 out of 25 abortions. Imagine if those reasons were given for a standard homicide: "I killed my first-grader because she was interfering with my work." "I killed my sons because their father doesn't want to spend time with them." "I killed my preschooler because she was costing me too much money." And we shouldn't forget the words of Barack Obama in March, paraphrased for our purposes here: "I don't want my daughters to be punished with a baby."
Finally, it's not as if there's not an alternative to abortion. If a mother is not ready to be a mother, if she has financial concerns, if she is too young or too involved in other things; adoption is a great option. The US leads the world in the number of children adopted each year, with over 127,000 children going to adoptive homes. Clearly the demand for children to adopt has not slacked, although since Roe v. Wade in 1973, the number of children adopted out has declined. Today, there is a growing trend to adopt children from other countries, perhaps because of the decrease in available domestic adoptees. Of course, it's a great thing for orphan children from around the world to be adopted into the land of opportunity. It's very sad that this opportunity is not afforded to literally millions of unborn children.
The most telling statement that abortion is immoral comes from the very people who support "abortion rights" in this country. How often have we heard, "I could never have an abortion myself, but that's not a choice I can make for everyone"? If a person "could never" have an abortion, that is a clear indication she believes it is wrong. The fact she is unwilling to carry that conviction to others is simply a lack of moral courage.
One more time, the abortion debate cannot be about choice. A fetus is a human individual with rights and protection under the law. Today, the law both recognizes and fails to recognize a fetus, depending on the whim of the mother. We cannot hide behind the false idea of choice while an entire group's rights are violated. The convenience of another cannot be the justification for killing someone any longer. Our society is ripe with rights - built around the right to life, liberty, and the pursuit of happiness. But without life, no other rights are possible.
But, you know, it's actually less than the number of abortions that take place in the US every year.
Perhaps the abortion debate in this country is heading in the right direction. From 2000 through 2003, the number was around the Jacksonville, FL, level. Back around 1990, it was more along the lines of San Antonio or Philadelphia. Put another way, in 2003, there was one abortion for every 500 people or so. In 1990, it was one for every 200. Still, counting that as a moral victory is like the construction foreman who said, "Only 4 people died on this job, and we had projected 6."
Abortion, for the record, has nothing to do with choice. I do not have the right to choose to rob a convenience store, beat up my neighbor, or run down a traffic cop. Why not? Because these choices interfere with other people's rights. As members of a free society, we are protected from one another's choices by the rule of law. The Fourteenth Amendment gives us equal protection under the law. Equal, that is, unless you are talking about the unborn.
The argument here is that a fetus, as a non-viable mass of tissue, does not have any rights. It would be like a tumor or a wart - an alien presence worthy of disposal. But wait. She's not another species or lower form of life. She's distinctly human, based on her genetic makeup, her developmental pattern, and her potential to become. She's also not part of mom, as she has a unique set of DNA. In the legal system, a fetus can sue for share in an estate. In the criminal justice system, a driver can be booked for two counts of vehicular manslaughter if he kills only a pregnant mother. Clearly the law allows for the fetus as a citizen worthy of rights. The difference seems to be whether or not the baby is wanted. I can't think of another area where we may choose to disregard someone's rights based on the feeling of another.
But she's not viable, the argument goes. Viable? That would indicate she can live on her own. True, a newly conceived fetus has no chance of survival outside the womb. But at what point does she become viable, under that argument? Is it when the chance of survival hits 50%? 25%? With technology improving all the time, that nebulous viability argument becomes a moving target. In other words, what was inviable ten years ago would be viable today. It's very dangerous to take a human individual and put her rights against someone's interpretation of medical science.
The argument that seems to have the most traction in our society is that abortion should be legal in cases of rape, incest, or where the mother's life is in jeopardy. (As a Christian, I believe all life has value, that God has a plan for even children conceived in evil. But wait... some 70% of aborting women identify themselves as either Catholic or Protestant. Clearly, the idea that abortion is unbiblical does not take hold in the actions of everyone.) Before we get into that discussion though, how many abortions actually take place because of rape, incest, or the mother's health? In all reality, data on abortion is not 100% reliable, since many jurisdictions do not require accounting for each abortion performed. And of course, not every aborting mother will declare a reason. But there are some statistics. For example, a 2002 study by the Alan Guttmacher Institute found that 1% of women who had abortions did so because of rape or incest. The Institute also found that some 2.8% of abortions were due to some concern for the mother's health. Leaving out the possibility for rationalization or exaggeration of medical conern, that means that, at best, less than one in 25 abortions fall into the most compelling categories. The rest? Here are the top 5 reasons:
1. I'm not ready for a baby.
2. I can't afford a baby.
3. There are issues with the father.
4. My parents (or others) say I'm too young.
5. I don't want to disrupt my job/schooling.
These reasons account for approximately 21 out of 25 abortions. Imagine if those reasons were given for a standard homicide: "I killed my first-grader because she was interfering with my work." "I killed my sons because their father doesn't want to spend time with them." "I killed my preschooler because she was costing me too much money." And we shouldn't forget the words of Barack Obama in March, paraphrased for our purposes here: "I don't want my daughters to be punished with a baby."
Finally, it's not as if there's not an alternative to abortion. If a mother is not ready to be a mother, if she has financial concerns, if she is too young or too involved in other things; adoption is a great option. The US leads the world in the number of children adopted each year, with over 127,000 children going to adoptive homes. Clearly the demand for children to adopt has not slacked, although since Roe v. Wade in 1973, the number of children adopted out has declined. Today, there is a growing trend to adopt children from other countries, perhaps because of the decrease in available domestic adoptees. Of course, it's a great thing for orphan children from around the world to be adopted into the land of opportunity. It's very sad that this opportunity is not afforded to literally millions of unborn children.
The most telling statement that abortion is immoral comes from the very people who support "abortion rights" in this country. How often have we heard, "I could never have an abortion myself, but that's not a choice I can make for everyone"? If a person "could never" have an abortion, that is a clear indication she believes it is wrong. The fact she is unwilling to carry that conviction to others is simply a lack of moral courage.
One more time, the abortion debate cannot be about choice. A fetus is a human individual with rights and protection under the law. Today, the law both recognizes and fails to recognize a fetus, depending on the whim of the mother. We cannot hide behind the false idea of choice while an entire group's rights are violated. The convenience of another cannot be the justification for killing someone any longer. Our society is ripe with rights - built around the right to life, liberty, and the pursuit of happiness. But without life, no other rights are possible.
Wednesday, September 3, 2008
The Case for Drilling
Democratic presidential nominee Barack Obama has criticized the notion of drilling for oil on the continental shelf and in Alaska, saying that the benefits are dubious and the costs are too great. Instead, he has proposed fast-tracking alternative energies as a means of transitioning away from foreign dependence on oil. But there are discrepancies between these views and the realities of the situation. Without a firm understanding and clear perspective on the topic, there is no possibility of putting forth a lucid policy.
In 2005, Obama said, "the rest of the world is already moving away from oil," and "our demand is about to jump 40% [over the next 20 years]". Before we go any further in this discussion, allow me to point out that a 40% increase in 20 years equates to an average annual increase of less than 1.75%. To give a contrast from the CIA World Factbook's 2007 estimate, the US has a 2.2% annual GDP growth rate. In other words, the economy produces sustained growth of 2.2% annually, while oil demand will increase only 1.75%. In an economy that is supposedly based around oil, does that truly represent an increase in oil demand?
The fact is that US demand for gasoline in absolute terms has been on the decline since mid-2007. If the trend continues, 2008 would be the first year in 17 years that has seen annual gasoline demand go down. In fact, in a year-over-year comparison, 2008 shows American consumers demanding over 100 million gallons less each month than one year prior. Why is this? Is this because of some policy advanced by the reigning Democrats in the legislative branch? No. Is it because of the words of Senator Obama regarding our so-called dependence on foreign oil? No. Could it be the invisible hand of the free market? An increase in prices causes consumers to change their buying habits.
In all fairness, Senator Obama could not have predicted in 2005 that US gasoline consumption would decrease two years later. Or could he? Adam Smith would have predicted it back in 1776, so perhaps one should consider Obama’s fundamental lack of understanding where it comes to the free market. One can also divine a lack of understanding when in the same speech he said that China is going to be using more oil (driving up demand and prices) and China is going to be using less oil (by making more fuel-efficient vehicles). It reminds me of his off-the-cuff solution of checking your tire pressure to save oil. Sure, the Energy Department says you can save as much as 11 cents per gallon by inflating your tires to the recommended pressure. But didn’t Obama oppose the suspension of federal fuel taxes, which equate to 18.4 cents per gallon?
Clearly, this discussion is not about how to save American families from high prices at the pumps. More likely, it’s about an agenda to transition away from fossil fuels at any cost. To quote former Democratic Presidential candidate Tom Vilsack, “We should be moving away from oil.” Why does the Left want to get away from petroleum altogether? Some would argue that it is the environmental impact of burning oil that leads this push. However, all the alternatives to oil that I have seen would lead to increased emissions (please, someone from the Green Nation send me some information if I’m wrong about that). Some would argue that it is the finite nature of the resource. However, this argument loses steam when you consider the resource becomes more abundant when avenues for exploration and extraction are opened up. Some would argue it is because of the foreign origins of oil, an argument that is also negated by the opposition to domestic drilling. Some even say this country has an oil addiction, which is akin to saying humans have a water or oxygen addiction. Oil has been one of many necessary components to keep America competitive, strong, and moving forward. Perhaps this is why the push is there. Perhaps those eager to apologize for America’s strength see the removal of oil as a way of grinding the American machine to a standstill. While I can’t speak for hidden or ulterior motives, the idea that domestic oil exploration is somehow bad or wrong doesn’t hold up to scrutiny.
The most consistent argument put forth by the Left against domestic drilling is that the effects would not be felt for five to ten years. This figure is thrown about like gospel, but what can anyone tell us about why it will take that long? There is already a petroleum infrastructure in place, and it includes everything from inbound crude to refining to domestic distribution to retailers on nearly every corner. Can the same be said for these mysterious “alternative fuels”? No. The public’s access to E85, hydrogen, and biodiesel is slim-to-none in most parts of the country. In fact, a recent internet search found no public sale of E85 anywhere within 200 miles of this desk. So, despite the presence of vehicles with the sharp-looking “FlexFuel” logo, they are buying good old regular unleaded like the rest of us.
The only piece of the infrastructure that doesn’t currently exist is at the top. Oil has to be found, drilled, extracted, and delivered to a point in the existing supply chain. If the ban on drilling were lifted, a company with a lease to drill in ANWR or on the continental shelf has plenty of incentive to expedite this process. Would it take five years or more? I honestly don’t know, but this should not be a deterrent to starting the process. It’s better to know there will be relief in five years than to have no relief at all. And, since the speculators have come under such fire recently, the development of new drilling operations would have its effect in the futures market first.
Finally, the argument has been raised that says much of the oil currently extracted from Alaska doesn’t come to the US, so new drilling would have no effect on our gas prices. This would be true, except that this is a global market. If the sum of the Alaskan oil went directly to East Asia, then East Asia would inevitably purchase less from Canada, for example. Canada’s surplus would lead those producers to lower their prices to clear inventory. The lower price of Canadian crude would lead to someone else buying it instead of what they are currently buying. Thus, over time, the world oil inventory increases, and prices go down.
Don’t misunderstand. I acknowledge that petroleum is a finite resource and that alternatives will need to be developed. I recognize that conservation of finite resources is good policy. But the premature moratorium on oil serves no purpose. Drilling for new supply is the bridge to new ideas and technologies. And the transition away from oil must not be a mad rush to mediocre substitutes, but rather an intelligent march toward a genuinely better alternative. Sorry, Senator Obama, but that right there sounds like change I can believe in.
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