Cap-and-Trade and the Cheap Energy Illusion

It may not have made as many waves as the Michael Jackson story, but last week, after the House passed the cap-and-trade bill, the media response was overwhelming. Not that anyone should be surprised. This is a huge issue.

However, it seemed that much of the earliest coverage stirred up an awful lot of hostility and opposition. And it was everywhere. From the most conservative blogs to the most liberal social media sites - those who oppose any kind of effective climate change legislation were not pacing back and forth in the waiting room. They were hitting up every possible media outlet to express their opinions and outrage.

Now I have no intention of opening up the global warming debate here. Those who believe global warming is some kind of scam are not going to change the minds of those who believe there's something to it. And vice-versa.

However, one thing that I'm finding increasingly frustrating is the amount of manipulated data that's being disseminated all over the internet...and mainstream media.

Let's first take a look at the data that was debunked earlier in the year - but was used as a rallying cry on Fox & Friends last Friday.

You've likely heard it before — that cap-and-trade will cost consumers an extra $3,100 a year. This is the figure that a handful of bureaucrats in D.C. came up with after massaging some data found in an MIT study.

John Reilly, one of the study's authors told House Minority Leader, John Boehner that the MIT study had been misrepresented in press releases distributed by the National Republican Congressional Committee. Reilly stated that it was misleading and simplistic to only look at the impact on energy prices, as it didn't account for the proposals that have been designed to offset the energy cost impacts on middle and lower income households.

Of course, it wasn't just Boehner's office that pumped out the press releases about the supposed high costs associated with cap-and-trade.

The Heritage Foundation chimed in with their analysis of the bill which they claim adds little more than a massive energy tax in disguise that promises job losses, income cuts and a sharp left turn toward big government.

Their cost estimate is $1,500 a year.

On the other side of the coin, we have John Reilly's estimate of about $800 a year. . .an EPA analysis which estimates a cost of between $98 and $140 a year. . .and a Congressional Budget Office estimate that puts the total at $175 a year.

I suspect all of these numbers have already been run through the opposition's spin mill, rejected thoroughly, and blasted back out on the internet.

Either way, no matter how accurate or manipulated the data - the truth will only be realized in practice.

Listen: Certainly no one wants to spend more money for energy. Especially during these rough economic times. And this is what opponents of climate change legislation are banking on - telling us that energy will cost more because it will cost more to produce. But isn't this really just an illusion - like the "cheap" energy we consume today?

I would argue that energy production would not cost more. The price we pay to the utilities for that energy, however, would. And there's a very important difference between the two.

What we're really talking about here is attaching an environmental cost to the production of electricity. But that cost has always been there. It's just that you and I never see that cost on our bill.

Bottom line: There is a definite environmental cost associated with the production and combustion of fossil fuels. And that cost is the deterioration of natural capital (water, minerals, fish, trees, oil, soil, air, and living systems, including wetlands, estuaries, coral reefs and rainforests)

Now before you write this off as some kind of random environmental agenda, hear me out...

As explained in the book Natural Capitalism (which is an absolute must-read for energy investors), natural capital has never really been valued appropriately. Rather, it has constantly been liquidated, thereby further enabling the deterioration of ecosystem services that really represent the most important type of capital - things like the regulation of atmosphere and climate, the cycling of nutrients and water, pollination, control of pests and diseases, and the maintenance of biodiversity. While the value of these free, natural, and self-regulating services are worth trillions annually, this value has never really been reflected on balance sheets.

Instead, the costs associated with the loss of natural capital have long been externalized onto the environment. i.e.) you, me and every single thing that lives around us.

And the truth is, we're only talking about CO2 with this cap-and-trade bill. As far as I'm concerned, there's still the mercury issues associated with coal, the waste issues associated with nuclear, and the security issues associated with our reliance on oil. These aren't included in the bill. But throw those on your tab, and you'll see an even higher cost per kWh (or higher cost per gallon of gas when referring to oil being used primarily as a transportation fuel)

Point is, the price we pay for energy today does not reflect the true cost of producing that energy. An effective climate change bill could at least begin to enable a more accurate cost structure.

I know, I know. No one wants to shell out a penny more for anything. And I'm no different. But if we truly believe in a free market system, than we should not resist a fair and accurate cost analysis of energy. Because the truth is, it's never really existed.

Now understand, I'm not saying cap-and-trade is the answer. To be honest, this thing is so politically-motivated, it's hard to figure out the most effective, and honest solution. Seems to me, the best way to do this is simply to charge consumers the REAL price. I'm confident that if no subsidies existed (direct or indirect) for any kind of power generation (fossil fuel or renewable), and ALL natural capital costs were figured into the equation - the market would dictate the rapid expansion of renewable energy and smart grid development, which would thereby enable a decrease in fossil fuel consumption, and ultimately a decrease in CO2 emissions.

While I don't expect that to happen anytime soon, there's no denying that the true cost of energy can no longer be swept under the rug.

And that's just one more reason we love renewable energy and smart grid. Because the further this stuff develops, the more folks will realize that fossil fuels may not be as cheap as we've been led to believe.

Now today, given all the momentum behind domestic energy development, we're bullish on the renewable energy and smart grid companies that have operations in the United States, currently generate revenue, and currently have the necessary capital to continue expansion efforts. These include, but are not limited to: SunPower Corporation (NASDAQ:SPWRA), First Solar (NASDAQ:FSLR), Ormat Technologies (NYSE:ORA), U.S. Geothermal (AMEX:HTM), Western Wind Energy Corporation (TSX-V:WND), EnerNoc, Inc. (NASDAQ:ENOC), Comverge (NASDAQ:COMV), and Itron (NASDAQ:ITRI).

Disclosure: Long ITRI

Comments

[laguna_b:]

History has shown that progressives have led the way in this country dragging the right wing along like a dead anchor. They reisted integration, seat belts, environmental legislation, the list goes on....always hand wringing about the costs, the loss of jobs, the discord etc. I know...I was one of them in teh 60s and 70s...started to shift when Reagan ran up the deficit on BS defense spending....it is good to have an opposition putting some brakes on things. Surely, left to their own, the left could do really stupid things as well....but the reality is that we are going to leave our grandchildren a planet likley devoid of reasonable oil, with agriculture challenged by pollution, water issues, population explosion etc. But as usual, the Republicans only care about taxes....today.

Jul 01 08:28 PM

[Bion:]

The only way to make energy "less costly" in the long run, is to remove all the insane subsidies provided to big-energy corporations -- oil, natural gas, nuclear, coal -- and level the playing field to start with. Then a Carbon-tax, whether an assessment based on societal economics models (addressing externalities) or a cap-and-trade model where there is some absolute ceiling on permitted Carbon emissions to meet an environmental target; means an economic value is attached. Take Carbon emissions out of the commons where it is "free" and assign it a value in our economy that realistically takes its costs and benefits into account. Examples = Benefit -- coal is a "cheap" (albeit dirty) way to produce electric power. Costs -- increasing sea levels, deterioration of lakes (acid rain), mountain-top removal damages local environments, etc. Doing this means efficiency and renewables can compete.

Jul 01 09:11 PM

[starboard:]

With regard to the cost of cap and trade, Obama is on record (during his campaign) as saying that electricity costs with cap and trade would "skyrocket".

Take a look at European electricity prices to get a small glimpse of where we are headed. The information available on the internet indicates a range of 19 cents/kwh to the high 40's per kwh. The 19 cent # happens to be France which gets 80% of its power from nuclear energy. By comparison, most of the US currently has less than 10 cents per kwh in regulated markets.

The US currently gets 50% of electric production from coal, 20% from nuclear, 20% from nat gas combined cycle and 10% from "renewables". Of the 10% renewables ~7% comes from hydro and ~2% from wood waste combustion.

Obama has said that coal plant operators would "go bankrupt" under his policies. He and his left wing environmental supporters are also opposed to nuclear. He is silent on natural gas (of which we have plenty). The left wing environmental lobby would never allow another hydro plant to be built. Hmm, looks like his statement that electricity prices would "sky rocket" under his policies actually makes a lot of sense.

Jul 01 09:20 PM

[TheSnail:]

Great job.

(As always negative feedback is appreciated from the scientific illiterate, people who don't give a rats... about the environment, and those who think pollution will have no long-term negative effect.)

Jul 01 11:32 PM

[Mad Hedge F...:]

Good Point. It’s amazing that Al Franken won his state Supreme Court case over Norm Coleman for the Minnesota Senate seat, just as the Clean Energy Act of 2009 comes up for a vote (see www.madhedgefundtrader...). Now the Democrats can ram the bill through, no questions asked, leaving fuming Republicans on the sidelines bitching to Fox News. This is one of those seemingly insignificant events which will have a huge impact on history. The last one of these I can remember was when a Cuban orphan named Elian Gonzalez washed up on a Miami beach, and ultimately threw the Cuban vote, the state of Florida, and the entire national election against Al Gore. The bad news is that the cost of your utility bill, gasoline bill, tax bill, and everything else you buy is going up. Those unhappy readers in the Midwest and South can expect more of their income to get shifted towards the two coasts. The good news is that you get to breathe, and your kids will live a full life.

Jul 02 12:35 AM

[AlexS:]

OK, assuming there is an cost to the environment from releasing CO2, why then should the payment go to the federal government? What are they going to do to balance the situation? So far the proposals are 1) given everyone in the poor and lower middle class a tax refund. Or 2) hand out subsidies to politically favored companies. And if you make it more costly to manufacture and drill here, the companies will just go somewhere else where they'll be happy to have them. So all you've done is move manufacturing from the U.S. say, to China. No difference to global warming, even if you accept those premises. Oh, and any middlemen will get rich (like Al Gore) which may be a big part of the point

Jul 02 01:30 AM

[A Barrel Full:]

I agree with the basic assumptions in your argument. Include the cost of externalities in all types of energy (include dead birds, loss of property value for wind as well) and the energy mix would change massively.

Much more importantly energy efficiency would massively increase.

Cap & Trade on the other hand is just a way of governments to control their populations. It means more regulation and more interference. Carbon tax (suitably offset with tax cuts elsewhere) would do the job so much better.

Jul 02 03:30 AM

[Green Oilman:]

While you made a point of mentioning the wide range of estimates concerning the cost of cap and trade, you failed to clarify why so many groups come up with such a diversity (other than to suggest that it was simply political). In fact, the underlying reason is simple. The current cap and trade legislation basically backloads (pushes out to a later date) the required changes by setting the caps fairly high in the coming years and only imposing significant caps in the latter years. Arguably, this is intended to allow time for adjustment in the economy and industry. However, this also means that the "benefits" of this legislation are also pushed out much further in the future. As there is little need to change behaviour in the short term, the cost to the consumer is less. Once the caps are reduced to a level so as to make a meaningful change in behavior and pollution levels, the cost will rise closer to the higher numbers on the range.

The above is simple economics. The legislation wants us to reduce usage of non-renewable fuels and does so by increasing the cost. The only complaint I have is that the Obama administration, rather than being up front with this, chooses to tell the electorate that they can have the reduction in green house gasses without any pain.

Note that I advocated a similar scheme right after 9/11 as a means to better secure the financial and sovereign integrity of the USA. By increasing the cost of fuel at this point by about $1-1.5 per gallon through taxation, the housing bubble would have been smaller, the budget deficit eliminated and the trade gap reduced. Rather than paying foreign powers $147 a barrel for oil, the world price would have declined by a good $30-40 (partially offsetting the increase in gas due to the tax). However, Mr. Bush lost the chance and instead just told us to go out and shop. Only goes to show that neither party will put the good of the country ahead of their fear of not being reelected.

Jul 02 04:28 AM

[wind4me:]

cannot beleive you left out Nevada Geothermal since NGLPF.ob is one month from finishing one of the largest geothermal plant built in USA in a few years

Jul 02 07:16 AM

[rgsmith@inb...:]

Experience is a hard teacher and sometimes cruel but truthful.

Look at what a similar bill did to Califormia in just 4 years. The waxman-markey bill would do the same for america. Hopefully the senate will have more wisdom than the House and kill it.

Jul 02 08:49 AM

[User 305589:]

very good article. I think this is an area where free markets simply don't work. the society as a whole, the environment and especially our children and the unborn generations that will have to live in the world we leave to them are not a party to the transactions in todays energy markets. they will never be, becuase it is simply impossible. therefore, govt. has to come up with a framework and to take up their interests. I seriously doubt that this bill will do it, but then again, it's a first step and it's undiscovered territory . Europe has a bit more experience and has already seen quite a number of missteps. it's a trial and error. My biggest fear is that greedy, corrupt and dumb politicians will allign with greedy and unscrupoulos businessmen to turn all this into just another giant govt sponsored income stream, thereby discrediting the whole idea behind it.

Jul 02 09:01 AM

[top_tier:]

Another soft shoe endorsement.

" Reilly stated that it was misleading and simplistic to only look at the impact on energy prices, as it didn't account for the proposals that have been designed to offset the energy cost impacts on middle and lower income households."

Do any of these proposals factor the lateral costs associated with transportation of all goods an materials; food? I think not. And like all government studies, including any of the ones you cite, have you ever heard of one that comes in line with projected costs, I mean ever? I think the anticipated costs are grossly underestimated, that the proposal is in fact too complex to accurately account for every cost and that it has a gigantic risk of being an albatross around the neck of our economy. Let's also not forget that this is yet another bill being rammed down our throats that most in congress haven't even read and certainly it doesn't have the transparency promised by the administration.

Jul 02 09:23 AM

[whisperonth...:]

If the actual increase in cost would only be $175 per year, most of us can find that $15/month to pay for it. However, if the actual cost is $3100 per year, this is an additional car payment, or effectively more than doubling the actual energy costs for most. Since there is a significant portion of humanity that cannot afford their current energy costs even with the help of charity subsidies and welfare handouts, that means that the rest of us will have to cover those costs as well. This will put an unfair and unmanageable burden on the rest of us, in the attempt to control something that many of us do not believe is actually happening.

Most baby boomers recall the fear of a looming ice age, and almost all of the people older than that have clearly experienced several temperature swings lasting for years. Warmer, cooler, hotter, colder. I've spent all my life living in Michigan, from the upper peninsula to the lower, and have experienced snow in June and 70 degree temps in December. We could blame it on manufacturing, or cows, or whatever you like, but the fact is that there has not been a consistent warming trend unless one considers something resembling an oscilloscope output as consistent.

Measuring the added cost against the likelihood that 5 years from now we will be cycling back to another trend, I would say we should save our money so we can pay for Al Gore's next movie. In fact, he should be double-billed with Stephen King for Fright Night. Or maybe on Comedy Central?

Jul 02 09:23 AM

[Ferdinand E...:]

Let's see now, I have been explaining that cap and trade is nonsense for almost 10 years. And I'm not the only one. But it doesn't make any difference who and how many go into this matter. Congressmen don't understand, their experts dont understand, and the voters don't understand.

I just wish that I remembered precisely why it's nonsense.

Jul 02 09:26 AM

[jerrydd:]

Great article. For so long we have given coal, oil huge subsidies. It's time both paid their true cost. Below is a post I wrote on it.

How about the cost we pay now for fossil fuels?

This bill is a scam because it doesn’t make oil, coal pay it’s full cost. It would be much better if it was a cap and tax on each ton of coal and gal of oil.

As for costs we now pay it in our incomes taxes so I’d much rather have those who use the oil, coal pay the real price. Then we can all get tax cuts and help switching to more eff homes, transport.

Or we can destroy our water supply, eat fish which in a recent test a guy ate 2 meals and his mercury levels went way above max safe levels, land destruction, SOx, NOx, radioactive coal emissions, google that for a real eye opener, of a 200lb dirty bomb from every large coal plant/day from coal costs.

From oil we spent $700B last yr on imported oil which 50% went directly to Iran, Russia, oil dictators and terrorists. Then there is the military costs of the Persian Gulf, Afghanistan, Iraq oil wars vs $1T/yr savings to balance our budget, create jobs replacing coal, oil where our homes produce the power we need so we no longer pay electric bills, in fact get a check for extra power each month, ect.

And this doesn’t even include CO2/GW costs. So please don’t complain about paying oil, coal’s true cost as 1/5 of the US gov budget already subsidizes them!!

With a $40/ton tax on coal and $1.50/gal on oil we can eliminate RE subsidies and give tax cuts and low cost loans for more eff homes. businesses, cars/trucks which could being us out of this recession and bring a real free market to correct the damage these subsidies have caused!!

If we don’t cut oil 5%/yr and reduce our electric use the price of oil, coal is going up with a bullet anyway. So it is far better that money go to our government for our benefit instead of our enemies.

Or we can go broke and pay others to kill us. Your choice!!

It’s eff along with RE that will get us out of this.

With Eff we can cut all coal out completely. How is by cutting power needs by insulation, eff windows, appliances, etc can easily cut building, many business electric needs easily by 50%.

Next is many homes, buildings can make their own power so need little or no power, even produce excess power. All this is very low tech.

Tidal/river generators can supply much of the power needs without dams. I’ve done this for 30 yrs on a small scale and can be easily scaled up and costs much less than coal power does..

Wind, solar thermal generators and soon PV are cost effective once built in real mass production both home and utility scale.

Now add NG cogen plants at 60% eff for peak power along with biomass, hydro and EV’s that both charge at night and while parked can feed power back into the grid when needed along with Sodium batteries in home, utility sizes will easily handle peak power needs all at less cost than we are paying now for fossil fuel and much less than future fossil fuel costs.


Nukes unless they can be found to cost 1/2 they cost now are too expensive and the money much better spent putting RE, eff in, on homes, businesses.

Now add EV’s which work very well, I drive mine every day along with local and high speed rail with NG semi’s, trucks can solve most of the transport problems at lower prices than we pay now over 20 yrs.
We need to do these for national economic and security and pollution reasons anyway

None of this is a technical problem but a political one. All of this could be done with already available tech, most which is 30+ yrs old or more and with a higher quality of lifestyle or we go broke, stay at war if we continue as we are now..

Jul 02 10:53 AM

[quick:]

Great article! It seems like everyone who opposes some kind of plan to limit greenhouse gasses is very concerned about not raising energy costs in the near term, but they don't take into account all of the costs we'll have to pay in the longer term if we keep using fossil fuels as much as we do now. From mountain top removal to mine for coal, to the mercury, NOx, SOx and other toxic chemicals burning coal produces, to the added costs of health care because of the dirty air we breathe, to our rising deficits because of all the oil we import, these costs are never taken into account, and that should be. We have some of the cheapest, most subsidized energy in the world. We either start paying the fair price now, or we (and our children) will pay for it later.

Jul 02 11:07 AM

[Hazel Hende...:]

Thank you,Jeff Siegel ! I take your Newsletter and I personally invested in many of your stock picks, including Nevada Geothermal, Western Wind, World Water and Solar ,Comverge ,Itron, Eneroc and others. I have written about Green Tax shifting for decades : reduce taxes on incomes and payrolls and shift them to virgin resource exploitation m energy waste and all forms of pollution, not just carbon. Then get the world's pension funds ( $120 trillion in assets) to invest in Climate Prosperity Bonds ( see EthicalMarkets.com)

Jul 02 11:44 AM

[searcher:]

Is there a problem/threat? Thesis - antithesis - synthesis - plurality - majority - consensus?

Can it be alleviated/mitigated without knowing the cause(s)? Thesis - antithesis - synthesis - plurality - majority - consensus?

Can it be eliminated without knowing the cause(s)? Thesis - antithesis - synthesis - plurality - majority - consensus?

What is(are) the cause(s)? Thesis - antithesis - synthesis - plurality - majority - consensus?

What is(are) the solution(s)? Thesis - antithesis - synthesis - plurality - majority - consensus?

Jul 02 11:55 AM

[jmark:]

Overall, the more comments I read on this website, the more I wonder who the heck most of you people are. Is this site some sort of political blog?

Jul 02 01:28 PM

[Chad Brown:]

Jeff- Kudos, I thought this was a particularly well-thought-out article. You are correct, unfortunately, that few minds are being changed by the torrent of hostility and opposition that is spewing forth from opponents of cap-and-trade. Still, I would like to think that a dialog or a debate is the right way to go. The human species (meaning a lot of people alive today, to be more precise) needs to do something about both climate and energy. It needs to be a multi-country effort. It is a complex enough issue that it is not going to be possible to have perfect definitive proof ahead of time that every action to be undertaken is going to work.

You are also correct to point out he irrelevance of all the "what it will cost" figures that are floating around. It is premature to estimate "what is will cost" until agreement is reached on what the "it" covers. Does "cost" mean the taxes collected by the government and exclude the revenue paid out? Or does it mean the net of the two? As your examples made clear, the various cost estimating efforts are free to pick their own definitions, and so none will achieve much credibility.

I gather that the Senate is unlikely to pass its own version of Waxman-Markey this year, and so debate will continue and another try will be made next year. Surely there are lessons to be learned from this year's try. Like don't make it so complex and riddled with special interest deals that voters have no idea what is going on.

Do we even have agreement that a price on carbon is a good thing for the world as a whole? I'm convinced it is, but I don't hear most people saying that they think so. Rather, the political debate surrounding Waxman Markey is over details of how many free credits to give away. Then there are plenty of voters who will reject the resulting complicated compromise deal because they think climate change is a hoax. Lots of opponents are arguing that we should not pass Waxman-Markey because the US cannot by itself make a difference. Of course not, but why do such people think they have scored a point? If we can hide behind China and India, they can also hide behind us. The US got off on the wrong foot when the whole Kyoto effort started, and it needs to do some catching up.

I would like to see more agreement on a few fundamental points before we get bogged down in details that will produce plans the voters won't buy.
a. Carbon emissions and other GHGs should have a price and zero is not the right answer.
b. The problem is not a few millimeters of sea level change or a few degrees of temperature change. It is rather the prospect of famine, species extinction, mass migrations, etc. Al Gore did not help the cause by picking issues like glacier melting to focus on. Given how dire the consequences are, we do not need to prove beyond any doubt that climate change will be a disaster. A very small chance of it is enough to take some action while continuing to do research.
c. People have to work together on this. It is not a rich country or poor country problem.
d. Cost estimates should show both sides, and cost estimates should not even be made until after there is more agreement on what to measure.

Where are Obama's speeches to the nation explaining these basics and trying to convince people? There is a cost to Bush pretending we could ignore the issue. Bringing along public opinion is not going to happen fast. But is is just as necessary to the process as building wind turbines, designing batteries for electric vehicles, drilling for geothermal power, and building a smart grid.

Jul 02 01:43 PM

[Steve20423:]

The cap and trade only makes if equivalent reforms are required with all our trading partners otherwise higher priced electricity to the end users puts us at a disadvantage. Perhaps you have all forgotten the the pollution of the industry 50-60 years ago. We have much cleaner air and water today as a result of incremental improvements.
Our way of life requires some stability in the economy and this is another drag we can't afford at this time.

Jul 02 01:50 PM

[richandmer:]

Doesn't it seem weird that the only true winner of Cap and trade is the government. They will be the recepient of much of the fees being generated by this massive scam on the public. Just curious why people are not angry with Obama as he promised "NO TAXES" on anyone with income less than $250k. This bill will charge everyone a tax on everyone regardless if you make 1cent or 1 million in income.

Why is Obama getting away with this? Why are people letting him lie without any consequences. Is this the way we want our politicians to play the game in the future? How are we to trust anyone?

Jul 02 02:58 PM

[JeffDB:]

On Jul 01 08:28 PM laguna_b wrote:

> History has shown that progressives have led the way in this country
> dragging the right wing along like a dead anchor. They reisted integration,
> seat belts, environmental legislation, the list goes on....always
> hand wringing about the costs, the loss of jobs, the discord etc.
> I know...I was one of them in teh 60s and 70s...started to shift
> when Reagan ran up the deficit on BS defense spending....it is good
> to have an opposition putting some brakes on things. Surely, left
> to their own, the left could do really stupid things as well....but
> the reality is that we are going to leave our grandchildren a planet
> likley devoid of reasonable oil, with agriculture challenged by pollution,
> water issues, population explosion etc. But as usual, the Republicans
> only care about taxes....today.
------------

I consider myself an "independent" and disagree, sometimes strongly, with memebers of both major parties, but I think your characterization above is rather one sided.

The "progressives" undoubtedly pulled "the right wing" along with them on integration, and that was certainly a truly "progressive" move, but it would seem to me as though the Republicans under Lincoln did them one better in freeing the slaves and ending slavery in the first place.

All change is not "progress" and I not only do I agree with you that "the left could do really stupid things as well", but assert that they indeed have, and continue to do so in the present and will continue to push for really stupid things in the future. Not that they have the corner on the market, by any means.

Sometimes "doing something" via government mandates has more detrimental effects than benefits, or is far more wasteful than necessary. I believe it was the progressive requirements for oxygenation of our fuel that pushed the refineries to add MTBE to our gasoline for some years, until it was found to be polluting our water supply, at which point they forced another changeover to mandatory use of ethanol, which once again caused shortages and a ramp up in gasoline costs during the conversion process. Now the California Clean Air Resources Board, CARB, is stating that ethanol is worse than the oil it replaces for carbon emissions. (1) Those "foot dragging" opponents of the government subsidies for ethanol have complained for years that it actually took more energy to produce the ethanol than has been obtained from it. Other issues are the jump in food costs associated with using food crops for fuel, and the big implications from the massive use of water.

LBJ's "Great Society" experiment, though laudable in its goals, was quite inefficient in achieving them, and in many cases was actually counterproductive. I remember reading a book by former Secretary of the Treasurey William E Simon back in the early 1970s, where he commented upon the massive difference between the economies of the USSR & the US that struck one between the eyes when coming back from a trip to the USSR. He felt that the "progressive" big government programs had a deleterious drag effect upon their economy and made things worse for all.

He noted how notoriously inefficient the government programs were and pointed out that if one divided up the spending of the various US government welfare programs to aid the poor by the number of people below the poverty line, one could have cut a check for $10,000 for every man woman and child. In other words our spending for a family of 4 would have come to $40,000 and yet the actual benefit they received was far less. I don't remember the actual figure, but it seems like it may have been $7,XXX plus or minus a couple of thousand. for that family. The bottom line, though, was that the vast majority of the money was spent on the government bureaucracy rather than the people it was designed to help.

Many critics contend, that many of those government rules and means tests actually hurt those families. It required many families to break up if they were to receive any assistance. Fathers of intact families were forced to move out if they wanted any government assistance for their families.

I remember hearing one father complain about the ordeal they went through when their son came down with a rare but very expensive life threatening disease. They eventually exhausted their company provided health insurance and went to the government for help. They were told by their social worker that the wife would need to quit her job. They felt that was rather silly, but complied and got some help for a little while. Then their social worker told them that the husband would have to quit *his* job as they still made too much money.

It was traumatic for them but they were faced with the choice of going along with "the system" or letting their son die. So, he quit his job. Some time later they came back and told him that he would now have to get divorced. Once again he was faced with an idiotic government mandated choice - divorce your wife or let your son die.

Perhaps that is what former UN Ambassador and presidential candidate, Alan Keyes, was speaking of when commenting on the deleterious effects those government programs had on poor communities throughout the country. He noted that although his family was very poor and lived in a ghetto community, that they never really feared for their safety. Most families were still intact and they joked that they didn't really have anything that anyone else would want to steal. That is no longer the case in our inner city communities, and some of those government programs designed to help them may well have played a key part in breaking down those communities even further.

It's tragically ironic, that the current leader Democratic Party, the alleged party for the poor and the downtrodden, is the poster boy for Planned Parenthood, a racist, eugenicist organization whose founder "called for the elimination of human weeds: 'for the cessation of charity, for the segregation of morons, misfits, and maladjusted,' and for the sterilization of 'genetically inferior races.'" and "said about her 1939 <Negro Project>, 'We do not want word to go out that we want to exterminate the Negro population and the minister is the man who can straighten out the idea if it ever
occurs to any of their more rebellious members.'"(2)

It's no coincidence that "almost 80 percent of {Planned Parenthood} facilities are located in minority neighborhoods" nor that "Twice as many African-Americans have died from abortion than have died from
AIDS, accidents, violent crimes, cancer, and heart disease combined." and

Every three days, more African-Americans are killed by abortion than
have been killed by the Ku Klux Klan in its entire history. (3)(4)

If President Obama is for the poor, the disadvantaged and the downtrodden and yet gets a "perfect voting" scorecard from such an organization, has voted three times against giving legal protection from being killed to children who have already been born (5), and in fact is not only in favor of the ongoing, often brutal slaughter (6) of 10s of millions of innocent human beings (7) (8) in the United States, but of government funding for that slaughter both here and abroad. How credible is a self-proclaimed champion of the helpless and disadvantaged, who is for the government funding of the deliberate killing of more innocent human beings in the United States of America every day of the year than were killed in the 911 terrorist attacks?

Should we trust him more than other government officials who are here to help? I think it would not only be more honest of them to impose their taxes directly on the consumers, ie. a gas tax, but more effective as well. Forcing auto makers to produce fleet mileage higher than what the consumer wants (or they would vote for that outcome with their wallets) may hide the tax but can skew things to thwart the intended effect. If gas prices are lower, consumers will still tend to want to use more, whether by skirting the mileage rules by buying trucks & SUVs with more lenient ones, by driving more miles, keeping their "gas guzzlers" longer or by assorted other means.

Similarly, Cap & Trade will have a tendency to push production overseas where international competitors may be operating under a different set of rules.

Certainly "the right wing" and the Republicans have their issues as well, but I think it is a mischaracterization of reality to claim that the "progressives" are dragging "the right wing" as "a dead anchor" into a Brave New World better future for everyone.

---

Endnotes:

1. Corn Ethanol Worse than Oil? California Rules Yes
www.treehugger.com/fil...

2. Planned Parenthood's Racism
www.ewtn.com/library/p...

3. Klan Parenthood
www.klannedparenthood..../

4. Black Genocide.org
blackgenocide.org/blac...

5. Obama Blocked Born Alive Infant Protection Act
www.citizenlink.org/co...

6. The Abortionist Speaks
The Carhart Testimony
mttu.com/Articles/The%...

7. When do human beings (normally) begin?
"scientific" myths and scientific facts
Dianne N. Irving, M.A., Ph.D.
lifeissues.net/writers...

8. When does life begin?
Senate Judiciary Subcommittee hearings April 23-24, 1981
buchholzins.com/cir/wh...

Jul 02 04:13 PM

[jack kreg:]

I'm pretty sick of this Cap/Trade nonsense.
Ditch it, and Congressman Waxman while your at it.

What we really need is a good old drilling opportunity. Lets start in CA where we really need the salary's/work, the long term sources of oil/gas, and royalty's for our citizens.

Yes, now thats more like it. Low cost American sources of energy, right in our own back yard, where American jobs will be had.
Yes, Ditch Cap/Trade, global warming is phony science, cooling for last decade, all the while CO2 levels on the rise, completely nullifying the global warming theory's and models.

Jul 02 07:34 PM

[rbblum:]

If any historical notes are to be referenced, it should be one in which the basic laws of economics can not be controlled by the will of man . . . no matter how magnanimous the intention(s) may be.

Besides, it is most perverse that man holds himself to be so wise while voting for a legislative bill that is neither read in its entirety nor fully understood.

Jul 03 01:40 AM

[Danny Newton:]

Anytime I hear someone pleading to reconfigure the analysis of benefit and costs, it usually comes from someone who has an agenda. who could not make their case in a straightforward way. Almost any activity could be considered to have both internal and external costs that are either captured or ignored. For instance, I could justify that I need a bass boat becuase the leisure time could offset the cost of seeing a psychiatrist.
If a benefit to cost analysis is correct, then over time ,there will be a pattern of success. Fannie Mae and Freddie Mac had a brief stint of success until they changed their ways of analyzing loan affordability. Departments of Transportation used to use rough rules of thumb to test the relative benefits of one project over others by considering the differences in the cost of crashes with and without injury or even death. Over time the value of human life increased in my lifetime at six times the background inflation rate. The comparrison became useless and pointed to the conclusion that all projects had enormous public benefits. In spite of the formulas, the death toll and the accident tolls continue to be fairly flat. The formula does not work. The cost of operating the car including the insurance is rising faster than the cost of the vehicle since the 80's. During this time external benefits were added to the formula that were largly associated with pollution. The formula seemed to wotk best between 1929 and 1981 in my state.
If you let me select which factors to count and how to weigh them, I can manipulate nearly any computation of value and get the bass boat or any other desired result. Most of the people who want to change the selection process have no interest in increasing GDP since they tend to believe that increasing GDP caused the environmental problems in the first place. People who profess to be environmentalist usually have no interest in any kind of action that would improve or even test performance, financial or other wise. If there is no profit, they can continue to ignore the reason for producing one and avoid the issue of the value of taking someting of little value and making it worth more.

Jul 03 04:10 AM

[bartpr:]

the details of the bill are not out yet. it too early to say how the coal and power industry will influence the final outcome. i say something
has to be done to stem the C02. there is no practical solution to its disposal in site yet and may not be for many years. its too costly to break it donw iinto )2 and carbon.

i know for a fact how C02 ACTS to absorb heat, using C02 gas in welding. it is there to contain the heat in the melted metal pool, so any argument that C02 does not abrorb heat is not true.

having been through many coal fired plants i am amazed at the
pollution the burning creats. there is the wash out of the fly ash that
must be removed by using copious amount of water. then the fly ash slurry is pumped to holding ponds. when one fills up another is built. wasted land is created in the process.

this alll must be curtailed and alternative energy indtroduced now.
since the industry is so powerful this will be a big fight. the loss to coal and fossil power will be bad.

Jul 04 08:27 AM