Progressive Energy Policy: Too Much Sun, Too Little Sense

In the article, “Sierra Club slams Gov. McDonnell's Va. energy plan,” Associated Press, October 11, 2010, Steve Szotak writes that the Sierra Club is not happy with Governor McDonnell’s energy policy. In its report, entitled "Power Failure: How Virginia is Losing the Competition for Clean Energy Jobs," the Sierra Club states that the Governor has failed “to recognize and take advantage of abundant opportunities that exist with energy efficiency and renewable energy.” In addition to the criticism of McDonnell's proposed energy strategy, the Sierra Club report also recommends a series of proposals, among them:

• Utility rate structures that increase in price based on power consumption, and reduced rates for customers who use less power.

• Programs to help homeowners evaluate and retrofit their homes for energy efficiency.

• Adoption of a standard that requires at least 20 percent of electric demand be met by renewable energy by 2025.

• Rescinding tax credits paid to coal mining companies and utilities.

• Rebates or tax credits for investments in energy efficiency and renewable energy.

In effect, the Sierra Club wishes to replace market demand with political demand.

So how is the replacement of economic science (the law of supply and demand) by political science (the law of unintended consequences) working out so far in the real world? All we have to do is turn to two other recent reports.

In a July 31, 2010, Wall Street Journal Review & Outlook article, entitled “Peak Water,” it was reported that the state of Arizona has mandated that utilities produce 15% of their electricity from “green sources” by 2025. With more than 10 months of plentiful sunshine and vast tracts of desert, Arizona would appear to be ideal for solar. There is only one problem: because of solar’s low energy density, the steam turbine that drives the electrical generator requires twice as much water than a conventional coal plant. And that’s a big problem: there is limited water in the desert. In fact, in 2009, the Congressional Research Service examined the consequences of a solar expansion in the southwest, and reported that it could consume as much as 1% of the state's finite water resources within a few years. So, Arizona – which is currently a net exporter of conventional electricity to surrounding states (most notably California, the “greenest” of all states), is about to create a water shortage to meet some artificial environmental emergency.

How about electric vehicles (EVs)? In the Wall Street Journal article, “Bumpy road for electrics”, by Mike Ramsey, October 18, 2010, the Obama administration is spending more than $5B in tax credits, subsidized loans, and grants to automakers with the goal of getting one million EVs / hybrids on the road. Ford, Honda, Toyota, and various battery suppliers caution that this goal is too optimistic. According to Ramsey, “Many experts say the trade-offs and economics of the cars don’t make sense for most drivers – even with a $7,500 US tax credit to buyers.” Cars, like the Nissan Leaf and GM Volt will cost between $33,000 and $41,000: about twice the cost of similar conventional vehicles. Johnson Controls, which makes batteries for the cars, found that the pool of potential buyers, for which the cars make sense, is very small – about 3% of all drivers. What needs to occur to drive demand? According to Boston Consulting Group’s Xavier Mosquet, gas prices must rise to $8 to $9 dollars per gallon before electric cars will be cost effective.

Add to these unintended consequences, the fact that the Obama administration is promoting the idea of increasing the ethanol content of gasoline from 10% to 15%. Not only may such a move have a harmful effect on older automobile engines, but will provide additional incentives to agriculture to convert arable acreage from food production to fuel production. Based on various sources, one acre of land produces a paltry 12 to 20 gallons of gasoline per year or can feed 8 people.

So what can we conclude? In order to save the planet, we will have to make sure its inhabitants are living in poverty and hunger first. This is readily achieved by artificially raising the price of gasoline by taxing it so that electric vehicles are more “cost-effective.” In parallel, we can divert our water and agricultural resources to other uses, so that the price of food and water goes up. Not to worry, we can pay for it with the money we “save” from our now cost-effective transportation: that is, if we have enough food to eat or water to drink.

Maybe, just maybe, these folks should come in from the sun.

Fact Re-distribution: The Myth of Meritocracy

In a letter to the editor of the Washington Post on October 17, 2010, “The myth of meritocracy,” Philip Allen asserts, without facts, that “Wealth in America is more often accumulated by the already wealthy, privilege by the entitled, and impoverishment by the already poor.” “... risk-taking diligents who ‘make it’ are far outnumbered by the fortunate and privileged who start ‘ready-made.’” While I cannot speak to privilege and impoverishment, I can speak to the accumulation of wealth by the "risk-taking diligents" and support my argument with facts.

The “wealthy” I assume are the top income earners: the people who either own small businesses in America or receive employment from those businesses. The small businesses they own are recognizable in every town: gas stations, laundries, retail franchises, and other boutique family businesses. According to 10 Secrets that Millionaires Keep, by Daren Fonda of Smart Money, the financially successful, defined as those who have a net worth of $1M, are 90% more wealthy than other US households, earn on average $366,000 per year, and are in the top 1% of taxpayers. Their number has doubled since 2002, with half of them earning their wealth in their lifetime from small business, one-third from large corporations, and less than 3 percent through inheritance. Most come from families, which would not be classified as wealthy, and have enjoyed their financial success for less than 15 years. Their median grade-point average in college was 2.9, with an average SAT score of 1,190. Fifty-nine percent attended a state college or university.

What is a “wealthy” person’s secret to success? In their words, it is hard work, discipline, education, and treating others with respect. This seems to be borne out by the Year 2000 Census data. Of the 39 million people representing the bottom 20% of income earners only 8 million heads of household worked. Of the 64 million people representing the top 20% of income earners 19 million worked.

Other than their wealth, the “wealthy” seem to be a lot like the average American, except they have taken extraordinary risks, worked smarter and harder, and converted the opportunities presented to them into greater financial success.

Mr. Allen is entitled to his opinion; he is not entitled to his own facts.

November is Nye Upon Us

This weekend, I traveled to Richmond to hear the second congressional district candidates defend their positions before the Virginia Tea Party convention. I was surprised to learn that Congressman Glenn Nye had backed out at the last minute. This behavior was not totally unexpected: he has previously canceled breakfast meetings, scheduled town halls on military bases where civilians could not participate, and in general, deferred forming an opinion on controversial issues until the last minute so that he did not have to defend them.


However, I did get the answer to the question I wanted to ask him. In a posting on the Hampton Roads Tea Party Facebook page, announcing Congressman Nye’s withdrawal from the forum, he was asked if he would vote for Nancy Pelosi again as speaker of the house. “He said, he would ‘cast a vote for whoever the Democratic Caucus put forward.’ … and if Pelosi was put forward? Glen[n] Nye responded, ‘Yeah, I’d vote for her.’”

That is why I am voting for Scott Rigell. Not only is Mr. Rigell qualified, but a vote for Nye or Ken Golden – the unelectable independent in the race – is in effect nothing more than a vote for Nancy Pelosi. It is time for a return to smaller government, fiscal responsibility, and constitutional principles.

Another Mickey Mouse Idea: A Call to Preserve the Estate Tax

In an August 31, 2010 article in the USA Today (“Mickey Mouse, the estate tax and me”), Abigail Disney makes the case that the estate tax “is not the bogeyman you might think it is.” In the last paragraph of her article, she states her real premise: "the estate tax is the cornerstone of a progressive system that leaves wealthy heirs with ample funds while providing the government with the resources it needs to build an environment for the common good. By preserving it, we not only restore billions in revenue to the national treasury – we also restore our most cherished collective ideals as a nation." [emphasis mine] Restated: government is the source of the common good and must be amply funded by the “wealthy.” I think not. The source of the common good is individual, unalienable rights endowed by our Creator. Through exercise of each individual’s personal rights – among these, life, liberty, and the pursuit of happiness – comes the creation of individual wealth, which in turn benefits society, not vice versa, as Ms. Disney would lead one to believe. It is government’s role to protect those rights not redistribute wealth these rights produce, in the pursuit of the greater good.


Ms. Disney supports her argument with what she calls three “truths:”

• First, the estate tax is not a double tax. “People like me and, who inherit assets, such as Disney stock, can spend our lives watching [emphasis mine] those assets grow, and when we pass them along to our children, they have not been touched or diminished at all by the tax system. The only thing I have paid taxes on is the interest from these assets, not their increased value.”

• Second, “opponents of the estate tax claim family farms will have to be broken up to pay the tax, but good luck finding an example of this."

• Third, “the estate tax incentivizes people like me to do good [emphasis mine] with our wealth because there is no estate tax on donations to charity. My filmmaking and foundations rely [emphasis mine] on a tax code that supports a vigorous non-profit sector, a vital part of our society..."

Ms. Disney, like most progressives starts her argument in the middle. She does not discuss the creation of wealth. Unlike most of America, she inherited her wealth: more than 80% of all Americans who have a net worth of more than $1 million, earned it in their lifetime. When I sold my first business, because I had no access to financial capacity, I had to liquidate 51% of the stock value I had created to pay the capital gains tax. I had worked for 12 years to build a very profitable business, and over a period of two years, wrote checks to the IRS that represented 51% of the value of the portion of the company I had built. It took 12 years to earn back this money through Ms. Disney’s “investment in the stock market” approach, while paying taxes on the interest, dividends, and capital gains earned (notice she conveniently left capital gains out as a tax). This is a triple tax: first on the wealth that is created, second on the earnings that flow from future investment, and last at death through the estate tax. So much for her argument on double taxation.

As for her second point, most small business persons have their fortunes inextricably tied up in their business. While I know little about farming, I know a lot about service-oriented small businesses. Most of them are “S” corporations, which are taxed at the personal income tax rate. So, each year, after deducting employee salaries, benefits, corporate payroll taxes, and legitimate operating expenses, the remaining income is taxed at the individual income rate. Retained cash – that which is left after paying taxes at the individual rate – is then used in the business to buy equipment and grow the business. If the small business person dies, his or her ownership in the business is included in his or her net worth and is subject to estate tax. If that tax cannot be paid with cash – not equipment or investment – then the business’s assets will be sold and the business closed. So much for her argument about losing the farm.

Last, I find it amusing that Ms. Disney believes a progressive tax code is both a necessary and sufficient condition for individuals, wealthy or otherwise, to “do good” in the world. In fact, she states her own “filmmaking and foundations rely on the tax code.” Implicit in her statement is that government must be funded because it is the principal agency through which “good” – as she defines it – is effected. Not necessarily: moral people do moral things, independent of the government and its tax code. Personally, I tithe because God, not government, has placed this burden on my heart. I only hope that the government allows me to keep enough of the wealth I created to meet the needs I find around me. So much for her argument about taxes as moral force for good.

Come Nye and Hear the Truth

On August 19th, Glenn Nye faced off in a debate against his 2nd Congressional District rivals for the first time. According to him, he has been: (1) fiscally conservative, (2) a leader in standing against issues that were not in the 2nd District’s best interest, and (3) a faithful provider who has brought home the bacon for his constituents. As is true of any good lie, there is an element of truth in each claim.

First, Nye did vote against the Health Care bill. Unfortunately, he then voted to fund the 10,000 IRS agents that must be hired and trained to ensure small business compliance with this monstrosity. According to the National Federation of Independent Businesses, the health care legislation will create 68 grant programs, 47 new bureaucracies, 29 pilot programs, six regulatory systems, six compliance standards, and two new entitlements. So, I guess he was against it, until he was for it.

Second, my experience with Nye’s voting record is that he never decides until the last minute. When I call his office, the night before a key vote, his position is reported by his staff to be “undecided.” I can only surmise that either he (a) is still diligently reading all 2,000 plus pages in order to form a conclusion OR (b) is waiting to be told by Nancy Pelosi if his yea vote will be required to push the bill forward. She certainly does not want to unnecessarily require a junior legislator on the House Armed Services Committee, facing a hotly contested re-election campaign, to explain his yea vote to his constituents if she does not have to. A real leader forms a reasoned opinion, communicates it to his constituency, and defends it in public forums.

Last, Nye has been supportive of his active duty and retired military constituents (he is on the Veterans Affairs Committee). Unfortunately, he has been ineffective in addressing the concerns of his small business constituents (he is on the Small Business Committee). According to the federal Bureau of Economic Analysis, as reported in the USA Today, August 17, 2010, “Military towns enjoy big booms,” military compensation (after adjusting for inflation) rose 84% from 2000 through 2009. Compensation grew 37% for federal civilian workers while only growing 9% for private sector employees. While I do not begrudge our average soldier, sailor, and marine the $122,263 in total individual compensation received in 2009, Nye and his fellow progressives need to figure out how stimulate the private sector economy to create jobs so that he can afford the public sector bill.

You cannot de-Nye it: if you want a closet progressive – who takes direction well from above, keeps all options open, and is only concerned about creating, growing, and protecting well paying government jobs – Glenn is your guy.

Alinsky, you Magnificent B******, I Read Your Book

The next government salvo has been fired by the Obama administration for the hearts and minds of voters in Hampton Roads: elimination of JFCOM’s 5,000 jobs. While this decision does represent a potentially grave personal and regional economic threat, there is a bigger lesson to be learned: what the government gives, the government can take away.

The larger story is that our elected representatives apparently did not know this was coming. The timing, speed, and targeting of this decision is circumspect. Its real objective is to cripple a state and region, whose voters have decidedly chosen to repudiate the Obama administration’s policies by overwhelming electing a republican governor, who has taken action to balance the state's budget, placed the state on a growth path, and legally confronted his health care and immigration policies.

The Obama administration's strategy is taken straight out of Obama's mentor's (Saul Alinsky’s) book  Rules for Radicals: the particular ends justify the particular means. The ends are to divide and defeat voters of the Commonwealth, in detail, by diverting our dialog and energies from opposing the abysmal failure of the Obama administration’s policies. Instead, they prefer we bicker among ourselves during campaign season and dedicate a larger portion of the news cycle to divining how to remain on the statist government’s form of crack cocaine: federal money. If we don’t play, they will give the crack to someone else.

Instead, we should come together and turn lemons into lemonade by: (1) publizing that we acknowlege and understand the tactic; (2) taking reasonable, coordinated action to delay JFCOM’s demise without diverting resources from our prinicipal mission -- defeating Obama's / Pelosi's / Reid's progressive policies; (3) re-deploying JFCOM's human resources, technology, and facilities to create private sector jobs in the high-tech global marketplace, and (4) firing every progressive representative in Washington in November.

If we think and act strategically, we will be able to say -- as George C. Scott said in the film "Patton," portraying Patton's defeat of forces under the command of Erwin Rommel -- "... you magnificent b******, I read your book!"








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So this is progress[ivisim]?

Two articles in the Pilot on August 9, 2010 illustrate how out of touch and out of control our current government is. "Optometrists say state’s Medicaid cuts lack vision” and asserts a new budget measure “barring them from Medicaid reimbursements limits eye-care access for the poor, harms their practices, and generally is an affront to the profession.” This dire state of affairs is attributable by this interest group to Governor McDonnell’s actions to balance the state budget. This page 1 story is followed by a page 5 story "Lackluster effort to combat Medicare fraud examined,” which discloses that out of $835 million in questionable Medicare payments, the government has only been able to recover $55 million. These two stories make the point: we have created a statist mentality that communicates everyone is entitled, enabled it with an incompetent government, and raised a generation of reporters who cannot draw a direct connection between the two.


Personally, I'm tired of funding out of control,inefficient, ineffective government that has lost any congruence with the intent of our founding documents. It's not government's job to meet our individual moral obligation to provide goods and services to the poor -  we should meet that directly, through our churches, our communities, and not-for-profit organizations.   The government's job is to protect our individual liberty not redistribute our wealth.  It is our responsibility to use our secured liberty in a morally responsible way to create wealth  and use that wealth to advance our personal and collective interests as a society.