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Thursday, October 21, 2010

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.

Sunday, October 17, 2010

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.

Sunday, October 10, 2010

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.

Remember ...

"You're entitled to your own opinion, but you're not entitled to your own facts," Sen. Daniel Patrick Moynihan.

"Against public stupidity, the gods themselves are powerless." Schiller.

“Who controls the past controls the future. Who controls the present controls the past.” – George Orwell, 1984

"Statistics are no substitute for judgement," Henry Clay

"The problem with socialism is that you eventually run out of other peoples' money," Margaret Thatcher