What is it about oil prices that results in politicians taking leave of their senses?

Earlier this week Bob Duff sent a letter to Congress, "Urging Swift Action to Fight Oil Speculation." Duff says, "“We have done what we can at the state level to protect consumers. Now we ask Congress and President Obama to take the torch and crack down on irresponsible oil speculators on Wall Street.”
Carlo Leone, echoes Duff's sentiments and congratulates himself on stopping the prices from going higher.

Almost all of the Connecticut Congressional delegation has come out against Wall Street speculation driving oil prices higher. Jim Himes has been silent on the issue. We congratulate him in not joining the inanity of his colleagues.

It's embarrassing. What is it about oil prices that results in politicians taking leave of their senses. Do we really have to waste more time and energy in another useless investigation that shows oil prices respond to market dynamics. We have never discovered the boogeyman speculator politicians have conjured up.

We frequently disagree with Duff and Leone. But we always thought they were smarter than this. Maybe not. Bob, Carlo, do you really have to be so silly?

Lierbman wants to save Post Office. What next? Bring back Pony Express?

The Connecticut Mirror reports Joe Lieberman wants to save the US Post Office. Our first reaction was, Why? We may as well try to resurrect the Pony Express.

"We're trying everything we can to save this great institution," said Lieberman. This is the same insitution that raises prices for less service and the same one that is increasingly irrelevant due to email, text messaging, FedEx and UPS? The one that is going bankrupt? That great institution? Let it go. Sell the real estate and the little trucks. Use the proceeds to fund the pension obligation. Turn off the lights.

 

 

How Solar Subsidies Wastes Money, Increases Electricity Prices and Hurts the Poor

The CT Mirror has a story today  on Connecticut's solar subsidy program, "Controversy flares in new solar program for homeowners." In our rush to pat ourselves on the back for being green, what we ignore is solar subsidies wastes money, increases electricity prices and hurts the poor.

The gist of the story is solar subsidies aren't big enough and don't last long enough. That is, the pigs at the trough want more and more and more. From their perspective it is entirely fair for the average ratepayer to pay more for electricity in order to subsidize their business.

The math just doesn't work. Connecticut ratepayers pay about 18.26 cents per kilo watt hour for residential electricity. (see page 6). The relevant metric in solar is "levelized costs" which is the equivalent cost per kilo watt hour for a solar system over the life of the system. Levelized costs will vary based on the cost of the solar system, the installation costs, the efficiency of the system and the amount of sun the system can collect. In Connecticut the levelized costs for a solar system is about 30 cents per kilowatt hour. In order to make a solar system competitive what the government has to do is make sure everyone doesn't get a fair shot, everyone doesn't do their fair share, and everyone doesn't play by the same rules, to coin a phrase.

The system is rigged in Connecticut in three ways. First there is "The Combined Public Benefits Charge represents a combination of three charges formerly known as: "Conservation and Load Mgmt Charge, Renewable Energy Investment Charge, and Systems Benefits Charge."That is, we pay a direct fee to subsidize solar energy, it's about 3% of our electric bill. Second the state mandates the amount of electricity that must be generated by renewable energy. This results in less investment for natural gas and other traditional power sources, which are lower cost than solar and wind. Third, the state gives direct subsidies to solar producers and residential customers to install solar.

We end up then with higher costs, to subsidize a politically connected group of businesses to install solar systems mostly on homes of high net worth residents (the average costs of a residential solar system tops $40,000) and the poor get hurt most since electricity is a bigger part of their budget.

CCEA Outlook Combines Bad Writing and Bad Economics

We were puzzled by the CT Mirror story, "State projects could play key role in accelerating economic recovery in 2012," because it put forth a rather inane concept that a state could accelerate economic growth by taking money out of one pocket and putting it into another pocket. Since the State must balance its budget, all spending must be funded by increased spending or increased borrowing. And since borrowing must be paid back, and with interest, taxes will go up to fund that. Robbing Peter to pay Paul is not a legitimate economic theory.


The story was based on a report, "Outperforming the Nation: Is it Sustainable?" by CCEA, the Connecticut Center for Economic Analysis. We strive to be civil in this column, but there's no way to be polite about this report. The writing is awful. It's worse than awful.

The title page states, "This CCEA Outlook explores policies for ensuring the State of Connecticut’s recovery continues to outpace the Nation’s." There is this sentence, "Though still early in development of the Biosciences Connecticut complex, the major research building that will house Jackson Laboratories on the Farmington campus, and construction of the New Britain-Hartford busway, each will clearly strengthen the state’s economic performance significantly, by nearly 1% in 2012 and 1.15% in 2013." Chart 3 is labeled, "Employment Growth Eschewing and Including Low Interest Rates." And on it goes.

Awful writing. Awful economics.

Where the CT Delegation Stands on HHS Ruling Against Catholic Church

If anyone can find Jim Himes' opinion on the policy that will force Catholic run hospitals and charitable organizations to offer services that violate the Church's teaching, please let us know.

In late January, the Department of Health and Human Services (HHS), as part of the Affordable Care Act, also known as ObamaCare, ruled employers must offer contraceptive services to their employees as part of their health care plans. The Catholic Church objected, stating it was against Church doctrine for Church-run organizations like hospitals and charities, to offer contraceptive services to employees. The White House offered a compromise on February 10th, that is best summarized by Greg Mankiw, "Semantics at the Highest Level."

Where does the Connecticut Congressional delegation stand?
CT-1 John Larson applauds the compromise, but was silent on the initial ruling.
CT-2 Joe Courtney also applauds the new ruling, but was also silent on the initial ruling.
CT-3 Rosa De Lauro "will work to ensure that this policy is implemented in a fair and equal way that does not compromise women’s access to preventive health services regardless of their employer," and was also in favor of the initial ruling.

CT-4 Jim Himes is silent on the issue. However, Mr. Himes was kind enough to let us know he dove into Long Island Sound with the Mayor of Bridgeport.

CT-5 Christopher Murphy was also silent on the issue.

Senator Joe Lieberman was against the ruling, see his February 8th twitter "Government should not compel religious organization’s to provide services contrary to their beliefs," and he "applauds compromise offer, will review the details on implementation."

Senator Richard Blumenthal came out in favor of the compromise but was silent on the initial ruling.


John Cochrane has the most insightful, non-sectarian view on this issue, "The Real Trouble with the Birth Control Mandate," which is why HHS should mandate insurance plan cover a specific service, like birth control?

Unfortunately the debate is framed as one over religious freedom. The real debate, as Cochrane points out, is the freedom of all of us to organize our lives as we see fit.

Bipartisan Soapbox: Lunacy

Bipartisan Soapbox: Lunacy: Eli, According to the Hartford Courant , Democratic lawmakers are proposing an increase of the minimum wage in Connecticut, and then index...

The Pig at the Trough

We continue to be amused, then depressed, by the debate over federal spending. While loud voices complain over radical/extreme/dangerous reductions in federal spending, the reality is federal spending is still, and is projected to remain elevated, for quite some time. 

From fiscal 2006 through fiscal 2011 US Government outlays increased from 2.654 trillion to 3.601 trillion. That is a 35.7% increase. This increase is far in excess of GDP growth, median household income growth, median weekly wages and inflation. The 36% increase in government spending is more than twice the 14.7% increase in GDP. It is about 5 times greater than the increase in median household income. It is 3x higher than the median weekly wage increase. It is almost 3x greater than the increase in the consumer price index. 

But what about the cuts we keep hearing about. The cuts that will jeopardize our weak recovery. The cuts that will result in layoffs for teachers and fireman and police officers. There are no cuts. The Office of Management and Budget (OMB), which "assists the President in overseeing the preparation of the Federal budget and evaluates the effectiveness of agency programs, policies, and procedures," in its September 2011 "Fiscal 2012 Mid Session Review" puts federal spending at 4.391 trillion in fiscal 2016, 21% higher than fiscal 2011 levels and at $5.6 trillion in fiscal 2021, 27% higher than fiscal 2016. (Table 6. page 22).

The projected growth in government outlays from fiscal 2011 to fiscal 2016 of 21% is lower than the 30% projected growth of GDP, but the projected 28% growth of government spending from fiscal 2016 to fiscal 2021 is higher than the 25% projected growth of GDP. As a percent of GDP federal spending is set to fall from 24% in fiscal 2011 to 22% in fiscal 2016 and rise again to 23% in fiscal 2021. 

There was, and remains, a loud wail from Washington about severe budget cuts. Much of this related to the Budget Control Act (BCA) which mandates $1.5 trillion of deficit reduction over the next 10 years. The Select Committee which was tasked with coming up with a plan to meet this mandate was unable to reach agreement. The BCA, in this case, calls for automatic cuts about equally shared between defense and non-defense discretionary spending. That is, no change to entitlements, which are primarily Social Security, Medicare and Medicaid. 

Let's assume the $1.5 trillion actually gets cut, and let's assume it is cut equally over the 10-year time horizon called for in the BCA. That's a cut of $150 billion per year to the projected outlays. So instead of federal outlays rising 21% from fiscal 2011 to fiscal 2016 they will rise 16%. Expenditures in the fiscal 2016 to fiscal 2021 time period will continue to increase 28%. Like we said, "What cuts?" 

We've come to believe the reason there is such a loud puling from Washington over "The 1%" and income inequality and the millionaires and billionaires not paying their "fair share" is a tactic to divert attention from the very large pig, aka, the Federal Government, chowing down at the trough. What has consistently grown faster than your wages, your household income, inflation and GDP? The Federal Government.