You can learn more but our movement and how to get involved, including the intitiative to install term limits on all Federal politicians, at:
www.unitedstatesofpurple.com
February 19, 2012
This is the fourth in our series of posts on how the United States of Purple drive for the Presidency would address and resolve the major issues facing the country, issues that have been around for decades. The political class has occasionally attempted to solve some of these issues but their half-hearted attempts have always failed, either because they did not understand the root causes of the problems or because actually solving a problem might alienate a few voters and endanger their much cherished reelection chances.
Without understanding the root causes of our problems, the odds of resolving these issues are minimal. As a result, when the political class actually tries to address the problem, their solutions fall flat on their face. Recent political class attempts to fix our energy dependence problem is a case in point:
- The current administration has given out Federal taxpayer grants, loans, and loan guarantees to various companies in what appears to be a a random manner. Solyndra, the California solar panel manufacturer is the purest example of failure. Shortly after getting a Federal government loan worth well over half a billion dollars, the company went bankrupt and lost the taxpayer wealth with no discernible benefit.
The shallow reason for the failure is that the company and the political class did not anticipate the changing short term market conditions, driven by the drop in foreign manufactured solar panels. The real reason for losing over half a billion dollars is that the political class did not understand the root causes and underlying dynamics of market conditions which led to the failed company.
- This deeper reason carries over to the many other failed alternative energy companies that the political class has thrown money at in a willy-nilly manner such as Beacon Power, Spectra Watt, and Evergreen Solar, all of which went out of business. They do not understand how to solve the energy problem from a root cause understanding perspective and their inability to think strategically. They have no idea how to use leverage to exponentially grow their opportunity for success.
As a result, we end up with very shallow, tactical thinking that just ends up wasting taxpayer wealth on bad investments.
- Every couple of years or so, the political class puts together a show about how they want to raise the average miles per gallon the cars in the country should achieve. These so-called CAFE standards are used for political debate and at the end of the bluster, the average miles per gallon performance standards are raised for some time in the distant, distant future. Then the politicians congratulate themselves for delaying, but not solving, the problem of energy dependence.
Their charade brings to mind an old saying that I believe is attributed to Abraham Lincoln:
Question: If you called a tail a leg, how many legs would a dog have?
Answer: It would still have four legs, just because you called a tail a leg does not make it a leg.
Just because you raised the CAFE standards doesn't mean it will happen, especially if you do not have a strategic plan behind it.
- Speaking of shallow tactical thinking vs. long term strategic thinking, let's talk about Obama's Cash For Clunkers program. Recall that the President gave away thousands of dollars of taxpayer wealth to anyone who bought a new car within a specified period of time. The failed rationale for the program was to increase sales of autos in tough economic times in order to help jump start the economy and replace older, lower mileage cars with newer, higher mileage cars.
We now all know that this tactical thinking approach was a failure. We have previously reviewed a Federal government report and analysis that proved there were no incremental auto sales as a result of this program and thus, no incremental spurring of the economy or substantial increase in national gas mileage. The timing of the sales may have changed, people delayed or moved up their purchase of a car to get the free Federal tax money, but in total, no incremental sales occurred. Bad tactical thinking, small minded energy programs that do no good.
We could go on about the failure of the Federal Energy Department and the Federal political class for a long time relative to their inability to create a strategic, coherent, and effective energy policy and strategy for the country, despite having over thirty years to do so. However, the above examples get the message across, allowing the same people to do the same type of short term and tactical thinking and get the same type of bad results is not the way forward
Complicating the matter today is the rift over global warming. Some citizens and scientists say it is an issue, some citizens and scientists say it is not an issue. As usual, we end up with the typical political gridlock, name calling and inaction, that we get on all other issues in today's political climate.
I, myself, am a global warming doubter. I laid out my reasons in the following post from last week:
http://www.loathemygovernment.blogspot.com/2012/02/i-am-global-warming-doubter-and.html
However, what if I am wrong? What if we really do need to do something about man made emissions? Do we really think that building a massive government bureaucracy called "Cap And Trade" would actually work?
We know now that the massive government bureaucracy known as Obama Care is not working nor will it ever work. With the collapse of MF Global, the 8th largest American bankruptcy ever, and the likely criminal misuse of over a billion dollars of client assets, that the massive government bureaucracy established by the Dodd-Frank financial industry reform legislation is also not working.
Other massive government bureaucracies also are dysfunctional, from Social Security To Medicare to food stamps. There is no reason to believe that a massive government global warming cap and trade program would not be a disaster
But what if you did not need a massive bureaucracy to address both global warming and our energy crisis? What if there was a long term strategic approach to both problems together rather than the failed tactical approaches to either problem? What if you could leverage the force of the market place to solve both problems, real or imagined, and not rely on the limited ability and knowledge of the 600 or so people in the White House and Congress? What if you could solve both problems with a minimal impact on freedom and citizens' wealth?
The following approach would be our best chance to do all of the above, migrating us to energy independence while cleaning up our energy foot print. This approach would involve some very simple principles:
•The approach to co-solving the global warming/energy crisis would be revenue neutral to the Federal political class, i.e. it would not put more of our wealth within the power of the politicians in this country.
•Once the approach was set, it would be hardwired for at least ten years in order to remove market uncertainty and allow businesses and citizens to compute their short term and long term personal energy plans based on a firm belief that the rules would not change midstream. As we have stated earlier this week in this series, the Obama administration has an ugly tendency to inject major uncertainty into all of the major issues of our times (tax codes, tax breaks, health care, energy policy, etc.). Uncertainty breeds fear and we do not need any fear on an endeavor such as this.
•Market forces and the personal choices of Americans would drive/leverage this process, not another massive government bureaucracy. The massive bureaucracy known as the Energy Department has been a bust for over thirty years, there is no reason to believe it or another government bureaucracy will do better going forward the next ten, twenty, or thirty years.
•The plan will be strategic and long term, no more short term failures like Cash For Clunkers, Cash For Appliances, and Cash For Caulkers, all of which not only were non-strategic but also were not successful.
•There will minimal and hopefully no failed government subsides. There should never be another Solyndra, Beacon, or Evergreen. The market, operating under a long term strategy and set of rules, should pick the winners and losers, not politicians and their cronies who have shown a propensity for only rewarding themselves and operating ill fated companies into bankruptcy. For a good review of these failures, track down a New York Times August 18, 2011 article entitled: "Number Of Green Jobs Fails To Live Up To Promises."
So what would this dual solution look like? It would have the following, long term (ten years) components
- A five dollar per barrel of oil tax/fee would be implemented and added onto to previous year's $5 tax every year for ten years, and that cost would be allowed to filter down into the production of heating oil and gasoline. Thus, ten years from now, a barrel of oil would carry an incremental $50 per barrel tax.
If everyone knew that this tax was coming and it was going to increase $5.00 every year, would would happen? People would adapt, the entire market would adapt, creating leverage for less consumption of oil and less creation of emissions that may be causing global warming.
How would they adapt? The next time the bought a car, they would likely give serious consideration to a vehicle that got great gas mileage, considering that in ten years the cost of a gallon of gas might be as much as 50% more expensive. They would likely look to better insulate their homes if the cost of heating oil was likely to be 50% higher within ten years.
They might also consider implementing active or passive solar energy equipment to avoid or minimize the higher cost of electricity and heating. All of these actions would crate more demand for energy efficient products and services, driving the down the costs of such products and services, getting more people and small businesses interested in managing their energy future if costs came down.
Auto manufacturers and heating equipment manufacturers would invest in research and technology that is more energy efficient, knowing that their customers will become more efficient and smarter shoppers in the future. That would further reduce costs and emissions. All of these actions occur because the true costs of energy, loss of freedom due to the dependency on foreign energy sources and environmental impacts, are now fully part of the end price, i.e. the $5 per gallon per year increase represents these environmental and freedom costs.
Innovators would seek out, invent, or refine better energy sources, be it natural gas, wind, solar, tidal, or other energy technologies that do not exist yet. The competitiveness of new energy sources would be enhanced by the $5 tax approach on oil, creating new domestic industries competing on a more equal basis against oil and coal (see below).
But won't that destroy the economy and give our politicians more access to our wealth. Here is the beauty of this plan: the $5 a barrel tax never makes it in the hands of the Treasury or the political class. That money is rebated back to tax payers every year to do with as they see fit. They could use it to go on vacation. They could use it for a new TV.
But many of them would use it for a better gas mileage car, a better heating system, more home insulation, etc. Thus, we have not reduced the amount of wealth in the market, we have not given it to politicians to waste, we have just reallocated it for the good of the country and the environment.
This plan has leverage, it has certainty, and it will affect far more people than anything else the political class has passed off as an energy program. Cash For Clunkers affected about 300,000 people. I would bet Cash For Appliances and Cash For Caulkers affected for fewer. Their results were pitiful. Practically everyone in the country would be affected be this program. The key is not allowing the political class to get their hands on this additional money.
How much money might this get each of the 140,000,000 U.S. personal taxpayers every year? The U.S. uses about 19 million of oil a day. If you go through the math of 19 million, 365 days, $5 a barrel, you would end up sending each of the 140 million taxpayers a check for just under $250 the first year. It doesn't seem like much but the next year that might get twice that much since the tax would be raised another $5, resulting in more money coming in for distribution.
However, if the plan works, there should be less oil consumption the following year. Thus, rather than $250, assume that consumption goes down 10%, resulting in a second year payback/rebate of $250 and $225 (10% less) or $475. If you continue this model for ten years, an additional $5 tax and an additional 10% decrease in consumption, by the tenth year, each American taxpayer is getting over an annual $1,600 credit that they can use for weatherizing their homes, putting in solar equipment, etc.
A simple but elegant solution: less consumption, less emissions, certainty in the market, a leveraging of the entire market structure, no massive and doomed to failure cap and trade bureaucracy, no energy technologies, and our politicians get no more of our money in the process.
However, I cannot take credit for the plan and its elegance. Many of the details and philosophy of such an approach are well laid out in a September 6, 2010 article in Fortune magazine, that was written by Nina Easton and which covered the above plan proposed by two Republican Congressman, Jeff Flake and Bob Inglis.
- But oil is not the only "bad" environmental fuel. What about coal? Different fuel, same approach. All you have to do is come up with a similar tax that is equivalent to the $5 per barrel oil tax discussed in detail above and apply that to every ton of coal that is mined or refined.
By imposing such a tax or fee, utilities and coal companies would be falling all over themselves to improve coal's performance and environmental impacts. One additional facet that could be included in coal is to reduce that fee as the industry meets tighter environmental standards, i.e. clean up your act, reduce your tax. But the coal tax also never makes into the hands of the political class. It is rebated back to utilities and their users in an annual coal tax rebate.
- Two steps from "Love My Country, Loathe My Government," would also go a long way to fixing our energy and environmental problems. Step 24 would establish a national research program to facilitate the cleaning up of coal and its by products. In this country we have a lot of coal. If we could clean it up, it would go a long way to reducing our emissions, reducing our overall energy costs, and make us much more energy independent.
- Step 25 would implement a serious discussion and initiative with China and India, two countries whose use of coal and the dirty after effects it produces is growing very, very quickly. What global warming enthusiasts always fail to appreciate is that even if the U.S. cleans up its act in emissions, it will have no impact on the global environment and global warming if China and India, big and growing coal users and polluters, do not do the same thing.
We would end up knee capping our own economy for no reason if China and India do not clean up their coal act and continue to increase the emissions they throw up into the atmosphere every day. That is why Step 24, cleaning up the bad after effects of coal, needs to be a world community effort, not just a U.S. effort. And the political class needs to start talking to China and India, to name just a few of the emerging economies, to clean up their coal act also and in cooperation with each other.
- But this is a ten year plan, what could be done prior to seeing the benefits of this simple, yet elegant approach to two problems? Two things come to mind. An Associated Press report on January 11, 2012 reported that the EPA had put together its first database of U.S. locations that emit harmful pollutants into the atmosphere.
According to the database, 72% of all U.S. emissions come from U.S. power plants, many of which burn coal to produce the electricity we need everyday to get through life. If one assumes this database is correct, why wouldn't we as a nation look at the top 30 or so plants and work to clean them up, if they are the leading polluters of the 72%.
You probably do not want to shut them down since they are probably also the larger creators of electricity. The local and national and national economies would be hard hit if these facilities were shut down and stopped creating electricity But it does not mean that the best and brightest people we have should not attack these 30 locations and do all they can to fix their emission volumes. This would one short term way of addressing the potential of global warming.
- A second short term way ties into the $5 a barrel tax on oil. If we are really series about weaning ourselves off of foreign energy sources, then one approach is to start taxing those people that insist on buying oversized/low mileage vehicles for no business reason whatsoever. This is a personal prejudice, but I see no reason why anyone needs to own a Hummer. I see no reason why someone needs to buy a large, low mileage pick up truck to go buy milk.
These vehicles serve no personal purpose at all.
Now, I hate to act like a politician here and restrict anyone's right of choice. If the political class is not serious about energy independence and global warming than this should not even be a discussion since it is intrusive into freedom of choice, an act I usually find repulsive.
But if we are serious, than I would start putting a purchase tax on all vehicles, like large Hummers, that do not meet a reasonable gas and emission target. Next year, I would increase that target, the following year I would increase it again. And again and and again.
Americans could still use their freedom of choice to buy a Hummer or a large low mileage pick up truck for personal use (if these vehicles are being used in legitimate business operations, they purchase tax would be waived). This plan would not take that options away from them. They would just have to pay more for this sales choice.
Two things would happen under this plan. First, auto companies would get really serious about improving emissions and gas mileage performance on these types of vehicles. If they did not, their vehicles would become less and less financially attractive over time, given the increase in the purchaser tax.
Second, some customers would start to ask if they really do need a large Hummer to take their kid to the soccer game, a family sedan with better mileage and no purchase tax would be just fine. In both cases, you get leveraged behavior across a large swath of the marketplace that reduces consumption of foreign energy sources and cleaner air.
This would not be a small tax. I would start it at $1000 and increase by $1000 every year for ten years. Within three years you have added $3,000 the cost of the car and should see results. If you do not, increase the amount until you do see positive behavior change.
And the best, most brilliant part of this approach: none of the purchase tax money goes to the political class. It goes into the rebate pot of money we discussed above, back to the 140,000,000 American tax filers each year and back into the economy, not the black hole of waste in Washington.
- While this is a simpler, more leveragable, and more elegant approach than anything our political class could come up with, it is no small task. That is why Step 23 in "Love My Country, Loathe My Government" is so important. Step 23 would put together a panel of smart Americans to operationalize this plan. They would use their vast knowledge and expertise to refine the Hummer purchase tax amount and increase, develop the coal tax we discussed above, determine if $5 dollars a barrel of oil tax increase very year is enough to change behavior, propose ways to fix the emissions on those top 30 emitters of global warming gases, etc.
They would develop and present the plan to Congress and the President, all of whom would vote thumbs up or thumbs down on the plan's entirety. They would not be able to adjust anything since 1) they are politicians, not experts, 2) they would adjust things based on personal political needs and campaign supporters and not the good of the country, and 3) if they start to nit pick the details then nothing would ever get finalized.
Let the expert panel do the hard work, trust their expertise, and let's get on with things. Establish some long term certainty in the market so that businesses, providers, and consumers of power know the ramifications of their own actions and plans, actions and plans that are not held hostage by the whims and uncertainty of the political class.
If the political class votes negative on the overall plan, then it would be pretty obvious that they really do not want to solve the problems of energy independence or global warming. Or they want to solve the problem where they control everything, restricting freedom of choice, building large, ineffective bureaucracies, and collecting and wasting more of our individual wealth.
We know that this approach never works, that is how we got stuck with the Federal Energy Department, Solyndra, and Cash For Clunkers, all of which were clunkers of ill repute and wasters of taxpayer wealth of large disrepute. In the United States of Purple, simple, elegant, long term, leveragable, and strategic is the only efficient and effective way to solve problems.
Political class bureaucracies like their proposed cap and trade lunacy is not the way to go. The political class way leaves us right where we were when we stood in long gas lines in the 1970s, stranded and helpless in the middle of nowhere.
“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein
We invite all readers of this blog to visit our new website, "The United States Of Purple," at:
http://www.unitedstatesofpurple.com/
The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.
The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.
Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:
http://www.cato.org
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/
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