President Obama’s Green Initiatives did not Create Jobs or Save the Planet

Posted by PITHOCRATES - June 2nd, 2012

Week in Review

If the Energy Department was a private corporation it would be the ideal bailout target for a company like Bain Capital.  Inept management, poor investments and bad strategic policy.  It has everything.  So much so that it would be easier for the bailout team to ask them at Energy what actually worked.  It would keep the initial meeting much shorter (see Difference Engine: To and from the grid posted 6/1/2012 on The Economist).

Since then, interest rates have fallen, while the price of solar panels has tumbled even more so—thanks to Chinese overcapacity. Meanwhile, electricity rates (at least those in southern California) have risen noticeably. Your correspondent reckons photovoltaic solar systems now cost half as much as they did four years ago.

Two things could make or break America’s affair with solar power. One concerns the ushered in by the economic stimulus bill of 2009. Many of those temporary tax credits are now coming to an end. If nothing is done to extend them, the incentives will fall from a peak of over $44 billion in 2009 to $16 billion this year and $11 billion by 2014. That could bring the solar-installation business to a screeching halt and wipe out tens of thousands of green jobs. The industry’s future depends largely on the outcome of the November election….

The irony is that those who invest their own money to generate clean electricity from solar panels on their rooftops are likely to be the last to benefit from it environmentally. Nowadays, most people work outside the home during the day and consume the bulk of their residential electricity in the evening and during the night. In California, that is when the state—which meets only 70% of its electricity requirement from its own resources—relies heavily on cheap electricity imported from dirty coal-fired power stations elsewhere in the country. This situation will only be exacerbated if, as expected, plug-in battery vehicles, needing to be recharged overnight, account for an increasing share of the Californian fleet.

That aside, all your correspondent now has to worry about is whether the 31% anti-dumping tariff recently imposed on Chinese solar-panel makers really does deter them. Having seen such trade spats play out many times before, he suspects the tariffs will only spur Chinese firms to acquire the few remaining American solar-panel makers so that they can carry on manufacturing in low-cost Wuxi or Shanghai and do their final assembly in middle America (presumably with local subsidies to boot).

So solar panels have never been cheaper thanks to the Chinese.  Which is good.  These lower prices will encourage people to save the planet by installing solar panels onto their roofs.  Unless the government raises these low prices with a 31% anti-dumping tariff.  Hmm.  Looks like you have to choose between saving the planet.  And providing green jobs.  For as this anti-dumping tariff clearly shows you can’t have both.

And because jobs are more important than the environment the government is subsidizing the clean energy industry.  Let’s crunch some numbers.  They say we could lose “tens of thousands of green jobs.”  So let’s assume there were 80,000 jobs created in the first year.  And they declined by 10,000 every year to reflect with the growing number of bankruptcies in the green energy sector.  Dividing the incentive by the cost in the first year you get a cost of about $550,000 for each job created.  If do the same for the last year you also get a cost of about $550,000 for each job created.  That’s a lot of money to pay someone.  And I’m guessing that the Chinese aren’t paying their employees a half million each in wages and benefits.  Not when they’re making these solar panels so cheap that the U.S. has to slap an anti-dumping tariff on them.

Of course these numbers don’t include the $500 billion the government blew on Solyndra.  Or the other Solyndras out there.  Which when you factor all of these in these green jobs are costing the taxpayer probably in excess of a million dollars each.  For what?  To pay someone a $50,000 wage on an assembly line so he or she can take these earnings and stimulate the economy?  Talk about a negative return on investment.  And the president is attacking Mitt Romney’s Bain Capital past?  If Bain Capital took over the United States government to turn it around to get a sensible return on tax dollar investments guess who would be the first fired from his job?  The incompetent chief executive that spent a million dollars plus to get $50,000 worth of stimulus.

And the kicker is that none of this matters.  When solar power is available people are at work.  When people are home cranking up their air conditioners and plugging in their electric cars for the night the sun is down and coal-fired power plants are meeting this peak demand.  So we get nothing.  No jobs.  And we don’t even save the planet.  We just get higher taxes and more debt.  A pretty crappy deal if you ask me.  We have coal.  We should just use coal.  And not demonize it.  We’d arrive at the same outcome.  Only with fewer taxes and less debt.  And cheaper electricity.  Because we’d be bringing more coal-fired plants on line.  Now that is a smart turnaround plan.  The kind of turnaround that could end up in the win column at Bain Capital.

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The Chinese Government invests in LED Chips poorly causing Over Expansion, Price Deflation and Factory Closures

Posted by PITHOCRATES - May 27th, 2012

Week in Review

China’s formula for success is to partner government with business.  Like they did in Japan during the Eighties.  Before Japan’s Lost Decade.  And their deflationary spiral.  China is using the same formula.  Having government invest in corporations to expand production to dominate the market.  And, of course, create some bubbles along the way (see Analysis: Falling prices to kill off half of Chinese LED chipmakers by Leonora Walet and Twinnie Siu posted 5/27/2012 on Reuters).

In China, surplus capacity and sliding prices are sounding the death knell for half of the companies making light emitting diode (LED) chips used in Samsung television panels and Sharp computer monitors, with only the large, state-backed players likely to pull through.

Sluggish global sales of TVs and computers may further cut LED chip prices by 20 percent this year, and consolidation or closure are the only options for China’s smaller LED players, analysts say.

By contrast, Sanan Optoelectronics Co Ltd, China’s top LED chipmaker with a market value of $2.8 billion, and Elec-Tech International Co Ltd will be among a handful of large companies that will survive as they continue to receive subsidies and incentives from the government, according to analysts…

For the majority of LED firms, the government is slowly rolling back incentives, including tax breaks, free land and more than $1.6 billion in cash to buy LED chip-making equipment, that had helped sustain the industry for more than three years.

Proview International, whose Shenzhen-based unit is battling Apple Inc over the iPad trademark in China, is grappling with slumping LED prices and fierce competition that have dragged down earnings for other LED companies including Hangzhou Silan Microelectronics Co and Foshan Nationstar Optoelectronics…

Many LED companies are operating their factories at 50 percent capacity in China, with up to half of the 700 or so chip-making machines purchased with government money during the boom years in 2009 and 2010 left idle, industry watchers say.

In the past year, overcapacity has shut hundreds of small Chinese makers of LED lighting, according to analysts.

“China’s financial policy is not giving enough support to mid-tier and smaller enterprises,” said Bao En Zhong, executive vice chairman of the semiconductor lighting association in Shenzhen, one of China’s largest production bases for LED lighting. “We may see more factory closures…”

So the secret to success in China is government incentives, tax breaks, free land and lots and lots of cash.  If you can get this from the government you, too, can flood the market with product.  Sending your prices into a tailspin.  Then all you have to do is be one of the lucky few the government bails out so you can flood the market with more of your product.  Sending your prices into a tailspin.  Again.

People say this type of dumping of low-priced products onto the market hurts consumers.  I never understood that.  Here the Chinese helped to bring the cost of televisions down by making the chips that make them work so dirt cheap that they shuttered hundreds of Chinese manufacturers.  And chip prices may fall by another 20%.  I just don’t see how the consumer loses here.  It looks like the losers are the hundreds of shuttered businesses.  And the Chinese government who invested so much into those businesses.

This is state-capitalism.  Where businesses make bad decisions because of the free government handouts.  If it weren’t for those free government handouts these businesses wouldn’t have produced so many chips that they put themselves out of business.  You add up all of this bad government investment throughout China and it says only one thing.  A day of reckoning is coming.  If the Chinese don’t believe it they can ask the Japanese.

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Competing against China in Solar Panel Manufacturing will only Create more Solyndras and won’t help Save the Planet

Posted by PITHOCRATES - February 5th, 2012

Week in Review

The cheaper solar power equipment is the more people will buy it and hire people to install it.  Because labor is labor.  There’s nothing you can do about that.  But manufacturing can reach economies of scale that can reduce manufacturing costs.  And selling prices.  Much like everything else in the world.  The first televisions were expensive.  Now they’re cheap.  The first VCRs were expensive.  Then they got cheap.  The first personal computers were expensive.  Then they got cheap. 

So all that we need is for someone to make solar power equipment cheap by employing economies of scale and we can ‘save the planet’ by replacing fossil-fueled generated power with clean solar-generated power.   And that’s the whole point of clean solar power, isn’t it?  Saving the planet?  Well, as it turns out, no (see The Coming U.S.-China Solar War by Bryan Walsh posted 1/31/2012 on Time).

Demand for solar power rose eightfold between 2006 and 2011 — from 200 MW to 1,600 MW…

Despite those rosy numbers, many U.S. solar companies — especially those that manufacture solar panels and modules — are struggling to survive. Most notably, the solar start-up Solyndra went under in 2011, taking with it over $500 million in government loan guarantees. The Bloomberg Large Solar Energy Index of 17 top solar companies lost more than two-thirds of its value in 2011.

That’s because solar power is getting much cheaper — prices for modules have dropped 40% over the past five years. According to some U.S. solar-panel manufacturers, that drop in price is due largely to low-cost imports from Chinese panelmakers. It’s not that their manufacturing methods are necessarily better than ours. It’s that government support from Beijing and low-cost labor make it easy for China to undercut its U.S. competitors. The result is more and cheaper solar power for Americans — but perhaps less market share for U.S. manufacturers.

You’re never going to compete against Chinese manufacturing and win.  And it’s not because of government support.  (Or their currency manipulation.)  Because the U.S. is providing government support, too.  Case in point, Solyndra.  It’s the cheap labor.  In a country that builds dormitories in factories.  Where workers work, eat and sleep.  And like it.  Because these are the good jobs.  Unlike being a starving peasant farmer.  Also, China doesn’t allow unions.  Or complaining or disobedience in the workplace.  Only when U.S. workers flood factories under similar conditions will the U.S. manufacturing ever hope to compete against the Chinese.

Of course, the U.S. could make this cheap solar equipment (that can save the planet) less cheap by slapping tariffs on it.  Making people spend more to buy this solar equipment.  So much more that the expensive American manufactured equipment is no longer more costly than the once cheaper Chinese imports.  Which, of course, would greatly discourage people from buying it and hiring people to install it.  Unless they receive massive government subsidies to offset the added tax of the tariffs.

Higher solar equipment costs for installers?  Higher costs for solar power installations for people who want to ‘save the planet’?  Higher taxes for everyone to pay for ever more government subsidies and incentives to save a few manufacturing jobs?  All while discouraging people from ‘saving the planet’?  Seems like some real silly policy.  And one that no one really thought through before getting us on this silly road.

If it’s not about saving the planet then the heck with solar power I say.  Let’s just keep using fossil fuels.  From American sources.  Let’s create good coal jobs.  Good oil jobs.  And good natural gas jobs.  For if we mine it or pump it up in America, all of the jobs will be American jobs.  It doesn’t require massive government subsidies or incentives.  And there will be no more Solyndras.  And the Chinese will be left with a surplus of solar panels that they will have to discount to unload.  Which we could then add to the electrical grid to offset peak demand on those hot summer days.  When the sun is scorching the land beneath it.  Now that would be a practical use.  It would help conserve our precious fossil fuels.  And it will also help to reduce emissions during peak demand.  Which was the whole point of solar power in the first place.  Only this way it wouldn’t require massive government subsidies and incentives.  Or the massive job-killing taxes to pay for those subsidies and incentives.

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It’s the Lack of Capitalism in Health Care that Makes it so Expensive and Inaccessible

Posted by PITHOCRATES - November 6th, 2011

Week in Review

Why is health care so expensive in the U.S.?  Apparently it’s because of doctors and insurance companies.  Not the people who set the rules doctors and insurance companies must play by (see Health insurance in America: Obamacare is making health insurers bigger posted 10/29/2011 on The Economist).

Good, cheap health care has long eluded America. Doctors are paid for each service, so they deliver as many as possible, necessary or not. Insurers protect margins by micromanaging claims and hiking premiums.  These perverse incentives are addressed, faintly, by Obamacare. For example, there are pilots to reward hospitals for the quality rather than the quantity of their care. Mostly, however, the reform deals with the symptoms of muddled incentives: high premiums and poor access.

Yes, these are perverse incentives.  But this is what happens when you exclude capitalism from health care.

All of the problems, and I mean ALL of the problems, of health care go back to one fatal flaw in how we pay for health care.  We don’t.  That is, we don’t pay for our own health care.  Others do.  And when the recipient of services rendered doesn’t pay for the services rendered you can’t help but to have these perverse incentives.

When you buy a new fridge you don’t let the salesman sell you the most expensive one with the most features if you can’t afford it.  Because you’re going to say no.  Because you can’t afford it.  Those features are nice.  But they’re not necessary for a happy and healthy life of refrigerating stuff.

But if someone else is paying the bill, guess what?  You’re probably going to get the best.  Because it won’t cost you anymore.

Just like people with good prescription coverage don’t buy generics.  Because it doesn’t cost them any more to buy the name brand.

This is what happens when you don’t pay for what you buy.  This is why health care costs are out of control.  And fixing this problem by making the original problem bigger, having other people pay for your health care, as in Obamacare, won’t do a thing to cut costs or provide more access.  What will happen is what has happened in nations with national health care.  Higher taxes and a rationing of services.  To pay for the out of control rise of costs.  Which, surprise surprise, keep rising.  Even in these countries that have ‘solved’ the problem of out of control costs.

If you want to control costs you have to increase the amount of capitalism in the system.  Not reduce it.  Because this is what capitalism does.  And what bureaucrats can’t do.

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FUNDAMENTAL TRUTH #75: “Lower income tax rates generate more tax revenue by making more rich people who pay more income taxes.” -Old Pithy

Posted by PITHOCRATES - July 19th, 2011

The top 1% of Earners pay close to 40% of all Federal Income Taxes

Poor people pay little income taxes.  Rich people pay a lot of income taxes.  Everyone else pays somewhere in between.  The tool to make this happen is the progressive tax system.  Government designed it so that people with more income pay more taxes.   Via progressive tax brackets.  And the current (2010-2011) brackets (for head of household) are:

  • 10% on first $12,150
  • 15% on income from $12,150 – $46,250
  • 25% on income from $46,250 – $119,400
  • 28% on income from $119,400 – $193,350
  • 33% on income from $193,350 – $379,150
  • 35% on income over $379,150

If you earn $8,000 you owe $800.  Simple.  If you earn $83,600 you owe $15,668.  If you earn $450,000 you owe $131,435.  If you earn $2,500,000 you owe $848,935.  See the pattern?  Earn more.  Pay more.  Almost as if you’re penalized for being successful.

Of course, low-income people often don’t pay any federal income taxes.  In fact, a lot of people don’t.  About half.  Thanks to tax credits, deductions and exemptions.  But when you’re a rich CEO earning a multimillion dollar salary there aren’t enough tax credits, deductions and exemptions to avoid your taxes.  That’s why the top 1% of earners pay close to 40% of all federal income taxes.  Something we should thank them for.  Instead of demonizing them.

The higher the Top Marginal Tax Rate is the more the Rich avoid paying Income Taxes

There are no Mom and Pop hardware stores anymore.  The big box home improvement stores like The Home Depot, Lowe’s and, for those of you old enough to remember, Builder’s Square put them out of business.  Because of greedy consumers like you.  And me.  Who want to get the best value while shopping.  And if we can buy something of equal quality at a lower price we do.  We work hard for our money.  We spend it carefully.  Wisely.  And we don’t pay more for something when we can get the same for less elsewhere.

It’s the same for rich people.  When they shop.  And when they invest their wealth.  Or their ability.  They look at their options.  Create a new business?  Work at an established business?  If you’re highly skilled you can earn a lot of income.  Which rich people take into consideration.  But there are costs.  Payroll taxes.  Employee compensation and benefits.  Compliance and regulation costs.  And, of course, the progressive tax system.

The higher the top marginal tax rate the less incentive they have to start or run a business.  The less incentive they have to create jobs.  And the more likely they won’t start or run a business.  Instead they’ll invest their money and pay the simpler and (so far) lower capital gains tax.  And this is what happens.  The higher the top marginal tax rate is the more the rich avoid paying income taxes, leaving the middle class to pick them up.  Just like you avoided that Mom and Pop hardware store on your way to The Home Dept.  And with an abundance of government debt available, the rich can invest and live on interest.  Sitting on the sidelines.  Watching the rest of us struggle to find a job.

You don’t need Employees to live on Interest Income

So, the progressive tax system is a way to make rich people pay more.  To transfer the tax burden to them.  And it does.  To a point.  But if you try to tax them too much they’ll just drop out of the economy.  And take their jobs with them.  Which is a double whammy.  We lose some of that generous 40% of income taxes they pay.  And we lose who knows how many thousands of jobs.  And taxpayers.  Thus transferring the burden the other way.  Away from the rich.  To those less able to afford it.

The progressive tax system is supposed to make paying taxes easier on the poor.  The less you earn the less you pay, leaving you with more money for the necessities of life.  Whereas the rich can afford to pay more so they do.  But a flat tax is a progressive tax, too.  The more you earn the more you pay.  For example, going to a 15% flat tax, our sample earners above would change their taxes owed as follows:

  • $8000:  $800  →  $1,200
  • $83,600:  $15,668  →  $12,540
  • $450,000:  $131,435  →  $67,500
  • $2,500,000:  $848,935  →  $375,000

It’s still progressive.  And, yes, the rich will pay less individually.  But there will be more of them.  For this lower income tax rate changes the dynamic.  It will be more profitable to get off of the sidelines and get back into the economy.  Because a flat 15% income tax rate will beat or equal the capital gains tax.  And the profit from creating or running a business will blow away the earnings on a portfolio of treasury bonds.

Better still are the jobs.  You don’t need employees to live on interest income.  But you need them to run a business.  More jobs mean more taxpayers.  So more rich people are back in the economy earning income and paying income taxes.  And more employees are working.  That’s more payroll taxes.  And more personal income taxes.  In the end, the numbers win.  More jobs.  More GDP.  And more federal tax receipts.

Keeping People Poorer and more Dependent on Government

If the goal of government tax policy is to raise tax revenue, the logical thing to do would be to design a tax code that creates more rich people.  A lower top marginal tax rate does this.  So does a flat tax.  Such a tax policy will create incentives to earn income instead of living on capital gains from investments.  Each rich person will pay less income tax individually but there will be far more of them paying income taxes overall.  And they will create jobs.  The more jobs there are the more payroll taxes and personal income taxes there are.

History has shown that cutting tax rates has done just that.  The Mellon tax cuts of the 1920s.  The JFK tax cuts of the 1960s.  The Reagan tax cuts of the 1980s.  The Bush tax cuts of the 2000s.  So if the record shows that lower tax rates produce more tax revenue, why are we always trying to raise the top marginal tax rates?  Simple.  Politics.

Being in politics is the closest you can get to being part of an aristocracy in the United States.  Unless you’re born a Kennedy.  Whether its ego or the graft, people aspire to be in the privileged few.  Life is better there.  If you have no talent or ability.  Other than being able to tell a pretty good lie.  So you use class warfare to get the masses to support you.  And the progressive tax system.  Which keeps people poorer and more dependent on government.  Like it used to be in the old days when there was an aristocracy.

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The Private Sector wants to Please us; the Public Sector wants to Change Us

Posted by PITHOCRATES - June 11th, 2011

The Private Sector versus the Public Sector

The best things in life aren’t free.  They come from the private sector.  Where they’re not free.  But can be purchased at some very affordable prices.  We willingly choose to go to the private sector and willingly choose to buy the things they’re selling.  Because we want what they’re selling.  And we enjoy our shopping experience.

The public sector is a different story.  We begrudgingly interact with the public sector.  And only do so when we absolutely have to.  To renew our driver’s license.  Deal with the IRS.  To get all the required building permits to add a deck in your backyard.  Rarely do we enjoy these experiences.  Or are happy with the high prices for these services.

So why is one experience enjoyable and the other one not?  Incentives.  And competition.  One of them has them.  The other doesn’t (see Two Different Worlds: The Public and Private Sectors by Ron Ross posted 6/1/2011 on The American Spectator).

There is in effect an undeclared race between the public and private sectors in regard to satisfying human wants. Who’s winning that race? Which sector is doing a better job of affecting peoples’ lives in a positive way? In fulfilling human wants the private sector is leaving the public sector in the dust. People get more and more value from the private sector and the same or less value from government activity even though the cost of government has increased at an exponential rate.

Why is there so much difference in how the two sectors function? Two important reasons are incentives and competition.

The University of Rochester economist, Steven Landsburg, says, “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.” Although I think that’s an exaggeration, there is much truth in it. The private sector is vastly more effective and efficient than the government mostly because of the differences in the incentive structures. In the private sector you can get rich filling needs and solving problems. The public sector’s incentive structure is totally dysfunctional.

This is why no one cares at the DMV that you’ve been in line for an hour.  Because where else are you going to go?  You know that and wait.  Because you have no choice.  And they know that.  So they don’t hustle to process people as quickly as possible.  Because there is no chance of losing their customers to someone who does.

In a competitive environment, innovation, efficiency, and product improvement become matters of survival. Apple and Microsoft spend billions of dollars annually on research and development. They spend those vast amounts more out of necessity than choice. If they did not they would fall behind and lose market share.

President Obama complained recently about the White House’s obsolete phone system. He said that the White House phones are “30 years behind,” and “we can’t get our phones to work.” He said that he was disappointed by the lack of “really cool phones and stuff.” Does he ever wonder why this happens? I doubt that he does. I’m pretty sure no major corporation has an obsolete phone system.

All innovation comes from the private sector.  It’s on the cutting edge of technology.  Because they spend money in research and development.  And in improving the process of delivering these products to the customers.  And all of these costs are included in the sales prices of what they sell.  Where prices typically fall after a product is introduced into the market place.  Amazing.  Meanwhile, taxes are always going up.  And despite all of this money the public sector operates more like a third-world nation in comparison to the private sector.

The High Costs of Licensing and Regulations

Not only does the public sector do things poorly in comparison to the private sector, their policies hurt the private sector.  And the very people their policies are supposed to protect (see The Cancer of Regulation by John Stossel posted 6/8/2011 on Townhall).

Licensing prices poor people out of the business.

“Compare New York City, where a license to own and operate a taxi is $603,000, to Washington, D.C.,” George Mason University economist Walter Williams told me. “There are not many black-owned taxis in New York City. But in Washington, most are owned by blacks.” Why? Because in Washington, “it takes $200 to get a license to own and operate one taxi. That makes the difference.”

Regulation hurts the people the politicians claim to help.

If the government in Washington can license a taxi for $200, why does New York City need $603,000?  To restrict entry into the market.  Which is the typical purpose of licensing.  To restrict competition so those in the market can charge more.

People once just went into business. But now, in the name of “consumer protection,” bureaucrats insist on licensing rules. Today, hundreds of occupations require expensive licenses. Tough luck for a poor person getting started.

Ask Jestina Clayton. Ten years ago, she moved from Africa to Utah. She assumed she could support her children with the hair-braiding skills she learned in Sierra Leone. For four years, she braided hair in her home. She made decent money. But then the government shut her down because she doesn’t have an expensive cosmetology license that requires 2,000 hours of classroom time — 50 weeks of useless instruction. The Institute for Justice (IJ), the public-interest law firm that fights such outrages, says “not one of those 2,000 hours teaches African hair-braiding…”

No customers complained, but a competitor did.

The competitor complained not over concern for the welfare of customers.  But because her lower prices attracted customers away from the established businesses.  Because if people can get the same or better quality for less, they choose the same or better quality for less.

Once upon a time, one in 20 workers needed government permission to work in their occupation. Today, it’s one in three. We lose some freedom every day.

“Occupational licensing laws fall hardest on minorities, on poor, on elderly workers who want to start a new career or change careers,” Avelar said. “(Licensing laws) just help entrenched businesses keep out competition.”

This is not what America was supposed to be.

Occupational licensing was to protect consumers.  But it restricts entry into markets.  Keeping prices high.  Hurting both people that would like to start a business.  And those who have to pay the higher prices because of licensing restrictions.  Often it’s the poorest people that suffer most.  And the rich that benefit most.  Which is the exact opposite of the desired result of rules and regulations that are supposed to protect the consumer from businesses.  And the poor from the rich.

Your Electric Car in Oregon may Kill You

So the public sector does not do things as well as the private sector.  And their rules and regulations hurt the private sector and consumers.  But those in government know what’s best for us.  Currently there is a push to get us is into electric cars.  They’re subsidizing them to make them more appealing to buy.  Because they are expensive.  And have limited range.  Which is a real turnoff to a car buyer.  But that doesn’t stop them.  Because they don’t care about what we want.  It’s about what they want.  And they want to put us into electric cars.

One of the biggest drawbacks of an electric car is that you cannot pull into an electric ‘gas station’, fill up and go on your way.  The current electric cars charge overnight at home.  And people drive them to and from work.  As long as the round trip is a hundred miles or less.  And they don’t use their lights and heater too much.  But they’ve come up with an idea to fix this problem.  But first, let’s look at some electrical safety.

Electricity is dangerous.  Especially at higher voltages.  That’s why our houses have 120V electrical outlets.  You may have a 220V electric oven, but you don’t play with the electrical connection.  A common industrial voltage is 480V.  It has more energy so it can do more work.  But because of that energy, it is more dangerous.  And people die in the workplace from electrocution.  And arc flash (see What is Arc Flash? by Mike Holt posted on mikeholt.com).

Arc Flash is the result of a rapid release of energy due to an arcing fault between a phase bus bar and another phase bus bar, neutral or a ground. During an arc fault the air is the conductor. Arc faults are generally limited to systems where the bus voltage is in excess of 120 volts. Lower voltage levels normally will not sustain an arc. An arc fault is similar to the arc obtained during electric welding and the fault has to be manually started by something creating the path of conduction or a failure such as a breakdown in insulation.

The cause of the short normally burns away during the initial flash and the arc fault is then sustained by the establishment of a highly-conductive plasma. The plasma will conduct as much energy as is available and is only limited by the impedance of the arc. This massive energy discharge burns the bus bars, vaporizing the copper and thus causing an explosive volumetric increase, the arc blast, conservatively estimated, as an expansion of 40,000 to 1. This fiery explosion devastates everything in its path, creating deadly shrapnel as it dissipates.

Yes, arc flash is so dangerous that there are costly and time-consuming OSHA regulations when working with or operating 480V equipment.  Safety programs.  Short circuit studies.  Arc flash calculations.  Employee training.  Warning labels showing the arch flash radius where personal protective equipment is required.  And personal protective equipment (gloves, face shields, fire-resistant clothing, fire-suits, etc).  Depending on the level of hazard.  Determined from the studies and calculations.

So working with 480V is dangerous.  But guess how they’re going to address the problems of electric cars in Oregon?  That’s right.  By installing 480V charging stations for ‘quick’ half-hour charges (see Oregon’s electric highway by Michael Vaughn posted 6/11/2011 on The Globe and Mail).

The Oregon Department of Transportation has announced it’s going to install Level 3 DC fast-charging stations along that portion of the highway.

Level 3 is the key. Level 1 chargers use 110 volts from a regular home outlet and charge a vehicle overnight. Level 2 uses 240 volts, like a dryer or stove, and charge a vehicle in three or four hours. Level 3 uses 480 volts and the heavy juice can take a Nissan Leaf’s 45-kilowatt battery from near empty to 80 per cent in half an hour.

And if there is an arc while you’re connecting or disconnecting, it can incinerate you.  Unless the OSHA regulations for worker safety are just a waste of time and money.  (Note:  Most arc flash standards are for AC voltages.  DC arc flash safety standards were developed after the AC standards.  Both are dangerous.  And both AC and DC will be present in these DC charging stations due to the long distances between stations.  DC does not work well over long distances.  So the charging stations will probably have an AC to DC converter built in.)

However, there are fewer than 50 electric cars registered in all of Oregon, so why do it?

John MacArthur, of Oregon Transportation Research Consortium, says the installation of fast-charging stations will build acceptance for electric vehicles by making it possible for people to take trips beyond the typical range of 100 miles. These stations will be spaced 30 miles apart and located close to the interstate around gas stations, restaurants and restrooms. You need to do something during that half-hour recharge.

Why do it?  To make us do something we don’t want to do.  Unlike Apple and Microsoft who can.  And they can do it without massive government spending.  Or make us wait for a half hour until we can use their product again.  A lot of which runs on easily replaceable batteries.  Which comes in handy during a power outage.  That and a car with an internal combustion engine so you can drive someplace that has power to wait until your power is restored.  Which you couldn’t do if you had an electric car.

The Private Sector Functions According to our Will 

The best things in life come from the private sector.  The things we don’t like tend to come from the public sector.  The influence of the public sector on the private sector increase consumer costs.  And creates barriers in some markets.  Which also increases consumer costs.  And government regulations and policies are often attempts to make us do something we’d rather not.  Like drive an electric car. 

So it’s not hard to see why the private sector is such a greater success than the public sector.  The private sector functions according to our will.  The public sector operates against our will.  That’s why there’re incentives and competition in the private sector.  And why there aren’t in the public sector.  Because one gives us what we want.  The other doesn’t.  Unless you want long lines, poor service and high costs.

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LESSONS LEARNED #66: “In socialism you don’t get what you want. You settle for what you get.” -Old Pithy

Posted by PITHOCRATES - May 19th, 2011

Prices, Price Controls and Rationing

People think high prices are just how rich people stick it to the poor.  But prices, high or low, are an automatic mechanism that matches supply to demand.  Things in high demand but low supply have high prices.  This helps discourage some from buying leaving supply available for those who are willing to pay the higher price.  High prices also tell the market where to expand.  Because high prices typically indicate high profit.  So others will rush in to fill that demand to get in on those high profits.  That’s why store shelves are typically full in capitalistic countries.  Because prices are always matching supply to demand.  And shelves are often empty in socialist countries.  Where a distant bureaucrat decides what people should build.  And what people should buy.

When you interfere with this automatic mechanism you get market failures.  As in socialist, command economiesPrice controls, though they sound kind and caring, hurt.  For example, rent controlled apartments in New York reduced the supply of apartments.  Which reduced the supply of affordable housing.  The exact opposite of the goal of price controls.  Why did this happen?  For the same reason you don’t invest your money for a negative return on investment.  Investors build and manage income properties (i.e., apartment buildings) for a profit.  With rent control, apartments became a bad investment.  So investors built condominiums instead.  And did little to maintain their rent-controlled income properties to limit their losses.

Price controls put people before profits.  Or so they thought.  Rent control kept rental prices down.  But only for the few who could find an apartment.  And those who did saw the quality of their housing decline.  Because they couldn’t pass on the cost of any improvements in higher prices, owners made few improvements.  With no profits there are no incentives.  So rent-controlled housing served as little more than a write-off against profits made from other good investments.  Rent control ultimately destroyed low-income housing.  In quantity as well as quality.  And low-income renters had to settle for what there was.

When OPEC cut oil shipments to the West in the Seventies gasoline prices soared.  People demanded that the government do something.  So the Nixon administration did.  Price controls.  They reduced the price of gas to what people were willing to pay.  And what happened?  The price indicated there was a higher supply of gasoline than there was.  So people bought as if there was more gasoline than there was.  Until the gas pumps pumped dry. And cars ran out of gas.  Gas was affordable.  There just wasn’t any to buy.  If the market had set the price, there would have been gas.  It would have been expensive, but it would have been there to buy.  Price controls took a scarce commodity and made it even scarcer.  So instead of gas at any price, people had to settle for life without gas.  And find another way to get places.

The People have Voted, Capitalism is Better than Socialism

After the communist revolution in China, Mao Tse-Tung began to collectivize agriculture.  Taking land from the wealthy and giving it to the poor to work.  For the state.  The People’s Republic of China.  Who cared about the people.  And even more about the grain they grew.  Because that was how they were going to raise the capital to industrialize China.  Buy low (i.e., take from the farmers) and sell high.  And beat anyone who didn’t get on board with the new way.  So there was no price mechanism.  No profit incentive.  In fact, the only incentive was not to get beaten.  They called this great plan the Great Leap Forward.  It was a disaster.  Unless famine was the goal.  And as far as famines go, this was one of the bigger ones.  They call it the Great Chinese Famine.  Some 15 million died.  Or 30 million.  Depending on who crunches the numbers.  No, the people did not fare so well in the People’s Republic of China.

Doing things for the people sounds good.  It sounds like you care about the people.  But the people rarely do well in nations with ‘People’ in their name.  The Chinese suffered and died wholesale.  They’re doing a lot better now.  But that’s only where they let some capitalism loose.  Allowed people to make a profit.  Gave them an incentive.  In the big cities by the sea.  Life was good.  Soon, people left the poverty and famine of the rural country and looked for a job in the city.  For a better life.  A better life provided by capitalism.  Not socialism.  They had had enough of the kind and caring state taking care of them.   They’d rather work for some rich guy who paid decent wages in a factory.  Because they could choose their life.  And not settle for what the state would give them.

You see, there is no such thing as a communist/socialist utopia.  The truth is, life is horrible in communist/socialist countries.  That’s why Cubans risked their lives on rafts to cross the ocean to escape their utopia and go to Florida.  And why Haitians did likewise.  Even though Cuba was far closer and was itself a communist utopia.  They said thanks but no thanks and took the longer and more deadly trip to Florida.  For they knew life was better in the United States than in Cuba.  Because capitalism is better than communism/socialism.  The people have voted.  At least the Cubans and the Haitians.  And everyone else that went to America.  Or any other capitalist country.

Venezuela Rations Food and Electricity

Hugo Chávez of Venezuela is a big fan of socialism.  He’s turned the whole country into a socialist utopia.  He launched a revolution.  The Bolivarian Revolution.  Nationalized industries.  Including the big one.  Oil.  Put people before profits.  Set up price controls.  Expanded education to the people.  And health care.  The kind of things that resonate with the people.  The people love him.  For sticking it to the rich.  And to the United States (who gets a lot of oil from Venezuela).  Oh, they got a kick out of him saying he smelled sulfur following George W. Bush to the UN podium.  Because George W. Bush was the devil.  He even said he smelled sulfur from Barack Obama in Copenhagen.  Where he called capitalism “the road to hell.”  So he sports true socialist bona fides.  So Venezuela must be a socialist utopia.

Well, we’ve seen what can happen when the market doesn’t set prices to match supply to demand.  And so it happened in Venezuela.  The supply of food dwindled to where they had no choice but to ration it.  They even bartered for food.  Traded some of their oil for Argentine meat and dairy products.  Because the price controls so disrupted the economy domestic production of food plummeted.  Food was affordable.  There just wasn’t much food to buy.

But food isn’t the only thing they’re rationing.  They’re also rationing electricity.  Through rolling blackouts.  This in a country rich in energy.  Oil.  If any nation should not have an electricity problem it’s Venezuela.  But the infrastructure is not there.  What they have is falling apart.  Insufficient.  And nationalized.  That is to say, they put people before profits in the electricity business.  And with no profit incentive, there was no incentive to provide more reliable electricity.  Those in government know they need more.  They tried to add more.  But socialist planners are just not good business people.  Or good electrical engineers.  And they’ve failed.  As an energy-rich nation suffers through humiliating rolling blackouts to ration what electricity they have.

Low Prices and Empty Shelves

People may get what they want in socialism.  For awhile.  At least, they feel good for awhile.  Knowing that the rich are finally getting theirs.  But rarely does life change for the better.  For the little guy.  Those in power live well.  But peasants are still peasants.  The hungry are still hungry.  Or, worse, dying from famine. 

With capitalism, you can always count on a grocery shelf full of stuff you want to buy.  Because prices and the profit incentive put the things you want on that grocery shelf.  Or it puts gas in your car.  Or you in housing.  You can’t always get what you want.  But your complaints will be more of the “I’d rather have steak than hamburger” variety than the “I’d rather have food than fair prices and empty shelves.” 

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LESSONS LEARNED #19: “Philosophical debates can be effective but character assassination is more expedient, especially when no one agrees with your philosophy.” -Old Pithy

Posted by PITHOCRATES - June 24th, 2010

THOMAS JEFFERSON HATED Alexander Hamilton.  So much so he hired Philip Freneau as a translator in his State Department in George Washington’s administration.  You see, Jefferson did not like confrontation.  So he needed a way to slander Hamilton, his policies and the Washington administration without getting his own hands dirty.  And that was what Freneau was supposed to do with the money he earned while working in the State Department.  Publish a newspaper (National Gazette) and attack Hamilton, his policies and the Washington administration.  Papers then were partisan.  More so than today.  Then, lies and libel were tools of the trade.  And they knew how to dig up the dirt.  Or make it up. 

Another scandalmonger, James Callender, was slinging dirt for Jefferson.  And he hit pay dirt.  Mr. and Mrs. Reynolds of Philadelphia had a lucrative business.  They were blackmailing Alexander Hamilton.  Mr. Reynolds had his wife seduce Hamilton.  Which she did.  And did well.  They had an affair.  And Mr. Reynolds then blackmailed him.  Jefferson pounced.  Or, rather, Callender did.  To keep Jefferson’s hands clean.  Hamilton, Callender said, was using his position at the Treasury Department for personal gain.  He was using public funds to pay the blackmailer.  They found no proof of this.  And they did look for it.  Hard.  But when they came up empty, Jefferson said that it just proved what a good thief Hamilton was.  He was so good that he didn’t leave any traces of his treachery behind.

Of course, when you lie down with dogs, you get up with fleas.  And Jefferson’s association with Callender would come back and bite him in the ass.  In a big way.  Upset because Jefferson didn’t appropriately compensate him for all his loyal dirt slinging (he wanted the postmaster’s job in Richmond), he publicized the Sally Hemings rumors.  And after breaking the true story of the Hamilton affair, many would believe this scoop.  That Jefferson was having an affair with one of his slaves.  It was a dark cloud that would forever hang over Jefferson.  And his legacy.

Hamilton admitted to his affair.  Jefferson admitted to no affair.  Hamilton would never hold public office again and would later die in a duel with Jefferson’s one-time toady, Aaron Burr.  This duel resulted because Hamilton was doing whatever he could to keep the amoral and unscrupulous Burr from public office (in this case, it was the governorship of New York).  When the election of 1800 resulted in a tie between Jefferson and Burr, Hamilton urged the House to vote for Jefferson, his archenemy.   Despite what had appeared in the press, Hamilton did have morals and scruples.  Unlike some.  Speaking of which, Jefferson would go on to serve 2 terms as president.  And all of that angst about Hamiltonian policies?  They all went out the window with the Louisiana Purchase (which was unconstitutional, Big Government and Big Finance).

RONALD REAGAN WAS routinely called old, senile and out of touch by the entertainment community, the media and his political foes.  But he bested Mikhail Gorbachev and the Soviet Union, something Jimmy Carter never did.  He said ‘no’ at Reykjavik because he told the American people that he wouldn’t give up the Strategic Defense Initiative (SDI).  He knew the Soviet Union was bleeding.  Communism was a farce.  It inhibited human capital.  And impoverished her people.  SDI may have been science fiction in the 1980s, but capitalism wasn’t.  It could do it all.  Including SDI.  The Soviet Union was on the ropes and Reagan would give no quarter.  The days of living in fear of the mushroom cloud were over.  And capitalism would deliver the knockout punch.

Reaganomics, of course, made this all possible.  Supply-side economics.  Which follows the Austrian school.  Say’s Law.  ‘Supply creates demand’.  You don’t stimulate the economy by taxing one group of people so another group can spend.  You stimulate it by creating incentives for risk takers to take risks.  And when they do, they create jobs.  And wealth.

Tax and spend is a failed Keynesian, zero-sum economic policy.  When you take from the earners and give to the non-earners, we just transfer purchasing power.  We don’t create it.  For some to spend more, others must spend less.  Hence, zero-sum.  The net some of goods and services people are purchasing remains the same.  Different people are just doing the purchasing.

When Apple invented the Macintosh personal computer (PC), few were demanding a PC with a graphical user interface (GUI).  But Apple was innovative.  They created something they thought the people would want.  And they did.  They took a risk.  And the Macintosh with its mouse and GUI took off.  Apple manufacturing increased and added jobs.  Retail outlets for the Macintosh expanded and created jobs.  Software firms hired more engineers to write code.  And other firms hired more people to engineer and manufacture PC accessories.  There was a net increase in jobs and wealth.  Just as Say’s Law predicts.  Supply-side economics works.

Of course, the Left hates Reagan and attacked Reaganomics with a vengeance.  They attacked Reagan for being pro-rich.  For not caring about the poor.  And they revised history.  They say the only thing the Reagan tax cuts gave us were record deficits.  Of course, what those tax cuts gave us were record tax receipts.  The government never collected more money.  The House of Representatives (who spends the money), awash in cash, just spent that money faster than the treasury collected it.  The record shows Reaganomics worked.  Lower tax rates spurred economic activity.  More activity generated more jobs and more personal wealth.  Which resulted in more people paying more taxes.  More people paying taxes at a lower rate equaled more tax revenue in the aggregate.  It works.  And it works every time people try it. 

Because Reaganomics worked and showed the Left’s policies were failures, they had to attack Reagan.  To discredit him.  They had to destroy the man.  Except when they’re running for elected office.  Then they strive to show how much more Reagan-like they are than their conservative opponents.  Because they know Reaganomics worked.  And they know that we know Reaganomics worked.

GEORGE W. BUSH was routinely called an ‘idiot’ by the entertainment community, the media and his political foes.  Yet this ‘idiot’ seems to have outwitted the elite of the liberal Left time and time again.  I mean, if their policies were winning, they would be no reason to have attacked Bush in the first place.  The Left hated him with such vitriol that they said he blew up the Twin Towers on 9/11 as a justification for invading Iraq for her oil.  It was Big Oil’s lust for profit, after all, that was driving this Texan’s Big Oil policies.  And taking Iraq’s oil would increase Big Oil’s sales and give her even more obscene profits.

If Bush was an idiot, he must have been an idiot genius to come up with a plan like that.  Then again, gasoline prices crept to $4/gallon following the Iraq War.  Had all that oil gone on the market according to plan, that wouldn’t have happened.  Unless the plan was to keep that oil OFF of the market, thus, by rules of supply and demand, the price of oil (and the gasoline we make from it) would go up thus enriching Big Oil through higher prices resulting from a lower sales volume.  My god, what evil genius.  For an idiot.  Of course, gas taxes, numerous summer gas blends (required by the government’s environmental policies), an aging and over-taxed pipeline infrastructure and insufficient refinery capacity (the government’s environmental policies make it too punishing even to consider building a new refinery) to meet increasing demand (soaring in India and China) had nothing to do with the rise in gas prices.

IS THE POLITICAL Left evil?  Probably not.  Just amoral.  They have an agenda.  They survive on political spoils and patronage.  Old time politics.  Enrich themselves through cronyism.  If tribute is paid they’ll extend favorable treatment.  If tribute is not paid, they will release their wrath via hostile regulation, litigation, Congressional investigation and punitive taxation.  Just like they did to Big Tobacco (and, no, it wasn’t about our health.  They could have just made tobacco illegal.  But they didn’t.  Why?  It just brings in way too much money to the government.  Via sin taxes.  And federal lawsuits.  And with it being addictive, it’s a frickin cash piñata for them.)

They know few agree with their philosophy.  But they don’t care.  It’s not about national prosperity.  It’s about power.  And they want it.  That’s why they can’t debate the issues.  They know they can’t win.  So they attack the messenger.  Not the message.  If you don’t believe that, you can ask Abraham Lincoln, Ronald Reagan, George W. Bush, Sarah Palin and just about any other Republican.  Well, you can’t ask Lincoln or Reagan.  But you can guess what they would say.

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