Tuesday, May 05, 2009

Doing the wrong thing for the right reason

A TV spot running currently shows the faces of people wearing hardhats who have lost their jobs. A man appears and tells us that thousands of people in this one zip code lost their jobs when the steel plant they worked in closed, as we are shown the empty steel plant building.

The ad says that “green jobs” like making wind turbines and solar panels will create new jobs, fill the empty plant with new equipment and a new purpose, and put these people back to work. It ends with the words “Carbon caps equal hardhats” on the screen, and the man’s voice saying, “We can’t afford not to do carbon caps right now.”

It’s true that the unemployment rate has hit 8.5 percent for the first time in quite a while, and it is a natural response to want to find ways to put people back to work. The message from this ad is a simple one: If we just build wind turbines and solar panels, we can put a lot of Americans back to work. Voila! Problem solved.

Not so fast.

Just as spending money on pork barrel projects and calling it “stimulus” is a poor solution to the economic problem, creating jobs just to create jobs is a poor solution to the unemployment problem. All spending is not equal and all jobs are not equal. Job creation is a natural economic process and jobs must be created in response to an economic need, or they will not last long. Following the advice of that TV spot and implementing cap-and-trade for no better reason than just to create jobs is sheer folly.

But then folly and the U.S. government are good friends; the auto and banking industries are in trouble to a large degree because of government meddling.

Let’s agree that there were management problems in both industries that were major factors in the current distress. But we also cannot overlook the role government played in these problems.

It was Congress, remember, that was responsible for pressuring banks to make home loans to people who were not qualified borrowers. It was Congress that changed the regulations that allowed mortgage banks and commercial banks to merge functions, setting up the conditions for the mortgage banking crisis. And it was Congress that ignored administration warnings of a looming crisis in the banking industry five years ago.

When government imposed its wisdom on the people and the auto industry, “guiding” all of us toward cars designed to please government and putting into effect mandates on fuel efficiency, safety and other things that raised costs, it contributed to the current crisis.

And while we watch quietly, some of us eagerly applauding the increasing encroachment of our government, it will yet again force its will on the people, implementing an energy policy that will intensify an already highly stressed economic situation.

By abandoning conventional energy sources like coal, oil and natural gas, the sources for which abundant reserves exist and the infrastructure for which is already in place; by putting regulations into effect that make those energy sources more expensive; and by forcing new technologies into the marketplace on the hotly debated, and scientifically unproved premise of impending environmental disaster, our reasonably stable energy system will become more expensive and less dependable. New technologies, like solar and wind power, are insufficiently developed and thus not ready to play a significant role. They are expensive, and wind turbines, as we have seen locally, are frequently unpopular with the people.

The cap-and-trade system touted in the TV spot, the one President Barack Obama is so wedded to, is a mechanism to force these new and undeveloped energy technologies into the energy market; government yet again imposing its wisdom on the people.

Even under the best of circumstances cap-and-trade will be very costly to consumers.

The Weekly Standard reported on a study by MIT that estimated that between 2015 and 2050, cap-and-trade would raise an average of $366 billion in revenues each year for the government. Sounds good, doesn’t it? But that money has to come from somewhere, and guess where: from cap-and- trade auction fees from companies that burn fossil fuels. And guess who ultimately pays those? American consumers.

After a computation error was corrected, the MIT study shows that cap-and- trade could cost American households an average of more than $3,900 a year, so, contrary to what the TV spot proclaims, we can’t afford to do carbon caps right now.

This situation also presents an interesting conflict between campaign promises from the new president. Mr. Obama promised change in all sorts of things, among which is the national energy policy and its supposed relationship to the environment. And he also promised a tax cut for 95 percent of Americans. But if the cost to the average household is $3,900 a year, a tax cut will be substantially negated, if not wiped out completely.

As time passes, Mr. Obama’s shiny armor is becoming more and more tarnished. The faster that tarnish spreads, the better the chance that the country will escape his dangerous ideas.

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