It's Alive!

Alternative energy subsidies make their biggest comeback since Jimmy Carter.

“Voters want action on energy,” one congresswoman told The Washington Post. “They don’t really care how much it costs.” A Democratic president was on the verge of signing “the most important energy legislation in a decade,” with tens of billions of dollars dedicated to jump-starting a cleaner alternative to fossil fuels and helping the United States achieve “energy independence.” For too long, most analysts agreed, America had put off the hard choices necessary to prevent the next oil shock and wean the country from petrodictators in the Middle East. Now was the time for bold investment and leadership from Washington.

The year was 1979. At the time I was a low-level regulator in President Jimmy Carter’s Federal Energy Regulatory Commission. It was a boring agency, but I got to work in its most exciting division: the special cases branch dealing with exotic new sources of power. From that perch I witnessed firsthand the sad, expensive, and now-forgotten saga of the Great Plains Coal Gasification Plant in Beulah, North Dakota. Like many projects being discussed in Washington today, Great Plains was hailed as the vanguard of a new domestic alternative to foreign oil.

In 1979, as lines at gas stations snaked for blocks, the House of Representatives, by a vote of 368 to 25, created the U.S. Synthetic Fuels Corporation, an “independent” federal entity charged with creating new fuel sources by spending $20 billion in seed money ($57 billion in 2009 dollars) during its first five years. Originally, the Synfuels Corporation was projected to spend $88 billion ($250 billion in today’s dollars) over 12 years to build the capacity to produce the equivalent of 1.5 million barrels of oil per day from coal.

That was just one element of Carter’s ambitious energy plans. In July 1979 he announced, “I will soon submit legislation to Congress calling for the creation of this nation’s first solar bank, which will help us achieve the crucial goal of 20 percent of our energy coming from solar power by the year 2000.” In 1980 Congress authorized the Department of Energy to spend $1.3 billion on ethanol research and loans to produce fuel for automobiles. In May of that year, Carter declared, “For the first time in our nation’s history, we will have a national energy program to put us on the road to energy security. It’s more ambitious than the space program, the Marshall plan, and the Interstate Highway System combined.”

Sound familiar? During the 2008 presidential campaign, Democratic candidate Barack Obama declared almost daily that developing new energy sources and breaking our addiction to foreign oil would “take nothing less than a complete transformation of our economy.” He explicitly compared his plan to putting a man on the moon and building the Interstate Highway System.

President Obama has not forgotten candidate Obama’s promises. In a February address to a joint session of Congress, the president boasted: “Thanks to our recovery plan, we will double this nation’s supply of renewable energy in the next three years. We have also made the largest investment in basic research funding in American history.” Obama promises to create 5 million new jobs by investing $150 billion in clean energy technologies during the next 10 years. He also aims to put 1 million plug-in hybrid electric vehicles on America’s roads by 2015, promising buyers a $7,500 tax credit. Even more ambitiously, 25 percent of our electricity supposedly will come from renewable sources such as wind, solar, geothermal, and biomass by 2025. To tie a ribbon on the alternative energy package, the president asked Congress to impose a cap-andauction scheme to reduce greenhouse gas emissions 80 percent by 2050.

Will such policies produce the promised results? They didn’t three decades ago.

After Carter’s equally ambitious moves, global oil prices dropped like a rock. The deregulation of natural gas led to vast new fossil fuel supplies, and abundant stocks of cheap coal kept electricity humming down transmission lines. Meanwhile, the federally funded Great Plains Coal Gasification Plant, on which I worked, became the largest construction project in the United States, costing $2.1 billion ($5.3 billion in today’s dollars) to build. The plant was supposed to convert coal into 125 million cubic feet of natural gas per day, an amount equal to about 20,000 barrels of oil. Instead, by 1984, as the price of natural gas continued to fall, Great Plains went into bankruptcy. It was eventually sold in 1988 to a local electric cooperative for $85 million—a little more than 4 cents on the dollar. The $2.1 billion the plant cost to build, if invested in bonds, would have grown to about $8.4 billion by 2009. Instead, Congress disbanded the Synthetic Fuels Corporation in 1986, the money irretrievably lost.

History teaches us that the government is not very good at getting the results it intends when it intervenes in complex markets subject to violent price fluctuations. And unfortunately for Obama’s Carteresque agenda, Washington also has a poor track record when it comes to alternative energy research and development.

Whistling Past the R&D Graveyard

Obama has promised to “invest” $150 billion in new energy research and development during the next 10 years. “To truly transform our economy, protect our security, and save our planet from the ravages of climate change,” the new president declared in his February address to Congress, “we need to ultimately make clean, renewable energy the profitable kind of energy.” What he presented as bold new policy has a long and decidedly untransformative track record. The main difference in 2009 is that an unfounded fear of depleting global resources has been replaced with an exaggerated fear of global warming.

Since 1961 the federal government has spent nearly $187 billion (in current dollars) for the development of advanced energy technologies and basic energy science research. About a quarter of the funds were spent during the oil crisis of the 1970s. According to an October 2008 report by the Department of Energy’s Pacific Northwest National Laboratory, $66 billion of that $187 billion has been spent researching nuclear energy, $65 billion on basic energy science, $28 billion on fossil fuel research and development, and $28 billion on renewables and conservation.

A comprehensive September 2008 report by the economic research firm Management Information Services, commissioned by the pro–atomic power Nuclear Energy Institute, slices the government’s energy-spending pie into slightly different portions. In addition to direct research and development spending, the report documents how the feds have used tax incentives, mandates, and regulations to steer energy production since 1950. During those six decades, the paper’s authors found, the oil industry received federal incentives worth $352 billion in current dollars, mostly in the form of tax breaks and regulatory relief (e.g., exemptions from price controls). Natural gas got about $105 billion, coal $99 billion, hydroelectric $84 billion, nuclear $68 billion (minus $15 billion assessed for nuclear waste storage), and renewables $47 billion.

Did all this “investment” in energy pay off? Not according to Robert Fri, a former deputy administrator of both the Environmental Protection Agency and the Energy Research and Development Administration. In the Fall 2006 Issues in Science and Technology, Fri, now a visiting scholar at the D.C.-based think tank Resources for the Future, noted that a “mere 0.1 percent of the expenditure accounted for three-quarters of the benefit.” Three unsexy programs—developing energy-efficient windows, electronic ballasts for fluorescent lighting, and better refrigerators—converted $13 million in spending into $30 billion in benefits, according to a National Research Council study cited by Fri. “Threequarters of the expenditure—a little over $9 billion—produced no quantifiable economic benefit,” he concluded. “Half of this money was applied to synthetic fuel projects that turned out to be at least a couple of decades premature.” As Fri told Chemical & Engineering News last year, “The government is very good at starting energy projects that it believes will solve energy problems, but it is not very good at generating the intended results.”

Yet Washington has gone on an energy project binge. In December 2007, Congress passed and President George W. Bush signed the Energy Independence and Security Act, which raises corporate average fuel economy standards from 27.5 miles per gallon to 35 miles per gallon by 2020, mandates that the U.S. produce 36 billion gallons of conventional and “advanced” biofuels by 2022, bans most incandescent light bulbs by 2014, and establishes the $25 billion Advanced Technology Vehicles Manufacturing Incentive Program to help retool legacy U.S. auto companies to manufacture more-fuel-efficient cars.

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  • ! </a||

    ... breaking our addiction to foreign oil would "take nothing less than a complete transformation of our economy."

    Something crazy, like drilling for more domestic oil, is never an option. Not sexy enough.

    Under Obama we will make friends with the aliens who built the pyramids in Egypt and they will help us solve our energy needs.

  • ||

    Great article Ron (read it in the print edition).

    Synfuel corporation displayed government business acumen even better than AMTRAK.

    ♪ Meet the new bass
    Same as the really, really old boss ♪

  • ! </a||

    Meet the new bass

    Is that one a Fender?

  • ed||

    our addiction to foreign oil

    We'll never get anywhere as long as our so-called "leaders" describe free trade as an "addiction." This choice of terms is indicative of how poorly American politicians (particularly but not exclusively on the left) understand economic principles and human action.

  • Alan Vanneman||

    Write on, Ron!

    You're right as rain, Ron, speaking of which (more or less), the NYT tells us a new study says we don't have to worry about global warming after all.

    http://www.nytimes.com/2009/05/15/science/earth/15antarctica.html?_r=1&hpw

    "Study Halves Prediction of Rising Seas"!

    I love the use of "halves" in a headline, but conservatives should love this even more, "proving" that all the "science" being cited by the Obama Administration are simply guesses. I'm amazed, and disappointed, that Obama is so cranked on this. Fortunately, I think the odds are very good that 90% of his grandiose plans won't make it through Congress. Thank god for petty self-interest! Unfortunately, the 10% that do make it through will be bad enough.

  • ||

    I'm a technology addict.

  • Nikola T||

    Again, I must say that this whole energy debate is ridiculous. Energy is free. Anyone can produce electricity at any time. Electricity is a force of nature. It doesn't need to be created - it exists.

    We need to stop the commercialization of energy. That is the underlying root of this problem. I'm a lover of the free market, but here we have politics and corruption hiding the truth in order to create profits.

  • Warty||

    I can never tell if Alan is being sarcastic or not.

  • ||

    Warty, merely translate everything Alan says into Roger Ebert's voice and picture him saying it about a movie, and you're all set.

    Alan, can you review Fast Food for us? That seems about your skill level.

  • Citizen Nothing||

    When he makes sense he's being sarcastic.

  • Citizen Nothing||

    Oooo. I sense an Epi/Vanneman war brewing. Save me an aisle seat.

  • Xeones||

    I sense an Epi/Vanneman war brewing. Save me an aisle seat.

    As long as Epi doesn't start breaking the comments again, it might be kind of entertaining.

  • ||

    Yes, let's see some extended claws and scratching. It's been a while.

    Alan, Episiarch is giddy like a little girl about the new Star Trek. If you feel he's foolish to feel that way, you can attack him there.

  • Untermensch||

    "The study of the deeds of our ancestors is thus more than an atiquarian pastime, it is an immunological precaution." (Umberto Eco, The Search for the Perfect Language, page 316)

    Alas, this is a lesson politicians never learn.

  • Gilbert Martin||

    The part of all the hype being spewed by the boosters of this nonsense that irritates me the most is the claim that it will boost the economy and create gobs of "green collar jobs".

    Government doesn't "create" anyting - all it does is redistribute wealth that has already been created by somebody else.

    All the "green" jobs come at the expense of economic activity (and all the related jobs) destroyed by sucking the wealth out of the hands of those who previously had it before it was snatched to pay for the "green" jobs.

    The people who are trying to fight this nonsense need to do more to explain some basic economic principles to the public and demonstrate how the "job creating" claims are bogus.

  • Xeones||

    Politicians don't have time to LEARN stuff, Untermensch. They got crises to solve!

  • ed||

    Energy is free. Anyone can produce electricity at any time

    So what's stopping you, Nikola (if that's your real name)? If you "love" the free market so much but, contradictorily, despise the profit motive, build a power plant on your own dime and give away your product. Problem solved. Please let us know when you've broken ground.

  • ||

    Change is good, ProL. You just have to deal with it. It's like when you'll have to deal with what your daughters will do when they grow up...and with whom.

  • ||

    One wonders how much we could accomplish if the government didn't attempt to arrogate to itself these "great projects." I look at the example of space and just shake my head. There's little doubt in my mind that it will be the private sector that will open up space--provided that the government doesn't stop it through ridiculous regulation, preventing the exploitation of space-based resources (à la Antarctica or the Moon Treaty), or hemming in private actors in the name of national security.

    NASA has been little more than a jobs program with some nifty science probes for most of the last forty years. How much more could we do with a permanent manned presence throughout the solar system? But NASA can't even get out of LEO with humans.

  • ed||

    The Bride of Frankenstein's hair looks like a Hostess Cupcake.

  • ||

    Episiarch,

    I can think of all sorts of changes that you'd object to. So can you. Still your tongue and save it for your duel with Alan.

  • ||

    A 2007 study by the Department of Energy's Pacific Northwest National Laboratory estimated that the country would reduce oil consumption by 6.5 million barrels per day, equivalent to 52 percent of current petroleum imports, if 84 percent of cars, light trucks, and SUVs were PHEVs, traveling an average of 33 miles per day on electric power. Greenhouse gas emissions would be cut by as much as 27 percent.

    And if we all rode flying unicorns to work, we could really reduce emissions. Well, except for the highly volatile unicorn farts.

  • Bruce||

    Why is it so hard to write a thoughtful and intellegent article that gives people the basis with which to make their own decisions?

    This is one and this makes it remarkable. It is well reasoned, up-to-date, with numeric data and no preconceived point of view.

    Oh, did I mention it was well written.

    Well done Ron.

  • ||

    I can think of all sorts of changes that you'd object to.

    O Rly? Like what?

    Alan isn't obliging by coming out swinging, so it's up to you, ProL.

  • ||

    "The Bride of Frankenstein's hair looks like a Hostess Cupcake."

    Too close to lunchtime.

  • Citizen Nothing||

    Hey, since someone quoted Umberto Eco above, and someone else injected recent movies, can we talk about what a piece of crap Angels and Demons undoubtedly is? (Dan Brown being the anti-Eco and all.)

  • ||

    The pope gave it two thumbs down.

    And consigned everyone in any way involved to the fires of Hell.

  • ||

    can we talk about what a piece of crap Angels and Demons undoubtedly is?

    Why? Who would even read or watch that piece of shit? I accidentally saw a bunch of The DaVinci Code on HBO and couldn't believe how bad it was. Tom Hanks is the first indicator, but I tried to ignore that for a while.

    "WILSON!!!"

  • ||

    We need to stop the commercialization of energy. That is the underlying root of this problem. I'm a lover of the free market, but here we have politics and corruption hiding the truth in order to create profits.



    A challenge for the board - find (and link to) an H&R comment from this week stupider than this.

  • Citizen Nothing||

    I think the popularity of the Da Vinci Code is a good demonstration of the biggest drawback of democracy - that half the people are of below-average intelligence.

  • ||

    "the NYT tells us a new study says we don't have to worry about global warming after all."

    The article says that if all the ice on Anartica melted, it would raise sea level by 10 feet instead by 20 feet as has previously been estimated. This might be a moot point anyway as the ice is accumulating on Antarctica except for a little peninsula which makes up such a small fraction of the total continent.

  • ! </a||

    A challenge for the board - find (and link to) an H&R comment from this week stupider than this.

    Can you extend it to this month? MNG has been quiet this week.

  • ||

    Michael Bay's Repo Man?

  • ||

    When I want a heads-up on the Next Big Technological Thing, the first person I ask is a government bureaucrat, because they are the most innovaty sonsabitches out there.

  • ||

    half the people are of below-average intelligence.

    Only half?

  • ||

    Michael Bay's Repo Man?

    No; Michael Bay's Real Genius. Starring Will Smith as Chris Knight, Shia LaBeouf as Mitch Taylor, Megan Fox as Jordan, and Martin Lawrence as Laslo Hollyfeld.

  • ||

    Pro Libertate will not be able to post for a while. He swallowed his own brain while reading Episiarch's last post.

  • ||

    Who is playing Jerry?

    Oh, God, please make the pain stop.

  • ||

    hey Gill,

    Just because government is using tax dollars that doesn't mean it can't create anything. I'll even go further and say that doesn't mean that it can't create anything of value (of course is sure doesn't always).

    But there are definitelly goods like roads, bridges, the military etc that either the private sector won't produce, or won't produce enough of.

    The government isn't the solution for everything, but that doesn't mean it can't do anything.


    Also, as far as the article goes, it seems to be saying that since government research often doesn't pan out, then the government shouldn't do any research?

    But isn't that the case with private research too? I mean whether you are trying to discover a new drug, or a cheap source of energy, you might have 100 failures, or maybe 100 million, but that doesn't mean we should never research anything.

    I think public private partnerships can be a good thing, especially as it regards to basic scientific research that might not get the funding it should.

  • Jeremy Bentham ||

    A challenge for the board - find (and link to) an H&R comment from this week stupider than this.

    Not so fast check out my back log:



    Stretching his hand up to reach the stars, too often man forgets the flowers at his feet.

    The age we live in is a busy age; in which knowledge is rapidly advancing towards perfection.

    All punishment is mischief; all punishment in itself is evil.

    Every law is an infraction of liberty.

    Tyranny and anarchy are never far apart.

    It is vain to talk of the interest of the community, without understanding what is the interest of the individual.

    It is the greatest good to the greatest number of people which is the measure of right and wrong.


    So, do I win?

  • ||

    Hugo Weaving as Jerry Hathaway.

  • ||

    I dunno, that's not the most offensive possible choice for Jerry. You did better with the kids.

    Whose the girl with the high standards?

  • ||

    Sorry, "who is."

  • ||

    Elisha Cuthbert.

  • ||

    You can't have the greatest good for the greatest amount of people. You can't maximize for two variables only one at a time please !

  • ||

    Ron,
    I would say that you missed one wild card, the possibility of increasing yield from GE corn and sugarcane. I have seen presentations by Monsanto where they expect to double the yield of corn by 2030. I have also personally seen sugarcane with 40% more sucrose that is in development stage. Given the fact that the improvements in yield through GE crops so far have been from herbicide resistance and insect resistance and that there are hundreds of traits in the development pipeline, the possibility of increasing yields to satisfy our needs for food and bioproducts is there.

  • ||

    That'll work. I think she demands a nail-hammering capacity from her men.

    We need a new Jerry. What's the most offensive possible Jerry? A nice guy? Or maybe Orlando Bloom?

  • Ebeneezer Scrooge||

    "Thanks to our recovery plan, we will double this nation's supply of renewable energy in the next three years. We have also made the largest investment in basic research funding in American history."

    Yes, and under the guise of affirmative action we will squander the whole F***ing investment on incompetent minority researchers. But hey, most of it will end up squandered anyway.


    Over the past century, in the long run, the US economy has somehow managed to grow faster than government could think up ways to kill it. Who's taking the odds that the same will happen this time around, versus those who think that this time, Uncle Sam is finally killing The Great Golden Goose?

  • just a guy||

    Whatever happened to hydrogen power? I always thought that looked promising as the next big vehicle powering method. Anyone know and/or have a link?

  • Gilbert Martin||

    "Just because government is using tax dollars that doesn't mean it can't create anything. I'll even go further and say that doesn't mean that it can't create anything of value (of course is sure doesn't always)."

    The government can create physical assets. What it cannot do is "create" jobs or economic improvement by doing so. Every dollar it spends on something is one less dollar available for the private sector to spend somewhere else. It is essentially nothing more than a transfer payment.

  • Chad||

    But the government doesn't know any better than anyone else. The best thing to do is to level the playing field…and then let the market sort things out.

    You are right, Ron. The government should level the playing field by getting rid of subsidies of all types - including the right to pollute public property for free. This would put enormous pressure on dirty industries, particularly coal, and the market could sort out the winners.

    The day a coal plant has to pay for not just SOx but NOx, particulates, CO2, mercury, mining-related pollution, etc, they are out of business.

  • ! </a||

    Whatever happened to hydrogen power?

    It blew up in our faces.

  • ||

    Elisha Cuthbert.

    Cuthbert J Twilley

  • ||

    The government should level the playing field by getting rid of subsidies of all types - including the right to pollute public property for free.

    How much should the federal government charge for a license to heat a home with a wood stove? Would the thousands of wood stove regulation enforcement officers qualify as "green "jobs"?

  • mark||

    J sub D,
    How about this comment by Chad, of course.

    Then there's this gem by Tony on the same board, but I can't tell if it's a spoof.

  • Chad||

    Gilbert Martin | May 15, 2009, 1:45pm | #

    Every dollar it spends on something is one less dollar available for the private sector to spend somewhere else. It is essentially nothing more than a transfer payment.


    True. So it really boils down to whether the government or the private sector spends its marginal dollars more wisely. Given that the public sector largely spends its marginal dollars on SUVs, McMansions, credit default swaps, and cheap Chinese crap, I feel that it is pretty much impossible for the government to do worse.

    Seriously. Think about what you would buy if you found $100 and had to spend it right away on something non-essential. Is that piece of junk worth more than whatever the government would buy with it? Highly unlikely.

  • Gilbert Martin||

    "True. So it really boils down to whether the government or the private sector spends its marginal dollars more wisely. Given that the public sector largely spends its marginal dollars on SUVs, McMansions, credit default swaps, and cheap Chinese crap, I feel that it is pretty much impossible for the government to do worse."

    It's pretty much impossible for you to prove you are capable of being a better judge of how anyone else's money should be spent than they are themselves.

  • ||

    Given that the public sector largely spends its marginal dollars on SUVs, McMansions, credit default swaps, and cheap Chinese crap, I feel that it is pretty much impossible

    Honester chad:

    Given that the public sector largely spends its marginal dollars on shit I disapprove of, I feel justified in imposing a Stalinist command and control economy on the poor, deluded peons.

  • mark||

    You mean "given the private sector" wastes its money, right?

    BTW, J sub D, there's your stupidest comment right there.

  • Gilbert Martin||

    Give him time.

    He'll come up with another one to top it.

  • ||

    Is that piece of junk worth more than whatever the government would buy with it?

    It depends; will the government (in its never-ending quest for *fairness*) take it away from me and give it to some other, "more deserving" person?

  • Chad||

    It's pretty much impossible for you to prove you are capable of being a better judge of how anyone else's money should be spent than they are themselves.

    It would be equally impossible to prove the reverse, as such things are beyond proof. We will just have to resort to democracy instead.

    It really does boil down to whether we want health care for more people, more renewable energy, and better transportation systems and infrastructure, or whether we would prefer somewhat bigger toys and homes.

    I have no idea why any sane person would prefer the latter.

  • Citizen Nothing||

    I pray to God (or whatever is up there) that Chad is 100 percent troll.

  • Chad||

    It depends; will the government (in its never-ending quest for *fairness*) take it away from me and give it to some other, "more deserving" person?

    Outside of health care, most of the things that the government purchases are used by everyone, not individual persons.

  • Gilbert Martin||

    "It would be equally impossible to prove the reverse, as such things are beyond proof. We will just have to resort to democracy instead."

    We don't live in a Democracy.

    We live in a Constitutional Republic where indivudal rights are supposed to be protected - including private property rights, and the government is supposed to stick to specifically ennumerated powers as is required by the 10th Amendment.

  • ||

    A challenge for the board - find (and link to) an H&R comment from this week stupider than this.



    Re: Jeremy Bentham | May 15, 2009, 12:39pm

    No links. Can't follow simple directions. Fail!

    Re: mark | May 15, 2009, 2:00pm

    Close, but not quite up there with "We need to stop the commercialization of energy".

    Re: mark | May 15, 2009, 2:13pm

    BTW, J sub D, there's your stupidest comment right there.


    Assuming you were referring to this comment of Chad's

    True. So it really boils down to whether the government or the private sector spends its marginal dollars more wisely. Given that the public sector largely spends its marginal dollars on SUVs, McMansions, credit default swaps, and cheap Chinese crap, I feel that it is pretty much impossible for the government to do worse.


    I think we have a winner.

    However, Chad's not through yet ...

    Outside of health care, most of the things that the government purchases are used by everyone, not individual persons.


    so you may have only identified the poster, but not the specific stupidest post. We'll have to get a ruling from the league office.


  • Chad||

    Assuming you were referring to this comment of Chad's

    "True. So it really boils down to whether the government or the private sector spends its marginal dollars more wisely. Given that the public sector largely spends its marginal dollars on SUVs, McMansions, credit default swaps, and cheap Chinese crap, I feel that it is pretty much impossible for the government to do worse."

    I think we have a winner.


    Why is it stupid? Convince me that Chinese crap that will probably be in the trash six months after you purchase it is a better investment than fixing our roads, weatherizing schools, providing health care to the poor, or building a stronger electric grid.

    The only argument you ever come up with is "The market could never be wrong!", which is in itself laughably wrong.

    It's always fun to argue with you true believers. You are as bad as evangelical Christians. I wonder what it is like to keep arguing that something is true even when a mountain of evidence exists to the contrary.

  • !</a||

    I pray to God (or whatever is up there) that Chad is 100 percent troll.

    Can you pray for me to get som hot Asian chick to pay my bar tab tonight and beg me to bang her brains out all weekend?

  • ||

    Just because dollars for public investment come from taxes instead of being raised through a stock offering, or a bank loan doesn't make them any different from an investment standpoint. In both cases they are being removed from the consumption side of the economy, and switched over to the investment side. There is different form to the transactions but the substance is the same.

    For example, a company could borrow 100m, then use those proceeds to make a toll road, then use the tolls to pay off the loan

    OR

    Citizens could decide they wanted a road, tax themselves, and then use the road.

    In both cases money came out of the economy, and was used to create something new.

    Whether the project really created something of value will depend on the particular project. Did the national highway system cost us something? Of course, but are we better off as a nation because of it, I would aruge that we are.

    Good point on the 10th, and the Feds really shouldn't have the power to do most of what they do. But of course that doesn't apply to the states.

    Anyway, I still think we as a society are better off when certain large projects with many public benefits are either partially or fully funded by tax dollars. Either because the private sector can't or won't provide the good (or provide it in a sufficeint quanity).

    I would argue that people can choose to spend a portion of their money how they want, and then also choose to tax themselves to pay for other larger goods that would benefit society as a whole. Infrastruture, military etc.

  • ||

    Just because dollars for public investment come from taxes instead of being raised through a stock offering, or a bank loan doesn't make them any different from an investment standpoint. In both cases they are being removed from the consumption side of the economy, and switched over to the investment side. There is different form to the transactions but the substance is the same.

    You can't tell the difference between coerced and voluntary investments???

    Or, the likely productive value of investments hat are coerced vs. those that are voluntary?

    Tell me, if I know you are being FORCED to provide my capital am I MORE or LESS likely to spend it efficiently than if I know you can sell your stock at any time?

  • Gilbert Martin||

    "Just because dollars for public investment come from taxes instead of being raised through a stock offering, or a bank loan doesn't make them any different from an investment standpoint. In both cases they are being removed from the consumption side of the economy, and switched over to the investment side. There is different form to the transactions but the substance is the same"

    Like I said - it's essentially a transfer payment. Government does not "create" jobs or improve the economy with government spending.

    Furthermore "creating jobs" is not a function that government has been tasked with by the Constitution to begin with, so that should never be used as an excuse for the government doing anything.

  • Gilbert Martin||

    Also, what Hazel said.

  • ||

    Citizens could decide they wanted a road, tax themselves, and then use the road.

    In the magic fairy land where the construction workers union can't simply vote itself funding to build roads by making donations to the politicians that do the resource allocation, and then take twice as long at three times the expense to complete the project, because they've got no compeition.

  • ||

    The orginal question had nothing to do with coercion, but whether governenment could actually produce something.

    Anyway, I would aruge that both funding through taxes, and funding through stockes have drawbacks. In general I would agree that it's better to fund something through stocks, but why don't I see that working for the military? Of course the military does waste a lot of money, but that doesn't mean that providing it as a private good will work.

    Also, for other spending projects if they are properly desinged can minimize inefficenices involved. Note that I said public/private partnerships several times. Examples of this might be a collaboration between a university, and a private company on research. Or, licensing out pattens developed in a government lab.

    I'm certainly not trying to argue that government isn't full of inefficencies. But at the same time we shouldn't argue that government NEVER can be useful at all.

  • ||

    Just because dollars for public investment come from taxes instead of being raised through a stock offering, or a bank loan doesn't make them any different from an investment standpoint.

    FAIL.

  • Gilbert Martin||

    "In the magic fairy land where the construction workers union can't simply vote itself funding to build roads by making donations to the politicians that do the resource allocation, and then take twice as long at three times the expense to complete the project, because they've got no compeition."

    Exhibit A: the Davis-Bacon Act. A msassive giveaway of the taxpayers money to labor unions by essentially requiring all federal construction projects to use overpriced union labor. This has been around since the 1930's so the cumulative amount of the taxpayers money waste is undoubtedly in the trillions by now.

  • ||

    The point is that coerced government "investment" is inherently unlikely to be efficient because the people running it lack the incentives necessary to make sure it is produced with greatest efficiency: A) The profit motive, B) the threat of failure.

    A government enterprise cannot fail, because it is funded by coercion. The losses are continuously bourne by taxpayers who cannot "opt out" of support for the program if it is run inefficiently.

    And a government enterprise has little incentive to be profitable. Rather, it is likely to be used as a "jobs" program. Their funding is dependent on political support from politicians, rather than the support of voluntary investors. So they will naturally be more interested in garnering votes in congressional districts than in providing dividends. More jobs means more votes. So they immediately have an incentive to pad their payrolls instead of cutting costs.

  • ||

    the private sector can't or won't provide the good (or provide it in a sufficeint quanity).

    Or- private actors, investing their own money, make a rational decision about the ultimate benefit of this mythical "public good" and decline to make the "investment".

  • ||

    Ok, Mr Brooks, explain how the function (not form) differs between then? In both cases money was removed from the economy and used for an investment purpose.

    Think about the actual economics of it, and not just some talking point you heard spouted from a talking head somewhere.



    And again Gilbert I'm certainly not arguing that there isn't plenty of ineffincies in government, (and I certainly wouldn't argue that the unions don't need to be taken down a peg). But that doesn't mean government doesn't ever have a purpose, or even mean that government can't produce anythign.

    Given the choice between public and private, private of course is the first place we look, but if private can't or won't produce the good in the amount needed, then public steps in.

    Who decides if a good isn't being produced in sufficent quanity well the voters of course (with the help of special interets, lol)

  • ||

    I guess for me, it's just as wrong to say that government is never the answer (like some here seem to) as it is for liberals to think that government is always the answers.

    The reality is somewhere in between. Government should be the last restort, but still it will be needed for some things.

  • ||

    Incentives matter. A politically driven "investment" is inherently subject to a different set of incentives than a private one. "Saving or creating jobs" is not the same as creating value in the economy.

  • Ebeneezer Scrooge||

    it's just as wrong to say that government is never the answer (like some here seem to) as it is for liberals to think that government is always the answers.

    I'll second that. But my caveat is that government is best involved in situations where the free market model breaks down. Examples abound:

    The idea that all roads should be privately owned sounds good to many libertarians in theory. But I strongly suspect that those privately owned roads which are success stories today, are so only *because* they compete with public roads.

    You can have 25 competing restaurants within four blocks of each other. But you will never have 25 competing systems of roads to get you to and from those restaurants. In fact there will probably only be room for one. I think it's got something to do with some dumb law of physics that says "You can only put one thing in one at the same time." Or something like that.

    Competition among certain resource-intensive things, like roads, gas and electric utilities, etc, will always range from limited to non-existent. It is in these cases that government is at least *more likely* to do something useful -- but good outcomes are not assured whether we go public or private.


    DoD contractors are another funny corner of the market. If Uncle Sam spends billions developing missile defense systems, you don't want the contractor selling it to everyone on the planet. And how many contractors are there going to be that produce missile defense systems? Defense technology is never going to fit the free market model no matter how you slice it.

  • Ebeneezer Scrooge||

    OTOH, P Brooks is also dead on -- incentives matter. Which is why in general I don't trust the government to "do the right thing".

    But I also recognize that there are segments of the economy that will never be able to function like a true free market. Those, we should give more consideration to.

    Some of Europe's public utility schemes (for example district heating and cooling systems) actually make a lot more sense than what we've done here in the US, with our bastardized "public utilities". I'm not sure what the right answer is, but Europe has in some cases been able to implement overall smarter solutions.

  • Gilbert Martin||

    "And again Gilbert I'm certainly not arguing that there isn't plenty of ineffincies in government, (and I certainly wouldn't argue that the unions don't need to be taken down a peg). But that doesn't mean government doesn't ever have a purpose, or even mean that government can't produce anythign."

    I never said government didn't have a purpose either. It's purpose is to do the things assigned to it in the Constitution. Which do not include attempting to create jobs or manage the economy.

    It may be necessary for the government to build an aircraft carrier to provide for the national defense. But the critieria for the necessisity of it is whether it furthers that specific function or not - not any claim that it 'creates" X number of jobs or "stimulates" the economy.

    Because it is NOT going to create ANY jobs overall or ANY improvement to the economy overall even if it is objectively necessary to build it. Government cannot create wealth - all it can do is redistribute it.

  • strat||

    "No; Michael Bay's Real Genius. Starring Will Smith as Chris Knight, Shia LaBeouf as Mitch Taylor, Megan Fox as Jordan, and Martin Lawrence as Laslo Hollyfeld."

    I know one of the people upon whom Jordan was based. Yes, she did knit.

    That's just wrong, though the Elisha Cuthbert thing might work.

    "A girl's got to have her standards"

  • ||

    But if the government creates a road that otherwise wouldn't have been built that does generate value for the economy (say by the economic activity that it permits) hasn't value been created?

    IE, if it costs 100m, but allows 150m of benefits say through expanded economic activity. Then value has been created.

    Whether something is created through private investment, or through public investment doesn't effect the value of the thing created (although it will often effect the cost of what was created).

    See redistrubtion is when they take your money and just give it to someone else. That is manifestly different than if they take money and use it to create a road. One is consumption, one is investment. One creates, the other just spreads the cash around.

    And as for the consitution that doens't apply to state or local governments for things like roads. I'll totally agree that the feds often overstep their constitutional authority.

  • Gilbert Martin||

    "But if the government creates a road that otherwise wouldn't have been built that does generate value for the economy (say by the economic activity that it permits) hasn't value been created?"

    How are you going to prove that any value generated by spending $ 100 M on the road is a higher value than the value that would have been generated by leaving the money in private hands to be spent on all the things that the previous holders of would have spent it on?

  • ||

    Well, I guess there would be a couple of ways.

    One would be pretty subjective. You could poll the people the road serves and see if they were happy it got built, and that there money was spent on it.

    The other is "slightly" more objective. Perhaps take the GDP Multiplier, and multiply it by that amount, and compare that with the estimated economic activity that has occured because of that road.

    How much weight you want to give to those models is of course up to you. I think they have some value, although I don't like to base my entire decision on them though. Then again I'm an economist, not a statistian.

  • ||

    But if the government creates a road that otherwise wouldn't have been built that does generate value for the economy (say by the economic activity that it permits) hasn't value been created?

    But, I thought that roads are a subsidy to the automobile industry. Which is evil, because it causes pollution and sprawl.

    Fewer roads = more population density, walkable neighborhoods, community centers, and most-importantly, lots of cafes and boutique stores.

  • ||

    Now Hazel, don't go putting words into my mouth, lol.

    Because I'm not arguing that at times it's possible for governent to actually create something (at a normally higher cost than the private sector would create it).
    Doesn't mean I'm totally out if left field.

    I'm merly a realist who's spent a good deal fo time studying economic theory (at UCSB) and in my own time.

    I'm fully aware of all the problems government has, and creates. Yet, I still think government can at times be useful for all its flaws.

    Anyway, I'm off, it's been a long 12 hours at work.

    Good night,

  • Gilbert Martin||

    "One would be pretty subjective. You could poll the people the road serves and see if they were happy it got built, and that there money was spent on it. "

    This is "proof"?

    I hardly think so.

    It's certainly no better than asking all the people who had to cough up the $100 M if they were better off with less money.

    "The other is "slightly" more objective. Perhaps take the GDP Multiplier, and multiply it by that amount, and compare that with the estimated economic activity that has occured because of that road."

    GDP Mulitlier?

    What the heck is that?

    That sounds like some of that Keynesean nonsense about the magic "multiplier" effect of government spending - which no one has ever been able to prove actually exists at all.

  • Gilbert Martin||

    In any event this thread isn't about the efficacy of building roads - it's about the government pushing "alternative" energy.

    Which in essence is mandating a substitution of higher cost fuel sources for lower cost ones to "solve" an alleged climate "problem" that no one can prove exists at all in the first place.

    Ultimately increased national prosperity is tied to increases in productivity. And a lot of that has to do with energy sources. Forcing a use of higher cost sources in place of lower cost ones most certainly is NOT adding anything of value to the economy.

  • Ebeneezer Scrooge||

    Which in essence is mandating a substitution of higher cost fuel sources for lower cost ones to "solve" an alleged climate "problem" that no one can prove exists at all in the first place.

    Ultimately increased national prosperity is tied to increases in productivity.

    So why can't you all see through this Obama-rian plot? Rather that pulling ourselves together and trying to stop the bullshit, he's got y'all fighting with each other about the minutiae.

  • ||

    For 40 years we have waited for the market to address our dependence on foreign oil and Opec and it has not worked. We are more dependent on our enemies to supply our energy than ever. The investment in alternatives pales in comparison to the trillions we spend on defense to protect the world's oil supplies. At the same time this promise of this research is the primary reason that the price of oil is not 3 to 4 times higher which will further drain our national wealth. Whether we like it or not, our government is the only entity that has the resources and will to win the fight for energy independence.

  • ||

    Mr. Bailey,

    Just a minor comment regarding your thoughts on nuclear energy. All of the reactor types that you discuss make fissile material. LWRs make Pu and higher transuranics, breeder reactors make Pu and higher transuranics, and the thorium breeders aim to produce U-233. All of these materials are suitable for both reactors and weapons, but some are better than others, depending on how they are made and the distribution of the various isotopes, which depends on the fuel burnup strategy. Your conflation of LWRs and weapons is mis-stated. None of the current nuclear weapons states used commercial LWRs to produce fissle material for their weapons, because it is not a very efficient way to make it, given the burnup schedules of LWRs which produce too many non-fissle isotopes.

    Instead they used either enrichment technology or purpose-built reactors, or heavy-water reactors (CANDU-type) or dual-purpose specialty reactors (e.g., Russian RBMK)to breed the material.

    Also, LWRs CAN be used to breed thorium to U-233. Admiral Rickover demonstrated this at the Shippingport reactor, but there is no need to use it in the US, because U is still cheap. The Indians would really like to make this fuel cycle work because they don't have much U but they do have LOTS of thorium.

    Otherwise, you analysis is correct. We could run the planet for a long time on the uranium that we have already mined, if we just recycled it, and if we had to, we could essentially run nuclear power plants until the mountains fully dissolve into the sea, using U taken out of seawater. And then we could start to develop fusion.

  • mark||

    Thank you, Richard! You're absolutely right, if Obama wants to spend billions on unicorn farts, it's just a drop in the bucket compared to what we send overseas to our enemies. And the promise of unicorns farting all across America has already lowered the price of oil from $100/bbl to $25-$33/bbl, at least that's what I just pulled up on my Bloomberg.

  • mark||

    Whether we like it or not, our government is the only entity that has the resources and will to win the fight for energy independence.

    How true! All those coal beds, and that ridiculously giant untapped oil field in Alaska, those are not actual resources, they are just put there by the devil to tempt us. Now, the Federal Reserve Note, that is an actual resource which only the government has, and if you don't vote for people who will print more, you are guilty of treason, like it or not.

  • Neu Mejican||

    This is one and this makes it remarkable. It is well reasoned, up-to-date, with numeric data and no preconceived point of view.

    Haven't been around in lately...
    This comment made me chuckle.

    It is a better than average article from Ron, but certainly it is more a fleshing out of a preconceived point of view on the topic than anything else.

  • Robert Hargraves||

    Thorium power, cheaper than from coal, is presented in a graphic tutorial form at
    http://rethinkingnuclearpower.googlepages.com/aimhigh

  • ||

    How true! All those coal beds, and that ridiculously giant untapped oil field in Alaska, those are not actual resources, they are just put there by the devil to tempt us.

    No, they are cheap energy sources that unfortunately come with a massive cost to the environment.

  • mark||

    Please define "environment". Sorry it's just that when you've got ads on TV characterizing "clean coal" as "pollution" then I have trouble trusting what environmentalists describe as a "massive cost to the environment."

  • Chad||

    Tony | May 16, 2009, 1:27pm | #

    No, they are cheap energy sources that unfortunately come with a massive cost to the environment.


    Actually, I disagree Tony. We have been drilling in neighboring Prudhoe Bay for decades with almost no impact on the environment there. We absolutely should be drilling in ANWR - and spending every penny we make on renewables. Same with the most offshore sites. With the enormous profits we would make from drilling (hundreds of billions in royalties and tax revenues over the next 30 years), we could buy LOTS of things which would help the environment far more than any minimal losses that might occur while drilling the oil and gas.

  • Justen||

    "They don't really care how much it costs."


    Oh man, really? Because that's not what the polls are saying. I wish I had this kind of insight. (haven't even gotten 3 lines into the article, but I couln't resist)

  • ||

    DC Is so full of liars it hurts. They are so blind they do not see the impending wave about to crush them. With luck, their positions shall be open soon. Without it, we will have another form of government. What we shall not have is their idea of energy legislation. Government has nothing to do with the production of petroleum or is development other than on Federal lands and this they cannot stand. This is a way to control the people. There can be no cap and trade program if people love freedom. I can no longer abide the willfully ignorant, the biased government supported scientists, the outright liars who toot the horn of AGW. I just want to get down to the War and be done with this distasteful mess. It will come to that.

  • ||

    You're right this thread was supposed to be about renewables, and not roads. I used that as a starting point in my argument, because I think it's easier to illustrate the value created by roads first.

    As for renewables, I think probably the easist and the best thing to do would be to replace a good portion of the income tax with a carbon tax. This would increase the returns to labor, and decrease the returns to using up natural resources like coal, and oil etc. This would also level the playing field, and should take into account all the externalities from burning of fossil fuels (not even taking into account carbon, there are a lot of health effects from fossil fuels like asthama etc).

    After that, I don't think goverment would have much of a roll except for making sure that a national electric grid could get built, and funding for basic research.

    That would allow the market to make the decisions about what technology wins or looses. And would also probably increase GDP because of the decreases in the income tax.

  • TokyoTom||

    "A chastened G.M., its CEO defenestrated by President Obama himself"

    Obama personally broke Rick Wagoner`s windows? Is that how Obama got him to resign?

  • nfl jerseys||

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  • nike shox||

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  • قبلة الوداع||

    thank u

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