Climate Policy And Keeping The Poor Poor

Fifteen years and more of no global warming, and President Obama and Secretary of State Kerry are doubling down once again on their anti-carbon energy policies.  I'm old enough to remember the time when the government thought that getting cheap electricity to the people was a good idea.  Now the idea is to make it more expensive.

So we have John Kerry speaking yesterday in Jakarta, Indonesia:

“We should not allow a tiny minority of shoddy scientists and science and extreme ideologues to compete with scientific facts,” Kerry told the audience at a U.S. Embassy-run American Center in a shopping mall.  “Nor should we allow any room for those who think that the costs associated with doing the right thing outweigh the benefits.  The science is unequivocal, and those who refuse to believe it are simply burying their heads in the sand,” Kerry said. “We don’t have time for a meeting anywhere of the Flat Earth Society,”

Well, as John Hinderaker says today about Kerry (in the context of yet other idiocies, his remarks on Syria), "He doesn't have a high enough IQ for difficult work."  My question is, can we at least acknowledge that the "costs" of the war against carbon energy include intentionally keeping the poor poor?

At the Center for Global Development, Todd Moss has a recent post that examines what has been going on at the Overseas Private Investment Corporation (OPIC) in the way of financing electricity-generating projects in poor countries.  Turns out that for multiple years OPIC has been almost completely forbidden to invest in fossil fuel projects.

Indeed, over the past five years, OPIC has invested in more than 40 new energy projects and all but two (in Jordan and Togo) are in renewables. 

Of course, because so-called "renewables" are more expensive than carbon-based energy,  the consequence of that policy has been that the same amount of investment provides access to electricity to far fewer people.

The CGD analysis shows that a $10 billion OPIC portfolio focused on 100% off-grid renewables would provide energy access to 70 million less people than if that portfolio was 100% natural gas.

And it's not just in the poor countries.  Here in New York City, Con Edison utility bills have spiked this month.  Why?  According to Bloomberg Business Week, even as fracking brings down the price of natural gas, there is inadequate pipeline capacity to bring that gas to the major cities of the Northeast.  So it's the transmission costs that have spiked.  Here in Manhattan we have the so-called "Sane Energy Project" fighting tooth and nail to prevent construction of pipeline capacity to bring "fracked" gas into the city.  Well congratulations guys, your electricity and heating bill just doubled!  OK, we can't blame this one on Obama and Kerry.  But will these guys ever figure out that there is cause and effect here?

Trying To Understand The Progressive Agenda

Many on the Left are excited by our new Mayor Bill de Blasio.  Yesterday in his first budget presentation as mayor he emphasized once again that he intends to govern as a "progressive."  Here is Brent Budowsky in The Hill yesterday channeling the excitement:

[T]he left is lifted by the possibility that he could evolve into a modern-day Robert Kennedy or a New York City FDR, turning city government into a laboratory for big ideas put into action.

Well, forgive me, but I'm trying to get a handle on what the progressive program actually is and how it could possibly work, and I just can't figure it out.  When I listen to the self-described progressives, I hear soaring rhetoric about fairness and the crisis of income inequality.  But when I look at the actual programs proposed, every single one of them looks to do absolutely nothing about "fairness," absolutely nothing about income inequality, and instead constitutes a giveaway to one or another favored constituency, almost always labor unions that provide political support, and whose members are nearly all well into the top half of the income distribution.

Granted, I'm about the farthest thing from a progressive, but I'm trying to look at the world from their perspective.  If you take their rhetoric at face value, the overriding problem of the world today is the unfairness of unequal distribution of economic goods by the capitalist system.  In his victory speech after winning the election, de Blasio called income inequality "the defining challenge of our time."  President Obama used the exact same phrase -- "defining challenge of our time" -- in talking about income inequality in his speech on December 4.

Well, if I were a progressive, and my overriding concern was income inequality, the first thing I would do is recognize that addressing this problem in a way that would meaningfully swing the numbers will take huge resources, and we have limited resources, so we must use every dollar effectively in order to have enough to address income inequality.   I would also insist on getting accurate data on real income inequality so that I would have some metrics to know whether anything I did was working.  For example, I would insist on correcting the fraudulent data currently used by the government by which nearly $1 trillion annually in in-kind handouts to low income people are excluded from income data, and the incomes of high earners are counted pre-tax even though they pay half or more of that income to the government already.  And finally, I would apply whatever spending I could muster for curing income inequality to a program that actually raised the measured incomes of the poorest people.

Applying these principles to actual programs, the first thing I would notice as mayor of New York is that we are way overspending on unsustainable pensions and health benefits for employees -- over $17 billion in the budget put forth yesterday, almost 23% of the entire $75 billion budget, and fully a third of the $52 billion portion funded by city taxes.  The second thing I would notice is that we are spending about $20,000 to educate each public school child for a year, while the rest of the country does it for about half that.  Those two things alone constitute about $15 billion of annual overspending of city taxpayer funds when the entire city tax system only raises about $52 billion.  In other words, vast overspending on these major items -- all of which goes into the pockets of the union supporters of de Blasio -- crowds out more or less any hope of making a dent in income inequality.  Overspending on Medicaid (by comparison with competitor states like California and Texas) is another several billion.  I just can't think of how you can say that income inequality is your top priority when you let this kind of big money just slip away.

Nicole Gelinas of the Manhattan Institute has an op-ed in today's New York Post about de Blasio's budget presentation, headlined "Mayor goes minor-league," the theme of which is that he "missed the big picture."  Yes, and then some.  Not a mention of overspending on worker pensions or health benefits or public education.  Instead he talked about things like another $35 million for snow removal and $3 million for an inspector general for the Police Department.  OK, those things are a fraction of a tenth of a percent of the budget.

But de Blasio continued to show that he has no idea that resources are finite and you can't just throw money away on waste and expect to have anything left over for important things, let alone for massive projects like income inequality.  So, for example, Bloomberg had proposed saving $59 million by closing surplus firehouses.  That's appropriate and necessary -- fires in New York City are down by well over half since the early 90s according to Fire Department data here, but community opposition keeps all the firehouses open even with no fires to fight.  Well, that's another $59 million that won't be addressing income inequality, and instead will go to the unionized firemen.

And how about two more de Blasio signature causes, hospitals and pre-K education.  Long Island College Hospital continues to lose about $13 million per month, and is projected to lose over $200 million over the course of three years of ownership by SUNY.  Granted this is state rather than city money.  But remember, there are next to no patients in this hospital; the money just goes to de Blasio's SEIU healthcare union allies to do nothing.  Universal pre-K similarly cannot possibly have any measurable effect on income inequality until the beneficiaries enter the labor force 20 years hence; but in the meantime the teachers union gets thousands of new dues-paying members.

If the actual agenda is to address income inequality, none of this makes any sense whatsoever.  If the actual agenda is to pay off political supporters for putting you in office, then it makes sense.  Or maybe a progressive can offer me an alternative explanation.

Why Is Vladimir Pozner OK?

I'm not much of a sports fan, but last night I thought I would check out some of the winter Olympics.  And who was on there commenting for NBC but Vladimir Pozner.  VLADIMIR POZNER!!!  Am I the only one who remembers this guy?

It's now well over 20 years ago, but in the 1980s Vladimir Pozner was the official spokesperson for the Soviet Union on American television.  In those days ABC had a late-night news/public affairs program called Nightline, hosted by a guy named Ted Koppel.  Pozner was a regular guest.  They had him on whenever they wanted someone to deliver the official Soviet line on anything.  And to be fair to him, the guy was quite skilled.  He had a truly remarkable ability to make the most brutal repression, murder and torture sound reasonable.  But really, there was no mistaking what the guy was about.

I thought they gave Pozner way too much airtime at the time, but at least in the 1980s there was a legitimate reason to seek out the Soviet viewpoint on current events, however preposterous that viewpoint might be.  But there's no reason to be respectful to this guy today.  I can't think of why he is not completely reviled by every civilized person.  Instead, he's sitting there giving the "Russian perspective" on ice skating and such, with nobody being so impolite as to mention that he made his name as the apologist for the killing, repression and imprisonment of his own people by one of history's most brutal regimes.

Well, Pozner is just one example.  The past week saw an outpouring of astoundingly uncritical obituaries of Pete Seeger, the folk singer who died on January 27.  Seeger was a long-time unhidden communist, supporter of and sometime apologist for Stalin and his successors.  Some of the obituaries I read on Seeger never even mentioned the Communist association at all.  The rest barely touched on it.   Here's the New York Times obit, headlined "Pete Seeger, Champion of Folk Music and Social Change . . ."    Social change?  Read half way through the article and you'll come to one little line that says he joined the Young Communist League in the 30s, "but after two years he dropped out and moved to New York City."  That's it?  A somewhat more honest write-up can be found in the Atlantic here.  Excerpt:

As late as the 1970s, in his column in the left-wing folk magazine Sing Out!, Seeger was giving space to horrifying ideas. Dealing with the case of Wolf Biermann, a socialist singer expelled from East Germany for dissidence, he gave space to correspondents arguing that there might appropriately be limits on what artists should say in an ideal Marxist regime. In 1999, he accepted an award from Fidel Castro’s regime. 

And are we allowed to mention that he gave concerts supporting the Eastern European Communist regimes as late as the 80s?  From John Fund in National Review Online:

I recall interviewing East German dissidents in 1989 who were still angry at Seeger and Kris Kristofferson for the concerts they did on behalf of the Communist regime that built the Berlin Wall. He was hailed in the pages of Neues Deutschland, the Communist-party newspaper in East Berlin, as “the Karl Marx of the teenagers.”

So what if those guys killed 25 million (or maybe 50 million) people.  Seeger's OK because he was "one of us" and he was for "social justice."   For endless effusive praise of Seeger, read the NYT piece, or maybe the obit in The Villager here.

Supporting mass murderers may be quite OK, but on the other hand, advocating a 5% cut in the food stamp program because it fosters unnecessary dependency and is infected by massive fraud?  That's "devastating," "sheer meanness," "repugnant," "repulsive," "cruel," and "disastrous."  I hope you're starting to get a little understanding of how this works.

Here Comes The "Affordable Housing"

More than a month into his mayoralty, and Bill de Blasio hasn't done much yet.  Whew!  So far so good.   But how long can it last?

Not too long.  News comes today on the ny.curbed website that things are starting to move forward on the "affordable housing" front.  Yes, "affordable housing" is precisely what I have nominated for the title of "worst possible public policy."  Well, maybe not quite:  my nomination was for "affordable housing" in Manhattan, while this proposal seems to cover at least the whole city, and maybe the whole state.  So it's not quite "worst possible," just really, really bad.

According to curbed, the new plan comes from Democrats in the state legislature, and proposes to spend some $150 million per year in discounted mortgage interest plus additional unspecified amounts in "a new tax credit" to get the housing built.

The Independent Democratic Conference, which the Journal describes as "a group of breakaway Democrats who share power in the state Senate with Republicans," unveiled a $750 million plan that would require the state to spend $150 million annually to fund more affordable mortgages for developers.  The plan also calls for the state to create a new tax credit for the qualifying developments.  In New York City, the housing would be aimed at families of four making $75,000 to $100,000, and monthly rents would be about $1,900 to $2,500.

Without even knowing the details, you can immediately see that a big part of the idea is to hide the cost of this program deeply off budget and off balance sheet so that nobody can figure out how much it costs per family benefited.  Also, remember that article from The Nation that I cited a few months ago (right after the election) as advocating both for more affordable housing and also for ending tax breaks for developers?  Well, forget about that.  The only real alternatives for building "affordable housing" are (1) with overt, on-budget subsidies, in which case the enormous cost per benefited family is immediately apparent to all and the thing could never get off the ground, or (2) with tax breaks, in which case the cost is deeply hidden and nobody can figure it out.  There never was any question which way they would go.

But there is an alternative way to derive the cost per family benefited, which is to look at the rent they are charged and compare to the market rent for comparable space.  For example, assume that the "affordable" apartment to be rented for $2000 per month has a comparable market-rate apartment in the same area that would rent for $3000 per month.  Actually, the $1000 per month differential probably understates the difference between "affordable" and market-rate.  But at $1000 per month, it would be $12,000 per year. 

That is quite a lot of money to hand out to a family that makes between $75,000 and $100,000 per year.   This family is not poor by anyone's definition.   In fact, it is above the median of the income distribution.  Another way of looking at that is, this is the layer of earners that bears the brunt of the tax burden.  Unless you believe in perpetual motion machines, you will quickly realize that society cannot come out ahead by trying to get taxes from these people and then handing them back $12,000 housing subsidies per family.  There's not enough money to go around.  Inevitably, a small number will get the subsidies and everybody's taxes will be unsustainable.  Meanwhile, if there are to be per family subsidies of this magnitude, shouldn't they go to the poorest first, rather than to the upper middle class?

But here in New York, there is almost no disagreement that this is a good idea.

Why Government Cannot Work To Increase Prosperity

Private enterprises are forever engaged in the maelstrom of creative destruction, where businesses and jobs that are insufficiently productive are destroyed by powerful economic forces and replaced with higher-productivity undertakings.  And thus we have Manhattan, at the center of the world's best natural port, having not one remaining active freight pier or longshoreman's job.  The space became too valuable for that.  Instead we have burgeoning digital media, tech firms, investment banks, and, at the very top of the food chain, hedge funds.  The Port Authority's massive former freight-transfer building is now the New York headquarters of Google.   All this is located in a place where most employees must cross a mile-wide estuary every morning to get to work and again in the evening to get home.  Would any central planner ever have come up with this?

In Obamacare they think they have an alternative model where the cost of healthcare can be reduced (that's a form of increased productivity) through study and direction from the all-knowing experts in the federal bureaucracy.   For example, now that you have finished reading the first 3,021 sections of the Affordable Care Act and have made it to Section 3022, you know that the ACA establishes so-called "Accountable Care Organizations."  Here is a law firm web site with a good description of how this is supposed to work, and a further link to the statutory text.  (You can try reading the statutory text if you want, but believe me it is incomprehensible.) 

To summarize, the basic concept is that healthcare providers like doctors and hospitals can sign up with HHS to become an ACO.  In the first instance, the providers must submit reams of data.  Then the geniuses at HHS analyze the data for ways to save money.  If ways are found, the government mandates use of the new cheaper methods through Medicare/Medicaid reimbursement and the ACO providers receive payments for the "shared savings."

And then there is the new Innovation Center of the Centers for Medicare and Medicaid Services, funded to the tune of $10 billion under the ACA to (according to Gina Kolata of the New York Times) "discover how to most effectively deliver health care."   How could we not have realized before that the millions of people already in the healthcare industry could not figure out "how to most effectively deliver health care," and that it could only be done by bureaucrats funded with $10 billion of federal money?  Anyway, now we know.  Take that, capitalism!

Well, these things are barely under way, and already some are starting to realize not only that they can't work, but in the grand tradition of government they will be designed and implemented to declare success and keep the funding going even as they are failing spectacularly.  Megan McArdle at Bloomberg has a report covering developments on both initiatives.  Perhaps most interesting about her report is that she cites articles from both the New York Times and the Washington Post.  If those two can spot the problem, it must be pretty glaring.

The Washington Post article, from Jenny Gold on January 31, deals with the government's first reported results from the ACOs, and is headlined "Medicare won't give a straight answer on Obamacare cost savings."   Seems that CMMS put out a big announcement on January 30 claiming that the ACOs had "saved a total of $380 million in the first year."  But OK, compared to what?  They say that the savings came from 54 of the 114 ACOs that had lower spending than projected.  So what about the other 60?  From Gold of the Post:

It’s . . . unclear whether the savings figures factored in any losses from some of the ACOs that did not do well. And the agency did not release information about which ACOs saved money and which did not.

McArdle accuses CMMS of engaging in the famous "Texas sharpshooter fallacy," where the sharpshooter first shoots at the side of a barn and only then draws the target and bullseye where the bulk of his shots had hit.  Well, fallacy is one possibility, and intentional deception of the public is another.  I'm not so quick as Megan to give the benefit of the doubt.

And how about that Innovation Center?  Kolata of the Times reports:

[N]ow that the center has gotten started, many researchers and economists are disturbed that it is not using randomized clinical trials, the rigorous method that is widely considered the gold standard in medical and social science research. Such trials have long been required to prove the efficacy of medicines, and similarly designed studies have guided efforts to reform welfare-to-work, education and criminal justice programs.  But they have rarely been used to guide health care policy — and experts say the center is now squandering a crucial opportunity to develop the evidence needed to retool the nation’s troubled health care system in a period of rapid and fundamental change.

I have a quibble with Kolata, which is that "randomized clinical trials" are only the "gold standard" in the world of bureaucratic government evaluations; in the real world, the gold standard is the definitive up or down delivered by a marketplace of people spending their own money.  But put that quibble aside, because Kolata at least has a point that randomized trials might deliver some real information.   Yet instead we have a series of so-called "demonstration projects" where nobody needs to face a competitor and everybody gets to declare success. 

Question:  When they've run through the initial $10 billion, will they be back for another $10 billion?  You can task them to find and implement better and cheaper ways to do things, but in actual practice they will just set up a useless bureaucracy and then fight to the death every year to maintain and increase the funding.

Shall we take up an Exhibit B for today?  That would be President Obama's designation last week of VP Joe Biden to lead an "across-the board reform" of federal job training programs to get rid of those that are ineffective or redundant.  HAHAHAHAHAHAHAHA.

There just can't be a better illustration than job training programs of federal spending that is ridiculously ineffective and redundant and yet somehow can never be cut.  The Wall Street Journal had an editorial on this on Monday following Obama's announcement last week.  The WSJ cites the most recent (2011) big GAO study as identifying 47 (!) federal job training programs with total spending of $18 billion in 2009.

It seems that GAO previously did, or tried to do, a big study on the effectiveness of the various job training programs back in 2003.  I say "tried to" because the report is full of statements like "Little Is Known about What the Program Achieves," and "No nationwide data exist on whether the Food Stamp E&T Program is effective in helping participants get and keep employment," and "While there are no nationwide data on the characteristics of Food Stamp E&T participants, state and local officials we spoke with in all 15 states said their Food Stamp E&T participants have multiple characteristics that make them hard to employ," and "We were unable to obtain unduplicated data for fiscal year 2001 from Florida," (and same for numerous other states), and so forth.  Wow!  You'd think this is about as bad as it could possibly get for federal programs.  Well, guess what?  By the time of the 2011 study eight years later, the number of federal job training programs had increased by three, from 44 to 47. 

Here's my prediction for Biden's effort:  there will be a big announcement of some consolidation and rationalization.  The number of programs will be reduced somewhat, maybe by half or so.  But the number of federal employees working on this and the level of funding will remain at least the same or grow.  Nobody will get fired.  And the bureaucrats will continue to make 100 percent sure that there are no data collected sufficient to show the complete ineffectiveness of their efforts.

You just have to understand the bureaucracy's version of the Brezhnev Doctrine:  Once a government program is in place, it must never be eliminated, or its funding reduced by even a dollar.  All collection of data must be done in a way to support continuation and increase of all programs.  That's the way it works.  And despite the fancy-sounding names and statutory mandates of the new ACA programs, that's how it will work for Obamacare.

Why Does The Center For American Progress Advocate For Predatory Lending?

In the aftermath of the recent financial crisis, one of the biggest claims against financial industry participants was "predatory lending," which I understand to be making subprime mortgage loans to uncreditworthy individuals who then find themselves trapped in mortgage payments they can't afford.   As recently as November 2013, JP Morgan agreed to a settlement of no less than $13 billion over alleged "predatory lending" practices.  More or less all of the big banks have also settled claims based on allegations of such practices, although the JPM settlement is the biggest one I can find.

Now you would think that the financial meltdown and hundreds of billions of dollars of defaults on subprime mortgage loans would have taught everyone not to go there again.  But instead, assorted housing advocates are out there right now pressing for another round of the same.  Yesterday's New York Times contains a typical article entitled "Race Gap on Conventional Loans," bemoaning the fact that a recent study showed that black and Hispanic borrowers have been found less likely to qualify for so-called "conventional" mortgage loans than white borrowers.  

Black and Hispanic borrowers are far more likely to apply for low-down-payment loans insured by the Federal Housing Administration. About 57 percent of black applicants and 60 percent of Hispanic applicants applied for F.H.A. loans, compared with 30 percent of white applicants  Access to financing that requires as little as 3.5 percent down is key for minority applicants, who on average have lower incomes and credit scores than whites, said Stan Humphries, Zillow’s chief economist.

The Times then goes for comment to one of its usual suspects, Julia Gordon, "director of housing finance and policy at the Center for American Progress, a liberal research group."  Here's her take:

“Like all the other separate-but-equal arrangements,” she said, “this is not good for consumers or the market or for taxpayers. We are seeing creditworthy people who should be able to get loans in the conventional market but can’t.”

Good question how people seeking 3.5% downpayment loans come to be called "creditworthy people who should be able to get loans in the conventional market but can't."

Now of course 3.5% downpayment loans are going to come with various higher fees than 20%+ downpayment "conventional" loans.   As soon as housing prices take even a small decline, these small-downpayment loans will immediately go into default in large numbers, and the cries of "predatory lending" based on the high fees will be right back.

The Times article also contains a few poorly-thought-out liberal ideas on how to "help" prospective minority homeowners acquire a downpayment (basically through some kind of government giveaway, natch).  If I might make one suggestion, it is that failure of minorities to save might arise not from any bad financial habits on their part, but rather might have a lot to do with perverse incentives of the various government handout programs to which they are already subject.  For example, Medicaid requires you to spend down your assets before you can qualify.  Food stamps also have asset tests -- bizarre ones, where home equity in unlimited amount and retirement account in unlimited amount don't count, but a bank account does.  So it goes without saying that people who have once been lured onto Medicaid and food stamps cannot save up money for a downpayment.  It's not allowed!  Congratulations, you have locked the so-called "beneficiaries" out of conventional loans.  So I know the answer:  Predatory lending!