Manhattan Contrarian On Brexit: Leave!

Today is the day of the big vote in the UK on "Brexit" -- whether or not to leave the EU.  The polls show the referendum to be too close to call, although the supporters of "leave" seem recently to have  taken a slight lead.  

Of course, all the forces of The Great And The Good are arrayed on the side of "stay."  Proponents of "stay" include the leaders of both major political parties (Conservatives and Labour), nearly all of the press and of academia, as well as most leaders in business.  Really, doesn't that tell you all you need to know?  This is why we need contrarians!  You won't be surprised learn that the Manhattan Contrarian urges the British people to vote "leave."

To its great credit, the UK does still have at least a few independent thinkers among its leaders and politicians.  Among the Brits who have taken the side of "leave," I would recommend reading statements from Daniel Hannan (Member of the European Parliament in the Conservative Party, representing the South East England district)  and Boris Johnson (Mayor of London from 2008 to earlier this year, and now an MP in the Conservative Party from a West London district).  Among Americans who have weighed in on the subject, I recommend this from Joel Kotkin (a professor of demography at Chapman University).

Admittedly some of the arguments that have garnered much of the support for "leave" are in my view not the best arguments.  Such arguments include playing on British dislike of the euro project and playing on the fear of a wave of migrants.  These arguments are not the best arguments not because the UK would be wise to join the euro or to take in hundreds of thousands of migrants, but rather because the UK in fact did not join the euro (and does not have to to stay in the EU) and because the UK did not join the Schengen agreement (that's the agreement that makes it such that any migrant once admitted to any agreeing state thereafter has unrestricted access to all the others).

But here's the argument that counts:  The EU has become fundamentally an anti-democratic project, what goes under the name of "progressive" in the United States, for turning over more and more of governance to an unelected, unaccountable class of "experts" in a distant capital who will then supposedly run things so much better than the stupid hoi polloi can run their own lives.  And it's not just that the existing Brussels bureaucrats are "progressive" in their outlook and direction.  It's that they are completely insulated and isolated from democratic processes.  With each passing day and year they seize to themselves more and more power; and there is no limiting principle to stop them or to say how far this can go.  Nobody knows who they are or how they get their jobs.  And there is no process by which they can be voted out when they overreach -- which they do more and more with every passing day.

Well, actually there is exactly one process by which anyone has the hope of getting out from under the thumb of these bureaucrats, and that is this vote on Brexit, available only in the UK and only right now.  Blow this one, UK voters, and it is highly likely that there will be no chance to say no to anything the EU does, or to reverse any EU decision no matter how bad, for the remainder of your lifetime and probably that of your children.

What the EU has come to is really a tragedy.  It all seemed to start out so well as the European Economic Community, a free trade bloc.  Let's remove all tariffs and trade restrictions between and among European states!  That will hugely increase trade and cause economic integration, growth, and prosperity.  And in fact that was a great idea, and basically worked as advertised.

But then the EU government started to metastasize.  The people in Brussels just had one brilliant idea after another of what they could accomplish for the public good if only given each time just a smidgeon more power.  Today, I'm certainly no expert on everything the EU is up to -- but then, neither is virtually anybody in Europe.  The nameless, faceless bureaucrats just crank out thousands of pages of regulations directing you what you can and can't do and gradually strangling creativity and enterprise and adventure in the name of supposed fairness and justice and the environment and eliminating all down side risk of life.  Here is a list from Kotkin of a few of the areas into which the EU bureaucracy has crept:

[The EU] bureaucracy [] . . . seeks to impose regulation on everything from the borders to the schools, planning, environment policy, and, perhaps most insulting of all, laws that control the production and distribution of such critical European products as alcohol and cheese. Climate change regulations imposed from Brussels also threaten to further weaken the middle class, even making car ownership too expensive for most drivers.

And of course the position of Brussels is that their regulations have "supremacy" over the law of any member country.  You won't be surprised to learn that the area of EU regulation that I find most offensive is the area of the environment and "climate change."  With unlimited ability to impose regulation in the name of "saving the planet," the EU bureaucracy is completely in a position to destroy much or most economic activity and thoroughly impoverish the people, without any ability of the people to push back.  And it goes without saying that the EU bureaucrats have completely bought into the anti-human carbon elimination campaign.  If there is anything that is going to stop them from multiplying the cost of energy in Europe by orders of magnitude, shutting down all electricity production that actually works, and making automobile ownership too expensive for all but themselves, I have no idea what that is.  Note that in the U.S. our EPA is up to the exact same thing; but in the U.S. the democratic election of a new President can get all the current EPA bureaucrats fired and replace with people who take the opposite direction.  There is no comparable process to get the EU bureaucracy to reverse or modify course.

On the other side, the side of "stay," the arguments are not trivial, but to me ultimately unpersuasive.  The main one is, once we exit, we are outside the EU and therefore subject to the EU external tariff.  That has the potential to severely damage many of our businesses and industries that currently make their livings selling to EU citizens, not the least of which is the UK's crown jewel, namely the London financial sector.  If you think about this argument, you realize why all the existing poo-bahs are for "stay": if lots of businesses and careers get disrupted, then those currently at the top of the economic heap are the most at risk.

Boris Johnson at the link above summarizes this argument as "the campaign of fear."  And I think he is right.  The extent of business disruption from exit is unknown and may be nothing.  The EU could impose its external tariff on the UK, but then again, it may well not.  Doing so would be just as disruptive for EU businesses as for UK businesses (although perhaps more widely disbursed in the EU).  Moreover, Switzerland is not a member of the EU, but is in on the free trade agreement. What's so hard about the UK doing that?

The pervasive economic stagnation in today's EU members is not entirely the fault of the EU bureaucracy; certainly the governments of the member states bear much of the responsibility for their own overspending and overregulation.  But the EU bureaucracy is responsible for a substantial part, and that part is growing unchecked.  The fundamental point for the UK is, if you want to preserve any prospect of future growth, dynamism, and human freedom, you've got to get out of this trap now while you have the chance.  Go for it! 

Let 421-a Die!

If you notice fewer posts than usual here this week, it's because I'm off on a trip, to Russia of all places.  On finding out that I'm from New York, some of my travel companions have immediately asked, why is it so corrupt, and is there anything to be done about it?  My answer is, our politicians are no more corrupt than those anywhere else, but our unique situation is our particularly large collection of government programs of handouts and crony capitalist giveaways.  New York has gone well beyond other states in seeking to use the levers of government supposedly to make the world more fair and just.  Instead of achieving fairness and justice, the handouts and giveaways get manipulated by the pols' friends and hangers-on to make themselves rich, while poverty never goes down and perfect fairness somehow always eludes us.  Meanwhile, once in place, the handouts and giveaways are fiercely defended by the alliance of the politicians who give them and their cronies who get them, and thus the giveaways are exceedingly difficult to eliminate, even as they never solve the problem they were supposed to solve, and even as they breed a steadily increasing level of corruption.   

One of the best examples of the genre has been in the news lately, and for the highly unusual reason that this major giveaway program recently expired, and then was unexpectedly not renewed in the recently-concluded session of the New York State legislature.   The program in question is a type of real estate tax abatement, and goes by the name "421-a."  Even if you live in New York, you may well not have heard of 421-a.  That's because, as a big crony-capitalist giveaway, it's arcane and complex, and it's only worth the time to figure it out if you're an insider getting rich off it.  From the perspective of the insiders -- pols and cronies alike -- the less the public knows about it the better.  To the public, the pols say something like, "we're fighting to get affordable housing built."  Who could be against that?  But perhaps you might think to ask, why, despite 421-a, housing in New York is so expensive, while meanwhile they have lots of affordable housing in places like Houston and Las Vegas and Orlando without having any comparable program of tax giveaways to real estate developers.

It started in New York with the idea that leaving the real estate market to operate on its own without government meddling would lead to unfair results for many tenants, who would be gouged by greedy landlords.  So New York City adopted the program known as "rent control" shortly after World War II (a detailed history can be found here).  As originally set up, that program basically allowed tenants to remain for life in their apartments with minimal yearly rent increases; however, new construction after 1947 was specifically exempt from the controls.  Thus, new construction was not severely hampered by the program, and continued at a reasonable pace through the 50s and 60s.  In the 60s some units were even removed from the controls.  However, the late 60s and early 70s were a period of high inflation, and rents in the unregulated sector of the housing market began to soar.  In a series of steps from about 1968 to 1974, New York City imposed a new program called "rent stabilization" on all the units in buildings 6 units and larger that had previously been specifically exempted or removed from controls.  In other words, New York double-crossed a big group of real estate investors who had thought that they were exempt from the restrictions.  Contemporaneous with this double-cross, new housing construction in New York City promptly fell off a cliff.  According to data at Habitat NYC here, New York City building permits fell from about 34,000 units in 1972 to about 4,000 in 1975, and then remained at a seriously depressed level of around 10,000 per year or less into the 80s.

But not to worry.  In 1971 New York also enacted 421-a as a way to bribe real estate developers to build new housing in the face of the otherwise overwhelming disincentive of the rent regulations.  The program has near infinite complexities (details available here), but in summary, depending on when and where in the city you build, you can get a complete exemption from real estate taxes on any increased value of the property that results from development for 10 or 15 years, and then a phase-in of the increased real estate taxes over several more years after that.

So is 421-a a cost-effective way of providing so-called "affordable housing" to New Yorkers?  Of course not.  To answer the question, what you want to know is the cost per unit to the taxpayers of "affordable housing" constructed; and of course, they make it absolutely as hard as possible for you to figure that out.  But when you put in some effort, you find that this program is exactly the opposite of a cost-effective way to provide housing -- it's an unmitigated disaster, at least for the taxpayers and for the intended beneficiaries (people looking for reasonably-priced housing).  A Manhattan Institute study in 2015 found that in its 44 years of operation up until that point 421-a had provided subsidies to some 150,000 housing units (only 37,000 of which were deemed "affordable"), but that as of that year the program was costing the City some $1.1 billion annually in foregone real estate taxes.  How much does that come to per "affordable" unit created?  Recognize that most of the units developed under the program are at the highest end of the market and would have been built anyway without the program, and that for the small number of "affordable" units the annual tax subsidy has to be paid not once, but ten or fifteen times.  A 2015 study by the Community Service Society here put the cost per "affordable" apartment at over $1 million!   -- a number that is about in line with my own back-of-the-envelope estimates.  From the CSS report:

421-a is responsible for losses of more than $1 billion annually in foregone revenue to the city-- more than the combined rents of the half a million tenants living in New York City Housing Authority buildings – while producing well under 14 cents of affordable housing investment for every dollar of tax subsidies. Of the tax revenue forgone through 421-a, a majority of it is being used to subsidize buildings that would have been developed without the tax exemptions.   “As wasteful public subsidies go, 421-a has no equal,” said David R. Jones, President and CEO of the Community Service Society.

But although this program is a disaster for the taxpayers and of very limited value to the intended beneficiaries, the story is not the same for politicians, land owners, and developers.  Because the tax abatement makes a higher percentage of revenues from a development go to the developer's bottom line, it has driven land prices higher and made many owners wealthy.  Those currently in the process of trying to develop property have likely bought in at the inflated prices, and would take a substantial loss if the tax exemption were eliminated.  Thus both land owners and developers have a high incentive to do what they can -- including contributing generously to campaigns -- to get the legislators to continue the program.  The program has been structured to come up regularly for renewal, thereby providing repeated occasions for politicians to exact tribute.          

The program recently came up for renewal in June 2015.  Then something unusual happened: labor unions (the other principal group of major contributors to New York politicians) attempted to use the occasion to extract some incremental handouts for themselves, particularly a so-called "prevailing wage" requirement for any developments benefiting from the 421-a program.  It seems that the labor negotiators then seriously overplayed their hand (asking for minimum wages of as high as $50/hour), and then negotiations stalled.  The program got only a six-month renewal from June 2015 to January 2016.  When negotiations continued to languish, the program expired.  That set off a lobbying frenzy seeking to have the program renewed during the 2016 legislative session; but that session has now ended without any revival.

Naturally the real estate industry is up in arms at having its gravy train at least temporarily derailed.  So what does the head of the Real Estate Board of New York (main real estate lobby) have to say?  From the Real Deal, January 15:

“New York is a city of renters and one that continues to grow,” Banks said in a statement. “Without a program like 421-a, one can’t build multi-family rental housing with a significant below-market, or affordable, component on a scale necessary to address the City’s needs.  We are committed to working with stakeholders to fashion a program that will produce the affordable housing throughout New York City that is so desperately needed, ensures construction workers are treated fairly and creates job opportunities for City residents.”  

To put it another way, they are trying to scare the public with the idea that no housing can or will ever again emerge without vast tax subsidies.  Nonsense.  What is really likely to happen if 421-a doesn't get renewed is that developers with projects in the pipeline will take a hit; but elimination of the tax handouts over time will lower land values and thus enable housing production at lower price points without subsidies.  In other words, New York can become more like all the other cities that somehow have lots of housing built by the private sector without subsidies.  But meanwhile the industry throws around plenty of fake figures.  For example, according to real estate publication the Real Deal, in 2015 through May more than 20,000 housing units were approved for construction, while in January to May 2016 (with 421-a expired) it was only 2700 -- less than 15% as many.  Does that prove that 421-a is the only reason that most units get built?  Of course not.  All that proves is that in 2015 developers were rushing to get projects started before the handout expired, while in 2016 developers were waiting for the program to be renewed before proceeding.  Many of them may well keep waiting until they get the word that the program is dead, dead, dead and not coming back.  The best result would be for that word to be delivered forcefully, and soon.

But of course that's not happening.  In the real estate industry, hope springs eternal.  The legislature is up for election this fall, and the real estate lobbyists are hard at work to get their favorite tax break renewed.  Political contribution season is beginning.  I still think it will be a miracle for 421-a to die permanently, but hey, I'm an optimist.

So we started out to create a world of "fair" prices for tenants through a rent control system.  Eighty years on in that game, and an increasingly elderly collection of long-term tenants get some benefits from that program, at the expense even to them of never being able to move.  Almost everyone new entering the market as a tenant has to overpay.  Meanwhile a tax subsidy program that sought to modify some of the disincentives of rent regulation has bred pervasive corruption.  We end up with a system less "fair" than if the government had never meddled at all, but with lots more corruption.  Well, at least for once we have a chance to get rid of some little piece of the problem. 

How Are Those Climate Catastrophe Predictions Working Out?

Probably the most famous of all the climate alarmists, and one of the creators of the climate alarm genre, is a guy named James Hansen.  Naturally, he long had a comfortably-funded government perch from which to create and disseminate his predictions of catastrophe.  For some 32 years (1981 - 2013) Hansen headed the branch of NASA called GISS (Goddard Institute for Space Studies) that is incongruously located in Manhattan (at Columbia University), and that somehow has come to be one of the repositories of world temperature data within the U.S. government.  Although he retired from GISS in 2013, Hansen still has some kind of appointment at Columbia, and still regularly makes apocalyptic pronouncements of impending climate doom.

Hansen first leapt into the public consciousness in the late 1980s with testimony before Congress predicting rapid increase in global temperatures resulting from the atmospheric greenhouse effect, in turn supposedly stemming from increased use of fossil fuels by mankind.  The most-remembered of his Congressional appearances occurred in late June 1988 at a hearing orchestrated by then Colorado Senator Tim Wirth, on what happened to be a day where the temperature in Washington rose to over 100 degrees Fahrenheit.  But the Washington Post helpfully reminds us in a feature article on June 11 that Hansen's 1988 testimony was not his first venture before Congress.  A prior round of Hansen testimony -- and of predictions of climate doom -- occurred during two days of hearings on June 10 and 11, 1986.  The host of these prior hearings was the Senate Committee on the Environment and Public Works, chaired by Senator John Chafee of Rhode Island.  We have now reached the 30th anniversary of those 1986 hearings.  Should we check in on how Hansen's predictions have fared?

The tenor of that Washington Post article can be summarized as "How right Hansen was!"  The headline is "30 years ago scientists warned Congress on global warming.  What they said sounds eerily familiar."  Then they quote Hansen's fellow climate doomsayer Michael Oppenheimer as follows:

“This hearing helped bring the concern together, and essentially painted a picture that things are kind of spinning out of control, that science is trying to tell us something, that the world seems to be changing even faster than our scientific understanding of the problem, and worst of all, our political leaders are way behind the eight ball,” said Michael Oppenheimer, a Princeton climate scientist who testified that day, and argued that action was warranted on climate change even though not everything was known about its consequences.   

But here's the funny thing about the article:  read it all the way through, and you will find that they studiously avoid stating what Hansen's actual quantitative predictions of temperature rise were.  Did he make a prediction in the 1986 hearings of how much the temperature would rise and by when?  You won't find the answer to that question in the Post article, although there is this bit of a negative pregnant:

Granted, in some cases the future temperature projections made in the 1986 hearings — based on assumptions about the rate of increase in greenhouse gas emissions and a high sensitivity of the climate to them — suggested temperatures might rise even more, or even faster, than scientists now believe they will.   

It seems that they don't want us to know.  Are you curious as to why?  Well, lucky for us, the New York Times published an article on June 11, 1986, reporting on the Chafee hearings, and that article tells us Hansen's quantitative predictions.  Ready?

Average global temperatures would rise by one-half a degree to one degree Fahrenheit from 1990 to 2000 if current trends are unchanged, according to Dr. Hansen's findings. Dr. Hansen said the global temperature would rise by another 2 to 4 degrees in the following decade.

This prediction gives a temperature increase range of 2.5 - 5 deg F (1.4 - 2.8 deg C) in the period from 1990 to 2010.  And now we've gone yet six more years, to 2016.  On Hansen's midpoint projection, we should have close to 3 deg C of warming by now -- right?

The actual data through May 2016 are now known.  Go to the UAH satellite data here, and here's what you'll find.  In November 1990 the UAH "global lower troposphere temperature anomaly" hit 0.25 deg C.  Twenty years later, for which date Hansen made a specific quantitative prediction that global temperature would have increased by at least 1.4 deg C and up to 2.8 deg C, the UAH global lower troposphere temperature anomaly was -- drumroll !!!!!! -- 0.17 deg C.  That's right, for the specific period covered by Hansen's testimony, the temperature not only did not follow the magnitude of his alarmist prediction, it actually went the opposite direction --  down, not up.  But, you say, how about bringing that up closer to the present?  The next five years beyond Hansen's prediction take us to November 2015.  Although Hansen's 1986 testimony contained no specific prediction for 2015, human greenhouse gas emissions have only increased.  If his prediction for 2010 had any validity, then temperature post-2010 should be going up by around 1 deg C every five years.  The UAH global lower troposphere anomaly for November 2015 was 0.33 deg C.  Whoopee!  It was up from November 1990 by 0.08 deg C!  On a straight-line extrapolation, Hansen's mid-point prediction for 2015 would be close to a full 3 deg C.  That means that he was off by a factor of, say, around 40.

But, you ask, hasn't there been a big spike in global temperatures in the first half of 2016?  Actually, there has been a substantial spike, although the term "big" is relative.  The spike has indeed been big relative to past spikes in the 37-year satellite temperature record; but it has been quite small relative to Hansen's alarmist predictions.  In February 2016 the UAH global lower troposphere temperature anomaly hit an all-time record of 0.83 deg C.  (The prior record was 0.74 deg C in April 1998.)  The 0.83 was only 0.57 deg C above November 1990 -- a far cry from Hansen's (extrapolated) prediction of 3 deg C or so.  And then after February the anomaly immediately started a sharp decline.  By May it was back to 0.55 deg C; and indications are that there will be a further substantial decline during June.  Will it shortly go back below the 0.25 deg C of 1990?  That's anybody's guess, but my bet is yes.

And, as one looks at the data, it only gets worse for Hansen's prediction of warming driven by greenhouse gases in the atmosphere.  The 1998 temperature spike was associated with a strong El Nino (i.e., unusually warm ocean surface temperatures in the tropical Pacific).  The  early-2016 temperature spike was also associated with a strong El Nino.  Nobody has come up with any plausible explanation of a mechanism by which atmospheric greenhouse gas effects can cause El Ninos.  The decline in temperatures over the most recent several months has further been associated with the dissipation of the 2015-16 El Nino.  In other words, there is every reason to think that such warming as there has been might have been caused by something entirely different from greenhouse gases:  If "global warming" is driven principally by atmospheric greenhouse gases, then why do the big spikes only occur when there is a big El Nino, and even more importantly, why do they promptly go away as soon as an El Nino dissipates? 

The invaluable Tony Heller weighs in with a comparison of Hansen's 1986 predictions to actual results in a "30th anniversary" post here:  

Thirty years ago, James Hansen made some spectacularly poor global warming predictions before Congress. . . .  Hansen predicted two degrees global warming by 2006. . . .  He was off by a factor of ten. . . .   Earth warmed about 0.2 degrees from June 1986 to June 2006.

I would only remark that Heller is extremely generous to Hansen in concluding that he was only off by a factor or ten.  Exactly how far off Hansen was depends on your exact start and end months for the 20-year measuring period.  As shown above, based on the New York Times paraphrase of Hansen's testimony and a November 1990 to November 2010 20-year measuring period, Hansen's error was effectively infinite (wrong sign).  Whatever.  Different start and end months can slightly change the precise result, but cannot change Hansen's fundamental problem of an error of, plus or minus, at least an order of magnitude.

If you are still somehow wondering if Hansen and the Washington Post are playing straight with you, consider this.  After acknowledging (as quoted above) that the 1986 predictions might have suggested that temperatures would "rise even more" than they in fact have, the Post gives Hansen a chance to explain.  Here is what he comes up with:

By email, Hansen clarified that we now know the world is closer to one scenario he presented in 1986 — called Scenario B — than to Scenario A, which assumed a much more rapid rate of greenhouse gas growth, and accordingly, much faster warming.

So what's he talking about with "Scenario A" and "Scenario B"?  While those terms do not appear in press descriptions of his 1986 testimony, they do appear in descriptions of his 1988 testimony, and in a 1988 article authored by him and others that backed up that testimony.  Here is an excerpt from the abstract of the 1988 article:

Scenario A assumes continued exponential trace gas growth, scenario B assumes a reduced linear linear growth of trace gases. . . .

So, since about 1988, have we had a "continued exponential trace gas growth" or a "reduced linear growth of trace gases"?  Well, perhaps we can look to this abstract of an article by James Hansen from 2013 in a journal called Environmental Research Letters:

Annual fossil fuel CO2 emissions have shot up in the past decade at about 3% yr-1, double the rate of the prior three decades (figure 1). The growth rate falls above the range of the IPCC (2001) 'Marker' scenarios, although emissions are still within the entire range considered by the IPCC SRES (2000). The surge in emissions is due to increased coal use (blue curve in figure 1), which now accounts for more than 40% of fossil fuel CO2 emissions. 

Three percent per year increase through 2013:  Is that "continued exponential trace gas growth" or "reduced linear growth of trace gases"?  How dumb does this guy think we are?  And how dumb does the Washington Post think we are?

Citizens United And Progressive Inability To Do Logical Thinking

A favorite whipping boy of today's progressive movement is the Supreme Court's Citizens United decision of 2010, which struck down as unconstitutional that portion of the 2002 McCain-Feingold "campaign finance reform" statute that limited independent political expenditures by corporations and unions in the run-up to elections.  Both Hillary and Bernie have as a main plank in their campaigns a promise to somehow legislatively reverse or otherwise find a way around Citizens United in order to "get money out of politics," and "rein in the special interests" in order to keep them from "buying elections."

Last week saw the issue again in the news.  The Senate Democrats put forth a new plan (it's not their first one) that they euphemistically call the "We The People Act" as their proposed way around the Citizens United decision.  Here is their press release.  Although the proposal contains some new tweaks to existing statutes (such as disclosure requirements for contributions to what are sometimes now called "dark money" PACs), the guts of the plan is found in a proposal to amend the First Amendment of the Constitution to give Congress and the states power to "regulate and limit" independent political expenditures:

This constitutional amendment resolution from Senator Tom Udall (D-NM) provides Congress and the states with power to enact campaign finance reforms that withstand constitutional challenges. It would fix Citizens United, McCutcheon, Buckley, and other bad precedents. Finally, it provides the authority to regulate and limit independent expenditures, including those made by corporations and Super PACs. 

The New York Times immediately weighed in on June 10 with a favorable editorial:

The Supreme Court’s 2010 decision in Citizens United, which opened the floodgates to the buying and selling of elections, is a ruling Democrats love to deplore but nobody ever seems able to do anything about. . . .  [T]he principle of cracking down on collusion is a good one. It has been made forcefully by good-government groups, like the Brennan Center for Justice, and by Senator Patrick Leahy of Vermont, who has sponsored a bill making similar suggestions. Senate Democrats on Thursday proposed a package of campaign reforms targeting Citizens United as well.

This has to be about their fiftieth editorial deploring Citizens United and the "opening of the floodgates to buying and selling elections."  

Call me crazy, but I just can't figure out how it is that when "independent political expenditures" by "corporations" become subject to "regulations and limits," that the New York Times won't find itself in the soup.  First, they are organized as a corporation.  Second, essentially everything they do is an "independent political expenditure" for the Democratic candidate or candidates of the moment.  OK, maybe someone could quibble over whether it's "everything" they do, or just a large percentage of what they do.  For example, perhaps the coverage of sports and the arts should be excluded, and maybe the weather.  But I wouldn't be so sure about the arts.  Consider this from an article a couple of days ago about the Broadway musical Hamilton.  Excerpt:

Mr. Miranda’s depiction of Hamilton as resourceful immigrant and talented self-made man captures an important aspect of his character. But the musical avoids an equally pronounced feature of Hamilton’s beliefs: his deeply ingrained elitism, his disdain for the lower classes and his fear of democratic politics. The musical’s misleading portrayal of Hamilton as a “scrappy and hungry” man of the people obscures his loathing of the egalitarian tendencies of the revolutionary era in which he lived.

The New York Times spends about $1.5 billion per year putting out its "news" product.  How much of that could be deemed some sort of political expenditure?  It could easily be $1 billion.  Any "limits" that might be imposed, even relatively high ones ($5000?) will of course catch them.  

Read some of their many editorials on this (here and here are a couple of more examples) and all you can think is that they have totally not recognized this as an issue.  Why?  Do they think it is because they are the Sulzberger family, and therefore "good," as opposed to, for example, the Koch family, who are obviously "bad"?  That argument won't help much in court.  The only real one they might try would be to argue that they are entitled to a blanket exemption because they are the "press."  But why isn't the Citizens United entity, and any other entity that organizes to put out information relative to a newsworthy event such as an election, part of the "press"?  You don't need a license to be part of the "press" in this country, so you can't distinguish "press" from "non-press" by whether someone has a license.  Is the distinction videos versus print?  The New York Times puts out plenty of videos.  And I'm sure that Citizens United (and every other Super PAC) could put out some kind of print newsletter in addition to its movie or ads if that's what it takes to qualify as "press."  

In short, I can't see any way that the "press/non-press" distinction could hold up to protect the New York Times and its ilk when the day comes that "independent political expenditures" are subject to "regulations and limits."  And remember, the penalties for campaign finance violations are not just civil; they are criminal.  With the proposed constitutional amendment in place, why wouldn't the next Republican president go after the Times and a few other soft targets in the mainstream media?

It's likely of course that this whole constitutional amendment thing is going nowhere, and the Times is well aware of that.  What that means is that the flood of proposals and editorials is not really about changing the law, but about getting the base fired up.  They are counting, of course, on the progressive base being too ignorant to know that the main thing protected by the Citizens United decision is the mainstream Democrat-operative media itself.   

Annals Of Government Fraud: The "Social Cost Of Carbon"

Somewhere along the line in the growth of the administrative state, some very naive people got the idea that giving bureaucrats arbitrary power is no problem because the bureaucrats can be constrained by a requirement that they do a "cost-benefit analysis" before they undertake major actions or regulations.  Thus no bureaucratic regulation will proceed unless the benefits exceed the costs.  Obviously, if the benefits exceed the costs, the regulation would be a net benefit, and of course it should take effect.  What could go wrong?

In the ranks of such touchingly naive people we have, for example, the U.S. Congress and the Supreme Court.  The Congress has indulged in hundreds of broad delegations of regulatory power to the administrative state, often with theoretically constraining language that either explicitly requires a cost-benefit analysis, or alternatively says something sort of close to that, such as that any regulation must be "appropriate and necessary."  In the case of a collection of power plant emissions regulations imposed by EPA in 2011, EPA attempted to take the position that the "appropriate and necessary" test under the Clean Air Act did not require it to consider cost before imposing the regulations.  The Supreme Court disagreed in the 2015 case of Michigan v. EPA, and sent EPA back to the drawing board.  So with that, agencies will almost always be required to assess cost against benefit before imposing any major action or regulation, and thus everything is now back to perfect balance and equilibrium in the world.  Right??

Of course the flaw here is the naive faith that a bureaucracy can be trusted to do an honest cost-benefit analysis, when in fact the essential dynamic of all bureaucracies is that they are only interested in growing their own power, staff, and budget.  For today's lesson, consider what goes by the name of the "Social Cost of Carbon."

The "Social Cost of Carbon" can fairly be described as the mother of all government cost-benefit analyses.  Supposedly it is a sophisticated tote-up of plusses and minuses that stands behind all government efforts to impose regulations in the area of "climate change."  In reality it is a completely dishonest scam that wildly exaggerates costs and ignores benefits in order to justify vast seizures of power unto the government.  

You may or may not have heard of the specific term "Social Cost of Carbon," but undoubtedly you do know that in 2009 when the Obama administration came in, "climate change" was one of its top priorities; yet it was clear that there was going to be no new legislation (even though the Congress was fully in Democratic hands).  The administration thus had a huge impetus to proceed by regulations to increase its power and authority.  This was several years before the Supreme Court's decision in Michigan v. EPA, but the Obamanauts were smart enough to realize that if they were going to have an aggressive regulatory agenda, somewhere in some statute would be something that someone would claim required a determination that the benefits of any proposed regulations exceeded costs.  And this "climate change" thing had the potential to impose hundreds of billions, if not trillions, of dollars of costs on the U.S. economy.    

This was way too big to entrust to any one little agency.  So instead, the White House itself took the reins, and convened what it called the "Interagency Working Group on the Social Cost of Carbon."  To do the mother of all cost-benefit analyses, you need the mother of all Interagency Working Groups.  What agencies?  In government acronym-speak, it was CEA, CEQ, DOA, DOC, DOE, DOT, EPA, NEC, OECC, OMB, OSTP, and DOT (here's a document with the list) -- all co-ordinated through the White House itself.  Whew!  The mission was to assess the costs versus the benefits of emitting carbon into the atmosphere via the burning of fossil fuels.  With this huge collection of scintillatingly brilliant geniuses from literally every important government agency, certainly you could be assured that the result would be perfect and fair and accurate.  They came out with their initial results in 2010.  The results were subsequently updated in a further document issued in 2013, with with yet a further revision in July 2015.

Now, step back from this for a moment.  Think about what fossil fuels have brought to the world over the course of the past century or so.  To start with, there's electricity.  Could you go as long as a few days without it?  It is light, telecommunications, computers, smartphones, the internet, music, television and movies, refrigeration, air conditioning, tools, appliances, and so many other things.  About 90% of electricity worldwide comes from fossil fuels and thus from the emission of carbon into the atmosphere; and by the way, most of the remaining 10% (nuclear, hydro) is also not OK with environmentalists.  Next, coming virtually 100% from fossil fuels, we have transportation -- automobiles, planes, trains, buses, ships, even motorcycles.  Then we have mechanized agriculture, also depending almost entirely on fossil fuels.  Mechanized agriculture is the difference between having our food supply produced by 2% of the population (as we have today) versus the 90% of the population it took to produce the food before mechanization.  Without mechanized agriculture, you would almost certainly be working on a farm today if you wanted to eat; and by the way you would be using a horse to plow the field rather than a tractor.  And your plow would be made of wood (can't make metal without fossil fuels).  Then come mechanized and automated factories, which also depend almost entirely on fossil fuels.  Is it even possible to run a steel mill on power from wind turbines?  Still other things dependent on fossil fuels:  Try mowing your lawn without a mower powered by fossil fuels; or trimming a tree without a trimming device powered by fossil fuels; or plowing your driveway after a snowstorm without a plow powered by fossil fuels.  Almost all homes that are heated use fossil fuels to do it.  This list is almost endless.  Fossil fuels literally have transformed human life, hugely for the better, over the course of little more than the past one hundred years.

Are there any negatives in the use of fossil fuels?  Of course there are.  Fossil fuels have impurities that end up as pollution in the atmosphere -- SO2, NO2, "particulates" (but great progress has been made in reducing the amounts of these impurities that make it into the atmosphere).  And then there's the threat of "climate change," largely theoretical at this point and projected in models that you may or may not believe.  

Suppose that you even believe some of the worst case scenarios projected by the most alarmist of the climate models, and you are then given the task of doing a cost-benefit analysis for the use of fossil fuels by mankind.  Your first reaction would probably be, how do you quantify something like this?  How do you put a value on what it is worth to people to have basically free streaming music, or air conditioning in Texas, or jet travel to Europe and back?  But even as you ponder some of those questions, I hope that your second reaction would be, this is not even remotely close.  On any conceivable scale of measurement, the benefits to mankind from the use of fossil fuels have to outweigh the negatives by a factor of hundreds if not thousands.  The benefits so wildly exceed the costs that the whole effort to try to quantify and weigh the two can't really even be justified.  Even if you hugely minimize the benefits and exaggerate the costs, there couldn't possibly be any way to make the use of fossil fuels by mankind into a net negative.  Indeed, if you need a reasonable proxy for the positive benefits of carbon-based energy, a pretty good start would be 100% of GDP.  For the U.S. that's around $17 trillion per year.  After all, without carbon-based energy GDP would be a very small fraction of what it is.  Maybe you could knock off a couple of tril for the part produced by nuclear and hydro, the infinitesimal part produced by wind and solar, and the even more infinitesimal part that you could produce by your own backbreaking human labor in the absence of an energy boost from something else.  So a good estimate of what we might call the Social Benefit of Carbon, or alternatively the Negative Social Cost of Carbon, would be around $15 trillion per year. 

That's how you would approach the problem if you were honest, or if you had even a smidgeon of integrity.  But remember, this is the government, and their power is at stake.

So in case you haven't already guessed, the huge collection of government geniuses in the mother of all Interagency Working Groups sweated and struggled over this problem for about a year, and then in February 2010 they came out with a document titled "Technical Support Document: -- Social Cost of Carbon for Regulatory Impact Analysis -- Under Executive Order 12866."    And sure enough, their conclusion was that the use of fossil fuels by mankind imposes big costs upon society, hereafter to be known as the "Social Cost of Carbon."  And not just small  costs.  Gigantic costs.  Of course they give multiple scenarios and estimates to make the whole thing as confusing and incomprehensible as possible.  But the simplest answer was, on our preferred assumptions and for this year of 2010, the Social Cost of Carbon is $35 per ton of carbon emitted.  (Total carbon dioxide emissions in the U.S. run in the range of 7 billion tons per year.  That would put the total annual "Social Cost of Carbon" in the range of $250 billion, for the U.S. alone.)  As mentioned above, since 2010 there have been two updates, most recently in 2015, and you will not be surprised to learn that the claims as to the Social Cost of Carbon have only increased.  At the comparable spot in the model ranges to the $35 per ton claim in 2010, the new 2015 number is $56 per ton.  That would put annual U.S. SCC now at around $400 billion.  But on other assumptions (particularly as to discount rate) it could be as high as $700 billion!  And also, rapidly increasing every year!

So what possible approach to valuing costs and benefits could possibly lead to such frankly insane conclusions?  Go to those two "technical support documents" put out by the IWG, and try to even figure out what they are doing.  It's endless bureaucratic doublespeak and bafflegab.  We're using really sophisticated models from the smartest of the smartest at the very best Ivy League schools!  We have the DICE model and the FUND model and the PAGE model! 

It's impossible to quote from documents like these in a short blog post, but I'll try to summarize at least a little.  It seems that the enormous costs projected by the models trace almost entirely to temperature rises assumed to occur from greenhouse warming, and that the increased temperatures are assumed to cause harm in four main ways:  sea level rise, health effects, agricultural productivity, and so-called "discontinuity events."  

For example, for sea level rise, here's how they say it works:  CO2 will cause global warming in the future; global warming will cause ice to melt; enough ice melting will cause sea level to rise; we project that rising seas will flood Manhattan in, say, the year 2060.  How much loss will come from that?  Pick an arbitrary large number!  How about $1 trillion.  No, make it $5 trillion!  Now discount that back to the present at a ridiculously low discount rate.  It's easily $1 trillion of "present value."  (Less than that?  Then make the 2060 loss $10 trillion!)  Your heating your house puts 2 tons per year of CO2 into the air.  The Social Cost of Carbon is $56 per ton.  Thus your personal contribution from home heating to the flooding of Manhattan in 2060 costs "society" $112 right now this year!  And sorry, there is no offsetting credit for your being warm in your house in the winter.  You should have heated your house with a wind turbine!  It is really far, far beyond ridiculous. 

My short comments on the four things that underlie the bulk of the projected "loss":

• Sea level rise.  I can find no convincing evidence that the rate of sea level rise is any faster now in the intensive fossil fuel era than it has been consistently since the end of the last ice age.  (The rate, by the way, is about 8 inches per century.)  Here's my favorite indicator:  The headquarters of Goldman Sachs is located just a few hundred feet from the Manhattan waterfront, and at most about 15 feet above sea level.  That's what the smart money thinks about sea level rise, at least over the next many decades.  (At 8 inches increase in sea level per century, the Goldman Sachs headquarters is safe from the sea for another good couple of millennia.)
• Health effects.  Assume worst case projected scenarios of five or even six degrees of warming.  That's a lot less than the average temperature difference between, say, New York and Houston.  As far as I know, Houston is no less healthy than New York.
• Agricultural productivity.  There is no question but that higher temperatures and more CO2 make for better, not worse, agricultural productivity.
• "Discontinuity events."  This seems to refer to future natural and weather disasters that they have no reason to think will be more frequent or severe in a warmer future than they are now.  They are completely making it up.

So to summarize: The government has convened literally everybody who is anybody in the regulatory apparat to put out a document to "prove" to the world what every thinking person knows can't possibly be true, namely that carbon fuels are a cost rather than a benefit to humanity.  It's hard to imagine a more transparent and obvious fraud.  

Anyway, I take up this subject today because the internet has been abuzz this past week with critiques of the government's Social Cost of Carbon analysis that somehow seek to deal with it on its own terms.  A paper in April by Dayaratna, McKitrick and Kreutzer re-ran the government's SCC numbers using lower climate sensitivity estimates based on empirical evidence (rather than just models).  Michael Bastasch of the Daily Caller picked up on that article on June 7 in a piece titled "Experts Debunk Obama's 'Social Cost of Carbon' Estimate -- It Might Be Negative!"   (Might be???  It's at least $10 trillion per year negative on any reasonable assumptions.)  The generally sensible Judith Curry also comments here on the issue, and equally points out that the government's SCC figures rely on climate sensitivity estimates that have been refuted by empirical evidence of the past several decades.

Fair enough.  But these people give the government way too much credit for fairness and honesty. The Social Cost of Carbon is a preposterous and transparent fraud by the government that is ridiculous in forty different ways.  I suppose these people deserve some credit for doing hard work to establish that the government's representations fall apart even on their own terms, but really, this whole Social Cost of Carbon thing is something that no intelligent person should take seriously.  And yet, it seems that we have to.  Meanwhile, the idea that imposing a "cost-benefit" requirement on the government is any meaningful constraint is exposed as complete futility.  If they can put out an analysis purporting to make use of fossil fuels a negative for mankind, then they can do literally anything.

Socialist Death Spirals And Politicians' Claims About Economic Growth

Understanding the phenomenon of the Socialist Death Spiral is critical to evaluating politicians' claims about how their policies will affect the economy.  For example, there is Hillary Clinton's oft-repeated claim that economic growth is stronger under Democratic presidents than under Republican presidents.  As one example among many, here was Hillary at one of the Democratic debates on October 13:

I have a five-point economic plan, because this inequality challenge we face, we have faced it at other points. It’s absolutely right. It hasn’t been this bad since the 1920s. But if you look at the Republicans versus the Democrats when it comes to economic policy, there is no comparison. The economy does better when you have a Democrat in the White House and that’s why we need to have a Democrat in the White House in January 2017.

Should anyone give the claim any credit?  

About a year ago in this post, I started writing about the phenomenon of the Socialist Death Spiral.  The concept is that increased government spending and tightening government control of an economy in the "socialist" model reverses the positive incentives of the private ownership/free exchange model (aka "capitalism"), undermines the dynamic of economic growth, and causes a gradual but then accelerating decline of the real economy.  Yet somehow as gradual economic decline sets in, official government economic statistics at first do not reflect that reality.  Instead, in the early phases of increased government economic control, official statistics appear to reflect continued, sometimes even increased, economic growth.  What is occurring is obvious to anyone who looks at how economic growth is measured:  government counts its own spending as a one-hundred-cents-on-the-dollar addition to GDP.  Even completely non-productive and wasteful spending can thereby be made to appear, for a time, to be "growing" the economy.  That is, until (in Margaret Thatcher's words) the government runs out of other people's money.  Then everything falls apart at once.

The single most notable example of this phenomenon was the former Soviet Union and its satellites, who continued to proclaim rapid growth and economic triumph into the 1980s, even though it was obvious that the communist economies were in stasis and decline.  It all fell apart within a period of a couple of years from about 1989 to 1991.  Today, we have Venezuela.  Official government statistics there reflected rapid economic growth from about 2003 to 2013, driven by blowout government spending and fortuitously strong oil prices.  As recently as 2013 David Sirota in Salon called Hugo Chavez's record in Venezuela an "economic miracle."  (Really???  Really!!!)  In 2014 the air started to leak out of the balloon; and in 2015 it burst.  Today the people of Venezuela are starving and rioting.  In retrospect, it is obvious that the government was able to use increasing spending, increasing control of the economy and control of the economic statistics to maintain an illusion of strong economic growth for about ten years.  Then it ran out of other people's money.

And then there's Brazil.  Former President "Lula" da Silva came into office in 2003 with an explicit left-wing agenda of higher government spending and much redistribution of wealth.  I do not claim to be an expert on Brazil's economic policies over the past 13 years.  Certainly Lula turned out to be more moderate in governing than many had feared, and did not try to nationalize the whole economy (although Brazil's economy was already dominated by state-owned enterprises before he came to power).  Here is an assessment (from approximately 2010, near the end of Lula's term) by a guy named Mark Langevin listing many of Lula's enacted policies:  the family cash stipend (bolsa familia) going to about 25% of the population; increased social pensions; in-kind benefits including dental care and rural electricity; repeatedly increasing the minimum wage; etc.  Anyway, when Lula left office at the end of 2010 the general feeling about his term of office can best be characterized as euphoria.  Literally dozens of articles talked about his economic "miracle" or his "alchemy."  He proved that you can engage in massive redistribution of wealth while still preserving economic growth!  Example (from CBS News, December 27, 2010, "Lula's Legacy: A Transformed Brazil"):

Early fears that the leftist union leader who battled Brazil's dictatorship would turn the nation socialist proved unfounded. . . .  Under Silva, the economy expanded twice as fast per year as it did in the previous two decades, growing an average of 4 percent yearly.
But Silva's legacy goes beyond figures. It's caught in the glint of an eye of a slum dweller such as Lima, who sees herself in Silva's impoverished roots, and feels pride that it was a man from the poor masses who finally delivered on the promise of Brazil.

Unfortunately, it didn't last; and much of the "growth" was likely illusory.  According to The Economist here, economic growth (by the official numbers) stopped in 2014 and has turned sharply negative in 2015 and 2016.  The government's budget deficit is up to around 10% of GDP, and projections for the future (given massive social spending commitments) are even worse.  They have run out of other people's money.  The current President is undergoing impeachment proceedings in a corruption scandal.

Walter Russell Mead has a post at the American Interest on May 23, "Brazil's Economic Nightmare."  Excerpt:

[T]he country faces a genuinely wrenching adjustment in the immediate term. The experiment with leftwing rule began reasonably well under Lula and had some genuine social accomplishments to show for itself. But Brazil has missed another historic opportunity, squandering the income from the China-driven commodity boom instead of taking advantage of the good years to build a more solid foundation for the future.

Mead is generally an insightful guy, but I'm sorry, this is ridiculously naive.  The "experiment with leftwing rule . . . began reasonably well" but they "squandered the income" from the commodity boom?  No.  The whole idea behind the leftwing rule was the blowout government spending.  That's the model: you spend as much money as you can as fast as you can and you pretend that it is all a 100% addition to economic growth.  That's how you claim a booming economy and a decrease in income inequality (assuming you count handouts as income), all at the same time.  It all seems to work (if you believe the official numbers), until the day that you run out of other people's money and the bottom falls out.  If you want to find out how much of the economic "growth" in the "growth" period was real versus illusory, I'm sorry, but no official statistics exist for that. 

So we return to Hillary Clinton's claim that "the economy does better when you have a Democrat in the White House."  Robert Farley checks that claim here at factcheck.org.  He uses a 2015 academic paper by Blinder and Watson.  (Yes, it's the same Alan Blinder who served on the Council of Economic Advisors under President Clinton.  Somehow Farley forgets to mention that.)  The B&W analysis measures the success of each President's economic policies by using the official government GDP numbers and the performance of the economy during exactly the period of that President's term -- in other words, assuming that each President gets his economic agenda enacted on day 1 and that that agenda produces its economic effects with no lags and is perfectly measured by government statistics that count increased spending as a 100% increase to GDP.  It's not hard to see how that methodology would favor presidents who increase government spending, and disfavor those who cut or stabilize government spending, even if the latter policy is far better for real growth.  John Gaski here at the City Journal on May 30 points out that if you merely introduce a two-year lag into the calculations, the apparent advantage to the Democratic presidents disappears.  The experience of Venezuela and Brazil suggests that the real lag before the harm of increased government spending becomes too obvious to ignore may well be more like ten years.