The Heritage Foundation - Leadership for America

The economic costs associated with a cap and trade policy are real. Republicans and Democrats alike realize this and have urged caution that a bill must protect American consumers and businesses. One idea floating around to protect American business and manufacturers is a protectionist carbon tariff. Secretary of Energy Steven Chu appears to be open to the idea:

Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a ‘weapon’ to protect U.S. manufacturing, just a day after one of China’s top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.

Mr. Chu, speaking before a House science panel, said establishing a carbon tariff would help ‘level the playing field’ if other countries haven’t imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years. It is the first time the Obama administration has made public its view on the issue.

Continue reading…

Although not necessarily what you think of when it comes to big oil, suppliers to extract and produce oil come in all sizes  - including family run businesses. Take William Whitefield, for instance, who runs “a family-owned company that now serves a host of national and international oil field, pipeline and industrial clients.”

He was one of about 60,000 attending last week’s Offshore Technology Conference in Houston, Texas. The mood was one of uncertainty but that had nothing to do with the swine flu or anything else in Texas. It had much more to do with the policy debate taking place more than 1200 miles away in Washington, DC. In the midst of a cap and trade debate that would cap carbon dioxide, along with the Obama administration “sticking with a plan to raise about $5 billion over 10 years through a new excise tax on oil and gas production in the Gulf of Mexico out of its proposed fiscal 2010 budget”, there’s could be only trouble ahead for the oil and gas industries. What does this mean? As Whitefield explains,

Higher taxes on our energy industry also make it difficult for the U.S. to compete with global competitors, national oil companies in unstable regimes like Russia and Venezuela. The U.S. already imports 60 percent of its oil to meet our growing energy demands. Imposing new energy taxes on natural gas production would only make us less competitive, increasing that dubious reliance.

Continue reading…

Harold Koh, the nominee for Legal Adviser to the State Department, supports “the global regulation of small arms” and a “global gun control regime.” And he believes it is “needlessly provocative” for any U.S. representative to refer to the right to bear arms when speaking to a foreign audience: the very mention of the Second Amendment, apparently, is offensive. That has very serious implications for domestic policy, but what does Koh want to do with the legal, international arms trade? The answer is simple: he wants to ban it. Continue reading…

The front page of the New York Times today has an article on China building cleaner coal-fired plants. The title and the article are fairly accurate but any conclusions should be carefully drawn. In particular, China is not taking effective steps to cut emissions of greenhouse gases.

In raw terms, China does genuinely invest a great deal of money in “green energy.” That’s because, in raw terms, the PRC invests a great deal of money in everything, including industries which heavily pollute. Continue reading…

In case you weren’t reading the New York Times front page today, we wanted to point you to an especially disturbing story. The Times wrote about The Story of Stuff, “a 20-minute video about the effects of human consumption, [which] has become a sleeper hit in classrooms across the nation.” What classrooms? Very likely the school your child attends, since over 7,000 American schools or churches have ordered the DVD.

The Story of Stuff highlights the very extreme left’s Greenpeace view of America. Essentially it tells the story of how America is not a nation to be proud of, and in fact, your child should be ashamed for living in it. For example: after implying that the radios for sale in Radio Shack are assembled by 15 year olds in Mexico, and by purchasing one, you contribute to the exploitation of the third world and the eventual end of the Earth, the film’s creator and narrator Annie Leonard says:

So MY country’s response to this limitation is simply to go take somebody else’s. THIS is the third world. Which SOME would say, is another word for our stuff that somehow got on somebody else’s land. So what does that look like? The same thing, trashing the place. (capitalized emphasis ours)

Surely no child would immediately buy the notion that wanting toys or a radio at Radio Shack is contributing to the end of the Earth, do they? The New York Times reports:

Continue reading…

This past week, we live-blogged about Secretary of Homeland Security Janet Napolitano’s admission during a Senate hearing that she still supports the Dream Act, a bill that would grant amnesty to individuals unlawfully in the United States who arrived before the age of 16. Amnesty advocates like America’s Voice are now touting the Secretary’s answer as a sign that the Obama administration will move for a full amnesty this year.

Despite its humanitarian pitch, the DREAM Act is bad public policy. Heritage fellow James Carafano wrote in 2007:

The bill would allow applicants to immediately receive conditional legal status, including eligibility for federal benefits like student loans.

The DREAM Act is not a new legislative proposal developed in the wake of the amnesty bill’s collapse earlier this year; the DREAM Act was first proposed five years ago. Its implications for undermining the enforcement of U.S. immigration laws were so obvious that the measure was never voted out of the Senate Judiciary Committee. Continue reading…

Looking to revive health care reform in Congress, the Obama administration is touting an announcement today by large health care trade associations including the American Medical Association, the Pharmaceutical Research and Manufacturers of America, the American Hospital Association, America’s Health Insurance Plans, as well as the Service Employees International Union.

Together these big health care giants, allied with the SEIU, have “offered to squeeze $2 trillion in savings from projected increases over the next decade.” But before we sign off on any new health care spending, lets see them actually deliver on these “savings” first. Continue reading…

Last week we noted that the Obama administration’s stimulus package had made the federal government, for the first time in our nation’s history, the main source of income for state and local governments. We warned at the time:

[A]s states become more dependent on federal funding, they begin to lose their ability to set priorities and make policy decisions that are best-suited to their specific needs.

This Friday the Obama administration made that fear a reality when they threatened to rescind billions of dollars in federal stimulus money from California unless the state reversed their decision to lower home health care worker salaries from $12.10 to $10.10. Continue reading…

In a surprisingly frank statement this morning, General Motors CEO Fritz Henderson confirmed that the Treasury Department is calling the shots on the company’s on-going restructuring. As reported by the New York Times, Henderson stated that GM was told by the Treasury Department to offer bondholders only up to 10 percent of GM’s equity in return for $27 billion of debt.

“They didn’t support us going above 10 percent,” Mr. Henderson said. “We went to the maximum that they permitted us.” Why 10 percent? According to Henderson, Treasury didn’t give a reason.

Washington’s control over GM isn’t too much a surprise — it’s been clear ever since Rick Wagoner was fired by the White House in favor of Henderson that the government was settling into the driver’s seat. But Henderson’s comments today provide unsettling confirmation of the degree to which Washington is now in control at the erstwhile private company.

No wonder the banks are scrambling to turn back their own TARP bailout money.

The Washington Post editorialized today in favor of a compromise on card-check, including snap elections or mandatory union access to company premises, because – they argue – the current process too heavily favors management. They also criticized the Coalition for a Democratic Workplace for refusing to admit this.

So here is a question for the Washington Post: If the current process heavily favors management, why did unions win over two-thirds of organizing elections last year?

In fact, as I have written before, labor law heavily tilts the scales in favor of unions during organizing drives: Continue reading…

This past Friday the Department of Labor released the nation’s employment’s figures showing that employers shed 611,000 private sector jobs in the first three months of this year. This brought the unemployment rate to 8.9% and revealed that in President Barack Obama’s first 100 days in office, employment has dropped about 2 million jobs. Of course, President Obama’s policies cannot be blamed for all of these job losses. They are due to the Great Global Recession, which was well underway before President Obama was sworn in. The Obama administration will be accountable for our nation’s economic recovery and it is important that we establish some unassailable benchmarks to which to hold them accountable.

The Obama administration has shown from the very beginning that they have no interest in being held accountable for how their policies will affect our nation’s economic recovery, hence the Orwellian “create or save” mantra they first unveiled with their economic stimulus package. The White House Council of Economic Advisers continues that farce today with a report claiming to show that no matter what the actual employment numbers show, their computer simulation has already proved that the stimulus will create or save 3.5 million jobs by 2010. White House Council of Economic Advisers Chairman Christina Romer defended these numbers Saturday telling CSPAN: “Accuracy has always been the main thing, not the political back-and-forth.” Economists not employed by President Obama are not buying this claim. University of Chicago economics professor Steven Davis told USA Today that the “saved or created” line is “a very clever device for providing future political cover.”

Continue reading…

Earlier today we noted that a recent MIT study showed that cap and trade energy tax proposals would cost the average American household $3,900 per year. Fortunately for us, the enviro-left has not yet succeeded in leveling their energy tax on the American people. The British are not so lucky. The British Parliament passed their Climate Change Act last year, despite the fact that the government’s Impact Assessment did not accurately reflect what was in the legislation.

Well the British government recently released the corrected Impact Assessment and guess what? Cap and trade will cost British families heavily The Daily Mail reports:

Laws aimed at tackling global warming could cost every family in Britain a staggering £20,000 - double the original forecast.

Climate Change Secretary Ed Miliband admitted the bill for introducing legislation to cut greenhouse gases had soared from £205billion to £404billion between now and 2050.

On Wednesday we exposed the farcical nature of President Barack Obama’s proposed spending “cuts” and today we posted a graphic putting his spending transfers in perspective.

Senior White House economic advisor to President George W. Bush Keith Hennessey adds another angle comparing President Bush’s last spending cut request with Obama’s latest effort:

This graphic does a great job exposing the Obama administration’s effort to cut our nation’s defenses while exploding every other area of federal spending

Last year Former South Dakota senator and 1972 Democratic presidential nominee George McGovern came out against the Orwellian named “Employee Free Choice Act” because it would destroy a worker’s right to secret ballot elections.

This week, McGovern has another op-ed, this time explaining how the binding arbitration portions of EFCA enable the federal government to take control of basic management decisions for every American business.

This feature would give the government the power to step into labor disputes where employers and labor leaders cannot reach an agreement and compel both sides to accept a contract. Compulsory arbitration is bound to trigger the law of unintended consequences.
…
In a contract negotiation, each party typically perceives the other as too demanding. But no one loses their right to contract willingly or suffers being forced to agree to anything. Employees can strike if they feel that they have been dealt with unfairly, but it is a costly option. Employers are free to reject labor demands they find to be too difficult to accept, but running a business without experienced employees is itself difficult. Both sides have an incentive to press their demands, but they also have compelling reasons not to press their demands too far. EFCA would disrupt that balance by enabling government-appointed lawyers to decide what they believe is fair or reasonable.

A federally appointed arbitrator cannot be expected to understand the nuances specific to each business dispute, the competitive market position of the business, or the plethora of other factors unique to each case. Yet fundamental decisions on wages and benefit costs, rules for promotions, or even rules for exiting an unprofitable line of business could fall to federal arbitrators under EFCA.
…
My perspective on the so-called Employee Free Choice Act is informed by life experience. After leaving the Senate in 1981, I spent some time running a hotel. It was an eye-opening introduction to something most business operators are all-too familiar with — the difficulty of controlling costs and setting prices in a weak economy. Despite my trust in government, I would have been alarmed by an outsider taking control of basic management decisions that determine success or failure in a business where I had invested my life savings.

The Natural Resources Defense Council recently went after The Heritage Foundation after hosting an event with Dr. Gabriel Calzada, author of a study that concluded for every green job created in Spain, 2.2 were lost. Let’s run through the NRDC’s points:

1.) “If you scour the Web this week, you find Kreutzer and only a tiny handful of others touting the now totally discredited “findings” of a Spanish “study” that purports to expose the pernicious nature of green jobs.” And, “[I]t is worth bearing in mind that ExxonMobil and the flacks they fund have been part of the dirty energy cheerleading team that has been busy trying to keep us stuck with dirty 19th century technologies.”

Great use of scare quotes. NRDC links to the Dakota Voice as if it were the only source that picked up the study. We encourage you to do just what NRDC said. Scour the web. Google Gabriel Calzada’s name. Also try it in Google News. We’ll let the results speak for themselves.

Continue reading…

“…I am indeed fearful writing this. It’s really a bad idea to speak out. Angering the President is a mistake…” What country would you expect to hear a citizen make this statement? Venezuela? Cuba? Russia? Nope, those are the words of prominent hedge fund manager Clifford Asness, who wrote a now-famous and widely circulated open letter this week describing the intimidation techniques used by President Obama and his administration.

Why did the President have to resort to such enhanced techniques of intimidation? Mainly because he was asking financial lenders to engage in the same unscrupulous acts his administration has been engaging in since January, i.e. picking winners and losers without concern for free market principles. The President wanted hedge funds to force a loss on investment onto their unknowing clients, so he could reward supportive union bosses in a “controlled” (i.e. Obama controlled) bankruptcy.

Shamefully, only Mr. Asness spoke up, pointing out five economic basics that the President and his advisors should learn: Continue reading…

Today the Obama administration’s Department of Interior announced that it would keep a Bush administration rule forbidding government scientists from considering global warming when protecting polar bears pursuant to the Endangered Species Act.

When the Bush Interior Department announced their rule, they were roundly criticized by the enviro-left. It will be interesting to see how they react to the Obama administration taking the same position.

More interesting is how the Obama EPA justified their decision. McClatchy reports:

On Friday, the Interior Department reluctantly agreed, saying that it’s scientifically impossible to use the Endangered Species Act to regulate greenhouse gases, which are contributing to the warming of the earth and the resulting melting of bears’ habitat in Alaska. The emissions from a cement plant in Georgia, for example, can’t be tied directly to the precipitous decline in polar ice, Salazar said.

But neither can the emissions from just one car tailpipe be tied directly to global warming. So by that same logic, the EPA has no business regulating carbon emissions pursuant to the Clean Air Act. Continue reading…

Any honest economist will tell you that a carbon cap and trade scheme, if it works perfectly, functions the same as an energy tax. The Waxman-Markey cap and trade bill currently under consideration in Congress is no different. In 2007, MIT did a study on the costs of cap and trade and found that cap and trade proposals that would reduce carbon emission by 50% to 80% below 1990 levels by 2050 would cost the American household $800 a year in economic losses and $3,100 a year in taxes collected by the federal government. That’s a total $3,900 cost for the average American household! How does this cost compare to other household expenses?

The U.S. Treasury auction of long-term bonds on Thursday was “terrible”, in the words of one Wall Street economist, with the rate on the 30 year bond jumping from 4.1 to 4.3 percent. This is just the first sign that the debt-based Obama economic stimulus plan is about to become a major drag on the recovery, just as expected.

The economic news is not all bad. We are seeing signs the rate of contraction is abating quickly, promising a bottom to the recession sometime this summer as many forecasters have expected. But therein lies another piece of the interest rate puzzle, and the trouble ahead.

There are two critical consequences to the economy stabilizing. The first is that the massive liquidity injected into credit markets by the Federal Reserve and central banks around the world transforms from economic medicine to inflationary heroin. Central banks are going to face a difficult task of extracting the excess liquidity before inflation soars and without causing another recession. Doubt about the fight against soaring inflation means higher inflation premiums in interest rates.

The second dangerous consequence is that President Obama is on course to double the national debt in just four years. Continue reading…

Today is Friedrich Hayek’s birthday and it is an important year to celebrate his birth. Although the twentieth century was the century of Hayek, this year seems also to be the year of Hayek. As a country, we are belatedly remembering his warnings, and seeing the consequences of ignoring them for so long.

Hayek explained many years ago the problems with centralized monetary policy, over-regulation and interference with prices. He understood the danger of subsidizing risk and loss and feeding a boom with easy money.

He also understood that markets are a process, and the process is one of learning and discovery—for this reason, financial models that are uniformly imposed and expect perfect information are doomed to fail.

To celebrate, we suggest buying a copy of the Road to Serfdom, if you do not have one, and perhaps in the evening, drink a toast of burgundy wine in his name.