Extension of remarks

After my lunchtime post, I had some additional reaction from reader J.M., discussing in more detail Delaware vs. Maryland energy policy. This is just slightly edited for brevity:

I don’t know if you are keeping abreast as to what is going on in Delaware regarding Renewable Energy initiatives.

But DE has been paying for a number of years now $31,500.00 maximum or 50% per each residential installation for photovoltaic(s). In addition, they are paying 50% of the entire installation (with) a maximum of $250,000 for commercial.

Moreover, they are paying $600/ton for installation of high efficiency HVAC 15 SEER or more (with) a maximum of $3,000 per residence. 

The story gets better, I guess you’ve heard of Bluewater’s proposal for the offshore windfarm. They are also moving briskly towards electricity generation on a grander scale.

Now as for Maryland – once again, I have been invited to testify on numerous energy bills during this past legislative session, but I’m happy to report that I’ll not be attending any of them. Why, you might ask? Because this would have made the 4th consecutive year that I would have wasted my gas and time to speak (to) deaf ears.

It isn’t any one party’s fault for lack of an energy policy. I tag the…fault to a totally dysfunctional State as it relates to implementation of Renewable Energy Initiatives. (Emphasis in original.)

So we have a good idea of what J.M. thinks. However I also wanted to take the opportunity of this post to extend something I remarked on this afternoon as well. As I stated:

I don’t have a lot of objection to HB377…except for my longstanding objection to tax legislation being used to pervert market forces.

After writing that I decided it may be a good idea to further this thought. There are a number of ways that business can take advantage of the government and by extension the taxpayer. In this case, government is using the incentive of a grant or tax rebate to shift the playing field of home energy sources toward the use of solar collectors or geothermal heating and placing a disadvantage on electric and natural gas providers. Somewhere there was a lobbyist for the solar and geothermal industry who talked a legislator into introducing this bill originally in order to secure an advantage for the lobbyist’s client company or group.

Similarly, every day government at all levels works at the behest of a particular business or industry to create some sort of advantage for themselves. A couple years ago my adopted hometown of Salisbury created a controversy for itself by allowing tax increment financing to a developer in order to redevelop the site of the former Salisbury Mall – while the mall has recently been demolished as promised, the new construction has not yet begun while the tax increases endured as part of payment have commenced.

We also see this on a regular basis when a large corporation such as an automaker decides it would like to build a large assembly plant someplace in America. States trip over themselves to secure these plants by offering up multi-billion dollar packages which include tax incentives, making the bet that the plant will not just employ thousands of wageearners whose payroll taxes would make up for the lost corporate taxes, but spinoff entities then create thousands more jobs and even more revenue. Sometimes these packages pan out magnificently, but oftentimes the jobs created fall short of expectations and taxpayers get stuck holding the bag while the corporation adds to its profitability. It also skews the market to some extent as other competitors who didn’t get those sweetheart deals have to find a way to make up for the disadvantage, perhaps holding one of their plants as hostage to local governments with a threatened closing if they don’t get a similar pact.

Corporate interests sometimes choose another angle to gain advantage. Similarly to the solar and geothermal bill above but without the individual tax incentives, companies try to game the system through regulation, a practice called rent-seeking. Fellow Red Maryland contributor and Maryland Blogger Alliance member Mark Newgent has been doggedly looking into this in recent weeks on his website The Main Adversary, with an emphasis on the “Global Warming Solutions Bill” scam (a recent example is here); while a good, quick primer on the concept by Thomas Firey can be found on the Maryland Public Policy Institute site.

Sometimes government can create a disincentive as well. Last week a story ran in Business Week (I found it on the MSN site) that talked about “Why Exxon won’t produce more oil“. While the story charged that Exxon/Mobil is being managed solely to maximize profit, one point I saw as key was that Exxon simultaneously was predicting more production in regions like Russia, Africa, and the Middle East but less production in North America and Europe. Where are the most onerous restrictions for exploring? You guessed it, North America and Europe. (By the way, as an XOM shareholder I don’t mind them making a profit, not that the whole nine shares I bought would allow me to retire on the dividends tomorrow.) Some of those restrictions have been placed by entities interested in alternative energy in order to hamper efforts at utilizing the oil we have. (I know oil companies get breaks here and there as well, so don’t start with the conspiracy theories. You all should know where I stand on oil drilling though.)

In a perfect world, all governmental entities would stay out of the free market but we know that’s not realistic. Even by the Constitution (Article I, Section 8 ), Congress is allowed “To lay and collect Taxes, Duties, Imposts and Excises” and “regulate Commerce…among the Several States.” They certainly have taken advantage of that power, and those Several States followed close behind. But to the extent that it’s possible, trying to put this genie back into the bottle is worth attempting because with a more level playing field innovation is encouraged, benefitting all of us.

Crossposted on Red Maryland.

Reader feedback

Knowing that I pay attention to bills in the General Assembly, on Tuesday reader J.M. wrote to me on the subject of energy grants, noting he “doubt(s) very seriously” that an energy grant bill will come out of our General Assembly session. In his opinion, Maryland lags far behind Delaware, which offers, “energy grants for commercial (and) residential customers…(and) implementation of geothermal heating and air.”

“Maryland continues to offer nothing…but demands higher taxes!”

(By the way, the last part was all caps in the original, I decided to be nice to my readers and not yell.)

So I looked up the bill he cited, HB377/SB207. J.M. correctly notes that the bill as amended passed the House of Delegates 137-0 on March 19, so it can be brought over to the Senate for their action before sine die on April 9th. For an O’Malley Administration-sponsored bill I don’t have a lot of objection to HB377 (nor did anyone in the House of Delegates as no one stood against it) except for my longstanding objection to tax legislation being used to pervert market forces. Be that as it may, the idea’s not too radical as solar and geothermal energy are relatively practical for limited applications such as heating a home. I know some who have used geothermal even without a large tax incentive because of the energy cost savings.

Like the bill or not, J.M. is correct on one statement, noting that, “this session…can be chalked up as a defeat for the Maryland taxpayer.” While we may not agree on a lot in the field of alternative energy, he and I share similar sentiments on that opinion.

Presidential candidate love for the First State

Insofar as I know this is the first campaign stop featuring a Presidential candidate on the Eastern Shore or Delaware, but it’s not someone for whom I can vote.

As a courtesy to those on the opposite side who want to make a road trip Sunday to see Barack Obama in Wilmington, the information is here.

Hopefully after Super Tuesday the remaining candidates will make an effort to visit our region since we’ll be the only game in town for February 12th. I did notice that the McCain campaign also had rallies today in Delaware that featured Tom Ridge and Mike Castle but not John McCain himself. Seeing that Delaware has the fewest delegates at stake of any Super Tuesday state that’s not surprising but it would be nice to see a swing through our area by someone in the GOP before the 12th.

If I find out I’ll be sure to spread the word!

Gilchrest sides with Pelosi again

This afternoon, the Democrats tried but failed again to override President Bush’s veto of their larded-up and onerous version of the SCHIP reauthorization. And guess who voted for the override?

Yep, you’re right, Wayne Gilchrest. Sad thing is he had 41 other GOP partners (including Delaware’s Mike Castle), but fellow Free Stater Roscoe Bartlett wasn’t one of them.

Something tells me that there’s two First District GOP opponents very interested in that vote, not to mention an upcoming candidate forum where it just might be mentioned if a certain blogger gets to ask the question. You think?

Hat tip: the lovely and talented Marylander Michelle Malkin.

Crossposted on Red Maryland.

Another reminder: health care is NOT a right

I’m going to turn north of the border – the border between Maryland and Delaware, that is. But the topic I’m discussing here smacks of the differences between our country and the nation to our north, Canada. (That’s just a reminder for the few geographically-challenged readers who come to monoblogue. I wonder if they still teach that in school sometimes.)

Jack Markell is such a good writer as far as conveying his stance on the issues that I had to add a category to deal with Delaware politics. In this case though it also has application to our side of the fence because one aspect of the special session we in Maryland just endured was allocating $600 million in money we supposedly didn’t have to cover another 100,000 Maryland residents with health insurance. If you use that dollar figure as a guide, knowing that Markell claims that there’s about 100,000 in Delaware without insurance, that’s a whole lot to add to the budget of a state Delaware’s size (a population roughly 1/7 of Maryland’s.) I give Markell some credit for not simply wanting to throw money at the problem but coming up with a palette of ideas he sees as solutions.

What Jack wants to do can be summed up in a few short bullet points:

  • Sign up all those who are already eligible for state programs;
  • Allow families to purchase their health insurance through a market regulated by the state;
  • Require employers to either have insurance or contribute to a state fund;
  • Require insurers to guarantee coverage for individuals and individuals to have insurance of some sort.

The entire plan is here, but I think I’ll tackle these issues point by point.

In the first case, there’s a lot of people who would be considered underinsured. They may have insurance through their employer but do not make enough to be past the threshold that the state uses to determine eligibility. It seems to me that what Jack is suggesting is similar to a move Wal-Mart was castigated for – encouraging people to use the state as their insurer rather than their employer. That point is reinforced when Markell talks about “presumptive eligibility”, when those who apply will be presumed to qualify and allowing schools and preschools to screen children to determine whether they qualify. (Another reason kids may be geographically challenged, since that process takes money away from what schools are supposed to do.) Further, as I’ll argue regarding subsequent points, the incentive for insurers to do business in the state will wane despite the additional pool for coverage.

The second point would add a number of hitherto uninsured people to the market; however, the market would not be a free market that just anyone can jump into. As Markell writes:

Standards for health care plans offered through the Marketplace would be set by a Delaware Diamond Board. There would be a benchmark comprehensive plan that would cover primary, preventive, acute, and hospital care, with an emphasis on preventive care and disease management. Health care plans would vary in the level of benefits offered and out-of-pocket costs. The out-of-pocket costs for the benchmark plan would be capped to ensure affordability and designed to encourage smart preventive health practices and treatment. (Emphasis mine.)

In other words, the amount that an insurer can be reimbursed by the user is limited, so the profit margin either has to come from the caregiver or the state. While most think HMO’s and health insurance companies are purely evil, they do have a right to a return on investment too. And chances are they’ll put the squeeze on hospitals and other providers.

The third point has already been tried in Maryland. Anyone remember Fair Share? I know I do, and in the early days of monoblogue it was a frequent subject. But instead of a statewide edict affecting only companies who employ over 10,000 and don’t devote a certain percentage of their employee costs to health care, Markell goes for pretty much the whole enchilada:

To level the playing field, employers with 10 or more employees will be required to pay a fair share fee for each full-time-equivalent employee who is not covered through the employer or through another insurer.

Not only is that a job-killing idea, he even uses the same term as Maryland did! While he claims that he’ll start with companies with 100 or more employees, it may behoove you if he becomes governor and you have, say, 12 employees, to lay off 3 pretty quickly. True, he may level the playing field in Delaware but all that may do is drive business someplace else.

Finally, Markell decides to channel a portion of Mitt Romney’s Massachusetts plan, requiring all to have health insurance. It’s not clear whether Markell would use the same tactic on scofflaws (an additional fee paid yearly with their income tax) but what Jack wants to do is apply the force of government to what should be an individual decision. Not only that, he also places the restriction on insurance companies who now would be forced to cover all who apply. That is sure to drive insurance companies away from the Delaware market, and eventually when no one is left to provide private insurance it will fall on the shoulders of the state government to do so. It may take a couple decades or so, but incrementalism is how the liberals have played this game for the last 70 years.

And I haven’t even gotten to how Markell plans on paying for this. You should already know that, being a liberal Democrat, he has one target in mind:

An additional 50 cent increase in the tobacco tax would raise nearly $38 million in additional revenue, result in over $85 million in long-term health care savings, and save 1200 Delaware kids from an early smoking-related death.

It’s a tobacco tax increase – for the children, of course! After all, Delaware “only” ranks 21st among the states in their cigarette tax rate, and I honestly don’t think those on the “progressive” side are satisfied with their tax rates until they hit number one. He also thinks that Delaware doesn’t hit up the feds for their rightful share either. Much as Maryland’s budget, a large chunk of the First State’s comes courtesy of taxpayers in all 50 states.

But a post of this nature isn’t complete to me unless I suggest some alternatives. Here’s some of where I think this issue should go. In that piece, I did suggest that each state should be its own laboratory for change, so Jack Markell is within his right to suggest changes occuring within Dover and not by some bureaucrat a few dozen miles west in Washington, D.C. 

What’s missing from his plan in my view are measures to bring more competition to the marketplace. Nor is there room for something I consider as more of a common-sense portion of the solution, health savings accounts. Instead, Markell chooses an incrementalist approach where eventually incentives for insurers to enter or stay in the Delaware market will dry up, leaving taxpayers and employers – those who create the jobs he vows to bring to Delaware – holding the bill.

It’s too late for us in Maryland to change the path we’ll be on until at least 2010. But those of you in Delaware would be wise to learn from our mistakes. I often note that Maryland is the canary in the coal mine when it comes to so-called progressivism run amok, so you folks north of the border need to pay attention and take the opportunity you have to keep your state more free than the Free State.