The outburst of cold weather during the first few days of January was the result of a meteorological anomaly which happened to occur on the same days for two years in a row. The polar vortex which occurred on January 6 and 7 in 2014 struck again with full force on those same dates this year, and the cold weather proved to reinforce a point made by a surprising beneficiary.
According to the American Wind Energy Association, which advocates for wind power as an alternative source of energy, consumers saved $1 billion in the 2014 polar vortex thanks to the availability of wind power. As they note:
Wind energy does this by protecting against spikes in the price of other fuels in the Mid-Atlantic and Great Lakes states. While other power plants failed in last January’s extreme cold or faced skyrocketing prices for fuel, wind energy continued producing electricity with zero fuel cost, not only keeping the lights on but also keeping money in consumers’ pockets.
With extreme cold now gripping much of the Eastern U.S., wind energy is once again helping to keep the lights on and protecting consumers against energy price spikes by diversifying the nation’s electricity mix. This is a repeat of the value wind energy provided to consumers during the “Polar Vortex” event exactly one year ago (Wednesday.)
Further, I also learned that the amount of electrical power created by wind reached an all-time high in two regions of the country overnight Tuesday night. Yes, it was blowing hard the other day so wind turbines were at their maximum effect and production.
In the last 24 hours wind set a new output record for the MidContinent ISO (MISO) and for the Southwest Power Pool (SPP), an area that covers much of the Midwest. Wind also performed at near-record levels in the PJM market (PJM).
Overnight on January 6-7, the MISO experienced a record 11,725 MW of wind production while the SPP region added another 7,625 MW – between the two, they powered 15 million homes. AWEA also claimed “near-record” production in the PJM area, which includes our region. In some areas, wind power was a far more significant provider during the event than its overall 4 percent share of the market.
Yet while wind power has made some significant achievements, no story is complete without pointing out a couple of realities: wind energy is not as reliable as fossil fuels, and its distribution pattern in this country makes it a tenuous backup plan for some regions, such as the southeastern part of the country. Negligible wind energy production exists there because of unfavorable conditions.
The reason wind power was so useful in this instance of cold weather was that natural gas has to serve two masters when it’s cold: electricity generation which occurs all year and home heating for the winter. With the difficulty in building the infrastructure needed to move our abundant supply of natural gas to markets in some areas of the country, the spot price surged. AWEA’s $1 billion assertion was based on that price spike for natural gas.
Because of the fickle nature of wind power, it’s interesting to note that PJM keeps a constant eye on the output of its wind turbines and their predicted effects. As of the moment I write this, the wind turbines are producing 4,424 megawatts, which is slightly below the 4,585 megawatts forecast. To meet needs other sources will have to come into play if they’re not already accounted for.
The economics of wind are fickle as well. While the on-again, off-again nature of the Wind Production Tax Credit of 2.3 cents per kilowatt-hour produced has affected the building of turbines – opponents consider them a handout both to the industry and Wall Street – state government mandates for clean energy prop up the demand. Without the prescribed mandates from states like Maryland, which has a current goal of 10% of its energy source generation from wind and other renewables, it’s likely the wind energy industry would be non-existent in America.
But its legitimacy was bolstered from a surprising source this week. Each year, the American Petroleum Institute puts out a State of American Energy Report, and for the first time it addressed a number of alternative energy sources including wind power. As Jack Gerard of API puts it:
Rather than focus solely on the oil and natural gas industry, API this year is pleased to partner with organizations representing various energy sectors to highlight the contributions of each toward America’s current and future economic wellbeing, and collectively stress the importance of adopting a lasting “all of the above” energy strategy.
In their section of the API report, AWEA notes that potentially 35 percent of America’s electricity could be created from wind power by 2050. Of course, there are questions about the health risks of living near a wind turbine which will merit further study, but it is relatively convenient that most of the best places for wind production are in sparsely-populated areas.
If you subscribe to the “all of the above” energy strategy, you may be setting a place at the table for wind energy. Certainly it won’t serve all of our needs as well as the versatile roster of fossil fuels has over the years, and it may have to navigate a brave new world without the tax credits that have built the industry up over the last two decades – in fact, I think it should. Logic would dictate that, since the fuel is free of charge, the only cost should be the infrastructure, transmission, and occasional maintenance and monitoring, so who needs a tax break?
We won’t always have a polar vortex, but if the wind energy industry is where its backers say it is, we won’t need one to make wind a good choice. Let’s put it on a level playing field and see how it fares.
In the midst of what’s good news about energy production in America – despite the headwinds created by an administration that believes global warming is a large problem while spending millions to prop up failing green energy companies – the question can be asked whether Maryland has achieved its share. I want to quote writer Mark Green from the Energy Tomorrow blog, who writes that based on Energy Information Administration data that:
This is a snapshot of America’s energy revolution – the fundamental shift from energy scarcity to abundance that would have been unthinkable less than a decade ago. The shift is the result of surging oil and natural gas production using advanced hydraulic fracturing and horizontal drilling, harnessing oil and gas reserves in shale and other tight-rock formations. Safe, responsible energy development has made the United States the world’s No. 1 natural gas producer, and the U.S. could become the world’s top producer of crude oil related liquids before the year is out.
Larry Hogan has acknowledged that western Maryland has an “enormous” amount of natural gas and that he favors an “all of the above” energy policy. On the other hand, Anthony Brown is studying the issue to death. At the other end of the state and scale, Brown backs his boss’s offshore wind boondoggle while Hogan mentions that “proponents (of wind power) rarely mention the actual costs which include billions in state and federal subsidies.” In a separate statement, he also decries the potential for offshore wind’s “crony capitalism” under a Brown administration.
You know, there’s no question that the key issue in this gubernatorial race is the economy. Maryland is a state lagging behind its peers, and more and more people speak about pulling up stakes and relocating somewhere else: Delaware, Florida, Virginia, the Carolinas, Tennessee – name a state south of the Mason-Dixon Line and it’s likely someone you knew in Maryland moved there.
But one piece of the puzzle is energy, and those who toil in the oil and gas industry understand what the potential is. In his piece, Green closes by quoting American Petroleum Institute president and CEO Jack Gerard:
We need leaders who reject the outdated political ideology of the professional environmental fringe and the political dilettantes who advance the irresponsible and unrealistic “off fossil fuel” agenda. Because if we get our energy policy right today, we can be the generation that erases what for decades has been our country’s most potent and intractable economic vulnerability: dependence on energy resources from less stable regions and countries hostile to our goals, ideals and way of life.
Writer Rob Port at the Say Anything Blog also asks the pertinent question, and the answer on a state level can be found in Maryland.
I look at it this way. There was a governor and a majority in the General Assembly who were willing to risk over a billion dollars in ratepayer money on something which studies suggested might work but hadn’t been tried in Maryland before, offshore wind. Conversely, given the success of the Marcellus Shale formation in several surrounding states (most notably Pennsylvania), why not encourage the exploration of several other regions in the state which share many of the same characteristics? The worst that can happen is that we find these areas aren’t worthwhile for natural gas with current technology, but the rapidly evolving science of energy extraction means studies done even as recently as a few years ago may be rendered worthless.
Given the correct conditions for marketable extraction of coal and natural gas and an aggressive expansion of power plant capacity which uses those resources, it should be a goal to make Maryland self-sufficient in electricity by 2030. I don’t think offshore wind will get us there, but extracting those resources we have gives us a shot, and provides good-paying jobs for Maryland families who need them.
Believe it or not, this feature which used to be a staple of my site has gone dormant for over 18 months. But I decided to resurrect it because all these financial reports I’ve been doing as well as other regular features have taken up my time and allowed my e-mail box to become dangerously full of items which were rapidly running out of shelf life. So here you go: the return of odds and ends for what promises to be a cameo appearance.
As evidence of that shelf life, I wanted to bring up a thoughtful piece by my friend Rick Manning – not to be confused with the former Cleveland Indians outfielder – regarding the prospect of a continuing resolution for federal spending which would expire in December, necessitating a lame duck session.
Manning is right in believing that the strategy is fraught with peril, and if the pre-election polling is correct and Republicans take over the Senate come January this only invites Democrats to lay a few traps as they back out the door. Of course, if Congress (read: the Senate) would actually do its job and get the budget work done before the federal fiscal year begins on October 1, this wouldn’t be a problem.
One Senator, Rand Paul, received some criticism from Timothy H. Lee of the Center for Individual Freedom, who noted Paul’s flip-flop on foreign policy neatly coincided with a shift in public opinion regarding the Islamic State.
Returning to the fold of NetRightDaily – which has been on a content roll lately – I found someone who agrees with me on the Seventeenth Amendment. Tom Toth lays out the case, although I think we should do a couple other amendments first. Obviously this would probably change the composition of the Senate rather quickly to an almost perpetually Republican body, but someone needs to look out for the states and that element is missing in modern politics.
Something else Congress should get to (but probably won’t) are curbs on civil forfeiture, the subject of a recent push by the Institute for Justice. The bills themselves were introduced back in July by Sen. Paul and Rep. Tim Walberg, but while IJ has been doggedly against what they call “policing for profit” for several years, this latest offensive stems from a petition drive and video the group has done detailing abuses of the process in Philadelphia.
It’s clear the libertarian-leaning group doesn’t like the idea, and with good reason. Think of it as the step beyond speed cameras.
Philadelphia also figures prominently into my next piece. I’ll explain this more on Sunday, but there were a number of pieces I was perhaps intending to use for my American Certified site but instead will be mentioned in brief here.
One group which has made it to those pages a lot is the Alliance for American Manufacturing. Certainly they complain a lot about the trade deficit with China but AAM President Scott Paul (no relation to Rand Paul) also made a great point about the continuing lack of manufacturing jobs.
This jobs report is a big disappointment for factory workers. While we can never read too much into just a month’s worth of data, a goose egg for manufacturing doesn’t look like progress to me. And it will be hard to consistently move the manufacturing jobs number up unless our goods trade deficit with China comes down.
Two years ago President Obama campaigned on a pledge to create one million new manufacturing jobs in his second term. Our #AAMeter shows progress toward that goal is stalling. A national manufacturing strategy could help get us back on track.
Yes, they track the progress toward that elusive one million jobs, and Obama stands at a puny 193,000. It’s surprising because as Rick Manning stated in an earlier piece, we have the energy resources to bring American manufacturing back. We’re now number 1 in natural gas production, and our energy dominance serves to stabilize world prices, says Mark Green of API.
Looking at it from the perspective of state government, a recent video by Republican gubernatorial candidate Larry Hogan explained his thoughts on creating opportunity.
The key phrase in this video comes early on, when Hogan talks about his appointments. This is an opportunity which is rarely discussed, but when Democrats have run this state for all but four years of the last forty, the pool of those who get to be department heads becomes ossified. The Glendening appointee to one office may have been O’Malley’s point guy somewhere else and would be on the short list for Anthony Brown.
But if Larry Hogan can resist the temptation to overly rely on his buddies from the Ehrlich administration, we have the potential for real reform and new ideas at the department level.
Another reform is being pushed by the Maryland Liberty PAC, and Republicans will be pleased to know they are firing in the right direction by attacking the “toxic track record” of District 34A Democratic nominee Mary Ann Lisanti. They didn’t catch this gem, though.
Finally, I wanted to promote something a fellow blogger is trying. Peter Ingemi (aka DaTechGuy) has a radio spot for you:
It’s near the end of the year when everyone’s ad budgets are pretty empty so as I’ve got some ad space left on my radio show I’ve got an offer to make exclusively to the bloggers, advocates & folk on my e-mail blast.
Produce a 15 second plug for your blog, podcast or web site and for only $30 I’ll include it on my radio show DaTechGuy on DaRadio for a FULL MONTH.
That’s not only 70% off the normal price but it also means your plug will be included on broadcast replays, my own podcast replay, the live replay on FTR Radio and all four weekly replays on the 405media Tuesday through Friday. And if you want an even better deal I’ll give you 30 seconds for just $50 a month (or I’ll replay your 15 second spot twice).
This is a great chance to get your blog some national exposure on multiple platforms that you might not currently be reaching. (His emphasis, not mine.)
He’s the consummate salesman, is he not? But I have him beat, at least in terms of price. I’m not doing a radio show anytime soon, though.
And I may not be doing another odds and ends soon either. But it was fun to go back and put one together for old times’ sake.
It may not have been such a bad idea at the time, but the thought of adding corn-based ethanol to automotive fuel to stretch the oil supply seems rather silly in retrospect given our recent prowess in finding new supplies of black gold. In 2005, under the George W. Bush administration and a Republican Congress, the EPA was given the first Renewable Fuels Standard (RFS) mandate to include ethanol in motor fuel. It was at a time when many still believed in the theory of “peak oil” and determined we had to look past this resource in order to meet our growing needs.
Fast-forward to the present day and we find that, because of issues with decreased consumption of gasoline combined with increasing statutory requirements for the inclusion of ethanol in automotive fuel, the EPA took the unprecedented step of reducing its mandated amount of ethanol for this year; meanwhile, the RFS which was supposed to come out in November of last year is still on the EPA drawing board.
In reading a summary of energy news I receive daily from the American Petroleum Institute, it was revealed that retailers and other petroleum marketers have their own concerns about the prospect of E15 fuel being approved for use in order to achieve the mandated amount of ethanol required for these increasing RFS numbers.
Naturally, this is from the perspective of what’s derided as Big Oil – on the other side, you have officials in corn-producing states beseeching Barack Obama to stand firm on these standards, while desperately attempting to secure infrastructure to provide the even higher E85 blend for flexfuel vehicles, such as the “I-75 Green Corridor” which has a lot of gaps.
The whole flexfuel idea was popularized a few years ago by a group I gave some pixels to during the $4 a gallon price surge called NozzleRage, which was the brainchild of another group called the Center for Security Policy – their goal in creating yet a third group called Citizens for Energy Freedom was to mandate cars be equipped as flexfuel vehicles. Even though it’s essentially a free option, there are few takers for flexfuel cars as they occupy a tiny proportion of the market – about 1 in 20 cars sold are flexfuel cars (although that number is higher for government vehicles.)
Obviously the hope for ethanol proponents is to expand the number of facilities where E85 can be purchased in order to eliminate the need to go to an unpopular E15 blend while simultaneously being able to ratchet up the RFS figures. If even 15 percent of the cars can run on E85 and the price is competitive, then corn growers would be happy. (Never mind the folly of using food for fuel.)
Personally, though, I’m hoping they scrap the RFS altogether. It was an idea which may have had merit (and a lot of Congressional backing from farm states) a half-decade ago, but we can do better because our oil supplies are much more plentiful thanks to new technology. That’s not to say that technology can’t eventually be in place to use another source for ethanol (like the sugar cane Brazil uses for its much more prevalent ethanol market) but how about letting the market decide?
And while it’s unrelated to ethanol, I thought it was worth devoting a paragraph or two to note that North Carolina – hardly a conservative state – is getting closer to finishing the rulemaking process for fracking in the state. Most noteworthy to me in my cursory reading of the rules is that North Carolina is looking at a fairly sane setback distance from various impediments – nothing more than 650 feet. They also seem to lean heavily on industry standards.
On the other hand, Maryland was looking to set rules which would require a completely arbitrary 2,000 foot setback and require plans for all wells proposed by a drilling company, rather than single wells. In short, we would do to fracking in Maryland what Barack Obama is doing to the coal industry nationwide – strangle it with unneeded and capricious regulations. That should not stand in either case.
It’s been my philosophy that an area which doesn’t grow will die. It may take a while, but killing growth will sooner or later kill the economic viability of a city, county, region, state, or nation. Putting silly regulations in place because a minority believes the debunked hype about a safe process is a surefire way to kill a vital region in the state, not to mention impede the possibility of prosperity elsewhere. We can do much better when common sense prevails.
It’s been awhile since I wrote about the energy industry but things are always happening there and I decided to take a peek because of some items I’ve spied in daily updates I receive from the American Petroleum Institute. I like to know what’s going on in important growth industries which profoundly affect our daily lives.
As one might expect, API CEO Jack Gerard is a leading spokesperson against what he calls Barack Obama’s “irrational” energy policy. It makes sense when you consider that the United States is now the world’s leading producer of both natural gas and oil, thanks in large part to recent advancements in fracking technology which have revitalized the once-moribund American energy industry. Speaking before an audience in New Orleans, Gerard noted:
The choice before us is whether we pursue an American future of energy abundance, self-sufficiency and global leadership or take a step back to the era of American energy scarcity, dependence and economic uncertainty.
It is that simple.
There’s a clear benefit to having the abundant resources we do. I was only nine years old when the first oil crisis hit in 1973, but I remember the long gas lines and jump in prices. If you consider the long-term effects in policy and marketing, such as the adoption of fuel economy standards and the push toward smaller cars, ask yourself what may have happened if we hadn’t become so dependent on Middle Eastern oil. Would we have had the resulting mid-1970s recession?
Obviously we have recessionary conditions now in spite of the current oil boom, but there’s a valid argument that opening up the spigots (so to speak) and allowing more extraction would push the economy into more consistent growth.
Another example of an irrational energy policy is our continued ethanol mandate, about which API is asking for another cutout of a mandated increase. The EPA decided not to change the allotment for this year, but needs to finalize the rule.
To me, there are two telling facts about this story: one is that API has given up on legislative relief from Congress and appealed directly to the EPA, which speaks volumes about the transition of our supposedly limited government into a fiefdom unto itself.
The second is the sheer volume of interests on the side of eliminating the mandates entirely – everyone from motorcyclists who complain about ethanol’s deleterious effects on their engines (as is the case for other small engines from boating to lawn equipment) to the poultry producers who have seen corn prices artificially propped up due to the amount of corn necessary for creating ethanol and even environmental groups who fret that the corn-based product is actually worse for the environment. Obviously the corn growers love the price support, though, and farmers have their own determined lobbyists who would love to see an even higher ethanol blend called E-15 allowed.
API and other ethanol opponents are hinging their future hopes on a more business-friendly Congress in the next term, though.
Irrational energy policy on the state level may occur after this fall in Colorado, a state which has taken advantage of the energy boom but may fall prey to the scare tactics environmentalists use to portray fracking in a negative light. There Governor John Hickenlooper, a Democrat, sees his state’s energy success being threatened by a petition drive to place further restrictions on fracking on their November ballot. Hickenlooper is quoted in Bloomberg as pointing out, “(t)hese measures risk thousands and thousands of jobs and billions in investment and hundreds of millions of dollars in state tax revenue.”
I found this interesting because the proposed restrictions would prohibit drilling within 2,000 feet of structures, a change which energy companies complain would “effectively ban” fracking in the state. Their current restriction is 500 feet.
Now something which came out the other day to little fanfare was a draft report outlining some of Maryland’s proposed fracking regulations. The original recommendation, based on other states’ best practices by the University of Maryland Center for Environmental Science, Appalachian Laboratory, was for a 500-foot setback from wells. That guidance was expanded by the Department of Natural Resources and Maryland Department of the Environment to – you guessed it – 2,000 feet. (Page 18-20 here shows the recommended DNR/MDE changes.) In short, these regulations are intended to “effectively ban” fracking in Maryland to the detriment of not just our far western counties, but any of the regions of the state (including the Eastern Shore) that have shale deposits underneath. Talk about an “irrational” energy policy!
So here’s the deal: Maryland wants to depend more and more on methods of generating electricity which lack reliability and increase cost to consumers. Yes, that’s sounds like “smart, green, and growing” to me – not too bright, costing more green, and growing the desire of businesses to leave the state to find a place where energy exploration and extraction is encouraged and rates therefore are cheaper.
I know the Hogan administration would want a “balanced approach” to energy in the state, but I would have to hope part of that balance is returning to the best practices suggested by UMCES and not the onerous restrictions which would effectively ban fracking in the state.
One recurring theme of this site is my interest in the manufacturing sector, both nationally and regionally. I suppose the realization that much of what we buy is supplied by a nation which points missiles at us and holds trillions of our debt made me consider the need to think a little bit more about self-sufficiency.
In the generations of my 78-year-old father and my last living grandparent, who died at the ripe old age of 90, America built things. Many cite Detroit as an example of where we as a nation once were “makin’ Thunderbirds,” but we made a million other consumer products as well, all over the country. And while the Thunderbird hung on through 2005 – as did my late grandfather – many of those other manufacturers long since had abandoned us for greener pastures overseas where things could be made more cheaply and regulations weren’t nearly as strict. The latter had to be the reason that companies could spend huge amounts to ship products across the ocean in order to bring them back to our market – the market where, in many cases, these same products were once made in factories which sat shuttered and dormant.
That’s why I’m glad to see some of our gubernatorial candidates pay attention to this long-neglected sector. In doing some research for this piece, I found that just one on the Democrat side, Doug Gansler, is making an issue out of manufacturing and doing more than simply giving platitudes in addressing it. I must say some of these ideas are worth discussion and adaptation; unfortunately Doug takes the time to pander to a certain crowd in advocating for the self-defeating ideas of a higher minimum wage and additional mandated sick leave – these would only discourage manufacturers and businesses from locating in this state. Gansler doesn’t quite understand the concept of market forces with some of his proposals, but with some tweaking a few – particularly the apprentice program – could be workable as an expansion of vocational education.
On the other hand, the leader in this arena on the GOP side is Ron George. While he already had a good beginning as far as job creation goes, yesterday he expanded on his existing ideas of rebuilding manufacturing in Maryland – as he pointed out at our Lincoln Day Dinner, “I cannot cut welfare payments unless I have those entry-level, mid-level jobs.” This is what George proposes to do:
The technology and life sciences industries in Maryland have taken off in part because of significant tax credits and a Tech Services tax repeal. By trusting you to use your revenue to enhance your businesses and create jobs, Maryland has become one of the most successful regions in the country for IT, healthcare technology and biotechnology companies.
I’m proposing we make the same investment in attracting and rewarding new manufacturing firms for creating jobs in Maryland. As Governor:
I will lower the Total Effective Tax Rate of new capital-intensive manufacturing firms from today’s current rate of 31.9% to 20% by 2016.
In the short term, I will work with local and county governments to lower property tax rates and with the legislature to exempt equipment from the property tax of manufacturing firms.
By 2018, I will eliminate the business personal property tax, returning stability and certainty to the manufacturing industry.
This proposal is an investment in the perseverance and innovation of Maryland workers. We must bring manufacturing back to Maryland.
While there is an appeal to eliminating the income tax we have to bear in mind that, as currently constituted, revenues from the income tax make up 22 percent of the overall pie, while business taxes make up far less – eliminating them, one could argue, would create enough of a multiplier effect that the other taxes could eventually also be reduced (with prudent spending, of course.) Having to account for the loss of a 22 percent chunk of state revenue is the reason why all of the income tax proposals out there phase themselves in rather than eliminate the income tax in one bite. (Ever notice, though, that tax increases are rarely phased in?)
But there’s also a lot being left on the table through the short-sightedness of the current administration, and while Gansler and his cohorts on the Democratic side are (literally) tilting at windmills for job creation, we can conclusively show that one $3.8 billion project will help a portion of the state succeed long-term. Maryland was one of the first states studied in a new series of blog posts detailing the impact of the energy industry.
And while the API concedes the state isn’t a leader in the production of oil and natural gas, there’s nothing saying we can’t hold our own through a combination of Marcellus Shale exploration in the state’s panhandle, the prospect of more natural gas in the heretofore barely- or unexplored Taylorsville, Culpeper, Gettysburg, and Delmarva (!) Basins, and perhaps oil drilling offshore. Even the idea of testing the waters can have a positive economic impact on a particular area, and one major key in attracting industry is having inexpensive sources of energy. We hear a lot of complaints from industry about the cost of electricity in Maryland, but having more natural gas (and the power plants to use it) would be of assistance in drawing manufacturers.
Now if the candidates can put together a proposal of transportation structure improvements, one which includes an interstate-grade highway north from Salisbury to I-95 (with the cooperation of Delaware) and the completion of the originally envisioned I-97 across the Potomac to meet with I-95 near Richmond to save trucks from having to deal with congestion around Washington so goods could find their way to market much more easily, I’d really be a happy camper. But for now these will have to suffice.
Just as an aside, you just might be hearing a lot more from me on the subject. Stay tuned.
I still like picking on Joe Biden. But over the last month or so I’ve collected a lot of divergent information on policy suggestions, each of which promses to be the magic elixir to get our economy moving in the right direction again.
I think the key to this lies in two areas: manufacturing and energy. In that respect, I keep a lot of information handy to discuss in this space, with a group called the Alliance for American Manufacturing (AAM) generally representing the left-of-center, pro-union side. And while their main goal seems to be increasing the coffers of Big Labor, luckily most workers still have free will – ask the employees at the Tennessee Volkswagen plant about how much effort from the UAW can be rebuffed in a simple up-or-down vote.
Currency manipulation is one area in which the AAM has been focusing. A study they cite, by the liberal Economic Policy Institute (EPI), makes the case that:
Many of the new jobs (if the subject is addressed) would be in manufacturing, a sector devastated by rising trade deficits over the past 15 years. Rising trade deficits are to blame for most of the 5.7 million U.S. manufacturing jobs (nearly a third of manufacturing employment) lost since April 1998. Although half a million manufacturing jobs have been added since 2009, a full manufacturing recovery requires greatly increasing exports, which support domestic job creation, relative to imports, which eliminate domestic jobs.
Personally I disagree with the premise that rising trade deficits can be blamed for the job losses; instead, I think an absurdly high corporate tax rate and onerous regulations have contributed more to chasing away American manufacturing. (While many simply blame “outsourcing” for the problem, fewer understand the dynamics which led to the outsourcing.) Yet there is merit to the idea that all sides should be competing on as level of a playing field as possible when it comes to the means of exchange, and China is one of the worst offenders. (And why not? They are communists, after all, and you can’t trust communists any farther than you can throw them.)
Two of EPI’s findings are quite interesting: first, should the EPI model come to its fruition, the oil and gas industry would be the hardest hit, and second, Maryland would be among the states least impacted, with barely a 1% rise in employment.
Yet AAM president Scott Paul is quick to blame Barack Obama:
President Obama promised to hold China accountable. He hasn’t. The White House last month said President Obama would use his pen and his phone to make progress on economic issues. He could start today by signing an order to designate China as a currency manipulator. Then, he could call the Chinese leadership to demand an end to that practice, and secure an agreement on a plan to cut this deficit in half over the next three years.
I sort of wish Mr. Paul would also figure out the other problems, but he is correct to be concerned about our Chinese policy. Job creation has become more important than deficit reduction in the minds of Americans, both in the AAM poll I cited above and a Pew Research Poll cited by the American Petroleum Institute (API).
And the industry which benefits from API’s efforts represents another piece of the puzzle which we can take advantage of: our abundant energy supplies. While America uses 26 trillion cubic feet of natural gas per year, there is the possibility of as much as 10,000 trillion cubic feet within our land mass. That’s nearly 4 centuries worth, so I don’t think we will run out anytime soon. (Estimates have continued on an upward path as new technology makes previously unworkable plays economically viable.) As I keep saying, it’s too bad we don’t have a nice shale play under our little sandbar. Not only that, but the infrastructure we will need to take advantage of all that (and help curtail spot shortages like the ones we’re having this chilly winter) would be a guaranteed job creator – one which derives its basis from the private sector. New pipelines aren’t just for export facilities like Cove Point, but could benefit this area and perhaps bring more natural gas service to our region.
Unfortunately, Maryland isn’t poised to take advatange of either the manufacturing or energy booms at present, thanks to back-breaking economic policy and a foolhardy go-slow approach on fracking. It takes a strident opponent of the latter to suggest yet another approach which will do damage to the former, but gubernatorial candidate Heather Mizeur accomplishes this with the tired old combined reporting proposal. Hers comes with a twist, though, which she announced last Monday:
In the morning, Mizeur will host several Maryland business owners for a Small Business Roundtable. They will discuss her legislation to provide tax relief to small business owners, as well as other highlights from the campaign’s ten-point plan for jobs and the economy, which was released last fall. She will also hear from the business owners on a range of other concerns.
At 1:00 pm, several business owners will join Mizeur in front of Ways and Means to testify on behalf of legislation that would enact combined reporting and distribute the estimated $197 million to small businesses for personal property tax rebates.
It’s the liberal way of picking winners and losers. And according to a 2008 study by the Council on State Taxation – admittedly, an opponent of the practice:
Combined reporting has uncertain effects on a state’s revenues, making it very difficult to predict the revenue effect of adopting combined reporting.
Even proponents don’t address that aspect, instead emphasizing how it would “level the playing field between multistate corporations and locally based companies.” But since Mizeur’s idea is one which would subsidize some businesses under a certain employment plateau, the uncertainty would likely be just another reason to avoid Maryland.
On the other hand, a Republican like Larry Hogan at least gets businesses together to discuss what they really want. Granted, once he gets them together he speaks in broad concepts rather than a more specific plan, but at least he’s listening to the right people. None of the others in the GOP field have specific plans, either, although Ron George probably comes the closest.
One has to ask what states which are succeeding economically are doing to attract new business. The state with the lowest unemployment rate, North Dakota, is prospering – more like crushing the rest of the field – on account of abundant energy resources, and perhaps that success is pulling surrounding states up with it. Its three neighbors (Montana, South Dakota, and Minnesota) all rest within the top 13 when it comes to low unemployment rates and other regional states like second-place Nebraska, Iowa, Wyoming, and Kansas lie within the top 10. Although the top five are right-to-work states, half the bottom 10 are as well. Nor can tax climate be seen as a dominating factor since the top 10 in unemployment vary widely in that category: Wyoming, South Dakota, Utah, and Montana are indeed excellent in that aspect, but North Dakota is decidedly more pedestrian and Iowa, Vermont, and Minnesota are among the worst.
But Maryland has the tendency to depend too much on the federal government as an economic driver. This presents a problem because bureaucrats don’t really produce anything – they skim off the top of others’ labor but don’t add value. Certainly it’s great for those who live around the Beltway, and it’s telling that all three of the Democratic candidates have a connection to the two Maryland counties which border the District of Columbia while none of the Republicans save Larry Hogan do.
In order to create jobs, I think the state needs to diversify its economy, weaning itself off the government teat and encouraging manufacturing and energy exploration. Meanwhile, there’s also a need to rightsize regulation and restore a balance between development and Chesapeake Bay cleanup – specifically by placing a five-year moratorium on new environmental restrictions while cleaning up the sediment behind the Conowingo Dam. Let’s give that which we’ve already done a chance to work and other states a chance to catch up.
The best route out of government dependence is a job. Unfortunately, when the aim of the dominant political party in the state is one of creating as many dependents as possible, a lot of good entrepreneurs will be shown the door. It’s time to welcome them in with open arms.
My friends at API alerted me to yet another study touting the benefits of offshore drilling, but this one was more localized because they discuss energy exploration in the heretofore moribund Atlantic Outer Continental Shelf (OCS). This rather lengthy research, sponsored by API and the National Ocean Industries Association, showed that Maryland and Delaware could expect an economic bump of over 12,000 jobs and nearly $1 billion over the cumulative 18-year period (2017-2035) covered in the report. It obviously assumes the case that exploration is opened up at the first opportunity, which will arrive in 2017.
Considering state employment in Maryland alone is about 3 million, with over 212,000 unemployed, these numbers may seem like a drop in the bucket. (Delaware adds about 430,000 and 30,000 to the respective totals.) But it’s worth mentioning that these jobs would be created by private investment, so they’re a net gain to the economy as opposed to simple redistribution of confiscated wealth which typifies government jobs, even those in infrastructure like roads and bridges.
And if there’s one thing I have noticed in the past few years about projections for the amount of oil to be found in a particular place, it’s that the initial estimates are far too low. This is more likely in the Atlantic region, which hasn’t been properly explored with the newest technology yet because there was no prospect for securing leases.
While there was a period where Atlantic leases were granted, no area has been leased out in the last thirty years. Furthermore, the seismic information is also three decades old, which is an eternity in this day and age of computer mapping – that was an era where the conventional wisdom was that many portions of America were played out insofar as oil was concerned. But recent technological advances and methods of exploration have determined there’s still a lot of life in these fields. The same may well be true for the Atlantic OCS, which could have double or triple the expected capacity. (The model used in the study essentially doubles the government’s most recent estimate, but that calculation is based on fields in areas where modeling was more constant than it was in the Atlantic OCS. So it wouldn’t be out of the question to see yet another doubling.)
Regardless, it’s more ammunition for the argument that allowing more energy exploration would be a job creator, with the added benefit of energy self-sufficiency. Drill, baby, drill!
I ran across an interesting piece of polling thanks to the Energy Tomorrow blog. Their American Petroleum Institute parent group commissioned a Harris Poll of likely voters in four states – Florida, South Carolina, North Carolina, and Virginia – and asked them a series of questions to gauge their support for offshore drilling. As I would expect, the topline numbers showing support for the practice are quite solid, ranging from 64% in Florida to 77% in South Carolina. (Virginia weighed in at 67% and North Carolina at 65%, so it worked out to roughly 2/3 overall.)
But before you assume this is going to be another shill for offshore drilling (which I indeed support) I wanted to point out a glaring flaw in the poll methodology. For example, read through the Virginia polling data and see if you can figure out what’s missing. I’ll give you a second.
The first piece of the puzzle I would have liked to see would be a breakdown of support in coastal areas vs. inland. Using Virginia as an example, it would be nice to know how the question did in the 757 area code, which covers the Norfolk area and the Eastern Shore of Virginia. I would bet that support in that particular area was closer to 50-50, if not slightly negative.
But the key omission was the question: “Would you support offshore drilling off the coastline of your state?” The API’s point is that much of our coastline is off-limits to drilling because of shortsighted policies which ignore the overall safety record of the industry as well as the “peak oil” hysteria helped along by those same environmentalists who wouldn’t mind putting aquatic birds at risk with offshore wind turbines. But their point would have been buttressed even better if they had a clear majority of Virginians (or any other affected state) indicate that drilling off their coastline was an acceptable practice.
While these particular states were probably selected due to the length of their coastline, I wonder how Maryland and Delaware would feel with the same question posed to them. Granted, between the two there’s just 59 miles of Atlantic coastline but they indeed have oceanfront within both states so they could be hosting oil exploration and extraction in their waters someday. My guess is that they would still fall in the 60 percent range as far as drilling support, but only run 30-35% for drilling off their coastline. (A large part of that might be because so much of it is state- or federally-controlled parkland.)
Certainly it’s reassuring that offshore drilling still enjoys support after all its bad press over the last half-decade, but I’m not convinced the impetus is there yet for much motion on the issue. Fortunately (or unfortunately), the question is pretty much moot until 2017 at the earliest so we have time to create the necessary shift in public perception.
Gasoline. It’s something all of us need, and if you’re reading this in Maryland last month you began paying roughly 3.5 cents more per gallon at each fillup thanks to the state expanding the sales tax to gasoline as part of a multi-year process for full adoption of our 6% sales tax to that product.
While that bad news applies to Maryland consumers, all of us may soon be seeing less bang for the buck if the EPA gets its way. They’re edging us closer and closer to widespread usage of E15 fuel, which may be a necessary method to comply with short-sighted federal law. The problem: a “blend wall” where the amount of ethanol mandated for use runs up to the limits created by actual consumption, which is down significantly from that which was predicted when the regulations were written several years ago when the economy was humming along.
Many longtime followers of my site know I use the American Petroleum Institute as a go-to resource when it comes to energy issues. Yes, they are an advocacy group but they advocate the tried-and-true solutions for our energy problems, advocating for the least-costly alternative of petroleum which, as a beneficial byproduct, is a great job creator to boot. So while the EPA believes it’s “flexible” on renewable fuel standards enacted as part of a 2005 law, API believes they’re quite inflexible. The only real change was in the category of cellulosic biofuels, which saw its mandate cut by more than half – quite handy when there’s only a negligible amount currently in production. (API has a handy guide to the pitfalls of the RFS here.)
Meanwhile ethanol apologists – like the group which lobbied for E15 in the first place – claim their product will create jobs and reduce our dependence on foreign oil without making an impact on grocery prices, Yet their solution is more government mandates and subsidies. I find it quite telling that this group formed mere days after the election of Barack Obama, who was probably – and correctly – thought of as a person who would shower even more government largess onto the ethanol industry in his quest to wipe out the coal and oil industries.
Yet Congress can act, just as it did in making the mandates in the first place nearly a decade ago – a lifetime in the oil industry, given the boom in oil exploration and fracking over the last five years. So what would happen if the ethanol mandates were scrapped?
Obviously you would have a number of winners and losers. All those who invested in ethanol plants figuring that the government subsidies and mandates would have profit rolling their way – well, they would have the biggest “L” stamped on their forehead. Farmers may take a temporary hit as corn prices drop, but they would eventually stabilize; moreover, farmers who shunned soybeans or wheat for corn to be turned into fuel could go back to those other staple items.
Consumers would win in a number of ways. First of all, they’d get better quality gasoline that’s less expensive, which would both increase their mileage per gallon and amount of money remaining in their wallets. Secondly, the lowering of corn prices would benefit them at the grocery store, and not just in corn-based products because feed for poultry and livestock would be cheaper. And lastly, their small equipment would last longer because ethanol is poisonous to many small gasoline-powered motors.
And while the intention of these mandates was to reduce our dependence on foreign oil, new advances in exploration and extraction have placed the goal of North American energy self-sufficiency within reach. Nor is it necessarily in the form of gasoline, as companies with large automotive fleets are moving toward using natural gas as a motor fuel, building their own infrastructure along the way. (Yes, this can be done without a massive taxpayer subsidy or regulation.)
It just makes more sense to me to not grow our fuel, but our food. When you think of corn, you don’t think of a gas tank but instead think about that tasty ear cooked to perfection with some butter and pepper on it. Let’s get back to using corn for what the Good Lord meant it for, eating.
If you are one of those who follows conservative grassroots activism, it’s likely you may have heard about the New Fair Deal rally being held in Washington tomorrow afternoon to coincide with tax day. While it will certainly be a modest event by the standards of other TEA Party rallies such as the 9/12 rally in 2009 or various Glenn Beck-led gatherings since, organizers believe a few thousand will attend with many staying around after the speeches to buttonhole various members of Congress about this new legislative program aimed at reining in government.
But the better question is: what is the legislative program? The four planks can be summarized as follows:
- No corporate handouts
- A fair tax code
- Stop overspending
- Empower individuals
The eight Congressmen who will be authoring the legislation in question, some of whom are among the most libertarian Republican conservatives in Congress, are Reps. Jeff Duncan and Mick Mulvaney of South Carolina, Jim Jordan of Ohio, Doug Lamborn of Colorado, Tom McClintock of California, Mike Pompeo of Kansas, Dr. Tom Price of Georgia, and Reid Ribble of Wisconsin. Mulvaney, Pompeo, and Price are among the speakers tomorrow at the event, which will also feature Rep. Justin Amash of Michigan, Senator Mike Lee of Utah, activists Rev. C.L. Bryant, Deneen Borelli, Julie Borowski, Ana Puig, and Maryland’s own Dan Bongino. Borelli is featured in this video decribing some of the features of the New Fair Deal.
“The New Fair Deal is a four-part legislative package that ends corporate handouts, closes loopholes in a simple tax code, balances the budget, and empowers Americans with the choice to opt-out of Medicare and Social Security,” explained FreedomWorks president Matt Kibbe. “Individual freedom, economic empowerment and equal opportunity are the ultimate fair deal for Americans. No more pitting us against each other while politicians and big business pick winners and losers in the marketplace at the expense of everyday individuals,” he added.
It goes without saying, though, that the devil is in the details. For example, ending corporate subsidies is great for avoiding the next Solyndra or Ener1, but my friends at the American Petroleum Institute would argue that the tax package for oil exploration is vital to the industry’s success. They may have a point, so perhaps the best solution is to prioritize which subsidies would be axed first and which ones would have more of a transition. Being a fairly mature industry, it may take somewhat longer for the oil and natural gas companies to deal with these changes, as well as the sugar farmers who were targeted in the video. I could see a time window of three to five years for these industries, but green energy? Cut them off yesterday.
As far as a “fair tax code” I honestly don’t think there is such a thing, particularly with the proposal of a two-rate system as specified. I like the idea of a “skin in the game” tax where everyone has to pay at least 1 percent (for someone making $20,000 a year that’s $200 – not a back-breaker if you know it’s coming) but I disagree with the progressive rate change from 12% to 24% at $100,000. If we are to have a flat tax, it should be one rate regardless of income. Why would I take the overtime which would push me from a salary of $98,000 (and an $11,760 tax bill) to $101.000 only to have that and much more – since the tax bill would steeply jump to $24,240 – entirely eaten up by taxes? I understand the populist idea of the secretary paying less than the billionaire, but the solution proposed would be ripe for complication because of situations like the above. I’d rather work on repealing the Sixteenth Amendment and creating a consumption tax, which would be the most fair of all because one can control their level of consumption to the greatest extent.
Another area which suffers from being too broad is the concept of “overspending.” Even if you cut off all discretionary spending tomorrow we would still have a deficit. Yes, we do need to eliminate the concept of baseline budgeting posthaste but we also have to lose the mindset which makes people fear their budget will be cut if they don’t spend their full allocation. While thousands and thousands of federal workers are superfluous to the task of good government, we have to educate the public as to why they need to be let go – you know the media will be portraying them as victims just like they tried to make a huge case that sequestration would be devastating.
Of the four planks presented, though, I really like the idea of the last one as expressed – the power of determining your own retirement and health care needs. In just 14 years I will be eligible for Social Security, but to be quite honest I don’t expect a dime from it because the system will be bankrupt by then in my estimation. (My writing was intended to be my “retirement” but real life intruded a little more quickly than I imagined it would.) The same goes for Medicare. If I had the choice, I would tell the government to give me back the money I paid into Social Security and Medicare – let me decide how to invest it best. This legislation may well allow me that option, although I suspect it will be tailored more to those under 40 who still have plenty of time to weigh all their retirement choices.
(Remember, though, I am on record as saying “Social Security should be sunsetted.” Nothing they can propose would eliminate that stance.)
The key to any and all of these changes taking place, though, is to remember none of this happens overnight. As it stands right now, the earliest we can make lasting national change in the right direction is January of 2017. Moreover, these Congressional visionaries and any other allies we may pick up along the way will be standing for election twice before a new President is inaugurated – and if the Republicans nominate another milquetoast “go along to get along” Beltway moderate who doesn’t buy into this agenda, the timetable becomes even longer.
But there is an opportunity in the interim, though. What statement would it make if Maryland – one of the most liberal states in the country according to the conventional wisdom – suddenly elected a conservative governor and confounded the intent of the heretofore powerful liberals in charge by electing enough members of the General Assembly to foil their overt gerrymandering attempts? No doubt it’s the longest of long shots, but let the liberals think they have this state in the bag. Wouldn’t it be nice to watch them fume as a Governor Charles Lollar, Larry Hogan, Blaine Young, or Dan Bongino is inaugurated – this after the stunning ascension of Speaker of the House Neil Parrott and President of the Senate E.J. Pipkin? Those who survived the collective hara-kiri and cranial explosions throughout the liberal Annapolis community would probably be reduced to bickering among themselves and pointing fingers of blame.
Our side often points to Virginia as a well-run state, but I think there are even better examples to choose from. Certainly there would be a transition period, but why not adopt some of these ideas as well as other “best and brightest” practices to improve Maryland and create a destination state for the producers as opposed to the takers?
If this sort of transformation can occur in Maryland, I have no doubt Washington D.C. would be next in line.
Yesterday it was announced that the Keystone XL project, an oil pipeline which would have connected the oil sands of Alberta to refineries that could handle the product here in the United States, was shelved again by President Obama. This despite his quest to find “shovel-ready” projects and address the nation’s high unemployment rate.
Reactions? Well, pretty much what I expected. Needless to say, Mark Green at Energy Tomorrow was critical of the decision, stating President Obama wasn’t after jobs but “settled on a different calculus – re-election politics.” The American Petroleum Institute writer also pointed out the Keystone project had been under review for three years, plenty of time to gauge environmental impact. This is particularly true when one considers the Keystone XL pipeline could have run close by the existing Keystone pipeline already in use.