Obama Finds A New Way to Strangle US Economy

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The scary question is, is he continuing to wound this recovery on purpose or by accident?

And which answer is worse?

Last Tuesday, President Obama announced his "Action Plan on Climate Change."

One of main "actions" is to kill a core piece of the US energy sector.

Among other things, he promised to use the Environmental Protection Agency regulation of carbon emissions to phase the U.S. out of coal fired power, even for existing stations.

Of course, environmentalists praised this move as a bold step against global warming.

Unfortunately, they're not very good at the economics of this.

So, I ran the numbers. And what I found was infuriating but not surprising: Regulations like this are the principal things slowing U.S. economic growth.

Did the Math

In the first four months of 2013, according to the Energy Information Administration, the cost per million BTU of power station coal was $2.35, while that for natural gas was $4.43 (other fuels were more expensive).

If the 11.9 quadrillion BTU generated by coal-fired stations in 2012 is exchanged for gas, the next cheapest alternative, the cost increase would be $2.08 x 11.9 billion, or $25 billion — every year.

That's the cost of just one regulation, which the EPA imposes with a flick of its wrist, so to speak.

Of course, environmentalists will tell you that new environmental regulations have gains too. But in this case the carbon emitted by the (relatively clean) U.S. coal fired stations is a tiny fraction of the world's total. What's more, the obstinate refusal of the planet to warm up over the last 15 years is pushing reality to the very edge of the global warming models; it's becoming increasingly clear that the warming effect of atmospheric carbon is much less than the doomsayers predicted.

If that's the case, and the entire global warming effect is less than 2 degrees Celsius by 2100 (for example, similar to the 0.6 degrees Celsius warming in the 20thcentury), then the benefit from avoiding it is pretty close to zero, and the benefit from zapping all the U.S. coal fired power stations is a tiny fraction of zero.

Take another example, the Keystone pipeline, phases 3 and 4, currently being held up by the U.S. State Department. The current differential between West Canadian Select crude and West Texas Intermediate crude is a $16 discount for the Canadian product, according to the Chicago Mercantile Exchange.

The new pipeline is scheduled to ship 510,000 barrels per day of oil from Canada to the U.S. market – so each day's delay in approving the pipeline costs $8.16 million. With the unnecessary delay so far having been well over a year, it adds up.

Plenty of Examples

There are innumerable other examples. The CAFE automobile fuel economy standards introduced by President Obama in 2011, mandate average fuel economy of 54.5 miles per gallon by 2025. That standard is far too aggressive; it will be very expensive and difficult to meet – and the cost will be passed on to car buyers – or possibly to taxpayers if the auto manufacturers have to be bailed out again.

There is an additional more serious cost, not mentioned in the publicity, of the additional fatalities from the flimsy playthings Detroit will have to manufacture to meet the new standards.

If Washington wants Americans to use less gas, let them impose an additional gas tax, which is visible for all to see. Consumers will make their own decisions how much tax they want to pay – and the new tax will help solve the budget deficit (or be used to reduce other taxes), increasing GDP instead of reducing it.

Good Intentions and the Road to Hell

I think this German example is the poster child of government's misguided abuse of the markets.

Germany has a complicated and intellectually elegant system of "green" taxes on existing energy producers, combined with subsidies for renewable energy sources.

As a result 21% of Germany's energy in 2012 was produced from renewable sources. The cost of this, however, was that German consumers paid 36% more for their electricity than the EU average. Frankly, if I was a German consumer, global warming would have to reach to 5 degrees Celsius starting next week before I thought that kind of additional cost was worthwhile.

Bottom line: The overall cost of regulation is incalculable, because there are so many of them, by no means all environmental. The outrageous cost of large Federal infrastructure projects, which have to use union labor and wait untold years for approval, is another area of regulatory bloat.

If you look at long-term productivity data, you see that U.S. productivity growth fell sharply around 1973 – from 2.8% per year from 1948-1973 to 1.8% a year from 1973-2012 – and 1973 was just about the time all the big regulatory agencies got going (EPA 1970, Occupational Safety and Health Administration, 1970, CAFÉ auto emission standards, 1975.)

Compound that 1% annual productivity differential for 39 years, and you can conclude that without the drop, we would all be about 45% richer today.

What's more, the periods of exceptional regulatory enthusiasm, like the Carter and Obama administrations, have given the country the weakest growth.

The solution for investors? Put at least some of your money in countries where regulation is light and economically intelligent, such as Singapore and Chile.

Join the conversation. Click here to jump to comments…

  1. 000037498411 | July 1, 2013

    How do we stop this runaway train?

  2. Maneb | July 1, 2013

    When the US piles on the energy industry and raises costs, factories shut down here and move to China. No environmental concerns there. How is the planet better off in this scenario? Notice the big brown cloud over Asia? Comments please, Al Gore!

  3. Paul G Huber | July 1, 2013

    I'm no Obama fan. The potus is way to far left for my taste, but neither am I so Conservative that I ignore Global Warming. I have a touch of environmentalist in me. Something should be done and everyone seems to be going about it wrong.

    I believe that cars & trucks produce more CO2 than any coal fired plant particularly now that scrubbing is required.

    I doubt our dumb potus is about do anything to harm the auto unions which he bought and paid for in his first term, but we need to develop more mass transportation. More trains and what ever happened to the idea of Monorail? Monorails could above over existing highways, railways and even above housing.

    The country need improved infrastructure and in the process it needs to develop transportation to wean us off autos.

    I sense you are not particularly happy with Obozo either. He's in Africa now spending our money like a drunk with a credit card and he can stay there for all care and maybe we could send the rest of his Muslim buddies back with him.

    • Richard Fincke | July 6, 2013

      Checkout the NASA report on Global Warming. You will find out that REAL Science shows the earth is actually COOLING and not warming. This is why you here "Climate Change" now and not "Global Warming".

  4. Jane E. | July 1, 2013

    When is Enough going to be Enough? This Is Going Far Too FAR! Please call your Senators, Congressmen and Anyone Else You Can that can GET the Beastman OUT OF Power! I Pray for those in Washington! Because They have a Soul! It is NOT GOD's Will for Anyone to be LOST! But I CAN'T Agree with their Policies!

    Peace Be Unto You All with Love and GOD Bless! Jane.

  5. Mike | July 1, 2013

    You forgot the economics of supply & demand. If coal power generation were shifted to natural gas, the cost of natural gas will surely rise.

  6. zainal | July 1, 2013

    Need more info

  7. Edouard Dopper | July 2, 2013

    Hi Martin,

    When you say flick of the wrist, flimsy things and 0.6 degrees. It seems to me you are gravely underestimating and brushing off the longer term effects of our energy consumption and behavior. Clearly you don't believe all the models predicting global warming. And we can never be sure, agreed. I just hear the quick gains in your column and I hear no long term suggestion.

    • c cannon | July 6, 2013

      Models, computer models? The national Weather service uses large scale weather models churned out by super computers. These things have proven to be less accurate than what a human Metorologist can do. The accuracy of weather forecasts nowadays is LOUSY! Forecasting anything half a century to a century ahead is way way beyond any stretch of the imagination. The whole idea of climate change and global warming is indeed a huge fraud geard to make billions of dollars for the fraudsters! Also shutting down our coal fired plants which are fairly clean is the height of stupidity when the Chinese are putting new coal fired plants on line at the rate of one a week and India is also building coal fired plants like crazy, and they are not nearly as clean as ours!!! We really know how to shovel money down a rathole! Or at least the Democrats do!

  8. Kneel | July 2, 2013

    The problem with working out the economics around environment is that you do not have a good way of converting environmental damage to money lost. If you assume that environmental damage costs nothing, then of course switching from coal to renewables will be more expensive.
    But let us look at a way of calculating ow much money is lost.
    Look from the bottom to the top. Earlier we had 1 disaster in 4-5 years, and slowly it has risen to 1 disaster per year, and now 2-3 disasters per year. This indicates a change in climate over the past century, i.e. climate change. Now, one disaster alone does not prove the existence of global warming, but you cannot deny the increase in the frequency of events (just look at the list!!) And then look at the costs! The author complains about an additional $25 billion costs per year. But in 2011, we spent about $90 billion on disaster management. 25 < 90 (just do the math!) Disasters will continue to happen, whether or not we act on climate change. But at least we can reduce the frequency of disasters to say, 1 disaster per 2 years. It will save us much more than the mere $25 billion – It will save lives.

  9. Ziad Abdelnour | July 4, 2013

    It looks like hypocrisy abounds today on both sides of the aisle in Washington DC and on the media company propaganda channels as well.

    As the national debt soared from $10.6 trillion on the day Obama took office to over $17 trillion today, I still hear the liberal media blame the debt on the Bush tax cuts and the Bush wars. If the Bush tax cuts were so horrific, why did Obama and his minions just make 98% of these tax cuts permanent? Obama’s defense budgets have been larger than Bush’s and he doubled down on our miserable failure in Afghanistan. You don’t hear a peep from the liberals about the warmongering Barack Obama who has kill lists and unleashes predator drones, killing women and children across the globe. Liberals pretend to be concerned about the welfare of the citizens, but continue to support a President that uses executive orders to imprison citizens indefinitely without charges, has expanded surveillance on citizens, has kept Guantanamo open, signs the continuation of the Patriot Act, and proposes overturning the Second Amendment by executive order. They shriek about the evils of an unregulated Wall Street, while remaining silent as Obama hasn’t prosecuted a single banker for the greatest financial fraud in world history. You don’t hear a peep about Jon Corzine, who stole $1.2 billion from the accounts of farmers and ranchers. Liberals talk about regulation and then stand idly by while Wall Street lobbyists wrote the Dodd Frank law and insurance and drug company lobbyists wrote the Obamacare law. Liberal hypocrisy knows no bounds and is only matched by Neo-Con hypocrisy.

    The Neo-Con controlled Republican Party is a pathetic joke. They have the guts to declare themselves the party of fiscal responsibility, after Bush’s eight year reign of error. He and his fiscally responsible party were handed a budget in surplus and managed to add $4.9 trillion to the national debt by waging undeclared wars, encouraging Wall Street to create the biggest fraudulent financial bubble in history, creating a new $16 trillion unfunded entitlement (Medicare Part D), cutting taxes without paying for them, and creating a massive new government agency (DHS) to take away our liberties and freedom. Federal government spending grew from $1.9 trillion to $3.0 trillion under Bush and the Republicans. Does that sound fiscally responsible? Does anyone believe the Republican Party is serious about cutting anything? Tough guy Republicans like Big Chris Christie preach fiscal responsibility when going to war with teachers’ unions, but he squeals like a pig when a $60 billion pork filled, unpaid for, Sandy Relief bill is held up in Congress. The courageous fiscally responsible Congress critters passed the entire pork filled, unfunded, bloated, vote buying joke. It included $28 billion to mitigate future disasters, $3 billion to repair or replace Federal assets, and $6 billion for transportation projects completely unrelated to Sandy damage. The hypocrisy of politicians who proclaim the $50 billion of 2013 fiscal cliff tax revenue as deficit cutting, and then immediately piss it away by paying people to rebuild their houses yards from the Atlantic Ocean while funding billions of non-disaster related projects is disgusting to behold. There is nothing like compromise to add another $60 billion to the national debt.

    Our entire economic and political system is a farce. The American people are being played by the powerful interests that provide them with an illusion of choice. Both parties serve the interests of their masters and the fiscal cliff show and debt ceiling show are a form of reality TV to keep the masses alarmed, fearful, and believing there is actually a difference between the policies of the ruling class. The funniest part this fiscal fiasco farce is watching the reaction of the sheep who believed Obama and the mainstream media storyline. Obama was able to raise the published top rate on people making over $400,000. The newly defined “rich” laughed heartily as they know only fools pay anywhere near the top rate. The rich just call their tax advisor and instruct them to use one of the thousands of tax loopholes in the 75,000 page IRS tax code to “legally” avoid the new Obama rates. Meanwhile, both parties and their mainstream media mouthpieces downplayed the 2% payroll tax increase on every working American. The joke is on the American people as the rich will ante up maybe $50 billion of taxes in 2013, while the working middle class will be skewered for $125 billion. How’s that “Tax the Rich” slogan working out for you?

    So when you see the cut in your take home pay, just comfort yourself knowing that JP Morgan, Citigroup, GE and hundreds of mega-corporations were able to retain their tax breaks. As they have done for decades, Congress and the President agreed to address spending cuts at a future date. Of course, a government spending cut isn’t actually a cut. It’s a lower increase than their previous projection. Nothing is ever cut in Washington DC. The austerity storyline is a lie. Not a dime has been cut from the Federal budget. Intellectually dishonest ideologues try to peddle the wind down of the Obama $800 billion porkulus program as a cut in Federal spending. They sold this Keynesian “shovel ready” crap to a gullible public as stimulus to jumpstart the economy. Federal spending was $3.0 trillion before the Obama stimulus. After the two year stimulus was pissed away without helping the economy one iota, the baseline should have been back in the $3.2 trillion range. Instead, FY13 Federal spending will be $3.8 trillion. This hasn’t kept liberal ideologues like Krugman and his minions in the mainstream media from blaming crazy Tea Party Republicans for inflicting horrendous austerity measures on the poor and disadvantaged.

    It is unfortunately a fact today that the country has been blessed with two of the worst presidents in U.S. history over the last twelve years. Obama and the current Congress are spending at a level of 24% of GDP versus the 18% of GDP when Clinton left office. This amounts to a nose bleed altitude $950 billion higher than the level headed Clinton was spending in his final year in office.

    The Op-eds in liberal rags across the land decry the lack of civility in Washington DC and plead for politicians on both sides of the aisle to come together and compromise for the good of the country. This line of bullshit would be laughable if it wasn’t so wretched in its falsity. Compromise is what has left this country with a $16.4 trillion national debt, $200 trillion of unfunded liabilities, and $1 trillion deficits as far as the eye can see. Democrats have compromised and let the Republicans create a warfare state. Republicans have compromised and let Democrats create a welfare state. The two headed monster living in the swamps of Washington DC just voted to increase taxes on all Americans. They voted to hand criminal Wall Street banks $700 billion. They voted to pass the Patriot Act. They voted to pass the NDAA. They’ve allowed the President to wage undeclared wars in Iraq, Afghanistan, Libya, and now maybe Syria and Iran. They voted for a $663 billion Defense bill that includes tens of billions the Secretary of Defense doesn’t even want. The last thing this country needs is more compromise. We can’t afford any more compromise. The hypocrisy of pandering deceitful politicians is boundless and shows utter contempt for the intelligence of the American populace.

    I could have shown quotes from George W. Bush during the 2000 Presidential campaign talking about a non-interventionist foreign policy and no need for the U.S. to get involved in nation building and then proceeding to pre-emptively attack sovereign countries while wasting trillions and impoverishing unborn generations trying to create “democracy” in the Middle East at the point of a gun as a cover to protect “our” oil. The point is that we are being given the illusion of choice.

    Let’s face it….The American Dream is dead. We’ve allowed a rich, privileged, elite few to achieve hegemony over our economic and political system with their control of the media and manipulation of our financial markets. They will collapse the country because they will never be satisfied with the amount of wealth and power they’ve accumulated.

    Now that you know the whole story, what are you going to do about it? Time will tell….

  10. Lance Strohsahl | July 6, 2013

    Words fail me in trying to describe what an utter moronic pos is your article. You must be in the payroll of coal or have interests in their success for your own bottom line or you're just plain ignorant. Doing the math?!? Can you possible fathom how many jobs it would create to retool an entire nation or the whole planet toward renewable energy ONLY in less than 50 years (if we have even that long to do it)? Go back to school.

  11. Robert Marsh | July 8, 2013

    How ironic. In yesterday's Money Map Report, Mike Ward loudly proclaimed that the free market system (e.g. availability of cheap natural gas) was THE REASON for the demise of the coal industry.

    He wrote "This is all part of a transition from coal-fired plants to natural gas, and public policy isn't driving the change. It's all because natural gas is cleaner, cheaper, and more cost-effective for generation companies. And this trend is going to continue. Coal isn't doomed because of the government. It's being priced out by a better alternative."

    So, please get your stories straight as it is evident that your politics play a huge role in your opinions. I'm shocked! The only thing you and Ward had in common was anti-Obama comments.

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