This month, the University of Missouri Food and Agricultural Policy Research Institute released its 2010 US Baseline Briefing Book (PDF). Among other topics, the report explores the effects of eliminating the credits and tariffs currently in place for corn ethanol. The current corn ethanol tax credit has many unintended negative consequences, and the United States would be better off if the program were scrapped entirely.

1. This production incentive encourages overproduction. This is undesireable from an environmental perspective, because it leads to deforestation. It’s also detrimental for the American economy because it results in an inefficient allocation of resources.
2. It increases the cost of fuel for taxpayers. Each gallon of ethanol that is produced costs them $4.18. This is separate from and in addition to the price that they pay at the pump. In a piece on The Huffington Post, Nathanael Greene explains how this happens:
   

   [N]ext year the oil companies will be required to buy 12.6 billion gallons of conventional corn ethanol, but because tax payers are giving them $5.85 billion they’ll consume 1.4 billion more than required. That works out to $4.18 per extra gallon.

3. It drives up the prices for corn, soybeans, and wheat. This is bad for consumers because they have to pay more for food. This is also bad for the environment because it leads to land-use change and further overproduction and deforestation. The FAPRI report quantifies that eliminating the tax credit for corn ethanol would cause the prices of these grains to fall. According to p. 64, if the production incentives were removed, the average corn prices would decrease by approximately $0.15 per bushel during the 2010-2019 period.
   
4. It discourages the development of biofuels that are cleaner and more renewable than corn ethanol. These alternatives are forced to compete at a disadvantage because they do not receive the financial favor that corn ethanol does.

The corn ethanol production incentive program is an application of the broken window fallacy. Politicians in Washington fail to consider the cost to taxpayers, and the aforementioned negative consequences. When taxpayers are forced to spend their money on subsidizing the overproduction of corn ethanol, they cannot spend it on something else, such as infrastructure or education or alternative renewable fuels.

Supporters of the production incentives will argue that discontinuing the program would hurt farmers’ bottom lines. However, government payments constitute a very small amount of their compensation relative to sales, as shown on p. 62 of the report. For this reason, eliminating the production incentives would not actually be detrimental to this group.

On Friday’s CBS “Early Show,” I saw a segment about a new government program that offers consumers cash rebates to replace their energy-inefficient appliances with new Energy Star–rated ones — “Cash for Appliances,” if you will. Sound familiar? Just like “Cash for Clunkers,” this program probably won’t increase the volume of sales significantly, but rather just shift the timing of these sales forward.

Some argue that this shift is the type of “stimulus” that the economy needs; after all, the money for this program was allocated from last year’s stimulus package. But will the effect of this program be worth the $300 million in taxpayer money that is being spent to finance it? I know “million” doesn’t sound like a big number anymore, with all of the billions and trillions being thrown around lately, but $300 million is still a lot of money — other people’s money. Using tax dollars to help people buy more energy-efficient machines is likely an inefficient use of funds, because purchases of these machines will become much more common within the next few years anyway, as older machines start to die. The fact that people can save money on energy costs by upgrading their appliances is already a significant incentive.

Each state has its own program, and Missouri has allotted $5.6 million in federal funding. The program will start on April 19 to coincide with the annual Show-Me Green sales tax holiday. If the funding only lasts for one day, which is likely given that Iowa’s $2.7 million ran out by 3 p.m. on the first day, no sales tax revenue would be generated. So, what genuine benefit will this expenditure have for our state? It will not add to the net state wealth, but is instead a mere transfer. Any benefit to appliance retailers will likely be very short-lived, and any arguable benefit to the state economy will be small at best. And, all the while, taxpayers will be able to watch their hard-earned money disappear down the drain into another ill-advised government program.

A number of people turned out in Columbia on Monday morning to call on Congress to pass a clean energy bill, which the activists claimed would create 36,000 jobs in Missouri. That sounds nice enough, but it would actually be a bad thing. Jobs are not goods; they are what people do to pay for goods. If people want work to do, they can come over to my apartment, and I can have them clean the place, cook meals, and start running errands for me. I’m not actually willing pay more than, say, $5 an hour for those services, but it would be a job.

What these activists are saying is that with a clean energy bill, we will get the same amount of energy, but it will take 36,000 more workers to create it, which means much higher energy costs. An economy is more efficient when it employs fewer resources (e.g., energy, labor, and steel) to make the same amount of a good or service, but the economic argument these activists are trying to advance is that we can get rich by doing less with more.

There are environmental arguments for supporting clean energy, and some of those may have merit. If you want to advance those arguments, there is a productive discussion to be had, but this jobs argument is completely specious and should be buried once and for all.

I’m currently reading Gridlock: Why We’re Stuck in Traffic and What to Do About It by Randal O’Toole, the Antiplanner. Although the book discusses the problems in America’s transportation system in general, certain parts of it are specific to light rail in Saint Louis and the debate surrounding the proposed MetroLink expansion. I’d like to share some passages from Gridlock that communicate why expanding MetroLink is unnecessary and cost-inefficient.

First, O’Toole provides evidence that expanding MetroLink hasn’t historically increased ridership in Saint Louis:

When St. Louis opened its first light-rail line in 1993, it was hailed as a great success because system ridership, which had shrunk by nearly 40 percent in the previous decade, started growing again. But when St. Louis opened a second line in 2001, doubling the length of the rail system, rail ridership remained flat and bus ridership declined. By 2007, total system ridership was no greater than it had been in 1998.

Second, O’Toole describes how Saint Louis experienced a reduction in energy efficiency after launching a light-rail line. He explains that this is because the city ultimately uses more fuel on buses that carry smaller average loads than it did before building the line.

For example, in 1991, before Saint Louis built its first light-rail line, St. Louis buses averaged for than 10 riders and consumed 4,600 BTUs per passenger mile. In 1995, after opening the light-rail line, average bus loads declined to less than 7 and energy consumption by bus and light rail together increased to 5,300 BTUs per passenger mile. CO₂ emissions also climbed, from 0.75 pounds to 0.88 pounds per passenger mile.

Third, MetroLink’s revenues add up to less than its expenses, and an expansion would exacerbate this deficit:

The transportation plan for St. Louis [...] notes that the transit agency’s projected revenues could not even cover its operating costs, much less the cost of light-rail expansion. The plan adds that county voters rejected a tax increase needed to support transit operations and that, even with that tax, the agency’s revenues would be insufficient to support the proposed expansions.

O’Toole has written several pieces on the subject of high-speed rail for the Show-Me Institute. His most recent study for the Show-Me Institute, “Why Missouri Taxpayers Should Not Build High-Speed Rail,” was published in September.

I have been thinking about ethanol lately because the hotel with which our office building shares a parking garage seems to be hosting some type of conference that has brought down some people from Iowa. Our garage contains several cars marked as belonging to “Iowa State” or “Iowa Department of Transportation,” and they all sport large bumper stickers proclaiming that they run on ethanol fuel. Good for them. I am glad they are visiting Missouri, where they get ethanol in their gas whether they like it or not. (I am pretty sure they like it.)

This is topical because just the other day the Government Accountability Office released a report recommending that we do away with the ethanol tax credit. The Post-Dispatch’s “Political Fix” has the story here. Now, the bad part is that the tax credit is no longer needed because another government mandate is forcing ethanol on us:

But the GAO said the tax break is no longer needed now that the industry has prospered under a government mandate for ethanol use, called the Renewable Fuel Standard.

So, the ethanol industry “prospers” because of a federal mandate, a federal subsidy, and an additional state mandate. But I guess getting rid of one of them amounts to some progress, at least.

Here is some of the work we have done at the Show-Me Institute about ethanol.

Copenhagen is becoming unlucky for the United States. Last Friday, Chicago lost its bid for the the 2016 Olympics there; this December, a summit will be held there to debate an international climate change treaty that, if passed, would critically damage the U.S. economy.

Some are pushing the “Clean Energy Jobs and American Power Act,” better known as “cap and trade,” to set the stage for this international treaty. In short, because of political compromises backroom shenanigans, the bill as it stands does more to raise the cost of energy — thus raising the cost of every product in the economy — than it does to reduce emissions. Missouri and other Midwestern states would be especially hurt by the regulations, given that much of our economy relies on carbon-emitting energy. (Read my previous blog post about cap and trade for more reasons why it is a bad idea.)

The student newspaper at Wash. U. wrote an article in favor of the international treaty, and about an upcoming event: In two weeks, Missourians will be marching in support of this treaty. Although everyone is entitled to their own opinion, this treaty and the support for it are misguided.

International treaties — especially in regard to environmental agreements — are difficult to enforce and are rarely effective. The Kyoto protocol, signed by 183 nations, was intended to reduce carbon emissions worldwide; however, the signatory nations have increased their emissions even faster than the world average and the United States.

This new treaty would only cripple the economies of the United States and other participatory countries. It would add an extra cost to business transactions with arguably negligible environmental benefits. Most of the world’s environmental damage is done by burgeoning industrial economies, like China and India, but they will not be party to the new rules. The United States can try to set a good example through productive and competitive efficiency measures, but cap-and-trade legislation would only hurt American businesses in an already uncertain global economy.

Today’s Springfield News-Leader has a rebuttal to a prior op-ed that quoted some information from the Show-Me Institute. The topic is Springfield’s pension problem, and the rebuttal questions how the Show-Me Institute writer (me) came up with a value of $75 million for Springfield’s water utility. From today’s piece:

- Neither the city staff, nor City Utilities, has any idea how the Show-Me Institute arrived at a $75 million valuation for CU’s water division. Regardless, there are two larger points here. First, the Show-Me Institute is not an unbiased source. Its mission statement is to promote free-market solutions for public policy. Maybe selling off some or all of CU’s assets is a good “market solution” for the buyer, but it would not be in the best interests of the CU consumer.

We may not be unbiased, but at least we are not lazy. As in, too lazy to do one minute’s worth of work to answer your own question. About three weeks ago, the Springfield Business-Journal ran my op-ed that cited the $75 million figure. I can’t link to the SBJ’s version of the piece online, but I can link to our copy. It very clearly states how I arrived at that estimate:

It is difficult to estimate the windfall Springfield might receive, because public utility valuations are very complicated, but Webster Groves, which has one tenth the population of Springfield, received $9.5 million in 2002 just for its water system. Using a rough per-capita calculation and adjusting for inflation, a similar sale might bring more than $75 million for Springfield’s water division alone.

I clearly stated that this was a rough estimated value, but as to how I came up with it, the answer was right there in black and white.

A commentary in the Springfield News-Leader today cited a recent op-ed of ours (OK, of mine) about city utilities in Springfield. The commentary noted how, despite its pension issues, the Springfield city government is far from broke, and offered as one piece of evidence the value of its utility holdings. That is where we came in:

Further, the Show-Me Institute estimated that City Utilities’ water division alone could be sold for $75 million.

That was a very rough estimate, as I readily admitted in the piece on Springfield and City Utilities that this figure came from, but it is nonetheless based on reasonable calculations that I discussed in detail. The author of today’s piece is right on: Springfield is not broke, and it does have options in fixing the city’s pension problems. Those options may or may not involve a tax increase, but selling the municipal utilities is a very realistic option that has already been done by Florissant and Webster Groves here in Missouri, to give just two examples.

The results of a new survey of members of the American Economic Association suggest that the Show-Me Institute is in good company.

The survey finds economists in consensus on several key policy issues:

• 51.6 percent agree: “The U.S. should place more stringent caps on medical malpractice awards.”
• 63.7 percent agree: “Barriers to entering the medical profession should be reduced.”
• 78.3 percent agree: “Government subsidies on ethanol in the U.S. should be” reduced at least somewhat.
• 42.4 percent agree: “State governments in the U.S. should eliminate mandates about what health insurance must cover.”
• 62 percent disagree: “Employers in the U.S. should be required to provide health insurance to their full-time employees.”

Other interesting results:

• 83.3 percent agree: “The U.S. should eliminate remaining tariffs and other barriers to trade.”
• 70.3 percent agree: “The U.S. should allow payments to organ donors and their families.”

David Catanese blogs over at ky3 political notebook that Sen. Claire McCaskill is highly unlikely to cast a yes vote for the cap-and-trade legislation that recently passed out of the U.S. House of Representatives (link via Combest):

“If there is going to be enough support for the bill, it will be a very gradual implementation as we move toward changing to wind and solar and other kinds of energy,” McCaskill told conservative Missouri talk radio host Mike Ferguson. “I’m going to be one of those trying to craft it in a way that is very gradual, that is not going to hurt a state like Missouri that is so coal dependent.”

McCaskill also said she’s in no rush on cap-and-trade because other world powers haven’t agreed to do their share.

“We need to be a leader in the world but we don’t want to be a sucker. And if we go too far with this, all we’re going to do is chase more jobs to China and India, where they’ve been putting up coal-fired plants every 10 minutes,” she said.

It is good that the Senate recognizes the harms that Missouri would incur upon passage of the cap-and-trade legislation as it is currently structured. We’ve been blogging about this often recently.  Cap and trade would significantly diminish the competitive ability of the state of Missouri. And I say this not as a global warming skeptic; I’m pro-environment. Still, this is not the way to go.

Show-Me Policy Pulse cited an AP article that appeared in the Kansas City Star on Sunday about the “energy efficiency” charge that would be added to energy bills beginning in August if the governor signs pending legislation authorizing the charge. The new fee was designed to fund energy-conservation initiatives by utilities like AmerenUE:

For example, the commission last week approved a program in which St. Louis-based AmerenUE can offer credits to businesses that voluntarily shut down or scale back their electricity use during peak demand. AmerenUE will be able to recoup the cost for the program that starts Thursday by increasing the rates it charges business customers.

Instead of providing more efficient or environmentally friendly energy, this program would cost most consumers more money in order for utilities to provide less energy. It’s a short-term solution to a long-term problem: As Missouri’s population grows, and our economy produces more, we will need more energy — or a more efficient way of getting energy. If the state insists on instituting some sort of environmental energy cap or tax, it would make more sense for the program to focus on increasing efficiency in energy production and fostering alternative energy sources.

The program currently under consideration would add 3 percent to energy bills in order to fund what amounts to education efforts, and utilities would remotely control some aspects of participating customers’ energy usage, such as air conditioning. From the article:

One of the company’s more popular energy-saving initiatives has provided free programmable thermostats to about 34,000 residential customers in Missouri and Kansas. [Kansas City Power & Light] can remotely control the devices to reduce the frequency at which air conditioners run during peak demand times. The power company overrode customers’ air conditioners four times last year and twice so far this summer, [KCP&L's senior director of public affairs] said.

A better solution would involve a way for companies to choose to buy green or more efficient energy from a competing company. Deregulating the energy monopoly would force utilities to become more efficient themselves, or give way to more efficient competitors. This competitive process should be encouraged here, rather than just paying existing utilities more to produce less.

David Frum has a great post up about how France handles the nuclear waste generated by its vast civil nuclear program. This goes a long way toward answering one of the open questions I had in my piece arguing for an expanded nuclear presence in Missouri. In short, France reprocesses and reuses the waste, although I readily admit my own limitations in explaining it much beyond that. (I originally found the article thanks to Andrew Sullivan.)

On a closely related point, I recently found one reason why AmerenUE was so intent on expanding within Callaway County — a project that hopefully will succeed eventually. Callaway County has a commercial property tax surcharge of just 11 cents per hundred dollars of assessed valuation, one of the lowest surcharge rates in Missouri. (Only two counties are lower: Reynolds and Camden.)

The Kansas City Star reports on the increasing support for a plan to scrap and replace the fuel tax. The article cites rising public concern that the current revenue stream for highway and transportation projects, structured around fuel taxes, is unsustainable.

In recent years, public highway funds have been shriveling. In response to concerns about environmental impact and personal budget costs, the public’s automobile preferences are slowly and surely shifting toward increasingly efficient cars with higher gas mileages, or cars that bypass gasoline fuel altogether. Is implementation of a mileage tax the best way to confront these trends?

On the state level, Oregon has experimented with this idea, with some degree of success and enthusiasm by the trial participants. Adam Stein of Grist explains how the system worked:

A small GPS receiver in participants’ cars tracked miles driven. When participants went to the gas station to fill up, a wireless scanner at the pump detected the GPS receiver and recorded the car’s current mileage, which was then sent to a central database to determine miles driven since the last payment. No specific location data was transmitted. The payment system at the gas station applied either the standard gas tax (for cars that didn’t have a GPS system) or the mileage tax (for participating cars). The experiment was designed to be revenue neutral, so fees were about the same in either case.

The Oregon experiment produced high satisfaction (91 percent of participants preferred the system to a fuel tax), and curbed both congestion and average driving times.

On the national level, Transportation Secretary Ray Lahood is a vocal supporter of phasing in a mileage tax system, a view which has been shot down by the Obama administration.

Problems abound with mileage tax systems, including — but certainly not limited to — high compliance costs (imagine retrofitting thousands of old cars with GPS transmitters!), interference of privacy rights, and ineffective distortion of driving behavior. Further, as economist Mike Moffatt notes, by removing incentives for purchasing fuel-efficient cars, mileage taxes feature all of the drawbacks of the fuel tax (regressive, decreasing travel, increasing prices of transported goods), while sharing none of its virtues. His solution? Make up for lost revenue by raising the fuel tax even higher.

In Missouri, revenues have been facing downward pressure for the past few years and have been falling at an average rate of 3 percent. The state’s highway budget is hobbling on, despite inflows of stimulus money. Missouri needs to act. Should Missouri join the ranks of other states like Ohio, Pennsylvania, Florida, Colorado, North Carolina, Oregon, Idaho, and Minnesota by experimenting with a mileage tax system? Should we raise fuel taxes? Should we stand by and do nothing, allow the system to die, and replace it with a private one? Your thoughts, please!

Good news for opponents of cap-and-trade policy in Missouri (via the Kansas City Star’s Prime Buzz):

The climate bill passed by the House last week now goes to the Senate, where capping greenhouse emissions could face a rougher ride.

Its fate could depend upon a group of about 15 moderate Democrats who have generally staked out a middle ground on President Obama’s domestic agenda.

One of them, Missouri Sen. Claire McCaskill, said on Twitter over the weekend: “I hope we can fix cap and trade so it doesn’t unfairly punish businesses and families in coal dependent states like Missouri.”

The realization that cap and trade systems are ineffective and highly injurious to state and national economic welfare is not a partisan issue. I will keep this pithy, and point you all to read Caitlin’s excellent discussion of the matter. The environment is worth saving, but it is important to remain open to other alternatives, and to not exploit the conveniences of one tool to silence discussion of all others.

A cap and trade bill was narrowly passed in the House of Representatives on Friday afternoon. If passed in the Senate, the bill would set a ceiling for carbon and greenhouse gas emissions, then allowing companies to buy and sell permits to produce more.

This cap would severely damage the coal-reliant Midwest economy, while being ambiguously effective (even the Progressive Democrats of America agree that it won’t work.) The Missouri Public Utility Alliance estimates the legislation could bring as much as an 80-percent increase in energy prices during the next 20 years. Science Applications International Corp. estimates that the Missouri economy would lose between $2.7 and $3.7 billion per year from cap and trade.

The legislation would result in high costs across the country. The Congressional Budget Office estimates that cap and trade will cost each American household $175 in higher annual energy costs by 2020. However, this analysis has been rebutted by other groups that say the CBO ignored the negative impact that this legislation would have for the GDP as a whole. The Heritage Foundation has released a report estimating that the bill would lead to an extra $1,870 in annual energy costs for a family of four by 2020, and $6,800 by 2035. This would amount to a huge tax increase on Americans, especially on the poor, who spend a higher percentage of their income on energy.

Some might argue that this high cost is worth the environmental gains that cap and trade might bring, but such projections are controversial. Previous cap and trade regulations in Los Angeles and Europe have failed to deliver on their promises, creating energy delays and huge profits for utilities without leading to reduction in emissions. A relevant op-ed in the Philadelphia Inquirer points out that the U.S. bill would allow companies to profit from polluting during the next 20 years, without any real environmental improvement.

On top of all this, the Competitive Enterprise Institute has released a report showing that the Environmental Protection Agency has been using outdated data to support its conclusions about how severe global warming is. According to this report, the EPA has ignored developments that include “a continued decline in global temperatures, a new consensus that future hurricanes will not be more frequent or intense, and new findings that water vapor will moderate, rather than exacerbate, temperature.”

There is still debate about how bad the climate change situation actually is, and much dispute about whether cap and trade will even be effective in reducing carbon emissions.

Existing evidence suggests that cap-and-trade legislation would hurt Missourians without providing the results claimed by advocates. More successful alternative routes to a reduction in emissions might include alternative and nuclear energy, solutions worth trying before we impose the largest effective tax increase in the history of the United States.

This op-ed defends green jobs subsidies with the argument that the resulting jobs are sustainable.

In a sense, it’s right. Green jobs are sustainable — for the wrong reasons. Once the government starts subsidizing jobs, the people employed by the program are few and easy to organize. They lobby to maintain the subsidy. The people who lose out — taxpayers and consumers — are numerous and spread throughout the economy. They can’t band together to blot out each and every economic inefficiency. So the subsidies perpetuate themselves.

In a complex economy, expecting jobs to be sustainable is unrealistic. Compare the jobs that exist today to the jobs people did two or three hundred years ago. Some professions, like farming and medicine, are still around, although the technology used looks dramatically different. Many jobs have disappeared. You don’t see wainwrights listed in the phone book. (You don’t even see many phone book publishers anymore!) And it’s a good thing, because the decline of some professions made possible the ascent of other, more useful and profitable professions.

A good job is one that makes both the employer and employee better off. Businesses will create new and better jobs whenever opportunities arise, as long as they aren’t bogged down sustaining outdated jobs.

This is a follow-up to my last green jobs post. Matthew Kahn, green economist par excellence, asks some questions about green jobs:

I’m still trying to understand what are the exact details of how the “green jobs” push translates into specific policies? Is this simply a relabeling of Keynesian public works projects? Is this a justification for a ramp up in basic research funding (I would support this!)?

I vote for the Keynesian public works option, but feel free to convince me otherwise in the comments.

Today’s Springfield News-Leader has a detailed article about the city’s pension issues, which also discusses the Show-Me Institute’s presentation at a luncheon yesterday and comments by our executive vice president, Dr. Joseph Haslag, before the pension commission last night.

Actuarial expert Richard C. Dreyfuss participated in yesterday’s lunch presentation, discussing Springfield’s pension problems (he also wrote a policy study for us last year detailing Missouri’s public pension issues). Springfield is in a very tricky situation with its pension, and the privatization of City Utilities would be one way to address it — unless this guy gets to decide how to fix the problem. I feel I must give one correction to a statement in this column, when he said that private utilities, aka IOUs, “are not accountable to the communities they serve. IOUs do not have a local Board for Utilities or City Council to report to.”

First, private utilities are generally more regulated than public utilities. Second, Springfield is free to require reporting to a local utility board as a condition of any sale or franchise agreement with a private utility. Springfield might see a decrease in the price offered for CU if it did insisted on such a requirement, but it is certainly an option. The Public Service Commission and Dept. of Natural Resources would still be the dominant regulators, but Springfield could add additional requirements if it so chose.

This video is the polar opposite of “I, Pencil” — Leonard Read’s essay about the market economy told from the point of view of a pencil. Whereas “I, Pencil” celebrates the achievements that capitalism makes possible, the documentary, called “The Story of Stuff,” deplores what it sees as widespread waste and decadence.

The anti-consumer opinions expressed in “The Story of Stuff” are inconsistent with the goal of empowering people and protecting the planet. For instance, it criticizes people who buy new models of computer monitors. But the sleeker designs are not only more fashionable, they’re also better for the environment because they use energy more efficiently, and use less plastic and other resources. Imagine if no new computer models came out, and everyone had to work on the room-sized machines of several decades ago. That really would be disastrous for the planet.

Another point that doesn’t stand up to inspection is the claim that gadgets are cheap — the example given is a $5 radio — because the full cost is being foisted on someone else. It’s implied that $5 is an arbitrarily low price that the manufacturer stuck on the item to get it to sell. But, if that’s the case, why don’t manufacturers charge $5 for a television or a microwave? And why do we see comparable prices for similar items across different models and retail outlets? It’s also not clear who paid for the difference if the price is arbitrarily low. The narrator claims that employees paid it by covering the cost of their own health insurance — although health insurance isn’t one of the inputs that goes into making a radio.

The narrator can’t believe that $5 is the actual cost of a radio because she doesn’t understand economies of scale. To make just one radio for her and ship it by itself in one of those ocean liners would of course cost much more than $5. If she got her way and all goods had to be produced in small amounts locally, a radio would be much more expensive. Mass production and trade (not exploitation!) brings the cost down.

She would also do well to ponder the lesson of “I, Pencil.” Markets have brought together widely spread-apart resources to serve human needs. Without markets, we wouldn’t have pencils, let alone video cameras to record documentaries. It’s easy to say you don’t want markets to get you more stuff, once you already enjoy all the technology you use to spread your message. It’s great if you already have what you need, but markets should be allowed to continue to bring other people the things that they need and don’t have yet.

There are two sides to every story. Here’s what Kit Bond says about government incentives for green jobs:

“It sounds really neat to think we’re going to have wind-powered jobs, except I don’t see cars going down the road with propellers on them.”

Bond argues that incentives for these jobs entail a lot of waste. The government provides a huge incentive, and the resulting jobs are few and far between. I’m inclined to agree with him. It’s nothing personal against the environment or job creation. When the state subsidizes any job, you can bet that it doesn’t make sense economically. Private businesses would step up to the plate if it did, without having to be coaxed by incentives.

Bracken Hendricks of the Center for American Progress, who is apparently an expert in PR, puts a positive spin on inefficiency:

“He made it sound like federally funded purchase of jobs when what we’re talking about is smart incentives and public investment in new infrastructure,” Hendricks said.

CWIP has been the subject of several previous articles and blog entries, both here at the Show-Me Institute and elsewhere, so I won’t use this entry to rehash the issue.

KMOX reports that controversy over proposed CWIP legislation, which would have supported the construction of an AmerenUE nuclear power plant expansion, has reached its final episode today. State lawmakers did not round up enough support to pass the constitutional amendment that would have been needed to move the new plant construction forward. Altogether, this was a not-so-surprising conclusion for a bill surrounded by a stream of publicity that, many people felt, raised more questions than answers.

It sounds like a monster. All sales tax holidays are scary, but for this one they specify the color. It makes it seem so much more palpable and alive.

The green sales tax holiday is exceptionally bad because it distorts both the timing of sales, as all sales tax holidays do, and the choice of which products to buy. The tax is lifted only on appliances that have been approved as earth-friendly by the Environmental Protection Agency. I hope nobody is expecting a slight diversion of sales for one week to save the planet!

As the debate over Missouri’s Construction Work in Progress (CWIP) law heats up, senators are spending copious amounts of time debating this important issue. Senate Bill 228, which would rescind the existing anti-CWIP law, has gone back to the drawing board after a rigorous and visceral debate. Some think the bill should be voted on by the people, akin to the original CWIP law’s conception during the ’70s.

Signs of compromise are now taking place; an amendment passed that allows exemptions for CWIP rate hikes to those older than 65, disabled, and who earn less than $40,000 a year. One opponent of the bill was able to pass an amendment requiring that “customers get 100 percent of any profits Ameren would realize if it ever sold the permit to build the nuclear plant.” Another proposed amendment includes a cap on the percentage increase that utility customers would pay.

The economics of this situation seems simplistic, in my opinion. There is a growing demand for energy, and neither wind nor solar power are technologically advanced enough to fulfill this demand. Furthermore, it seems logical that those who will benefit by consuming cleaner sustainable energy should be those who assume the cost. It is possible that, in another economic climate, Ameren could have found enough investors with deep pockets to finance this gargantuan investment without needing CWIP funding, but this is not the case. The consumers who need the product must therefore bear the costs if the plant is to be constructed.

More on this topic from the Show-me Institute:

Policy Pulse: Legislation Aims to Allow CWIP Billing By Missouri Utilities

Op-ed by David Stokes: Kick Anti-Cwip Laws to the Curb

I spotted a recent letter in the Post-Dispatch, responding to David Stokes’ earlier article about the proposed repeal of the law banning contruction-work-in-progress (CWIP).

The letter’s author says it’s “condescending” when Stokes suggests that “the [anti-CWIP] proposition was not placed on the ballot because of a carefully considered economic objection to CWIP financing plans in general.” I don’t think David’s analysis is in any way condescending. Rather, it reflects his firm belief that the main reasons the ban was instituted were the general anti-nuclear bias prevalent during the 1970s and Missourians’ desire to keep their electric bills low.

Regardless of the motives for the ban on CWIP financing, I do believe that from a utilitarian point of view, the proposed new nuclear plant is needed now more than ever, and would serve the state’s energy needs well.

Our first major, original piece created specifically for Policy Pulse is now up over at that site. It’s a newspaper-style story about AmerenUE and the construction-work-in-progress issue, written by Andrew Guevara. Check it out.

The Post-Dispatch has a quick-hitter about a rebuilt gas station in Brentwood that is now offering E-85 gasoline. (I used to fill up at this station all the time when I lived in Brentwood Forest.) Because there is no mandate to sell E-85, the station owners have to include the reduced energy output of ethanol gas in their pricing. According to the story, they are selling it for 20 cents less per gallon.

This is how markets are supposed to work. Our new SUV (just doing my part to get the economy moving) is a flex fuel vehicle. I honestly didn’t think much about that when we bought it, I was much more concerned with making sure my wife and I had the ultimate set of rims. But if a station gives me enough of a price reduction on the E-85 gas, I will certainly consider buying it. This is the nature of capitalism: The government does not tell me what I have to buy; businesses give me a choice. Recent events have probably made people forget about that.

Combest links to this article in the Fulton Sun about a proposed nuclear reactor. The General Assembly is considering AmerenUE’s plan to add on to the Callaway Nuclear Plant. What I liked best about the article was that in addition to summarizing the usual arguments for and against, it points out that nuclear energy is a success in countries that don’t impose so many political barriers to its use:

France has more than 60 nuclear power plants that generate more than 80 percent of its electrical power. France also is the world’s largest exporter of electrical power, sending 18 percent of its production to other nations.

We’ve followed in France’s footsteps by establishing an official language; it would be a good idea to emulate their openness to energy innovation, too.

I didn’t see this when I wrote about gas taxes last week: Gary Becker and Richard Posner both oppose an increase. They make some good arguments against raising taxes during a recession — in their opinion, a depression — but I’m disappointed that they don’t address the proposal to offset the increase with rebates.

The Kansas City Star reports on the approbation that commentators from varying political camps are showering on a proposal to increase the gas tax. Given that the economy has been in bad shape lately, some are suggesting that the increase should be revenue-neutral, with money returned to taxpayers through a rebate or similar mechanism. Here’s a quote from one supporter:

“There are tremendous benefits for the environment, for the economy, for energy independence and national security” from that approach, said Dan Rosenblum of the Carbon Tax Center, which supports higher levies on all carbon-based energy.

Two things bother me about this reasoning. First, I don’t believe a $1 or $2 tax increase would afford tremendous benefits. Slight benefits? Maybe. People would buy less gasoline, but they would still buy gasoline. Cars would continue to pollute the environment. The U.S. would continue to buy oil from OPEC, which in fact has little or no bearing on our national security. (I don’t see any petroleum executives trying to blow up buildings, do you?) If you want to improve the economy, the environment, or foreign relations, it’s better to confront those issues head-on instead of waiting for a small change in driving habits to solve the problem.

Second, even if the benefits would be substantial, that’s a bad reason to impose a tax. The purpose of taxes is to raise money for the many worthwhile things the government does. If it’s necessary for people’s driving habits to change in order to keep us safe or whatever, then we need a new law to state that explicitly. Legislators shouldn’t use taxes as a sneaky way to trick people into doing what they want.

A judge upholds the Kansas City public smoking ban, reports the Star. Also in KC’s newspaper of record, AmerenUE fights to be able to charge current customers during construction of future facilities (like any private business would be able to do). A St. Louis cab driver talks to the Post-Dispatch about being an entrepreneur in this highly regulated industry.

Please let me know your thoughts, especially you former interns who are now tasked with keeping our comments section flowing. You know who you are!