Liveblog of Pickens on Hannity Show II

4:08 PM: Sean announces T. Boone to be on in the next hour. Supposedly to talk oil prices and how oil is jeopardizing our national and economic security. $700 billion has to come up, even if the oil price isn’t anywhere NEAR what is needed for $700 billion.

6:20 PM: AARGH! Stupid WIS radio! I just realized that I’ve been listening to a looped version of the first hour! So that means no liveblog. But I’ll try to see if I can find a clip of the broadcast and analyze that. But because Hannity’s website sucks, I doubt I’ll be able to find this…

Pickens Continues to Use $700 Billion Myth

From a Cato Institute Blog Post by Will Wilkinson:

Pickens: It’s more than me. I mean, this is about America. This isn’t about Boone Pickens and whether Pickens’ wind farm makes money or whatever happens to it. But I mean, here with $700 billion going out of the country, and let’s say that we could cut it in half — $350 billion in the United States, can you imagine how that would multiply for jobs here. I’d much rather that gonna $350 billion was being used here than to give some for foreign oil.

As I’ve stated before, $700 billion is a falsehood. In fact, all we’ve done in the past is import $320 billion or so, and given current oil prices, are on track for something in that neighborhood, say $400 billion. So even if we do NOTHING, we’ll get to that $350 billion number that Pickens would “like to see happen.”

Here’s another issue with this argument. Lets say the Pickens Plan is successful and it cuts down on oil imports by half (to $150 billion, not $350 billion). He says that all that money would be going towards American jobs. Yes, but at what cost? That’s something that Pickens does not address at all (nor has anyone else for that matter). If it costs $150 billion in tax incentives, infrastructure and whatever else is needed to get his plan off the ground, then it’s a wash. Sure some workers are happy, but consumers are left in the cold. And that’s if his plan works exactly as he thinks it will. As I’ve pointed out before, on both transportation and electricity, that’s far from a given. But this is the point that Will makes rather well in his post.

But I’m glad that at least more people are starting to call out Pickens on his economically illiterate thinking.

I also recommend the Cato@Liberty blog as an excellent resource or non-partisan thinking on political and economic matters.

Politics as Usual with Palin and the Media

So we’ve gone through a weekend of hearing about Sarah Palin as the new Republican VP nominee. And, to no one’s surprise, it was all about personal characteristics and almost nothing on policy.

There were thousands of stories on Palin’s children, both newborn and almost adult. But that’s the essence of the game as the liberal media and the blogosphere tried to find something against Palin that would stick in terms of criticism. I know it’s hard to find some actual information on three day’s notice, but I was somehow able to find information on her in five hours on Friday afternoon. You’d think the media could do that, since they’re getting paid for it after all. But instead, we get innuendo and slander, going after her personality, but not her policies. And it’s not like she’s a blank slate, as she’s got two years as governor and a couple of years as mayor to find information on. So, as usual, the ancien media fails at their job of investigation and reporting.

Meanwhile, the GOP side of the media is just ecstatic about the pick, as if this is all the people needed to warm up to McCain. To his credit, he did reinforce his social conservatism at the Rick Warren forum, and it appears that this is another pick along those lines. Which is why the anciens wanted to go after her personal life as to make the hypocrite tag stick. But there’s nothing to those attacks, which is why the GOP side is going after them on this issue. So instead of introducing their candidate and filling in the gaping holes on her policy ideas and where she stands on the issues, they’re, once again, playing on the other team’s field. But as this weekend has shown, there’s nothing to this issue, which is why the GOPers are attacking this hard.

But it doesn’t help us in the minority who actually, you know, still care about the issues and policies that government puts in place. And more to the point, both sides have been strangely silent on Palin’s energy policy while in Alaska. It’s supposed to be her strong point, and she even mentioned it in her introductory speech. But as I outlined in my Palin on Energy post, it’s at best a political pander, and at worst, a contradiction of the national Republican policy on taxation and a gold mine for the Democrats, if they’re going to take the bait.

In case you don’t know, Palin instituted a new severance tax on oil pumped from state-leased lands. And contrary to usual Republican policy, this tax was higher than the previous level. In fact, it became a windfall profits tax, as the structure of the tax was that it increased as the price of oil increased, the very definition of a windfall profits tax.

But people aren’t interested in the fact that it’s a tax increase out of the Obama handbook, they’re more interested in covering it up as “giving a tax rebate back to the people”, as epitomized by the Rush Limbaugh show this afternoon:

CALLER: And you asked him a specific question, and what he picked out was so mundane, I mean it was on everyone’s mind. You asked him what were Sarah’s accomplishments here, and he had an ability to tell you a whole litany of things. And he picked out oh, you know, “She’s going to send us some money.” Well, yeah. It’s a small part of a much larger plan by the state –

RUSH: Well, but wait a minute.

CALLER: — to help us out.

RUSH: No, I knew what he was talking about at the time. Alaskans – she gave them a rebate on rising gasoline prices added to whatever it is you guys already get for allowing the Alaska pipeline and other things up there, but she was simply saying, she made it a point in her announcement to say that she didn’t keep the money as a governor and put it in government coffers; she sent it back to the people who were experiencing this rapid increase in gasoline prices. Remember, Obama at the time the gasoline prices were skyrocketing up, said, (paraphrasing) “I’m not really worried about the price but I am concerned about how rapidly it went up.”

CALLER: Yeah, it was disgusting.

RUSH: She turned it back to the people, that’s all. No different than a tax rebate.

CALLER: Right, which was the original idea of the original permanent fund in the first place, because the oil revenue of the state, according to Hammond, our governor at the time, belonged to the people. And so the people get a tiny little portion of the interest, and that’s what that dividend is about, but I wouldn’t have chosen that as her most important accomplishment. Frank Murkowski was expected to be a really good governor, and he was just a bust. She beat him in the primary, and she filed his deal that he had made with the gas companies — or the oil companies, she filed that right in the trash. (Emphasis added)

First of all, it’s not a tax rebate, as the $1200 doled out by each citizen was never collected from the citizenry. It was collected from the oil companies and redistributed to taxpayers. That’s NOT a tax rebate. It’s the same problem that the Bush tax rebates/stimulus payments have, the rebates are uncorrelated with tax payments. So it can’t be a rebate if you don’t pay the tax in the first place.

But the bigger problem is that there is this entitlement to the oil company revenue because the oil came out of state-owned land. The fact that the state owns any land is something entirely different, but that’s different from a federally owned parcel (which was in most circumstances expropriated and definitely unconstitutional). Under the Alaska Constitution, the state can own land, and lease mineral rights, but it doesn’t own the oil. Well, they can own the oil, but they allow private entities to explore and produce the oil, at least until politicians decide to take over the production as a whole (or just go ahead and tax it 100%).

In the grander scheme of things, this should sound at least some concern for conservatives, but I haven’t heard a peep from either side of the aisle, but it’s actually pretty obvious once you think about it.

Republicans don’t want to dirty up the image of Palin, especially when she says that it’s not a tax increase, but it’s getting a fair valuation on the resources. If a Democrat tried doing that on a tax on… anything, Republicans would skin that Democrat alive.

Democrats are either waiting for a “gotcha” moment, possibly during the debate or closer to the election. The question will be obvious: “During your time as governor of Alaska, you passed a tax increase on oil companies that were then sent taxpayers as an energy rebate. Barack Obama has proposed the same thing, but John McCain and the Republicans have attacked this proposal. Do you support Obama’s plan that is very similar to your policy in Alaska?” And then she’s going to have to square the circle, saying that it’s ok to do it on the state level, but not on the national level, or backtrack on her record in Alaska. Either way, the Republicans are going to have to figure that one out quickly, because either she’s going to piss off fiscal conservatives or be attacked (rightly so) as a flip-flopper.

Right now, there’s no sign of what she’ll do, even if she highlighted the policy (in a limited way) in her speech in Dayton. But unlike the pregnancy/child issues, this is a serious issue that could very well put her in a bad position.

(UPDATE: The Cato Institute has done some research into her tax policies: Gov. Sarah Palin’s Record on Taxes and Spending and Palin: Uninspiring Tax Policy Record. Leave it to the libertarians to do the political work of the partisans. There’s a thesis to be had there, do non-mainstream party outlets cover the issues that the Big Two parties do not want to have discussed? I’m also thinking Obama/climate change and environmental parties.)

Sarah Palin on Energy

As most people know, Sarah Palin is now the VP nominee for the Republican Party. Everyone knows the obvious stuff: she’s a woman with 5 kids, current governor of Alaska, former mayor, elected on an anti-corruption kick.

But there’s not so much that people know about her policies and her accomplishments. So I’m going to try and fill in the blanks, especially on energy (It’ll be tougher to get her policy ideas on transportation, but they’re there in the land of the Bridge to Nowhere). I first had my antennae up when both McCain and Palin in this afternoon’s rally mentioned that she had fought against “Big Oil.” It might just be cover to make sure that she doesn’t get politically attacked for being cozy to oil interests or attacking her as “continuing Bush’s presidency.” Referring to the oil industry as “Big Oil” is not something the Bush presidency was known for.

So I found this website, run by a lawyer named Beldar, who jumped on the Palin bandwagon early and often, as shown in the link. As for what she’s done in office:

• She’s spoken out against putting polar bears on the endangered species list. While only tangentially related to energy, putting the polar bear on the list would enable federal regulation of pretty much the entire economy, as the specious reasoning for putting the polar bear on the list as “threatened” is due to global warming climate change. If anything makes climate change worse for the polar bears, it can be regulated by the feds, according to the Endangered Species Act. This is a no-brainer, but it’s a politically risky action to take, for fear of being labeled a “Big Oil” supporter, or anti-green. But she makes up for it with…
• She signed onto the punitive damages case that was eventually brought to the Supreme Court. This case, stemming from the Exxon Valdez oil spill, was about the $5 billion in punitive damages that were sought against Exxon (now ExxonMobil). Exxon thought that this was excessive and fought all the way to the Supreme Court to have them lowered. Exxon won in a 5-3 verdict to lower the damages, though the 4-4 split meant that there could actually be punitive damages under maritime law. The actual Court decision can be found here (warning, lots and lots of legalese). Funny thing, Palin found herself on the side of Breyer, Ginsberg and Stevens, and against Thomas, Scalia, Roberts, Kennedy and Souter. But as you can see in the video below, this is mostly a populist action, since there were 33,000 people, businesses, and associations impacted by this. It’d be political suicide to not support this, but the populism still remains:
  
• In another populist move, she signed onto a tax increase. On oil companies (scroll to see discussion on “serverance” tax vs. “income” tax vs. “windfall” profits tax.) Here are the details of the actual tax. Key points:
  1. Increases base rate on all oil from 22.5% to 25%.
  2. Adds surtax on value of oil between $30 to $92.50 of .04%
  3. Adds surtax of .1% on all value above $92.50

  Whether you want to call it a windfall profits or a severance tax, she raised taxes on oil output, and made them progressive instead of flat. That’s pretty counter intuitive to pretty much all conservative tax thought, as we would like taxes lower and flatter.

  (As a side note, it CAN be argued that this is a windfall profits tax as this tax is increased as the value of the oil increases. The value of the oil increases NOT on the production capabilities of the oil company but on factors outside their concern, making additional profits prohibitively “windfall”. A flat tax would not be a windfall tax, as the tax would not increase as prices increase, but because of the progressive nature of the tax, it becomes a windfall profits tax. This makes any progressive tax a windfall profits tax, though it’s worse for income, because presumably, the increased income is through increased work, which is not a windfall to the user. Arguments against the windfall profits tax should be the same as arguments against progressive income taxes. It also increases the incentives for oil companies to increase their production costs (or more accurately, persuade the government to increase the production costs allowance) to avoid paying higher taxes, a perverse economic incentive.)

• And with these new tax revenues, she gave them back to the state already flush with government handouts. From the Seattle Times:
  Alaska’s oil windfall by the numbers
  $6 billion – Estimated revenue collected by state of Alaska from new tax on oil profits this fiscal year.
  $10 billion – Estimated total oil revenue collected by state this year (old plus new oil taxes).
  $1,200 – Special payment to each Alaskan resident this year from new oil tax.
  $2,000 – Estimated annual dividend each Alaskan will receive this year from oil-wealth savings account, not counting the new oil tax.

  So Gov. Palin raised taxes by more than 100%. Though to say this is on profits is somewhat disingenous, as it’s just on oil price above production and transport costs, which means that this isn’t even a tax on profits, as it ignores other costs (R&D, maintenance, marketing, etc.). So it’s even worse than a profits tax.

  But the revenues at least went straight back to the populace instead of funneled through all sorts of government programs. That would be even more wasteful and economically illiterate. First she wanted to create a debit card system for energy payments but instead settled on a straight check to “help with rising gas prices” although the money will probably be spent on things other than energy (like the stimulus checks). The straight check at least is good that it doesn’t increase government any more than it already does (the creation of a government check card bureaucracy), since they already have a system in place for doling out the money that they had already received.

  So this tax was in essence a populist ploy to get more oil money redistributed to the citizens of the state. It smacks me of being a little on the road to nationalizing the oil fields there (state-izing?). What happens when the citizenry wants more of it’s $1,200 dollars. The tax goes up. No surprise there.

• Lest I seem too negative on Palin, there are some points that I do like about her. She supports drilling in ANWR and completed the natural gas pipeline to the US through Canada. The natural gas pipeline will be an immense help to the US natural gas market, even if you have to travel through Canada to get there. I don’t know enough about the pipeline as to whether the gas will be intermingled with Canadian gas or not, which would be an interesting trade issue, at least statistically.

So overall, I would peg Palin as a conservative populist on energy. This seems to fit with her overall philosophy, as so far as it can be determined by ontheissues.org:

But we’ll get a closer idea of what she brings to the table as the campaign unfolds.

Pickens Starts His Town Hall with His Lie

http://www.pickensplan.com/news/2008/08/21/t-boone-in-lincoln-2/

Go to about the 4:30 mark in the video. This is where he says incorrectly that we’re spending $700 billion a year on oil. This is incorrect, as I’ve shown before. I’ve even put this FACT on his website, but I guess he doesn’t check that too often. Or doesn’t care. I’m pretty sure it’s the second.

As far as I can tell, nobody (other than me) has challenged him on this. And yet, he uses it as HIS FIRST POINT in his town hall meeting. And it stays up there the whole time.

A commenter in my post on his website challenged me to suggest that he “change his commercials each time the oil price changes”. That would be silly, but he COULD use better numbers when he’s presenting things to groups. But he doesn’t, again because nobody is challenging him on this, and it has a shock value to it.

But someone, at some point, is going to bring this up, and then Pickens is going to have to cover his ass. I look forward to that day.

New Anti-Pickens Graphic

In light of my questioning of the $700 billion figure quoted by Pickens and perpetuated by… everyone else, I’ve “modified” one of the badges used by Pickens to help spread his plan.

I’m happy to take suggestions on how to improve the graphic. There are other of Pickens’ badges that I would like to correct, and I will post those in the future.

Proliferation of Protectionism

Has anyone noticed the noticeably increased amount of protectionist attitudes recently?

From Obama’s NAFTA gaffe to T. Boone Pickens “No Foreign Oil” shtick (this is the worst crisis the country has ever seen, ignoring 200 years of American History like the Civil War, for starters), there has been a marked changed in the amount of foreign bashing that’s been going on. I’ve noticed alot of this in the reaction to criticisms of the Pickens Plan, and is one of the reasons I’m writing this post.

Most people, when confronted with the issue of foreign import of oil, say “Yeah, that’s bad. We need to end it.” When confronted with issue, they come up with posts like this:

I guess you think you’re clever bringing all this supposedly accurate information to light. You’ve exposed the rich corporate fat cat for what he really is. Just a money hungry capitalist…. right?

Put this in your pipe and smoke it….

I DON’T CARE!!!

I guess you’d rather some “America hating” oil sheik to get that money. That way he can just funnel it to terrorists.

Pickens is what??? 80 years old? He’s got all the money he needs and even if your absolutely right and this is just a scheme to make him richer then I say FANTASTIC!!!!
At least the money and jobs stay here in America and thats just fine with me
In my America entrepreneurs have huge dreams, they put their money and hard work down on the table and risk it all with no guarantees and yet they do it anyway. That’s the America I love.

But what you failed to mention is that money aside, we import 70% of our oil from foreign countries. That is the true danger. A country that gets that much of it’s energy needs met by offshore concerns ceases to be a world power in short order. Want to bring the US to it’s knees? Everyone knows…. just turn off the tap

And the problem is that there are more people with ideas like this that don’t make any economic sense whatsoever. Ever since British economist David Ricardo came up with the theory of comparative advantage, there hasn’t been anything approaching a criticism of it that has gained legitimacy. In case you don’t know, the theory states that it is advantageous for a country to produce what it is best at making and sell it to everyone else, and then import what it isn’t as good at making from other people. Thus, in the US, we’re good at entertainment, so we produce alot of entertainment and ship it to the rest of the world. But we are inefficient at, let’s say, drilling for oil, because of… I don’t know, environmental and labor laws that dramatically increase costs for domestic producers. So we import oil from people who don’t have moral or political issues with drilling for oil. Thus, we export our entertainment (from sports to movies to television) and import oil.

Because the United States has become an “information economy” due to the rise (and government encouragement) of higher education, the US will be better able to do stuff that requires higher education. That’s OUR comparative advantage. So we’ll max out production of things that require education (and education itself), and import things that we will not do ourselves, like oil.

But protectionists see just one side of the issue (the large importation of oil) and fail to see the other side (the focus on the information economy and expanded education). Note that the US exports oil drilling services and equipment, again enforcing the comparative advantage in the US of knowledge-based industries.

But there’s no one defending free trade in general, and the move from industrialized production to knowledge based production. Not National Review or Reason. Not Marginal Revolution or Cafe Hayek. Not the Heritage Foundation or the Cato Institute (though Cato has been the best on this, but only marginally so).

The point is that all of these supposedly free traders are silent when it comes to the distortions of the Pickens Plan. Nobody is going to stick up for free trade and for the benefits of allowing the US to import what it doesn’t want to produce.

So you want the solution to oil imports. Ending government regulation of the oil industry completely. That includes all labor and environmental standards. But I bet even the most nationalistic people wouldn’t dare to say that.