Carbon-Income Inequality

Obama's new energy rule is a huge tax on the poor and middle class.

WSJ editorial. Excerpts:

"The EPA's goal is to cut carbon emissions by 30% by 2030 from near-peak 2005 levels, which will inevitably raise the price of electricity and thus all other goods down the energy chain. The 645-page rule is targeted at the 1,000 or so U.S. fossil fuel power plants, but it more or less orders states to adopt cap and trade or a carbon tax. 

A Democratic Congress debated and rejected this anticarbon program in 2010, and there isn't a chance it could get 50 Senate votes now. But no matter, the EPA claims the authority for this sweeping power grab by pointing to an obscure clause of the 1970 Clean Air Act called Section 111(d) that runs merely a few hundred words and historically has been applied only to minor pollutants, not the entire economy.

The new rule is unprecedented because EPA is supposed to regulate "inside the fenceline," meaning that its command-and-control powers are limited to individual energy generator sources. The agency can tell America's 3,000 or so fossil-fuel power units to install on-site technology like scrubbers to reduce pollution, but not beyond."

"The agency recently rejected state plans to reduce regional haze before they are even formally proposed and revoked permits it had previously approved.

The EPA also claims that by some miracle the costs of this will be negligible,"

"the government is essentially creating an artificial scarcity in carbon energy. Scarcities mean higher prices, which will hit the poor far harder than they will the anticarbon crusaders who live in Pacific Heights. The lowest 10% of earners pay three times as much as a share of their income for electricity compared to the middle class."

"The EPA plan will also redistribute income from economically successful states to those that have already needlessly raised their energy costs. The New England and California cap-and-trade programs will get a boost, while the new rule punishes the regions that rely most on fossil fuels and manufacturing:"

"Notably, these plant retirements may endanger the reliability of the electrical grid. This winter's cold snap showed that traditional power is essential to keeping the lights and heat on, and the risk of rolling blackouts is real as the EPA re-engineers the system.

The irony is that all the damage will do nothing for climate change. Based on the EPA's own carbon accounting, shutting down every coal-fired power plant tomorrow and replacing them with zero-carbon sources would reduce the Earth's temperature by about one-twentieth of a degree Fahrenheit in a hundred years."

The Blue-State Path to Inequality

States that emphasize redistribution above growth have a wider gap between lower and higher incomes.

WSJ article by Stephen Moore And Richard Vedder. Mr. Moore is chief economist at the Heritage Foundation. Mr. Vedder, a professor of economics at Ohio University, is the co-author with Lowell Gallaway of "Out of Work: Unemployment and Government in Twentieth-Century America" (Independent Institute updated edition, 1997). Excerpts:

"The income gap between rich and poor tends to be wider in blue states than in red states."

"According to 2012 Census Bureau data (the latest available figures), the District of Columbia, New York, Connecticut, Mississippi and Louisiana have the highest measure of income inequality of all the states; Wyoming, Alaska, Utah, Hawaii and New Hampshire have the lowest Gini coefficients. The three places that are most unequal—Washington, D.C., New York and Connecticut—are dominated by liberal policies and politicians. Four of the five states with the lowest Gini coefficients—Wyoming, Alaska, Utah and New Hampshire—are generally red states. 

In the Northeast, the state with the lowest Gini coefficient is New Hampshire (.430), which has no income tax and a lower overall state tax burden than that of its much more liberal neighbors Massachusetts (Gini coefficient .480) and Vermont (.439). Texas is often regarded as an unregulated Wild West of winner-take-all-capitalism, while California is held up as the model of progressive government. Yet Texas has a lower Gini coefficient (.477) and a lower poverty rate (20.5%) than California (Gini coefficient .482, poverty rate 25.8%). 

Do the 19 states with minimum wages above the $7.25 federal minimum have lower income inequality? Sorry, no. States with a super minimum wage like Connecticut ($8.70), California ($8), New York ($8) and Vermont ($8.73) have significantly wider gaps between rich and poor than those states that don't."

"In general, the higher the benefit package, the higher the Gini coefficient. States with high income-tax rates aren't any more equal than states with no income tax. The Gini coefficient measures pretax, not after-tax income, and it does not count most sources of noncash welfare benefits. Still, there is little evidence over time that progressive policies reduce income inequality."

"The two of us have spent more than 25 years examining why some states grow much faster than others. The conclusion is nearly inescapable that liberal policy prescriptions—especially high income-tax rates and the lack of a right-to-work law—make states less prosperous because they chase away workers, businesses and capital."

"The states that lost the most taxpayers (as a percent of their population) were Illinois, New York, Rhode Island and New Jersey. 

When politicians get fixated on closing income gaps rather than creating an overall climate conducive to prosperity, middle- and lower-income groups suffer most and income inequality rises." 

"The Gini coefficient for the United States has risen in each of the last three years and was higher in 2012 (.476) than when George W. Bush left office (.469 in 2008), though Mr. Bush was denounced for economic policies, especially on taxes, that allegedly favored "the rich.""

The Rush to Expand the VA

From the Cato Institute.

"The Senate voted 93-3 on Wednesday to expand health care spending for veterans. Under the Senate bill, veterans would be able to access health care services from facilities outside the Department of Veterans Affairs (VA) system. 

The headlines from the last few weeks clearly illustrate the need to reform this massive system, but the Senate’s rushed plan would dramatically increase veterans’ health care spending without tackling needed fundamental reforms.

Just before the vote, the Congressional Budget Office (CBO) released a preliminary estimate of the bill’s costs. Because of the hurried nature of introduction and debate, CBO was not able to fully review and estimate costs.

CBO says that the new program would increase spending by $35 billion over 10 years. But that doesn’t tell the full story. CBO expects initial set-up of the new program would take several years with veteran enrollment ramping up over time. And the bill just authorizes the new spending until 2016. So it appears that the CBO estimate of $35 billion just includes the cost over the first three years.

Over the longer term, CBO estimates that added annual spending would be $50 billion a year. So if the current bill is enacted and the added spending extended in the future, it would raise federal spending by about $385 billion over the next decade, as illustrated in the chart below the jump.

 

The $385 billion figure is likely conservative because it assumes that costs stay flat over time. But as more veterans enroll and health care costs increase, the figures could grow larger. CBO says that its estimates are “highly uncertain,” which is one reason why the Senate’s rush to push the bill through was so irresponsible.

The VA is already the fifth largest federal agency. If the new spending is made permanent, VA’s total budget would grow by about one-third and VA health care spending would roughly double.

During debate on Wednesday, several senators raised concern over the dramatic increase in VA spending without any offsetting cuts, but 75 senators swiftly brushed it aside. Allowing any debate about large expansions of government is apparently out of style in the Senate. But what’s needed in the VA is fundamental restructuring, not an ill-planned gusher of new spending.

Political crises are always the most dangerous time for the growth of government. The VA crisis is proving to be no different."

Global Warming And Heat Related Deaths

From the Cato Institute.

"A week ago, the White House released a report on the health consequences of global warming that was meant to supplement and reinforce the heath benefit claims made during the roll-out of new Environmental Protection Agency regulations aimed at reducing carbon dioxide emissions from existing power plants.
Those claims, which border on the bizarre, were met with a great deal of pushback—and deservingly so.
The supplemental White House report didn’t make things better. Take for example, how they handle extreme heat events and heat-related mortality.

To say that we are disappointed with how the White House/EPA presents the data on heat-related mortality is an understatement. No matter how many times we point out—through official means, op-eds, blogs posts, etc.—that they are mishandling the data to such an extent that they present the opposite conclusion from that reached in the scientific literature, it never gets better.

In fact, it seems to be getting worse.

Below the jump, in its entirety, is the section on heat waves from the new White House report, The Health Impacts of Climate Change on Americans:



Figure 1. Observed U.S. temperature change (source: White House report).
Notice that there is not a single study cited that links changes in heat waves to changes in heat-related mortality. Instead, it is strongly implied that increasing heat will lead to increasing deaths. We can’t think that any reader would reach the opposite conclusion given the White House discussion and presentation. And yet, that is precisely the case that scientific study after scientific study finds. Despite rising heat, fewer American’s die from heat-related causes (when properly adjusted, of course, for population increases and changes in age stricture).

But such information is nowhere to be found in the White House report. Instead, the section on extreme heat events shows a map of temperature trends across the United States and then goes on to say that extreme heat causes death, leading the readers to a false conclusion.

Here is a similar but more complete presentation from a scientific study looking at trends in temperature and trends in heat-related mortality across the United States.



Figure 2. Annual heat-related mortality rates (excess deaths per standard million population on days in which the decadal-varying threshold apparent temperature (AT) is equaled or exceeded) by city and decade, and long-term trend in summer afternoon AT. Each histogram bar indicates a different decade: from left to right, 1960s–1970s, 1980–1989, and 1990–1998. Decades without histogram bars exhibit no threshold ATs and no heat-related mortality. Decades with gray bars have mortality rates that are statistically significantly different from the decades indicated by black bars. The average excess deaths across all 28 cities is shown at the lower left. AT trends are indicated beneath each city abbreviation (from Davis et al., 2003).

The map in Figure 2 shows trends in summer time apparent temperature (AT)—a combination of heat and humidity—indicated by the small symbol under each city and explained by the right-hand legend. It indicates basically the same thing as the White House map—that summer temperatures are on the rise across the country. But this map also superimposes the trends in heat-related mortality on the trends in temperature (the bar charts for each city).

What it shows is that annual heat-related mortality was on the decline across the United States from the mid-1960s through the late 1990s (the end of the data used in this study). More recent studies confirm that the downward trend in heat-related mortality has continued even in the face of rising temperature (can you say “adaptation”?).

This more complete presentation of the data tells the exact opposite story than the one that the White House (mis)leads you to believe.

You have to ask yourself why the White House finds it necessary to lead you away from the best science in order to drum up support for its energy policies (another example here)."

More patients flocking to ERs under Obamacare

Article by Laura Ungar of the Courier-Journal. Excerpts: 

 "Norton Hospital has seen its packed emergency room become even more crowded, with about 100 more patients a month.

That 12 percent spike in the number of patients — many of whom aren't actually facing true emergencies"

"That's just the opposite of what many people expected under Obamacare,"

"many hospitals in Kentucky and across the nation are seeing a surge of those newly insured Medicaid patients walking into emergency rooms."

"Nationally, nearly half of ER doctors responding to a recent poll by the American College of Emergency Physicians said they've seen more visits since Jan. 1"

"Experts cite many reasons: A longstanding shortage of primary-care doctors leaves too few to handle all the newly insured patients. Some doctors won't accept Medicaid. And poor people often can't take time from work when most primary care offices are open, while ERs operate round-the-clock and by law must at least stabilize patients.

Plus, some patients who have been uninsured for years don't have regular doctors and are accustomed to using ERs, even though it is much more expensive. Others have let illnesses and injuries fester so long they have become emergencies."

"A report from the Robert Wood Johnson Foundation said the average ER visit costs $580 more than a trip to the doctor's office."

"Studies have shown that Medicaid patients were among the most frequent ER users before health reform, and becoming newly insured only increases ER use by giving an avenue to get treatment to patients who had been forgoing care because they couldn't afford it."

"A 2007 issue brief from the Kaiser Family Foundation said Medicaid patients made up 9 percent of the general population at the time but accounted for 15 percent of emergency visits. Researchers concluded that the most frequent users weren't substituting ERs for primary care, but rather suffered from chronic conditions and required more health care in general."

"getting covered under Oregon's 2008 expansion of a Medicaid program for uninsured adults increased ER use by 0.41 visits per person, or 40 percent relative to visits among a control group."

"Claims data from Passport Health Plan, a Louisville-based Medicaid managed-care organization, separates out the newly insured, and suggests they are slightly more likely to use emergency rooms than traditional Medicaid patients."

"A workforce capacity study conducted for the state by Deloitte Consulting last year found that Kentucky needed 3,790 more doctors, including 183 more primary-care physicians, to meet pre-ACA demand. Under the law, it said the state may need to add an additional 284 primary-care physicians by 2017. Complicating matters, a quarter of Kentucky's primary-care doctors could be ready to retire within five years, the report said."

"While primary care may be difficult to find, emergency rooms cannot turn anyone away."

"Mason said letting nurse practitioners practice and prescribe on their own also may help by giving people another treatment alternative."
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The Lose-Lose Tax Policy Driving Away U.S. Business

There's a good reason why American companies are sitting on $2 trillion in unremitted foreign earnings.

WSJ article by Michelle Hanlon. She is an accounting professor at MIT's Sloan School of Management. Excerpts:

"The U.S. corporate statutory tax rate is one of the highest in the world at 35%. In addition, the U.S. has a world-wide tax system under which profits earned abroad face U.S. taxation when brought back to America. The other G-7 countries, however, all have some form of a territorial tax system that imposes little or no tax on repatriated earnings."

"U.S. corporations have developed do-it-yourself territorial tax strategies. They accumulate foreign earnings rather than repatriate the earnings and pay the U.S. taxes. This lowers a company's tax burden, but it imposes other costs.

For example, U.S. corporations hold more than $2 trillion in unremitted foreign earnings, a substantial portion of which is in cash. This is cash that currently can't be reinvested in the U.S. or given to shareholders. As a consequence, companies are borrowing more in the U.S. to fund domestic operations and pay dividends. Another potential effect is that companies invest the earnings in foreign locations.

In short, our international tax policy encourages U.S. multinational corporations to keep cash abroad, borrow more in the U.S. and invest more in foreign locations than they otherwise would."

"Some firms have taken the next logical step to stay competitive with foreign-based companies: reincorporating as foreign companies through cross-border mergers."

GAO Study Finds Little Decline in Competition on U.S. Air Routes

Government Study Examined Five-Year Period of Major Airline Consolidation

WSJ article by Jack Nicas. Excerpts:

"A government study concluded that there was relatively little decline in competition on U.S. air routes during a recent five-year period of airline consolidation, in part crediting the rapid expansion of discount carriers."

"On the 37 most-traveled U.S. routes, traversed by about 83 million fliers a year, the number of airlines providing nonstop or connecting service decreased to an average of 4.3 in 2012 from 4.4 in 2007, the GAO found. The report counted only airlines with more than 5% of the market on the given routes. On the 9,379 smallest city pairs, also traveled by 83 million passengers, the average number of competitors decreased to 3 in 2012 from 3.3 in 2007."

"markets maintained competition in part because low-cost airlines expanded rapidly into busy markets.

The average number of discounters in each of the 37 busiest city pairs increased to 2.3 in 2012 from 1.7 in 2007, the report said."

"The GAO also said that while mergers can eliminate a competitor on many routes, they also can create new connections. The 2010 United-Continental merger, for example, created a new option for fliers between Fargo, N.D., and Amarillo, Texas, through a stop in Denver, the report said."