How many does it take?

Government never furthered any enterprise but by the alacrity with which it got out of its way. Henry David Thoreau

The number of bills that became law in Colorado in 2011: 330. Average number of pages of new rules issued by Colorado per year: 15,000. The 2010 Federal Register, which contains federal rules and regulations, is 81,405 pages long – you can buy a copy for $929.

 

How many laws does it take to create jobs? We keep hearing politicians talk about creating jobs. Unfortunately, too many politicians don’t really understand how jobs are created, or who creates them. Nor do they understand what prevents job creation. Here’s a hint: see paragraph one, above.

 

There is a pervasive idea that businesses are unwilling to invest because of uncertainty about taxes and regulations. But it’s not uncertainty that prevents business investment and hiring - it’s the certainty. We know with absolute certainty that federal, state, and local governments will continue to write more laws, rules and regulations that limit economic and personal freedom, and require us to beg favor from government officials just to make a living.

 Over 96,000 pages of new state and federal law, rules and regulations, and that doesn’t even include local governments. How many will you violate today? How could anyone possibly know?

 
Although I’m a registered Republican, I’m not particularly optimistic about the ability or willingness of either party to curb the appetite for more control. In 2010 when Democrats controlled both Colorado houses, 454 bills were signed into law. With Republicans controlling one house in 2011, one would hope for a 50% reduction in passed bills, but we got only a 28% reduction. Republican politicians tend to favor legislation that “favors business,” but that generally means favoring big business at the expense of small business. This is called “economic development,” Orwellian doublespeak for corporate welfare.
 
Democrats add more regulations to “help the little guy,” claiming to be the “party of the people,” but regulations almost always benefit larger businesses, and help only workers who are lucky enough to find and keep their jobs. For example, every year we see legislation advanced by Colorado democrats that would require businesses to provide paid time off for workers. Large businesses already do this, so it’s of no consequence to them. But small businesses and start-ups may not be able to afford it. This type of legislation from democrats hurts “the little guy.”
 

The cost of complying with regulations is astounding. A 2010 report from the US Small Business Administration estimated that in 2008, US businesses spent $1.75 trillion in order to comply with federal regulations. The Colorado Senate Republican Caucus extrapolates from that to conclude Colorado businesses’ cost of compliance with federal regulations was over $30 billion in 2008. That’s enough to pay for 500,000 good paying jobs, or 100,000 jobs in the top 1% of wage earners.

 

When I started my first small business in 1990, I was shocked at the cost of compliance. But I was thankful for Adams County government, who demonstrated common sense and flexibility in allowing me to build that business.  In 2008 however, it was entirely different. I was preparing to start a new business and found that government officials now strictly adhered to codes and regulations that added unnecessary costs, and were unwilling or unable to predict what other problems I might encounter.

 

My plans to start a small business that would have kept me working at something I love, would have employed six or eight people to start, would have filled one or more of those many empty retail spaces, and would have provided a valuable service for my customers, have been scrapped. As I contemplate whether to take on another business venture, I look at the regulatory landscape and have to wonder why anyone would bother trying to combat government to create a business. I applaud those who do, but I fear that fewer are willing or able to do so.

Xcel Energy “Breaks Wind” Records for Rate-Payers

The Denver Post reports: 

Early on Oct. 6, Xcel Energy set a world record for electricity from wind power. Between 4 and 5 a.m. that day, 55.6 percent of the electricity consumed by Xcel’s 1 million customers in Colorado came from wind farms dotting the state. 

“We’re proud of that and believe it shows that wind is an important part of the portolio,” said Michelle Aguayo, an Xcel spokeswoman. 

While that seems like a tremendous accomplishment, let’s take a look at what was accomplished, and what it means for Xcel customers.

The record itself is not that impressive. In a recession at 4:00 in the morning, overall electric usage is pretty low. When the economy is humming along at full steam, manufacturers that require lots of electricity often add night shifts, because electricity often costs less at night, and it’s cheaper than building more production capacity. This creates more jobs. But in this economy, it’s a safe bet there ain’t much happening.  

October 6 was a high wind day. Portions of I-70 were closed that day from winds. In Denver, the wind uprooted power a light pole, which landed on a light-rail power line, delaying the trains. Lots of wind combined with a recession produced the record.

Wind energy costs up to 80% more than conventional power production. When Xcel brags that they broke a record for wind power generation, they are really saying that at 4 a.m. they produced high cost energy at a time that was once considered to be the least expensive time of day to buy electricity.

Let’s go a bit deeper in our analysis. Colorado has a 30% Renewable Portfolio Standard (RPS), meaning 30% of our electricity must come from renewable resources by 2020. The citizens voted in 2004 for a 10% standard, but a “too eager to please” legislature has since raised it twice. Solar and wind devices provide roughly one third of their rated capacities, because the wind doesn’t always blow and the sun doesn’t always shine. A wind farm rated at 100 megawatts will only deliver 33 megawatts. Because they mandated the 30% RPS, we must overbuild renewable generation by nearly three times.

That sounds great, right? Except that there is no way to store the power produced when the wind is blowing for use when it isn’t. Therefore we must have stand-by generation capacity that can meet all our electricity needs.

Coal power can’t easily or efficiently be “cycled”, meaning you can’t turn it off and on to complement wind speeds or sunshine. Some clean coal plants violate clean air standards because solar and wind are too variable. When they are cycled, their clean status is compromised.

Nuclear power, which has no carbon or other bad emissions, can’t be cycled at all. It can only be used for “baseline generation”, the lowest amount of electricity that gets used during a day. As we approach that 30% standard, nuclear can not be part of the mix, because sometimes all our power must come from renewables. The stand-by generation will all have to be quick cycling sources, such as oil or gas.

In recent years, technology has rapidly advanced to make coal a much cleaner fuel for electricity generation. Now that Colorado and President Obama have decided that coal will be eliminated or minimized as a fuel, there will be no incentive for further advancements in clean coal technology. Meanwhile, advancements in wind, solar, and storage technology are creeping along at a snail’s pace. Government interference is misdirecting research and resources.

Colorado’s Renewable Energy Standard is raising electricity costs when families and businesses are struggling, costing hardships and preventing job creation. The environmental savings, if there are any, are negligible. Readily available, clean burning fuels are being ignored, or shipped to China where they burn without the benefit of our clean technology, creating global pollution. It’s time to eliminate the arbitrary Renewable Portfolio Standard and let market forces, guided by sensible restrictions on pollution, determine how we will generate electricity for families and the businesses that create jobs.

Preserving our Blessings

I’m thankful. I’m very thankful. And not just today, Thanksgiving Day, but every day. I grew up in a family with loving parents and siblings. I don’t mean to demean the rest of you, but I’ve got the world’s best wife (some of you are undoubtedly pretty good, but no one can hold a candle to Courtney, the love of my life). We have a home that someday we’ll own, in the great State of Colorado, a state whose abundance of outdoor beauty and recreation gave birth to my entrepreneurial spirit. We live in a land of liberty and opportunity, and for all these things, I’m grateful.

Dad worked hard to provide for us, but also instilled a strong work ethic so that we could provide for ourselves. I remember working with Dad after school one day as an 11 year old. We were picking up scraps and trash at a home he was building. A subcontractor stopped to talk to Dad, and I stood idly by and listened for most of an hour. Then it was time to go home. As we got into the van I was foolish enough to remark how easy it was to earn my 50 cents for that last hour. Man, did he lay into me! He said he wasn’t going to pay me for that hour. I complained that I was there to help him, and since he was listening to the subcontractor, I was helping him listen. Dad carefully explained that he pays me to work, and that we each have different jobs. If I expect to get paid, I had better stay busy doing my work.

My dad taught me that hard work in this land of opportunity is rewarded. Indeed, the United States of America is the most prosperous nation in history. Even the poorest among us live far better than most of the rest of the world. We owe that to our history of respect for liberty. It is our deeply held belief in liberty that gave us a legal system that protects property rights. Without property rights there is no incentive to create or produce anything more than what it takes to survive. After all, if you can’t enforce your right to own what you produce, why bother?

As thankful as I am for all these things, I’m also deeply concerned. Former State Senator John Andrews today told me of the writings of Alexander Tytler:

The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, those nations always have progressed from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to complacency, from complacency to apathy, from apathy to dependence, and from dependence back into bondage.

In Senator Andrews’ book “Responsibility Reborn” he says, “You’d have to be dreaming, not to recognize that we have been living in a nation that has for quite a while been somewhere on the declining side of the cycle”. He also points out that the cycle can be reversed. If I didn’t believe that, I would not write these columns. I would not have run for State Representative in 2010. Simply put, I wouldn’t bother. If we don’t renew our respect for liberty, if we don’t restore limits on government that respect property rights, we will continue down that cycle.

We have gone from a nation that was built on a rugged entrepreneurial spirit, on self reliance and personal responsibility, and on mutual respect for rights and liberty, to a nation with a culture of dependence that relies on what the government can take from one to give to another.

 

During this season of thanks, let us be grateful for the work of those who established, secured, and protect our freedoms. Let us be mindful of the abundance we enjoy, and how the blessings of liberty created that abundance. And let us commit to not decline into complacency, apathy, and dependence, but embrace the independence and personal responsibility that will ensure the survival of the Republic.

The Misdirected Anger of the Occupiers

“I’ll have a hamburger, for which I’ll gladly pay you, Tuesday”. Wimpy.

Comics often allow a humorous glimpse into real life. I remember growing up and reading Family Circus every Sunday, tracing Billy as he ambled from amusement to amazement throughout the entire cartoon panel. At the time, it didn’t occur to me that we behave that way as children. I just thought Billy was cool. Then there was the comic strip “There Oughta Be a Law”. Can anyone doubt its success? Although its not singlehandedly responsible for overregulation, we certainly have an abundance of laws!

 

What can we learn from Wimpy, the affable carnivore from the Popeye comics? For many youngsters, this was our first look at capitalism. Wimpy made an offer. The hamburger vendor (Bluto) was under no obligation to accept the offer. Why might he accept the offer? If he values the future payment more than his immediate possession of the burger. Were another customer to show up and offer to pay immediately for the burger, Wimpy might not get to eat. Neither has the right to demand anything of the other, because they each have the right to control the fruits of their own productivity. If Wimpy does not respect Bluto’s rights, he may be inclined to steal the hamburger. At that point, government should step in to protect Bluto’s rights, ensuring that each participant in this scenario has full enjoyment of their own property, but not the unearned right to the property of the other.

 

Capitalism is based on value, offer, acceptance, competition, and property rights. The participants, each looking out for their own interests, decide with whom and for what they will trade. Some call this selfishness, but it’s really rational self interest. Competition ensures that resources are used where they achieve the best value for their owner, and that creates wealth. Wealth creates jobs. Jobs create more wealth and society benefits as a whole.

Government’s role is to ensure respect for property rights, the ultimate basis for liberty. When each individual is assured of the right to his property, self interest unleashes the kind of creativity that transformed America into the wealthiest, most respected, and most generous nation in history. Without the rule of law to protect property rights, there is no reason to create wealth because someone else can simply take what you created. Self interest is lost to the extent that property rights are lost.

The Occupy Wall Street movement is based on self interest. The protesters hope for some ill-defined change within Corporate America that will somehow turn into comforts for themselves. Unfortunately, their desires are examples of the very greed they rail against, and their anger is misdirected.

The Occupiers are asking for unearned wealth. That’s human nature. It’s the trait that Corporate America and unions display when they funnel millions of dollars into campaign coffers of elected officials. There will be no human evolution that eliminates self interest, and no amount of punishment for Wall Street will convince corporations to forego their own survival for the sake of mankind. The anger should be directed at government.

 

Lawmakers acting in their own self-interest have lost respect for liberty, property rights, and the right of people to pursue their own selfish interest. With subsidies, loopholes, and regulations, lawmakers have bestowed undue power on those that can return the favor by funding their campaigns. Big business competes for favorable treatment, and it nearly always comes at the expense of the “little guy.” Lawmakers and bureaucrats have essentially institutionalized legal theft. The result is a loss of freedom, opportunity and jobs for society as a whole, and the 99% in particular.

A return to constitutional limits on government will return opportunity to the powerless, increase self interest, and create greater prosperity for all Americans. As F. D. Roosevelt said, “[it is] not that the system of free enterprise for profit has failed in this generation, but that it has not yet been tried”.

The Cost of Monopolies

Jon Caldara of the Independence Institute, when asked if teachers are paid too much, said, "How would we know? The reason that I say that is, there is a government monopoly for education…"  

Proposition 103 is on your ballot. It’s a huge increase, advertised as being for education (although the legislature is not required to spend the money on education.) IF it really does go to education, a major chunk of will probably go to increasing teacher compensation. It’s reasonable to ask if teachers should be paid more. 

I met many teachers while I was on the campaign trail in 2010. Every one impressed me as a caring, devoted, hard worker. They expressed a sincere desire to make a difference for the youth they teach. Teachers, like all of us, want to do good and also better their own lives. That’s a common instinct for all of us, and it’s what led to America’s prosperity.

Wages and benefits, like other valuable resources, are controlled by supply and demand. That’s the essence of a free market. In times of full employment employers often find it difficult to find workers. To entice people to join their companies they offer higher wages than other companies who are competing for those workers. If the strategy is successful the companies that are losing workers have to raise wages. At some point the businesses will either have to become more efficient or pass the increased costs on to customers. Those who can’t will lose customers. If they go out of business, their laid-off workers add to the supply. The fresh supply of new job-seekers reduces wages. In a free market for workers, wages never quite reach stability, but are always moving toward balance. 

In contrast, public education is a monopoly with wages set by union demands and school board acquiescence. Public teacher unions will always push for higher wages and benefits, regardless of sustainability, because public education simply won’t go out of business. Taxpayers are forced to meet the demands of these unions because the consumers (parents) never have to pay directly for the product. In contrast, private sector unions often give up some of their benefits to help in the survival of their industries. 

Back to Caldara’s question about how much public school teachers are paid: we can look at schools that compete for the same teachers but aren’t compelled by a union contract. This won’t give us a complete answer, because the supply of teachers is mostly consumed by public schools, but it could give us an indication.  

 

 

In 2007-08, private school teachers were paid $13,000 less than their public school counterparts, and that doesn’t even include the far superior benefits most public schools offer. So do private schools have trouble finding qualified teachers at a considerably lower price?  

Compared to private schools, public schools are free. Private schools must offer enough value to persuade parents to pay for them. If private schools could not get enough teachers, or if they were only able to hire teachers rejected by public schools, they would not be able to compete for customers. Who would pay thousands of dollars every year to put their children in poorly staffed schools? The existence of successful low-paying private schools indicates that they can find good teachers. 

Meanwhile, unions are sending good teachers to the unemployment lines. There are about 50,000 public school teachers in Colorado. If unions agreed to accept lower wages and benefits for teachers, every 25 cents per hour in reduced compensation would allow our public schools to retain 3-400 teachers. Would public schools be able to find enough teachers at lower wages? 

Principal Pat Gardner of Broomfield Academy (a private school) tells me that she quickly gets 40 qualified applicants for every open full time teacher position. After that she quits taking applications. Broomfield Academy pays less than public schools. Granted, working for a private school has other benefits. Because of the greater freedom to hold students and parents accountable, a teacher can be more effective. Does that added benefit make up for less pay? As Caldara said, how can we know?

Stuck With a Dishonest Tax Increase

There will be no floor debate, no committee hearings, no amendments. Proposition 103 is already written, and if we approve it we are stuck with it.

Boulder Senator Rollie Heath’s Proposition 103 increases sales and income taxes to raise over $500 million per year, supposedly for education. I applaud Senator Heath for properly proposing this tax increase. He’s following our constitution’s Taxpayer’s Bill of Rights (TABOR) that requires tax increases be voted on by the people.  A whole slew of groups are trying to circumvent and destroy TABOR. 

The Colorado Supreme Court ruled that property taxes could be increased without our vote. They also ruled that removing a tax exemption is not a tax increase, leading to the “Dirty Dozen” tax increases in 2010 which killed businesses and jobs. The legislature raised fees instead of taxes to get more money, and we got a huge increase in our vehicle registration fees.

Westminster City Councilman Bob Briggs sued the state to end the Taxpayer’s Bill of Rights. Separately, Lobato v. Colorado would more than double education spending, creating a crisis that would require emergency tax increases. It’s another end-run around our Taxpayer’s Rights. If this assault on TABOR continues, our right to vote on taxes will soon be but a cherished memory. 

But Senator Heath got this one right. At least he’s asking us for more tax money. That’s where my appreciation for Heath’s efforts ends.

Heath and his campaign to raise taxes have been, shall we say, less than honest. Heath used fourth grade students as campaign props without asking permission. Robo-calls say it’s a time-out in cuts to education instead of a tax increase. The website for Prop 103 falsely claims that the new revenue will go to education. 

The biggest deception of all is in the proposed law itself. It requires the money raised by the tax increase to be spent on education. This is pure folly. Heath knows it and yet it’s his biggest selling point. 

The legislature is under no obligation to spend the money on education. Prop 103 is a law, and it is only valid until it is superseded by another law. That law is the budget. Prop 103 will not automatically move money into education. It must be done through the budget, a law that is passed every year by the legislature. They are not obligated to write the budget in accordance with Prop 103.

Heath could have written this as a constitutional amendment to direct the new taxes to education. He chose not to. He knows that the money is not required to be spent on education, yet he and his campaign continue to sell it that way. Heath is also not telling you if the money is spent on education it will create two huge education budget cuts.  

The 2012-13 education budget would have roughly $783 million in extra revenue for education. In 2013-14 there will only be $533 million in extra revenue. That’s a $250 million cut. And when (or if) the temporary tax increase ends in 2017, education funding would lose over $500 million. 

As disheartening as all of that is, the second worst part is that there is no plan for this additional spending to improve education. There is no correlation between higher levels of funding and improvements in educational outcomes as many studies have shown. AJTT.org compares spending to outcomes. Washington D.C. spends more per pupil than 47 states and is ranked dead last in outcomes. North Dakota is outspent by 41 states and has the 6^th highest quality educational system. Money spent on education funding will not guarantee better education. 

Now for the worst part: Prop 103 is a job killer. A study by Economics International Corp. found that the proposal would result in a loss of 30,500 jobs. The average family of 4 will pay $400 per year to lose those jobs. 

A dishonest tax increase. Future education cuts. Huge job losses. Is this what we want to be stuck with?

Reality Over Hope - Three Jobs Saved

We cannot solve our problems with the same thinking we used when we created them. Albert Einstein 

President Obama has explained his new stimulus program. Let’s see how the old one did. Obama’s Council of Economic Advisors (CEA) reports that the American Recovery and Reinvestment Act (ARRA) has been a success, creating or saving 2.4 million jobs through the first quarter of 2011 at a cost of $666 billion. As pointed out by The Weekly Standard, this comes to approximately $278,000 per job. We’d have saved $427 billion by just writing $100,000 checks to each person who has a job because of the stimulus.

The CEA is a group of three economists appointed by the President to…advise the President on economics. Being economic advisor to the man that spent $278,000 per job only to see unemployment stuck at over 9% would be a tough job. How do you tell the President that he wasted oodles of money and prolonged the recession –without losing your job? The report relies on Obama’s old campaign slogan. Heavily invested in HOPE, the president might see only what he wants to see in the report, and believe the skewed conclusions.

The report mentions twice that nobody can observe what would have happened in the absence of the stimulus. We can observe that the economy reversed its downward trend one quarter before the stimulus, and that the biggest positive jump was in the first quarter before 98% of ARRA funds had been spent. And we can see that as stimulus spending increased, the economic growth trend reversed again, going down. The report says that it can’t determine the cause of what happened, but in a triumph of hope over reality, it misconstrues facts, confuses correlation with causation, and lays the groundwork for more stimulus. 

It gets worse. The first company that got a government guaranteed loan under ARRA was Solyndra, a California solar panel manufacturer. Government guaranteed loans, by the way, are actually guaranteed by you and me. Solyndra got $535 million. Assuming all of its 1100 workers were hired because of the stimulus money, that’s over $486,000 per job. Now Solyndra is bankrupt. Solyndra’s 1100 jobs were lost because Obama was mistaken in his choice of handout recipients. How many more failures will we see? If a company requires a subsidy, it probably doesn’t deserve it. 

We’re not done with that CEA report yet. It relies on “independent approaches and supplements those estimates with those of numerous outside analysts”. The data was cherry-picked to create the desired outcome: Impress the President and save the jobs of three economists. If outside data is included, where is data from other countries that demonstrate whether their stimulus programs worked? 

Our nearest “rich country” neighbor is the closest thing to that which the CEA said could not be observed – the effect of doing nothing. Canada did next to nothing. According to David Lee, writing for the Mises Daily, Canada’s stimulus package “was little more than a clever display of political gamesmanship whereby the appearance of action was maximized, while the action itself was minimized…It is precisely in this abstinence that we find Canada's source of relative success”. Canada’s economy grew 3.3% in 2010. Job losses have been recouped. Their unemployment rate is 7.2%, compared with ours at 9.1%. A recent business survey indicates record hiring expectations and optimism about future demand. 

Canada is perceived as the hope-over-reality bastion of socialism in North America. But the truth is that in 1993 “Canada underwent one of the most fiscally responsible periods in its history…[Finance Minister] Martin made it clear from the start that the priorities of the government would be fixed squarely on eliminating the deficit and the record of the following decade leaves little doubt that this was a commitment that was delivered upon powerfully”. 

While the CEA shows us that they can save their own jobs, Canada shows us that government non-interference is how job creation really works.