Innovation Investment Tax Credits Hurt Free Markets

According to Dictionary.com, innovation is “something new or different introduced”.  The caveman that turned a round rock into a wheel and used it to move things was an innovator. Steve Jobs, co-founder of Apple was an innovator. Even the neighbor kid who convinces you to let him mow your lawn is an innovator, because he tapped a new market. And the single mother who gets her kids to band practice, finds the time to help her kids with homework, and goes to work to provide for her family – that’s innovation.

So innovation is good, right? It expands our economy, helps businesses thrive and improves lives. Businesses, in turn, hire more people, buy more equipment, invest in more innovation.

However, not all innovations are equal.

In free markets, entrepreneurs are rewarded when they bring valuable innovations to their customers. And only the free market can determine whether those innovations are valuable. But when government decides to reward “innovators” it becomes a political decision - not a free market decision. Politicians have a notoriously bad track record when it comes to making good investment decisions.

My opponent in my campaign for State Representative believes her “Innovation Investment Tax Credit” idea will create jobs. However, that has just never proven to be the case.

An innovation tax credit requires that all taxpayers pay more taxes so that the few politically favored businesses (those that the government defines as “innovative”) can receive gifts from the government. If your neighbor kid somehow innovates the best, most innovative lawn mowing service in the world, he will likely not be popular enough with the State Legislature to get payouts.  

This is not government by consent of the governed - - it is government by elitists who believe they know what’s best for you and your family.

It’s what caused the debacle with Solyndra, the solar panel manufacturer that received $535 billion in federally guaranteed loans and then went bankrupt, eliminating 1200 jobs, and leaving you and me to pay the bill.

It is what nearly forced Colorado taxpayers to spend $300 million on the Gaylord Hotels project, a project which Gaylord itself decided is no longer financially viable. We dodged the bullet on that one.

My opponent’s “Innovation Investment Tax Credit” scheme is just another example of her flawed understanding of how economies and businesses work. In her vision for Colorado, entrepreneurs who have more concern for politicians and bureaucrats than customers will benefit – regular people like you and me will be left to struggle on our own against her redistributionist policies.

Many politicians seem to believe that government’s main purpose is to help them buy votes. I believe that my fellow citizens are smarter than that. They can run their own lives, they can build their own businesses, they can find employment in a thriving economy - if only government will get out of the way.

Rush was wrong,but the market will correct him

Rush Limbaugh went too far when he called activist Sandra Fluke a slut and a prostitute. No woman deserves to be called those disgusting words and Republicans do not support or tolerate that, at all. That kind of cheap tactic does more damage to Republicans and conservatives than to Ms. Fluke.

Rush established his career by “using absurdity to illustrate absurdity”. But this was far beyond absurd. It was cruel and stupid. As a result, well over 100 advertisers are leaving his show. Rush will most likely survive the firestorm and live to insult again. But he will have learned an important lesson – the market punished his bad behavior, and we’re not likely to hear a repeat performance. If he does repeat it and more advertisers walk out, it may be the end of his show. 

That's both the power and beauty of a free market – behavior gets rewarded or punished based on people who are free to pursue their own values. It doesn’t require a government intervention to bring about important change. It only requires people acting on their own free will.

Perhaps this disgusting incident can help teach us a lesson that people who are free to make their own choices, not Government, can better solve our problems.

Electricity, Unemployment, and...

This is my final column for Metro North Newspapers. On Thursday, January 5, I became a candidate for State Representative, and can no longer be a columnist.

How many times do we pay for renewable electricity?

Xcel Energy is asking for another rate hike which will add 6% to your electric bill. The rate hike is to pay for electricity they aren’t generating.

Xcel used to sell 300 megawatts of electricity to Black Hills Energy, a utility that serves southeastern Colorado. In 2004 Xcel forecasted that they would need that electricity and would no longer sell it to Black Hills. Now Xcel says it doesn’t need those megawatts because demand isn’t as high as they forecasted. It costs money to own an idle power plant, hence the requested rate hike.

Coincidentally in 2004, Colorado voted to require 10% of Xcel’s electricity to come from renewable sources. That’s a reasonable and worthy goal. As the economy grew and need for electricity rose, new renewable generation could fulfill the requirement. But then our legislators got carried away with it. They increased the requirement to 30% by 2020. 

Xcel has 328 megawatts of renewable energy, slightly more than the excess capacity. So let’s see how many times we pay for electricity:

1. We pay for power plants.
2. We pay for renewable power plants.
3. We pay for subsidies for renewable energy.
4. We pay for more gas power plants, because coal power plants can’t respond quickly enough if the wind quits blowing.
5. We pay for subsidies for energy saving washers, dryers, furnaces, even window shades, which reduce demand.
6. We pay to upgrade power plants so that they will cause less pollution.
7. Then we pay for idle upgraded power plants.

Who is responsible for this mess? Legislators who believe they know best how to run an economy. Friederich Hayek called this the “Fatal Conceit.”

Misclassified

It’s personal now.

The Colorado Department of Labor and Employment (CDLE) intends to end the practice of “misclassifying” employees as independent contractors. They claim that one in seven Colorado workers is misclassified. The club where I coach swimmers has decided that rather than risk the possibility of a CDLE audit I have to be an employee instead of an independent business owner. Even though I carry my own insurance, market my services, and set my hours, nobody can defeat the power of a CDLE auditor. Employees cost more than contractors, so the club reduced what they are willing to pay for my services.

As a “new hire” my loss of a business counts as a created job in labor statistics. In the very near future, Colorado may see an increase in jobs when many employers reclassify their independent contractors. At the same time, real unemployment will increase. Some independent contractors will lose work because of the extra cost to their employers. Some employers will go out of business because they can’t afford the cost of reclassifying workers. Think about that - one in seven workers (small business owners) is at risk, but the state will claim better hiring.

Farewell?

This will be my last column for Metro North Newspapers. Tomorrow I’ll be filing paperwork and standing for office (That’s how they say it in Australia, and I like the idea of standing for office rather than running.) As a candidate for State Representative, I’ll have to forfeit my job as a columnist.

My column is called “Wake Up Call.” I hope I’ve made my case that government has run amok, and we need to limit what it does. That doesn’t make me an anarchist. Government provides some very important functions. However, the opposite of limited government is unlimited government, and we don’t want to go there. It’s time that we wake up and enforce limits.

Undoubtedly, what I’ve written will be twisted and used against me. But if I wrote nothing, they will just make stuff up anyway. I hope, despite what they say about me, you will remember this: I believe that the aggregated wisdom of millions of free people living under the rule of law beats the heck out of legislators and bureaucrats. As I stand for office, I stand with you for your rights.

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.