American Elephants

Here’s Leftist Infrastructure Spending And How it Works. by The Elephant's Child

Detroit has become a place Hollywood directors come to for great wreckage shots. One quarter of the city’s 140 square miles are deserted.

Detroit public school students boast the nation’s worst reading scores, the products of a corruption-ridden school system that recently flirted with bankruptcy. Detroit bested Baltimore in 2009 to take the dreaded “murder capital” title. It may also be the worst place in the country to have a heart attack: prepare to wait half an hour for an ambulance.

In a town lacking essential services, what do local leaders and federal politicians have in mind for helping the city? What’s needed to hoist Detroit back to its 1950 heyday, when it was America’s fourth largest city, with more than double its current population?

Why, light rail, of course!

The Motor City is moving ahead with a plan to build a 9.3-mile light rail line that will run from downtown Detroit to the edge of the suburbs. It’ll cost an estimated $500 million. Three-quarters of the bill will be paid by federal taxpayers, with the rest picked up by a consortium of foundations and businesses.

Bet on two or three times $500 million.  People in Seattle are still paying for the last vision that was to make Seattle a “world class city,” the Kingdome, though it was long since torn down. Light rail is now operational but nobody rides it.  So naturally they want to expand it.  They never, never learn.

I don’t always agree with the Libertarians at Reason, but they surely make some good videos.

And Now He Wants to Spend More on Infrastructure! by The Elephant's Child

Just this last week, the Congressional Budget Office released their preliminary figures for fiscal year 2010, and Congress outdid themselves.  It was a fabulous year for records.  Unfortunately, not the kind of records that get awards.

Spending for the fiscal year that ended September 30 came in at $3.45 trillion, second only to the $3.52 trillion that they spent in fiscal year 2009.  This doesn’t really mean that Congress was thriftier.  The cost of TARP declined by $252 billion when banks repaid their bailout cash.  Payments to Fannie Mae and Freddie Mac were $51 billion lower, and deposit insurance payments fell by $55 billion.  If you excluded those three programs, spending rose about 9 percent in 2010.

According to President Obama’s own Office of Management and Budget federal spending has just completed its largest two-year surge in nearly 60 years.  The average federal spending from 1950 to 2010 was 19.9% of GDP.  In the last two years it has been 25.4%.  The numbers provide only some general points to remember, for the numbers are too big for my mind to comprehend.

What matters is that Washington’s massive spending spree has failed by any objective measure to create jobs.  The outdated myth that government can spend its way to prosperity and job growth can be returned to the graveyard where it was previously buried, with several more nails in the coffin.

We should be going back to the drawing board to map out a new approach, but President Obama just announced that he wants more infrastructure spending.  Been there, done that.  The only possible solution is to stop the spending and drastically change the policies.

Moratoriuim’s Over? So When Do They Get To Drill? by The Elephant's Child

The Obama administration has a peculiar relationship to the law and to rules and regulations.  They just lifted the deep water drilling moratorium in the Gulf just enough to get favorable headlines in the media, but not enough to actually put the rigs back to work.

Lifting the moratorium will be only a symbolic move unless the department moves quickly to issue permits.  That acts as a de facto  moratorium which continues to cripple employment in the Gulf  region. Jack Gerard, president of the American Petroleum Institute, said that counting long-term and indirect losses, he estimated that it could cost more than 175,000 jobs.

The administration has created a raft of new rules and regulations.  The idea seems to be that if they just make enough rules, then there can never be another accident.  The administration acknowledges that its new offshore drilling safety regulations will raise costs for the oil and gas industry— and may delay offshore development, increase gas prices and kill some jobs.

The new rules will increase operating costs by an estimated $1.42 million for each new deepwater well drilled with a floating rig, $170,000 for each new deepwater well drilled with a platform rig and $90,000 for each new shallow-water well.

A reminder: there have been, according to Loren Scott, emeritus professor of economics at LSU, 50,000 wells drilled in the Gulf with no problems.

The Department of Interior’s notice says: “A meaningful increase in costs as a result of more stringent regulations and increased drilling costs may result in a reduction in the pace of deepwater drilling activity on marginal offshore fields, and reduce investment in our domestic energy resources from what it otherwise would be, thereby reducing employment in [outer continental shelf] and related support industries.  Those negative risks are worth it, Interior says, and environmentalists agree.

Dan Naatz, V.P. of federal resources at the Independent Petroleum Association of America said: “When you look at this issue of increased compliance cost, increased regulation coupled with discussions of unlimited liability…all make, certainly some amount of uncertainty for our producers, if not flat-out stop them.  They’ll have to take a very serious look at whether to continue operating in the Gulf of Mexico.” The 111 pages of rules from the Department of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement are here.

Since President Obama first banned drilling for oil and gas in the Gulf in May, about 36 rigs have been put out of work,  five rigs have left the Gulf to drill in Egypt and other parts of Africa.  But  Obama’s 2011 budget as presented to Congress funds the Mexican governments drilling in their part of the Gulf by about $22.2 billion. And the Obama Administration is also underwriting offshore drilling off the coast of Brazil by about $2 billion and may increase that amount.

It is very clear that White House policy in the Gulf is driven by politics, not science.  Way back in 2004  candidate for the Senate Barack Obama told  the League of Conservation Voters: ” I believe that existing policies are imbalanced in favor of new and increased [oil and gas] extraction…Reduced energy demand would eliminate the need for new production on federal public lands, and I would oppose such production in any event.”

Obama has been all over the map with comments about energy. The constant seems to be eliminating oil, gas and coal  in favor of wind, solar and biofuels, in spite of all scientific evidence, experience of other nations, and clear evidence from engineers and energy experts.

if industries do not offer complete fealty, they will be brought under government control with a smothering blanket of regulations and rules, issued by unaccountable bureaucrats somewhere in the maze of the executive branch.  At the same time, the administration feels no need to abide by legislation, tradition or custom on their own part.

The Progressive understanding of business, like all things “progressive” derives from old tired ideas.  In this case their ideas of business come from 19th Century myths of the ‘robber barons’.  Business is to be despised, profits are evil and rob poor people, business has evil intent and unless thoroughly regulated would cheat and steal to enrich the nasty people at the top.  And that’s what liberals attempt to sell to their true believers.  You must be suspicious of business, expect them to behave badly, and depend on enlightened government to protect you from their depredations.

Makes it a little hard to work closely with American business and earn their trust.

Chopin’s “Winter Wind” Etude by The Elephant's Child
October 13, 2010, 6:52 am
Filed under: Politics

Played by Yeol Eum Son, Finalist in the Chopin Competition in 2005.  Broadcast in South Korea, when, according to Derb, she was about 19.

(h/t: John Derbyshire NRO)


The ObamaCare Cost Curve — Bends Straight Up! by The Elephant's Child

John Goodman, in his Health Policy Blog at the National Center for Policy Analysis, reminds us that in the national debate leading to the passage of the Patient Protection and Affordable Care Act (ObamaCare) President Obama said on several occasions that he would veto any bill that did not lower the growth rate of health care spending. One would assume that a lot of people are focusing on how that is going to work.

But it would seem that “cost control” or “bending the cost curve” isn’t much talked about —except for the analysts at the Office of the Medicare Actuary. They found that costs will go up, not down, as a result of the new legislation, and if you have heard from your health care plan, you are probably aware that costs are going up almost immediately.

Many ideas were touted as efforts to hold costs down, but in the real world they have not been shown to control costs.  Efforts to control fraud, waste and abuse; electronic medical records (you should hear my doctor on those!); managed care; coordinated care; teamwork care; medical home care and cost effectiveness research all sound good, but are ineffective in practice.

Dr. Goodman lists three cost-control efforts that are new, unique to PPACA and worth discussing.

1—Refusing to Fund the Supply Needed to Meet the Demand.The demand for care will skyrocket.  32–34 million newly insured people will double their use of health care services.  Add to that 70 million or so who will have more generous insurance than they currently have.  Everyone is promised an array of preventative care services with no copayment or deductible.  This is an enormous increase in spending.  PPACA offers no new supply to meet the demand.  All the subsidies meant to increase the numbers of doctors, nurses and paramedical personnel were removed before the bill was passed.

2—Squeezing Medicare Providers There is some silly rhetoric about doctors becoming more “productive”, but when you get down to the nitty-gritty, the mechanism to control medicare spending is to decrease payments to doctors and hospitals.  The trustees assume that Medicare physician fees will be reduced by 30% over the next three years.  Those who have served Medicare patients — doctors, hospitals, nursing homes, will get out of the Medicare business.  25% of facilities would become unprofitable by 2030 and 40% by 2050 if the law is not changed.

3—They’re Going to Experiment with Pilot Programs. They will fund various ways of reducing costs and improving quality.  There are already (ignored) islands of excellence here and there throughout the health care system, but nobody has figured out how to replicate them.  Their success may be due to personalities or teamwork that depends on the specific people involved. They may be the result of a freedom that is the antithesis of ObamaCare.

John Goodman PhD has been a leading voice in the health care debate, promoting a more patient-centered, consumer-driven health care system.  He is the “Father of Health Savings Accounts”, one of the ideas that actually works to save significant money.  You can subscribe to his blog here. It’s a good way to keep abreast of the battle.


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