Banner ad

Monday, February 14, 2011

Myths liberals believe

There are two myths that liberals believe and refuse to give up no matter how many billions are sacrificed on the altar of these beliefs. The myths are so deeply ingrained that some Republicans desiring to be thought to be on the side of all that is good also fall for the myths.

One myth is the idea that there are jobs to be found by government subsidies of green energy. What could be better - the politicians can help the environment and fight unemployment while talking about the future. The fact that such programs are dreams when it comes to job creation and have been everywhere that they've been tried doesn't dissuade liberals from thinking that this time all will be different. Bjorn Lomborg explains what is the reality behind the green-jobs myth.
The Copenhagen Consensus Center asked Gürcan Gülen, a senior energy economist at the Bureau for Economic Geology at the University of Texas at Austin, to assess the state of the science in defining, measuring, and predicting the creation of green jobs. Gülen concluded that job creation "cannot be defended as another benefit" of well-meaning green policies. In fact, the number of jobs that these policies create is likely to be offset—or worse—by the number of jobs that they destroy.

On the face of it, green-job creation seems straightforward. Deploying more wind turbines and solar panels creates a need for more builders, technicians, tradesmen, and specialist employees. Voilà: Simply by investing in green policies, we have not only helped the climate but also lowered unemployment. Indeed, this is the essence of many studies that politicians are eagerly citing. So what did those analyses get wrong?

In some cases, Gülen finds that proponents of green jobs have not distinguished between construction jobs (building the wind turbines), which are temporary, and longer-term operational jobs (keeping the wind turbines going), which are more permanent. Moreover, sometimes advocates have assumed, without justification, that the new jobs would pay more than careers in conventional energy. In other cases, the definition of a "green" job is so fuzzy that it becomes virtually useless. If a sustainability adviser quits a concrete factory and goes to work instead for a renewable energy project, can we really conclude that the number of green jobs has actually increased?

More disturbing is Gülen's finding that some claims of job creation have rested on assumptions of green-energy production that go far beyond reputable estimates. Of course, if you assume that vast swaths of the countryside will be covered in wind turbines and solar panels, you will inevitably predict that a large number of construction jobs will be required.
When you hear liberal politicians tout how many jobs will be created by subsidizing such industries. But we need to strap on our Bastiat goggles and examine what is unseen as well as seen. Those visible jobs will come at the cost of the less-trumpeted, but still real loss of more jobs.
But the biggest problem in these analyses is that they often fail to recognize the higher costs or job losses that these policies will cause. Alternative energy sources such as solar and wind create significantly more expensive fuel and electricity than traditional energy sources. Increasing the cost of electricity and fuel will hurt productivity, reduce overall employment, and cut the amount of disposable income that people have. Yet many studies used by advocates of green jobs have not addressed these costs at all—overlooking both the cost of investment and the price hikes to be faced by end users.

The companies calling for political intervention to create green jobs tend to be those that stand to gain from subsidies and tariffs. But, because these policies increase the cost of fuel and electricity, they imply layoffs elsewhere, across many different economic sectors. Once these effects are taken into account, the purported increase in jobs is typically wiped out, and some economic models show lower overall employment. Despite a significant outlay, government efforts to create green jobs could end up resulting in net job losses.
Another myth that liberals believe is that it is desirable to sink billions into building high-speed rail throughout the country. Such investments once again combine the dreams of environmental benefits with the promise of more jobs. But it is a sink-hole for government money. The WSJ explains why.
Two years ago California taxpayers approved a $9.95 billion bond initiative to fund the train, buying the pitch that it would create hundreds of thousands of jobs and attract 94 million riders. The state's high-speed rail authority told voters a one-way ticket from San Francisco to Los Angeles would cost $55—about the price of a Southwest flight. They said private equity firms were dying to invest, and that the train would operate without a public subsidy.

Studies by economists and financial consultants Alain Enthoven, William Grindley and William Warren have since debunked the rail authority's claims. Based on the costs of high-speed rail lines in Europe and Japan, the price tag likely will fall between $62 billion and $213 billion. A one-way ticket from San Francisco to Los Angeles will cost about $190, which means more people will choose to fly.

Because of uncertainty over costs and ridership forecasts, private equity firms say they won't invest without a revenue guarantee, i.e., an operating subsidy. Even if the state somehow manages to attract $10 billion in private equity, its business plan calls for another $5 billion in local grants and $15 billion more in federal funds. The $15 billion that they want from the feds would be nearly a third of Mr. Biden's $53 billion figure. Maybe high-speed rail is a back-door bailout for California.

Messrs. Obama and Biden argue that the U.S. has to invest in high-speed rail to stay competitive with the world. Only if we're competing in the Debt Bowl. Two high-speed railways in the world have broken even, and those are in densely populated areas of France and Japan where people drive less because gas prices are twice as high as in the U.S., and many foreign intercity highways levy tolls.
Robert Samuelson continues the devastating attack on such government subsidies.
Passenger rail service inspires wishful thinking. In 1970, when Congress created Amtrak to preserve intercity passenger trains, the idea was that the system would become profitable and self-sustaining after an initial infusion of federal money. This never happened. Amtrak has swallowed $35 billion in subsidies, and they're increasing by more than $1 billion annually.

Despite the subsidies, Amtrak does not provide low-cost transportation. Longtime critic Randal O'Toole of the Cato Institute recently planned a trip from Washington to New York. Noting that fares on Amtrak's high-speed Acela start at $139 one-way, he decided to take a private bus service. The roundtrip fare: $21.50. Nor does Amtrak do much to relieve congestion, cut oil use, reduce pollution or eliminate greenhouse gases. Its traffic volumes are simply too small to matter.
He goes on to debunk the argument that government subsidies of rail would just balance out subsidies of highways. What is clear is that we would go from the annual deficits we face with Amtrak to a much larger drain on the federal budget with these rail adventures.
The reasons passenger rail service doesn't work in America are well-known: Interstate highways shorten many trip times; suburbanization has fragmented destination points; air travel is quicker and more flexible for long distances (if fewer people fly from Denver to Los Angeles and more go to Houston, flight schedules simply adjust). Against history and logic is the imagery of high-speed rail as "green" and a cutting-edge technology.

It's a triumph of fancy over fact. Even if ridership increased fifteenfold over Amtrak levels, the effects on congestion, national fuel consumption and emissions would still be trivial. Land-use patterns would change modestly, if at all; cutting 20 minutes off travel times between New York and Philadelphia wouldn't much alter real estate development in either. Nor is high-speed rail a technology where the United States would likely lead; European and Asian firms already dominate the market.

Governing ought to be about making wise choices. What's disheartening about the Obama administration's embrace of high-speed rail is that it ignores history, evidence and logic. The case against it is overwhelming. The case in favor rests on fashionable platitudes. High-speed rail is not an "investment in the future"; it's mostly a waste of money. Good government can't solve all our problems, but it can at least not make them worse.
But that doesn't stop President Obama from still asking for $53 billion to subsidize high-speed rail construction around the nation. It makes no sense and is counter to every analysis of how many people would use such trains or how much building such trains would actually cost. It's a fantasy, but since it has the tinge of environmentalism, there are those who will continue to believe in them.


Rick Caird said...

This line jumped out at me:

"Messrs. Obama and Biden argue that the U.S. has to invest in high-speed rail to stay competitive with the world. "

It makes no sense at all to claim we need high speed rail to be "competitive". Competitive with what? It makes no difference to our competitive position if we move people, and high speed rail is about moving people, via rail, road, or air.

There are always a few buzzwords big government types use to justify their big government programs. One is jobs, forgetting that increased taxes cost jobs, the second is "green" as if that actually meant something, and the third is competitive, usually used by people who have never competed in the marketplace in their lives.

The takeaway is you have to be a complete moron to believe politicians trying to sell some big boondoggle. We would be better off immediately firing any politician who supports these big projects that private industry won;t attempt without a huge, guaranteed subsidy.

John A said...

Gor now, high-speed rail only makes some sense to me if applied to freight - not passenger service.

OTOH, this administration seems bent upon destroying things like the personal automobile. Try to make them all electric, despite cost, while simultaneously ensuring no new power plants (except "alternative" power) and doubling the cost of what electricity is availlable. This would cause rail (and "mass transit" buses/subways) ridership to increase...

pumping-irony said...

"What's disheartening about the Obama administration's embrace of high-speed rail is that it ignores history, evidence and logic."

Well, to be candid that's basically how Obama does everything else.

Pat Patterson said...

We must have a national policy to address the choo-choo gap.

tfhr said...

Giant catapults and parachutes - problem solved.