Part two takes a closer look at the scientific divergences within the Governor’s letter.
Claim: “We’ve already lost 20% of our snow pack over the last 30 years.”
Response: It is unclear where this number comes from, but it is at odds with the most recent study being released by atmospheric scientists at the UW. Mark Stoelinga, the study’s lead author, and a professor in the UW’s Atmospheric Sciences Department told TheSeattle Times last year that, “We can’t see the global-warming signature in terms of a decline in snowpack.” This doesn’t mean that rising temperature may not affect snowpack in the future, but if supporters of cap-and-trade need to distort the science, it raises questions about the policy justification.
Claim: “In my first four years as Governor, I made more emergency declarations than ever in the history of the state. Within 13 months, we suffered through two 100-year floods. In the summers, we are enduring more droughts and devastating wildfires.”
Response: This claim is repeated frequently in Washington, citing recent storms as evidence of climate change. But this is completely unscientific in the same way that citing our two years of record snowpack “disproves” climate change. UW atmospheric scientist Cliff Mass addressed this earlier this year. He wrote: “How many times have you heard that severe windstorms and heavy rains will increase in the Northwest under global climate change? The truth is, there is no strong evidence for these claims and the whole matter is being actively researched. Some portions of the Northwest have had more rain and wind during the past decades, some less.”
Claim: “Rising sea levels threaten nearly 40 communities – including several of Washington’s largest cities – along our 2,300 miles of shoreline.”
Response: While many numbers for sea level rise are thrown around, the UN Intergovernmental Panel on Climate Change and the UW both agree that the most likely scenario is about 14 inches. The numbers cited by the Governor likely refer to projections of 2 feet or more which are called “unlikely” by scientists.
As I listened to President Obama describe the prospect of a government run health care plan at his press conference Tuesday, I thought that his proposal sounded reasonable enough. After all, the public plan would offer among other things, "a better range of choices, make the health care market more competitive, and keep the insurance companies honest." This all seems well and good, but one important detail the president failed to mention is how the inherent structure of the public plan would create an environment that would destroy competition. The public plan would not have to compete with anyone, because it is impossible for private insurers to compete with the United States Government.
Scott E. Harrington, a professor of health care management and insurance and risk management at the Wharton School of the University of Pennsylvania, wrote on this exact problem and the possible ramifications in thisarticle from The Wall Street Journal on June 15th.
As Mr. Harrington notes, a government run health insurance plan would soon be nothing more than a single-payer system.
Congress currently has three bills under consideration that all include a government-run option to private health insurance.
In 1964, over 60% of seniors had private health insurance. Medicare was passed in 1965 as a government option health care plan for seniors. By 1970,the private market for senior health insurance, except for co-pays and deductibles, was gone. For the past forty years, seniors have had the government-run Medicare plan as their only option.
Medicare now has an unfunded liability of at least $67 trillion and is rapidly becoming financially insolvent. Access for seniors to health care is now being limited by decreasing provider reimbursements and lack of provider participation. The paper work and regulatory burden for hospitals and doctors has reached formerly unimaginable levels.
Using Medicare as an example, the currently proposed government option for non-senior health insurance would unquestionably destroy the private health insurance industry. Likewise, there is absolutely no reason to believe that a government-run option health care plan for non-seniors would ultimately be different than the financially unsustainable Medicare model.
This week Governor Gregoire wrote a letter to members of the Washington State Congressional Delegation asking them support pending federal legislation that would establish a cap-and-trade system across the United States. In her letter she writes:
“The United States cannot afford to wait any longer to take comprehensive action to break our dependence on foreign oil while at the same time seizing the opportunity to develop 21st Century energy technologies, create jobs, reduce greenhouse gas emissions, and arrest global warming.
In the letter, the Governor offers up “examples” and “evidence” for why these policies are necessary. However, our research and analysis of the cap-and-trade system proposed in the state of Washington and that system’s experience in Europe, demonstrates that many of the claims and arguments that the Governor provides are misleading or not based in the consensus science.
Below are highlights from areas of the Governor’s letter that diverge from accepted experience and are at odds with environmental economics. In a separate blog posting we will review the scientific divergences made by the Governor.
Claim: “During my time as Governor, I have taken many actions to position our state to be a leader in the new clean energy economy…energy efficiency standards for buildings.”
Claim: “Our state’s $21 billion in annual energy expenditures, much of which currently leaves the state, justifies targeted public-sector investment in energy.”
Response: This is a strange claim for the Governor of “the most trade dependent state in the nation.” Imagine if the rest of the world took this attitude to justify refusing to buy Washington products like Boeing airplanes, Washington wine and apples, or Microsoft software.
Following this policy would harm the people of Washington, creating fewer jobs, make us poorer and hurt the environment.
Focusing on what we do best, we create more jobs and more prosperity because productivity is increased. Buying energy, whether it is oil or windmills, from others who produce those cheaply, saves money for Washington consumers, allowing us to invest in other industries and jobs.
“Targeted” investments in biofuels and other politically- selected technologies have a poor track record and justifying them with bad economics compounds that problem.
Claim: “We naively set a goal in 2007 of 25,000 green collar jobs by 2020. Today, with our robust community and technical college system with programs specifically designed to support more green jobs, we already have more than 47,000.”
Response: The Governor’s use of the word “naively” is interesting. Naïve implies that the state went about setting their goals without adequate knowledge or understanding of what a “green collar” job is or how they could be created. Given that naivete, we should wonder if credit is actually due here.
Additionally, these jobs are more theoretical than real. During the time Washington met and surpassed that “naïve” target, our unemployment rate has nearly doubled. When the Governor signed the “green jobs” Executive Order in February of 2007, the unemployment rate was 4.8 percent, identical to the US rate. After the creation of 39,000 “green” jobs (there were 8,000 in 2007), the unemployment rate has reached 9.2 percent, 0.1 percent higher than the national average.
Claim: “Economists concluded that Washington’s families, businesses and communities are likely to incur billions of dollars of annual economic costs if we fail to drive reductions in climate-changing greenhouse gas pollution. Increased public health expenses alone could account for $1.3 billion a year.”
Response: The Governor references a study released by the University of Oregon. Those numbers are debatable and they ignore the costs of the policy. Washington Policy Center, in partnership with Beacon Hill Institute, provided an economic analysis of the Western Climate Initiative’s cap-and-trade proposal. The key findings of that report found that Washington State could lose: “18,292 net jobs, $5.71 billion in personal income and $302.54 in per capita disposable income” by 2020, with costs continuing to rise after that. If we ignore the costs of the policy we are likely to adopt a cure that is worse than the disease.
Claim: “The final bill must fairly allocate allowances to Washington’s hydroelectric utilities – recognition of our important hydropower base has been a basic tenet of mine for any cap-and-trade program.”
Response: This paragraph is full of irony. First, the Governor has opposed counting hydropower as “renewable” under state law, but now asks Congress to do exactly that.
Second, the Governor has repeatedly argued that Washington needs to be a leader in reducing CO2 to set the tone for federal policy. Now, however, federal policy is giving the bulk of free permits to emit CO2 to states with historically high emissions. States, like Washington, that showed “leadership” and reduced their emissions will be punished under the new system. Washington led, but nobody followed.
On June 24th Deputy Secretary of Transportation John D. Porcari sent a
letter to the chief executive officers of every state department of
transportation in the country advising them of an impending cash shortfall in
the Highway Trust Fund (HTF). The HTF is the federal funding source for
thousands of state highway projects, which support hundreds of thousands of
jobs, across the country.
The Deputy Secretary's letter put all state DOTs on notice, warning that
instead of sending states overnight reimbursements for transportation
investments, the Federal Highway Administration could begin to ration state
repayments; possibly shifting to weekly or bi-weekly payments in the event that
state reimbursement requests exceed the cash available in the Highway Trust Fund.
Faced with the same crisis ten months ago, Congress transferred resources
from the general fund back into the HTF to prevent a shutdown of the Federal
Using general fund dollars for the HTF can be dangerous at the federal level. Once the subsidy from the general fund reaches a certain amount, it triggers a provision that forces all future allocations to become subject to the regular budget process. This means transportation funding will have to compete with every other federal program, like defense and health care.
"Our audit found County officials should improve oversight and safeguards over its cash receipts, expenditures and assets. In many instances, oversight and safeguards were impaired by a lack of sufficient monitoring to ensure policies are complete, followed and staff is adequately trained to operate within those policies.
Further, County officials do not consistently provide or enforce performance measures or expectations in holding staff accountable. As a result, the County exposes itself to greater risk of loss, less ability to control expendi!
tures, and increases the risk for non-compliance with laws, regulations and contractual requirements. Consequently, our audit identified 12 findings."
The Auditor also attempted to conduct a performance audit of the County's construction management practices but terminated the audit "because the County was unable to provide complete and timely access to files and records related to construction projects" that the auditors requested.
Though a long list of problems was identified, perhaps the most curious finding of the audit concerned the County's management of construction records. From the audit (emphasis added):
"For the files we could access, we observed one file group where the naming conventions did not reflect what project or projects the file contained. The files observed were named after popular science fiction characters.
County personnel stated the County does not have !
standard procedures for naming, organizing and storing electronic records and does not have protocols for file protection or shared drive access and permissions.
Instead, individual project managers are permitted to name their files whatever they want, organize them however they want and establish whatever restrictions to access they want."
So what sci-fi projects was King County engaged in?
In response to an email inquiry the Auditor's office said the files referenced above were named: Hulk, Jabba, Kahn and Kirk.
Though the County may escape the Wrath of Kahn, the wrath of voters is another story. In light of this audit you may start hearing them channeling the Hulk: "D!
on't make me angry, you wouldn't like me when I'm angry."
The Federal Railroad Administration does not have a clear role other
than to distribute the stimulus money, which states are competing
fiercely to obtain, said Susan A. Fleming, director of infrastructure
issues at the Government Accountability Office.
"In our view, it is more of a vision than a strategic plan," Fleming said.
The Transportation Department's deputy secretary, John Porcari, said the agency's plan was "carefully thought out."
also said the $8 billion represents only a small fraction of the
estimated costs for starting and enhancing service on federally
authorized high speed rail corridors.
"While the potential
benefits of high-speed rail projects are many, these projects — both
here and abroad — are costly, take years to develop and build, and
require substantial upfront public investment, as well as potentially
long-term operating subsidies," Fleming said.
In a sign that Americans are becoming more dependent upon their broadband Internet connection, the Pew Internet & American Life Project released numbers last week that show that as of April 2009, 63% of adult Americans have broadband connections at home. This is up from 55% in May of 2008.
Don't miss today's Seattle Times article by Katharine Long, which reveals that the Bellevue School Board members understand how best to serve their students: by allowing principals to make key resource allocation decisions.
Parents are up in arms by the decisions of all five high schools and four middle schools in Bellevue to reassign their librarians from their libraries to work in the classroom. The libraries will remain open, staffed instead with library assistants.
The Bellevue School Board President is backing the principals, saying that "Building administrators are in touch with their student population, and know what their needs are." The only school administrator who knows the names of the teachers and of the students is the local school principal. Accordingly, the school district is allowing principals to decide how to use their staff dollars next year, allowing each school to tailor its staffing to that school's needs.
These decisions by local principals will help keep class sizes smaller and save money.
What a step in the right direction. Washington's schools spend far too much outside the classroom, placing too few resources to assist the real work of public education: the work of the classroom teacher. Less than 48% of public school employees in Washington are elementary and secondary classroom teachers. Less than 59 cents of every dollar makes it to the classroom.
Here is a suggestion for school board members and school principals: identify the Total Student Loads on teachers (which will be between 150-175 students--five periods a day times 30-35 students), and work to reduce that load to 80. By transferring even more resources to the classroom, and by adjusting school schedules, principals can dramatically reduce Total Student Loads on teachers, which has been shown to significantly increase student achievement in 442 schools in eight school districts across the country. See Professor Ouchi's The Secret of TSL (Total Student Load): A Revolutionary Discovery that Raises Student Performance, available September 1st. Also see "Beware the Easy School Fix," by Jay Mathews of the Washington Post.
Kudos to the Bellevue School Board for allowing Bellevue's principals to act as true leaders of their schools.
In a letter to Washington's congressional delegation regarding the federal cap-and-trade legislation, the Governor says this:
On the jobs side, by way of example, in our state, we naively set a goal in 2007 of 25,000 green collar jobs by 2020. Today, with our robust community and technical college system with programs specifically designed to support more green jobs, we already have more than 47,000...
Yes, it was naive.
After the Governor issued Executive Order 07-02, calling for 25,000 “green” jobs, we wrote this in August of 2007:
It could be that the total target of 25,000 clean energy jobs by 2020 is extremely low and will be met with ease as utilities diversify their portfolios. If that is the case, then the target itself is relatively meaningless because meeting the target didn’t require government intervention. As such, the only value of such a target is political.
The target was, and is, political, not real. If, however, the Governor actually believes that these "green" jobs are real or positive, the naivete continues.
As we noted last week, according to the Pew Center, the top state in the country for "green" jobs is Oregon which also has the second highest unemployment rate. Not the most attractive poster child for "green" jobs.
During the time Washington met and surpassed that "naive" target, our unemployment rate has nearly doubled. When the Governor signed the Executive Order in February of 2007, the unemployment rate was 4.8 percent, identical to the US rate. After the creation of 39,000 "green" jobs (there were 8,000 in 2007), the unemployment rate has reached 9.2 percent, 0.1 percent higher than the national average.
Imagine where we'll be if we create too many more "green" jobs. At the very least, claiming that the creation of "green" jobs will help Washington "grow a clean energy economy," has not stood the test of actual experience.
Today's Seattle Times reports that Seattle Mayor Greg Nickels, along with City Councilmen Tim Burgess and Richard Conlin, are going to work towards abolishing the $25 per employee "head tax" within Seattle city limits.
While I and WPC mainly focus on state-based policy, with my work in the small business community I feel safe asserting that this "head tax" was one of the worst business tax policies I have ever seen. The level of frust!
ration and outrage from small business owners regarding this tax was just about the same as, if not stronger than, their dislike of the state's Business and Occupation tax.
Really, the head tax was a punitive response against employers for the "privilege" of hiring employees within city limits. The reason? Because these employees commuted from outside the tax's jurisdiction, therefore employers are responsible for the damage done by their employees' commutes to the local environment. This is why exemptions were in place for employees who walked, rode the bus, carpooled or biked to work.
It's good to see policymakers in the Emerald City realize the tax made Seattle that much less competitive. Now, if the city would just come to its senses on the "square foot!
Just last week the Editorial Projects in Education Research Center reported that Washington State's high school graduation rates have dropped from 68% to 62.4% between 1996 and 2006, placing Washington State at a ranking of 43rd among all states on this measure.
This week's Economist reports that New York City's 1.1 million students in New York City's schools are reaping substantial benefits from a 2002 law which placed schools under control of Mayor Bloomberg. In 2002, only half of the city's fourth-graders met state learning standards. Today 85% are meeting or exceeding math standards and 70% are meeting or exceeding English standards. Graduation rates have also started to increase.
How did they achieve this about-face in school outcomes? Mayoral control has been the first step for NYC schools. Fortunately, this particular mayor knew to use this control to decentralize school decision-making. While Mayor Bloomberg and Chancellor Joel Klein have increased teacher salaries and school funding, their real achievement has been in giving principals budgetary control, and in training principals to assume these new responsibilities.
Precisely how have principals raised student achievement in NYC and in Boston, Chicago, Houston, Oakland, Seattle, St. Paul, San Francisco ? A new book available September 1st by Professor Bill Ouchi, The Secret of TSL (Total Student Load), The Revolutionary Discovery Which Raises School Performance, tells the story. Principals who are allowed control over their budgets are able to allocate resources and schedules to reduce student loads on teachers, from unmanageable levels (150-175 students) to manageable levels (88 students). Jay Mathews of the Washington Post does a masterful job explaining this research in "Beware the easy school fix".
The happy result is improved student achievement.
The time has come for Washington State to revamp the structure of its schools by following the model in New York City: train school principals to assume new powers and responsibilities so they can raise the effectiveness of teachers at their schools, and then hold them accountable for student performance.
This past legislative session, the legislature passed HB1906 which temporarily increases the amount of unemployment insurance (UI) checks by $45 as well as raised the minimum insurance benefit amounts by drawing down the state's health UI trust fund. The $45 is temporary, however, and only extends to the end of the year. At first this was part of the Governor's plan to help stimulate the economy. As I pointed out, however, raising unemployment insurance benefits doesn't fall under the category of economic stimulus. It's just increasing government benefits.
According to the Employment Security Department, the March forecast shows a 24% bump in the cost of the temporary!
benefit. The Department uses these forecasts to guesstima!
te costs and November's forecast showed a $187 million cost for the $45 temporary increase in UI benefits (through 2011) but now that has been updated to $231 million. Again, this is off of the March forecast, so the June forecast released last week will most likely increase these costs. ESD won't have that information available for a few weeks.
True, a $231 million hit to a reserve fund of $3.7 billion is not a huge amount. But the latest ESD Economic Update also contains information that based off of this year's 1906 and 5963 legislation, the trust fund could dip as low as 11.7 months by calendar year 2011 -- or $2.4 billion. This would put the tru!
st fund below the DOL recommended levels.
Why is this a concern? Because unforeseen expenses can lead to tax increases. And since employers pay 100% of UI premiums do we really want to make the cost of labor even more expensive?
Washington should apply for its share of federal high-speed rail stimulus funds for safety improvements such as grade crossings and signaling systems, but not for new trains that will obligate taxpayers to pay millions of dollars in annual subsidies, says a new study written by WPC adjunct scholar Randal O'Toole.
∙ Initial funding commits the nation to a program whose eventual costs!
could exceed $1 trillion. This doesn’t count overruns, operating subsidies, and rehabilitation costs.
∙ Outside of the Boston-to-Washington and Philadelphia-to-Harrisburg routes, Amtrak short distance trains lose an average of $37 per passenger and Amtrak expects the states to cover most of these operating losses.
∙ A hidden cost of rail is that it must be rebuilt about every 30 years. This means construction could leave states obligated to fund billions of dollars in rehabilitation costs.
∙ The fact that American freight railroads are profitable while European passenger lines are not suggests that freight, not passenger, is the highest and best use of a modern railroad in most places.
∙ It is far more cost-effective to save energy by encouraging people to drive more fuel-efficient cars than to build and operate high-speed rail.
∙ Considering the energy required for rail construction, improvements in auto and airline energy ef!
ficiencies, and the high energy cost required to move trains a!
t higher speeds, high speed rail will have little to no environmental benefit.
∙ Upgrading the 280 rail miles in Washington to 110-mph standards would cost nearly $1 billion.
∙ The average Washingtonian will take a round trip on high-speed rail once every 8.5 years.
∙ For every Washingtonian who rides high-speed rail once a month, more than 100 Washington residents will never ride it.
The US House of Representatives released its 850 page bill for health care reform today. Although the details at the margin are different than the Kennedy-Dodd bill in the Senate, there are some fundamental similarities:
* A government-run health insurance exchange.
* A government-option health insurance plan to "compete" with private insurance.
* Subsidies for the purchase of health insurance up to 400% of the federal poverty level.
* Guaranteed issue - i.e. anyone, regardless of prior illness, must be offered health insurance.
* A cap on out-of-pocket expenses.
* An individual mandate - everyone must have health insurance.
* An employer pay-or-play with a penalty fee of 8% of payroll. To avoid the fee, employer- sponsored plans must meet minimum benefit and contribution requirements set by the government.
The one glaring item not addressed in the bill is how to pay for all of this government-run health care. As the House leadership has stated, however, everything is "on the table" - read increase taxes and further deficits.
Now that the reform proposals in Washington, D.C., are actually coming out on paper, the taxpayers of the nation are starting to understand the real impact of these broad sweeping health reform plans. The debate is just now starting as more people understand the restrictions of liberty and the costs of government controlled health care.