Washington Policy Blog

Weird but Green

June 26, 2009 in Blog

A recent report from a Spanish economist noting that their effort to create green jobs has backfired, killing 2.2 jobs for every one created, elicited an interesting response from Presidential Spokesman Robert Gibbs. He called the analysis into question, telling the White House press corps:

It seems weird that we're importing wind turbine parts from Spain in order to build -- to meet renewable energy demand here if that were even remotely the case.

It may be weird, but Washington State has another name for it: "green." The 2008 Washington State Green Energy Jobs report counts "Tank Car, Truck, and Ship Loaders" as green jobs, saying that we have 30 people working in that category doing "green" work. In Washington some of these ship loading jobs are related to unloading wind turbines from overseas.

One person's weird job is another's "green" job.

Cash for Clunkers the Model of Inefficiency

June 26, 2009 in Blog

Recently, Congress passed legislation, called "Cash for Clunkers," that offers funding to those with old cars so they can upgrade to new cars with better fuel efficiency. The Seattle Times editorialized against the legislation citing a number of problems with the bill.

We hadn't previously examined the legislation, but a reporter asked today what we thought about it, so we took at look.

One of the questions we typically ask (but policymakers too seldom do) is how much a particular climate policy spends to reduce one metric ton of CO2. This is the standard unit of carbon as a commodity. Currently, a tonne (metric ton) of CO2 costs €13.40 (about $19) on the European Climate Exchange. If a policy spends more than that to reduce a tonne of CO2, then they could do more for the environment by putting the funding elsewhere.

How does "Cash for Clunkers" do using this approach? Put simply, very badly.

The typical car travels 15,000 miles per year. If that car averages 18 MPG, it will use 833 gallons in a year. If someone trades that car in for a new car that averages 22 MPG, they receive $3,500 from the government and will use 682 gallons. So, the government spends $3,500 to save the emissions from 151 gallons, about 2,939 lbs of CO2, per year. That is 1.34 tonnes of CO2.

Even if that car lasts 10 years, the government is spending $261.96 per tonne, or 13.8 times the price available on the European Climate Exchange.

The numbers are slightly better if you buy a car that gets 10 MPG better than your old car. The government provides $4,500 to you in that circumstance. But they are still spending $204.12 per tonne, or 10.75 times more.

Some environmental activists may respond that the cost doesn't matter because the issue is so important that it is worth the cost. Wasting money, however, is wasting resources. By wasting money we are losing the opportunity to do much more for the environment and are wasting 90 percent of the funding. Imagine what we could do with that money.

It is ironic, to say the least, that legislation seeking to improve efficiency is extremely inefficient.

Lawmakers to arm wrestle Speaker to see copy of cap-and-trade bill before vote

June 26, 2009 in Blog

Ok, so the arm wrestling comment was an exaggeration but according to Politico only one copy of the cap-and-trade bill was available on the floor of the House today:

“Republicans say Democrats are ramming their climate-change legislation through the House without enough time for members to read the bill — let alone to understand it — all in violation of their promises about creating a more transparent legislative process.

Rep. Joe Barton (R-Tex.), running the debate for his party, asked repeatedly Friday afternoon if there was even a copy of the current version of the bill anywhere in the House chamber. Democratic Rep. Ellen Tauscher – sitting in the speaker’s chair although she’s already been confirmed as Obama’s undersecretary of State for Arms Control and International Security — repeatedly dod!
ged the question.

Rep. Ed Markey (D-Mass.), one of the bill’s sponsors, finally rose to say that a single copy of the current version of the bill was available at the speaker’s desk and on the Internet, which members would have to leave the floor to access.”

I know democracy can be messy but this is ridiculous. Is it asking too much for members of the House to take the time to at least read and understand this 1,200 page bill before voting?

Additional Information
ReadTheBill FAIL: Cap and Trade Edition
Web voters support 72 hour budget timeout
WPC response to Governor's letter!
on cap-and-trade

WPC response to Governor's letter on cap-and-trade – Part two

June 26, 2009 in Blog

In part one of our response to the Governor’s letter on cap-and-trade we highlighted several areas where the Governor diverged from accepted experience and was at odds with environmental economics.

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 The Seattle 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.

Click here to read the full WPC response to Governor's letter on cap-and-trade

Government Plan Takes the Competing Aspect Out of Competition

June 26, 2009 in Blog

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 this article 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.

Government Option? - Look no Further Than Medicare

June 26, 2009 in Blog

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.  

WPC response to Governor's letter on cap-and-trade - Part One

June 26, 2009 in Blog

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.”

Response: We have repeatedly highlighted the failure of these “energy efficiency standards for buildings” to save energy. The state Department of Ecology and Superintendent of Public Instruction have both confirmed this. An opinion piece earlier this year from DOE called savings estimates “prema­ture,” and the SPI’s office released a report last December saying that data didn’t show savings. Our research found that schools built using the standards have actually increased energy use by up to 30 percent.

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.

This stance also hurts the envi­ronment. McKinsey & Co. note that the least expensive, low-carbon fuel is sugar cane biofuel. The US, however, has trade barri­ers against that energy source to keep biofuel money here. Doing so, however, led us to use fuels like corn-based ethanol and soy-based biodiesel, both of which have been determined to be more environmentally damaging.

“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.

Click here to read the full WPC response to Governor's letter on cap-and-trade

Federal Transportation budget going broke....again

June 25, 2009 in Blog

From AASHTO....

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
Highway Program.

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.

King County's sci-fi construction projects: Hulk, Jabba, Kahn and Kirk

June 25, 2009 in Blog

Earlier this week the State Auditor's Office released an accountability audit on King County's compliance with state laws and regulations and its own policies and procedures. The results weren't pretty.

According to the audit:

"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."

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GAO: Gov't lacks strategic high-speed rail plan

June 25, 2009 in Blog

On Tuesday, the GAO testified to Congress on the federal government's plan to expand high speed rail. The GAO's concerns reiterated the same claims made by Randal O'Toole in WPC's most recent study on high speed rail: Why the U.S. and Washington Should Not Build High-Speed Rail.

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.

Read the full AP story: GAO: Gov't lack strategic high-speed rail plan

Broadband usage up in U.S. despite Great Recession

June 25, 2009 in Blog

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.

Bellevue School Board allows principals to lead their schools

June 24, 2009 in Blog

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. 

The Solution to Unemployment: Stop Creating Green Jobs!

June 23, 2009 in Blog

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.

Some sensible tax reform in Seattle?

June 23, 2009 in Blog

Seattle 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!
age tax."

Washington's high school graduation rates drop: Let principals lead their schools

June 23, 2009 in Blog

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.