Red Clay Citizen

Surge-ing Ahead: Credit Where Due

Well lookie here... the surge worked.
-Max Borders

To All Politicians: Leave Speculators Alone

Professor Boudreaux hits the proverbial nail...

John McCain credits the recent fall in oil prices on President Bush's announced support for more off-shore drilling and, hence, on the fact that the future supply of oil likely will be higher than previously thought. ("McCain Credits Bush For Drop in Oil Price," July 23).  Sen. McCain also blames the preceding run-up in oil prices on unjustified speculation.

Sen. McCain can't have it both ways.  Prices either chiefly reflect the underlying reality of supply and demand or they don't.  If baseless speculation caused oil's price to rise to heights unjustified by supply and demand - if speculators are financial sorcerers who detach prices at will from underlying economic realities - how does a presidential announcement signaling higher future supplies cause lower prices?  On the other hand, if a more promising prospect of greater off-shore drilling really is responsible for pushing oil prices downward (which I think likely), why would Sen. McCain have ever blamed high oil prices on unjustified speculators rather than on the underlying conditions of supply and demand?

Super Sized Nanny State

Nanny-staters in LA are making Ronald McDonald public enemy #1, as this WSJ article describes.

"Jan Perry, a Los Angeles city-council member, is spearheading legislation that would ban new fast-food restaurants like McDonald's and KFC from opening in a 32-square-mile chunk of the city, including her district."

Surprised? You shouldn't be. Such measures are what naturally follow in a nation that has come to consider health care to be a "public good." If government is to provide a collective health care system, then expect government to become very concerned with your personal life, including: diet, smoking, drinking, exercise, weight, dangerous hobbies, etc., etc.

The catch-22 is that a socialized health care system is what creates the moral hazard government is trying to combat here. In other words, if government is paying for your health care needs no matter if you engage in a healthy lifestyle or if you make poor health decisions - why take care of yourself? The consequences of your poor decisions (higher medical bills) will be paid for by "society" so eat, drink and be merry - it won't cost you anything.

Let's wise up and see the writing on the wall. People's waist size and calorie intake is none of government's business, but under the single-payer type system the liberals want to impose, every aspect of your life suddenly becomes a "public good" because it is the general public that will be paying for your health care.  

This is an aspect of health care reform that lefties don't want you to know about. Their "solutions" to health care will be leveraged to excuse the most massive government intrusion into your personal life imaginable.

Transportation: A Picture is Worth 1000 Words

Credit to Kevin Siers who draws for the Charlotte Observer, which published this.

Poll: Dole 47 Hagan 38

And here are the US Senate numbers from this month.  Dole maintains her comfortable lead.  I think just about every poll over the past two months has her up somewhere in the 9-12 point range.

Her initial TV boost after the primary worked to give her that little edge and break away.  Should be interesting to see if Hagan can shrink the margin when her TV ads begin.

Full release here.

Oil: Econ for Lefties #423

Here's one of the little Koses -- offering an Open Letter to the President inviting him to explain why/how opening up the continental shelf to oil drilling would lower the price of oil. Since the Pres is probably busy, I'll be a stand-in:

Just wondering, by how many cents would you estimate that gasoline prices at the pump would drop if the entire continental shelf was opened to oil drilling?

If futures markets were equipped with crystal balls, there would be no futures market. Determining a future price would be the crystal ball equivalent. So the question betrays more than a little economic ignorance. I don't expect lefties to understand market uncertainties any more than I expect lefties to understand that the prospect of increased supply - particularly opening the entire Atlantic coast - would lower the price per barrel due to changes in forecast availability (often derided by the ignorant as unfair "speculation".) But by how much? We don't know.

Moreover, how much more would the price at the pump drop in that scenario than if current leaseholders merely drilled on the 68 million acres of oil and gas leases already granted on Federal lands which stand unused?

If it's still not cost-effective to drill in these areas, they won't drill. But more importantly, we must also consider that most known/accessible stocks are already factored into the price per barrel. This is the beauty of the distributed knowledge that those evil speculators bring to the process. So only new potential supplies would change the speculative landscape and thus the price per barrel (and price per gallon).

When would such savings be realized, and would that date come earlier than, say, the development of a domestically produced hydrogen-powered alternative vehicle?

Who knows? No one, does. But it's funny how lefties are eager to keep us at $4+ per gallon so they can pin all their hopes on their favored venture--which may or may not be realized in the future. Millions of market actors and investors are much better at teasing out this information. If hydrogen is viable, it will overtake gas in the same way gas overtook horses and buggies and petroleum overtook coal engines, and coal engines overtook whale oil. It's called the market process and it runs on price signals. If Stalin and the central committee had all the knowledge about what makes an economy tick, we wouldn't have found 1940s-era factories in Russia after the Collapse (1990s).

Finally, how do you expect companies to come up with the intensive capital investment such an overwhelming increase in domestic drilling would require while lowering prices?

The same way they came up with the capital to drill from 1000 - 10000 feet using expensive platforms in the Gulf of Mexico. If they couldn't come up with the capital, a de facto moratorium would remain. So what do you care? Might as well let 'em drill.

Happy to offer an economics lesson for a lefty. And since I know that this particular lefty hates to be referred to intellectuals and experts, I'll go ahead and link to one that explains why price signals, human ingenuity and distributed knowledge mean will never need to (nor would want to) put energy policy in the hands of government. (Julian Simon)
-Max Borders

Beware of Health Care Councils - Update

As Max and I have commented and written about previously, Verla Insko has teamed up with some special interest groups to craft a study group to essentially recommend how to drive North Carolina further down the road to socialized medicine.

Fortunately, the bill to create a Council died, but in this year's Study Bill the North Carolina Institute of Medicine is authorized "to study issues relating to access to health care." According to the bill, the study is to research and inform the General Assembly about  providing "access to appropriate and affordable health care for all North Carolinians." That small word 'all' carries a lot of weight - implying that health care is to be viewed as a right in this study. Who is to define what is "appropriate" and "affordable" for 9 million citizens with different needs, resources, preferences etc. is not mentioned.

The good news is that this legislation merely authorizes a one-time study rather than creating an ongoing "council." The results of the study are to be released by Jan. 15, 2009, which leaves less than six months for them to develop their predictable list of government mandates and expanded Medicaid programs.

Anyone willing to bet on the number of words dedicated in their study to the negative consequences of government interference with the health care marketplace?

Poll: McCain 43 Obama 40

Our July poll results have McCain holding a 3 point lead over Obama 43-40.  This is now inside the margin of error of our poll, so basically we have a dead heat.

Full release here.

One thing I will point out, we seemed to have gotten a funky sample from the 828 area code this month.  Last month we had McCain leading Obama by 19 points in the west.  This month we have Obama leading McCain by 10.

A 29 point swing in one month is pretty much impossible, and knowing what we know about the political bend of western NC, there's just no way Obama is up 10 points out there.

So our poll should probably go a couple of more points towards McCain, but if we're getting into that, it should also go a couple of points towards Obama if the percentage of black vote goes up to around 22% as everyone expects (It's 19% in this month's poll and historical average is around 18%).

Conclusion:  The race is close, but McCain is probably up a small amount.

To the N&O: The Plan Should Be to Stop Planning

The Raleigh News & Observer asks rhetorically "What's the Plan?" Then proceeds to list a slew of messes caused by government planning:

Inflation is up, the Dow is down. Fannie Mae and Freddie Mac, the federally chartered companies that hold or guarantee about half the mortgages in this country, have lost 80 percent of their value and now are being offered taxpayer money for a bailout -- but that money's limited by a struggling economy and the drain of the war in Iraq.

Then, as if the authors had forgotten what they had just written (and oblivious to the irony), proceed to critique the Bush Administration for a free-market "let-the-chips-fall" attitude to the economy! (This is, of course, a caricature of the Administration, which, sadly, cannot properly be made.)

I must take a moment to point this out, because - like so many others in economic history - the News & Observer labors under the misunderstanding that complex economies can be planned and that planning failures can be fixed by bureaucrats with special knowledge. Call it the "Intelligent Design" fallacy, which has been thoroughly exposed and discredited by a number of luminaries and economic titans.

I hope the average reader is able to read between lines like:

But the White House and Congress, despite flurries of activity that seem driven by desperation, have been generally slow to respond. The "trickle down" of a bad economy feels this time like a waterfall.

A waterfall? Is the N&O seriously arguing with this shabby mixed metaphor that the economy is worse now than when Reagan took over from Carter? Or is this wobbly Wortspiel an attempt to discredit one of the most successful economic reform eras in U.S. history?

It's ill-advised rapid responses by government (responses to dumb planning that creates unintended consequences - whether bailouts, tax increases or fed infusions) that keep the business cycles booming and busting. Cheap shots like the above quote at supply-side economics are yet another example of journalists playing economists in the papers. It's this kind of unreflective pap that gets produced when reporters get their regular assignments done and the editor give them a crack at weighing in on something weighty. But it's rather like letting a filing clerk at the doctors' office play diagnostician for a day. I sure wouldn't want to be the patient.
-Max Borders

Real ID Opponents: Follow the Money

Although the Oppose Real ID Act did not pass the Senate this year, we want to point out that opposition to Real ID has little to do with fiscal responsibility.

After all, the sponsors of the Oppose Real ID Act requested $1.2 billion in earmarks during the past 2007-2008 legislative session. Compare that to the $200-$300 million price tag to implement Real ID.

Proposed earmarks include Rep. Cole's (D-Rockingham) request for $55,000 for a national banjo museum in Rockingham as well as Rep. Coates (D-Rowan) request for $29 million for the N.C. Research Campus at Kannapolis.

Here is the list of total proposed earmarks by sponsors of the Oppose Real ID Act:

Primary Sponsors:
Nelson Cole (D-Rockingham): $11 million
Lorene Coates (D-Rowan): $31.7 million

Co-Sponsors:
Cary Allred (R-Alamance): none
Alice Bordsen (D-Alamance): $9.4 million
Becky Carney (D-Mecklenburg): $72 million
Walter Church (D-Burke): $9.2 million
Jerry Dockham (R-Davidson): $3.1 million
Nelson Dollar (R-Wake): $500,000
Jean Farmer-Butterfield (D-Wilson): $21.2 million
Phillip Frye (R-Caldwell): $3.8 million
Pryor Gibson (D-Anson): $35.3 million
Mitch Gillespie (R-Burke): none
Jim Gulley (R-Mecklenburg): $1.1 million
Phillip Haire (D-Haywood): $28.2 million
Jim Harrell (D-Alleghany): $59.3 million
Pricey Harrison (D-Guilford): $38.4 million
Dewey Hill (D-Brunswick):$40.4 million
Pat Hurley (R-Randolph): $8 million
Verla Insko (D-Orange): $17.2 million
Maggie Jeffus (D-Guilford): $86.5 million
Jimmy Love (D-Harnett): $5.6 million
Marvin Lucas (D-Cumberland): $33.9 million
Paul Luebke (D-Durham): $570,000
Deborah Ross (D-Wake): $46.1 million
Drew Saunders (D-Mecklenburg): $13.6 million
Tim Spear (D-Chowan): $12.1 million
Joe Tolson (D-Edgecombe): $316.2 million
Jennifer Weiss (D-Wake): $41.3 million
Arthur Williams (D-Beaufort): $287.1 million

$1.2 billion for banjo museums and research boondoggles and $5 million horse parks. But not enough money to protect North Carolinians from terrorists and identity thieves -- or to secure our driver's licenses from illegal aliens.

... something needs to change.

Jameson Taylor, with Amanda Abbott

 

Oil Prices

Anyone noticed what happened to oil prices this week?

Bush says,"Drill."
Price of oil falls $16 per barrel in one week.

Coincidence?

Dole Presses Tippett about Equity Formula

Transportation Secretary Lindo Tippett (D-Cumberland) recently got a letter from U.S. Senator Elizabeth Dole (R-N.C.) inquiring as to why the Yadkin River Bridge project -- which bottlenecks I-85 near Salisbury -- hasn't been upgraded as has been promised for years. Tippett claims it's inflation that keeps this project (and others) from being built.

But Secretary Tippett and his good buddy N.C. Senate Majority Leader Tony Rand (D-Cumberland) are happy with the status quo. Not only do projects, rather mysteriously, get done more quickly down east, the Equity Formula directly benefits eastern N.C. (not least their home town of Fayetteville) because it allocates resources based on factors other than vehicle usage and maintenance needs.

Senator Rand and Secretary Tippett also enjoy a special relationship that probably helps explain why transportation dollars get pumped down east -- away from where construction projects are actually needed, and towards constituents who have kept these two in power for years. Indeed, Secretary Tippett admits at a 2005 Fayetteville loop ribbon-cutting that "approximately $1.2 billion is allocated for loop projects in the final 2006-2012 State Transportation Improvement Program for loop projects, including $258 million for the Fayetteville Loop, which is more than any other loop in the state." (Emphasis mine.)

That's right, Secretary. Charlotte's loop, which was started in 1989 and is still not complete, suffers because of the accelerated Fayetteville loop that was started in 2003. I'll leave our readers to contemplate the reasons for this.
-Max Borders

Sunlight as Disinfectant

If you haven't already, check out the Capitol Monitor -- a transparency project that keeps sunlight on North Carolina's politics, non-profits and interest groups. MSM: keep your eyes on this project.

(PS: I don't think they're supposed to use the "o" but rather the "a" in capitol -- only DC should use that. We'll forgive them the typo, considering what they're doing for transparency.)

(Update: maybe the Capitol Monitor is using metonymy (or is it synecdoche) here by referring to the capitol building.)
-Max Borders

Who's in Charge?

Apparently, the voters have no clue.  This month, we asked voters which party, the Democratic or Republican controlled the NC House, NC Senate and the Governor's mansion.

Sadly:
- Less than half the voters know who is in charge of the General Assembly.
- Only 49% correctly identified the Democrats in charge of the House.
- 40% correctly identified the Democrats in charge of the Senate.

Strangely, though, a whopping 61% could correctly identify that the Governor was a Democrat.  Francis seems to think it has to do with his public endorsements of Hillary and then Obama, so people relate him to a Democratic presidential candidate.  I was hoping that maybe all the recent bad publicity had made people pay attention.  Unfortunately, I think Francis' theory is probably right.

Click here for the full results.

COPs and "Creative" Financing

One of the big stories of the FY08-09 State budget is the General Assembly’s authorization of a staggering $523 million in Certificates of Participation (COPs) to finance UNC construction projects. The numbers push the boundaries of the debt affordability model. The economic realities have also spawned some creative future financing provisions. Included in this year’s budget is language (Section 27.7B(a)) that amends existing statutes (Chapter 116-29 (5) and appropriates from the General Fund to UNC, $172 million in 2009-10 and $45 million in 2010-2011 for completion of the of Biomedical Imaging Research Center (BRIC) at UNC-Chapel Hill. The provision expires if the Legislature provides by June 30, 2009, “sufficient debt financing” to complete the BRIC project. No doubt the provision is intended to show strong support for the project. However, as one General Assembly cannot bind another, the provision has little practical value. Someone in the know about UNC capital financing tells me you’d have to go all the way back to the early part of the twentieth century to see a similar provision.

The Biomedical Imaging Center is a huge project ($255 million). And, my guess is the remainder of the project will ultimately be financed through COPs. The growing use of this non-voter approved borrowing should outrage voters, as should the view -- common among many lawmakers -- that UNC capital projects are jobs programs. We’ll be paying for this building binge until the capital planning process is overhauled and limits are placed on COPs financing. We can’t start soon enough.