by John McClaughry

An environmental organization called Climate Central, whose board is composed of people from the Environmental Defense Fund, Natural Resources Defense Council, and the like, released an interesting report on winter temperature increases in the US since 1970. Burlington Vermont led the nation by experiencing a seven degree Fahrenheit average temperature increase over the three winter months.

The accepted science of global warming holds that however caused, the warming effect should be more pronounced in high latitude places, such as Burlington and Minneapolis. The choice of 1970 as the starting point makes the increase seem greater, since back then scientists were worrying about an approaching ice age.

Yes, it has been getting warmer in Vermont. Is that a good thing? Climate Central says “Warming winters may sound nice to some who prefer more moderate temperatures, but milder winters can signal more difficult times for industries that economically depend on cold winters. Tourism and recreation may suffer when mild conditions negatively affect skiing, snowmobiling and ice fishing.”

OK, let’s look at the tradeoff here. Less fun things like skiing, snowmobiling, and ice fishing, measured against less fuel needed to heat our homes and businesses, less ice and snow on the roads, a longer growing season and greater food production. And what is the recreational downside of a zero degree winter day replaced with a seven degree above day – still far below freezing?

It looks to me like the winter warming is an overwhelming benefit.

- John McClaughry is the vice president of the Ethan Allen Institute 

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By Rob Roper and David Flemming

Proponents of the latest Vermont Carbon Tax scheme, called the ESSEX Plan, have severely underestimated the ease with which Vermont can implement the proposal.

Johanna Miller of Vermont Natural Resources Council says that ESSEX “is intended to be built off our distinct infrastructure and pretty easy to administer, thereby not having too significant of a cost. All of the dollars raised going to into a escrow account, the utilities could then just take that financial benefit, monetize it, and pass it on to their 3 customer classes: residential, commercial and industrial.” The designers claim that “there is no cross-sector subsidization under The ESSEX Plan.” But keeping the money separated in these silos would be anything but simple.

Think about it. The state has to collect this tax – an excise tax – from the distributors of fossil fuels, not the end users. How does the distributor know who the end user is? For example, a gasoline distributor pays the tax, then sells the gasoline to a gas station, who sells it to… who exactly? Someone driving their kids to school (residential), or a contractor filling up a work truck (commercial). How is the state supposed to keep the taxes collected from these different uses separate?

Then the state puts these tax monies into an escrow account for the utilities to draw on, and the complexity really begins.

In addition to keeping those silos separate, the utilities have to break them down further into 4 additional categories of residential customers who qualify for certain kinds of rebates which depend on resident location and income.

To give just one example of the administrative difficulty, take the low-income rebate. The ESSEX Plan proposes a 400% federal poverty level threshold to qualify for the low income rebate (about $90,000 for a household of 4). The key proponents of the plan do not indicate how often they intend to require Vermont’s tax department to report a family’s income to whatever government agency will be overseeing the utilities who calculate the rebates. This creates a dilemma.

If the low income rebate eligibility is only recalculated every so often, you could have a situation where a family receives the low-income rebate long after an increased income would have disqualified them. In the other extreme, if the utility companies must wait for tax information from for all hundred-fifty odd thousand Vermont families before completing eligibility calculations, the cost of administering the program could far exceed what its designers had envisioned. The designers have not even attempted to estimate the cost of calculating the low income rebate, let alone the entire ESSEX program. No doubt some of these questions can only be answered after trial-and-error. But these trials can only be completed by taking even more of taxpayers’ money.

Of course, no ratepayer will actually see these calculations that determine their eligibility for the rebates. They will just have to hope that the utility companies overseen by bureaucrats got it right.

Again, anything but “pretty easy.” So, as with most government redistribution programs, the ESSEX plan will rely on a host of bureaucratic functions to collect the tax and administer the program.

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By John J. Metzler

UNITED NATIONS–The Olympic Games should be about sport, sportsmanship and solidarity. Yet they rarely are. Every four years the athletes of the world, or at least most of them, meet in an exotic locale plagued by political controversy, cost overruns, corruption, and doping concerns.   The upcoming Winter Games in PyeongChang, South Korea bring the Games to a whole new level given the looming threat from nuclear North Korea.

For South Korea it’s déjà vu all over again to quote a New York sports legend. Back in 1988, in the nervous countdown to the Seoul Summer Games, South Korea was on edge.

Despite meticulous preparations for what would become the last Olympiad during the Cold War, (of course we didn’t know that then), most sporting venues in metro Seoul were dangerously close to North Korea.

Needless to say geography has not changed and the PyeongChang Games in the beautiful mountains again is just fifty miles from the DMZ; a little too close for comfort given the political climes.

When I visited the Olympic sites in Seoul on the eve of the 1988 Games, the big political story was how South Korea was wooing its enemies and North Korea’s old comrades in both Moscow and Beijing to send its athletes to participate. The point was that if the Soviets and their East Bloc buddies and China would partake in the Games, North Korea’s mercurial dictator would not dare attack.

North Korea was invited too but did not show in a fit of pique.

The plan worked. The Soviets, China and the East bloc were all there and would subsequently open commercial and eventually diplomatic ties with The Republic of Korea. Equally on the domestic front, the still authoritarian South Korean government

allowed for a political decompression which led to democratization. In my opinion, South Korea’s open democracy was one of the winners in the post-Olympic era.

The Seoul Olympiad presented a stunning sporting and indeed political success for South Korea; it put the country on a global stage from where it has excelled ever since. National pride and accomplishment were on the podium for all to see.

Many of the players back in Seoul 1988 and PyeongChang 2018 have not changed. Sadly the Korean nation is still divided South/North and a thaw in the glacial political freeze doesn’t look likely. The communist Kim dynasty now has nuclear weapons, and has threatened to use them.

During yet another UN Security Council meeting on the North Korean missile firings, French Ambassador François Delattre bluntly stated that the North Korean menace has evolved from a regional threat to a global one. Hardly a welcoming setting for the world’s athletes.

A comment by U.S. UN Ambassador Nikki Haley initially cast doubt whether Team USA would participate in PyeongChang. She said, “There’s an open question” about whether the U.S. Team would go in light of the security situation. After the initial confusion over the Ambassador’s remarks, official Washington went into damage control mode to assure the Koreans that American athletes will be there.

Lee Hee-beom, Chair of the PyeongChang Winter Games hopes to see North Korean athletes participate in the February games. Lee told Seoul’s Yonhap news agency, “The IOC’s position is that as long as North Korean athletes want to participate in the PyeongChang Games, it will work with international sports federations to make sure the athletes will be there,” he said. The International Olympic Committee (IOC) has invited the North Korean Team.

So the anxious countdown to the Games between February 9th – 25th continues. IOC President Thomas Bach met with North Korea’s Olympic team chief in Lausanne, Switzerland, in a bid to break the logjam. Equally there’s intense behind the scenes diplomatic action to ensure the Winter Games come off smoothly and safely as they did back in 1988.

Due to doping concerns the IOC has formally banned the Russian Team but most other countries are expected to attend. Naturally cajoling North Korea remains a real hurdle for the organizers as presumably this would assure a safe venue. And hopefully Russia (who successfully hosted the 2014 Sochi Winter Games) won’t try to get even with PyeongChang for being banned.

The UN General Assembly passed a resolution calling for an Olympic Truce and expressed the expectation that the PyeongChang Games “will serve to advance peace on the Korean Peninsula and in Northeast Asia.” Indeed, the Seoul government strives to make the Winter Games the “Olympics of Peace.”

The main thing PyeongChang’s organizers should worry about is enough snow, not about security.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.

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by John McClaughryJohn 2

A recent announcement from the Vermont Public Interest Research Group (VPIRG) brought back vivid memories of a long- forgotten legislative episode of 25 years ago.

The announcement came two weeks ago in a webinar sponsored by VPIRG and its ally the Vermont Natural Resource Council. The purpose of the webinar was to build support for their most recent plan to lay millions of dollars of new taxes on gasoline, diesel, propane, natural gas and heating oil, some of which would, the advocates said, be returned to everyone through lower electric rates and assorted rebates (The ESSEX Plan).

An economically literate viewer asked this incisive question: “If these new carbon tax revenues are used to reduce electric rates, won’t that give people less of an incentive to buy energy efficient appliances?” Ben Walsh of VPIRG, presumably aware that VPIRG has for years pushed for legislation to ban insufficiently efficient appliances, replied “it is something that VPIRG is going to be working on this coming legislative session, [to] go beyond what the federal government does… We think there are some really exciting opportunities for Vermont to keep inefficient appliances off store shelves and protect Vermont consumers from those added energy costs.”

VPIRG has always found it exciting to levy new taxes and prohibit Vermonters from buying products that don’t meet VPIRG’s idea of what’s good for them and the planet. Let’s roll back the calendar to 1991.

S.109 was a mostly non-controversial bill to encourage least cost energy planning within state government. But among its many provisions were VPIRG-backed prohibitions on insufficiently efficient shower heads and light bulbs. The bill went to the Natural Resources and Energy Committee, on which I served, and in whose small committee room the VPIRG lobbyist had a designated seat from which she regularly slipped instructions to her two most dependable allies.

I was able to persuade three of the other five members that Vermonters would not take kindly to its legislature sending snoops into their showers in search of contraband shower heads installed by rogue plumbers, or telling them which light bulbs they could or could not buy. Those provisions were discarded. The VPIRG lobbyist, and her allies, were crestfallen.

The Senate easily passed the amended bill. The House sat on it for a year. Then late in the session it was brought to the floor, where VPIRG’s allies persuaded a majority to add a ban on disapproved fluorescent bulbs.

The amendment provided that unless the Federal government preempted the light bulb business by 1995, the Public Service Department would develop rules defining which fluorescent bulbs could be sold, offered for sale, imported, or installed in Vermont. A government bulb inspector would sniff out violations and notify the attorney general. That official would send a lawyer to Superior Court to request an injunction to force the offender to desist. Violating the injunction would bring a fine of $50, possibly for each day in violation.

The House version reappeared in the Senate on the hectic final day of the 1992 session. I moved to delete the light bulb section. I pointed out that the state then had the highest tax rates in its history (enacted in 1991), Vermonters didn’t need their state government to enforce VPIRG’s product choices, nobody but VPIRG wanted to send a PSD bulb inspector to roam about the state digging up violations, the attorney general had many more pressing things to do than going to the backlogged Superior Courts to get fluorescent bulb injunctions, and in sum, the whole scheme was, to use my memorable summarization, “wacko”.

In spite of this titanic oration (or possibly because of it), my amendment was voted down 23-6. Ten of the 15 Republicans voted to reject it, along with all but one of the Democrats.  Gov. Dean signed the bill, probably because the rest of the bill was non-controversial and indeed useful.

What came of it? The Federal government got into the light bulb regulation business. Gov. Dean decided the authority wasn’t worth using, and it was never activated – but it’s still on the statute books.

Why recount this now? Because, in addition to its eternal campaign to saddle Vermonters with an enormous carbon tax, VPIRG is back pushing for the same prohibition scheme all over again, this time vowing to get “inefficient home appliances off the store shelves”.

VPIRG will never give up trying to get legislative majorities to tax, mandate, prohibit, spend, regulate and penalize the people of this state until its every imaginable goal is achieved – and that imagination has no limit.

- John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

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by Rob Roper

The latest analysis of the $15 minimum wage is by a team of economics professors from Miami University and Trinity University and looks at California. This study, California Dreamin’ of Higher Wages, concludes that:

… a 10% increase in the minimum wage would cause a nearly five-percent reduction in employment in an industry where one-half of workers earn wages close to the minimum. In an industry with an average share of lower-wage workers, their findings imply that each 10% increase in California’s minimum wage has reduced employment for affected employees by two percent.”

Consider that Vermont is debating a 50 percent increase in the minimum wage over a handful of years, and consider also the finding that the industries most negatively impacted by minimum wage increases proved to be accommodation/food services and retail trade (55 percent low wage), followed by agriculture, forestry, fishing and hunting (46 percent low wage).

That right there is a pretty good description of a huge part of Vermont’s economy, and we do not have Silicon Valley here to compensate.

Vermonters should also be paying close attention to this analysis because California’s and Vermont’s minimum wage histories are very similar. Both states began raising their minimum wages above the federal rate in the late 1990’s, and have followed similar trajectories ever since. Now California is scheduled to raise its minimum wage from $10.50 in 2017 to $11.00 in 2018, and then increase $1 per year until it reaches $15 in 2022. Vermont, just one year behind, will go from $10 to $10.50 on January 1, 2018, and, should the legislation under consideration pass, follow a similar path to $15 by 2022 or shortly thereafter.

The California study concludes that, “In these industries [food services and retail trade], we project 10.7 and 9.5 percent of jobs will be eliminated as a result of a $15 minimum…. These two industries account for half of the predicted job loss….”

Tell us again how a $15 minimum wage is supposed to help low wage Vermonters?

Rob Roper is president of the Ethan Allen Institute

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by Chris Campion

The GOP has recently been working on tax reform, and both the House and Senate have versions of tax reform that are currently being hashed out in conference between the two houses.  Aside from the caterwauling on the left side of the house, predictions of our moon exploding and destroying all life on the planet because taxes might be cut, reform of one kind or another is inevitable.  Why?

Because it’s not really the revenue side of the equation that’s the bulk of the problem.  It’s the spending.

Why does spending go through the roof, annually?  Because the government can.  Because politicians are rarely penalized for spending money.   They’re typically rewarded for it, by being re-elected.  They’re rewarded because they brought some of that federal pork back to their home states, and not coincidentally, their names are often found on the outsides of buildings that other people paid for.  Some states are even proud of their Congressional representatives “bringing home the bacon” for them, as if there’s just a pile of magical money in DC and the job of Senators and Representatives is to back U-Hauls up to the pile and shovel as much in as they can (or pay their staffs to shovel), then call it a day.

The result of all this shoveling is $20 trillion in debt.  That’s a $170,000 debt burden for every taxpayer – not every American, mind you, but just those who actually pay net income taxes.  As the debt has doubled in the last 8 years, and the annual federal government’s spending has followed that same doubling, what’s happened to economic activity?  Based on the hysteria of the left over tax reform, our very lives depend on government spending, because apparently all economic activity will come to a halt if we spend one less dollar next year.

But the reality of the economy is much different from those idiotic rants.  In fact, if you take a look at the data, the opposite is true.  As federal spending goes up, the M2 velocity of money goes down.

What’s the velocity of money?  Let’s let Fred tell you.  He’s got all the answers here:

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.

 

If you take a look at federal debt alongside the same M2 indicator, the idea that federal spending is what keeps the economy going (according to permanently-ensconced chowderheads like Nancy Pelosi), goes “poof”.  It’s an idiotic assumption, that all federal spending is a net positive, and to even challenge that piece of it is something that’s off the Left’s table.

So as spending and debt go up, economic activity goes down.  This is apparently news to Democrats in Congress.

But that’s the crux of the argument.  You can’t have tax cuts, because we’ll be able to spend less, even though spending goes up, annually, regardless of tax revenues.  The gap between spending and tax revenues is a permanent one, and any change to the status quo is Armageddon.

As the tax bill currently stands, the corporate tax rate reduction to 20% would put the United States on a much more level playing field with other countries, even if the effective rate is always lower than the official rate (which is another argument to strip down the tax code and carve-outs, but that’s a longer conversation).  If you’re looking to free up capital that companies would use to expand and invest, that’s a very quick way to do it.  At the very least, it would bring our rate nearer to the average of the G20 countries, which improves the ability to compete:

 

While the tax reform bills are a small step forward, the really tough work is on the other side of the table, and not the ideological one.  The toughest challenge will be spending, and reducing it, so the debt above doesn’t crowd out all other economic activity, and dampen growth.  Since debt is now over 100% of GDP (below), and the economy, while growing, is growing at historically low levels, especially coming out of recession, one is left wondering if Congress has the ability to stop this descent into madness.  They don’t seem to be willing to even slow it down.

It’s an abdication of responsibility.  Considering the incumbency rate, we are going to continue to let them fail, and not hold them accountable.  Then it becomes our fault, not theirs.

 

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by Guy Page

Green Mountain Power’s proposed 2018 5% rate increase will cost ratepayers $80 million, Vermontbiz.com said November 27. GMP spokesperson Kristen Carlson blames the hike on increased transmissionregional capacity and net metering costs. The following briefly explains these terms:

  • “Net metering” refers mostly to how Vermont subsidizes solar power at three to four times the cost of buying power on the open market [emphasis added]. Thanks mostly to large-scale solar development (think acres of pasture, not rooftop), the load share of high-cost solar has grown enough to adversely impact rates. Solar capacity totaled 107 MW in 2015 and has continued to grow since then. New state policies partially restricting the sale of renewable carbon credits out-of-state is expected to impact ratepayers.
  • “Regional capacity” refers to paying the dwindling number of New England power plants (mostly natural gas-fired) to produce power on demand, as other plants (coal, oil, nuclear) retire from service. As New England’s share of intermittent renewable power grows, on-demand “backup” power becomes increasingly necessary and therefore valuable.
  • “Transmission” refers in part to the cost of building and maintaining the 9,000 miles of New England’s high-voltage transmission power lines. ISO-New England budgeted $2.1 billion for 2017, an all-time high. Vermont will pay about $43 million more in regional transmission costs in 2018, according to GMP rate filing documents.

–  Guy Page is affiliated with the Vermont Energy Partnership, Divestment Facts, the Vermont Alliance for Ethical Healthcare, and the Church at Prison. He is a member of the coordinating committee for the Consumer Liaison Group of ISO-New England, the operators of the regional transmission grid.

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by John McClaughry

Here’s a news item some will find surprising. The American Legislative Exchange Council is a conservative business-oriented association of legislators and corporation interests. Recently it debated a resolution calling for a review of the Environmental Protection Agency’s 2009 “Endangerment Finding.” That’s the finding that the Obama EPA made that carbon dioxide emissions are pollutants that endanger human health.  This is ridiculous, but in a 5-4 decision the Supreme Court said that EPA could do it.

A group of corporate members, led by ExxonMobil and the Edison Electric Institute trade association, packed the meeting room with lobbyists and allies and indicated they would vote against the resolution. The sponsor, a state legislator, realized the corporate opposition was intense, and although a straw vote showed that the legislators favored it, he withdrew it.

The conservative Heartland Institute, which had helped draft the resolution, said “Big corporations like ExxonMobil and trade groups like EEI have put their profits and ‘green’ virtue signaling above sound science and the interests of their customers….Rescinding the Endangerment Finding is the logical and necessary next step. We are optimistic that the self-serving regulatory capture and green preening of big corporations like ExxonMobil may delay but will not prevent that step.”

Remember that the New York attorney general, flanked by Al Gore and Vermont’s AG Bill Sorrell, held a news conference in April 2016 to vow a legal war against ExxonMobil. Now it looks like ExxonMobil changed sides.

- John McClaughry is vice president of the Ethan Allen Institute.

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by Rob Roper

The New Hampshire Union Leader recently posted an editorial about their legislature’s 2015 decision to cut taxes on New Hampshire businesses. The tax cuts are still in the process of being phased in, but when fully implemented, the Business Profits Tax will be reduced by nearly 12 percent, and the Business Enterprise Tax by 33 percent.

When these tax cuts passed, the article reports, “State House Democrats warned that shaving the state’s high tax rates slightly would ‘blow a hole in the budget.’”

Nope:

According to the Department of Administrative Services’s monthly revenue report, general and education fund revenues were $5.5 million ahead of the budget plan adopted earlier this year thanks to the state’s two main business taxes generating more revenue than anticipated. [emphasis added].

For the year to date, revenues are $11 million, or 1.6 percent, ahead of schedule.

This is important to mention for two reasons. First, there is the general lesson to be learned that when you reduce the barriers (such as cost) to doing business, you get more activity that generates more revenue. And, when you increase those costs you get less of both.

The second is the fact the New Hampshire, which we are all well aware has no income or sales taxes, is taking steps to make their business climate even more competitive. And, it’s working.

Let’s hope Vermont’s legislature considers both of these lessons as they debate things like $15 minimum wage, a new payroll tax to cover the cost of a government-run Paid Family Leave insurance program, and a Carbon Tax.

Rob Roper is president of the Ethan Allen Institute

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Do you support the new “ESSEX” Carbon Tax proposal? This would ultimately be a $240 milliondownload-6 tax on gasoline (32¢/gal), heating oil and diesel fuel (though not dyed diesel) (40¢/gal), and natural gas and propane (24¢/gal). Fifty percent of this revenue would be used to subsidize Vermont’s electric utilities for the purpose of lowering electric rates, and the other half would be redistributed to low-income and rural Vermonters via a rebate scheme. 

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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