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Obama's New Environmental Regulations Would Weaken The Economy Further

June 25, 2013

By Diana Furchtgott-Roth

Federal Reserve Chairman Ben Bernanke is considering tapering off monetary accommodation, and European and Chinese economies are weakening. American stock markets are on the skids. The American economy shows many signs of fatigue.

So what should President Obama do? Surely, he should take steps to help the economy, such as by loosening costly regulations that keep Americans from working and firms from expanding.

But reportedly Obama will do the opposite in a speech at Georgetown University on Tuesday. He will override Congress and use his executive powers to write new rules to reduce greenhouse gas emissions even more than currently required. Current rules have cost many Americans their jobs and all Americans pay more for energy and related products than they should. Obama’s tougher rules will spread pain across America: job losses for many of us Americans and higher prices for all of us.

In a video posted on the White House Web site over the weekend, Obama once more laid out the industrial policy argument: Scientists will design new fuels, and farmers will grow them (cut to views of cornfields). Engineers will invent new sources of energy, businesses will produce and sell them (cut to electric cars), and workers will build new technologies (views of windmills).

White House sources say that the president will use his executive powers to reduce greenhouse emissions from existing power plants, rather than future plants. He also plans to increase efficiency standards for appliances and authorize wind farms and solar power plants on federal lands.

No matter that by some measures global temperatures have not risen for the past 15 years, and wind turbines and solar panels are imported from abroad, manufactured in China using electricity made by coal. The nation’s gasoline supply cannot absorb rising quantities of ethanol mandated by Congress because fuel consumption is declining. Cellulosic ethanol, required by law to be purchased by petroleum refiners and importers, is not produced in commercial quantities.

Greenhouse gas emissions have been declining since 2007, and fell by 1.6 percent between 2010 and 2011, the Environmental Protection Agency announced earlier this year. Required use of alternative energy technology might reduce greenhouse gas emissions further, but the new technologies make fuel and electricity more expensive, reducing economic growth.

The message that government can create jobs by requiring more costly technology is a siren song, seductive but empty. Yes, some Americans might be employed building the technology, but others lose jobs due to more expensive energy.

The Bureau of Labor Statistics gave up its green jobs survey this year after the 2011 count was embarrassingly low, 3.4 million jobs, despite $500 million in the stimulus bill for green jobs. By the end of 2011, combined expenditures of the Energy Training Partnership, Pathways out of Poverty, and State Energy Sector Partnership green jobs stimulus programs totaled $257.3 million. However, only 5,400 new jobs through the programs were retained at least 6 months, yielding a cost of $47,754 per job.

By reducing emissions through executive order, the president is stepping carefully between the blues and the greens which comprise part of the Democratic Party’s fragile coalition. Blue-collar workers want jobs and economic growth, and environmentalists, who do not care about growth, want conservation and lower emissions. These goals are fundamentally at odds.

Most obviously, increased regulation of carbon will reduce jobs in the mining industry, harming the 74,577 members of the United Mine Workers of America. Over 100 coal-fired power plants have closed since the beginning of 2010.

The Democrats’ blue collar supporters are one reason why legislation to regulate emissions, known as "cap-and-trade" because it would have capped emissions and encouraged firms to buy and sell rights to pollute, failed to pass the Democratic 111th Congress in 2009-2010, the first two years of Obama’s term.

The bill would have required EPA to shrink greenhouse gas allowances steadily to 2050. When any year’s emissions would have exceeded a firm’s cap, the firm would have to purchase allowances from the government or other companies. That is a tax under another name, driving up costs that would be passed on to consumers.

The revenues from the Kerry-Lieberman and Waxman-Markey bills, about $646 billion over 8 years, were too large for a Democratic Congress to support, even with Obama’s backing.

The president has blocked the Keystone XL pipeline, angering the blues, such as the Laborers International Union of North America. Not only would constructing the pipeline create construction jobs, but employment in Gulf refineries would expand to process oil from Canada.

LIUNA president Terry O’Sullivan said earlier this year, "I urge the State Department and the White House to move with all haste in completing the next steps in the authorization process. The Keystone pipeline will unlock thousands of good jobs for American workers and any further delay beyond the State Department’s current schedule will only result in prolonged economic insecurity for thousands of Laborers who would otherwise be working."

According to White House sources, Obama does not appear to have plans to approve Keystone in his Tuesday speech.

The president is making his announcement as some manufacturers are returning to America due to low-cost energy. The new French Vallourec Star pipe mill in eastern Ohio is making tubes for the electric pipe industry. Other companies making similar investments are Luxembourg’s Tenaris and China’s Tanjin Pipe. Royal Dutch Shell is building a $4 billion ethane cracker plant in Pennsylvania, and is planning on hiring 5,000 construction workers.

If these companies run into difficulties, their investors and shareholders will bear the losses. But when the government picks investments in risky new technology, taxpayers and the federal budget lose if the projects fail. Of the 33 energy loan guarantees made since 2009 under the Energy Department’s programs, 30, or over 90 percent, have shown signs of trouble, ranging from missed production goals to bankruptcy filings.

Companies which received loans or grants from the Energy Department during the Obama administration then filed for bankruptcy include Solyndra, Abound Solar, A123, Ener1, Evergreen Solar, Solar Trust of America, Energy Conversion Devices, and Beacon Power. Grant recipients Ecototality, SunPower, and Smith Electric have reported losses.

The Inspector General of the Energy Department, Gregory Friedman, found that employees of LG Chem, a battery manufacturer in Holland, Michigan, "spent time volunteering at local non-profit organizations, playing games and watching movies during regular working hours." LG Chem, meanwhile, sold batteries made in South Korea to U.S. firms rather than producing the batteries in Michigan.

The percentage of Americans who are employed or looking for work stands at 63.4 percent, the same as 1981 levels. With more Americans looking for work, the unemployment rate would be higher than its current level of 7.6 percent.

Raising the cost of energy at any time is poor economic policy, but especially when economic growth is slow. After four years of economic "recovery," the United States is stumbling along at 2 percent GDP growth, with 2.4 million fewer nonfarm payroll jobs than in December, 2007, at the start of the recession. Now is not the time for Obama to overrule Congress and slow the economy further.

Original Source: http://www.realclearmarkets.com/articles/2013/06/25/obamas_new_environmental_regulations_would_weaken_the_economy_further_100431.html

 

 
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