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How to Create Productive Jobs and Avoid Global Warming Bankruptcy
Raymond Richman, 2/9/2011

Yesterday, we suggested some measures that would promote a quick recovery. These included:

  • 1. Getting our international trade into reasonable balance by means of our proposed scaled tariffs that we would impost on China, Germany, Japan, and OPEC countries. It would create an estimated  4 million manufacturing jobs in a relatively short time. No government expenditures are involved. To the contrary, to the extent they maintain a trade surplus with us, we’ll realize billions in revenues. All we have to do is tell those countries that trade is a two-way street and that they have to increase their imports from us or we will impose the scaled tariff on all imports from them.

  • 2. Ending the foolish barriers to the drilling for oil and gas on public lands, offshore in the Atlantic and the Pacific. Besides creating a million jobs this would also diminish our dependence on foreign oil. The new oil and gas wells do not damage to the environment. Opening up public lands to drilling for oil and gas would create a million or more jobs.

  • 3. Using natural gas, thanks to the invention of the new technology of drilling from shale, natural gas has become enormously abundant. Our reserves promise to make us energy independent. It is less polluting than oil or coal. We should move immediately to convert buses and trucks to natural gas as T. Boone Pickens has urged. Doing so would open natural gas filling stations across the country and open the market for consumers to purchase natural gas powered automobiles. The increased use of natural gas promises to lower the cost of energy not only as a fuel for motor vehicles but to heat our homes, offices, and factories, and to lower the cost of electric energy to businesses.

There are other things we could do to stimulate business investment in the U.S.

  • 4. Abolish the corporate income tax. A distinguished University of Chicago economist, Prof. Arnold Harberger, now emeritus, showed recently that corporations that sell their products in the U.S. pass the tax on to consumers in the form of higher prices but they cannot do so for products sold internationally because their competitors are not subject to the U.S. corporate income tax. So the corporate income tax acts like a sales tax at home and puts American companies at a disadvantage in international markets. Moreover unlike the value-added tax, the fair tax, and other consumption taxes, corporate income taxes cannot be rebated to exporters. Most of our trading partners impose a value-added tax and rebate the tax to their exporters and impose the tax on our exports to them.

  • 5. Reduce the barriers to the erection of nuclear energy plants. Those concerned with the environment should be aware that their opposition to nuclear plants is opposition to clean energy. France gets most of its electricity from nuclear plants.

What is wrong with our current policies? Our subsidies to wind and solar plants promise to bankrupt the U.S. Moreover they tend to destroy the environment. Environmentalists argue oil and gas wells on public lands would spoil the views and hurt the animals. At the same time, they are oblivious to the ugliness of miles of solar panels and windmills and the damage done to plant and animal life. They are oblivious to the noise of the windmills and the fact that they kill thousands of birds each year.

Nevertheless, our objection is not environmental but economic. How much does so-called renewable electricity really cost.  One cost study published May 5, 2010 by Heritage Foundation’s Center for Data Analysis projects that a common Renewable Energy Standard would:

  • Raise electricity prices by 36 percent for households and 60 percent for industry;
  • Cut national income (GDP) by $5.2 trillion between 2012 and 2035;
  • Cut national income by $2,400 per year for a family of four;
  • Reduce employment by more than 1,000,000 jobs; and
  • Add more than $10,000 to a family of four’s share of the national debt by 2035.

Further it estimates its effect on GDP as follows:

The broadest measure of a country’s economic activity is gross domestic product (GDP). As the mandated level of renewable energy rises over time, so does the cost of electricity and so do the losses imposed on the economy. Compared to the no-RES baseline, GDP drops by $50 billion in 2012. The annual losses increase to $197 billion by 2020, $300 billion in 2030, and more than $325 billion in 2035. Summing up the impacts for 2012 to 2035 yields a total loss of $5.2 trillion. All of these impacts are adjusted for inflation to 2010 dollars. On a family-of-four basis, this lost income averages over $2,400 per year.

John Walker, author and radio commentator, wrote on 12/11/2010:

We currently import $770 billion of oil a year from foreign countries and 27% of that comes from Communist dictators or Terror supporters (OPEC). By offering 40% of our oil rich lands to bid to oil companies and natural gas companies the country could raise between $400 and $600 billion without raising anyone’s taxes. After the bidding was complete, 4.2 million jobs would be created in the energy sector (high paying) for pipeline building, drilling, and refinery construction." And, "However, what is not often discussed are the hidden costs of implementing the various methods of renewable energy. What many do not know is that the investments needed for the U.S. to make a timely switch to green technology would cripple our already weak economy.

At the 4th Intl Conference on Climate change, Spanish economics professor Dr. Gabriel Calzada addressed the claims that green policies create large numbers of jobs. In Spain, he observed, “green jobs are created by green rain” — huge taxpayer subsidies: €570,000 per green job created (about US$774,000). The cost per job created in the U.S. by “green jobs” is similarly astronomical. (See below.)

As a result of the tax-subsidized increase in the use of renewables from 1998-2009, the price of electricity in Spain rose by 77 percent, he observed. The Spanish economy is a wreck because the Spanish government led the world in embracing “GREEN’ sources of energy. About eleven percent of its electricity is produced by wind and solar plants. It is on the verge of bankruptcy. It has 20% unemployment. Its socialist government  announced in December that it would cut the subsidies to “renewable” energy and a host of vested interests, foreign and domestic, screamed to the high heavens for continuation of the subsidies.

That is what the U.S. is going to experience. Take the case of Abengoa, a Spanish company that the US government Department of Energy has agreed to loan $1.45 billion in order to construct a 250 – megawatt solar-thermal power plant in Arizona. The plant named Solana will be the largest solar plant in the world. Total cost of the facility should run in the area of $2 billion. The loan guarantee was necessary even though Abengoa Solar signed a power purchase agreement with Arizona Public Service Co.(NYSE: PNW), Arizona’s largest electric utility, to buy the energy produced by Solana for a period of 30 years. [At what price?] Solana will produce enough energy to serve 70,000 households and will prevent the emission of 475,000 tons of CO2 per year compared to a natural gas burning power plant. Abengoa Solar estimates that the Solana project will create between 1,600 to 1,700 new construction jobs and over 85 permanent jobs. Around 25% of the equipment and supplies required to build Solana will be imported.

Only 85 permanent jobs at a cost of $277 million per job. Worse, the project is bound to fail, leaving the U.S. government holding the bag for $145 billion. Why is it bound to fail? Because consumers will compare the cost of Abengoa’s electricity with the nearest natural gas producer, whose cost will be a fraction of solar electricity. Moreover, the loan is not all the money the government is putting in. The federal government is contributing a gift in the form of a subsidy of a several hundred million dollars, financed out of Recovery Act funds (Pres. Obama’s $800 billion economic stimulus program). Remember the taxpayers are going to bear the burden in the end.

Multiply this program by thousands like it that would be necessary to substitute for power produced from coal and natural gas.  The global warming expenditures are a sure prescription for a bankrupt U.S. We’ve already seen the process at work in Spain.

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Comment by Daniel, 2/11/2011:

The mindset promoted in this article is exactly what has driven the US into a recession it is not going to recover from so soon. I am deeply in favour of a free market economy, however this country needs to realise that a free market only works when

no one is excluded, that is everybody has at least the hope of contributing. the media in the us has for a long time been able to keep up the illusion of upward mobility for everyone, something that once seemed to be in the dna of every american. now however, more and more people even within the country are beginning to realise that upward mobility is virtually non-existent. america was not fast enough to adopt to new challenges. in today's globalised world it is hardly any longer possible to just launch a company from scratch, without any education whatsoever. the educational system is a catastrophe: the majority of people are uneducated, uninspired and dull. still believing that the market alone is going to solve the problem is utter foolishness.

the environmental issue is omnipresent and I am not talking about greenhouse gas emissions, I am talking about issues like water- supply that is comparable to that in third world countries, or growing issues with waste.

The US needs a new mindset, one that relies on sustainablity (not just in environmental but also in economic terms). you need a completely revised educational, political and health care system. only if this happens will people be able to unleash the power of the free market again. it takes more than desparate optimism or the stubborness in this article.

WAKE UP




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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]