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Saturday, August 13, 2011

An end to ethanol pandering?

Subsidies for corn-based ethanol have for years been the third rail of politics in Iowa, home of the first presidential caucus. Just like social security in Florida, even suggesting that subsidies be cut has been the kiss of death for would-be presidential hopefuls. The Iowa Corn Promotion Board even has its own pro-Ethanol website.

Thus, it was very encouraging to see this article in Friday’s dead tree edition of the LA Times:
GOP presidential hopefuls take dim view of ethanol subsidies
Most of the candidates want to do away with the government subsidies, which cost $6 billion annually. The once-unimaginable message has support even in Iowa.

By Seema Mehta, Los Angeles Times

For decades, nearly every candidate who hoped to win the presidency has visited this state to pledge their allegiance to King Corn and to the government subsidies that have propped up its price and increased demand for it.

But for the first time, the GOP field is dominated by candidates who want to do away with such kickbacks. One even used his formal campaign kickoff in front of the gold-domed statehouse here to announce his opposition to such subsidies.
The reporter had chapter and verse about how the Republican presidential candidates were opposed to adamantly opposed to ongoing subsidies for corn-based ethanol. The reporter speculated that this might have to do with the importance of fiscal conservatism in the GOP primary this year, or even a decrease in the population of rural voters (who would presumably benefit from the subsidies).

The timing of the report might be a bit embarrassing to the NY Times, which in an unsigned editorial Monday called on Republicans to cut a $100 billion, 10-year ethanol subsidy. The NYT said that ethanol subsidies are being protected by House Republicans, even though (as it noted) the Senate has been unable to institute a reform that supposedly has bipartisan support.

I suspect what is protecting the ethanol subsidy is that the farm states are swing states in 2012 both for the presidency and control of the Senate. I suspect neither side wants to risk losing any votes in these states — since those who lose a subsidy are more likely to get upset than the general voting populace will be happy.

So despite the support of the GOP field and at least one former president, the corn ethanol subsidy is still with us — at least a little longer.

Tuesday, August 9, 2011

Runaway green jobs inflation

Last month, the Brookings Institute published a report entitled “Sizing the Clean Economy” which promises:
The “green” or “clean” or low-carbon economy—defined as the sector of the economy that produces goods and services with an environmental benefit—remains at once a compelling aspiration and an enigma.
The report claims to offer a definition of green jobs, but that was done several years ago by a San Mateo consulting firm working for a Next10, a California advocacy group.

Of more concern is that Brookings is perpetuating — if not magnifying — the use of “green” as a political statement rather than an economic concept. For as reputable a group as Brookings — the most prestigious economic thinktank on the left — this is troubling.

In previous incarnation as a green jobs project director, I decided that the “green” jobs concept seemed like sausages — you didn’t want to see how they were made (calculated) or it would make you squeamish.

An article from the Mackinac Center for Public Policy (in Michigan) shows how we should ignore the command to “pay no attention to that man behind the curtain” — because (as in the movie) he is no wizard. (Yes, Mackinac is trying to unmask the wizard while Toto is just a naïve little dog, but…)

I was aware of one of the problems in the existing definition. Suppose a building contractor switches from installing inefficient windows to energy saving windows? Voilà! We’ve created a green job!

At least that building contractor (or roofer or electrician) is doing something to make the world a greener place by reducing the need for carbon-based fuels. However, what happens if a janitor switches from traditional chemical cleaning solutions to natural ones? Voilà! Another green job!

Jack Spencer of Macinac interviewed one of the authors, Brookings analyst Jonathon Rothwell, and it gets worse.

First, all mass transit jobs are counted. So if we had bus drivers 20 years ago or Pullman porters 75 years ago, they were working in green jobs and they didn’t even know it.

Then there’s the unappealing matter of garbage. As Spencer puts it:
Regarding the matter of waste industry jobs being included as part of the “clean economy,” did the report include everyone from the designer of a landfill to the person who picks up the trash from the curb?

“Yeah, that's pretty much it,” Rothwell said.
In other words, much of what is counted as “green” jobs are jobs that already exist, have existed for decades, and (unless we have gross labor inefficiencies) are not really growth areas of the economy.

If you add up all the bus drivers and trash truck drivers, it certainly dwarves the number of people working in companies that make renewable energy products. It probably even dwarves the people in the building trades installing solar panels, double-pane windows and CFL light bulbs.

Meanwhile, advocates, politicians, and reporters are republishing these estimates without reservation or qualification. The politicians are intentionally misrepresenting the truth — because they want to claim credit for private sector job “creation”. VCs seeking government subsidies also want to exaggerate the benefits of their tiny little companies. I guess (as in other stories) the reporters are merely economically ignorant naïve.

This is not particular to green jobs, but is a problem anywhere politicians get involved. The arguments for attracting sports teams and their stadia are similarly suspect, both because of the “multiplier” effect but also because money visibly spent at a pro football game is money not spent on a college game, movie, or just a 24-pack of beer. (The problem of unseen substitution is exactly as predicted by Frederic Bastiat 160 years ago).

Again in my efforts to develop renewable energy jobs, we found there weren’t all that many in California, and that the perception this was a growth area exacerbated the mismatch of supply and demand by attracting more job seekers than there were jobs.

One of these days people will realize how much fewer jobs have actually been created (as opposed to shifted) by green technologies. I look forward to the day when we measure such jobs the same way we measure IT jobs or aviation jobs — in specific (identified) companies and industries. Certainly that’s the only measure that matters to entrepreneurs, employees, investors and others that have real skin in the game.