The Tennessee Valley Authority’s (TVA) assets probably should be unwound and sold off, as David Frum has suggested. Although the TVA receives no taxpayer money, its hard to imagine that the moving parts of a privately run TVA would not be more efficient and lower cost than the current government-run system. At the very least, a privately held corporation would have some actual accountability. The TVA  is “not scrutinized by shareholders and, unlike traditional government agencies, it is self-funded, so it doesn’t have to justify itself to Congress to win annual appropriations.” The result? Last year, a TVA screw-up resulted in dumping “5.4 million cubic yards of waterlogged fly-ash” in the Emory River.

The TVA is the nation’s largest public utility. It provides power to 9 million Americans. And those 9 million Americans deserve power generation that gets them the most efficient, welfare-enhancing treatment.

The half-in/half-out approach of no Congressional appropriation oversight, mixed in with all of the effectiveness of a not-for-profit, Federal government-protected corporation simply screams inefficiency. Maybe the TVA is not in the same precarious position as the currently broke U.S. Postal Service, but there is no reason why the bulk of TVA assets: its dams, hydroelectric facilities, and power plants could not be auctioned off to the highest bidder.

Of course, getting rid of the TVA could be a precarious position for some members of Congress. When Senator Barry Goldwater ran for President in 1964, he included TVA privatization on his platform. For this, one voter reported that she could not vote for Goldwater because the Republican nominee planned to get rid of her TV. (This is not a winning position in America, even with the advent of cheap Hulu on the laptop or iPod.)

Oh well. At the very least, perhaps the TVA-run solar panels at Cocke County High School in Newport, Tennessee could be devolved away from Federal administration.

Zac Morgan is a law student at George Mason University and writes for the American Consumer Institute

Elected representatives seldom have the expertise needed to specify a technical matter such as the minimum “in-flight” separation between passenger jets needed for public safety, or even tradeoffs between jobs and lower prices for consumers.   For such matters, they rely on “experts” in the departments or independent agencies.  When Congress specifies the mission of each department or independent agency it grants authority to write regulations that can accomplish that mission. 

The Administration through its Office of Management and Budget (OMB) sets standards for how those rules are established.  The usual requirements are notice and opportunity for public comment and for any regulation with significant impact on the economy (i.e. more than $100 million/year), a formal analysis of that regulation’s cost and benefit (CB) to the public.  OMB’s Office of Information and Regulatory Affairs (OIRA) reviews the quality and compliance with standards for those regulations.  

Without CB analysis, public comment, and OIRA oversight, the public would be subjected to regulations that merely reflect the whim of the partisan appointees running departments and “independent” agencies (many of whom pretended to be exempt from CB analysis obligations).  Recent Presidents have appointed a scary list of political buddies to steer the departments and agencies.  The quality of their regulations and enforcement is horrible.

A competent CB analysis protects the public and helps pick rules that make the best sense.  CB analysis monetizes costs imposed on the public by a proposed regulation and monetizes benefits from that proposed regulation.  Regulators have found acceptable ways to monetize most concepts – even human lives and human suffering, frequent topics at the EPA and HHS.  A CB analysis should be performed for each reasonable variant of regulation so the regulator can pick the regulation version that presents the best benefit over cost profile.  After the regulation has been in place for some period, a retrospective CB analysis should be performed to validate that the regulation retains an acceptable benefit over cost profile for the public.

Unfortunately, cost benefit analysis has been performed inconsistently, poorly, and sometimes not at all.  The lackluster pattern persists in both Republican and Democrat administrations.  What makes this more alarming is the astounding volume of regulations headed our way due to recent Congressional actions.  

The Dodd Frank bill contains 259 rules “yet to be written” by the existing and new agencies, and another 188 rules Congress recommends.   The Affordable Care Act contains an avalanche of regulations and determinations that will choke the health care industry with reporting and paperwork burdens (e.g. it increases categories of injury and illness from the current 18,000 to 140,000).  Almost everything in these acts has substantial impact, and the regulations will be contested in court.  If consumers are to see benefits from these stacks of regulations, CB analysis must be built-in from the start.

Alan Daley is a retired businessman living in Colorado.  He follows public policy from the consumer’s perspective.

In the recent State of the Union address, President Obama highlighted his America Built to Last Plan – a blueprint for boosting domestic manufacturing.  The proposal called for giving a 20% income tax credit to manufacturers that bring their operations back to the U.S., a doubling of tax deductions for advanced manufacturing, and reauthorizing the expensing of businesses investment, along with other recommendations.  Citing jobs as the number one issue for the nation, his proposal is a “long term strategy” intended to bring jobs back into America.

Challenges Remain

While the concept of boosting manufacturing, on the surface, makes sense, it comes with many challenges.  First, as the chart below shows, except for World War II, manufacturing as a percent of total US employment has been on a steady and sharp decline.  This trend comes despite a low dollar that makes U.S. goods cheaper in overseas markets, and such trends are not easily reversed by a one-time tax stimulus.  However, it can be argued that lowering corporate tax rates in line with other countries can provide some competitive parity.  But, why just reduce corporate tax rates on manufacturing?

Manufacturing Chart

The problem with a single focus on manufacturing is that all industries are so intertwined that helping some sectors at the disadvantage of others can be somewhat counterproductive.  For instance, ending tax credits on some energy producers could have the unfortunate consequence of raising energy prices, which in turn could affect manufacturing costs.  For example, the energy cost to produce a single vehicle (including steel, glass, plastic and electronics) could total $2,000 across all of the stages of production – from raw materials to final assembly.  Along with energy, transportation is certainly part of the calculus of where manufacturers will locate, as are many, many other industries.  In fact, manufacturing and information technologies are so inextricable linked that the health of one depends largely on the other, as I will explain.  So, why lower tax rates for one industry (manufacturing) at the cost of all others?

Information Services Link to Manufacturing

Information services, consisting primarily of broadband, video and telecommunications networks, are a major linchpin to the success of domestic manufacturers – both as buyers and suppliers.  As a buyer, manufacturers see broadband networks as a necessary input to its production produce, a means to sell digital goods and software, and the linkage to communications, engineering and design.  Encouraging state-of-the-art broadband and wireless network provides manufacturers with a competitive advantage at home.  Just as industries had located near major transportation centers many generations ago, information transport is a necessary part in design, production, inventory control, distribution and sales.  As such, encouraging investments in information networks, say via tax breaks, is critical to the success of many industries, including advanced manufacturing.

As a seller, manufacturers produce the plant and equipment purchased and installed by network providers.  Just last year, the top ten cable and telecommunications accounted for nearly $50 billion in investment, and, in less than 30 years since the production of the first cell phone, wireless network companies have invested one-third of a trillion dollars in the US economy.  For every dollar invested more than two dollars of production cascades through the economy.  This means that information service providers are major buyers of manufactured goods, which makes this investment vital to spurring economic growth in the economy.  The expensing of plant and equipment purchased by these network companies will encourage more investment in state-of-the-art infrastructure, which would benefit many industries and provide another reason for manufacturers to relocate to the US.  Furthermore, providing additional tax advantages to these network services companies for the purchase of domestic plant and equipment would be doubly beneficial.

There is yet another important link between network service companies and manufactures.  As these investments are made, consumer products are designed and manufactured to ride on these networks.  Specifically, broadband and wireless services have created a market for manufactured consumer goods – smart phones, tablets, notebooks, laptops, desktops, monitors, software, routers and other equipment.  That in turn has encouraged development of web services like Google, eBay, Facebook, Amazon and millions of online and wireless applications.  Furthermore, fiber deployment and upgrades in wireless telecommunications and cable/video networks provide consumer services spark the consumer purchase of cell phones, teleconferencing equipment, set top boxes, digital cameras, HDTVs, game consoles (like Xbox), and so on.  Along with these computing and Internet-enabled devices is the derived demand for software and applications.  In effect, these network services are the path on which consumers ride using electronic consumer goods purchased and hopefully manufactured domestically.  It would be counterproductive to disadvantage network service companies or other information technologies for the benefit of manufacturers, much like it would be counterproductive to help one foot to run faster than the other.

The reality is that information technology service – like transportation, like energy and many other industries – go hand-in-hand with manufacturing and research & development.  There is no need to favor one over the other.

Is it better for the government not to pick winners and losers?

While it would be nice to see resurgence in manufacturing, focusing on manufacturing at the expense of other industries does not mean that more jobs will be created.  The fact is that stimulating one sector of the economy, while disadvantaging other sectors ignores the symbiotic relationship across many industries and that will likely lead to suboptimal results.  A better approach would be to broaden the plan’s focus and take advantage of these linkages.  That should mean broad and permanent corporate tax reforms across all industries, as well as a serious look at addressing the root causes of international competitiveness, if reversal of the manufacturing trend is important a long term strategy.  Picking industry winners and losers will not work to create lasting jobs.

Steve Pociask is president of the American Consumer Institute, a nonprofit educational and research institute.  For more information, visit www.theamericanconsumer.org.

Job creation is still the key economic assignment for U.S. politicians.  So why does the White House chronically obstruct business investment needing regulatory approval?  And let’s drop the pretense that the executive branch doesn’t clearly signal to regulators what “the right answer” is.  It does through its choice of appointee and enforces its will directly in conversation or indirectly through “mutual friends.”

There’s enough recoverable oil from Canadian tar sands to replace current U.S. imports from all hostile and unstable counties.  Investment in a pipeline that would reliably bring that Canadian oil to the refineries in Texas needs Federal approval.  Federal approval’s not forthcoming, even though it would create 20,000 well-paying jobs in the U.S. and improve Americans’ protection from international leaders who wish us ill.  China also wants the oil and will go to great lengths to win it from Canada.  Who are the regulators trying to impress?

The White House appointed an SEIU union attorney to the National Labor Relations Board (NLRB).  Quickly, the NLRB embraced a union complaint that Boeing was moving some aircraft production to South Carolina as punishment for the union’s chronic strikes in Washington State.  Boeing argued the labor is skilled but cheaper than in Washington.  The NLRB action could kill Boeing’s business plans to invest in a large assembly plant and create jobs in South Carolina, or tilt Boeing toward investing offshore – beyond the NLRB’s reach (but not beyond the Administration’s revenge through the government contracting process).    The sole Republican NLRB board member threatened to resign.  His resignation would deny the NLRB the quorum it needs to reach decisions, making it non-functional, probably for the balance of the White House’s current term.  Suddenly, Boeing and the complaining union reached an agreement – much as Boeing proposed before the NLRB tried to snuff the South Carolina investment and jobs.   Who were the regulators trying to impress?

AT&T asked the Federal Communications Commission (FCC) for a ruling on its plan to merge with T-Mobile.  AT&T wanted the spectrum held by T-Mobile so it could expand its investments in 4G LTE (an advanced wireless service) to cover 97% of the U.S. population, going beyond AT&T’s current customer coverage to include all 34 million of T-Mobile’s customers and an extra 55 million customers covered by neither carrier.  Neither T-Mobile nor its parent (Deutsche Telekom) has funds to make the upgrade to 4G LTE.  The FCC released a staff report on AT&T’s proposal, that featured the usual anti-carrier allegations (less competition, higher prices) but the report ignored the density of actual competition even after the merger, the benefits of offering a 4G LTE alternative to 97% of the population, and the obvious counter-moves by AT&T’s competitors to ratchet up quality (Sprint with Clearwire, and Verizon with Comcast and Time Warner’s spectrum).  Instead, the FCC separately concluded that the Universal Service Fund (i.e. money the FCC skims from consumer bills) should be used to upgrade wireline Internet access in FCC-specified areas – such as some that AT&T/T-Mobile proposed to serve.  The FCC behaves as if investment is good when government specifies how and where, but bad when the private sector makes a business decision.  Who are these regulators trying to please?

 Gibson Guitars in Tennessee was raided by Federal Dept. of Justice agents using SWAT gear and weapons – not about a violation of U.S. law, but about Justice’s pettifogging interpretation of India’s law governing how some special woods should be “finished” by Indian craftsmen, not by U.S. workers.  Gibson did nothing wrong: they followed the regulations for buying special decorative woods.  Gibson deserves applause, not harassment.  Jack-booting Gibson’s workers comes from Dept. of Justice employees who lack a full unit of meaningful work.  Instead of raiding and halting American manufacturers, perhaps they can go recover the automatic weapons that Justice gave to the drug cartel in Mexico.  Fast and Furious my foot!

Alan Daley is a retired businessman living in Florida.  He follows public policy from the consumer’s perspective.

The new technology has more than just national security implications for America.  In Ohio alone, researchers suggest that the new drilling permits will bring Ohio $14 billion in new revenue and 200,000 new jobs.  In an economy barely creating anything, 200,000 jobs sounds like a dream come true, but it’s the real deal.  In New York State, where permits are harder to come by and regulations are tighter, even the most conservative estimates still see increases in wages equaling as much as $2.5 billion.

Unfortunately, the Obama Administration has been hot and cold on hydraulic fracturing (known as “fracking” to many).  The EPA has been much more cold than hot.  Indeed, the EPA is expected in January to release its guidance to states aimed mainly at the new technologies.  Titling the guidance part of the “Safe Drinking Water Act”, the rules will add a wealth of bureaucracy and new processes.

For one instance, North Dakota’s Department of Mineral Resources Director, Lynn Helms, has suggested that the new rules on using Diesel fuel in the fracking process could put a moratorium on fracking in his state for almost two years as state officials work to rewrite the arcane and confusing EPA language.

The process itself is a safe one, having been deployed in some form for more than 45 years. The vast majority of fracking materials consist of water and sand. Smaller percentages of diesel fuel are used in cold weather conditions and other additives in other situations.  But Chris Faulkner, CEO of Texas-based Breitling Oil & Gas argues that, even in the case that dangerous chemicals were used, any problem is near impossible.  He says the process involves drilling down well below the aquifer and all materials are housed in thick steel pipe as they are pushed down the well.

Misguided by a sensationalizing media campaign against fracking and an unscientific documentary (Gas Land), some state officials themselves have been behind efforts to block fracking.  New York State has, for instance, put a moratorium on the process and they are already feeling the effects.  While their neighbors in Pennsylvania reap the benefits of new jobs and new revenue, New York’s unemployment still hovers at record highs while the only jobs added are low income.

Speaking at an event promoting future fracking bans in New York was Arthur Kremer, chairman of New York Affordable Reliable Electricity Alliance and a former Long Island assemblyman:

“At this moment, the state of Pennsylvania is eating our lunch,” Kremer said outside the hearing. “They’re raising millions of dollars in local communities from hydrofracking.  It’s not an industrial wasteland. They are having a great time at the expense of New York State.”
Unfortunately, celebrity voices like Mark Ruffalo resonate better with media and perpetuate common misconceptions about the science of fracking.  At the same rally, Ruffalo suggested fracking was somehow responsible for “radioactive” waste, wholly impossible.

Spending just minutes online, critics of the new process could find a nationwide database, created by the Groundwater Protection Council, that offers information about the materials used and safety record of each fracking well in the nation. It shows nothing unsafe and no major problems.  Indeed the EPA’s own Lisa Jackson spoke highly of the burgeoning new energy supply some time ago, before the political campaign started against it.  In the video she admits that she has no record of any contamination of water from the fracking process.

It’s time for politicians to stop humoring environmental activists and instead lean on scientists to answer these questions.  If that happened, the U.S. could reduce its foreign dependence on energy sources, create hundreds of thousands of new jobs, and consumers would see the benefits in their paychecks and on their energy bills.

Zack Christenson is a blogger for the American Consumer Institute who writes on technology policy.

Technical innovations plus opening restricted Federal areas can halt the need to import petroleum and create 1 million new jobs in the US by 2020, or 1.4 million by 2035.   Staunching imports from unstable suppliers would allow the US to retain $100 billion each year in the US economy, a stimulus taxpayers won’t need to fund.

Extraction of crude oil from tar sands is now both effective and efficient enough that it will allow the XL pipeline from Alberta to carry up to 0.83 million barrels/day (mbpd) to refiners in Texas.   Hydraulic fracturing (“fracking”) is being used to release gas and crude oil trapped in deep rock.  Fracking can be used on new wells and on wells once considered “depleted,” generating new supply of 1.4 mbpd of crude and equivalents.  Exploration and production from Atlantic, Pacific and Gulf of Mexico waters and from Alaskan areas could bring the total to 4 mbpd by 2020 and 10 mbpd by 2035.

The XL pipeline and fracking can operate under reasonable regulations that have been in place over the last 2 decades.  Likewise, reasonable regulations for operating shallow and deep water exploration have been around for a few decades.  If enforced, they can secure safety.  The Alaskan ANWR area remains an emotional issue with the public, but it is a small piece of the total potential.

Alan Daley is a retired businessman living in Florida.  He follows public policy from the consumer’s perspective

Prior to the mid-1980s, restoring employment to a pre-recession level took 6 months, but this time it will take 60 months.  We welcome gains in jobs, but they are a Potemkin village if they cost the taxpayer $278,000 apiece.   Realistically, we should focus on crafting medium and longer term plans.  Consumer spending is and is likely to remain limp.  Government spending is in political deadlock due to our mountain of national debt – whose interest payments could crush us or force us into radical inflation.  If you hear glib speeches on easy fixes to our jobs shortage, don’t believe them.  Only Washington talking points are reliably shovel-ready.  The most plausible catalysts for a jobs recovery are US exports and business investment, including business formation.

In the exports market, products from low-skill workers are uncompetitive due to our comparatively high wage rates.  To succeed in the medium and long term, McKinsey believes we will require more graduates with high demand skills, finding ways to win in international competition, innovation and scaling up of company size, and removing regulatory impediments to investment and job creation.

Refocusing US education to equip students for success in international commerce will take a generation or more.  Removing regulatory impediments could be done quickly if fostering investment and meaningful jobs is a serious priority.  US prowess in innovation is strong, but other nations are improving.  Building sustainable advantages for winning in international commerce is challenging as those advantages will need to evolve.

We have the talent, the resources, and certainly the need to take this on.  Progress will pay off gradually through desirable employment in both large and small businesses.   What we lack is leadership determined to make it happen.

Alan Daley is a retired businessman living in Florida.  He follows public policy from the consumer’s perspective.

According to a study released in March as part of the Chamber of Commerce’s Project No Project initiative, almost 2 million jobs are sitting, waiting and wishing to start, but are mired in regulations, awaiting government approval, or caught up in some other government bureaucracy.  The authors of the study looked closely at 351 new solar, wind, gas, coal, hydroelectric, or other energy creation and transmission programs that have been delayed or shut down by government regulation, litigation or bureaucracy.

The term “shovel-ready” may well have lost its believability after countless promises from the previous stimulus bill, but these projects are truly ready to begin, often completely funded, and just stuck in regulatory limbo.  The authors use multiplier analyses to look at an economy wherein these programs were allowed to continue.  Breaking the programs into two phases, initial construction and operations, the authors see the long-term economic effects of the new energy programs.

In the construction phase, the authors expect the creation of over a million jobs ($352 billion in employment earnings) and $1.1 trillion in additional GDP.  The long-term maintenance and operations phase, then, was projected to produce another 800,000 jobs and $2.3 billion in additional GDP.

It seems like policymakers and the White House have not taken the population’s temperature on this issue.  A poll done just weeks ago finds overwhelming support for the creation of new energy jobs.  The poll, commissioned by the American Consumer Institute, found that over 92% of Americans feel the economy is weak.  What’s more interesting is how they think it can be solved.  Over 90% of respondents think that an investment in energy projects would benefit the economy and create new jobs.

When the pollsters break down energy jobs by type, only one type of energy program (nuclear) doesn’t get popular support.  Others, like natural gas, with over 80% support, are viewed positively by the broad population.  Consumers also overwhelmingly believe that these new energy projects will help to drive down the price of energy for consumers.

The energy study illustrates the massive benefits of a deregulated energy sector, and with overwhelming popular support from consumers, one has to wonder what exactly is it that is keeping policymakers and the current administration from acting to release over a million jobs from the clutches of an expanding regulatory bureaucracy.

Zack Christenson is a Chicago-based blogger who writes on consumer policy.