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May. 12 2010 - 8:19 pm | 664 views | 0 recommendations | 7 comments

No free lunch: Why Republican policies always end up biting you in the ass

The Wall Street Journal today editorializes that the Cape Wind clean energy project that recently won the approval of the Interior Dept. is a “lousy deal” because it may, if the pricing scheme proposed by the company operating the wind farm is approved by regulators, produce energy at double the price consumers in the area now pay.

Here’s what’s also going to be expensive, if we don’t move aggressively toward a clean energy future:
•Rebuilding after hurricanes, which will be stronger and more frequent with a warmer Atlantic Ocean. Hurricane Andrew, in 1992, cost $41.5b in 2010 dollars.
•Cleaning up after oil spills, such as is now being played out along the Gulf Coast. Current costs are estimated at $350m and rising.
•The price of food, as fertile soil is lost to heat and drought.

I could go on, but you get the point: Conservatives don’t want to pay now, but we’ll all end up paying later. The difference is that the costs now are knowable, and so easier to plan for.

The Journal says that Cape Wind will result in “$443 million in new energy costs.” It doesn’t say among how many people these costs will be spread out, or over how long a period of time; if it’s 5 million people who might get power from Cape Wind, over 40 years (which seems like a reasonable amount of time for it to function), then we’re talking about a whopping $2.21 per person per year.

Disinvestment—the inevitable result of their tax-cuts-to-solve-everything approach to governing (if you can call it that)—also ends up costing more in the long term. Case in point: In 1978 Californians voted to cap their property taxes. This was hailed as a great moment, the people taking power away from big scary mean government, and launched an anti-tax movement that can be said to be the roots of the “Tea Party” (which boasts among its membership people who are on Medicaid yet rail against “people looking for handouts” and “the whole welfare mentality”). But since public schools get the bulk of their funding from this pool, the state’s schools went from tops in the nation to down around Mississippi’s somewhere. Obviously this would not have been the sole factor (conservatives will probably blame unions and immigrants), but it cannot be said that the way to improve outcomes in education is to reduce its funding.

Now you’ve got companies saying the students we’re graduating are too dumb for them to hire (I can point you to the surveys if you’re interested). So we get a lot of unemployed people. But Republicans don’t want to pay unemployment benefits. Some of these people turn to crime—and Republicans are always happy to lock people away. Here’s the problem: It costs about $25000 a year to incarcerate someone.

California spends about 1/3 that figure per pupil on public education. So would you rather educate people now, or get car-jacked by them later?

This would be funny except the pattern gets played out again and again. Look at the news today: It’s conventional wisdom on the conservative blogs (and leaking into the mainstream press) that the reason Greece and Spain are so screwed (if they are indeed screwed; the $18b per year bailout compares favorably with the $144b a year we’re spending in Iraq) is because of their overly generous welfare states. The implication is that there but for the grace of God go I, i.e., the US will be headed down this road if we don’t cut back on entitlements (somehow the Pentagon’s budget, which has nearly tripled in the last 20 years, is always left out of these discussions).

Now consider Republican policies: They want every company to be free to move their operations to wherever labor is cheapest. They don’t want to pay to retrain the workers left behind for the service jobs that are all our economy creates anymore. They don’t want to give them unemployment insurance over the long term. They don’t want to pay to educate their kids, so that the kids don’t grow up into the same predicament as their unemployed parents.

So what are they supposed to do? Live off the fat of the land? Become bond traders? Whoops, that won’t work—their education is shit. Work retail? Great—but who’s going to buy the stuff they’re selling?

Is there something I’m missing here?

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  1. collapse expand

    You are missing something, in fact quite a bit.

    Your economic claims lack foundation, and many of your facts lack basis or are bent.

    Greece and several other EU countries are in financial trouble because they over spent on credit.

    Governments can’t effectively plan the economy; markets do a much better job. For instance, look at financial regulation. Senator Dodd and the President are trying to push through new financial regulation. They still don’t fully understand the causes of the financial crisis and the government commission looking into the causes hasn’t reported. But Fannie Mae and Freddie Mac were contributors to the financial crisis. Senator Dodd knows this well. The government excessively pushed housing and puffed it up. Senator Dodd even got a sweet deal on a housing loan. And they aren’t reforming Fannie and Freddie.

    When government does something the result is more costly and less efficient. Look at Greece through the eyes of an economist, not a political. Try facts. Make your decisions upon evidence. Wishing on a start doesn’t work very well.

    • collapse expand

      You don’t address the larger question of how Republican policies end up costing more in the long term, foiling their very purpose, but if you want to get into a discussion about the financial crisis I can do that too.

      Your statement “markets do a much better job” is the most stunning denial I have read in a long time. I mean, you must be joking. Not even Alan Greenspan believes this anymore. How good a job did markets do in the fall of 2008?

      This is another myth (itself a contradiction) that has leaked into the Big Dumb Media of late, and which Mr. Lepp has swallowed: That we don’t know what caused the financial crisis, but Fanny and Freddie were responsible. Here’s the fact: Fannie and Freddie don’t sell loans to consumers. They buy them and securitize them. They were only two actors among dozens who were doing this. Who sold those loans to consumers? Under-regulated private industry.

      At WaMu, the biggest seller of “liar loans” during the boom, employees were encouraged to foist these risky loans on people who qualified for better ones because the company could make more money packaging these loans, compared to traditional ones, into securities and selling them off. And who rated these crap securities as equivalent to US government debt? Moody’s and other credit-ratings agencies—private companies with no oversight which are paid by the banks whose products they’re objectively rating. Internal emails have shown that those doing the ratings for Moody’s were bumping up the ratings to get more business.

      No, the system failed because a bunch of people in government, who now admit that this was an error of judgement, decided against regulating derivatives such as CDOs and CDSs. $600 trillion was running around the financial markets with no one having any idea where the was at any one time, who owed what to whom, what loans the securities were actually composed of, etc. One day people stopped believing that everything was going to be fine and it all went to pot.

      I’m not saying government had no role. The Fed probably kept interest rates too low for too long. The Bush administration’s efforts to encourage home ownership among people who had historically been excluded from it was, while one of the few decent things it did in 8 years, a factor in pushing risky loans on people who couldn’t afford them. But to say that markets are always right would seem to be the statement of someone who has been asleep since September 10, 2008. It’s just ridiculous. And to argue that because we don’t precisely know what caused the meltdown we shouldn’t do anything to keep it from happening again is just rhetoric from these free marketeers who’ve been completely discredited. Economists are still arguing about what the unemployment rate was in the third quarter of 1983. (Literally.) If we wait until there’s consensus, nothing will ever get done. We have a pretty darn good idea of what went wrong: There was a very transparent system of regulation in place from the 1930’s to the 1980’s. Markets were never more stable, and economies grew. Slowly, this system was dismantled, and then all hell broke loose.

      Have you ever heard of Occam’s Razor?

      In response to another comment. See in context »
      • collapse expand

        I pretty much agree with what you have written, but I do think you downplay the role of the government’s policy of keeping interest rates low. Unregulated complex financial products aside, this crisis was brought on by something quite simple: a housing bubble.
        And, I don’t see much good in Bush’s (and Clinton’s ) policy of pushing housing as an unqualified good. For one thing it saddled many people with too much debt and a very illiquid asset.
        Pushing housing ownership was just one part of Bush’s “ownership society” agenda. It all sounded very nice, but if you examine it, you can’t help but think that it pushes the idea that to be a full member of society you have to own something. Of course, lots of people never owned the houses they “owned” anyways.

        In response to another comment. See in context »
        • collapse expand

          I agree that low interest rates were at the root of it. Greenspan was trying to engineer a “soft landing” out of the Internet boom, which he had done masterfully well a couple of times before, but he ended up trading one bubble for another. Still, we could have had low rates, and even many of the lending abuses that occurred partly as a result, without ending up in a near-total meltdown of the global economy. (It’s difficult to overstate how severe a situation it was for several days, or weeks–once money markets broke the buck, literally anything could have happened. The banks’ run on those funds could have been the China syndrome, to extend the metaphor.)

          It’s hard to see, though, how an unregulated $600 trillion market in opaque securities could not have caused problems eventually, or how it was a good idea to let speculators dick around with taxpayer-backed money whereby they use our safety net and keep all the money if they’re right, but get an FDIC bailout if they’re wrong. A lot if people, like William Greider, argued this for a long time beginning with the repeal of Glass-Stegall.

          As for the ownership society, you’re right again. I just meant to say that for once, Bush’s heart was in the right place.

          In response to another comment. See in context »
          • collapse expand

            Yeah, you’re right. But I would say go further and break up the big banks. (And, as my thoughts on the matter hold a lot of sway in congress and the white house, I am sure this will happen any day now.)
            Still, I have a hard time believing that Bush’s heart was in the right place. It seemed more like delivering customers to certain business interests, dressed up as a (sort of) populist measure.

            In response to another comment. See in context »
  2. collapse expand

    I have long thought the price of things should include cradle to grave cost of using the thing — environmental costs, disposal costs, etc. If we had to pay the REAL cost of gasoline, we would pay seriously more than double the current cost.

    And it is simply untrue to argue as herb Lepp does that government is ALWAYS less efficient. Somethings require government intervention. Anyone who remembers eastern rivers and lakes from the 70s knows the benefits of federal environmental laws. Anyone who grew up black in the south in the 60s knows the value of the Civil Rights Act.

    Of course, to make our government work better we first need to de-couple it from corporate control. Now there is a challenge.

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    About Me

    I've been writing and editing for national magazines for 11 years, the last few specializing in environmental journalism, with additional experience producing daily news for, and appearing as a commentator on, public radio, and editing and managing a website.

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