Category Archives: Economy

Study: Ethanol Policies Drove Massive Release of Carbon

It’s almost as if the ethanol policies weren’t about the environment and were more about driving money into the pockets of special interests. Hmmmm…..

Federal ethanol subsidies aimed at slowing climate change have triggered the release to the atmosphere of about 30 million tons of carbon a year as farmers have cleared land to plant more crops for production of the renewable fuel, UW-Madison researchers said Wednesday.

The first comprehensive measurement of climate damage associated with ethanol was being presented at a conference in Texas by its lead author, graduate student Tyler Lark, and graduate research assistant Shawn Seth. The study will be submitted to a journal for peer review within weeks, said geography professor Holly Gibbs, who is also an author.

The researchers spent years examining satellite imagery and high-resolution maps showing the vegetation and soil types on land before it was cleared for new crop acreage.

[…]

The researchers determined the amounts of grasslands, prairie, wetlands and wooded parcels that were gobbled up from 2008 to 2012 during a period of high crop prices after federal policies began pushing ethanol as an environmentally-friendly fuel that could constrain burning of fossil fuels in cars.

A portion of the carbon was released when grasslands were burned, but plowing up soil exposed organic matter and began the process of decomposition began the slower release of about 75 percent of the carbon, Gibbs said. Most of that carbon would be released from soil over a period of decades, but some could take a century or more, she said.

Engineering Wisconsin’s Roads for Autonomous Vehicles

Foxconn is pushing Wisconsin to the forefront of technology and innovation.

Spurred by Foxconn Technology Group and its plans for a mega-factory in Racine County, state highway planners are studying the possibility of including special lanes for driverless vehicles on I-94.

Should that come to pass — and at this point it is only something being contemplated — it would put Wisconsin in the vanguard of what many believe will be a key part of transportation in the future.

Driverless cars have been developed and are being tested, but there are no highway lanes dedicated to so-called autonomous vehicles, a spokesman with the U.S. Department of Transportation said.

[…]

One possibility, Sheehy said, would be driverless lanes between the Foxconn plant and Milwaukee’s Mitchell International Airport as a way to move supplies and products to and from the factory.

He said the fact that Foxconn executives brought up the use of autonomous vehicles indicated the vision the company is bringing to the project.

“We’re thinking about two years down the road; they’re thinking 20 years down the road,” Sheehy said.

The Myth of “Free”

The news media is engaging in grotesque propaganda when “reporting” on the Obamacare premiums. Take this story:

Almost every county in the U.S.’s HealthCare.gov exchange has free health insurance plans available on the individual exchanges during the current open enrollment, according to a new analysis from Avalere, a public health care firm.

The Center for American Progress and the Kaiser Family Foundation also detailed significant swaths of plans that are inexpensive for people eligible for subsidies.

THE PLANS ARE NOT “FREE”!!! They are paid for by the taxpayers in some cases, but that does not make them “free.” What it means is that the government took a dollar from one American and gave it to another to pay for health insurance. That is not “free.” That is “welfare.”

WEDC Approves Foxconn Deal

Excellent. And the guarantee from Gou is icing on the cake.

The WEDC board approved the deal, 8-2, after protesters shouted at the agency’s directors as they voted to go into a private session. The pair of no votes came from state Sen. Tim Carpenter (D-Milwaukee) and Rep. Dana Wachs (D-Eau Claire), who is running in the Democratic primary for governor.

Gov. Scott Walker and Foxconn’s billionaire founder Terry Gou will sign the 29-page contract Friday afternoon at SC Johnson with U.S. Speaker of the House Paul Ryan of Janesville on hand. 

Coming after critics pounded an initial deal with Foxconn Technology Group of Taiwan, the state’s final contract with the company includes greater requirements for job creation and calls for Foxconn and Gou to stand behind those job requirements to the tune of up to $500 million or more.

Wisconsin Economic Development Corp. head Mark Hogan said the Walker administration had always planned on tougher job requirements and didn’t add them in response to criticism. Hogan touted the personal guarantee from Gou as “highly unusual” but declined to say when the state had first asked Gou for it.

“It really speaks to the level of commitment and confidence that he has that this is going to be a great investment not just for him but for the state of Wisconsin,” Hogan said of Gou. 

Taxes and Regulations Drive Up Costs for Consumers

The results are the same irrespective of the product.

California’s legal marijuana marketplace is coming with a kaleidoscope of new taxes and fees that could influence where it’s grown, how pot cookies and other munchies are produced and the price tag on just about everything.

Be ready for sticker shock.

On a retail level, it costs about $35 to buy a small bag of good quality medical marijuana in Los Angeles, enough to roll five or six joints.

But in 2018, when legal sales take hold and additional taxes kick in, the cost of that same purchase in the new recreational market is expected to increase at the retail counter to $50 or $60.

At the high end, that’s about a 70 percent jump.

There is already a robust black market for marijuana in California. This will help it continue to thrive.

Assembly Passes Mining Bill

It’s good to see the state legislature back at work.

Assembly Bill 499 would replace a law that essentially bars companies from extracting minerals such as copper, gold and silver because of pollution concerns.

Rep. Rob Hutton (R-Brookfield), the chief Assembly sponsor of the bill, said the measure would allow Wisconsin officials to consider mining proposals just as its neighbors have for decades.

“Minnesota is doing it on our left,” he said. “Michigan is doing it on our right. We need to be part of that discussion.”

[…]

Wisconsin is the only state with such a restriction, which has kept mining companies out of the state since Rio Tinto Kennecott closed the Flambeau mine in Ladysmith in 1997 after four years of mining copper, gold and silver.

Supporters of the bill say that new technology allows for safer, cleaner mining that would bring needed jobs to rural areas.

Environmentalists say opening the door to metallic mining would threaten state waterways.

Dealers Push Back on Tesla Law

Uh huh.

JANESVILLE—Tesla seeks a change to state law that would allow it to open its own stores and service centers in Wisconsin, but it could face pushback by some traditional auto dealers.

[…]

He said the law could circumvent what he considers healthy competition by dealers under a current law structure that he said ultimately benefits consumers.

“The purpose of the laws on the books, it’s well known. If you have multiple (local or regional) representatives — in this case, dealers — it produces competition. That’s good for the consumer. If it’s a factory-direct sale, you have one source, and there is no other source of competition,” Clapper said.

The rule change could cut licensed dealerships from the equation and offer “no advocate between the consumer and the manufacturer,” he said.

I completely understand why the dealers would push back on this change in law. After all, this is their business model and they don’t want to see it changed. But their arguments don’t hold water.

The root of their argument is that dealers provide value by introducing competition into the market for consumers. This was true 50 years ago when there were only really three manufacturers in the market (Ford, GM, & Chrysler). Now there are not only dozens of manufacturers, but consumers can literally shop for care all over the country via the internet. In fact, I’m willing to bet that most dealers would admit that many of their customers walk into the showroom already knowing a lot about the vehicle and how much they are willing to pay. Their argument is no longer valid in our modern economy.

Dealers do provide value and I’d think that many consumers would still prefer to buy through a dealer where they can have a relationship and great service. But some consumers would rather buy direct from the manufacturer, and that’s OK. Just like some people buy their computers and phones over the internet and some still like to go to Best Buy or Wal Mart to get them.

Lawmakers should resist the urge to keep forcing an unnatural market condition just to appease the automobile dealers.

 

Drones at Work

Doing the work Americans won’t do?

It could be a scene from Blade Runner 2049; the flying drone hovers in the warehouse aisle, its spinning rotors filling the cavernous space with a buzzing whine.

It edges close to the packages stacked on the shelf and scans them using onboard optical sensors, before whizzing off to its next assignment.

But this is no sci-fi film, it’s a warehouse in the US – one of around 250,000 throughout the country, many gargantuan in size: retail giant Walmart’s smallest warehouse, for example, is larger than 17 football fields put together.

And these automated drones are now doing the jobs humans – on foot, or operating fork-lift trucks and mechanical lifts – used to do: and they’re doing them more cheaply and more accurately.

Union Membership in Wisconsin Plummets

The MacIver Institute churned through the numbers for us. For all of the wailing from unions, they really aren’t that popular when people aren’t forced to be in them.

Since Act 10 and right to work, there have been some interesting developments across Wisconsin. UnionStats.com compiles Census Bureau data and provides a great look at some of the Wisconsin metro areas’ union data.

In the metro area of Madison, a hive of organized labor, union membership has decreased significantly since its peak of 21.1 percent of the workforce in 2010. When the law really started to effect change in contracts in 2012, the rate dropped to 10 percent. The state’s capital city employs many of the state employees affected by the legislation, – many of whom joined the massive, big labor-led protests against Act 10 at the Capitol in late winter 2011.

Despite liberal Madison’s seeming love of unions, only 5.4 percent of Madison area workers were union members in 2016. While there were well over 56,000 members in the Madison metropolitan area in 2010, there were just over 20,000 as of the most recent data.

The Fox Cities area, including Appleton, Oshkosh, and Neenah, also has seen declines, although not as pronounced as Madison. A peak of 16.5 percent in 2010 followed a drop in 2011 to 11.6 percent. Similar results followed the introduction of right-to-work freedoms, with a drop from 11.2 percent to 9.6 percent from 2014 to 2015. Union membership continues to decrease.

The Milwaukee metropolitan area saw a sharp decline in union participation following implementation of the right-to-work law. In 2014, the rate was 10.2 percent before dropping to 7.4 percent in 2015. The rate has since risen to 9.1 percent.

Overall, the state of Wisconsin has seen recent decreases across the board, including declines following both reform measures. The worker exodus from union was more dramatic early on. A 29.1 percent drop in union membership rates in 2015 was succeeded by a modest decline from 8.3 to 8.1 percent in 2016. Close to 355,000 employees were union members in 2010. More than 125,000 Wisconsinites have left their unions since 2010, with only 218,000 members today.

Trump acts on Obamacare

My column for the Washington County Daily News is online. Here you go:

President Trump, frustrated with Congress’ failure to repeal Obamacare, has begun to take unilateral action to reintroduce market forces into the health insurance market and pick at the pillars of Obamacare. His actions are a great first step.

Before getting into the specifics of Trump’s actions, we must note that the continued concentration of power in the presidency is abhorrent and an existential threat to liberty. That concentration has been progressing for decades, but greatly accelerated during the President Obama’s terms. Whereby Obama bragged about governing with a “phone and a pen,” Trump is exercising that same arbitrary authority. And while Trump’s most recent orders are good policy, the same power can and will be used for bad policy and worse. The fact remains that so much arbitrary power — the power over the lives of hundreds of millions of Americans and trillions of dollars — should never be concentrated in the pen of one person.

Obama used that arbitrary authority to implement Obamacare and make changes to our health care insurance market — sometimes in ways not legal. Trump is using that same arbitrary authority to make different changes to our health care insurance market.

Trump’s first executive order was a series of directives to various cabinet agencies and tweaks to find ways to allow more health insurance options and more flexibility in the health insurance market. The first directive was to the Labor Department to find ways to allow small businesses and individuals to collectively buy insurance through association health plans.

Allowing small businesses and individuals to group together — particularly if they are allowed to do so across state lines — would allow them to gain more purchasing power, better rates and in some circumstances, alleviate them of many of Obamacare’s regulations by shifting their plans under federal regulation instead of state regulations.

The second thing Trump’s order did was to allow people to buy more kinds of short-term health insurance plans. Obama limited these plans to 90 days, but allowing people to by plans for up to a year provides much more flexibility to people between jobs or open enrollment periods.

The third thing Trump’s order did was allow employers more ways to give employees tax-free money to pay for health care expenses elsewhere. In the past, some employers that did not provide health insurance could instead give their employees money to buy insurance on the individual market through a Health Reimbursement Arrangement (HRA). Obamacare forbade this accommodation and Trump’s order allows it again.

These series of changes are all positive and allow for more flexibility and competition in the health insurance market. It was Trump’s second action, however, that really undercut Obamacare. When the Obamacare law was written, the lawmakers knew that it would dramatically increase the cost of health care insurance. It sought to address that by shifting costs to the taxpayers in two primary ways. The first way was to give subsidies to people buying Obamacare policies if they couldn’t afford it through a tax credit.

The second way was to mandate that the insurance companies providing Obamacare policies cut what they charge health care providers — even if those cuts results in a loss to the insurance company. This was done with the understanding that the taxpayers would pick up the losses of the health insurance companies, but the Obamacare law never appropriated any money for such subsidies. Lawmakers at the time were justifiably fearful of being accused of subsidizing the profits of big health insurance companies, so they did not appropriate the money. President Obama picked up the ball and began illegally giving the health insurance companies subsidies to prop up their profits beginning in 2014.

Trump is ending this illegal practice. Ironically, all Trump is doing is following the law as written. The result is that the insurance companies are still required by law to keep their billings lower — sometimes below costs — but they will not get a check from the taxpayers to cover those losses. They will be forced to either pass those costs on to policy holders through massive premium increases, or exit the Obamacare exchanges. The structural flaws of Obamacare will no longer be covered up with billions of taxpayer dollars illegally funneled to insurance companies.

Obamacare has already failed America. Trump is just trying to mitigate and hopefully reverse some of the damage.

On Merchants

“The parson lives on the sins of the people, the doctor on their diseases, and the lawyer on their disputes and quarrels. But the merchant lives on the wealth of the people. He never wishes for a poor customer or a poor country… the merchant has every inducement to seek and support the wealth of the state.”

– Pelatiah Webster

Layoffs at Tesla

That stinks.

Tesla has fired at least 400 employees this week, including associates, team leaders and supervisors, a former employee told Reuters on Friday.

The dismissals were a result of a company-wide annual review, Tesla said in an emailed statement, without confirming the number of employees leaving the company.

‘It’s about 400 people ranging from associates to team leaders to supervisors. We don’t know how high up it went,’ said the former employee, who worked on the assembly line and did not want to be identified.

Tesla Inc fired about 400 employees this week, including associates, team leaders and supervisors, a former employee told Reuters on Friday

Though Tesla cited performance as the reason for the firings, the source told Reuters he was fired in spite of never having been given a bad review.

Tesla is an innovative company that is pushing the boundaries of culture and technology. It is also a company that consistently fails to meet expectations, is propped up by taxpayers, and is apparently very poorly managed. It would be nice to see a better managed company acquire them, their patents, and move it forward.

What’s in Trump’s Executive Order?

While I continue to lament the fact that our federal government now operates largely by executive fiat instead of legislative action, these are all very positive changes.

Let more small businesses join together to buy coverage. Trump is directing the Labor Department to study how to make it easier for small businesses, and possibly individuals, to collectively buy health insurance through association health plans. Small employers may expand their ability to offer group coverage across state lines, providing them with a broader range of policies at lower rates.

[…]

Extend short-term coverage policies.The order would allow more consumers to purchase short-term health insurance plans. It directs agencies to lengthen the coverage of these policies and permit renewals.

[…]

Expand employers’ ability to give workers cash to buy coverage elsewhere.Health reimbursement arrangements are not well-known, but they figure into Trump’s executive order. Employers use them to provide workers with tax-free funds to pay for health care costs, mainly deductibles and co-pays.

Trump Administration Rolls Back Oppressive Environmental Regulations

Excellent!

The Trump administration on Tuesday will begin the process of dismantling President Barack Obama‘s signature policy to reduce greenhouse gas emissions from power plants, according to Environmental Protection Agency Administrator Scott Pruitt.

“Tomorrow in Washington D.C., I’ll be signing a proposed rule to withdraw the so-called Clean Power Plan of the past administration and thus begin the effort to withdraw that rule,” Pruitt said in a speech Monday in Hazard, Kentucky.

Several news agencies reported last week that the EPA would soon propose repealing the rule and seek comments from stakeholders about a replacement regulation. The plan signals that the EPA has opted against tinkering with the existing rule — which was never seen as a likely course of action — or scrapping it altogether, a decision that would have almost certainly drawn lawsuits.

It also marks the next chapter for a policy that has become a lightning rod in the debate over the government’s role in slowing climate change. The rule has been in limbo since the Supreme Court put it on hold in February 2016, after 27 states and other opponents filed suit.
I suspect that these regulations were never going to survive the Supreme Court anyway, but at least we won’t have to risk it.

Fearless Girls Paid Less

How funny.

The statue of a young girl staring down Wall Street’s famous stock market bull was installed to draw attention to gender inequality and the pay gap in the corporate world.

But in an ironic twist the firm behind the Fearless Girl statue will pay $5m (£3.8m; €4.3m) in a row over equal pay.

State Street Global Advisors (SSGA) has been accused by the US Department of Labor of paying hundreds of female executives less than male colleagues.

The firm denies the claims.

It said it wanted to bring an end to the matter.

The fund manager will pay the settlement to more than 300 senior female staff which were paid less than their male counterparts, according to the Department of Labor.

Foxconn Chooses Mount Pleasant

What wonderful news for Wisconsin.

RACINE — Residents of the southeastern Wisconsin town where Foxconn Technology Group plans a massive display screen plant greeted the announcement Wednesday with excitement about the possible economic boost and wistfulness about the community’s changing landscape.

Foxconn announced the location of its planned factory after months of negotiations with the company and the village of Mount Pleasant in Racine County. The company has said it intends to build a campus with about 20 million square feet of office space over 1.56 square miles, eventually employing as many as 13,000 people to manufacture liquid-crystal display screens used on phones, televisions, computers and other devices.

Tammy Graceffa, 54, the owner of the Hiawatha Bar and Grill just south of the plant’s expected location, said the influx of workers and her land’s possible purchase could bring her financial gains. But still, she found the moment bittersweet.

“Where we grew up and were raised will no longer be farm fields. It will be concrete and industry,” she said. “You can’t go back and say, ‘This is the road where we used to play ball.'”

Equifax Failed to Patch Known Vulnerability

Yikes.

Equifax was alerted to the breach by the U.S. Homeland Security Department on March 9, Smith said in the testimony, but it was not patched.

On March 15, Equifax’s information security department ran scans that should have identified any systems that were vulnerable to the software issue but did not, the testimony said.

As a result, “the vulnerability remained in an Equifax web application much longer than it should have,” Smith said. “It was this unpatched vulnerability that allowed hackers to access personal identifying information.”

It’s one thing to get hacked. It’s quite another to know about it and refuse to take basic countermeasures for weeks on end.

Republicans tackle tax reform

My column for the Washington County Daily News is online. Here you go:

In an attempt to rise from the ashes of their failure to repeal Obamacare, the Republicans in Washington are forging ahead with an ambitious tax reform plan. While it remains to be seen if Congress can accomplish anything substantial under Republican management, this tax reform plan needs to get done.

There are substantial political obstacles for any real reform of the federal income tax system. The first political obstacle is that the United States’ federal income tax has become so progressive that any real reform of it will be lambasted by political opponents with the old tired rhetoric that it “benefits the rich more.” And that rhetoric will be largely true if the benefit is measures in real dollars.

As of the latest figures from the Tax Foundation, the so-called “rich” pay the vast majority of the taxes — and they pay a disproportionate amount of taxes compared to their share of income. The top 10 percent of income earners earn 47 percent of the aggregate adjusted gross income while they pay 71 percent of the overall income tax burden. The top 50 percent of income earners earn 89 percent of the aggregate adjusted gross income while they pay 97 percent of the overall income tax burden.

Looking at the numbers from the alternate perspective, the bottom 50 percent of income earners earn 11 percent of the aggregate adjusted gross income while they pay 2.75 percent of the overall income tax burden. Our federal income tax system is beyond progressive. It is redistributory. It is almost a mathematical impossibility to reform the federal income tax system without disproportionally benefitting the upper half of income earners.

The second political obstacle to tax reform is the throng of lobbyists and special interests in Washington who will fight against reform. While the average American and business owner yearns for a simple and fair tax system, the lobbyists and special interests thrive in the system’s complexity. For every tax exemption, loophole, credit, and shelter, there is a constituency that will fight tooth and nail to protect it. Any attempt at simplifying the tax code will run into a withering fire from K Street.

Despite the obvious political obstacles, the Republicans are seeking to simplify and flatten the tax code. There are many components to the plan, but the thrust is very straightforward and sensible. They want to lower the overall rates while removing almost all of the loopholes.

Under the plan, the individual income tax framework wouldbe reduced from the current seven tax brackets to just three brackets with rates of 12 percent, 25 percent and 35 percent. But while reducing the number of brackets and the rates, the plan would eliminate all tax exemptions except for those for home ownership, charitable giving, retirement savings and higher education. The plan would also increase the child tax credit and the standard deduction.

As a point of comparison, the current highest tax rate is 39.6 percent, but the effective average tax rate of the 1 percent is 27 percent after all of the deductions, credits, and loopholes. Under the plan, even though the highest rate would be lowered to 35 percent, the effective tax rate will most likely increase due to the elimination of most of those loopholes.

For business taxes, the Republicans’ plan would lower the corporate tax rate from a ridiculously high 35 percent to 20 percent — slightly below he world average. The plan would also eliminate almost all of the loopholes that corporations use to avoid paying income taxes.

Perhaps more importantly, the Republicans’ reform plan would decrease the top tax rate on small businesses from 39.6 percent to 25 percent. Since most businesses in America are small businesses whose profits are taxed at the individual tax rate of the owners, they are usually paying a much higher rate than corporations, although corporate profits are taxed twice.

Finally, the Republicans’ plan would switch to a territorial system for taxing overseas profits of American companies, which is more in line with the majority of industrial nations. This would encourage American companies to bring home and spend the estimated $2.6 trillion in cash that they are currently holding overseas to shield it from confiscatory taxation.

Year after year, Americans have clamored for a simpler, fairer, less burdensome tax system for our businesses and our own incomes. The Republicans’ tax reform plan would go a long way toward delivering that kind of system. It is also the Republicans’ last chance to deliver on one of their big promises before the next election. For the sake of the American people, let us hope that the Republicans can overcome the obstacles and pass their plan into law.

 

Bill Climbs for Volkswagon

Ouch.

The diesel emissions cheating scandal will cost Volkswagen an extra $3bn (€2.5bn), because engines are proving “far more technically complex and time consuming” to adapt the company said.

The additional cost, for fixing engines in the United States, takes the total bill to $30bn.

Two years after the problems first emerged, Volkswagen is still struggling to put the crisis behind it.

Separately Munich prosecutors made an arrest in connection with the scandal.

West Bend School District to Require Personal Finance Education

This is excellent.

Personal financial literacy is set to become a required class for the district.

During an August board meeting, Assistant Superintendent Laura Jackson said the personal financial literacy course is already in place and making it a requirement would affect the freshman class and all subsequent classes.

East High School business education teacher Allison Holtzer said the course is currently elective, but she has heard support for making it a required course. Allison explained some young people “are making mistakes (financial) early on, which is just setting them up for failure later on.”

The goal of making it a required class would be to give all students a solid financial literacy foundation.

“We are trying to help this upcoming generation,” Holtzer said. She explained in the last decade there has been an increase in non-traditional credit use with interest rates between 300-1,000 percent and that 54 percent of Wisconsin residents live paycheck to paycheck.

The course is typically taken by juniors and seniors, but is open to sophomores. More than half of Wisconsin school districts make the course a requirement.

There are some other good additions and changes to the course catalog, but financial literacy is critical. I’m glad to see the coming change.