March 3, 2009
Repudiate Obama’s Carbon Regulation Plans to Start Economic Recovery
by Bill Levinson
Banking problems and “toxic assets” are major contributors to the ongoing decline in the stock market, but it is quite likely that investors took them into account last year. The 800 pound gorilla in the living room that nobody seems to want to talk about consists of Barack Obama’s agenda (per his State of the Union Address) to impose taxes on all fossil fuels, or require users of fossil fuels to buy carbon offset credits from the modern counterparts of medieval indulgence peddlers.
As long as this agenda continues to menace the United States, investors are rightly reluctant to invest in American manufacturing, transportation, and other energy-intensive sectors. If, however, enough Senators (including Democrats from coal-producing and manufacturing states) pledged to vote against and filibuster Obama’s cap-and-trade agenda, it would restore investor confidence, break the downward momentum of the stock market, and set the stage for an economic recovery.
The stock market’s decline is obviously being driven by the fact that most Americans recognize that their new President (B.A. in political science, graduate degree in law, career as a “community organizer”) is totally incompetent in the fields of economics, business, and manufacturing. It is well known that it is far better to be thought a fool than to open one’s mouth and remove all doubt, which Obama’s State of the Union speech did quite effectively. The stock market took a nose dive the next day because investors realized that this individual is totally clueless as to how the economy really works. Obama’s previous pledge to create five million “green” jobs reinforces this observation because most people know that economically viable jobs tend to create themselves. Henry Ford, for example, did not need a dime of Federal money to create an entire business sector, associated spin-off industries, and millions of well-paying jobs. Bill Gates did not need government mandates or assistance to create an entire new industry either.
Obama’s infatuation with “renewable” and “green” energy therefore underscores his total lack of competence, and Wall Street knows it. A solar or wind home system delivers after-tax income because electricity must be paid for with after-tax dollars. We researched such systems for our own home, and a solar system would need 30 years to pay for itself even with a 30 percent tax credit from the government. (Performance would admittedly be better in the Southwest, where there is more solar energy.) If someone could develop an economically viable solar system in the near future, they would do it because the resulting profits would be enormous. Wind turbines do somewhat better, but you need a place to put one. The fact that power companies and factories are not buying more of them, however, shows that they apparently cannot pass a Net Present Value analysis. In other words, Obama’s energy agenda is the product of fanciful wishful thinking as opposed to reality, and it is hardly surprising that no investor wants any part of American manufacturing until Congress puts this to rest for good.
Carbon taxes or cap-and-trade mandates would not even deliver the purported benefit of fewer greenhouse gases. Corporations could simply opt out of compliance by moving their smokestacks, all their carbon dioxide, and the high-wage jobs that go with the smokestacks to places like China that would be more than delighted to provide cheap energy. California has already turned itself into a business world pariah, and no entrepreneur in his right mind would invest money in that state. Obama’s energy policies would simply do for (or to) the entire country what California has already done to itself while knifing the blue collar workers and union members who helped elect him.
Kimberley Strassel’s “If the Cap Fits: Why our CEOs are warming to Kyoto” describes the Climate Action Partnership, whose membership pretty much speaks for itself. Many if not most of USCAP’s for-profit members need government support for their continued survival, while others are non-producers that need outside money to pay their employees and directors.
There was a time when the financial press understood that companies exist to make money. And it happens that the cap-and-trade climate program these 10 jolly green giants are now calling for is a regulatory device designed to financially reward companies that reduce CO2 emissions, and punish those that don’t.
Four of the affiliates"Duke, PG&E, FPL and PNM Resources"are utilities that have made big bets on wind, hydroelectric and nuclear power. So a Kyoto program would reward them for simply enacting their business plan, and simultaneously sock it to their competitors. Duke also owns Cinergy, which relies heavily on dirty, CO2-emitting coal plants. But Cinergy will soon have to replace those plants with cleaner equipment. Under a Kyoto, it’ll get paid for its trouble.
DuPont has been plunging into biofuels, the use of which would soar under a cap. Somebody has to cobble together all these complex trading deals, so say hello to Lehman Brothers. Caterpillar has invested heavily in new engines that generate “clean energy.” British Petroleum is mostly doing public penance for its dirty oil habit, but also gets a plug for its own biofuels venture.
Finally, there’s General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.
We were not particularly sorry when Lehman Brothers went out of business, because it is clear that a company that needs government regulations to force people to buy its product (carbon caps) is a corporate welfare parasite that leeches off society while contributing little or nothing in return. Meanwhile, if General Electric was up to the job of developing economically viable solar panels and wind turbines, it would not need government mandates to compel people and businesses to buy them. Its membership in USCAP suggests that it is not up to the job, as reinforced by the 80 percent drop in its stock price from a high of about $40.
Here is a list of the U.S. Climate Action Partnership’s remaining members (noting that Lehman Brothers went bankrupt). Some appear well-managed, but the reader should also recognize the prominent losers: General Motors (on life support from the American taxpayer), Chrysler LLC (another basket case), and General Electric. Non-producers include the Environmental Defense Fund and the Pew Center on Global Climate Change.
There is an old saying, “Dance with the one that brought you.” Barack Obama must decide quickly whether he is on the side of the blue collar workers and unions that played a major role in his election, or on the side of the Climate Action Partnership, the modern counterparts of medieval indulgence peddlers, people who make millions of dollars from books and movies about global warming while their own carbon footprints are big enough for King Kong and Godzilla put together, and similar climate profiteers. If he does not side with the American worker and American investor very quickly, then Congress needs to make it clear that it will not support his incompetent and irresponsible energy policies.