Thursday, January 21, 2010

John Stossel. T. Boone Pickens. Wind Farm Scams. Light Rail.

John Stossel's show tonight was about alternative energy and government rail projects.
I've made a solemn vow that I'm not going to write any more about the Climate Change Scam.

Maybe it was not a vow, just a general goal. Maybe Stossel is not going to talk about Climate Change and why they justify wind farms, except in a sort of general way.
Stossel started off with a short snippet of Al Gore and Texas Jillionaire T. Boone Pickens talking about the savings to be found in wind power. (Unh oh....I get a feeling that The Goracle and T. Boone have been looking for subsidies.)

He had a funny montage of all our recent presidents vowing and declaring that we would reduce our dependence on foreign oil, kinda like me vowing and declaring not to write any more about Climate Change Scams.
When Nixon was president, we imported 25% of our oil. Then we got the Department of Energy, it was charged with lowering this percentage, and we now import almost 70%. Stossel showed some T. Boone ads touting the purity and wholesomeness of wind power.

The first guest? T. Boone Pickens himself. (Pickens is a BIG deal in Texas.) They discussed a wager they had on the price of oil. Would oil be more or less than $100 per barrel on May 22, 2010. Stossel has the under, and Pickens has the over. Man, it must be fun to be able to place bets with T. Boone Pickens.

They discussed the T. Boone Pickens website, which shows the U.S. Wind Corridor. It runs from Central Canada down to my bedroom in Fort Worth, TX. Then they talked about why Pickens needs your money to subsidize his new wind and gas toys. (See H.R. 1835). If he could get these wind farms and gas operations going, it would reduce our dependence on foreign oil almost immediately. His project would only cost us $10,000,000,000.00. That's Ten Billion Dollars, if you have trouble counting zeroes.

They didn't discuss this, but if Pickens wants to profit from this operation, he should fund it by himself, and with the funds of other jillionaire investors, right?

(I'm more or less live-blogging this. Pickens claims that his wind farms will create jobs. Stossel is holding a baseball, and wondering if he can create jobs with the baseball. Get ready, fellow members of the Cult Of Frederic Bastiat ! ! ! We're getting ready for THE BROKEN WINDOWS PARABLE ! ! Lord have mercy, I geek out watching this show ! !)

Stossel showed some T. Boone commercials, showing how much it costs us to buy foreign oil. Pickens does these commercials with his own money, but they're basically trying to drum up sympathy for programs that require more of your money. The main thrust is that we need to act now (and have Congress vote to give Pickens....a boatload of money).

Then Pickens outlines a proposed incentive plan that makes Cash For Clunkers look like The Louisiana Purchase. I really can't describe all the things wrong with it. You buy a domestic car that uses domestic fuel (natural gas instead of diesel), and you would get a $65,000.00 tax credit. What's not to like? (Unless, of course, you're one of the 57% of Americans who have to pay Federal Income Taxes?)

1)The wind farms get tax credits, and that creates jobs.
2)Wind is currently priced off the margin, because natural gas has to be around $7.00 (per cubft?) for the proposed system to work.
3)Therefore a $10,000,000,000.00 subsidy is necessary.

Then John Stossel did it. He gave a physical demonstration of the best anti-Statist, anti-subsidy, anti-stimulus essay ever written. He made Frederic Bastiat proud, and threw a baseball through a window. A great moment in TV journalism.

Stossel lost a piece of glass, and created a job for a glassmaker. But Stossel had to pay to have the glass replaced, instead of spending the money on something else more worthwhile.
Pickens argued that he wasn't destroying anything to create any jobs with his windmill subsidy, he's wanting to create something that creates jobs. (A subtle difference, if you're drunk.)

Stossel: You're taking money from people, money that they could spend on themselves, and using it to spend it on your project.
Pickens: I'm not taking it from people, I'm taking it from what from what is PAID in taxes.

Brief audience uproar over the ludicrous nature of Pickens' statement. It almost got out of control in there. If the audience had rotten fruit and cabbages, they'd be throwing them.

Pickens quoted somebody from the Sierra club, stating that if you do the wind project over a 10 year period, it'll create 5 million jobs. Stossel retorts that the money, if left to the private sector, might have created 6 million jobs. Pickens couldn't argue with him, but responded with this joke:
You know what an economist is? Somebody who couldn't be a CPA. (I thought it was kinda funny, having known some very dull economists and very dull CPA's. But in the Stossel audience, you could hear the crickets chirping. Not even a giggle.)

Stossel mentioned that Pickens and Al Gore are agreed that America is in danger because of our dependence on foreign oil. This, of course, is enough to prove that Pickens is deeply and profoundly wrong.

Stossel brought out journalist Robert Bryce, author of a book called "Gusher Of Lies". Bryce wanted to state 3 points:

1) "Energy independence" is sheer hokum. We're the biggest energy producer and the biggest energy user. The idea that we'll ever be "independent" of the world's single biggest market is insane. If a guy talks about the evils of foreign oil, you better go out in the back yard and bury the family silver. He's up to no good.

2) In 2007, the U.S. imported oil from 90 countries. We exported oil to 70 different countries. We export two million barrels per day. We are a net importer, but so is China. It's a global market. We rely on other nations for iPods, tennis rackets, beer, and computers. We've been a net importer of crude oil since 1913. Two of our three largest sources of imported oil are Canada and Mexico, and they aren't terrorist havens.

I don't know if I can type number three. They're arguing numbers faster than I can type them. Pickens is arguing that there's only one resource we can use to replace foreign oil, and that's natural gas. (I disagree. Drill, baby, drill.)

Ethanol subsidies came in for some well-deserved abuse. (Hit the ethanol label at the bottom of this post for the reason why.)

Pickens tried to explain why he needed start-up funds to get his windmills going. Bryce argued that the entire wind industry was a scam from beginning to end.

And then it happened....When Bryce declared the obvious, that Pickens was fishing for subsidies, the audience applauded. I love this show.

The topic then switched to trains. Light rail systems in particular. Isn't government the only entity that can do a rail system? Well, the New York subways were built by private companies. A few Stossel audience members were divided on government subsidies for rail systems.

Stossel showed a Joe Biden clip, where our Veep claimed that allocating money to rail is the single best investment in travel that our country could invest in. Biden claiming this, of course, is enough to prove that it isn't.
Then they showed a clip of the Baltimore train running empty.
They showed a clip of an undisturbed coyote riding on the Portland train. (Coyotes like solitude.)
Stossel brought on The Cato Institute's Randal O'Toole, who has written a book called "Gridlock: Why we're stuck in traffic, and what we can do about it". O'Toole argues that we design our rail systems to run 18-20 hours a day, and 2/3rds of the time they're empty. The average number of people on board a light rail train at any given time is 25. We could spend the same amount on buses and be far more effective.
The trains are subsidy farms. Transit agencies feel inferior if they don't have a train. Then it turns out that most transit authorities can't run a rail system.
Before Portland Oregon opened it's light rail system in 1980, 9.8 % of commuters used public transit to get to work. Now it's at 8%. Why? There were so many cost overruns on the rail system that they had to cut back on the buses.
Buses are relatively efficient. They can go anywhere. Trains, on the other hand, are far more romantic.

Another Biden video pops up, one where Biden claims that rail is our least subsidized transportation system. O'Toole promptly calls bullshit. Highways, etc., are subsidized to the tune of less than a penny per passenger mile. Amtrak's subsidy is 25 cents per passenger mile. The subsidies on urban transit are 60 cents per passenger mile! The taxpayer is being taken by rail construction companies, drivers making 100k per year, and unions. You're paying for it.
What's the solution? Innovation. Prizes.
Stossel name-dropped the X-prize for space travel. Charles Lindbergh flew solo across the Atlantic to win a $25,000 prize. There are prizes waiting in the field of human genome research, energy efficient cars, and missions to the moon.
The Progressive Automotive X Prize (for a car that can get 100 mpg) is drawing entries from all over the world. The guy who organized this one, Peter Diamandis, appeared from a remote facility someplace. He is using the prize to do "what only governments could do before".
They've currently got 51 vehicles in their competition.

Government spends billions researching stuff like this. Diamandis is getting good results by putting up only $10 million. No credential necessary to compete. You don't have to present a scholarly grant proposal. You have to want to be famous, and make money, lots of money, by selling your idea to a manufacturer. That's a much more effective system than working your way up through a government hierarchy to get your ideas heard.

Stossel closed by arguing that the phrase "energy independence" is a feel-good phrase with no merit. To promote energy independence is to oppose trade, and trade is what makes us richer. He quoted Adam Smith:

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.

People should do what they do best. Stossel should produce TV shows, but he's a bad mechanic. Mechanics should work on cars, not produce TV shows.

What if we were "food independent", and we had a disaster? The more places we get food from, the more secure our supply.

What if a foreign supplier says they aren't going to sell oil to the U.S.? Well, they've got to sell it to somebody. And guess who that somebody would probably sell it to next?

Last but not least, for us to achieve energy independence, government would have to plan it. We wouldn't dare trust those people for overnight package delivery, cell phones, a computer, or anything else that we've gotten through private innovation. The idea that government has to guide this process is absurd.

May the best entrepreneur win.

Broken Bastiat pic came from here.


Hot Sam said...

Pickens can't even get his jokes right.

The joke (as last I heard from Robert Reich) is that "an economist is somebody who didn't have the personality to become an accountant."

Being an economist and knowing accountants, I'm certain Reich was being self-deprecating and drawing humor from the irony of the inverted comparison. I've been studying accounting for the CFA exam - it's as boring as watching paint dry.

Pickens, like Ross Perot, are living proof you don't have to have a single brain cell to earn a billion dollars. That's a rather encouraging testament for capitalism, don't you think?

Wind mills = Bird Cuisinarts

Anonymous said...

Thanks for taking the time to do such a full write-up- can't read it until this weekend, but I shall return. I have skimmed it and watched only a snippet of the video on Dvorak. And you should know I don't like Pickens BUT I also hate FOX and hate John Stossel from way back when he did a pathetic job on 20/20. But as it stands: I think Pickens does an embarrassingly bad job of presenting what can be good ideas. Do we like cheaper goods? Yes: He should have reminded the viewers of the huge % of their items that get to them by truck. If the fuel for trucking is natural gas, the costs of what we buy goes down because the U.S. has a lot more nat. gas than it does petroleum and gas will stay cheaper for a long time. Also - we can turn biomass or garbage into a gas that is a nat. gas replacer. Do we like cleaner air? Yes: nat gas will burn cleaner-MUCH cleaner than diesel. Use your own experience as proof: try cooking next to your gas stove. You can breath. Try standing next to the exhaust of a diesel bus. Can you breath? Uhhh. Maybe but not so good. Is there a bang for the buck in what Pickens wants? Break it down to _value_ - what is the value to the common American of cleaner air and cheaper goods _as compared to_ handing the same 10 bill. to the bankers or to evil contractors in Afghanistan... Unfortunately when I pay my taxes I can not check the box for "quit sending my taxes to war" or "quit bailing out bankers".