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Archive for November, 2011

The founding fathers of our country believed that the role of government should be strictly limited to providing for the common defense and to protect individuals in their personal pursuit of happiness. On the other side of the intellectual divide are modern secular progressives who believe it is now the proper role of government to optimize happiness for the greatest number of people.

Is it enough for government to attempt to provide for equality of opportunity to all citizens, or should it mandate an equality of outcomes? One can make the argument that even if all schoolchildren have access to equally good schools, the “cultural enrichment” provided by affluent parents (who read to their children daily and offer music lessons and other advantages compared to the children of the working class) provides their children with greater chances of social and economic success. And if that is the case, is there a policy imperative here?

It seems impossible to achieve perfectly equal opportunity, or to ensure equality of economic outcomes for citizens within an atmosphere of individual freedom. But what are the acceptable outcomes for equal opportunity? As of 2009, the top 1% of earners in our economy has a 17% share of all income,but they also pay a 38% of income taxes. This income share has roughly doubled in the past 30 years. Is this result a priori wrong in an egalitarian society? Is it remotely possible they deserve this wealth?

Few Americans today oppose the existence of social safety nets such as Medicaid, welfare programs, unemployment insurance and food stamps. But how much is enough? And when do the self destructive actions of individuals exercising their right to personal liberty and transient happiness cause us to withdraw some of that support? Most would say that drug addicts should be treated and rehabilitated rather than coddled with additional benefits. “Sin taxes” on tobacco and alcohol are readily accepted as a socially good way to discourage their use. Should we also have taxes on sugar containing soft drinks or junky fast food to discourage their consumption?

How about increased health insurance rates for smokers? Wal-Mart, the nation’s largest employer, recently announced surcharges of as much as $2000/year for it’s workers who smoke, arguing that such employees consume as much as 25% more in healthcare costs. Under the Patient Protection and Affordable Care Act (Obama-care)  guaranteed issue and partial community rating will require insurers to offer the same premium to all applicants of the same age and geographical location without regard to most pre-existing conditions (excluding tobacco use).  Ultimately, where do we draw the line? Do Americans want more such mandates, and if so, are they willing to pay for them?

This week the White House announced that it will explore a new route for an extension of the Keystone Pipeline (Keystone XL) which will complete a Canada to Texas pipeline to bring oil sands production from Alberta to Texas refineries on the Gulf Coast. The project has been in the works for over three years with various state and federal regulatory authorities .

KXL was scheduled to cost $7 billion and generate 20,000 direct high paying construction jobs, and as many as 300,000 indirect jobs after completion. The 1700 mile pipeline would have brought about 700,000 barrels of oil per day to the U.S. (9% of our crude oil needs), and would have generated about $5 billion in new tax revenues per year. So many union jobs would be created that the Teamsters Union and the AFLCIO agreed with big Energy that this is a worthy project. For a jobs and tax revenue hungry country, this should have been a “no-brainer”.

By creating greater structural linkage with Canada, we would tie their energy interests even more closely with ours, even as America reduced its reliance on Venezuela and Middle Eastern countries, whose priorities are very different than ours.

So what happened? Well the Environmental Lobby swung into full gear. On Sunday, 12,000 protesters formed a human chain around the White House to protest the project. Nebraskan politicians claimed that it would endanger the Ogallala Aquifer that supplies drinking water to 2 million Americans. Others cried that it would tie American to “dirty” oil for decades instead of advancing the use of clean energy. If the administration explores a new route, “it’s a huge victory, and it would probably be the biggest environmental gift that President Barack Obama has given us,” said Tony Iallonardo, a spokesman at the National Wildlife Federation.

Well, let’s look at those concerns. In August, after a three year review, the EPA announced that the project ‘s special precautions posed no significant concerns to the environment. The builder of the project, Trans-Canada, has put up large bonds to pay for any cleanup efforts in the unlikely event of a spill. Meanwhile, the Ogallala Aquifer already has over 25,000 miles of older, less safe pipelines running through it which have been transporting oil for decades. The KXL project includes 57 improvements above standard requirements demanded by U.S. regulators so far, and will be the safest pipeline ever built.

Just because the US doesn’t allow KXL to be built doesn’t mean the tar sands will not be exploited. Instead, Canada might build another pipeline to its Pacific coast, avoiding U.S. intervention, and then put it on ships to be refined somewhere else. China has already signaled interest in this production. Surely those who truly care about our environment realize that we have not a local but a worldwide issue, and that this alternative transport is potentially and probably far more threatening to the Earth. Furthermore, the U.S. will still need to import an equivalent amount of crude oil, via tanker ships that generate greater greenhouse gases and have greater risk of spillage than a pipeline. So instead of the KXL pipeline, we would cause two sets of tankers to move 1.4 million barrels of oil per day for decades to come.

So let’s discuss what our government did here. They kicked the decision can down the road until after the 2012 election so as to avoid further antagonizing the Greens and losing their campaign support. The review will not overtly kill the project, or move it from Nebraska. Instead, it is tasked merely with exploring alternative routes within Nebraska and report back on whether superior alternatives exist. This is not a serious look at other choices, because over its three year regulatory review, at least 13 alternate routes have already been examined in detail. And shifting the path to avoid a major aquifer could increase the number of perilous stream crossings and put the line closer to populated areas. Realistically, the delay is a stealth method of killing the project.

Part of leadership is making the tough decisions. Sometimes, that means choosing between the lesser of two evils, and maximizing our national interests.  Whether or not you approve of tar sands oil production, believe in global warming or want to return to the stone age while we wait for clean alternative energy to become commercially viable, killing the Keystone XL project won’t make America safer, reduce worldwide carbon emissions, or improve our economy. As the old saying goes, “you’ve got to crack a few eggs to make an omelet”. But here, Mr. Obama has stood up and voted “present!” Leadership requires taking positions to move the electorate to places they need to go. This administration has abdicated that role, and it rings false to the most Americans. Perhaps that is why most of us personally like and admire the President, but disapprove of so many of his policies and his administration.