Thursday, June 25, 2009

The Cap and Tax Fiction

Democrats off-loading economics to pass climate change bill.

From the Wall Street Journal editorial page, June 26, 2009

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.
Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

Friday, November 7, 2008

Republicans' Road Back: Washington Post

By John BoehnerFriday
November 7, 2008

While Republicans are disappointed by Tuesday's results, we respect the American people's decision and pledge to work with President-elect Barack Obama when it is in the best interest of our nation. Some Democrats and pundits may want to read Tuesday's results as a repudiation of conservatism -- a sign that Republicans should give Democrats on both ends of Pennsylvania Avenue a free ride. I don't see it that way, and neither should Republicans across the country.

The next four years are critical to the future of our families, our economy and our country, and we have a responsibility to rebuild our party by fighting for the principles of freedom, opportunity, security and individual liberty -- the principles upon which the GOP was founded. Recommitting ourselves to these principles means two things: vigorously fighting a far-left agenda that is out of step with the wishes of the vast majority of Americans and, more important, promoting superior Republican alternatives that prove that we offer a better vision for our country's future.

America is still a center-right country. This election was neither a referendum in favor of the left's approach to key issues nor a mandate for big government. Obama campaigned by masking liberal policies with moderate rhetoric to make his agenda more palatable to voters. Soon he will seek to advance these policies through a Congress that was purchased by liberal special interests such as unions, trial lawyers and radical environmentalists, and he'll have a fight on his hands when he does so.

In record numbers, Americans voted on Tuesday for a skillful presidential nominee promising change, but "change" should not be confused with a license to raise taxes, drive up wasteful government spending, weaken our security, or give more power to Washington, Big Labor bosses and the trial bar. Americans did not vote for higher taxes to fund a redistribution of wealth; drastic cuts in funding for our troops; the end of secret ballots for workers participating in union elections; more costly obstacles to American energy production; or the imposition of government-run health care on employers and working families.

Republicans have a responsibility to offer a better way. We must reaffirm Americans' faith in our party by reminding them why ours traditionally has been a party of reform rooted in freedom and security. This will not happen overnight. We must make the case one issue at a time, offering solutions to our country's biggest challenges to earn back the American people's trust and rebuild our majority.

Our most immediate challenge is creating new jobs and getting our economy moving in the right direction again. While Republicans have put forward a plan for economic growth and job creation, congressional Democrats are proposing hundreds of billions of dollars in new government spending masquerading as "economic stimulus." To rebuild 401(k) plans and keep jobs here at home, we'll offer tax relief for families and small businesses. And to lower fuel costs and create as many as a million new jobs, we'll offer a comprehensive plan for more American energy.

We'll also offer health-care reforms that empower patients and doctors, promote a strong military that keeps us on offense to protect the American people, and demand fiscal and ethical reforms to fix a broken Washington tarnished by scandals on both sides of the aisle. We have a responsibility to the American people to make sure our ideals are heard, and we expect these to be vigorous debates.

I wasn't born a Republican. I grew up outside Cincinnati as one of 12 children. Our dad ran a bar. I became a Republican because I believe that if you work hard and believe in yourself, there is nothing you can't achieve. That's the American dream. And I look forward to leading Republicans in fighting for it. If we return to our roots, to our belief in freedom, opportunity, security and individual liberty, our party will come back stronger than ever.

In Congress, Republicans will work across party lines to find solutions to the immense challenges that confront our nation. But we'll also stand firmly against policies that violate our principles -- the same principles held by the vast majority of American families. We Republicans must renew our nation's trust in us by offering better alternatives rooted in the reforms that define our party and by fighting for the American dream.

The writer, a congressman from Ohio's 8th District, is the House Republican leader.

Saturday, November 1, 2008

Davis brings health care expertise to race: Mankato Free Press

By Mark FischenichThe Free Press
October 30, 2008 08:49 pm

Dr. Brian Davis has a professional resume that just doesn’t quit.

There’s the degree in nuclear engineering from the University of Illinois and the work in nuclear power plant design and radioactive waste management. There are the master’s and doctoral degrees in mechanical engineering from the Massachusetts Institute of Technology.

There’s the medical degree from the University of Illinois and the oncology practice at the Mayo Clinic.

Davis jokes that when his parents encouraged him to get a college education, he went a bit overboard. But the Illinois native also notes the work he did to earn money for college, including jobs as a furniture mover and janitor.

While Davis believes his background would be useful as the nation faces important energy and health-care decisions, he hasn’t made his biography a central part of his campaign. There is one skill he’s developed as a specialist in cancer treatment he believes would be helpful on a broader level if he’s elected.

He talks of the many times he’s gone into a room where a cancer patient and family members are waiting, tries to put them at ease and then discusses the sometimes tough choices they face.

“It does put things in perspective and also puts me in a position where I need to explain difficult things,” Davis said. “And I think when you’re running for office, you are put in a position where you have to answer a lot of questions in front of a lot of people.”

New to politics

Davis’ political experience is as shallow as his educational and professional background is deep.
A resident of Minnesota for a dozen years, he first became active in Republican politics when he began thinking of running against Walz. Generally pleased with the representation he’d received from Republican Congressman Gil Gutknecht (who Walz defeated, ending a 12-year-run in the House), Davis didn’t like the direction the new Democratic majority was headed in 2007.

Despite his inexperience, Davis knocked off two veteran Republican state lawmakers in the GOP endorsement process and in the September primary election. He raised more than $1 million in campaign donations, although more than $300,000 was in the form of loans and contributions he made personally.

Described as “a brilliant guy” who is “also deeply conservative” by John Hinderaker, one of the founders of the influential conservative Web log Power Line, Davis doesn’t comment on the “brilliant” part but agrees with the description of his political philosophy.

He’s an opponent of abortion and gay marriage, is doubtful that fossil fuel consumption is the primary reason for global climate change and opposes embryonic stem cell research. He wants to make the Bush tax cuts permanent, would like to eliminate the estate tax and would be interested in studying a nationwide sales tax as a replacement for income taxes.

Davis doesn’t expect a majority of voters in the 1st District agree with him on all of those stances, but he’s confident he can win the race.“Minnesota is a great place, and a lot of people look at the candidates for who they are,” he said. “And they may not agree with them on every issue, but they feel they can trust that person to be straight with them.”

A new direction

With too few exceptions, Walz has been a loyal supporter of the Democratic leadership of the House, Davis said.“What we were told in 2006 is that we were going to see an independent voice. We haven’t seen that from Mr. Walz.”

Walz bucked his leadership on gun issues, the No Child Left Behind education plan and on the $700 billion bailout of the financial services industry — but not much else, Davis said.

“And when it comes to the votes on Iraq, he hasn’t always been there — I would argue — in terms of supporting the mission.”

Much of Davis’ campaign has centered on oil drilling. Davis supports virtually unlimited access for the oil companies to federal waters and lands, including in the Arctic National Wildlife Refuge. He condemns Walz for initially opposing expanded offshore drilling, although Walz later joined a coalition of Democrats and Republicans who developed a compromise plan that received 179 Republican votes (about 90 percent of all Republicans) in the House earlier this fall.But the delay was a costly one, Davis said.

“That preceded our financial crisis, and the two are very much related,” he said. “I think it’s difficult to deny that that precipitated our financial crisis. And that’s where we differ.”

Davis adds that the bursting of the housing bubble and the reckless lending practices of financial institutions also played a role.


The Walz campaign and the Democratic Party have criticized Davis’ positions on Social Security and taxes, in both cases not telling the complete story.

Because Davis would consider partial privatization of Social Security, a Walz ad has said Davis supports “cutting guaranteed benefits.”

The basis of the accusation is that Davis would undermine the financial viability of the system because younger workers would be able to divert money to private accounts.

Davis notes the long-term solvency of the Social Security system is in doubt even if no changes are made and that Walz is offering no specifics on how he would fix the problem.Another criticism — this one from the DFL Party — suggests Davis wants to institute a 23 percent nationwide sales tax. Davis said the flier fails to mention he only supports studying the idea of a flat tax and that it would be intended as a replacement of — not in addition to — existing federal taxes.

He also disputes suggestions the Bush tax cuts favor the wealthiest 1 percent of Americans.

“That is not true,” Davis said. “And there’s a lot of rhetoric geared toward the politics of envy and class warfare.”

Davis doesn’t give a direct answer when asked if he supports the current progressive income tax, which taxes higher income at higher rates: “I don’t like that we have a 67,000-page tax code. It’s a monstrosity.”

He also said he’s opposed on principle to the numerous tax credits available to individuals and businesses, something he considers government micro-managing of the economy.

Davis also doesn’t say whether he would support the pay-as-you-go budget rules — a strategy to reduce budget deficits by requiring that any new spending increases or tax cuts be offset with spending cuts or tax increases in other parts of the budget: “That’s one strategy.”

Looking forwardDavis released internal polling more than a month ago that showed he’d closed the gap with Walz — but that it was still 18 percentage points. He hasn’t released any polling results since.“It’s always hard to tell,” he said of the campaign. “But we like the way things are going.”

Davis has talked often on the campaign trail about energy issues, particularly boosting the nation’s domestic energy production. Rather than being a campaign strategy aimed at fed-up motorists, he said it’s an issue he believes is the key to everything from joblessness to the federal deficits.

The only major factor that is absent today but was present during the boom times of the 1990s is cheap oil, Davis said.

“If we could get to the point where we get energy prices down, I think you’d see inflation go down, you’d see unemployment go down, you’d see tax receipts go up.” If he can pull off a come-from-behind victory next week, Davis promises to work on that issue and more the next two years.

“Right now, we have problems with taxes, our economy, energy and health care,” Davis said.

“And we’ve got somebody who’s going to go there and offer honest solutions and try to get something done.”

Copyright © 1999-2008 cnhi, inc.

Davis on the Road: New Ulm Journal

Journal Editor

NEW ULM - As the political campaign season hits its final frantic days, Republican First District Congressional candidate Brian Davis is hitting the road hard to make a last pitch for votes.

On Thursday he was on the road with Gov. Tim Pawlenty, and Friday he took a big swing through the western part of the First District, with stops in Worthington, Pipestone, Fairmont and New Ulm.

Davis is working to get the word out on his main issues, and encouraging supporters to "bring 50 friends with you when you go to the polls on Tuesday."

Davis is touting his positions on the economy, energy and health care, but he is also spending time defending himself on issues such as Social Security and tax policy.

He has been targeted by Democratic literature that claims he wants to "gamble your Social Security benefits in the stock market," and that he wants to add a 23 percent federal sales tax.
The Social Security claims are not true, said Davis, especially when it says he wants to cut people's benefits. "That's just not true," he says.

As far as privatization, he has advocated in the past for allowing younger workers to invest some of their Social Security taxes, but not requiring it for anyone, especially workers who are nearing retirement and will be receiving benefits soon.

The national sales tax claims stem from a debate back in Winona between candidates seeking the Republican endorsement. When they were asked about the Fair Tax proposal, in which the federal income tax would be replaced by a national sales tax, "I said I thought it was worth studying, especially since 70 members of Congress had supported it, but I never said I would vote for it," Davis said Friday.

"We do need tax simplification," said Davis, but there are many, many questions about the national sales tax that need to be answered before such a major change in tax policy would ever be considered.

Davis, running against Democratic Rep. Tim Walz, said he would have opposed the economic bailout package, as Walz did.

"We need to fix the lending procedures first that led to this situation before we should be giving federal funding to the lenders," he said.

Davis said he believes in the strength of the free market system and its ability to create wealth rather than government intervention.

On the issue of energy, Davis said he favors an "all of the above" policy that includes expanded offshore drilling, and utilizing renewable energy as much as possible.

He favors expanded use of U.S. oil supplies to reduce the country's dependence on foreign oil.
Asked about the record third quarter profits ($14.8 billion) that Exxon reported this week, Davis said he thinks the investment tax credits oil companies received for drilling should end. But there should be incentives to encourage oil companies to go after the large amounts of U.S. oil that exists in oil shale.

The energy issue is very important to the U.S. economy, he said. In the 1990s, when oil was $10 a barrel, the U.S. economy was humming and there were federal budget surpluses, Davis said.
"We should have used that to pay down some of the national debt," he said.

But when the price of oil skyrocketed this year, it has led to economic problems resulting in a recession.

Davis favors developing more alternative energy, but he points out that the U.S. is currently getting 85 percent of its energy from fossil fuels. He doesn't think it is likely that renewable energy and wind power will be able to replace that 85 percent anytime soon.

On health care Davis, who is a radiologic oncologist at the Mayo Clinic, said the U.S. health care system is the best in the world, but it needs improvement. "I was asked to grade it, and I give it an A-minus. We need to make it an A-plus.

"The problem is that the cost of health care coverage is increasing at twice the rate of inflation," said Davis.

Davis said it would help if the nation had a uniform set of health care mandates. Currently, each state has its own mandated health care that insurance companies must cover. Minnesota tops the list, he said, "and that's not necessarily a bad thing."

But if there was a national consensus on what health care coverage should cover, it would allow insurance companies to compete over a broader area, reducing the costs.

He also favors a John McCain style of tax credit that can be used to purchase health insurance that goes from job to job, rather than expecting employers to provide health coverage.

Davis also favors more competition and negotiations for pharmaceuticals in the Medicare program to cut costs.
Davis said there are changes coming for health care, but the country should be careful not to destroy the incentives that have led the private sector to produce so many advances in medical care in the last few decades.

A private take on Social Security: From Former State Legislator Al Schumann in the Pipestone Star

To the editor:

Our Democrat friends all over the nation are running against privatizing the Social Security system.In Minnesota the state employees, as well as the teachers retirement, have always been privatized. Their retirement board is made up of elected members of the employees and the governor and state treasurer, which invests the money in various stocks and bonds in the open market.

Back in the 1960s when I was in the Legislature we made a slight change. P.E.R.A. and T.R.A. did not include death and survivor benefits, and Social Security did. We changed the law so that 50 percent of the payments went into Social Security, 50 percent went into the privatized accounts. Oh, did we run into opposition from the state and teacher’s union. They much preferred their privatized retirement system because of the excellent returns on their investments.

I get the regular reports from the board and they have been getting up to 10-12 percent annually. They wouldn’t change for the Social Security’s two percent return at any price. Under the “rule of 72” it would take 36 years to double your money at two percent, while at 12 percent it will double in six years. If $10,000 is invested, at two percent, it will be worth $20,000, with compounded interest, in 36 years. If $10,000 is invested, at 12 percent, it will be worth $640,000, with compounded interest, in 36 years. Can you blame them for not wanting to change?

There have been numerous bipartisan boards looking at the problems we are going to have in Social Security. The last one included our former Democratic congressman Tim Penney and former U.S. Sen. Daniel Moynihan, D-New York. One recommendation was that we consider privatization. Remember you only lose money on stocks when you sell low. The boards invest roughly the same amount every month and they can buy more stock when the price is low. The stock will always come up in time.

Brian Davis is right to support partial privatizing for Social Security. Our younger citizens won’t have much when they retire under the present program. Being against this may be a popular gimmick for an election, but please tell us Mr. Walz, what are you proposing to do about the Social Security system? And, contrary to what you have been saying on TV ads, it will not take any money away from the present recipients.

Al Schumann

Davis stumping through First Congressional District: Pipestone Star

By Duane Winn
November 1, 2008

Republican Brian Davis offers a fair facsimile of a football coach who tells his troops at halftime that although they are behind, they still have a fighting chance of pulling off an upset. Or perhaps Davis is exhorting his players not to be complacent; that although they are enjoying a healthy lead, they still need to play hard to sew up victory.

Davis said there are no published polls of which he is aware that show either him or his incumbent opponent, U.S. Rep. Tim Walz, DFL-Mankato, in the lead for Minnesota’s First Congressional District seat in the U.S. House of Representatives.

Davis, a Rochester physician, half-joking, asked each Republican gathered Friday at Lange’s CafĂ© in Pipestone to call 200 of his or her closest friends to urge them to vote for him. Pipestone County is a bastion of conservatism. In 2006, it was one of four counties in the district that longtime Republican incumbent Gil Gutknecht carried en route to a stunning setback at the hands of Walz.

With five days left until the general election, Davis is making a swing through his district, even where his support is the strongest, outlining where he stands on the issues and combating what he calls mischaracterizations of his positions by the enemy camp.

“We can win this election. We have to get every vote out,” Davis said Friday. "When it comes to important issues like the economy and energy, we have the right answers — at least, we’re offering solutions to these problems.

"Davis said Friday that he believes in the right to life (“Life begins at conception”). He also stated that the United States should drill offshore for oil. Davis also believes that the nation’s health care system doesn’t need to be revamped, just fine-tuned, emphasizing an increase in insurance portability and preventive treatment.

These platforms, Davis said, make sense for the entire country, not just for Republicans. However, he believes that the Walz campaign is trying to prevent his positions from getting out by mischaracterizing his positions on certain hot-button issues, such as Social Security a national sales tax.

A Walz radio ad claimed that Davis wants to cut guaranteed Social Security benefits for senior citizens.

“I think this is the most egregious mischaracterization, that I want to cut benefits,” Davis said.

“You cannot get that from anything I’ve said. I do not want to cut benefits. People rely on it, and it’s the best anti-poverty program that we have.

“Secondly, he’s mischaracterizing me on the privatization. He says I want to privatize all Social Security and put in the stock market, gamble it all away on the stock market.

”Davis stated that the DFL Party is claiming in ads and brochures that he supports a national sales tax when, in fact, he’s never publicly stated his approval for it.

Davis said that given the economic climate, all potential strategies should be looked at. He said, though, that he wouldn't support the idea until exhaustive research showed that it was a feasible idea.Davis said these accusations are designed to “frighten people needlessly.”

“It’s not a productive means of bringing issues to public discourse,” Davis said.Davis also took the Walz campaign to task for insistently referring to him as a “millionaire,” hinting that he doesn’t understand middle-class concerns.

“It’s a certain type of class warfare and politics that just isn’t productive,’ said Davis.

Former state legislator Verne Long, of Pipestone, said that no congressional candidate in this district within recent memory has featured gifts like those of Davis. In addition to being a physician, which gives Davis a unique perspective into health care issues, Davis also holds a degree in nuclear engineering. This gives Davis special insight into dealing with our energy problems, Long concluded.