This month Consumer Reports issued its annual automobile ratings based on reliability and safety. For the first time, the top ten picks were all Japanese cars.
At one time, three out of every four vehicles sold in America were made by the Big Three U.S. automakers. GM, the largest manufacturer in the world, had 358,000 employees. Today it has less than half the market share it once had and about 145,000 employees. But only about 137,000 actually work. The others are in a “Jobs Bank,” which pays people their full salaries for not producing automobiles. According to both company and union sources, the Jobs Bank annually costs $100,000 to $130,000 per person for wages and benefits. GM and other U.S. auto manufacturers will pay $1.4 to $2 billion this year for the Jobs Bank, which was supposed to be a stopgap measure until workers could go back to the factories. But the Jobs Bank has twice the number of attendees it did last year, and next year its enrollment is expected to exceed 17,000.
Workers in the Jobs Bank must perform some company-approved activity. This may include volunteer work, attending classes, or simply going to a “rubber room,” where nothing other than one’s presence is required. Classes that are offered include learning crossword puzzles, trivial pursuit, and how to deal blackjack and poker for those who might want to work in casinos.
Besides the enormous direct waste of money and the corrosive effects on individuals, the Jobs Bank creates huge indirect costs for the industry. It encourages the companies to build more vehicles than consumers want. Companies figure it is better to build more cars—even with little or no profit—than to pay people for doing nothing. They also may keep work in-house even though it would be cheaper to outsource it.
The Jobs Bank was actually proposed by GM itself in September 1984 in order to end a strike. GM proposed a 3-year program for employees with 10 years experience. The union sent back a demand for a six-year program for six-year employees. Later, even one-year workers could join. And now there is no limit for how long a person can be in the program and collect benefits. The costs went in only one direction, up.
While the U.S. auto industry’s costs for the Jobs Bank were expanding, its costs for health benefits were growing even faster. Now GM has 137,000 workers, but it is responsible for the health care of 1.1 million current and former employees and their families. Its cars now cost $2,500 more than equivalent Japanese models—even before the cars begin to be built. Through decades of escalating costs and steadily declining market share for U.S. cars, no one seemed overly concerned whether U.S. auto manufacturers could cope in the long run. The long run is now arriving, and future bankruptcy is not out of the question. In 2005 GM lost $10.5 billion, and its credit rating has plummeted to “junk bond” status.
There is a lesson here. The U.S. government has for decades been pursuing a financial trend not unlike that of GM. It has been expanding its expenditures and future obligations without due consideration of how or whether these responsibilities can be met in the future. This month Congress raised the government’s limit on borrowing by $781 billion, then voted to spend well over $100 billion with no offsetting budget cuts. With no brakes on spending, the national debt is now rising at an unprecedented rate. As the government bumped up against the statutory $8.18 trillion spending limit, the Treasury was forced to borrow from employee pension funds to keep the government operating. This led to increasing the debt limit to just under $9 trillion ($896,000,000,000,000), which amounts to $30,000 for every man, woman and child in America. This was the fourth increase in the statutory debt limit in five years.
On March 23rd, President Bush had been in office 1,889 days without exercising his veto power. He approved every one of the 1,091 bills Congress sent to him—costs be damned. Federal spending has grown twice as fast under Bush as under Clinton. Inflation-adjusted federal spending exceeds $22,000 per household, the highest since World War II. And 65 percent of the increase under Bush has been unrelated to national security. Educational spending has increased 100 percent just since 2001. No president had gone so long in office without using his veto power since James Monroe, our fifth president, went 1,888 days before vetoing a toll on the first federal highway. By contrast, President Bush in 2005 signed a $286.4 pork-laden highway bill. He had threatened to veto the bill if it exceeded his proposed $256 billion but then “compromised” by signing the $286.4 bill (See our posting of August 13, "No Politician Left Behind".) Later he said, “One reason I haven’t vetoed any appropriations bills is because they met the benchmarks we’ve set.” (What’s another $30 billion?) The statutory debt limit has risen by more than $3 trillion since Bush took office.
By surpassing Monroe’s record, President Bush’s veto-free performance is exceeded by only that of Thomas Jefferson, who never vetoed a bill in his entire eight years in office.
Like the automobile Jobs Bank, the federal government pays workers not to produce. It spends billions of dollars every year paying farmers not to produce crops. And, just like the Jobs Bank, its $60 billion in subsidies to corporations leads to producing goods and services that consumers don’t want and to keeping people doing work that would be more efficiently outsourced. And just as with GM and the rest of the U.S. auto industry, due consideration is not being given to how or whether future financial obligations created by current policies can be met.
Saturday, March 25, 2006
Monday, March 13, 2006
Ethanol and MTBE—Shoud EPA be Abolished?
At long last EPA has lifted its requirement that corn-based ethanol or MTBE (methyl tertiary butyl ether) be added to gasoline, allegedly to fight pollution, in compliance with the Clean Air Act of 1990. But, as I pointed out in my book MAKERS AND TAKERS, as far back as 1997 EPA was receiving reports of adverse health consequences from MTBE, and some states were already banning its use. EPA officials admitted they were surprised to find MTBE in blood samples from people even in Alaska. So why did it take almost another nine years for EPA to take action?
By 1999 sixteen states had banned MTBE. Still, EPA would do nothing for another seven years. By 2001, MTBE was found to have polluted the ground water in 49 states, including 20 percent of the nation’s urban water wells. California alone had identified 10,000 sites of polluted ground water, with some sites having 1,000 times the EPA limit for this chemical. Santa Monica found MTBE in its municipal water supply. You could no longer drink the water in beautiful Santa Monica. By 2002 the city had imported water continuously for four years at a cost of $3 million per year. New York identified 1,500 MTBE-polluted sites, and 3 million people were exposed on Long Island alone, which was found to have more than 100 polluted municipal wells, and those people had no alternative source of water.
Perhaps the most shocking aspect of the whole story is that EPA knew about the danger of MTBE for ten years before the 1990 Clean Air Act but made no attempt to alert Congress or notify the public. In 2001 the popular CBS program “60 Minutes” displayed official documents from EPA itself showing the EPA was aware of the problem as far back as 1980. Yet EPA quietly let legislation pass in 1990 that would increase the use of MTBE—and then for another 15 years did nothing about the problem it had precipitated. It claimed the additive was necessary to improve air quality from automobile exhausts and was required by the Clean Air Act of 1990, which it wanted passed.
That law required an “oxygenate” to be added to gasoline, and the only two available were ethanol and MTBE. Ethanol breaks downs in water, which is found in small amounts in pipelines and large storage facilities. Ethanol itself entrains (attracts) water, and the ethanol-water mixture alters the blend of the fuel as the ethanol breaks down. So gasoline with ethanol must be transported by truck, which means it is impractical to use ethanol instead of MTBE outside the corn-growing states of the Midwest, despite the clamor of the ethanol industry for a larger share of market.
EPA maintained it had to continue to allow MTBE to be used in order to protect the nation’s air quality and comply with the 1990 law. But the National Academy of Sciences said the fuel “oxygenates” had little impact on air quality. (Further, it said that ethanol was of even less benefit that MTBE. It said “using ethanol as a blending agent in gasoline would not achieve significant air-quality benefits, and in fact would likely be detrimental.”) So, for a dubious air quality benefit, the government produced a catastrophic pollution of the nation’s ground water. This government-caused water pollution is so great it far outweighs all the benefits EPA has ever achieved. The role of EPA in this unnecessary disaster—which polluted ground water in 49 states and placed 100 million people at risk—should be reason enough to abolish EPA and end the myth that government regulations on balance improve our environment. MTBE has been identified as cancer-causing in rat studies that are comparable to the kind of rat studies that EPA has used to attack all sorts of food additives and agricultural chemicals, but EPA raised no alarm about this regarding MTBE. When EPA declares industry to be the culprit in allegedly cancer-causing chemicals, it demands immediate correct action—but when EPA itself is the guilty party, it takes many years before something is done.
Furthermore, it has long been known that the “oxygenates” have no benefit at all in modern cars. For many years now cars have been built with computer systems that regulate the fuel-air mixture and duplicate what the ethanol and MTBE are supposed to do. So the only possible benefit has been from much older cars, which have been steadily disappearing from our roads simply because of age.
EPA in 2006 has now said it can eliminate the 1990 oxygenate mandate simply by announcing new rules on the grounds that refineries now have other ways to blend cleaner-burning fuel. Yet as far back as 1999, several oil refineries said they could make cleaner-burning gasoline without using MTBE or any other oxygenate. Chevron Corp. and Tosco Corp., for example, said they would substitute alkylate, a byproduct of the gasoline refining process.
The MTBE issue is not the only case of inappropriate action by EPA. The nonpartisan General Accounting Office and the Congressional Research Service have been severely critical of EPA’s policies and behavior regarding secondhand smoke and a variety of other issues. EPA has been guilty of violating its own risk assessment guidelines. It has been found guilty of violating six federal statutes for using harassment and intimidation to try to compel employee support for its policy on secondhand smoke. It has fraudulently misrepresented the findings of other scientists in order to make it appear they supported conclusions EPA favored. A dozen career employees of EPA wrote a letter to the Washington Times “risking our careers rather than choosing to remain silent” about “egregious misconduct” at EPA. Internal documents available under the Freedom of Information Act show that EPA exaggerated claims and promulgated unwarranted policies. EPA has gone against the advice of it own Science Advisory Board (see, for example, its history of action on particulates.) EPA fraudulently manufactured fake “scientific” studies in order to support its views on sulfur dioxide (see my book MAKERS AND TAKERS for fuller explanation of this.) EPA has funneled taxpayer money to lobby groups that support political action on policies—even unscientific ones—that EPA wants to promote (for example, a million dollars a year to the American Cancer Society). EPA should be a scientific agency, not one that funds political activism. For all these reasons and many other examples of scientific malpractice, deception, and incompetence, EPA should be abolished.
By 1999 sixteen states had banned MTBE. Still, EPA would do nothing for another seven years. By 2001, MTBE was found to have polluted the ground water in 49 states, including 20 percent of the nation’s urban water wells. California alone had identified 10,000 sites of polluted ground water, with some sites having 1,000 times the EPA limit for this chemical. Santa Monica found MTBE in its municipal water supply. You could no longer drink the water in beautiful Santa Monica. By 2002 the city had imported water continuously for four years at a cost of $3 million per year. New York identified 1,500 MTBE-polluted sites, and 3 million people were exposed on Long Island alone, which was found to have more than 100 polluted municipal wells, and those people had no alternative source of water.
Perhaps the most shocking aspect of the whole story is that EPA knew about the danger of MTBE for ten years before the 1990 Clean Air Act but made no attempt to alert Congress or notify the public. In 2001 the popular CBS program “60 Minutes” displayed official documents from EPA itself showing the EPA was aware of the problem as far back as 1980. Yet EPA quietly let legislation pass in 1990 that would increase the use of MTBE—and then for another 15 years did nothing about the problem it had precipitated. It claimed the additive was necessary to improve air quality from automobile exhausts and was required by the Clean Air Act of 1990, which it wanted passed.
That law required an “oxygenate” to be added to gasoline, and the only two available were ethanol and MTBE. Ethanol breaks downs in water, which is found in small amounts in pipelines and large storage facilities. Ethanol itself entrains (attracts) water, and the ethanol-water mixture alters the blend of the fuel as the ethanol breaks down. So gasoline with ethanol must be transported by truck, which means it is impractical to use ethanol instead of MTBE outside the corn-growing states of the Midwest, despite the clamor of the ethanol industry for a larger share of market.
EPA maintained it had to continue to allow MTBE to be used in order to protect the nation’s air quality and comply with the 1990 law. But the National Academy of Sciences said the fuel “oxygenates” had little impact on air quality. (Further, it said that ethanol was of even less benefit that MTBE. It said “using ethanol as a blending agent in gasoline would not achieve significant air-quality benefits, and in fact would likely be detrimental.”) So, for a dubious air quality benefit, the government produced a catastrophic pollution of the nation’s ground water. This government-caused water pollution is so great it far outweighs all the benefits EPA has ever achieved. The role of EPA in this unnecessary disaster—which polluted ground water in 49 states and placed 100 million people at risk—should be reason enough to abolish EPA and end the myth that government regulations on balance improve our environment. MTBE has been identified as cancer-causing in rat studies that are comparable to the kind of rat studies that EPA has used to attack all sorts of food additives and agricultural chemicals, but EPA raised no alarm about this regarding MTBE. When EPA declares industry to be the culprit in allegedly cancer-causing chemicals, it demands immediate correct action—but when EPA itself is the guilty party, it takes many years before something is done.
Furthermore, it has long been known that the “oxygenates” have no benefit at all in modern cars. For many years now cars have been built with computer systems that regulate the fuel-air mixture and duplicate what the ethanol and MTBE are supposed to do. So the only possible benefit has been from much older cars, which have been steadily disappearing from our roads simply because of age.
EPA in 2006 has now said it can eliminate the 1990 oxygenate mandate simply by announcing new rules on the grounds that refineries now have other ways to blend cleaner-burning fuel. Yet as far back as 1999, several oil refineries said they could make cleaner-burning gasoline without using MTBE or any other oxygenate. Chevron Corp. and Tosco Corp., for example, said they would substitute alkylate, a byproduct of the gasoline refining process.
The MTBE issue is not the only case of inappropriate action by EPA. The nonpartisan General Accounting Office and the Congressional Research Service have been severely critical of EPA’s policies and behavior regarding secondhand smoke and a variety of other issues. EPA has been guilty of violating its own risk assessment guidelines. It has been found guilty of violating six federal statutes for using harassment and intimidation to try to compel employee support for its policy on secondhand smoke. It has fraudulently misrepresented the findings of other scientists in order to make it appear they supported conclusions EPA favored. A dozen career employees of EPA wrote a letter to the Washington Times “risking our careers rather than choosing to remain silent” about “egregious misconduct” at EPA. Internal documents available under the Freedom of Information Act show that EPA exaggerated claims and promulgated unwarranted policies. EPA has gone against the advice of it own Science Advisory Board (see, for example, its history of action on particulates.) EPA fraudulently manufactured fake “scientific” studies in order to support its views on sulfur dioxide (see my book MAKERS AND TAKERS for fuller explanation of this.) EPA has funneled taxpayer money to lobby groups that support political action on policies—even unscientific ones—that EPA wants to promote (for example, a million dollars a year to the American Cancer Society). EPA should be a scientific agency, not one that funds political activism. For all these reasons and many other examples of scientific malpractice, deception, and incompetence, EPA should be abolished.
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