Tuesday, December 29, 2015

To Your Benefit—or at Your Loss?

The purpose of any economic exchange is to better one's position, whether a person buys or sells something for money or barters for something else. This is the essence of free market capitalism, where all economic transactions are voluntary because they are of mutual benefit. They are all “win-win” situations in the minds of the participants.

By contrast, when a government compels an economic transaction, it is always “win-lose” because one side gains when a loss is inflicted on the other, as evidenced by the fact it wouldn't voluntarily agree to it. This is the essence of a planned economy, where an elite in government is believed better able to decide what is best for everybody than allowing people to determine that for themselves. It is assumed that some losses are inevitable—and are usually blamed on capitalism—and that government must ameliorate this by managing (distributing) the losses, and benefits, for the greater overall benefit of society. This may include benefiting the environment.

The idea that an aggregation of win-lose transactions can somehow produce an economy superior to one of win-win transactions is ludicrous. It is all the more so when one realizes that initial losses produce secondary ones in the same way that benefits of free markets produce secondary benefits for society. And this includes benefiting the environment.

Take ethanol, for example. Initially it was supported because it was widely claimed the world was running out of oil—now shown to be untrue because technology has proven there will be no shortage for thousands of years, if ever. So now it is being argued that ethanol is important because it reduces air pollution and global warming and promotes jobs in the ethanol industry. It is even said to be competitive with gasoline.

Farmers raising corn and manufacturers producing ethanol benefit from federal and state subsidies. The losers are the taxpayers, who pay not only through direct taxes for the subsidies but through higher costs for fuel and electricity (due not only to ethanol but to the government's effort to eliminate coal in the production of electricity.) As a result, people have correspondingly less money to spend on other things. Those would-be benefits are foregone, lost without being seen. The beneficiaries of ethanol (and wind and solar) subsidies spend their subsidy money, but much of it goes for farm machinery and labor to raise more corn for ethanol and build more solar panels and wind farms, rather than things that are more useful in society. Thus losses of mandated energy inefficiency beget secondary losses in inefficient industries, just as the efficiencies of free markets beget secondary benefits in more useful and efficient industries that would come about if the money for them were not preempted by the requirement for inefficient fuels.

Another class of losers from ethanol is the consumers of corn as food, primarily poor people in Latin American countries. The use of corn in ethanol tripled in three years, and the World Bank report noted that biofuels forced global food prices up by 75% — far more than previously estimated. More U.S. corn now goes for ethanol than is consumed as food. The World Food Program, the United Nations' Food and Agriculture Organization, and the Organization for Economic Cooperation and Development have formally called for all G20 nations to drop their biofuels subsidies and mandates because of the adverse impact on food prices around the world.

How inefficient is ethanol? First we must recognize two unbreakable laws of the universe. The first law of thermodynamics (conservation) states that energy is neither created nor destroyed, but only changes form. The second law (entropy) distinguishes between useful energy that can perform work and useless energy that cannot, and “some fraction of useful energy irreversibly becomes useless every time energy is converted from one form to another,” explains T.A. Kiefer. “Together, these two laws declare that the amount of useful energy that can be recovered from a system is always less than the energy that was put into the system. Every transaction, process, or conversion pays an energy tax, which is why it is impossible to construct a perpetual motion machine. The ratio of energy-out to energy-in is a critical parameter in evaluating energy sources.”

A key measure, then, is the energy return on investment (EROI), a ratio of energy from a new fuel to the energy consumed in producing it. An EROI of 1:1 would mean that the useful energy produced by the new fuel would exactly equal the energy needed to produce it. Kiefer writes:

A civilization is itself a high-order physical and biological organism that has tremendous overhead costs and can spare only a fraction of its energy to assimilate new energy. A study of historical US economic performance over the last century has found that economic recessions are linked to primary energy EROIs dipping below a critical threshold of 6:1. This value represents the minimum energy quality an industrial civilization must have to sustain a modern, energy-intensive quality of life. Another macroanalysis found that an EROI of 3:1 is the bare minimum quality a raw energy feed-stock must have to overcome all the production costs and conversion losses and still deliver positive net energy to modern civilization. A 3:1 EROI thus also represents a critical tipping point. To put these values in biological terms, a modern industrial civilization is very energy-hungry, and if undernourished on a diet of foods with lean EROIs below 6:1, it becomes catabolic, eating into the fat of its savings and the muscle tissue of its infrastructure to replace the missing calories. As long as EROI remains below 6:1, industrial civilization is locked into a death spiral where an ever increasing fraction of its economic output (GDP) is spent on energy at the cost of eroding standard of living. At EROIs below 3:1, the food is so poor that digesting it into fuel takes more energy than it returns, and full starvation sets in. The only way out of this hunger trap is either to find higher-EROI energy or to decay into a preindustrial civilization with lower energy needs. The bottom line is that a healthy modern economy must be fed by hearty primary energy sources with a collective EROI above 6:1. [Incidentally, the EROI for coal is 30:1]

After decades of study and experimentation and continuously refined commercial production, the scientific literature consensus for corn ethanol EROI is a lowly value of 1.25:1. Even worse, there is no net gain in liquid fuel energy—the ethanol produced contains energy barely equal to the input fossil fuel energy. The small energy profit is contained in byproducts, principally high-protein biorefinery leftovers called distillers’ dry grains and solubles (DDGS) that can be used as cattle feed. More than $6 billion a year in direct federal assistance to corn growers and ethanol refiners since 2005 has served only to reduce a nonexistent foreign dependence on animal feed protein supplements. It should be pointed out that the corn ethanol EROIs published in the literature and discussed above are not for a pure corn ethanol life-cycle, but for a hybrid lifecycle involving both fossil fuel and corn ethanol where fossil fuel provides much of the input energy. A proper corn ethanol EROI would be calculated using corn ethanol as the exclusive energy source to make more corn ethanol, but no example is available today. This is telling. It will be shown...by lifecycle analysis that making corn ethanol is a negative energy-balance process that consumes more than five-sixths of the energy invested. Civilization would get six times more output energy from the fossil fuel diverted to make corn ethanol if it were instead used directly as fuel.”

Ammonia, which is made from natural gas, is second only to plastic in consumption of industrial energy in the U.S., and 80 percent of ammonia is used in making fertilizer. Use of fertilizer is the main reason for the six-fold increase in corn production in recent decades, without which ethanol would be more easily recognized as uneconomic. Kiefer writes, “Modern intensively farmed corn, with its huge appetite for fossil fuel-based ammonia and agrichemicals, is making a large, net negative contribution to the nation’s energy budget ….Biofuels can never be cheaper than nor replace fossil fuels while fossil fuels comprise the bulk of the energy invested to make them....Applying ammonia fertilizer to any crop intended for biofuel is an indefensible waste of energy.”

Hosein Shapouri, an employee of the U.S. Department of Agriculture, has produced a study of ethanol showing a small net benefit from ethanol. But Howard Hayden, a Professor Emeritus of Physics from the University of Connecticut and Adjunct Professor at the University of Southern Colorado, notes that Shapouri et al “use the most optimistic figures: the best corn yield, the least energy used for fertilizer, the least energy required for farming, the most efficient distillation techniques, the most residual energy (in the form of mash); and in general the most favorable (but still credible) values for any and all aspects of [ethanol] production.” Even so, Hayden says that, using Shapouri's numbers, the net average power available from the ethanol of one acre of corn would be enough only to keep one 60-watt light bulb burning continuously for one month.  To keep that bulb burning for a year would require 12 acres of corn—an area larger than nine football fields.

Puny though that energy gain from ethanol would be, even that is controversial. A thorough study done by Cornell University Professor David Pimmentel, who also chaired a U.S. Department of Energy panel to investigate the energetics of ethanol production, found Shapouri had left out many energy inputs. These include farm labor, farm machinery, repair of farm machinery, energy to produce the hybrid corn, and irrigation. Pimmentel also says Shapouri gives an extravagant credit for distillers dry grains (DDGS), which are used for animal feed as a substitute for soybean meal. Pimmentel says, “We went back to the soybean meal, and examined how it’s produced, and the energy that is required to produce it. Instead of giving [distillers grains] a 40 to 60 percent credit as the pro-ethanol people do, we found that the credit should be more like 9 percent. They [pro-ethanol researchers] are manipulating the data again.” Incidentally, soybean meal has 49 percent protein content compared to 27 percent for DDGS. 

Cellulosic ethanol, produced from wood, switch grass, and harvest wastes is even more uneconomic than corn ethanol. Cellulose can be broken into fermentable sugars using concentrated acid and explosive steam, but this one step consumes as much energy as exists in the final ethanol. Thermodynamic analysis shows cellulosic ethanol is at least three times more difficult to produce than corn ethanol and has an EROI far below 1:1.

Biodiesel and other liquid biofuels have shortcomings that require “hydrotreating” to change the hydrogen-carbon ratio, remove all oxygen, and change the molecular structure to make them compatible with high performance engines and existing fuel infrastructure. Hydrotreatment greatly increases the cost and releases 11 tons of carbon dioxide for every ton of hydrogen added.

Algae is even worse. According to the Argonne National Laboratory, it takes 12 times as much energy and 2.6 times as much fossil fuel energy to put a gallon of algae diesel in a gas station pump as a gallon of petroleum diesel—and that's without counting hydrotreatment.

Kiefer's research is based on “an extensive literature survey of recent and reputable sources emphasizing U.S. government agency data published in official reports and university studies published in peer-reviewed scientific journals. Since 2008, a new generation of more rigorous studies has dramatically undermined the na├»ve assumption that biofuels are inherently clean and green.”

He writes: “Compared to the petroleum fuel lifecycle, the corn ethanol fuel lifecycle consumes 3.5 times more fossil fuel, more than triples Greenhouse Gas emissions, increases water use by three orders of magnitude, adds environmental costs from agrichemical runoff while still suffering those associated with crude oil, and competes with food cultivation for cropland acreage and associated agricultural production capital and resources.”

Finally, Kiefer provides here an extensive list of studies for his assertion, “New, more thorough studies that consider the full fuel creation and combustion lifecycles are now showing cultivated liquid biofuels to be more damaging to the environment and causing the release of more CO2 and other greenhouse gases and pollutants per unit of energy delivered than fossil fuels.”

Tuesday, November 24, 2015

Thanksgiving: Obama Fails to Learn Pilgrim's Lesson

In anticipation of the Thanksgiving holiday, PBS television tonight featured “The Pilgrim,” a story of the founding of Plymouth colony and the first thanksgiving. It is a slick program with many interesting facts, especially about the immense starvation during the early years. But this two hour program, despite all its scholarship, failed to mention the real lesson to be learned here, namely, what ended the starvation. That was private property rights, assigning land “to every man for his own particular,”—after which the governor wrote years later, “any general want or famine hath not been amongst them since to this day.” PBS hasn't learned this lesson any more than Obama. And a great many other people don't know about this important lesson either.  So we present our previous Thanksgiving Day message again here:    

President Obama has failed to learn the simple basic lesson that the Pilgrims, who established the tradition of Thanksgiving Day in 1623 (not 1621, as often claimed), learned the hard way. The bounteous harvest they were gratefully celebrating on that day was preceded by years of starvation. They arrived in mid-December 1620, and half of them died the first year. Though the Indians helped them survive, the colonists were chronically short of food, and their numbers continued to dwindle.

Under the Mayflower Compact, which governed the colony, “all profits and benefits that are got by trade, working, fishing or any other means” were community property in the “common stock” of the colony. And “all such persons as are of this colony are to have their meat, drink, apparel and all provisions out of this common stock.” People were required to put in everything they could—they were forbidden from growing their own food—and to take out only what they needed. It was a policy of “from each according to his ability, to each according to his need,” centuries before Karl Marx seduced millions of people with those words.

The communal system was such a failure that in the spring of 1623 the Pilgrims feared they would not survive another poor harvest. “So they began to think,” wrote the colony's governor William Bradford, “how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefest among them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves....And so assigned to every family a parcel of land.....This had very good success; for it made all hands very industrious, so as much more corn was planted then otherwise would have been by any other means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content.”

Far from making the people “happy and flourishing,” the communal system, wrote Bradford, “was found to breed confusion and discontent, and retard much employment that would have been to their benefit and comfort.” Not surprisingly,“young men that were able and fit did repine [complain] that they should spend their time and strength to work for other men's wives and children, without recompense. The strong, or men of parts, had no more division of food, clothes, etc. than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labor, and food, clothes, etc. with the meaner and younger sort, thought it some indignity and disrespect unto them.”

Under the circumstances, there was little incentive to produce food. Severe whippings were tried to induce greater production, but they did little more than increase discontent.

The social disharmony, along with the food shortages, disappeared once the concept of private property was introduced and people could keep whatever they produced, or trade it away as they saw fit. In 1647 Bradford was able to write “any general want or famine hath not been amongst them since to this day.” Such was the success of the new system that in 1624 the colonists began to export corn, trading it for beaver pelts, other furs, and meat.

In 1624 the Pilgrims took a further step in property rights. The system of assigning land “to every man for his own particular” had certainly increased the production of corn, but the assignment was drawn by lot yearly. Thus there was not much incentive for making improvements to one's tillage when someone else might draw that land next year. The men requested of the Governor “to have some portion of the land given them for continuance, and not by yearly lot....Which being well considered, their request was granted.”

Jamestown, the first permanent English colony in America, established in Virginia in 1607, had an experience similar to the Pilgrims at Plymouth. Early years of starvation were followed by converting to a system of property rights and a free market, which brought abundance. Under collectivism, less than half of every shipload of settlers survived the first twelve months at Jamestown. Most of the work was done by only one-fifth of the men, to whom the socialist system gave the same rations as to the others. During the winter 1609-10, called “The Starving Time,” the population fell from 500 to 60.

But when Jamestown converted to a free market, there was “plenty of food, which every man by his own industry may easily and doth procure,” wrote the colony secretary Ralph Hamor in 1614. Under the previous system, he said, “we reaped not so much corn from the labors of thirty men as three men have done for themselves now.”

We should not underestimate the significance of the experiences at Plymouth and Jamestown. Property rights and free markets were truly revolutionary and fundamental to capitalism. Without them, all the wealth, progress and human betterment that followed could not have occurred. According to Sartell Prentice, “In England, meanwhile, farming 'in common' continued to be the general practice for another hundred years. Not until the second decade of the seventeen hundreds did 'setting crops for their particular' begin to be slowly accepted in England—and decades were to pass before the new practice became sufficiently widespread to provide an adequate food supply for the population.”

Even today, centuries later, there is still inadequate understanding of the importance of property rights and free markets. A recent BBC poll of 29,000 people worldwide found only 11 percent think free-market capitalism is a good thing. One-quarter of those polled said capitalism is “fatally flawed.”

There is no shortage of people who want a political system that gives them the fruits of other men's labors, as at Plymouth and Jamestown. And there is an abundance of politicians willing to accommodate them at the expense of other men's property. The result is repetition of the collectivist systems (socialism, fascism) that have failed in the past, and no end to the discontent and resentment they engender. But people can be seduced to try them again and again by lofty idealistic statements, eloquent messages of hope, and promises that can never be kept. All of which allow the covetousness of other people's property—whether for personal gain or altruistic, collectivist aims—to masquerade under noble-sounding phrases.

When Barrack Obama was campaigning for the presidency, he promised to redistribute other people's wealth for the collective good. In a short but spirited dialog with a small businessman, “Joe the plumber,” Obama argued that society would be better off if Joe's taxes were increased and the money distributed more widely to those less well off. What is this but a denial of Joe's property right to his own money and a repetition of the socialist distribution schemes that were so disastrous at Plymouth and Jamestown?

Once he was president, Obama came up with a health plan that would require everyone to buy health insurance—as though people's money was not theirs by right but, rather, was part of the “common stock” of community property, to be allocated by the leader for the collective good! And, just as at Plymouth, people who did not cooperate would be punished—not by severe whippings as was done there, but by the more civilized penalty of seizing their property (money) through fines if they refused to buy health insurance.

Contrast the government inflicting pain and penalty to force compliance compared to the benefit and satisfaction—even happiness—from market transactions, which people undertake without force or penalty in order to enhance their lives and are far more effective than socialistic distributions.  Obama said, "We are fundamentally transforming the United States of America." He is indeed, wiping out the fundamental principles that allowed America to prosper.

Obama claimed, "This is our moment, this is our time to turn the page on the policies of the past, to offer a new direction." Yes, he is “turning the page on the policies” of property rights and free markets. But the direction he is offering is not new but old. It is the ancient system of four centuries ago, before property rights, those basic rights which are still denied in varying degrees in many countries that have never discovered free-market capitalism, much less embraced it—and whose standard of living reflects that fact. And those countries comprise a large share of the 89 percent of the world's people who do not think capitalism is a good thing—but who look with envy on America's success and demand we redistribute a share of our wealth to them.

"Generations from now,” Obama said, “we will be able to look back and tell our children that this was our time." Yes, and they will be the worse for it—and damn you for it!

Saturday, October 31, 2015

Congress is Worthless for Limiting Spending

It is hard for people to grasp the magnitude of the U.S. debt problem—and what the ultimate “day of reckoning” will be. The national debt reached $1 trillion for the first time in 2009. It is now well over $18 trillion. That's the official total; the real total is much higher. Lawrence Kotlikoff, a professor of economics at Boston University, has calculated that based on Congressional Budget Office data the real debt is $202 trillion, more than eleven times the official debt. It is also about 3 times what the entire world produces, that is, global gross domestic product (GDP), which is $72 trillion. In 2013 Kotlikoff updated his debt calculation to $222. That's $700,000 per person, $1.9 million per household.

Kotlikoff says, “ Congress has been very careful over the years to label most of its liabilities 'unofficial' to keep them off the books and far in the future.” Professor Paul Gutterman says, “Congress plays games with the budget in so many ways that it is hardly a stretch to say that if it was held to the same accounting standards as public corporations, the entire Congress would be in jail for fraud.” Here are two examples of accounting gimmicks identified by Gutterman, which I describe in my book The Impending Monetary Revolution, the Dollar and Gold. Second Edition:

Congress only budgets out ten years. The government receives immediate benefits of increased revenue from Roth individual retirement accounts, but the lost revenue occurs beyond ten years so is treated as never happening. In the 2013 fiscal-cliff agreement, this 'long-term revenue loser was scored as raising $12 billion over the next ten years.'

The Congressional Budget Office says the four largest student loan programs will yield official saving of $135 billion in fiscal years 2015-2024; but it notes that under fair value accounting that is practiced in the real world, those programs would likely cost $88 billion rather than save $135 billion.”

Underlying the accounting gimmicks are fundamental realities that the gimmicks cannot mask indefinitely or prevent from asserting themselves as the future unfolds. Kotlikoff explains:“We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.

“This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck....It will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills. Worse than Greece. Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices.”

Both Republicans and Democrats have created the problem of government spending, and both have failed to solve it. Since 1980 the U.S. national debt ceiling has been raised 42 times, and both parties were complicit in that. In 2008 the deficit under George W. Bush was $458.6 billion, less than half a trillion, a record at the time. While running for president in 2008 Obama promised to cut the deficit in half by the end of his first term. Ha! That promise was worth no more than his oft-repeated promise that under Obamacare people could keep their insurance and their doctor and that the average family would save $2,500 on health insurance. Obama became the biggest spender in world history. In just the first six years of his presidency his deficits added more than $7 trillion to the national debt, more than all the presidents in our history from George Washington through George W. Bush combined. And the national debt limit was raised seven times under Obama.

Raising the debt limit has become a meaningless formality. Everyone knows it is a hollow gesture that will not control spending, because Congress will routinely raise the limit as it is approached in order to accommodate greater spending. Or the law will simply be violated as Obama has done:

The Budget Control Act of 2011was supposed to restrain federal spending. But in return for multiple rounds of spending cuts for the decade 2012 through fiscal 2021, it raised the debt ceiling $400 billion immediately and provided for even further increases. The act provided that if the distribution of spending cuts could not be agreed upon in those coming years, across-the-board cuts would be made, known as sequestration. The sequester budget cuts were subsequently postponed and reduced somewhat. Then Obama unilaterally reneged on his commitment to the law. The Washington Times reported, “Four years after agreeing to 'sequestration' budget cuts, the White House has emphatically told Congress that President Obama will no longer abide by them and will use his veto to insist that lawmakers boost spending on defense and domestic programs alike. In letters to the Republican chairmen of the House and Senate spending committees, Office of Management and Budget Director Shaun Donovan said sequestration 'was never intended to take effect' and that it was time to officially end the budget tool.” Though the president expects everyone else to obey the laws, he was flatly not going to do so. (This man was a lawyer?)

Now sequestration will henceforth be a meaningless formality just like raising the debt ceiling. The precedent has just been established which destroys it usefulness as a budget tool.

The Bipartison Budget Act of 2015, which has now been passed, is an even more shameful—and extreme—example of the familiar pattern of increasing spending along with the debt limit and pushing reform into the future. It accedes to Obama's violation of the law by dispensing with the sequestration budget cuts, not just the current ones but to sequestration previously agreed to for all the years through fiscal 2021. It would increase spending by $85 billion over the next three years, suspend the debt limit until March 16, 2017 and allow unlimited spending and borrowing until then. Significant cuts would not take place until 2015.

The underhanded way in which the law was crafted and passed is as despicable as the law itself is. It was negotiated in secret closed-door meetings of just four people: Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Minority Leader Harry Reid and Senate Majority Leader Mitch McConnell. Boehner had kept his party members in the House in the dark until the final product was introduced on October 26, with only a few days to the deadline of November 2 for avoiding financial default. Hence it was really too late for any meaningful opposition or even any input from Boehner's Republican colleagues. Obviously that was the way Boehner wanted it. He didn't want his own party members to interfere with his capitulation to Pelosi and Reid. He was more interested in satisfying them than members of his own party who elected him as speaker. When voters elect House members, they choose candidates who reflect their views and expect their voices will be heard in Washington. If those elected are excluded by their party leader from representing the views of the people who elect them, why should anyone bother to vote for a Republican? And why would anyone want to run on the Republican ticket? Now you know why Boehner resigned. After what he did to those who elected him to be speaker, you can sure they would never vote for him as speaker again.

Senator Mike Lee is a former law clerk at the U.S. Supreme Court and author of the book “Our Lost Constitution.” Speaking on the floor of the Senate, he called the new budget deal a “horrible piece of legislation,...a product of an unfair, dysfunctional and fundamentally undemocratic process, a process that is virtually indistinguishable from what we promised the American people a GOP-controlled Congress would bring to an end.”

A major detriment to controlling future spending—as well as his own party's political future—was Boehner's acquiescence to pushing the date for further budget and debt ceiling legislation to 2017. In addition to opening the door to unlimited spending in the meantime, it downgraded the importance of spending as an issue in the 2016 elections, making it more difficult for Republican candidates to win.

For many decades there have been attempts to control federal spending. These include proposed constitutional amendments requiring a balanced budget and returning to a gold standard, both of which are desirable and would not have permitted the expansion of federal spending we have seen. All have failed because the procedure employed required support from too many members of Congress who benefit from the status quo and don't want it changed. The procedure, which has been used for all past amendments to the Constitution, requires approval of two-thirds of both Houses of Congress. But the Constitution provides a second procedure for amendments, which has never been used. It provides that a convention be called for amendments if two-thirds of the legislatures of the states agree. The U.S. House and Senate will be left out of the loop.

Once a new convention is called, it cannot be limited to a single amendment; any number of amendments can be brought up for consideration. This would set the stage for adoption of amendments to overturn decisions of the Supreme Court, as I mention in my book. I shall mention here only one that should be overturned. The Constitution limits the legislative powers of the federal government; but in case United States v. Butler, 1936, the Supreme Court ruled that “the power to authorize appropriations of public money for public purposes is not limited by the direct grants of legislative power found in the Constitution.” I maintain that if government has no power to act beyond the enumerated powers, it should have no power to spend beyond those limitations either. A constitutional amendment to this effect would greatly reduce federal spending, but obviously it will never happen under the usual procedure for amendments, which involves Congress. Congress is never going to vote to limit its power to spend.

Another constitutional amendment I recommend pertains to unfunded mandates. These allow federal politicians to please their constituents—and garner votes from them—with spending the federal government does not pay for, because the costs are pushed onto the states.

For example, under Obamacare (Affordable Care Act) and the Dodd-Frank financial reform the president signed in 2010, the federal government imposed 86 unfunded mandates on state and local governments. There are six paperwork requirements related to ACA that each impose more than one million hours on local governments. Combined, these six impose 27.1 million paperwork burden hours that cost $880 million. Since Obama took office, his regulators have added $35 billion in unfunded regulatory costs and at least 75 million paperwork burden hours on state and local governments. These don't show up as federal expenditures, but Americans still have to pay for them.

States have no power to print money and must pay through taxes for federal mandates imposed upon them. State taxes should be for purposes determined by state government; federal taxes for federal purposes. We need a constitutional amendment that requires all federal mandates thrust upon the states must be paid by the federal government. That would certainly reduce the proclivity of the federal government for expanding its powers to dictate what the states must do and force them to pay for it.

Opponents of a convention by the states for proposing Constitutional amendments sometimes claim it might become a “runaway” convention, that too many amendments might be dangerous. This is absurd. The new convention would simply propose amendments. They would not take effect unless ratified by the legislatures of three-fourths of the states. That is the same process of ratification that was required for all previous amendments, which were achieved under the procedure originated by Congress. That is a very high bar to pass. If passed, it is far more likely the effect would be beneficial rather than dangerous. What we do know right now is that today's “runaway” government—of “runaway” spending—is already dangerous. And constitutional amendments such as I have suggest are our best option.

Tuesday, September 29, 2015

U.S. Economy Is Worse Than Claimed

            Courtesy of ShadowStats.com
The above chart shows a growing divergence between the Consumer Price Index and what it would be if the method of calculation had remained consistent. Beginning in 1983 the government changed its method of calculation to show lower inflation by excluding food and energy, claiming they were too volatile to be reliable indicators. The result is the so-called “core inflation” CPI, which is a favorite of the Federal Reserve. The latest figure for the CPI reported by the Bureau of Labor Statistics is 0.4% (for August and also July), but if calculated by the method used in 1980 the inflation rate would be 7½ percent, as shown by Shadow Government Statistics (ShadowStats.com).

The chart shows the difference in the inflation rate only from the change in 1983. The divergence would be even greater if the effects of several later adjustments were also included. For example, a reconfiguration of this statistic by the 1995/96 Boskin Commission made the CPI an even worse indicator of the cost of living for most Americans. It has been estimated that from 1996 to 2006 this adjustment reduced by over $680 billion what the U.S. Government would have paid in cost-of-living increases in salaries, social security, federal employee pensions, and other benefits.
It seems no one attempted to objectively determine the real cost of living without the influence of the flawed government model. The Chapwood Index sought to remedy that. Its founder, Ed Butowsky, said it is “our attempt to help people understand why they feel like they aren’t keeping up and why, as they get older, they feel as though their money does not go as far – even when they’re following the rules, working hard and supposedly beating inflation.”

The Chapwood Index reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation. The latest average price increase of the 50 cities is 8.9%. Not a single one of the cities was even close to the near zero (0.4%) inflation of the CPI reported by the U.S. Bureau of Labor Statistics. The lowest of the 50 cities in the Chapwood survey was Tucson, Arizona, at 5.7%. http://www.chapwoodindex.com/

Butowsky notes that routine salary increases and corporate pensions are often keyed to the CPI. “The middle class has seen its purchasing power decline dramatically in the last three decades, forcing more and more people to seek entitlements when their savings are gone. And as long as pay raises and benefit increases are tied to a false CPI, this trend will continue.” The Chapwood Index shows where people actually spend their money. The CPI is not a true indicator of the cost of living since it excludes food and energy, which are not only necessities but for many people their largest expenditures.

Like the inflation numbers, the unemployment statistics have been manipulated by the government to present a more favorable picture.

John Williams, founder of Shadow Government Statistic, says, “The seasonally-adjusted SGS Alternate Unemployment Rate depicts current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers. The U-3 unemployment rate is the monthly headline number [Note that this is the least complete category—has the most exclusions—and thus shows the lowest, most favorable unemployment numbers]. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.”

Notice that the most complete measure of unemployment (SGS) places today's unemployment rate at 23 percent. That is not only worse than in the recession of 2007-09 but comparable to what occurred in the Great Depression of the 1930s. The so-called recovery from our recent recession has been the weakest since World War II despite the most massive effort in history to promote economic growth and employment with the stimulus of “quantitative easing,” which is simply a scholarly-sounding term for printing money. 

In addition to the above charts, there are many other indications that quantitative easing has not benefited the economy. The labor participation rate (those working or looking for work) fell in September 2015 to 62.4%, the lowest level since 1977. Wages have increased by the slowest rate since the 1980s, and median household incomes are still falling, down 1.5% in 2014 from 2013, according to new census data available mid-September 2015.

Small businesses account for most new jobs and employ about half of the private workforce. But small business deaths now exceed births for the first time since the Census Bureau began keeping records more than 30 years ago.

The September jobs report was a jolt. It said only 142,000 new jobs were created, compared to economists' forecast of 206,000. The numbers for August and July were revised downward by 59,000, showing an average of only 167,000 for the third quarter. That's down from the monthly average of 198,000 for all of 2015 so far, which is down from 260,000 a month in 2014. (Previously, April and May were revised downward by 54,000 jobs.) And of the 142,000 jobs created in September, only 118,000 were in the private sector. Some 350,000 Americans left the labor force in September. An all-time record of 94 million people are not employed or actively looking for work.

Obama's $787 billion (later adjusted to over $800 billion) stimulus program was a failure of the Keynesian idea that government spending produces a multiplier effect as dollars would be spent again and again throughout the economy, multiplying wealth. Franklin Roosevelt tried the same thing. Didn't work then—in fact, prolonged the depression. Didn't work for Obama either. Keynes' biographer Hunter Lewis says, “There is just no evidence” that spending ever cured a recession, and Keynes “wasn't much interested in evidence.” Harvard economics professor Robert Barro has written, “What few people know is that there is no meaningful theoretical or empirical support for the Keynesian position.” I discuss this subject at greater length in my book, but here is a convincing admission about it by Roosevelt's treasury secretary before the House Ways and Means Committee on May 9, 1939: “We are spending more than we have ever spent before and it does not work....After eight years of this Administration we have just as much unemployment as when we started....And an enormous debt to boot.”

Here is a more recent statement, in July 2015, from a paper by Stephen Williamson, economist and vice president of the St. Louis Federal Reserve Bank: "There is no work, to my knowledge, that establishes a link from QE [quantitative easing, i.e., bond-buying to increase the money supply] to the ultimate goal of the Fed—inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation....Indeed, mainstream monetary theory and the experience of Japan for the last 20 years tells us that extended periods of ZIRP [zero-interest-rate policy] lead to low inflation, or even deflation. [emphasis added.]"

Japan is now in its fourth recession since 2008. Annual growth has averaged 0.85% since 1992, and Standard & Poor's just downgraded the ratings on its massive national debt, which the other two major ratings agencies had already downgraded.

Shinzo Abe was elected prime minister by campaigning for a more aggressive version of the monetary stimulus policies that have failed Japan for 20 years. He said, “Countries around the world are printing more money to boost their export competitiveness. Japan must do so too.” That was his prescription for a degree of “needed” inflation to bring the country out of economic stagnation and avoid the growing fear that deflation was now a greater threat than inflation. On October 31, 2014, Japan's central bank and its main government pension fund said they would pump trillions more yen into the long-stagnant economy, now growing at 0.2%. The bank of Japan would expand its asset-buying program by as much as 33 %. It would now buy at the market more than twice the amount of new bonds issued by the government, and it would buy not just government bonds but stocks, ETFs, and real estate funds.

The European Central Bank is engaged in a QE policy of buying 60 billion euros ($67.5 billion) per month in hopes of raising inflation by increasing the money supply and reducing borrowing costs. That program, which amounts to more than a trillion euros ($1.1 trillion), is scheduled to end in September 2016; but on September 3, 2015 ECB President Mario Draghi said he is prepared to expand the program. He previously said he would do “whatever it takes” to save the euro. Deflation could stifle consumer spending and make it more difficult for European governments and businesses to repay debts. In response to Draghi's comments, the euro tumbled 1% against the dollar. Jean-Michel Six, Standard & Poor's chief economist for Europe, said he would not be surprised if the ECB's program extended into 2018 and reached 2.4 trillion euros, twice what was initially committed.

The next stage for both the Bank of Japan and the ECB is more easing; they’re going to keep putting fuel on the fire, but at some point the fire’s big and there’s nothing left to burn -- What do we do?” said Philip Moffitt, the Asia-Pacific head of fixed income at Goldman Sachs Asset Management, which oversees about $1 trillion globally. “So your immediate response to that would be a huge sell-off in risk assets.”

The stock market is poised for a huge sell-off of risk assets.  Stocks are terribly overpriced in view of the economic weaknesses I've cited. 

Since 2008 the combined balance sheets of the world's five largest banks have increased by a staggering $9 trillion. This has inflated financial assets just like excess credit inflated the stock market bubble in the 1920s and the housing/mortgage bubble in the 2000s. Today's stock prices have also been inflated by companies buying back their own stocks with near-zero interest rate borrowing. And those same low interest rates have led many people to withdraw from traditional savings and shift to riskier investments such as the stock market in hopes of higher returns—and very likely also because of concern about the future value of the dollar. What is the point of saving for the future when interest on savings is so low and printing vastly more dollars will surely make the currency worth less in the future? If central banks achieve the 2% inflation they now view as optimal, nearly half the principal of today's savings accounts—43%—will disappear in 25 years. Do you want to settle for that or roll the dice for greater return? With those two bad choices, gold becomes more attractive.

With all the fiat money being printed by central banks, it should be no surprise that people all over the world have been turning to gold. As we have pointed out in previous writings, there is a global shift of gold from the West to the East and increased demand for physical possession of gold. The Shanghai Gold Exchange has become the world's largest gold market, and here we are talking about physical delivery. According to the China Gold Association Yearbook, China in 2014 imported at least 1,250 tonnes and domestically mined 452 tonnes, for a total of 1,702 tonnes. In the week ending September 25, 2015, the Shanghai Exchange delivered over 65 tonnes of gold, making a year-to-date total of 1,958.7 tons—an annual rate of nearly 2700 tonnes, which represents about 90 percent of world's gold mine production this year.

The remaining 10 percent cannot possibly meet the demand. Indian demand is conservatively estimated at 950 tonnes, and there is little variation in this since it is determined largely by cultural and religious factors. Some of this demand will no doubt be met by smuggling and recycling of “scrap” gold, but those cannot possibly make up the difference. Nor have we included here any demand from other Asian countries, the Middle East, Europe and the United States, which collectively usually account for up to 50% of global demand. Most likely China has grossly understated the amount of gold it produces domestically, but in any case only a far higher price will determine how newly-mined gold is rationed to world demand. 

President Franklin Roosevelt outlawed private ownership of gold in the 1930s, but there remained one final link between the dollar and gold. Foreign central banks could still exchange dollars for gold until 1971, when President Nixon ended that policy.

When Deng Xiaoping ascended to power in China, he made many far reaching market reforms that transformed the rigid, backward communist nation into an economic powerhouse. Through its exports to the U.S., it accumulated trillions of dollars. Some of these were used to buy U.S. Treasury Bonds—in effect, recycling China's trade-surplus dollars back into the U.S. There were benefits to both sides. China could use the dollars for investment in developing the country and paying wages for its workers, and the U.S. government needed a buyer for its bonds to pay for its huge deficit spending.

It seemed that both sides were “trapped” in a relationship that neither wanted to give up nor could see a way out of. But China grew increasingly uncomfortable about accumulating greater amounts of dollars whose future value would be eroded by the expansion process it was financing. China was fearful that U.S. printing of money would lead to inflation and a hard fall of the dollar, which would seriously reduce the value of China's holding. In 2009 Zhang of the China Gold Association stated: “In view of the declining US dollar value, it is paramount that China steps up gold reserves. How to do this is the only question that China is debating these days. The possible steps include opening up new gold mines, aggressively going for gold mining, buying gold from the open market etc. All said and done, it is imperative that China needs to buy more gold,”

China has done all the things Zhang recommended, and more. For instance, the government takes out ads on television urging people to buy gold. It has established gold stores throughout the country. They look like jewelry stores but exist to sell gold. Any person can walk into any such store or bank and buy gold for cash. No questions asked. It's all part of the goal of “storing wealth among the people.”

Meanwhile, China's currency, the yuan, has climbed in stature. It is now in fourth place as the most-used currency in cross-border payments, having surpassed the Japanese yen in August. As recently as 2012, it was in twelfth place. It is now behind only the U.S. Dollar, the euro, and the British pound. The volume of foreign exchange trades in yuan reached more than a million in a single month in August, rising 50% from the same period last year. More than 1,000 banks in 100 countries can now use the yuan. According to a Bank of England survey, trading in the yuan rose 25% in the six months to April this year while trading in other currencies fell 8% on average.

The London Metal Exchange, the oldest futures exchange in the world, in now owned by the Hong Kong Exchanges and Clearing Ltd., which has launched yuan-denominated futures contracts for some industrial metals.

China is no longer “trapped” into buying U.S. treasuries to finance U.S. profligate spending. Although China and other countries can no longer exchange dollars for U.S. Treasury gold, they can instead exchange their dollars for gold on the Shanghai Gold Exchange and other exchanges.

The New York Comex is the leader in gold futures contracts, accounting for 82% of the world trade in them. But the overwhelming majority of these do not involve any physical exchange of the metal. They are simply paper trades because most positions are closed out before the delivery date. A buyer will almost always sell his contract before delivery is due, and a short seller will do just the opposite. Neither trader will see the gold, and the Comex will have exactly the same amount of gold in storage as before those traders participated. The Comex warehouses gold to provide a delivery option, but historically most participants haven't used it. That has changed in the last few years.

Recently the website zerohedge.com, a highly respected observer and analyst of monetary happenings, noted that the Comex supply of deliverable gold had declined to barely 10 tons, its lowest ever, resulting in a record-high ratio of 124 ounces of outstanding open interest for every physical ounce of gold in storage. Fears of default were quickly calmed by the Comexboosting its eligible gold by a whopping 78% overnight, from 362K ounces to 643K,...However, this was not achieved with an infusion of actual new gold into the Comex, but thanks to JPM [J.P. Morgan] reclassifying 276K ounces of gold from the Eligible into the Registered category, even as actual eligible gold continues quietly hemorrhaging out of the Comex.”

Delivery troubles on the Comex and increased demand for delivery by buyers, fearing they may have problems doing so later, point to a higher gold price. That does not augur well for the dollar, but another trend is developing that is also negative for the dollar. In an article headlined “Central Banks Dump U.S. Debt,” the Wall Street Journal stated: “Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.

Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging-markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt....China, the biggest owner of U.S. treasury securities, owned $1.241 Trillion at the end of July, according to the latest data from the Treasury. That is down from the record $1.371 trillion in November 2013."

Monday, August 31, 2015

Why Laws Fail To Make Us Healthier

Why do so many laws passed with good intentions and seemingly desirable goals so often fail? And why do they so often worsen the problems they are supposed to solve—and hurt people they are supposed to help? In previous postings we noted: 1) government programs to reduce intake of fats in the name of lessening heart disease actually led to weight gains and increased danger of diabetes and heart disease, 2) government efforts to improve the federal school lunch program by increasing consumption of milk, fruit and vegetables led to fewer students drinking milk, many skipping meals entirely, more “junk” food snacks being eaten, and vast quantities of fruits and vegetables being thrown away, and 3) government policies to reduce salt consumption are more dangerous than the salt Americans devour. The government recommendation for daily sodium intake is 1,500 to 2,300 milligrams or fewer. But people consuming fewer than 3,000 milligrams of sodium were found to have a 27% higher risk of heart problems, stroke or death than those consuming 3,000 to 6,000 milligrams.

Now the issue is banning plastic bags in grocery stores and other retail establishments. More than a hundred cities and counties have already done so, and others are considering it to reduce litter, disposal in landfills, and other environmental concerns. The bans are done with the implied or expressed intent that consumers will switch to reusable bags.

The effects of the bans, however, have not been what the advocates expected. A study from the Institute of Law and Economics of the University of Pennsylvania Law School found reusable grocery bags contained potentially harmful bacteria. Examining hospital emergency room admissions related to these bacteria, Professors Jonathan Klick and Joshua D. Wright found emergency room visits spiked when the ban went into effect. “Relative to other counties, ER admissions increased by at least one fourth, and deaths exhibit a similar increase.” Using standard statistical estimates, they found the associated health costs “swamp any budgetary savings from reduced litter. This assessment is unlikely to be reversed even if fairly liberal estimates of the other environmental benefits are included.”

In May 2013 the Los Angesles Times reported, “A reusable grocery bag left in a hotel bathroom caused an outbreak of norovirus-induced diarrhea and nausea that struck nine of 13 members of a girls’ soccer team in October.”

Researchers at the University of Arizona and the Loma Linda University School of Public Heath randomly tested reusable grocery bags carried by shoppers in Tucson, Los Angeles and San Francisco. They reported, “Bacteria levels found in reusable bags were significant enough to cause a wide range of serious health problems....Bacteria was found in 99 percent of the tested bags, nearly all of which were made of woven polypropylene. Half carried coliform bacteria; eight percent carried E. coli.”

Various studies state that nearly all dangerous bacteria in reusable bags can be removed by washing them, but 97 percent of the people using them don't wash them. The San Francisco ordinance states that reusable bags must have a usable life greater than 125 uses and, furthermore, must be durable enough to be washed and disinfected at least 100 times. Because the usable life requirement exceeds the number of washes requirement, the ordinance assumes the bag will not be washed after every use. The Klick and Wright study notes that “washing such bags will itself have negative environmental consequences through excess water use. Further, the detergents necessary to clean the bags add to the environmental costs, as does the use of water hot enough to kill the bacteria.” Kofi Aidoo, Professor of Food Science at Glasgow Caledonian University, is a leading expert on bacterial toxins and food-borne diseases. He says, “If people are going to have to pay for bags and re-use them my concern is we're creating a high risk of food poisoning. At the very least people have to be given advice to clean these bags every time they use them." 

Common plastic bags are environmentally superior to reusable ones in many ways. Manufacturing them requires less than half the energy needed for compostable plastic or cloth bags and less than a third of what's required for paper bags. A higher percentage of energy can be recovered (through combustion) from the single-use plastic bags than from the other two types. Making plastic bags requires less than 6 percent of the water needed to make paper bags. And cloth bags are much more challenging to recycle since they contain a combination of materials including metal, cotton and other fabrics.

In a comparison of quantities of municipal waste by weight, the production, use and disposal of single-use plastic bags produced a net 15.51 pounds of municipal solid waste; compostable plastic bags, 42.32 pounds; paper bags, nearly 75 pounds.

A report from the National Center for Policy Analysis states, Studies show that plastic bags represent a tiny portion of litter and that banning them has not reduced the amount....According to the Keep America Beautiful campaign, plastic bags are not one of the top 10 sources of litter nationwide.” In Austin, Texas, plastic comprised 0.6 percent of the city's total litter—but that is high because it included other types of plastic, not just plastic bags. A statewide study in California found plastic bags were only 0.3 percent of the waste. In San Francisco, plastic bags accounted for 0.6 percent of the city's litter before the ban—and 0.64 percent after the ban. 
The United Kingdom’s Environmental Agency found paper bags were more environmentally harmful than plastic bags in every category: global warming potential, abiotic depletion, acidification, eutrophication, human toxicity, fresh water aquatic ecotoxicity, marine aquatic ecotoxicity, terrestrial ecotoxicity and photochemical oxidation. It also found plastic bags were environmentally superior to reusable cloth bags. It said cloth bags would have to be used 104 times to surpass the environmental performance of plastic bags.

The campaign to outlaw plastic bags in the name of improving the environment is based on ignorance and misinformation. It will do the exact opposite. It will waste energy, water, and money. It will create inconvenience, waste people's time, and impose health risks. It will deprive people of the liberty to exercise choice which has produced a more efficient, economical and safer product—and with less residual municipal waste—than alternatives favored by the ban. Banning plastic bags is an attempt to achieve by political means what cannot be achieved by economic means, because it is unrealistic. It means government against the economy! Which means government against reality. There is nothing government can do to make an economic function more efficient than a free market; its only power is to make it less efficient and more costly—and, yes, environmentally inferior.

If government sacrifices even small measures of individual liberty in hope of some small economic gain deemed more important, the liberty disappears but the gain proves illusive. If government instead regards safeguarding liberty and individual rights as preeminent—not to be sacrificed to anything—the result is a free market that provides economic benefitsincluding environmental and health benefits— unattainable by political action.


Tuesday, July 28, 2015

We Need a Constitutional Convention, Part 2

In the same way that EPA has extended its control over water—and even land—under clean water laws (See Part 1), it has exceeded Constitutional authority and the intent of Congress under the Clean Air Acts. Once again, it has caused an enormous waste of billions of taxpayer dollars on government itself—and costs approaching a trillion dollars for compliance in the private sector. All this with measures that have little benefit—and often negative consequences—to the environment or human health. Take carbon dioxide for example.

Since carbon dioxide from burning fossil fuels cannot harm human health directly, the EPA alleges the health hazard is indirect, from global warming. This is why EPA has declared carbon dioxide to be a pollutant; otherwise it would have no legitimate authority for regulating it. But an array of studies over more than twenty years demonstrates that warm climate is beneficial while cold climate is detrimental to human health. For example, in 1998, Thomas Gale Moore's “Health and Amenity Effects of Global Warming” estimated a temperature increase of 2.5 degrees Celsius would cause a decrease of 40,000 deaths per year from respiratory and circulatory disease, based on U.S. Mortality Statistics.

In 1997, “Cold Exposure and Winter Mortality...” by Keatinge, Donaldson, et al explained the mechanisms of serious illness from cold: hemoconcentration increases blood viscosity and accounts for half of all excess cold-related mortality. In 2000, “Heart Related Mortality in Warm and Cold Regions of Europe...” examined mortality as a function of mean daily temperature in Athens, Greece; London, England; and Helsinki, Finland. These two studies provide the most comprehensive evidence that mortality decreases as temperature increases, over most of the current climate range of Europe.

The data show U.S. mortality from cardiac, vascular, and respiratory disease in winter is seven times greater than in summer; in Europe, nine to ten times greater. Data from the 1997 study indicate an estimated 25,000 to 50,000 fewer deaths in the U.S. per year from a 1 degree C temperature rise.

In 2007 Deschenes and Moretti presented a comprehensive study of all-cause mortality as a function of the day of the year. Maximum mortality occurs in January, and the minimum is in the warmest months of July and August.

In 2008 the U.K. Department of Health released “Health Effects of Climate Change in the UK 2008”, an update of reports from 2001/2002. It showed that there was no increase in heat-related deaths 1971-2002 despite warmer summers. And cold-related mortality fell by more than a third in all regions.

The foregoing studies show EPA's claim it regulates carbon dioxide because global warming is a health hazard is bogus and unscientific. The agency has abandoned not only science but basic honesty in service to an ideology that demands that the bogus is real, that humans are causing global warming and, hence, must be regulated.

The EPA, politicians, news media and other opinion makers rely heavily on the assertions by the United Nations' Intergovernmental Panel on Climate Change (IPCC) that increased CO2 emissions cause global warming. The United Nations established the IPCC not to investigate global warming but to find a human cause for global warming. IPCC rules require all assertions in its assessment reports to be based on published papers in refereed scientific journals. That procedure was flagrantly violated in its Fourth Assessment Report. That report listed the World Wildlife Fund as the source for sixteen of its assertions, including that Himalayan glaciers would disappear by 2035. The WWF is an environmental advocacy group with no refereed journal but a well-deserved reputation for exaggerated, unsupported claims. The IPCC Fourth Assessment Report also cited a Greenpeace report, a mountaineering magazine and a student paper as sources. Obviously, the IPCC would not be using these unscientific sources if it could find scientific ones. The inescapable conclusion is that the IPCC could not make a valid case for human-caused global warming with scientific evidence. On June 24, 2012 it said whatever it chooses to post will be considered as peer reviewed. In other words, the IPCC's position of “authority” is now to be considered as equal to, and a substitute for, the scientific rigor of peer review in a scientific journal. Whatever it says, counts—simply because it says so.

Because the IPCC is so flagrantly political and unscientific, a Nongovernmental International Panel on Climate Change, composed of independent highly qualified climate experts, has challenged its assertions. In 2009 this NIPCC published a monumental 880-page report, Climate Change Reconsidered (and later CCR II, over 1,000 pages), supported by thousands of references in peer-reviewed scientific journals, most of which were not utilized by the IPCC. It has since published several other reports. All were published without government or corporate funds being solicited or accepted, and authors were not paid for their articles.

As documented by the NIPCC, the widely publicized “greenhouse” theory that carbon dioxide causes global warming does not withstand scientific scrutiny. The sun—not CO2—determines climate change; and the sun—not factories and automobiles—determines the level of CO2 in our atmosphere. I have written more than 20 blog postings and articles on the subject of global warming, and I do not intend to repeat that information here. That is not the purpose of this posting; its purpose is to show that the federal government has not provided a valuable environmental service but instead has misled the public in colossal fashion that has wasted billions of dollars. Eliminating the EPA because it has no authority under the Constitution's enumerated powers would eliminate this gigantic economic waste without endangerment from the global warming hyped by alarmists as “the greatest threat of our time.”

From 1993 to 2013, the federal government spent $165 billion on global warming and continues to spend about $22 billion annually on it. Billions of additional dollars are wasted in the private sector by engendering expensive “green” solutions rather than economic ones for construction, transportation and electricity.

The greenhouse theory, which is based on computer models—not actual physical evidence—was sold to the public on the grounds those models accurately represented the real world. Actual physical evidence has now shown they do not. There has been no global warming for 18 years and 6 months despite enormous increases in CO2 emissions. In the fifteen years 1972 through 19887, humans produced 302 billions tonne of CO2. In the next 15 years they produced 461 billion tonnes of CO2, yet there was no global warming. The global-warming models have been an utter failure, projecting a scenario exactly opposite to what occurred in the real world. Nor have they been able to demonstrate any validity in backtesting over much longer time periods. When a theory contradicts reality, it is the theory that is wrong. That is really all you need to know about the global warming scare. But for those who would like more information on this but do not care to tackle the voluminous NIPCC reports, see my postings here: “Sun—not CO2—Drives Earth's Climate” and “Its the Sun, Stupid. For more, click here, here, here, here, here, here, here, here, here, here.

The proposed Constitutional amendments described in Parts 1 and 2 of "We Need a Constitutional Convention" are taken from my latest book The Impending Monetary Revolution, the Dollar and Gold, Second Edition. That book contains several additional ones that are needed to reform America and regain our liberty through sound money and restoring the meaning of the Constitution. Please see the book for these and support a new constitutional convention to be called by the states under Article V of the Constitution.