Archive for November, 2011

Published 11/17/2011 in The Daily Caller

When I was a kid, my favorite Superman comics featured Bizzaro World, a place where everything was topsy-turvy and kryptonite was good for you. Today, you can find a real-life congressional version of Bizzaro World at the House Agriculture Committee, a place where deficit spending is rarely criticized and corporate welfare is stoutly defended. On Wednesday, the Republican committee chairman, Frank Lucas, successfully blocked a small but bipartisan effort to reduce agricultural spending — demonstrating that in Lucas’s political Bizzaro World, Republicans want to spend and spend.

The issue was how to pay for what the United States owes Brazil as a result of Brazil’s win at the World Trade Organization in its case against U.S. cotton subsidies. As part of a WTO settlement reached last year, the United States agreed to fork over $147.3 million annually to Brazil’s Cotton Institute.

Before you start sputtering in outrage, you should know that in March 2010 Brazil published a list of over 100 U.S. goods that would be subject to import tariffs of up to 100% and a preliminary list of U.S. patents and intellectual property rights that Brazil could restrict if no cotton settlement was reached. Trade actions like this frighten U.S. exporters, as they not only are shut out of the importing country’s market but also stand to lose market share — perhaps permanently — to third-country competitors.

Also bear in mind that the $147.3 million annual payment need not go on forever — it will be revisited in 2012 when current U.S. farm subsidy legislation expires and new subsidy programs are enacted. Thus, the payment is an incentive for U.S. lawmakers to (hopefully) make the changes necessary to end Brazil’s WTO case.

Meanwhile, however, Congress has to find that $147.3 million to pay Brazil now. Congressman Jeff Flake (R-AZ), a tireless fiscal conservative, proposed reducing direct payments to U.S. cotton farmers to fund the obligation to Brazil. No, said Lucas. Congressman Earl Blumenauer (D-OR) had an amendment that would have reduced subsidies by capping annual farm payments at $125,000 per farm operation. Lucas nixed that too. Finally, Lucas blocked an effort to limit certain agricultural payments to producers with an adjusted gross income of over $250,000.

Recall that Lucas is a member of the party that’s supposed to treat big government like kryptonite. But not in Lucas’s Bizzaro World, where big government is good and spending cuts are bad.

Where’s the House Republican leadership’s outrage over the damage done to the GOP brand by a party teammate who successfully thwarts attempts to reduce corporate welfare? The leadership’s pronouncements about fiscal responsibility are nice, but when it comes to making tough choices about a traditional Republican constituency (e.g., farmers), why must Bizarro World win?

Joanne Butler

Senior Economics Fellow

Caesar Rodney Institute

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Plentiful natural gas coming from new wells in Pennsylvania and elsewhere are key to lower manufacturing cost, lower electricity prices, lower heating costs, and may possibly replace expensive foreign oil in our vehicle fleet. The Delaware River Basin Commission has been working on rules that will allow drilling in parts of Pennsylvania and New York that drain into the Delaware River. As a partner in the Commission, Delaware gets a vote on rule adoption even though there is no drilling potential here. Delaware should approve these rules:

• There has been ample time for review and public comment. Requests for more hearings is merely a delaying tactic by groups who want to stop drilling completely
• The proposed rules adequately protect the basin with well pad setbacks and well siting requirements, and requirements for waste water re-use or treatment
• The rules are consistent with other jurisdictions, some in operation for over sixty years, and with experience learned from over one million “fracked” wells drilled in the U. S. so far

A primary concern has been control of wastewater from “fracking” operations when water with additives is forced into horizontally drilled wells to form micro-cracks to allow gas to flow. The water can be effectively recycled or treated in approved waste water treatment plants eliminating this concern. A second issue is gas leakage into drinking wells. Most reports of well contamination have been shown to be caused by local near surface methane sources not related to drilled wells. Where the wells have caused contamination it is from problems with improperly built or managed near surface well casings. Technical solutions for these problems exist and are being addressed by individual state permitting authorities and are not part of the DRBC rule proposal.

David T. Stevenson
Director, Center for Energy Competitiveness

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In March of this year, Caesar Rodney Institute’s Center for Economic Policy and Analysis released a technical study of the methodology behind Delaware’s prevailing wage system. With regard to the prevailing wage (PW) the study documented that: a) the methodology used by the Department of Labor was seriously flawed, b) the PW was biased toward union collective bargaining wage rates, and c) the PW was 40% above the market wage for experienced construction workers.

As a result, in the last fiscal year $135,000,000 of state capital spending went to boost the salaries of construction workers at the expense of additional construction accomplished on public schools and infrastructure. Using the market wage would also have put 2,000 more construction workers on the job. Legal opinion has concluded that Delaware’s PW regulation wastes taxpayers’ money and is discriminatory and unconstitutional.

All this is known to Delaware’s Secretary of Labor, Governor, legislature, unions, contractors associations, Delaware Association of School Administrators, the Delaware State Teachers Association, and the News Journal. Yet there is no indignation and no proposed remedy.

As it turns out, this is nothing new. In 1997 Eleanor Craig, associate chair and professor in the University of Delaware’s economics department, also studied Delaware’s prevailing wage system. Following are highlights from that analysis:

• Prevailing wage labor rates average nearly 23% higher than those contracted under competitive market conditions
• Delaware’s prevailing wage law is considered one of the more restrictive in the U.S. since the rates chosen are almost always found in union agreements
• The extra cost of paying prevailing wage on state projects in 1997 was $41,000,000
• The need for additional record keeping and accounting imposes compliance costs on contractors
• The Department of Labor’s Office of Labor Law Enforcement employs 21 full time worker and costs $800,000

The study also notes other than on construction projects, the state relies on competitive bidding, and that taxpayers are subsidizing the incomes of some construction workers.
Caesar Rodney is in the middle of raising funds for a legal challenge to this inane system and the prospects are good. In a similar case, the California Supreme Court found that the prevailing wage requirements did not serve to promote safety and broad economic goals, and were for the benefit of certain groups, primarily members of certain unions.

If you wish to help in this battle, you can make an anonymous donation to the Prevailing Wage Legal Fund through the CRI website

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

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