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1.6.06

Fair bill for cable providers, consumers irks local government

So shrill have local governments become in their opposition to opening up the provision of video services in Louisiana that they have resorted to promoting outright misleading or just plain fake issues to stop its advancement.

HB 699 would permit non-cable television channel providers to enter into franchise agreements with the state, bypassing local government. Earlier, much fuss was made about allowing the bypass as potential providers, mainly telephone companies with broadband capacity, wanted to do away with the artificially-imposed startup costs typically demanded by local governments, as an inducement to enter the market and to guarantee entry (local governments do not have to grant a franchise even if it is an identical or better deal to any one with an existing franchisee).

As previously noted, local governments had allied with cable companies to try to stop the bill. Cable companies, of course, wish to avoid competition but the motive for local governments is that through their agreements, they can impose extra requirements on franchisees and use the rates charged as a backdoor way to raise revenues from their citizens. HB 699 would take away these abilities.

Especially under the amendment added in the Senate Commerce, Consumer Protection, and International Affairs Committee yesterday which is an attempt to break up the local government/cable company alliance. This insertion would allow cable companies to opt out of their existing franchise agreements if they pursued a statewide one, just as in the case of the new entrants.

As a result, local government lobbyists have taken to arguing that there would be a huge loss of revenue to local governments because of the inability to negotiate local franchises. But this simply isn’t true: the bill provides that the fees can be charged by a local government as much as five percent of the gross revenues of the provider from the provision of that service. In fact, revenues may increase as a result: with these new entrants into the market, the share of the one provider which currently is not subject to any fees, satellite, may go down, while payers of fees may increase.

Stymied here, opponents try to get around this by arguing that providers will try to manipulate the “gross revenues” reported (which, given the way they are defined in the bill, would be practically impossible) or that they will claim they are exempt from the fees because they are “information,” not video, providers (a claim being made in other states that so far has been unsuccessful and which easily could be overridden by changes in law or regulation). At wits end, opponents finally threaten the state with a lawsuit about the loss of local rights-of-way jurisdiction from the opt-out provision they must know they cannot win because of the state general police power (except in the case of pre-1974 Constitution-chartered entities which had to be exempted in the bill).

Again, to understand opponents’ motivations behind these objections, follow the money: local governments like being able to force existing providers to provide certain services, for which then they may take credit from voters even as ratepayers subsidize them, and the ability to pass along certain fees. Losing these powers is really why they protest, but their interests are not compelling compared to the better service at lower cost most, if not all, Louisiana consumers would gain under this bill.

31.5.06

Consumers lose; agriculture, government win with ethanol bill

It’s so typical: when governmental elites in Louisiana proclaim the state is or is poised to become a “leader,” almost always that’s not because of people’s free choices in some area of activity, but because of state fiat that usually proves to be counterproductive and leaves the state worse off than before.

That’s the way HB 685 seems to be headed, ready for the signature of Gov. Kathleen Blanco with her expressed intent to provide it. The bill would require that once state refiners produce at least 50 million gallons of ethanol or 10 million gallons of biodiesel, henceforth the amount of ethanol produced would equal at least 2 percent of the fuel sold in the state.

The problem is, this is a sure ticket to artificially higher prices at the pump for consumers. Presently, just the ethanol production component costs roughly $3 a gallon to make. This is why where it’s done, chiefly in the midwest because of federal air pollution requirements that also force the use of expensive additive MBTE to gasoline, the federal government subsidizes the process anywhere from 70 to 90 cents a gallon. Further, it will create chaos in the supply chain and force some providers and middlemen to take heavy losses in creating the infrastructure to deliver the product.

Proponents have attempted to make four facile arguments to justify the bill’s requirements. First, some have said it will be years before the trigger implements, leaving plenty of time to gear up for manufacture and distribution. But as state Sen. Walter Boasso, who tried to amend the bill in its Senate committee hearing to change the implementation after the pulling the trigger from six to 18 months, argued, with such a low threshold (just over 800,000 barrels at current rates), just a few test runs at refiners could hit the threshold. This is why opponents say by this time next year the bill already would be mandating the mixing of ethanol and gas.

Second, supporters claim lower prices will result. That’s hard to square with the realities of production costs, noting that the federal subsidization available in Louisiana is just 51 cents per gallon – due to expire next year in any event. And it’s hard to believe somebody who was a college professor, the bill’s House sponsor Rep. Francis Thompson, would make such a retarded argument to try to defuse this claim – comparing the previous day’s gas prices in the Midwest to around Louisiana.

Thompson’s legislative history shows he has a hard time understanding what a free marketplace is or knows anything about economics in general, and it clearly shows with this remark. A number of factors go into gasoline pricing that makes such a comparison between apples and oranges, not the least of which are the federal air quality mandates in the corridor beginning in Milwaukee, heading south to Chicago, and then branching off. Because of the peculiarities of the special blends of gasoline required, given supply vagaries prices can fluctuate 30 cents or more within a single day (believe me, I lived it).

In fact, much of the most recent increases in gas prices in the restricted air-quality areas have come from increases in ethanol, not petroleum, prices. The simple fact is (like most “environmental” measures like recycling) because the production of ethanol is so energy-intensive (a half gallon of petroleum required to make one gallon of ethanol) at this time under typical market conditions it will be more expensive than gasoline production.

This belies the third claim, that using ethanol will save substantially nonrenewable energy sources. At best, savings of oil use are just half because of the 2:1 production ratio. Technological advancements may change this, but that will be slowed if government mandates and subsidizes an inefficient process. Without these policies, the marketplace would provide greater incentives for invention of more efficient processes.

Finally, others argue introducing ethanol blends will reduce dependence on foreign energy sources. But, again, the marketplace can solve for this in a much more efficient fashion. Given the recent direction of energy prices (and forgetting for the moment that environmental restrictions on refiner expansion and new construction), this is making economical oil extraction from previously prohibitive sources, such as offshore or in the mountain west of the U.S. The major problem there is start-up costs – a tremendous capital investment that will occur only with a period of sustained high prices. Once the revenues from this kind of extraction are adequate to pay off the initial fixed costs, subsequent supply will drive world prices down – and increase the amount of oil from domestic sources.

The real impact of this bill will be to suck needlessly money out of consumers (one estimate being 67 cents a gallon’s worth) and transfer it to a small coterie of agricultural interests and the state itself, because of lower gas mileage per gallon with ethanol blends which will increase the amount of gas sold thus sales and use taxes collected. If a majority of the Legislature really cared about high gas prices and wanted to do something effective, it would reduce or eliminate its tax on gasoline, not run this confidence game on Louisianans.

30.5.06

Hypocrisy behind reaction to Jefferson's Louisiana Purchase

Ever since it happened, it’s been reasonable to believe that government managing of the aftermath of Louisiana’s 2005 hurricane disasters would be the biggest contribution the state made to the issues resolving the 2006 federal midterm elections. Instead, it could be the actions taken over the issue of Jefferson’s second Louisiana Purchase.

Obviously, this incident refers not to the third president of the U.S. but to the state’s Second Congressional District member William Jefferson, a Democrat the evidence against steadily mounts indicating an extended pattern of his corruption while in office. This has thrown a wrench into the lurid, contrafactual plans of Democrats to try to paint Republicans as institutionally corrupt for use as a campaign issue.

This has lead the Democrat House leadership, in a fit of simulated outrage, to demand his resignation from his one committee assignment, from perhaps the most important committee in the chamber, Ways and Means. But he has declined, and its attitude in response has been. “All right, we tried but it didn’t work, so let’s move along now, nothing more to be seen here.”

But this represents an unserious attempt to enforce standards: all the House Democrat leadership would have to do is to convene the party’s Policy and Steering Committee (controlled by the leadership), then its Caucus (comprised of all elected Democrats in the House), and to have the former strip Jefferson of his seat with the latter confirming that decision. If Democrats really meant what they requested of Jefferson, this easily could be done. Of course, they don’t do it because they don’t really mean it.

However, House Republicans are making it easy for Democrats to slouch away from the spotlight of the negative publicity of the incident not only by having their leader Speaker Denny Hastert complain about the recent federal government fact-finding search of Jefferson’s Washington office, but then to have the poor sense to launch not one, not two, but three planned hearings by their majority party on the entire enterprise. They base these hearings on some derivation of a constitutional question (the search having separation of powers implications), but then conveniently seem to forget other passages of the Constitution much more direct and relevant to the incident.

First, does Congress not remember that it has an almost total (except for executive privilege) power to compel information from the executive branch? Article I Section 7, in giving Congress the power to legislate, infers the power to investigate. In other words, in holding these hearings Congress is suggesting it has a much broader right to investigate the executive branch or anything else than the executive branch has in performing the duties Congress laid out for it when members of Congress themselves are involved – a self-exemption of the crassest kind.

Second, this does not square with the contents of the previous Section 6, which outlines Congressional immunity only (except in cases of “Felony, Treason, of Breach of the Peace”) “from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place.” This says nothing about investigations, so there is no direct Constitutional protection involved – only a legal one that the House seems to think it could put in there to shield its own members.

So when House Republicans are saying they would rather spend their time and resources on investigating an open-and-shut Constitutional question than on pressing national problems, they open themselves up to charges that they are almost as concerned with trying to preserve power for power’s sake as the Democrats are in trying to avoid being labeled the party of congressional corruption by their meaningless actions concerning Jefferson. Both tactics give off the scent of hypocrisy.

Which party gets hurt worse at the ballot box as a result of this at this time is unknown, but none of this is in the interest of the public from which that electorate comes.

29.5.06

Interesting contests crowd fall election calendar

Except for the unsettled situation regarding the Second Congressional District, things are starting to heat up for the contests regarded as competitive in state and national positions in Louisiana this fall.

The only such race out there at the national level (again, not considering the Second District for the moment) is the Third Congressional District which sets to be a partial replay of two years ago. In that, current U.S. Rep. Democrat Charlie Melancon barely made it into a runoff with Republican Billy Tauzin III, just outpacing Republican state Sen. Craig Romero. Melancon narrowly defeated Tauzin in part because Romero waged a scorched earth campaign of non-support of his fellow Republican.

All seems forgiven, now. Romero has widespread GOP backing and Melancon faces a stiff challenge for the seat. Still, bitter feelings Romero created may now boomerang against him and allow Melancon to retain the seat despite this being the most partisan-deviant seat in the entire Congress.

The dynamic of this contest two years ago possibly could come into play concerning one of the statewide executive branch offices up for grabs, secretary of state. A Republican would be favored, but that could change despite the fact two strong GOP adherents have emerged – former state Republican Party Chairman Mike Francis and state Sen. Jay Dardenne. Opposing them appears to be state Democrat Rep. Carla Dartez.

Francis is perceived as an outside reformer, while Dardenne is seen as an experienced insider. Consequentially, more ideological conservatives see Dardenne as suspect. Fueling this speculation is Dardenne’s confused behavior over his vote for and then against exceptions to abortion in SB 33 presently moving through the Legislature (even as the abortion issue has no direct relationship to the job of Secretary of State). If this contest turns particularly contentious, the loser may be so embittered just as was Romero and act accordingly that it could allow Dartez to slip in for the general election runoff.

Perhaps as interesting but in a different way is the other statewide executive branch tilt, for the insurance commissionership. There, state Sen. James David Cain, formerly a Democrat but now a Republican, looks to square off against the acting Commissioner James Donelon, formerly a Republican but now a Democrat. Newcomer Republican Deanne Henke also has said she will run. At this point, it’s anybody guess as to how all this party switching will translate into support between the two major candidates.

28.5.06

The meaning of Memorial Day

This column publishes every Sunday through Thursday after noon U.S. Central Time (maybe even after sundown on busy days, or mayve before noon if things work out) except whenever a significant national holiday falls on the Monday through Friday associated with the otherwise-usual publication on the previous day (unless it is Independence Day, Christmas, or New Year's Day when it is the day on which the holiday is observed by the U.S. government). In my opinion, there are six of these: Memorial Day, Independence Day, Veterans' Day, Thanksgiving Day, Christmas, and New Year's Day.

With Monday, May 29 being Memorial Day, I invite you to explore the link above.