by Steven Waechter | Mar 7, 2012
I recently heard a radio commercial urging me to contact various members of Congress to voice my support for tax credits connected to the wind energy industry. On a lark, I went to the Iowa Legislature website and searched active bills for the word “wind,†and received several dozen hits, many of which seemed to be focused on state tax credits for manufacturing and installing wind turbines. Both state and federal politicians seem to be tripping over themselves to get into the wind energy craze.
Back in 2010 Alliant Energy was petitioning to be allowed to increase the rates they charged for electricity, and one of the supporting reasons they put forward was the $150 million project called the Whispering Willow-East wind farm in Franklin county. This was big news in Newton, where I was living at the time, as Newton is both the location of some wind turbine manufacturers, and within the area that would be affected by the rate increase.
This serves as perhaps a perfect litmus test for how people think about economics. If you are a progressive or a neo-Keynesian, then your reaction is likely to be that this is entirely appropriate; these wind farms are being built for our benefit, so of course we must pay. If you are an environmentalist or a socialist, then, of course electricity should cost more in your mind. As you are increasing your standard of living, at the unfair expense of the environment or the proletariat, it would be akin to questioning whether people should be locked up for committing assault, wouldn’t it?
If you believe in Austrian economics, or just in free-market pricing in general, then this situation would seem a bit odd. The supply of electricity is presumably increasing because of new wind farms. Increases in supply tend to reduce pressure on prices, not cause them to increase. Yet here, the new wind projects are being cited as a reason to increase the rates per kilowatt hour to the end users. They have built a wind farm, and now demand to pay for it by charging more for electricity still produced mainly by coal which could have been provided for the old price if they hadn‘t bothered to build the wind farm.
That is how capital investment works; if you couldn’t make money by building houses in the current market, but you build a bunch of houses anyway, it doesn’t cause the price of houses to go up. Wind energy doesn’t seem to follow the script of wealth creation.
The rule of thumb seems to be that a wind turbine costs about $1 million per nameplate megawatt of capacity, so if a turbine has 3 megawatts of stated capacity then it would cost about $3 million. Then you have to factor in what the industry refers to as the “capacity factor,†which is the percentage of the nameplate capacity that the turbine actually produces, and in Iowa the capacity factor is said to be about thirty percent. In plain terms, that means that if you want one megawatt of electricity, you need a three-megawatt wind turbine. However, it isn’t as simple as that. Although Iowa might be the “Saudi Arabia of Wind†– proclaimed as such by people who have likely never been to Saudi Arabia, nor had difficulty paying their electric bills – our winds are not constant.
When the wind doesn’t blow, the turbines don’t turn. The same is true for when the wind is too strong – wind turbines are equipped with a braking mechanism to stop them during high winds. If that brake fails, the turbine blades can rattle the entire tower to pieces, if the generator doesn’t catch on fire first – which you should look up on the internet because it is an interesting sight.
As a result of all the shortcomings of wind turbines, wind power costs about $90 per megawatt hour, compared to about $60 per megawatt hour for coal and even less than that for natural gas-generated electricity, yet we are told we need to fill our skylines with expensive wind turbines which spend most of their lives perfectly still and producing nothing – and then charge us for the cost of the electricity these intensely ugly things don’t produce. The Iowa Wind Energy Association has a goal to increase Iowa’s wind capacity from 4,500 megawatts to 20,000 megawatts by 2030 – so we can enjoy 6,000 megawatts of electricity doled out in intermittent intervals.
Germany announced its intent to decommission all of its nuclear power stations after the Fukushima incident, and the German government has been very supportive of wind energy, but not a single coal plant has been shut down. In fact, Germany is replacing its nuclear capacity with new coal power plants – as many as 26 new coal power plants are planned. The wind, like the sea, is a fickle lover as it would seem.
According to wind energy supporters, expanding wind energy creates jobs, and therefore none of the shortcomings in the technology or the economics are considered to matter. This attitude seems to be the source of the consensus among political leaders – or at least the appearance of consensus – as politicians go along with the wind energy movement lest they be accused of being “against jobs.†There are even pictures of wind turbines on Iowa’s new driver’s license design.
The wind energy addiction will end up being much the same as the other fads. State and federal tax credits, grants, and green energy targets are directing capital towards these wind energy projects. The jobs created in the short term are visible to politicians seeking reelection, but the damage is diffused across the entire economy and the effects won’t be felt until later. They can see the turbine blades going down the interstate, but not the higher utility bills of their constituents – including employers – nor the layoffs when the negative financial effects become impossible to ignore. Americans are too broke to pay for expensive wind-generated electricity, governments are too broke to continue subsidizing these projects, and the economy is too broke to carry an industrial sector which generates no profits, no useable increases in electricity, and no discernable tax revenue.
Wind turbines don’t increase the standard of living; in fact they seem to make energy more expensive. They only work intermittently, wear out rather quickly without expensive maintenance, and are heavily dependent on government credits and grants for their manufacture and installation. They have also been known to kill eagles, which is reason enough to hate anything.
The future might be filled with wind turbines, but that won’t be a positive thing. They are too expensive and too underproductive to provide electricity in quantities and at prices that are necessary to make them profitable. Elected officials at all levels need to move past the rhetoric of the wind energy craze and do their own research into this matter.
Unless they do so, they have no business voting to appropriate public funds to support the construction of more public relations kitsch at $1 million per nameplate megawatt. Even now attention is turning towards natural gas as the real driver of future energy production while a combination of better exploration techniques and hydraulic fracturing makes natural gas properly cheap.
Alliant itself is looking at building a new natural gas power plant – in Iowa.
by | Oct 25, 2011
This is the second installment of a two-part interview, to read part one click here.
Education
Governor Branstad’s legacy-minded education reform proposal has struggled to draw support since its release on October 3rd, and you can count Mr. Landon as one of those lacking in enthusiasm.
A core tenet of Landon’s philosophy is local control. The benefit he sees in applying this principle to education is that the parents of each child, and the teachers in the actual class room, will have their voices better heard and their concerns more directly dealt with,
“My first reaction (to the governor’s plan) is that it drives us towards more state control and more mandates on levels of performance. I think that we are going to have to reform the system, but I think that instead of less local control we need to focus on more local control. I think we need to make sure that the families, the school teachers, and the administrators all have their say on how this should be done. I really believe that parents and school teachers, the people who are in that sector, know the best for their kidsâ€.
Health Care
The Democrats failure last session to construct Iowa’s insurance exchange program in accordance with Obama Care means that a nasty, brutal fight awaits next year. By all accounts this will be one of the three most high-profile issues debated by the Iowa Legislature in 2012, and one that ultimately drew fellow candidate Stacey Rogers (R-Ankeny) into the race. Landon, for one, would have voted no last year on SF 404 and sounds ready to engage in the fight,
“What would guide me is local control. The rights of District 37 residents and the rights of Iowans have to come first. Anything that’s done has to be for their benefit and their economic interests. And frankly, I view Obama Care as unconstitutional from the get-go. I am not in favor of taking care of this through the government because they (the people) will not be taken care of the way they should be.â€
On Illegal Immigration
“I am a proponent of legal immigration. It is probably not that big of an issue in this particular district, but there are areas in Iowa where it is. As a state issue I would say that the Federal government, like in so many other things, has failed. I am against the taxpayer having to pay for the upkeep of people who have come here illegally.â€
Barring an unexpected Federal resolution to this problem Landon indicated a willingness to possibly engage at the state level, “If the Federal government won’t do it and they are going to continue to let the border be porous, from the standpoint of public safety and who is going to protect the taxpayer, there has to be a process that protects you the citizen.â€
On Varnum (Gay Marriage)
“That should have been decided by the voters. That is a monumental shift in society and voters need to have their say. If a constitutional amendment is the only way for voters to get their voice heard on it, then we need to do it.â€
On The Tea Party
In response to a question seeking his thoughts on the Tea Party and if he would consider himself a “Tea Party-ish†candidate, he answered, “I haven’t found anything in their platform that offends me or that I take issue with. I am for individual rights. I think people can make their own decisions and government would be well advised to pay attention to that. Having said that, I am part of the process and a consensus builder, I just don’t think you can go out there as a maverick and get a whole lot done. What I want is for Lincoln and Douglas townships to flourish and for Ankeny to flourish. The only way I can do that is by being an effective voice, and the only way to be an effective voice is to be a part of the process.â€
Race Analysis and Summary
The contest for the Republican nomination in House District 37 will be of elevated importance as the probability is high that the nominee will ultimately be the Representative. Due to the fact that the district has a 2,400 advantage in registered Republicans over registered Democrats in what is already shaping up to be a Republican wave year, it is likely that the nominee may run un-opposed. Even more likely is that if the Democrats do choose to field a candidate they will not bother to recruit a top-notch challenger or commit substantial resources to the effort.
In what could end up being a crowded field of Republicans, John Landon is a serious contender who will be in it for the long haul. He appears both fired up for the race and ready to put in the time and work that will be required to win the seat. The major pillars that his candidacy will be built on are: less intrusive government, more local control, simplicity in legislative solutions, sensitivity to Iowa’s taxpayers, and a vehement opposition to unfunded mandates.
In particular, emphasizing that the failure to make budget cuts leads to higher taxes and a crusade against unfunded mandates could garner wide-spread appeal in District 37.
As his background suggests he is clearly positioned in the race as the “business candidate.†While often times the “business candidate†moniker is attached to folks who have had professional success, it’s worth noting that the business-like way Mr. Landon breaks down large issues as he thinks through them suggests that he would translate these skills to governance should he be elected.
Though we are early in the process, as Republicans begin to look at the field they will find much to like about John Landon as a person and as a candidate.
by | Oct 24, 2011
This is part one of a two part piece. A link to the second installment covering the topics of education, health care, illegal immigration, gay marriage, the tea party and an early analysis of this race can be found at the end of this article or by clicking on Part 2 here.
The population explosion the city of Ankeny has seen over the last ten years has brought many changes to this Des Moines suburb. Along with construction of a new high school and the surge of large retailers that accompany a population growth from 27,000 to 45,000 in one decade, Ankeny has also received a make-over in its state legislative districts.
In terms of the Iowa House, what resulted is for the first time Ankeny has been split into two House districts. Replacing old HD 70 are new political territories HD 37 and HD 38 (click for maps). While former HD 70 Representative Kevin Koester (R-Ankeny) is running in HD 38, the city’s other new district, composed of north Ankeny extending to Alleman and east to the Bondurant city line, finds itself without representation.
Recently I sat down with one of the candidates vying to be this district’s inaugural public servant, Republican John Landon.
Any voter sizing up a candidate who will speak for them at any level of government needs to seek answers to three basic questions—who are they?, where do they stand?, and why do they stand there? The following should give you a good feel for all three.
The Candidate
Mr. Landon is a fourth generation Iowan who grew up working on a family farm in Marshall County. After serving two years in the Navy, which included a tour in Vietnam, he returned to Iowa and earned a degree in Ag Business from Iowa State University. Following school he embarked on a 28 year career working for two international grain companies. After retiring from that business in 2002, he became a partner in the Iowa based Peoples Company. He, his wife Marvis, and their two children moved to Ankeny in 1994 where he became active in both his church and the Boy Scouts.
His reasons for getting into politics, and ultimately deciding to make this run, are both numerous and specific, “I became increasingly dissatisfied with state government over the last 12 years.†The root of this dissatisfaction first emerged from the exposure his business career gave him to industry regulations, “Lots of people in the Legislature make all these rules and say ‘hey that’s great,’ but they don’t understand the impact that they’re having on people and business—it has gotten to be a heavy blanket over business.â€
While his business dealings with the government may have laid the foundation, it was a trip to the State Capital over an issue that flared up in 2009 that proved to be the final impetus,
“There became a discussion in the state about the deductibility of Federal income taxes on our state returns. There was a public hearing and we drove down to the Capital and went into the House chamber for that hearing. And I saw the Speaker of the House rule over it like a little dictator with an iron fist, and eventually he threw us all out and cleared the gallery. I realized at that point just how far state government had become removed from the average citizen, and that got me activated.â€
The Issues
The Budget
When asked if a $6 billion annual budget was appropriate for Iowa, Mr. Landon clearly indicated that he would come in shooting for a much lower number, “I am strongly in favor of people keeping as much as their money as possible . . . we need to break this down and see what we are getting back for the taxes that we pay—and I’m struggling to see what we get back.â€
Directly related to the spending cuts that would be necessary to shrink our yearly outlay, I specifically asked about the $42 million in “targeted reductions and savings†the governor will be asking the legislature to approve next year and the political peril this may entail. He responded, “It’s going to be used as a hot issue no matter what happens, because you are dealing with people who are receiving public aid for their health care.â€
Though no specified cuts have been proposed, he would stand with the governor on this issue in theory, “We are talking about trying to find 2%-3% spent in inefficiencies,†a percentage he felt could in part be found using the Six Sigma method.
While noting the complexities involved, he is quick to draw a direct line from the failure to make budget reductions to the eventual higher taxes that they lead to,
“I want Iowans to have the best care possible but I also have a heart for the people who are paying taxes, I understand how complicated that balance gets. This is about the will of the people. This is the time where people have to stand up and say either I am satisfied to give up half my income or not. If that’s what they choose then fine, but I am here to tell you that it’s not fine, and it’s not working. There is no way that people can feel good about the current tax structure and what is going on. We cannot succeed by taxing ourselves to prosperity.â€
Taxes
One of the major issues to go unresolved last session was tax reform, and center stage in that debate was how to go about lowering commercial property taxes in Iowa. Should this issue come before a Representative Landon he would be inclined to support the largest reduction plan on the table. Interestingly, in addition to standing for cutting taxes he has some proposed solutions to address the root cause of our ever-growing tax burden, “When these school boards and community boards are faced with mandates for a rule the state is making and they are not sent any money to do it, it is going to end up in your tax receipt just as plain as day. And I think unfunded mandates ought to be absolutely unconstitutional and illegal in the state of Iowa.â€
When asked if this is something he would propose in legislative form on his arrival to the chamber, he replied, “That is a bill that needs to be brought forward and something there needs to be a good public discussion about.â€
Note: To read the rest of the story click here for Part 2
![The Great Sino-American Currency War]()
by Steven Waechter | Aug 29, 2011
The economic relationship between the United States and China is often described as being “co-dependent.†The Chinese lend America money, and the Americans buy Chinese goods. If the Americans stopped buying Chinese goods, then people in China would lose their jobs, and if the Chinese stopped lending to America, then Americans couldn’t consume Chinese goods, and around and around as the story goes.
It is a complete mirage. Right now, the Chinese are dedicating a large portion of their economy (land, labor and capital) to produce cheap, depreciating consumer goods to sell to the United States. We pay for these goods with American dollars, and China’s domestic exporters have so far been happy to accept these dollars in exchange for their products.
These dollars flow back to China through those exporters, but the Chinese companies that end up with these dollars have a bit of a problem: They are paid in dollars, but their outflows (wages, supplies, taxes and dividends to their owners) are largely priced in the Chinese yuan, so they need to exchange their dollars for the locally accepted currency. Rather than force their exporters to sell their dollars on the international currency exchanges, the Chinese central bank has been content to buy dollars from their own exporters.
This has led to two problems from the Chinese perspective: It causes massive inflation in China (floating between 6 and 8 percent lately) as the Chinese central bank prints yuan to buy all these dollars (when you hear politicians talk about the Chinese “suppressing their currency,“ this is what they are talking about); and, it has left the Chinese with a reserve of American dollars totaling something like $3 trillion in cash, accounts, and US Treasuries. They have thus far been happy to acquire this massive stockpile because the American dollar has enjoyed the status of the world reserve currency, leading it to be considered a trustworthy store of value.
This situation is about to change. The Chinese are about to figure out that they have acquired a stockpile of money that they will not be able to easily spend. Right now, about the only things the Chinese can easily buy with their dollars is oil and US Treasuries, and some in the United States actually think that this is a sustainable economic model (the Chinese work hard, sell things to us for money, and then lend it to us so we can spend it).
The only reason we were able to run the trade deficits which facilitated the assembly of these massive dollar reserves around the world was because the dollar was considered a reserve currency. China, Russia and Japan have had to export goods in order to import other goods, because other countries were largely unwilling to hold massive reserves of these currencies. Germany, with the largest trade surplus in the world and not enough arable land to feed its own populace, has had to export things of high value in order to purchase what it couldn’t produce at home.
In response to this, we have been told that the ongoing devaluation of the dollar will begin the long process of reversing our trade deficit, as it will make our exports more affordable and more attractive to other countries. It hasn’t worked – our trade deficit is growing as of August 2011, not shrinking. Devaluing the dollar has, rather than make our goods cheaper for foreigners, actually raised the prices foreigners already holding dollars need to pay for American goods. If India devalued the rupee, then the Japanese yen will buy more rupees and Indian goods will be more attractive to holders of yen because of the exchange rate. Since the dollar is held in reserves around the world , foreign customers end up paying the same higher prices as we do when our currency loses value, because they hold our currency already.
Eventually this will all come to an end. The financial authorities in China are going to stop printing yuan to buy all these dollars, and China’s exporters will have to sell their dollars on the international exchanges. When that happens, the decline in the dollar’s value will accelerate, and the value of the yuan will begin to rise. Many Americans will be priced out of Chinese goods, and because the United States has little to offer China in trade except agricultural commodities, prices for food will rise even farther in the United States, as the Chinese try to divest themselves of the dollar by purchasing something of value to them – food – not more US Treasuries that pay interest in the form of more American dollars that China can‘t spend.
But, without the American consumer, won’t there be massive unemployment in China? I don’t believe so. There might be a brief recession in China, as their economy re-balances from producing cheap goods for America to producing things for China’s domestic markets, as well as for countries like Germany – with the world’s largest trade surplus and a trade surplus with China individually. China’s economy will recover and grow, assuming the Chinese government doesn’t screw it all up by continuing to rob their own people with inflation, as they try to suppress their own currency further.
It isn’t clear if anybody can actually win this currency conflict; the American people will have a massive recession as our bubble economy based on spending borrowed money continues its collapse, and the Chinese populace will have spent the last 20 years working hard, saving money and enduring inflation so their government could amass a pile of foreign money and bonds that are being rendered worthless.
Although, if the dollar collapses the Chinese government will be at the reigns of the new global superpower; and in return American politicians got to spend money on social programs, wars and bike trails without raising taxes. So, if you happen to be either a Chinese foreign ministry official or a 15-term member of Congress, then it really is a win-win situation. If you are a Chinese factory worker or an American looking for work, then the arrangement looks rather less appealing.
Image © ktsdesign – Fotolia.com
by Paul McKinley | Jul 16, 2011
Though the third longest session in Iowa history has been over for two weeks, Governor Branstad still has until the end of July to sign or veto any of the legislation that was passed.
While there were some notable and very positive accomplishments, Senate Democrats also stood in the way of a lot of positive progress.
Here are a few accomplishments followed by some of the missed opportunities.
1) Sustainable Budget
We finally are back on the path to long-term fiscal sustainability with a budget that spends less than we take in and funds Iowa’s priorities. Is there more we can cut? Absolutely. But it’s a good start and a real break from the problems of the last four years.
2) Rule & Regulatory Reform
We have begun to change the direction of the state when it comes to onerous rules and regulations that are stagnating job creation. Our 11 city “Re-Open Iowa for Business†tour has yielded some great suggestions and opened a lot of eyes. Stay tuned in a few weeks more information on this as our comprehensive report will be made public.
3) Reorganization of Economic Development Department
This reorganization of Iowa’s economic development department, one of Governor Branstad’s top priorities, will give the state more flexibility as it pursues and recruits entrepreneurs and job creators to Iowa. This reorganization, coupled with helping our existing businesses, will be key to continuing to grow Iowa.
What were some of our missed opportunities because of Senate Democrat obstruction?
1) Property Taxes
In order to make our state more competitive for jobs, we must have lower property taxes – for all classes of property. Unfortunately, the property taxpayers of Iowa will not get the comprehensive tax reform that they deserve. We will continue to work hard to find a bi-partisan solution and make next session the session of true property tax reform.
2) Clean Abundant Energy
In order to grow the economy of the future, we must have adequate, clean and reliable base-load energy. Nuclear energy is one excellent source that would create a lot of good jobs in Iowa. The Iowa House passed legislation to continue to pursue possibility of adding additional reliable base-load energy. The votes existed to pass it in the Iowa Senate in bi-partisan fashion, but Senator Gronstal obstructed a vote.
3) Income Tax Relief
Both individual and corporate income tax reductions would help grow our economy, create jobs and stimulate positive economic activity. Once again, it did not happen this session because of Senate Democratic obstruction but count on us to continue to push forward next session.
4) Collective Bargaining Reform
The Iowa House, with broad support, voted to inject some common sense reforms into the collective bargaining and arbitration processes in Iowa. For the long term fiscal sustainability of the state, we believe there needs to be more equity and fairness in the process. As it stands today, over 80 percent of state employees pay nothing for health insurance and most get lucrative benefit packages and healthy annual salary increases that are out-of-line with the private sector. It is not just the union bosses that should be at the table – the taxpayers deserve a seat at the table too.
5) Education Reform
We must once again make education about the children and discontinue the notion that simply spending more money will equal better student achievement. We need to set high standards and hold everybody accountable for the success and achievement of our students.
6) Late-Term Abortion & Marriage
Because of inaction by Senate Democrats, Iowa could soon become the Midwest Capital for Late-Term Abortions. We had the votes in the Iowa Senate to slam the door on abortionists like Dr. LeRoy Carhart who wanted to come into Council Bluffs and open up a clinic, but Senate Democrats refused to do what needed to be done. On the issue of marriage, Iowans sent a strong message last fall with the ouster of the three Supreme Court Justices. We need to keep the pressure on to give Iowans the statewide vote they deserve on the issue of marriage.
Though we made some positive steps forward, much of what we set out to accomplish not yet been achieved. Senate Democrats obstructed much of our pro-jobs agenda.
That is why we must work hard day in and day out to talk to our family, friends and neighbors about the important issues facing Iowa and continue to press forward with what we know will bring the brightest future for all present and future Iowans.
As always, I welcome hearing from you and can be reached by phone at 515-281-3560 or by e-mail at [email protected]
I recently heard a radio commercial urging me to contact various members of Congress to voice my support for tax credits connected to the wind energy industry. On a lark, I went to the Iowa Legislature website and searched active bills for the word “wind,†and received several dozen hits, many of which seemed to be focused on state tax credits for manufacturing and installing wind turbines. Both state and federal politicians seem to be tripping over themselves to get into the wind energy craze.