Lela on Federal Overreach   Leave a comment

Thom had something come up, so I’m posting instead. Thom’s latest article highlighted some very interesting issues of crony capitalism and government competing against private enterprise. I don’t want to venture far from that, so I’m mainly expanding upon my reply from last week.

Chattanooga’s fiber optic case is an example of government stepping into a role where private enterprise is available to do the job. In stark contrast, you have Michigan and other states banning Tesla’s direct sales in order to protect existing industries, which is a form of crony capitalism. Neither of these are states’ rights issues. Last week, I explained that the solution to these issues is not setting aside state sovereignty. When government, whether federal or state, picks winners and losers in the marketplace it reduces competition which ultimately harms the consumer by saddling them with higher costs and fewer options.

I “get” why the City of Chattanooga wants a fiber optic system. It allows a smart grid system that will give the municipality total control over the electric consumption in people’s homes. That’s not how they advertise it, of course, but that is the natural outcome. I fail to see a direct benefit to electric consumers of having the government in control of their electric consumption, but further, I just plain object to the use of federal dollars to provide cable television to a local market already served by commercial providers. Here’s an article on the subject:  http://www.washingtonpost.com/blogs/the-switch/wp/2013/09/17/how-chattanooga-beat-google-fiber-by-half-a-decade/.

I would note that here in Alaska, many services are or previously were provided by government because no private providers existed. Growing up our electric, water, sewer, and phone were provided by the City of Fairbanks and if they had not provided those services … private enterprises would have developed to provide them. How do I know? Because outside of Fairbanks’ city limits, an electrical cooperative was formed to provide electricity, a telephone company was created to provide telephone, and a water company came into being to provide water to the urban area just outside the city limits. It took longer, but it happened. Eventually, the electric cooperative bought the municipal electric company, the telephone utility was sold to a private telecom and the water company took over the water and sewer system (this was not a money-maker and the City essentially gave it away). They even found a buyer for the district steam heat utility. All of these government utilities are in private hands, even in the very government-heavy state of Alaska.

Tesla is a different situation and a prime example of crony capitalism. GM and Ford provide a great deal of tax revenue to states like Michigan. Tesla does not. When these moribund corporations whined that they couldn’t compete against this newer company, Michigan chose to support the companies that provide the state with revenue rather than the competitor who doesn’t. I don’t agree with that. I’m just explaining how it worked. That is crony capitalism at its most bald, protecting entrenched industries against new competition.

And, if you involved the federal government …?

We actually know how that would turn out because it already has. The federal government bought GM for a period of time to keep it from going out of business. It heavily subsidized Chrysler. Crony capitalism exists at all levels of government, but it is particularly egregious at the federal level. If Tesla isn’t allowed to sell cars in Michigan, state residents can find a way to purchase the car in another state. It’s inconvenient, but doable. If the federal government decides something can’t be sold in the United States — now it’s a much larger issue that affects us all.

Neither of these issues is a states’ rights issue. We have lots of examples where the federal government imposes a one-size-fits-all standard on the entire country that doesn’t make sense for some states. I brought up the issue of Positive Train Control, which might have some benefits in the Lower 48, particularly on the dense Northeast rail network, but is going to shut down passenger train service in Alaska, where it isn’t even needed.

Here are some examples of other federal overreach. The one that catches my eye is the EPA’s proposed cutting of 30% of carbon dioxide emissions from coal plants by 2030.  This is another example where some states can easily achieve this, but others (Alaska) cannot. Obviously solar energy is not going to work for us. Wind energy works great where there’s lots of wind, but no so much in the still Tanana Valley. Geothermal would be amazing, but for practical reasons we haven’t built our communities on the sides of volcanoes. The vast majority of our electric generation in Alaska comes from coal and we have an 800-year supply at current consumption levels. So a 30% reduction in carbon dioxide emissions from coal plants likely means at least a 25% reduction in electrical usage here in Alaska.

Can you imagine what not having electricity means in Alaska? Just imagine what it means where you live and then imagine it where the winter nights are 20 hours long and the temperatures drop to -50F without wind chill.

Now break the illusory icicles off your beard and consider why I might think a one-size-fits-all federal standard for everything is a really bad idea.


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