Monday, March 29, 2010

States Should be Taking Responsibility

November might be a long way off but the ominous political summer storm will soon engulf the entire nation. I can already hear the political radio adds blasting over the airwaves and see the polarized television commercials between innings of baseball games. Even in this remote area of Colorado the political bashing will reach uncomfortable levels and stress the community to the breaking point. In fact, political rage might be worse in smaller rural areas due to recent popularity of the Tea Party movement.

From my removed prospective, the fundamental issues for our national and local governments is lost in political polarity of both major parties. The issue is really a simple concept for most people on an individual level but due to political positioning the concept has been twisted and manipulated into large scale arguments and complicated solutions. So what is this simple issue that faces our nation?

It is paying for what we receive. All taxes have an associated expense in government, from the local level all the way to Washington. American society expresses what public goods that we want and governments respond by estimating the cost and collecting taxes for each public service. For example, Americans love roads because it allows the freedom to go where we want, when we want. Having well maintained roads is an American tradition that started at the foundation of this nation. In return, the roads provide more than personal freedom, it connects cities, towns and individual houses and allows commerce to flourish. These fee-free roads have helped America become an economic power house.

Paying for what we receive is not a complicated concept. However, both political parties use misleading statements to paint the idea that taxes are bad, instead of taxes being a basic price tag on a good or service. The Tea Party movement owes its popularity to the concept of evil taxes and the opinion taxes should be kept to an absolute minimum.. Far left Liberals on the other hand think of taxes as a corrective tool to punish large companies or wealthy individuals, taxes are ok as long as the rich pay. These two extreme understandings of taxes have diluted the middle of the political spectrum to a point that politicians can buy votes by promising but never paying.

This ongoing process has resulted in citizens who no longer remember why we pay taxes. Citizens want more services and no taxes. The concept of a negative change to the status quo of taxes is known as psychological price anchoring. Humans usually use a starting number to determine the value of a good or service. The starting number does not have to reflect the true cost or value of the good or service but it always effects what the individual thinks of the value.

For example, if I paid $50 in taxes a year (including sales taxes) due to a tax relief program, then I would use that $50 as my anchor in determining the value of public goods I received. The next year a new government was elected and repealed the tax break due to a rise in the state deficit. My taxes are now $1500 a year. Due to the anchoring effect my brain uses, my first reaction would be outrage due to the raise in my taxes. I received all the same services the year before for $50 and now I have to pay $1450 more this year. However, if I took an account of the services I received and then calculated the cost of my share of those services. I would discover that the $1500 was a really good deal. So instead of anger, I might feel good about the services I am receiving.

What am I getting at with this lengthy description of taxes? As a society we enjoy the benefits of public goods and services. So instead of trying to get more without paying we need to account how our tax dollars are used. Right now America can see how inefficient the national government has become and it is not because everyone in congress is corrupt. (although there are many examples of corruption) It is due to the fact one city cannot provide all public services for 300 plus billion people.

States and local governments can effectively handle how much to tax vs. how many services communities want and need. The benefits of having local economies handle their own taxes and finances are enormous. Taking a quick account of service provided to citizens and adding in future goals and projects, local government can then tax the population accordingly. If there is corruption or serious mismanagement of taxes the local population can take action quickly and not have to worry about lobby groups, corporations and other stalling tactics that are present in Washington. Taking responsibility for our taxes is the best way to improve this nation over a long time horizon.

The sad truth is the majority of local governments would rather receive “free” money from the federal government because it helps in elections. Why tax for something when you can get it for free? Well, rational people understand that nothing is free and by delaying payment for a service, we only hurt ourselves in the future. It is time for people to stop complaining about taxes and hold states and local governments accountable for the services we receive. Until then, politicians will promise more and pay for less. America will continue to add to the debt until we are forced to cut most services or raise taxes to unattainable level. Either way, citizens will pay for our lack of fiscal responsibility.

Friday, March 19, 2010

The Exploding Cost of College

I wince in mental anguish every time my grandparents recall how much they paid for college in the early 1950’s at Colorado State University. Their yearly tuition was less than $100 per year. Yes, the 1950’s was a long time ago but the cost of college has beat in inflation by astronomical levels. According to an article in 2008 by U.S News, the average cost of attending a four year public university was $17,000 a year. $100 in 1950 adjusted for inflation equals $900 presently, how did college cost get so out of control?

Many colleges argue they offer more services to their students now than they did 60 years ago such as internet, TV, parking, computers and so on. However, does that account for the fact college is seventeen times more expensive than in 1950?

To answer that question let us look at the cost of college since 2000. Business Week released statistics on the cost of college; the average cost of college has gone up 92% since 2000. There are two main reasons for this explosion in college education.

The first reason is colleges are paying more for the retirement of their professors and faculty members coupled that with earlier retirement by most professors the costs to maintain pension plans is becoming increasingly expensive. The second main reason for college cost is the fact the federal government is giving more aid. When Washington gives out aid, colleges counter by increasing tuition and other costs and the result is a back and forth game of rising costs verses rising aid. The problem is much of the federal aid is in the form of student loans which have to be paid back and adds to the debt burden of college students.

There are several other reasons for the rise in the cost of college but it is clear these are the two main culprits. In a weakening economy many students are taking a huge gamble on going to college only to find they cannot find a job even at low paying jobs. The result is jobless grads with an enormous debt load that cannot be refinanced or defaulted on, when the students cannot pay; their credit rating suffers making the probability of getting out of debt even lower.

At some point college, even on a community college level, is going to become too expensive to justify for most middle class students. This will leave the majority of the work force without the education it needs to make the United States economy as powerful and flexible as it has been. At some point colleges need to understand they are crippling many students before they even graduate and the government needs to recognize they cannot handout aid to colleges that take advantage of government help.

I do not believe this country can take another 92% rise in the cost of education in the next decade without severe social and economic repercussions.

Monday, March 1, 2010

Nuclear Power Misconceptions

With the President backing nuclear development last week, many opponents of nuclear energy have publicly criticized the move for several reasons. However it is time to address ideas and stereotypes that originated in the 1970’s and understand why nuclear power is a big step towards good environmental and fiscal stewardship in the United States.

The Wall Street Journal had a great editorial in Saturday’s paper but I am going to add and expand on some of the points that William Tucker made in his article.

Nuclear power is not safe. The truth is that nuclear power might be the safest energy source in the world. There have been two incidences of nuclear accidents. First was the Three Mile accident when a faulty cooling valve caused a meltdown of a reactor without injuring anyone. All reactors in the US now share all information on reactor malfunctions to avoid any accidents. Many lawsuits and false claims of higher cancer rates have continued to circulate since the 1979 accident. However, there has been no proof of radiation contamination in the area and all lawsuits have been rejected due to lack of radiation contamination.

Then there is the infamous Chernobyl disaster in the former USSR satellite of Ukraine. This reactor accident stemmed from the USSR military performing tests on the incredibly crude reactor. The reactor did not have a protective shield and the staffed that manned the plant were not trained on nuclear power. To make matters worse the military took safety features built into the reactor and turned them all off. The resulting malfunctions lead to a steam explosion that killed two workmen. Over the next several months 30 operators died from radiation poising. This could have been avoided if the workers had protective emergency suites or if hospitals knew how to treat radiation poising. But the USSR was not known for caring for its citizens. The only long term health consequences has been 200 cases of thyroid cancer in which 12 children have died since 1990. The reactor was nothing like reactors anywhere else in the world and cannot be an example of what might happen to Western reactors.

Nuclear power is too expensive. As William Tucker points out in his article, each 1,500-megawatt rector costs around $5 billion, this might seem expensive until you compare it to the equivalent capacity in wind power. You would have to build 4,000 windmills at $1 million dollars a piece and then build hundreds of miles of transmission lines and then the equal amount of capacity in natural gas generators to back the wind power up when the wind does not blow. The cost of the windmills alone is $4 billion and does not include the new power lines or backup gas plants. We are trying to cut down on CO2 but we still have to use it with wind? Lets do some math. As of the end of 2009 wind generates 35,000-megawatts of power or 1.9% of all US power. If it takes 4,000 windmills to make 1,500-megawatts then almost have 100,000 windmills in the US. To power the US with wind it would take almost 5 million windmills and this would all have to backed-up with gas and coal when the wind does not blow in areas. 5 million windmills x $1 million = $5 Trillion plus a new grid plus equal amount of backup power. Rough stuff.

Nuclear power plants could be used by terrorists. This is crazy for two reasons. First, nuclear power plants cannot be turned into nuclear bombs it is just not possible. Second, the concrete safety shells protect from attacks inside or from the air or ground. Search “Plane crashes into wall.” There is no threat from terrorist.

Nuclear Waste cannot be taken care of and lasts thousands of years. This is only true in the United States. The rest of the world recycles their waste and it not only produces almost no radioactive waste but does not have to be stored in a mountain. Reprocessing reduces waste by 97%. For example the French have been reprocessing their fuel for thirty years and the thirty years of waste is kept in a one room basement under the La Hague plant. France has been powered by 70% nuclear for over 30 years.

Reprocessing will lead to nuclear proliferation in other nations. Even if other nations could steal our left over waste in the US plutonium has never been a good source of nuclear bomb material. In addition, many nations have now built bombs without stealing from our waste piles so this is really a mute point.

In closing, there is really no reason the US cannot become a leader in nuclear energy in the next decade and cut all coal and oil power from the country. We can produce less co2, decrease acid rain and other side pollution from coal and oil. We can mix in wind and solar because nuclear power is a great back up for those energy sources and with the money save we can finally upgrade the grid and maybe even move towards electric cars. This can be accomplished in the next decade if we allow it to. No other energy source can provide that. If climate change is going to kill us and the polar bears by 2050, we cannot wait for wind and solar to find a way to store energy for long periods of time. Nuclear is the way to go, I just hope fear does not stop progress.

“Obama’s Nuclear Power Breakthrough.” The Wall Street Journal 02/27/2010 A15
“Chernobyl Accident.” The World Nuclear Association.