Monday, August 23, 2010

MN-02 : When Kline Votes NO, He Wants to Say YES

John Kline (R-MN-02) recently lamented As long as uncertainty hangs over our economy, small businesses and entrepeuners will sit on the sidelines and job-seekers will abandon the workforce.

Mr. Kline’s words were echoed by Minority Leader John Boehner (R-OH-08) in an August 16th letter to President Obama in which he wrote :
During our recent meeting at the White House, I expressed Republicans' concern about the ongoing uncertainty American small businesses are facing as a result of what many believe has been a near-constant stream of new federal rules and requirements on private sector job creators. I conveyed our belief, supported by many economists, that such uncertainty is contributing significantly to the ongoing difficulty our economy is experiencing with respect to the creation of new private sector jobs.”

Previously, on July 16, Minority Leader Boehner endorsed a one-year moratorium on most new regulation saying that a moratorium "sends a wonderful signal to the private sector that they'll have some breathing room."

Unfortunately, Mr. Kline (and Leader Boehner) are advocating a policy that will potentially add more uncertainty. Mr. Kline is a co-sponsor of the REINS Act (H.R. 3765). The Regulations from the Executive In Need of Scrutiny (REINS) Act requires that Congress must vote to approve any new Major Rule proposed by the executive branch before it can be enforced. Under the REINS Act, the executive agency charged with writing rules would serve a drafting function for major rules. After which the regulations must be approved by both bodies in Congress and signed by the President before being enforced.

Well, well, well ... what an interesting title for the legislation ... Executive In Need of Scrutiny. Timing in politics is everything. And when a Democrat is in the White House, well, let's just say that all of a sudden, "Scrutiny" is in order.

In fact, the last time Congress wanted "Scrutiny" was during the Clinton years ... when it enacted the Congressional Review Act. See below for a description of how regulations now have a 60 day period for Congressional review and the right to reject a regulation. However if Mr. Kline's sponsored legislation is enacted, Congress would be forced to take another vote before implementation ... instead of just providing a window for review and potentially revoking of the regulation.

Talk about adding uncertainty ! As slow as the Senate acts (for example, consider food safety), this will add unnecessary delay and change policy implementers into appeasers of every interest group. This would expand the influence of K Street lobbyists. Would the Republicans really have wanted to empower the Democrats to be able to delay implementing Bush policies ? Or any future Republican Administration ?

At the heart of this is the premise that regulations are bad … err … maybe better restated as regulations implemented by Democrats are bad.
But did you know that Congress gets a review of financial impact of major regulations ?
From the last Bush-era report :

The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 1997 to September 30, 2007 range from $122 billion to $656 billion, while the estimated annual costs range from $46 billion to $54 billion. These totals are somewhat higher than the benefits and costs reported last year.

During the past year, agencies quantified and monetized benefits and costs for 12 major final rules. These rules added $28.6 billion to $184.1 billion in annual benefits compared to $9.4 billion to $10.6 billion in annual costs.

While the most recent Obama Administration prepared report :

The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 1999, to September 30, 2009, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $128 billion and $616 billion, while the estimated annual costs are in the aggregate between $43 billion and $55 billion. These ranges reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated.

So under the Bush and Obama Administrations, regulations are being implemented and no doubt that some produce far higher net benefits than others. One agency that is always in the crosshairs is the Environmental Protection Agency (EPA) which produced 60 to 87 percent of the benefits and 58 to 64 percent of the costs.

Let’s look at a recent proposed regulation that EPA has offered for public comment over the current 60 day window. The agency also will hold public hearings.
The proposed rule would reduce power plant emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) to meet state-by-state emission reductions. By 2014, the rule and other state and EPA actions would reduce SO2 emissions by 71 percent over 2005 levels. NOx emissions would drop by 52 percent. The regulation will target power plant pollution that drifts across the borders of 31 eastern states and the District of Columbia.
The proposal would replace and improve upon the 2005 Clean Air Interstate Rule (CAIR), which the U.S. Court of Appeals for the D.C. Circuit ordered EPA to revise in 2008. The court allowed CAIR to remain in place temporarily while EPA works to finalize the replacement rule proposed today.
EPA expects that the emission reductions will be accomplished by proven and readily available pollution control technologies already in place at many power plants across the country.

The EPA values the benefits as :
“Today’s action would yield more than $120 billion in annual health benefits in 2014, including avoiding an estimated 14,000 to 36,000 premature deaths, 23,000 nonfatal heart attacks, 21,000 cases of acute bronchitis, 240,000 cases of aggravated asthma, and 1.9 million days when people miss school or work due to ozone- and particle pollution-related symptoms. These benefits would far outweigh the annual cost of compliance with the proposed rule, which EPA estimates at $2.8 billion in 2014.

Why would Mr. Kline want to delay $120 billion in annual health benefits ?
The costs are estimated at $2.8 billion ... and existing technology will be used ... and many producers are using this technology ... and is it really small business or major corporations such as AEP, Constellation Energy, Duke Energy, Exelon, FPL Group and PG&E.

During the Obama Administration, Mr. Kline has consistently voted NO, but now he wants to say YES to what is implimented.

What is wrong with the current law :

The Congressional Review Act (CRA, 5 U.S.C. §§801-808) requires federal agencies to submit all of their final rules to both houses of Congress and the Government Accountability Office (GAO) before they can take effect, and also delays the effective date of “major” rules (e.g., those with a $100 million impact on the economy) until 60 calendar days after submission and publication.

The CRA established a special set of expedited or “fast track” legislative procedures, primarily in the Senate, through which Congress may enact joint resolutions disapproving agencies’ final rules. Although the general powers of Congress permit it to overturn agency rules by legislation, the CRA is unique in permitting the use of expedited procedures for this purpose. If a rule is disapproved through the CRA procedures, the act specifies not only that the rule “shall not take effect” (or shall not continue, if it has already taken effect), but also that the rule may not be reissued in a “substantially” similar form without subsequent statutory authorization.
Once a rule has been submitted to Congress, Members have 60 “days of continuous session” to introduce a resolution of disapproval.20 The CRA also provides that, if Congress adjourns its annual session sine die less than 60 “legislative days” (House of Representatives) or “session days” (Senate) after a rule
is submitted to it, then the rule is carried over to the next session of Congress and treated as if it had been published in the Federal Register on the 15th legislative or session day after Congress reconvenes. The purpose of this provision is to ensure
that both houses of Congress have sufficient time to consider disapproving rules submitted during this end-of-session “carryover period.” In any given year, the carryover period begins after the 60th legislative day in the House or session day in the Senate before the sine die adjournment, whichever date is earlier. The renewal of the CRA process in the following session occurs even if no resolution to disapprove the rule had been introduced during the session when the rule was submitted.

Even without the CRA, though, Congress can stop agency rulemaking in other ways. For example, each year, Congress includes provisions in appropriations legislation prohibiting rulemaking within particular policy areas, preventing particular proposed rules from becoming final, and prohibiting or affecting the
implementation or enforcement of rules. However, unlike disapprovals under the CRA, the regulatory requirements that have been put into effect are not rescinded, and the agency is not prohibited from issuing a substantially similar regulation in the

Monday, August 02, 2010

MN-02 : Kline Willing to Risk 3M Jobs to Cut Corporate Welfare ?

Timing is everything in politics.

An issue can be ignored until it’s time to be used to make political hay.

Some would say that the Republican current fixation with deficit spending is an issue whose “timing” will help this November.

So it is that when John Kline posted on his website : Congressman John Kline is inviting Minnesotans to help Washington end its addiction to wasteful spending, that I was not surprised. I expected to see the typical stuff that he likes to talk about … like an earmark added to the 2006 Appropriations Bill (HR 3058) for the Sparta Teapot Museum in North Carolina. But NO, Mr. Kline actually asked about ending a program that is more Corporate Welfare than a Congressman bringing “home the bacon.

Of the four choices, the biggest dollar program with a projected savings of $2 Billion is : “Eliminate funding for a green government project that the private sector is already leading: The “FreedomCAR” and fuel partnership program is a duplicative program already being implemented by the private sector.”

FreedomCAR ? Hmmmm… I will bet that you never heard of the FreedomCAR, but since Freedom is in the name, somehow you are probably thinking that this is a Republican-themed program. The C-A-R in FreedomCAR is an acronym for Cooperative Automotive Research, but what’s the Freedom … simple … to reduce our dependence on foreign oil and the foreign dictators that reap monies off our dependence. A goal that every American can agree with … and also agree that we have a long way to go to get there.

The program was created during John Kline’s first term in Congress … that’s when the Republicans controlled the House and George Bush announced the program in his 2003 State of the Union address. Funny, how we forgot about that … but now, the “timing” has a Democrat in the White House and Democrats controlling the House.
Yes, “timing” is everything … especially since President Obama just drove Chevrolet Volt during his tour of the Detroit-Hamtramck assembly plant last week.

This program subsidizes research by major automakers for developing their own versions of hybrid, plug-in hybrid (PHEV), and fuel cell vehicles. The subsidies also fund private R&D of light- weight materials, electronic power control, and electric drive motors.

One of the main components in these plug-in hybrid vehicles is the battery … since PHEVs have the potential to displace a large amount of gasoline by delivering up to 40 miles of electric range without recharging— new batteries would have to be developed. The Department of Energy awarded 3M in Saint Paul up to $1.14 million (total DOE/industry cost share: $ 2.28 million) over two years to screen nickel/manganese/cobalt (NMC) cathode materials through building and testing of small-sized cells.

I do not know the status of 3M’s project, nor how many jobs were created or retained, but the objective sure sounds reasonable.

Working with corporate interests is not new … when President Bush gave monies to the auto industry, he said : “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action." The monies for this came from the TARP legislation that John Kline voted for. Ah, “timing” is everything … while President Obama’s so-called bailout of the GM and Chrysler is now getting repaid, the Bush monies will never be returned.

What seems odd though is the “timing” and what project Mr. Kline included in his choices.

Ending Corporate Welfare is fiscally responsible. Yet, this project is one that may take government incentives from our goal of being energy independent.

The question is why did Mr. Kline and the Republicans pick the FreedomCAR project and not some other Corporate Welfare programs.

The term “Corporate Welfare” actually has many components.

How about ethanol subsidies which cost the US Treasury $6 billion in 2009 ?
Ethanol subsidies are just the tip of the money tree. "Farm subsidies are America's largest corporate welfare program," said Brian Riedl, an analyst at the Heritage Foundation. The question is why federal money flows primarily to growers of five crops—corn, soybeans, wheat, cotton and rice—while livestock, poultry and produce farmers get by without subsidy checks? After the media reported that at least 2,702 millionaires received farm payments from 2003 to 2006 (including such hobby-farmers as Scottie Pippin of the NBA fame and a number of family members of Congress including Minnesota’s Michele Bachmann (R-MN-06), the 2008 Farm bill prohibited all subsidies to anyone whose non-farm adjusted gross income exceeds $500,000. The Obama administration said its proposed farm subsidy cuts would save $2.3 billion over 10 years. Its new budget proposal would lower the cap on direct payments from $40,000 per person per year to $30,000. It would also reduce income eligibility limits over three years to $250,000 for non-farm adjusted gross income.

As easy to see Corporate Welfare in the Ag sector, there is a larger sector that is prone to largesse … and that’s is processed by a House Committee that Mr. Kline sits … The House Armed Forces Committee. Interestingly, Mr. Kline makes the argument the FreedomCAR program is a “duplicative program.” Hmmm. Why is Mr. Kline supportive of General Electric’s request for $1.8 - $2.9 billion required for an alternative engine for the F-35 Joint Strike Fighter ? In essence, a “duplicative program.”

GE claims that its alternate engine will enable the government to have cost-saving competitions across the lifetime of the F-35 program, saving taxpayers billions of dollars. What it leaves out of its talking points is that the government would first have to pay for two production lines, two supply chains and two workforces to build the competing engines, and then split the annual buys between two teams in a way that would eliminate any economies of scale. Once fielded, the two engines would require separate sets of spare parts, separate maintenance procedures, and other redundant items that would increase rather than decrease the cost of operating the plane. Senator Tom Harkin (D-IA) during debate about whether to fund the alternate engine expressed concerns about having two redundant engines would increase the complexity of the program, potentially undercutting both affordability and readiness.

Lockheed chairman Robert Stevens has stated that the company expects the actual purchase price of each Air Force F-35 variant will be roughly the same as a current Lockheed F-16 or Boeing F/A-18. That would be about $60 million in today's dollars -- less than half the price of an F-22 Raptor -- and it includes all the necessary mission equipment. Remember that Mr. Kline supported an “earmark” to procure additional F-22 that the Pentagon does not want …. Oh, and the alternate engine was not requested by President Bush or President Obama or the DOD … it’s just Corporate Welfare being funded by Mr. Kline and his friends in Congress.

“Timing” is everything in politics … and this “Timing” reeks of a political stunt.
Cutting Corporate Welfare for the FreedomCAR maybe short-sighted. Developing the technology required to ween ourselves from foreign produced oil, will require decades of trial and error in which a variety of bridge technologies are phased in over time.
Cutting FreedomCAR funding may sound good for political purposes but not be a good strategic decision.