July 22, 2016

Time to Let the Sun Set on Solar Energy Tax Credits

In a recent 14-page study,"The Sun Should Set on Solar Socialism," Citizens Against Government Waste (CAGW) argues that Congress should "lower the boom on an up-front subsidy like the" investment tax credit (ITC).

But let's start with an introduction to the solar tax credits, though. According to CAGW:

"To the extent that taxpayers pay attention to renewable energy policy, they are likely to be most familiar with the infamous solar panel manufacturer Solyndra, which received $535 million from the Department of Energy’s Loan Guarantee Program (LGP) before the company went bankrupt in 2011. This well-publicized boondoggle opened the door for greater scrutiny of all renewable energy programs and subsidies, which include loan guarantees, grants, tax incentives, and tax credits. Although various parts of these programs are available for biofuels, fuel cells, geothermal, hydrogen, hydropower, solar, and wind, solar is now drawing the most scrutiny because of the amount of federal and state government support it needs to maintain viability.

"Energy subsidies have been around since the 1970s, but really took off after Congress passed the Energy Policy Act of 2005. The legislation dramatically changed U.S. energy policy by creating commercial and residential tax incentives and loan guarantees for energy production of several types. The Act implemented or extended tax reductions for various forms of energy, including nuclear power, fossil fuels, biofuels, and “clean coal.” It also extended existing subsidies, such as the renewable electricity production credit. Funding for many of these programs was significantly expanded in the American Recovery and Reinvestment Act of 2009 (ARRA), better known as the stimulus bill.

"Despite the best efforts of experts to determine how much taxpayers are paying for renewable energy subsidies, there is no comprehensive estimate of their cost. A May 5, 2015 Massachusetts Institute of Technology (MIT) Energy Initiative report, “The Future of Solar Energy,” found that “there is no authoritative compilation of total spending to support the deployment of solar technologies – at the national level or for any particular state – let alone a breakdown of total spending across subsidy programs.” A July 2015 University of California at Berkeley Energy Institute at Haas Business School study stated that the total tax expenditures for the four largest federal “clean energy” tax credits, which include the weatherization of homes, the installation of solar panels, and the purchase of hybrid and electric vehicles, had cost more than $18 billion since 2006.

"Tax expenditures for alternative electricity generation cost $13.7 billion from 2004-2015, with the investment tax credit (ITC) and production tax credit (PTC) accounting for $11.5 billion of that total, according to the IRS. However, the agency is not required to collect project-level data for either tax credit, so the total generating capacity supported by these tax expenditures is unknown. The LGP has more than $40 billion available for loans, and the Section 1603 tax credits for renewable energy that were created in the ARRA cost taxpayers $24.5 billion for 101,364 projects, as of July 30, 2015."

CAGW notes that section 48 of the Internal Revenue Code (IRC) provides a 30% "credit for qualifying 'energy property'" while section 25D allows for a 30% residential energy efficient property credit.

According to the study, there are "problems with the policy itself." For example:

"Publications and public remarks by renewable energy industry proponents are replete with allusions to the ITC as essential for these energy sources to vie effectively with fossil fuels, create jobs, and provide a fantastic return on “investment.” In other words, the tax credits are all things to all people."

They also note, "One of the largest solar companies, SolarCity, "has been sending a mixed message on solar subsidies and especially the ITC . . . . On June 1, 2015, the company’s chairman of the board, Elon Musk, told CNBC that “none of the (solar) incentives are necessary, but they are all helpful.” In fairness to Musk, he also went on to split a hair in the same interview, arguing that the real value of tax breaks is to accelerate the adoption of solar power rather than to prop it up – a point somewhat in sync with the energy finance partnership study."

In addition, the study says, "the efforts to subsidize solar have not just failed to lower its cost, they have also led to waste, fraud, abuse and mismanagement. Perhaps these results were inevitable when the government created a new, lucrative program and provided little accountability." The study also says, "A 2012 GAO audit found program overlap among some 65 different federally-funded and- managed initiatives to support solar energy. More than half supported only solar projects while the remaining initiatives funded solar and other renewable technologies." (emphasis added)

The study is certainly well-researched with 62 footnotes.

The study concludes by saying:

"Although subsidies doled out by Congress can become as ensconced as Washington’s monuments, there is an encouraging precedent for ending the ITC. The other icon of tax support for renewable energy, the windmill, was set free from the federal dole and sent out to seek its fortune when Congress allowed the wind production tax credit to expire at the end of 2014. A bid to restart the credit in the spring of 2015 was shot down in the Senate after even wind-state senators agreed to let wind power sink or swim on its own.

"The least Congress can do is lower the boom on an up-front subsidy like the ITC. Like the wind PTC, it has yet to deliver on promises that it will help to foster a sustainable, reliable, credible component of the U.S. energy portfolio. Indeed, it will not be clear that the power of the sun is viable in helping to power America’s homes and businesses until its federal purse strings are severed, setting free the solar industry and taxpayers."

Take a few minutes to write your members of Congress to urge them to end these wasteful energy tax credits since they have failed to foster a sustainable and reliable renewable energy portfolio. Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

Kudos to CAGW for this well-researched and well-written study on two renewable energy tax credits. For more information about Citizens Against Government Waste, visit their website.

July 21, 2016

A Thought about Ideologues

"In general, politicians are rank opportunists, but at least most of them are malleable and attuned to public opinion.

“Ideologues are far more anti-empirical — and thus dangerous.”

~ Victor Davis Hanson

Source: his June 23, 2016 column, posted in the Washington Times.

Victor Davis Hanson is a classicist and historian with the Hoover Institution at Stanford University.

July 20, 2016

A Thought on Public Opinion

"Public opinion sets bounds to every government, and is the real sovereign in every free one."

~ James Madison, 1791

Source: Founders' Quotes Database, The Patriot Post.

July 19, 2016

A Thought about Censorship

"In the modern world, those who have power, but not the ability to convince others, often resort to censorship, or attempt to legally or forcibly ban ideas, products, like guns and sugary drinks, or practices that they disapprove of. A couple a months ago, a number of Democratic attorneys general initiated an effort to go after certain corporations, advocacy organizations and think tanks for allegedly disseminating “false” information about global warming. In fact, the information in question has been open to considerable scientific debate and, even if it was not, dissent from the views of the power elite is protected by the First Amendment. Even more disturbing is a quote from the Reason Foundation’s Shikha Dalmia that the Democrats, as part of their party platform, have pledged to use the “Department of Justice to investigate alleged corporate fraud on the part of fossil fuel companies who have reportedly misled shareholders and the public on the scientific reality of climate change.” This is nothing more than an attempt to use government force to quash dissenting views.

"In the past, some religious fundamentalists were advocates of censorship and book burnings. Perhaps the most famous in America was Anthony Comstock, who created the New York Society for the Suppression of Vice in 1873. He and his followers destroyed books and other materials they considered “lewd.” Congress even passed the Comstock Law to make such destruction and repression legal. Thus, it is most ironic that many of those who were part of the free speech movement in the 1960s and 1970s, fighting such laws, have now become a real threat to freedom in their insistence on political correctness and willingness to prosecute those who do not conform."

~ Richard W. Rahn

Source: his 7/19/16 column, "Book burners and gun banners," posted at the Washington Times.

Richard W. Rahn is on the board of the American Council for Capital Formation and is chairman of Improbable Success Productions. Also see his Wikipedia entry.

July 18, 2016

More "Government is the Problem." A Regulatory Example.

An article last Friday, by Elizabeth Harrington, in the Washington Free Beacon (HT Potemkin) says a new energy efficiency regulation issued by the U.S. Department of Energy to regulate wine refrigerators will "cost small businesses $12,500 each."

Harrington writes, in part:

"The Department of Energy now has a specific regulation for wine refrigerators.

"The agency released a final rule Friday requiring manufacturers to test the energy efficiency of refrigerators used for wine. It estimated the rule would cost the average small business $12,500 to test whether their equipment meets specifications.

“This final rule classifies a variety of refrigeration products that are collectively described as ‘miscellaneous refrigeration products’–i.e., ‘MREFs,’ as a covered product under Part A of Title III of the Energy Policy and Conservation Act (‘EPCA’), as amended,” the agency said. “These products include different types of refrigeration devices that include one or more compartments that maintain higher temperatures than typical refrigerator compartments, such as wine chillers and beverage coolers.”

"The agency said the $12,500 testing cost is “unlikely to represent a significant economic impact for small businesses.”

"The rule goes into effect in 30 days. Wine refrigerators will now be tested for temperature settings and energy use."

The final regulation "spans 159 pages," she adds, and notes, ”There was much discussion about the exact definition of the term "cooler" in the final reg.

As President Reagan said in his first inaugural address, "government is the problem."

We've growled several times recently about the regulatory state. On May 2, 2016, we growled that Uncle Sam, Esq., has a legal army of 25,060, larger than the combined TOP 7 private sector law firms (24,411). A week later, on May 10, 2016, we growled that regulatory costs were making so-called affordable housing unaffordable. Later in May -- on May 24, 2016 -- we growled that individuals and business were drowning in red tape.

Speaker Paul Ryan has announced several task forces, including one to reduce regulatory burdens. The regulation of wine coolers should be one item on its plate.

What are your members of Congress doing to reduce the regulatory burden? Growls readers are encouraged to write their representatives in Congress to find out. Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

July 17, 2016

Aggressive Panhandling Clouds Metrorail's Future

The headline of a Washington Post online story, posted Thursday, July 14, 2016, says, "Metro board chairman warns of asking jurisdictions for up to $100 million each"

The story, reported by the Post's Martine Powers, begins this way:

"With a looming budget deficit and no clear solution in sight, the Metro board chairman, Jack Evans, is pushing to nail down a fiscal 2018 spending plan by November — months earlier than usual.

"The move by Evans is a signal that the transit agency is preparing to ask the District, Maryland and Virginia for additional money if fares are not raised or the federal government does not come forward with more funding.

"The budget for the coming fiscal year is usually finalized by January, but Evans wants Metro finance officials to make haste so the board can pass a budget before state legislatures swing into session, Evans said at Thursday’s board meeting.

“We need to move quicker than usual,” he said.

"If Metro does not find a new source of revenue, Evans warned, the agency could end up needing to request as much as $75 million to $100 million per jurisdiction so that the system can continue to function — a heavy burden for lawmakers who already believe they are spending far too much for substandard service."

She reports the WMATA chairman's panhandling "came at the end of a board meeting where independent consultants outlined a laundry list of Metro’s problems and recommendations for improvement: retooling workers’ compensation and pensions, increasing revenue from parking, finding a way to perform rail-car and bus maintenance more cheaply, and identifying a more efficient model to provide paratransit services."

She describes some of those problems this way:

"One of the board’s biggest concerns: Metro’s full-time staff has increased by an average of 5 percent a year since 2011 — a particular consideration given the subway’s steady slide in ridership in recent years.

"Buoyed by dozens of graphs and charts depicting Metro’s financial woes, consultant Tyler Duvall of McKinsey & Company indicated that Metro was paying significantly more for expenses than comparable transit agencies.

"If fringe benefits had grown at the same rate as they did at the New York City Transit Authority between 2011 and 2015, Metro would have saved $25 million, according to the McKinsey report."

To fully understand WMATA's problems, Ms. Powers article is worth reading in its entirety since the problems described above are just a few of the problems described.

It's worth noting that Arlington County taxpayers contributed almost $30 million to WMATA in FY 2015 out of the county's general fund. That's in addition to fares paid by Arlington residents and employer subsidies. Moreover, those contributions grew at a rate of 8.3% from 2001 through 2015 while total county spending "only" grew at 5.1% over the same 15 period.

Perhaps it's also time to have our own version of a Brexit vote. Would the Metro board chairman wake-up to the need for better governance if Arlington County held a successful ARLexit referendum?

We also growled about Metro spending on May 15, 2016, after Metro reported that it is facing an $18 million budget shortfall in the next decade.

Growls readers are urged to write to members of the Arlington County Board to express their opinion on the WMATA board chairman's efforts to squeeze $100 million from every Metro jurisdiction. Just click-on the link below:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.

July 16, 2016

A Thought about 'American Populism"

"Bad economic times breed angry politics. We remain in bad economic times, irrespective of what our leaders in Washington say, and the political climate is getting more and more angry. America is moving into a period of heightened populism of both left and right. The result will be increasing political polarization on top of the polarization we already have experienced in recent years. The next couple of election cycles will be raucous.

"To understand all this, it helps to understand populism as a recurrent American political impulse and also to understand its conservative and liberal variants.

"As a general outlook, populism is the angry response of people who feel abused by people and institutions more wealthy or more powerful than themselves. It could be the followers of President Andrew Jackson in the 1830s, who thrilled at his effort to kill the Second Bank of the United States because it represented too much concentrated economic power. It could be the Southern farmer circa 1890 — beset by a constricted money supply, low crop prices and pressures from the town banker — who felt that the politicians always seemed to favor that banker over him. It could be the followers of Louisiana’s Huey Long in the 1930s, who felt that the great villain of the Depression era was the big financial establishment of Wall Street.

"The central cry of the populist is the need to smash institutions of entrenched power that, in the populist view, distort the American system to benefit themselves at the expense of the broad mass of citizens. When William Jennings Bryan, one of history’s greatest populists, ran for president in 1896, his campaign was touted as “the masses vs. the classes.” Populists particularly go after people who can be labeled as American “oligarchs” or “plutocrats.”

"There are two strains of populism in the American political tradition, though — liberal and conservative. Both are rising in today’s political environment."

~ Robert W. Merry

Source: his June 2, 2014 commentary column, posted in the Washington Times.

Robert W. Merry is a contributing editor, and former political editor, at the National Interest and an author of books on American history and foreign policy.

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