Saturday, April 20, 2013

Energy policy blocked by those who ‘just say no’

Because almost every energy resource comes under attack, making energy policy seems to be impossible.

Each time a new possibility is proposed, opponents appear and warn about the catastrophe it could cause.

Take a look at the list of resources and what opponents say.

Oil from the Middle East or Venezuela makes the United States vulnerable to political pressure from countries that oppose our policies and threaten our allies. The word “blackmail” pops up when talk turns to imported oil.

The alternative is oil from North America. In the United States, its exploitation can lead to massive leaks or spills or invasion of pristine national preserves.

Oil from Canada is drawn from Alberta sands, but the process is harmful to air quality. Woe be to us if a pipeline carrying such oil, like the proposed Keystone XL line or the Portland Pipeline, ever springs a leak.

There’s no point in talking about coal. Coal mining is dangerous and burning it can seriously harm air quality. It’s doubtful if there is any such thing as clean coal.

Natural gas is coming on strong. It has a less harmful effect on air quality than oil or coal. 

And it turns out there’s a lot of it in the United States.

But to get at natural gas, or oil for that matter, increasingly the industry uses hydraulic fracturing – fracking. That process can endanger drinking water quality, so many communities want it banned.

As for nuclear, Chernobyl or Fukashima were enough to scare the world. And we still cannot agree on how to store spent fuel so that it does not pose a radioactive danger to the world.

Perhaps the solution would be renewable resources that don’t cause any pollution and relieve our dependence on outside suppliers.

Hydro can produce more energy than any other renewable, and it has been used successfully for more than two centuries.

But dams prevent fish from swimming upstream. So we have had a policy in recent years of turning back the clock by tearing dams down, even some that have been functioning for ages.

And no new dams are being built except in countries like China that don’t mind what they flood or places like Labrador, which are so remote that opponents leave them alone.

Then there’s wind. It has been coming on strong with the kind of enthusiasm that was formerly associated with hydro.

But some people don’t like seeing wind turbines on ridgelines or strewn across the landscape. And, unfortunately, they are not reliable enough to provide a steady supply. 

What do you do when the wind doesn’t blow?

Solar seems to have relatively few problems to go along with the relatively few places where it can be used effectively.

And we will have to recognize that the development of renewables will increase our costs.

Recently, Maine regulators proved that point, when they approved offshore wind generation. They agreed electric rates could increase to cover development costs.

Perhaps the best solution is to use energy more efficiently, which means that we could get more done with less energy.

If homes were better insulated or cars could use electricity at hours when it was readily available maybe we would need less of resources we don’t really like. Though government subsidies for efficiency have increased, more tax dollars go to developing more supply.

Smart electric meters might be an effective way of helping use energy efficiently. But some worry about the radio frequency waves they use, and others think that any external control of home energy use would be an invasion of privacy.

By now, the picture is clear. There’s always somebody ready to oppose any proposed element of energy policy.

There are lessons to be drawn from this depressing picture.

With 5 percent of the world’s population, the United States uses 20 percent of its energy. We must conserve, but there’s no chance Americans will reduce their living standards or productive capacity to the point of only using a fraction of current consumption.

We are going to have use a mix of resources plus conservation and accept some downsides. If we choose resources that have the least environmental impact, we will need some way to prioritize those impacts and accept some of them instead of allowing opponents to pick them off one at a time.

We have to ask the question, “If you don’t like this resource, which mix of energy supply, adequate to meet our needs, are you willing to accept?

In short, when it comes to energy policy, "Just Say No" won't work.

Medicare reform comes to the fore

When it comes to trying to reduce federal government spending, the biggest issue is the ever-increasing cost of Medicare and Medicaid, the two largest government health care programs.

Recently, President Obama proposed reducing payments to health care providers and increasing copayments for wealthier recipients. But a lot more reform is needed.

Obama and some Republican leaders are considering making Medicare less complicated and having people pay more of their own health care costs.

Medicare involves four different kinds of insurance. Part A is hospital insurance. Part B is coverage for doctors’ costs. Part D deals with prescriptions. Medigap is supplemental insurance to deal with what’s not otherwise covered.

Part C is Medicare Advantage, a government-subsidized program that replaces some or all of the other parts. Its future is uncertain.

Medicare could be simplified by combining Part A and Part B. That makes increasing sense, because most doctors are becoming hospital employees.

A single program would have one deductible to be paid by the individual. That deductible could be higher than is usually the case with the two separate programs.

When people meet more of their medical care costs, it supposedly will make them more careful in deciding to get care. If today’s low patient payments promote wasteful and unnecessary usage, this approach could reduce program costs.

Obama goes even further. He dislikes private Medigap options that also may relieve the insured of any medical costs, because they encourage overuse. Even though such policies have high price tags, he would impose a special tax on them, either leading people to avoid them or pay even more for using them.

By increasing deductibles, Obama and some Republicans believe that people would have what House GOP Leader Eric Cantor calls “reasonable and predictable expenses.”

In fact, by setting fixed limits on total Part A and Part B outlays required of individuals, people might not even need to purchase Medigap coverage, according to the proponents of these reforms. If that proves to be true, total health care costs for the insured could decline.

Merging programs could lead to the eliminating a couple layers of insurance currently needed. Interestingly, for those eligible for Medicare, it would make the health care coverage look more like the single payer system.

Democrats could support cutting down on the number of insurers, while Republicans seem to like the idea of getting people to have an increased stake in their medical costs as a way of reducing the size of Medicare.

This concept has extended into the discussion of Medicaid, the program for lower-income people, which covers both seniors and younger people.

As part of the Affordable Care Act known as Obamacare, states were required to expand Medicaid, which they administer. The federal government would cover all costs of the program’s expansion for three years and 90 percent afterwards.

In approving Obamacare, the Supreme Court said the federal government lacked authority to force states to accept this change in Medicaid. But the Court said it could be offered as a voluntary program. Most states are finding it politically difficult to turn it down.

The federal Department of Health and Human Services and Arkansas have been negotiating an approach designed to make Medicaid expansion more appealing to reluctant states.

Instead of the new federal money going into Medicaid, it would be used to pay insurance premiums of newly covered people. The coverage would be provided by the new state insurance exchange, which is intended to provide a lower-cost alternative to traditional private health insurance.

This approach would require the participant to pay some costs and would support a market system for Medicaid rather than more direct government operation.

The problem with this idea is that the health exchange approach could be more costly than what Obamacare would pay for Medicaid. The reason? Like Medicare, Medicaid pays less reimbursement to health care providers than does a private insurer, even an exchange.

Some studies suggest that, over an extended period, the cost of the proposed alternative way of expanding Medicaid would be about the same as the state program. But, if those studies prove to be wrong, who will make up the shortfall?

Whatever the outcome of these discussions on Medicare and Medicaid, it is a positive development to see both parties and the federal government and some states talking about common solutions to reforming Medicare and Medicaid.
The question remains how to control hospital costs, which is the real driving force behind the rising cost of government health care programs.

Big budget requires small compromises

Republicans and Democrats have both proposed federal budgets, the first time in years that each has come up with a plan.

Both parties call for tax increases and spending cuts.

The difference is mainly about what each would do with the money from the tax increases. 

The Republicans would raise some taxes to reduce others. The Democrats would cut the deficit.

The GOP plan is based on the idea that tax cuts stimulate the economy. An improved economy produces more tax revenues and, when spending is under control, the new revenues would make it possible to reduce the deficit.

The Democrats have a more direct approach. Use new tax revenues now, they say, to trim the deficit.

One way or the other, both say they want to reduce the annual federal deficit. Unfortunately, when it is in power, each party increases the deficit, often by catering to the interests that contributed to its election success.

The picture that emerges shows both parties seem somewhat less serious than they claim to be about cutting the deficit.

Recently, some Democrats have admitted they favor a permanent annual deficit, provided it’s not too large. Because some federal spending benefits future generations, they say, it’s all right to pass some of the cost on to them.

What taxes would the GOP cut? They complain that, at 35 percent, the federal corporate tax rate is among the highest in the world. They want to reduce it.

The corporate tax rate would be a reasonable target, if only companies actually paid it.

Last year, General Electric, a huge, diversified company, paid 14.4 percent in taxes on its profits. It can take advantage of tax preferences — more commonly called loopholes — that allow it to exclude income from taxation.

And Fairchild Semiconductor paid no taxes at all. It can take advantage of having lost money in earlier years, a feature of the tax law that does not apply to most individual taxpayers.

A cut in the corporate tax rate would mostly benefit the corporations concerned.
The budget choice is to raise taxes or cut the programs. In either case, the federal government would continue to run deficits.

Beyond taxes, the main differences between the parties are about cutting spending on Medicare, Medicaid, and Social Security. Republicans want to reduce these entitlement programs, but Democrats aren’t enthusiastic about such rollbacks.

The elusive “Grand Bargain” would deal with all issues — taxes, entitlements and deficits. 

The parties are so far apart, even to the point of allowing the sequester to kick in, that such a deal seems impossible.

One solution is for a party to take control of the presidency, the House of Representatives and a filibuster-free Senate. That’s not likely, leaving compromise as the only alternative to more deficits.

Let’s say each side was willing to hold its nose and accept something less than perfect. 
Taxes could be increased with some of the money going to deficit reduction and some of it going to tax reform that could result in lower taxes for middle-income people.

The first step on this approach is to close as many of the worst loopholes as the parties can agree upon. That’s not as impossible as it sounds, because there is already agreement on getting tough on a few tax breaks.

But that step won’t produce enough revenue. The total amount of loophole benefits that any taxpayer — individual or corporate — can use could be limited to a fixed percentage of gross income. Taxpayers could still choose their loopholes, but within limits.

In setting a cap on loopholes, Congress would have a good idea how much revenue would be raised. As the economy changes, the cap could even be adjusted.

That way, Congress could keep adding loopholes as it inevitably will, knowing the effect would be limited by the cap.

If too much of the income of the wealthy or of companies doing business abroad still escaped taxation, the much maligned “alternative minimum tax” could be made to do what was originally intended. It was meant to nullify or limit tax avoidance features used mainly by the wealthy.

In short, all of these measures show that it is possible to increase tax revenues without touching current tax rates.

Some diehard GOP House members won’t accept any compromise. But electoral reality could push other House Republicans to join with Democrats in finding a compromise.

Without abandoning their widely opposed positions on taxes and spending, the parties ought to concentrate on finding small steps on which they might both agree. We’d call that progress.