Aug. 7, 2019

Permission to republish original opeds and cartoons granted.

Want to stop China from manipulating the yuan and the dollar? Bar it from buying treasuries, Mr. President.
Now that the U.S. Treasury has labeled China a currency manipulator, President Donald Trump should consider barring it from purchasing any more treasuries as a penalty. After all, China needs to keep buying treasuries to exert its trade advantage and keep the yuan weak to boost its exports. Without treasuries to fall back on, the yuan could appreciate vis a vis the dollar, even with the fixed exchange rate. That would give the tariffs, now 25 percent on $250 billion of Chinese goods, and 10 percent on the rest of the $300 billion of them, some real teeth. It would also create a very real penalty for currency manipulation, and serve as a deterrent to other countries that want to play games with the dollar.

Video: Trump and Treasury slaps China with currency manipulator designation and it's about time
Following a sharp devaluation of the yuan to offset President Trump’s tariffs, the U.S. Treasury has pegged China as a currency manipulator. It’s about time.

Dear Congress, stop subsidizing wind like it’s 1999 and let the tax credit expire
Congress created the production tax credit for wind energy in 1992. In other words, wind turbine owners receive a tax credit for each kilowatt hour of electricity their turbines create, whether the electricity is needed or not. The production tax credit was supposed to have expired in 1999; but, instead, Congress has repeatedly extended it. After nearly three decades of propping up the wind industry, it is past time to let the tax credit expire in 2020. All Congress needs to do is nothing.

U.S. Rep. Fred Keller: Biden's plan to eliminate fossil fuels is bad for our national security, worse for our economy
“While many ideas discussed by the nearly two dozen Democratic hopefuls for the White House would spell disaster for the future of an America that is now realizing unprecedented prosperity, Joe Biden’s call to eliminate fossil fuels is particularly egregious. When pressed whether he would get rid of coal and ‘fracking’ — the predominant process by which natural gas is extracted from the ground — Biden pledged to get rid of both. By selling out to the far-left extreme of his party, the former vice president told hundreds of thousands of hardworking Americans that he is coming for their jobs and prepared to jack up their energy costs.”

Want to stop China from manipulating the yuan and the dollar? Bar it from buying treasuries, Mr. President.

By Robert Romano

Don’t look now, but with China’s sharp devaluation of the yuan vis a vis the U.S. dollar, the Federal Reserve slashing its interest rate and and the Treasury designating Beijing as a currency manipulator, the 10-year-2-year treasuries spread may be about to invert.

Meaning, one the key recession signals may be about to go off.

Since the beginning of July, the spread between the 10-year treasury and 2-year treasury has dropped from about 0.25 to 0.09 as of this writing. When it goes below zero, this has traditionally signaled a recession is on the horizon.

Recessions tend to occur on average about 16 months after the 10-year, 2-year inverts, and so even if it were to invert right now, that might not forecast a recession until Dec. 2020, after the next election.

And even then, you won’t know it until it’s reported by the Bureau of Economic Analysis a few months later and when unemployment begins significantly rising.

But it could be cutting it close, if one is keeping their eye on the political calendar, with the 2020 presidential election cycle upon us.

Trump is not guaranteed reelection even if the odds tend to favor the incumbent. Therefore, whatever he intends to achieve with China, trade and reversing globalization, this is his moment to succeed or fail. He might get another four years to see it through, but then again he might not.

One thing is certain, it has been a decade since the last recession, and the U.S. economy is long overdue for another one. Since World War II, the U.S. has averaged a recession once every 5.3 years, according to data compiled by the National Bureau of Economic Research.

One key indicator is the federal funds rate set by the Federal Reserve. The central bank kept the interest rate at near-zero percent for the entirety of the Obama administration, only beginning the hiking cycle after the 2016 election. Arguably that was too long. It probably could have safely begun hiking back in 2014 or 2015. If so, the recession might have already happened.

We tend to judge these things in hindsight. Many argued that the Fed made the same mistake in the 2000s, leaving interest rates too low for too long, and that the devastation of the financial crisis and the Great Recession could in part be attributed to that.

If the next recession is steep, undoubtedly fingers will be pointed at the Fed for waiting too long. And even if it is not so steep, a certain amount of blame will be leveled. As it is, you would have to ask former Federal Reserve Chairwoman Janet Yellen her rationale for keeping the rates low for as long as she did.

For now, other indicators for the U.S. economy seem good. Unemployment remains near 50-year lows at 3.7 percent. Almost 5.2 million jobs have been created since Jan. 2017 in the household survey. The economy is still growing.

Can anything be done to keep it going? Probably not, if you believe in that the economy operates in cycles. But there are still factors that policymakers and the President ought to consider over the longer term, circling back to the trade and currency dispute with China.

Now that the U.S. Treasury has labeled China a currency manipulator, it should consider barring it from purchasing any more treasuries as a penalty. After all, China needs to keep buying treasuries to exert its trade advantage. Currently it holds $1.1. trillion and is the world's largest holder. Exporters tend to stockpile dollar-denominated assets to weaken the local currency. Without treasuries to fall back on, the yuan could appreciate vis a vis the dollar, even with the fixed exchange rate.

That would give the tariffs, now 25 percent on $250 billion of Chinese goods, and 10 percent on the rest of the $300 billion of them, some real teeth. It would also create a very real penalty for currency manipulation, and serve as a deterrent to other countries that want to play games with the dollar.

Such a move might also ease demand for treasuries, placing pressure on interest rates to rise, perhaps easing the imminent inversion temporarily. China might respond and consider dumping its treasuries in response, but that too would hasten the yuan’s appreciation.

While these developments would create pressure for treasuries interest rates to rise, this would be offset by a market panic into treasuries out of equities, as markets and central banks buy up the excess bonds. In fact, fearful of the breakdown of trade talks with the U.S. by China, investors are already doing that. The 10-year treasury is down to 1.6 percent as of this writing amid the trade tensions.

Barring China from treasuries markets might not be able to forestall another recession, and so the rationale has to be long-term. Kicking the currency manipulator China out of treasuries markets as a penalty could help the U.S. achieve an implied aim of the Trump administration to decouple from the Chinese economy, or finally force China to the table to craft a long-desired trade deal, make its foreign exchange operations transparent and let the yuan float once and for all. Would that be such a bad thing?

Robert Romano is the Vice President of Public Policy at Americans for Limited Government.

Video: Trump and Treasury slap China with currency manipulator designation and it's about time

To view online: https://www.youtube.com/watch?v=ec7YNbNTrIQ

Dear Congress, stop subsidizing wind like it’s 1999 and let the tax credit expire

By Richard McCarty

Congress created the production tax credit for wind energy in 1992. In other words, wind turbine owners receive a tax credit for each kilowatt hour of electricity their turbines create, whether the electricity is needed or not. The production tax credit was supposed to have expired in 1999; but, instead, Congress has repeatedly extended it. After nearly three decades of propping up the wind industry, it is past time to let the tax credit expire in 2020.

All Congress needs to do is nothing.

Addressing the issue of wind production tax credits, Americans for Limited Government President Rick Manning stated, "Wind energy development is no longer a nascent industry, having grown from 0.7 percent of the grid in 2007 to 6.6 percent in 2018 at 275 billion kWh. The rationale behind the wind production tax credit has always been that it is necessary to attract investors.”

Manning added, “wind energy development has matured to the point where government subsidization of billionaires like Warren Buffett cannot be justified, neither from an energy production standpoint nor a fiscal one. Americans for Limited Government strongly urges Congress to end the Wind Production Tax Credit. The best part is, they only need to do nothing as it expires at the end of the year."

There are plenty of reasons for ending the tax credit. Here are some of them:

Wind energy is unreliable. Wind turbines require winds of six to nine miles per hour to produce electricity; when winds speeds reach approximately 55 miles per hour, turbines shut down to prevent damage to the equipment. Wind turbines also shut down in extremely cold weather.
Due to this unreliability, relatively large amounts of backup power capacity must be kept available.
Wind energy often requires the construction of costly, new high-voltage transmission lines. This is because some of the best places to generate wind energy are in remote locations far from population centers or offshore.
Generating electricity from wind requires much more land than does coal, natural gas, nuclear, or even solar power. According to a 2017 study, generating one megawatt of electricity from coal, natural gas, or nuclear power requires about 12 acres; producing one megawatt of electricity from solar energy requires 43.5 acres; and harnessing wind energy to generate one megawatt of electricity requires 70.6 acres.
Wind turbines have a much shorter life span than other energy sources. According to the Department of Energy’s National Renewable Energy Laboratory, the useful life of a wind turbine is 20 years while coal, natural gas, nuclear, and hydroelectric power plants can remain in service for more than 50 years.

Wind power’s inefficiencies lead to higher rates for customers.
Higher electricity rates can have a chilling effect on the local economy. Increasing electricity rates for businesses makes them less competitive and can result in job losses or reduced investments in businesses.
Increasing rates on poor consumers can have an even more negative impact sometimes forcing them to go without heat in the winter or air conditioning in the summer.

Wind turbines are a threat to aviators. Wind turbines are a particular concern for crop dusters, who must fly close to the ground to spray crops. Earlier this summer, a crop dusting plane clipped a wind turbine tower and crashed.
Wind turbines are deadly for birds and bats, which help control the pest population. Even if bats are not struck by the rotors, some evidence suggests that they may be injured or killed by the sudden drop in air pressure around wind turbines.

Large wind turbines endanger lives, the economy, and the environment. Even after decades of heavy subsidies, the wind industry has failed to solve these problems. For these and other reasons, Congress should finally allow the wind production tax credit to expire.

Richard McCarty is the Director of Research at Americans for Limited Government Foundation.

ALG Editor’s Note: In the following featured oped from The Hill, U.S. Rep. Fred Keller (R-Pa.) makes the case against Joe Biden’s Green New Deal to eliminate fossil fuels:

Biden's plan to eliminate fossil fuels is bad for our national security, worse for our economy

By Rep. Fred Keller

For two nights last week, the Democratic candidates for president treated the American public to round two of their socialist proposals to bankrupt our nation, kill good-paying jobs, and drastically alter the fabric of our economy.

While many ideas discussed by the nearly two dozen Democratic hopefuls for the White House would spell disaster for the future of an America that is now realizing unprecedented prosperity, Joe Biden’s call to eliminate fossil fuels is particularly egregious.

When pressed whether he would get rid of coal and “fracking” -- the predominant process by which natural gas is extracted from the ground -- Biden pledged to get rid of both. By selling out to the far-left extreme of his party, the former vice president told hundreds of thousands of hardworking Americans that he is coming for their jobs and prepared to jack up their energy costs.

While socialists in Congress and most of those seeking the Democratic presidential nomination continue to push for the Green New Deal, a recent study showed that it would cost Pennsylvania taxpayers $70,000 per person in the first year alone.

However, the complete elimination of fossil fuels spells more pain than just massive tax increases for working families.

It means weakening our national security by eliminating our ability to be energy independent, killing a thriving energy economy and the hundreds of thousands of jobs it supports, and stopping investment in rural America.

The success of the natural gas industry in Pennsylvania and across the United States has completely shifted long-term thinking about American energy policy and our role in the global energy marketplace.

Thanks in large part to our nation’s robust supply of natural gas, the United States is no longer energy dependent, relying on foreign adversaries to meet our energy needs.

For the first time in six decades, the United States is a net natural gas exporter.

We can now use our energy exports as leverage in our foreign policy, giving our allies flexibility, while diminishing the influence of unfriendly nations.

One way to marginalize countries that do not like the United States is to bankrupt them.

The less we are forced to buy the energy exports from our foreign adversaries, the worse their economy becomes, and the less they are able to exert influence over us.

For example, last year, Massachusetts was forced to import natural gas from Russia due to New York’s refusal to put in place pipeline infrastructure that can get natural gas to markets where it is needed.

Those concerned about Russian interference need to be concerned with Russia’s ability to influence our country when Americans are forced to buy natural gas from Russian gas companies and when countries like Russia have leverage to increase the price of natural gas in the winter time and turn the lights off for millions of Americans.

That absurdity is exponentially increased in a world where fossil fuels are completely eliminated to fulfill a campaign pledge made to satiate the unsound political interests of our country’s far-left base.

The elimination of fossil fuels would also severely harm the economy in states like Pennsylvania and affect rural investment in places like my home district.

I know this first-hand. On any given day in my congressional district, natural gas companies produce between one-tenth and one-twentieth of the entire nation’s natural gas supply. The district is also home to two of the largest natural gas producing counties in the country.

In Pennsylvania, the natural gas industry supports more than 300,000 jobs, contributes $45 billion to the commonwealth’s economy, and saves the average household $1,100 every year in energy costs.

This means more financial security for families, making day-to-day life more affordable.

The natural gas industry has created good-paying jobs and injected new life into our local economies as energy companies continue to partner with local communities to invest in schools and higher education, improve our infrastructure, and grow down-stream jobs.

The loss of this economic engine under Joe Biden’s plan to completely eliminate fossil fuels would set my district—and the rest of energy-producing America—back decades.

Natural gas as a fossil fuel has dramatically improved the quality of life and the economy in areas like my congressional district and across America. Our ability to become energy independent is making our nation stronger.

As a member of Congress, I will not let radical proposals to eliminate fossil fuels set America back, make us weaker, and hinder our growing economy.

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