Can America Import Scandinavian-Style Socialism?

debunking_utopiaby James A. Bacon

In the never-ending debate that rages in the comments section of Bacon’s Rebellion, defenders of an extensive welfare state often refer to the success of the Nordic countries — Sweden, Denmark, Finland and Norway — as proof that the United States “blue state” governance model can succeed. The Nordics combine high state spending, high taxes, generous welfare benefits and leading-edge green environmental policies with a high standard of living. The Nordics have among the highest per capita incomes of any country in the world, they have low levels of income inequality, and they rank among the highest countries globally in surveys of happiness. Liberal icons from President Barack Obama and economist Paul Krugman wonder, why can’t America be more like Sweden?

The key to Scandinavian success, according to Kima Sanandaji, Kurdish-Iranian by ethnic origin who migrated as a child to Sweden, is that the Nordic countries are small, socially cohesive societies with shared values well adopted to a mixed capitalist-socialist economy. As Sanandaji writes in his book, “Debunking Utopia,” “High levels of trust, a strong work ethic, civic participation, social cohesion, personal responsibility, and families values are long-standing features of Nordic society that predate the welfare state.”

Believers in expansive government visualize look to Sweden and Denmark as examples of how their policies would turn out. But why not to Greece or Venezuela? The outcome of the socialist experiment, Sanandaji argues, depends largely upon the cultural setting in which it takes place.

There are a number of points people should bear in mind when they hold up Nordic countries as examples for America to emulate.

  • The Nordic Four experienced their strongest economic growth in the century before World War I, by which time they had become among the most affluent countries in the world. Their rate of economic growth slowed as they embraced moderate socialism, and then slowed even more as they committed heavily to the socialist model between 1970 and 1990. In response to economic stagnation, all four countries have dialed back the size and scope of government since their socialist heyday.
  • While the Nordics still maintain generous welfare states (though less generous than before), they embrace free market principles for their economies, exposing their corporations to global competition. Their economies rate among the most “free” in the world.
  • As evidence that culture is a driving force behind Scandinavian success, immigrants from the Nordic countries are among the most prosperous ethnic groups in the United States. They share many of the same cultural characteristics as their Scandinavian cousins. Not surprisingly, Americans of Nordic descent have even higher incomes on average than their Scandinavian counterparts, but comparably low rates of poverty and social dysfunction.
  • The Nordic countries have experimented with extending their welfare-state model to minorities, mainly from the Middle East, and it hasn’t worked — indeed it has fared so poorly that the Nordic nations are experiencing a backlash against immigrants. Over the past couple of decades, ethnic minorities in all four countries, Sweden most prominently, have gotten caught in the welfare trap. Having difficulty assimilating to Nordic society, they experience high levels of unemployment, poverty, crime and discontent. The same ethnicities fare better in the United States.

“Social outcomes are to a large extent determined by the choices that people make, which in turn is influenced by culture,” writes Sanandaji. “A country cannot just copy the policies of another country and hope to gain the same social outcomes.”

As an example, he points to life expectancy. Critics of the U.S. health care system point to the higher life expectancy of the Nordic countries with their systems of socialized medicine. But the health of Nordic peoples can be traced in good measure to their healthy lifestyles.

“Instead of trying to copy Nordic policies, why not copy their health lifestyles,” he asks. “Wouldn’t Americans be healthier if they exercised more, took hikes in nature, walked to the store on occasion (as Nordic people often do) instead of driving, and ate less junk food and more fish? … Perhaps some Americans would like to continue having an unsound diet and hope that Nordic-style social democracy can improve their health. I very much doubt that would be the case.”

An Aging Economy Is a Sluggish Economy

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Source: “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity.” (Click for more legible image.)

by James A. Bacon

Why is U.S. economic growth slowing? Perhaps for the same reason economic growth is slowing in Europe, Japan and other advanced economies — our populations are getting older. That was a major theme of my book “Boomergeddon,” written in 2010, when I accurately predicted that U.S. economic growth would fall short of the optimistic expectations in U.S. eonomic and budget forecasts. I don’t pretend I got everything right — I failed to foresee the fracking boom that ignited the U.S. energy boom, and I did not anticipate how quantitative easing would goose goosing the economy by inflating asset values. But I was pretty certain about one thing — the U.S. population was getting older, and an older population would dampen economic growth.

That’s not a controversial view among the handful of economists who study the impact of aging. It just isn’t appreciated by the broader economic profession, the geniuses who have consistently overshot economic growth forecasts over the past decade, or a political class that has shown no willingness to put entitlements and debt accumulation on an economically sustainable basis.

Now comes a study, “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity,” by Nicole Maestas, Kathleen J. Mullen, and David Powell, and published by the National Bureau of Economic Research. Their disturbing conclusion: “We find that a 10% increase in the fraction of the population ages 60+ decreases the rate of GDP per capita by 5.5%. … Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.”

Extrapolating from differential rates of aging and economic growth in the 50 states, the authors see a number of forces at work. Slower growth in the workforce accounts for about one-third of the effect. The rest comes from slower productivity growth from an aging workforce, with possible spillover affects among younger workers.

The fraction of the United States population 60 or older will increase by 21% between 2010 and 2020, and by 39% between 2010 and 2050. This dramatic shift in the age structure of the U.S. population — itself the effect of historical declines in fertility and mortality — has the potential to negatively impact the performance of the economy as well as the sustainability of government entitlement programs.

We can argue over the impact of taxes, regulation, quantitative easing, fiscal policy, and most will retreat into our respective ideological corners, agreeing upon nothing. But the aging of the population is an undeniable phenomenon that transcends partisan analysis. And there is consensus in the economic profession that once a tipping point is reached — as it has in many countries — the economic impact is negative. The U.S. and other aging countries which once had the demographic wind at their back now are leaning into a gale. None are likely to return to the economic growth rates of the early post-World War II era.

Virginia impact. Sadly, the paper did not provide a state-by-state breakdown for aging. However, two maps in the appendix (including the one above) show that Virginia’s population aged more rapidly than that of most other states between 1990 and 2000, and again between 2000 and 2010. One could conjecture that the aging effect has dampened economic growth here somewhat more than the national average. There may be more to blame for Virginia’s economic sluggishness than federal sequestration or flawed public policy.

No one can foresee the future, but if there is one aspect of the future that is predictable with some reliability, it is a nation’s (or state’s) demographic profile. And if there’s one thing we can say with some certainty, it is that economic growth will be slower. Our elected leaders should bear in mind as they discuss expanding entitlements and taking on more debt. No miraculous resurgence of economic growth will make it easier to pay our bills.

When the political class ignores this advice, don’t say I didn’t warn you.

Virginia’s Political Class as Criminal Class

morris

Morris

Del. Richard L. Morris, R-Suffolk, has been charged with 14 counts of violence against members of his household, including offenses of cruelty and injuries toward a minor, as well as assault and battery against a female relative, reports the Richmond Times-Dispatch.

Three of the charges stemmed from allegations that Morris had physically assaulted a boy relative Sept. 16, causing “injuries consistent with excessive physical discipline.” Suffolk police made contact with the boy, writes the T-D, after receiving a complaint from Child Protective Services. Additional charges arose from an alleged assault last year on an adult woman in the Morris household. The alleged victims were not identified by name or relation.

Morris is married and has nine children. Ironically, according to Morris’s website biography, he is treasurer and finance director of the Southeastern Hampton Roads CASA (Court Appointed Special Advocate), “a group of volunteers that represent abused and neglected children in court and advocates for their needs.”

I’m guessing these charges will make it hard for Morris to run on a family values platform.

— JAB

Regulators Grant Water Permit for Chesterfield Power Station

chesterfield-power-station

by James A. Bacon

The State Water Control Board approved today the reissue of a waste-water permit at the Chesterfield Power Station, the largest fossil-fueled power plant in Dominion Virginia Power’s generating fleet. Among other features, the permit covers the de-watering of coal ash as the utility moves toward a long-term disposal of the potentially toxic coal-combustion byproduct.

The permit incorporates treatment processes approved for the de-watering of coal ash at Dominion’s Bremo and Possum Point power stations, reached after extensive negotiation between the company, environmental groups and the Department of Environmental Quality.

Cathy Taylor, Dominion’s senior environmental and sustainability advisor, said the $80 million investment in waste-water control sets “new stringent limits” on the level of potentially toxic heavy metals that can be released into the James River. “We’re committed to doing this right. We live here, too, and want to ensure our neighbors and the community know exactly what we’re doing, when we’re doing it, and why.”

In a statement during the permit hearing, Brad McLane, an attorney for the Southern Environmental Law Center pressed for even tighter limits, especially on arsenic. The 6-to-0 vote to approve the permit with only minor changes was disappointing, he said after the vote.

“We proposed common-sense revisions to the Chesterfield water discharge permit, including an expedited implementation of newly-required pollution controls (from a 4-to-6 year time frame to a 2-year time frame), and an expedited process to address thermal pollution and water withdrawal impacts in the reasonable future instead of five years or more in the future,” McLane said. “Unfortunately, the Board rejected our proposed revisions and moved forward with the permit as recommended by DEQ with only one very minor change.”

The Virginia Chapter of the Sierra Club was harsher. “The permit allows Dominion to use minimum requirements for thermal discharge and water intake, and allows for more stringent limits on toxic pollutants like arsenic and lead to be delayed until March 2022, rather than requiring Dominion to meet the federally suggested date of November 2018,” said Kate Addleson, director of the Sierra Club-Virginia Chapter. “We are concerned that DEQ is unjustifiably willing to bow to the wishes of corporate polluters like Dominion.”

The Chesterfield Power Station began operation in 1944. The coal- and gas-burning facility supplies about 12% of the electricity in Dominion’s service territory. Dominion has spent about $1 billion over the decade to meet tough air pollution standards designed to cut emissions of mercury, nitrogen oxide and sulfur dioxide. Now the company expects to spend another $80 million to upgrade its industrial wastewater treatment.

The plan involves closing two coal ash ponds where the company deposited the residue from coal combustion, and converting to a “dry ash management” system. The old way of handling coal ash was to mix with water to prevent it from blowing away. That method raised concerns that heavy metals could leach from the coal ash into the water, and eventually into underground water supplies or rivers and streams. The Environmental Protection Agency has mandated all electric utilities de-water their coal ash ponds and dispose of the residue safely.

Dominion tackled coal ash disposal at its Bremo and Possum Point power stations first. After considerable controversy, the Bremo transition has gone so smoothly that McLane was moved to say, “Dominion has established a strong track record of effective treatment of these waters over the last several months. In our view, this is absolutely a good thing.”

Dominion has adopted the Bremo template for treating coal ash at the Chesterfield facility. But de-watering is only the first step. State regulators still have to approve a permit for the disposal of the dry coal ash.

Dominion’s Taylor described the ultimate disposition of the coal ponds this way:

Chesterfield is unique because unlike the other generation stations where we are closing coal ash ponds in Virginia, we continue to burn coal at this station. Dominion is constructing a new onsite state-of-the-art lined landfill to safety manage future ash that is generated. The conversion to dry ash management will result in the elimination of future wastewater discharges associated with the station’s coal ash ponds and a reduction in the station’s water requirements by over 5 million gallons per day. Only after the new state-of-the-art landfill is constructed can we begin closing the ash ponds.

Environmental groups also were disappointed that the permit does not immediately address the issue of thermal pollution, a potential threat to endangered sturgeon. The James River Association has measured water temperatures near the Chesterfield outlet at 105 degrees Fahrenheit, high enough to kill fish, destroy habitat, cause algae blooms and reduce dissolved oxygen levels, said Nate Benforado with the SELC. The permit requires Dominion to study the water intake and discharge issues, but the company doesn’t have to provide DEQ the findings until 270 days before the expiration of the permit.

A Matter of Public Necessity

gas_pipelineby James A. Bacon

Two years ago, four electric and gas utilities announced the formation of a joint venture, the Atlantic Coast Pipeline. The 600-mile project, the partners said, would connect Virginia and North Carolina with the Marcellus and Utica shale basins, tapping abundant natural gas supplies to benefit residential customers, spur economic development, and enable power companies to shift generation from dirty coal to cleaner-burning gas. If all went according to schedule, the pipeline would receive a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission (FERC) in the summer of 2016.

The project is rolling forward but it has encountered delays: A FERC ruling is not expected until next year. Intense opposition has arisen in Virginia mountain communities through which the pipeline would cross. Foes have raised concerns about the threat of gas explosions, harm to rare species, disruption to viewsheds, and pollution of rivers, streams and water supplies.

There is no legitimate public need to build the pipeline, opponents argue. Virginia and North Carolina can get plenty of natural gas through existing gas infrastructure. In their view, the ACP represents a bold play by four monopoly utilities — Dominion Virginia Power, Duke Energy, Piedmont Natural Gas and Southern Company Gas, owner of Virginia Natural Gas — to leverage their buying power to create a captive pipeline that will generate higher investment returns than they could get from their own regulated businesses.

FERC cannot approve any pipeline project “unless it is absolutely necessary,” said Joe Lovett, executive director of Appalachian Mountain Advocates in a press release issued last week in conjunction with a study disputing the need for the pipeline. “In cases like this, where the government allows for-profit companies to take private property — family farms, people’s homes — that protection is especially crucial. … The pipelines are not needed, so there should be no eminent domain for private gain.”

Pipeline foes have been hammering home this message to regulators and the public. ACP officials counter that the argument is based upon a profound misunderstanding of pipeline economics and how the project originated. The four partner companies issued Requests for Proposal in 2014 and compared the proposals — real submissions, not theoretical alternatives thrown out by pipeline foes. Plain and simple, company spokesmen say, the ACP best met the utilities’ needs. The four partners backed the venture because it made the most economic sense.

The story of how the Atlantic Coast Pipeline came to be has never been told to the public. Given the way the debate was focusing increasingly on the pipeline’s public necessity, I thought the public could benefit from a clearer understanding of the thinking behind the enterprise. At my request, Aaron Ruby, a spokesman for Dominion Transmission, managing partner of the ACP, set up a phone-conference interview with executives from the four partner companies. During a 45-minute interview, they made several key points:

  • Duke and Piedmont foresaw an increasing demand for natural gas. Totally dependent upon the Transco pipeline, they wanted to diversify their sources of gas supply and transport. In 2014 they issued an Request for Proposal.
  • Thinking along parallel lines, Dominion Virginia Power issued its own RFP around the same time.
  • Instead of building separate pipelines, Duke, Piedmont and Dominion agreed that joining forces in a single pipeline would be far more economical than any other alternative. By signing up Virginia Natural Gas and Public Service of North Carolina as customers as well, the proposed pipeline would enjoy economies of scale that no one else could match.

The natural gas revolution

The Obama administration has presided over a regulatory makeover of the electric power industry. In March 2011 the Environmental Protection Agency (EPA)  proposed regulations designed to reduce electric utility emissions of mercury and other toxic chemicals. The so-called Mercury and Air Toxic Standards (MATS) compelled many power companies to shut down their oldest and dirtiest coal- and oil-fired plants and replace them with generators powered by cleaner-burning gas. By 2014, electric utilities were in the midst of implementing MATS when the EPA rolled out its Clean Power Plan (CPP), which aimed to achieve a major reduction in carbon-dioxide emissions blamed for global warming. The CPP gave state regulators leeway in how to achieve the cuts by means of such strategies as energy conservation and efficiency and switching to natural gas and renewable fuels.

Meanwhile, thanks to the fracking revolution, natural gas production was booming in the Ohio-West Virginia-Pennsylvania area where the Marcellus and Utica shale fields were concentrated. The price of gas had plummeted, and it looked like supplies would stay abundant and relatively cheap for a long time. East Coast markets were served by a relatively small number of gas pipelines, most notably the massive Transco pipeline system that delivered gas from the Gulf Coast to markets as far north as New York. Connecting the Marcellus fields to East Coast populations centers was shaping up as a once-in-a-lifetime business opportunity for the gas industry, and by 2014 FERC was fielding an unprecedented number of pipeline proposals.

As utility planners in Virginia and North Carolina looked into the future, they had to figure out how to do two things: replace the old coal-fired power plants and accommodate economic growth in one of the faster-growing regions of the country. While they saw a role for solar and wind power, electric utilities also were responsible for maintaining the reliability of the electric grid. Because renewable energy sources are intermittent, not always generating electricity to match demand, planners leaned toward natural gas, whose production they could dial up and down as needed.

In the winter of 2013-2014, a North American cold wave known as the polar vortex drove home the urgent need for more gas. A change in the jet stream sent temperatures plunging and natural gas consumption soaring in the East Coast. “We saw winter peaks that were eye-popping to us,” said Greg Workman, Dominion’s director of fuels. “The winter peak eclipsed our previous winter and summer peaks.” Continue reading

Should Terry McAuliffe Heed This Poll?

poll_results

by James A. Bacon

A poll commissioned by the Chesapeake Climate Action Network shows strong public opposition to the Atlantic Coast Pipeline and strong support for tougher restrictions on the disposal of coal ash.

Twenty-eight percent of Virginia voters support Governor Terry McAuliffe’s backing of the Atlantic Coast Pipeline and the Mountain Valley Pipeline while 44% oppose it, found a poll conducted by the Cromer Group in a run-up to a planned picketing of the governor’s office in October.

Meanwhile, 71% of voters polled said McAuliffe should follow the example of other southern states by requiring coal ash to be deposited in lined landfills rather than buried in place near rivers.

“This poll shows that Governor McAuliffe’s cheerleading for fracked-gas pipelines is not only dangerous for communities and the climate, but decidedly unpopular in Virginia,” said Mike Tidwell, director of the Chesapeake Climate Action Network in a press release. “The Governor likes to dismiss both the pipelines and coal ash as ‘federal issues’ beyond his influence, but that’s untrue. He has direct executive power to act on behalf of Virginians facing direct harm now. Governor McAuliffe has the means and the moral responsibility to reject the pipelines and to reform coal ash disposal, and his legacy depends on it.”

Bacon’s bottom line: This poll of 732 registered Virginia voters asked two questions. The questions were not laughably slanted, as in some push polls I’ve seen.

(A great example is a American Civil Liberties Union poll sitting on my desk that I actually may respond to, just for yuks. Sample question: “Across the country, we’re seeing efforts to twist the meaning of religious liberty to allow people and businesses to use religion as a license to discriminate and a means to impose their religious beliefs on others. How serious a problem do you think the use of religion to discriminate is in our country today?”)

Though the Cromer Group questions don’t sink to the level of the ACLU’s risible push poll, that’s not to say the phrasing of the questions didn’t nudge respondents toward the desired answers. The first question reads as follows:

Governor McAuliffe supports building two long pipelines that would bring gas from West Virginia into Virginia and send it across the state. He says the pipelines will create jobs, lower bills, help manufacturing, and help the environment. This gas would be extracted through hydraulic fracturing drilling, or fracking. Opponents say these pipelines will allow energy corporations to take hundreds of miles of privately owned land from citizens for private corporate gain. Opponents also say the pipelines will harm Virginia farms, worsen pollution, and damage drinking water and local wells. Weighing the pros and cons, do you support the Governor’s efforts to build these pipelines for fracked gas across Virginia, or not?

The statements within the question are accurate, or at least arguably so. The questions do not contain obviously biased language. They mention reasons to both support and oppose the pipeline. However, the question devotes only 14 words to the “pro” side while giving 41 words to the “con” side. In addition, it refers twice to “fracking” and “fracked gas,” which one could argue are loaded phrases.

Here is the second question:

For decades, Dominion Power has burned coal to create electricity, resulting in an accumulation of millions of tons of coal ash waste near the banks of the Potomac, James, and other rivers. This waste must now be disposed of. Dominion wants to leave its coal ash waste in the ground, covering the top of the ash and not placing protective barriers or linings along the bottom. Dominion says this is safe. North and South Carolina and Georgia have rejected this method as unsafe. They have required the coal ash be moved away from rivers and drinking water into protected, lined landfills. Do you think the Governor should support Dominion’s approach, OR, follow the example of other Southern States to remove the ash to modern landfills?

Again, the statement is accurate and it contains no loaded language. Yet it frames the issue in such a way as to ask the respondent, who likely has no independent knowledge to draw from, to choose between believing Dominion or believing three state governments regarding the best way to dispose of coal ash. The question clearly leads the respondent to group’s preferred answer.

That’s not to say that the question is illegitimate. Virginians should take into consideration the regulatory approaches of other states when pondering how best to regulate coal ash in Virginia. But that is only one way to frame the question. Alternatively, the poll could have focused respondents on the cost of the coal ash disposal. Dominion has estimated the bill could total $3 billion. Environmentalists say it would cost less. I dare say that a question focusing on cost would have yielded different results.

Are those biases in the questions sufficient to skew the findings? Is this a poll that Governor McAuliffe should take seriously? Now that I’ve biased you with my analysis, you tell me. Please respond in the comments section.

Update: Dominion spokesman David Botkins has issued the following statement: “Dominion’s plans for closing coal ash ponds as well as building the ACP protect the environment. To say otherwise is untrue. Over the last many months Dominion has developed plans to close our ponds by consolidating the ash on station property.  EPA endorses that approach. The poll is an obvious effort to use biased questions based on incorrect information to slant the results.”

Atlantic Coast Pipeline Hires Construction Contractor

pipelineA decision by the Federal Energy Regulatory Commission (FERC) regarding the Atlantic Coast Pipeline isn’t expected until next year. But Atlantic Coast Pipeline LLC, a joint venture whose managing partner is Richmond-based Dominion, announced today that it has signed a construction contract with Spring Ridge Constructors International (SRC) to build the 600-mile project.

SRC, a joint venture comprised of four companies with extensive natural gas construction experience, was selected after an extensive competitive bidding process, ACP said.

“The members of SRC are aligned in purpose with the common goals of safe construction practices, a commitment to environmental stewardship and quality construction,” said project director Dam Plume.

The project has aroused furious opposition among environmentalists opposed to the expansion of natural gas-generated electricity and landowners along the route of the pipeline concerned about safety, environmental damage and loss of property values. Foes have contested the public necessity for the pipeline, claiming that a combination of solar, wind, energy efficiency and gas delivered by existing pipelines can meet the energy needs of Virginia and North Carolina.

Showing every outward sign of confidence that it will win regulatory approval, ACP has made significant financial commitments. It has contracted with a Pennsylvania manufacturer to deliver high-quality steel pipe, and now it is contracting with a construction enterprise. In early August, FERC issued a Notice of Schedule, which established a timeline for the remainder of the project’s federal environmental review process. Based on that schedule, ACP expects to receive a FERC certificate in the late summer or fall of 2017, with construction beginning shortly thereafter.

— JAB