What Would it Cost for the U.S. to “Go Solar”?

Proponents of renewable energy claim that wind and solar energy is now cheaper than fossil fuels. According to USA Today, “Renewables close in on fossil fuels, challenging on price.” A Forbes headline agrees: “Renewable Energy Will Be Consistently Cheaper Than Fossil Fuels.” The “expert” websites agree: “Renewable Electricity Levelized Cost Of Energy Already Cheaper,” asserts “energyinnovation.org.”

They’re all wrong. Renewable energy is getting cheaper every year, but it is a long way from competing with natural gas, coal, or even nuclear power, if nuclear power weren’t drowning in lawsuits and regulatory obstructions.

With both wind and solar energy, the cost not only of the solar panels and wind turbines has to be accounted for, but also of inverters, grid upgrades, and storage assets necessary to balance out the intermittent power.

Taking all variables into account, what might it cost for the entire U.S. to get 100 percent of its energy from solar energy?

Speaking the Language of Energy and Electricity

According to the U.S. Energy Information Administration, the United States in 2017 consumed 97.7 quadrillion BTUs of energy. BTUs, or British Thermal Units, are often used by economists to measure energy. One BTU is the energy required to heat one pound of water by one degree fahrenheit.

If we’re going understand what it takes to go solar, and usher in the great all-electric age where our heating and our vehicles are all part of the great green grid, then we have to convert BTUs into […] Read More

A New Approach to Pension Reform Goes to Appellate Court

The recent ruling by the California Supreme Court in the case CalFire vs CalPERS has garnered much attention from pension reformers. While falling short of being a landmark ruling, the result was nonetheless encouraging. The court left open the possibility that vesting does not protect prospective benefits of current employees. The implications of that are left to related, still active court cases to decide.

Meanwhile, a completely different approach to pension reform has been hitting courts around California, centered on the argument that government agencies did not follow due process when approving pension enhancements. Between 1999 and 2007, one by one, nearly all of California’s government agencies enacted pension benefit increases of 50 percent or more. These increases were made retroactively, causing an actual financial impact well in excess of 50 percent. But when they did this, did they obey the law?

Three lawsuits have been filed by citizens taxpayers seeking to have pension increases overturned on the ground that they were adopted in violation of Section 7507, but each time, the trial court has dismissed the case on the ground that the lawsuit is barred by the three-year statute of limitations.

Convinced that the statute of limitations should not act as a bar to taxpayer claims to challenge these statutory violations, taxpayer/plaintiff George Luke raised the money to hire counsel, Robinson & Robinson LLP, to take an appeal from the statute of limitations ruling. If Mr. Luke is successful, it will open the door to every agency, or […] Read More

How to Make California’s Government Agencies Far More Transparent

Last year, California’s state Senate and Assembly passed 1,217 pieces of legislation. Governor Brown signed 1,016 of them into law, and most took effect January 1st. Included were predictable acts of liberal zealotry – sanctuary for the undocumented, gender equity on corporate boards, gun control, “me-too” inspired laws, a mandate to move California to 100% “clean” energy by 2045, laws to protect government unions, reduce mandatory criminal punishment, and, of course, a ban on plastic straws.

To be fair, most of these issues aren’t black and white. But what’s notable is a complete lack of legislation that might reflect some kind of ideological balance. Where were the laws to rebuild our highways, fast-track the construction of the Sites Reservoir, open land for housing development, license new nuclear power plants, or permit drilling for natural gas? As Tony Soprano would say, “fuggedaboutit!”

There’s one law pending in this year’s legislative session, however, that could do a world of good. It’s probably the best new proposed law that nobody’s ever heard of. It’s utterly bipartisan, and wouldn’t cost much at all to implement.

That law is SB 598, the Open Financial Statements Act, sponsored by Senator Moorlach. It’s fitting that Senator Moorlach is the author of this bill, because Senator Moorlach is the only certified public accountant serving in a state legislature that, in general, is quite likely the most financially illiterate group of state legislators in America.

This isn’t idle speculation. An recent analysis by the California Policy […] Read More

Economic Headwinds Came Long Before Trump’s Presidency

After the unexpected election of President Donald Trump, something else unexpected happened. The stock market soared.

In the final week before the 2016 election, the Dow Jones Industrial Average closed at 17,888, an unimpressive level, since it had reached that same point nearly two years earlier in December 2014. But following Trump’s victory, the Dow went wild. By the time he took office in January 2017, it had already jumped over 12 percent, to 20,094. By January 2018, it peaked at 26,616, then edged upwards to 26,828 on October 3, 2018. In less than two years, the Dow Jones Index grew by an astounding 50 percent.

Since then, however, the Dow, along with the other major U.S. indexes, have been tumbling. By Christmas Eve, the Dow was 19 percent off its high, down to 21,792. What had been called the “Trump Bump” is now being called the “Trump Slump.”

While President Trump has been criticized for taking credit for the stock market rise, Barack Obama also got into that action, claiming in October 2018 that “the booming started on his watch.” But today’s economy, and especially the stock market, are reacting to longer-term trends for which neither president deserves full credit or blame.

Depicted on the chart below is the performance of the Dow from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. On clear display are the past two bubbles, the internet bubble of 2000, […] Read More

Pension Funds, Meet the “Super Bubble”

Earlier this month, outgoing California Governor Jerry Brown predicted “fiscal oblivion” if California’s state and local agencies are not granted more flexibility to modify pension benefits. As if to help Governor Brown make his point, U.S. stock indexes took an obliging plunge. The Dow Jones average cratered in December, dropping nearly 16 percent in three weeks, from 25,826 on December 3rd to a low of 21,792 on December 24th. And whither hence? Nobody knows.

If history and trends are any indication, however, “up” is unlikely. Depicted on the chart below is the performance of the Dow Jones Index from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. Clearly shown are the past two bubbles, the internet bubble of 2000, the housing bubble of 2007, and what we may call the “super bubble” or “everything bubble” of 2018.

Dow Jones Stock Index – 1995-2018

It doesn’t take an economist to notice a pattern here. The Dow Jones Index, which tracks closely with all publicly traded equities in the U.S., more than doubled in the four year heady runup to its January 2000 peak, than went into decline for nearly four years, before doubling again between 2004 and 2007. Then when the housing bubble popped, the Dow went off a cliff, dropping to half its 2007 peak in little over a year. In the ten years […] Read More

How to NOT Solve California’s Housing Crisis

There are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere.

Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.

This is a shakedown. It has caused a politically engineered housing shortage in California that enriches billionaire property developers that have the financial strength to withstand decades of delays and millions in fees, because they reap the extreme profits when they sell these homes at inflated prices. Also enriched are the public servants whose pay and pensions depend on all taxes – definitely […] Read More

Towards a Grand Bargain on California Water Policy

When it comes to water policy in California, perhaps the people are more savvy than the special interests. Because the people, or more precisely, the voters, by huge majorities, have approved nine water bonds in the past 25 years, totaling $27.1 billion. It is likely they’re going to approve another one this November for another $8.9 billion.

The message from the people is clear. We want a reliable supply of water, and we’re willing to pay for it. But the special interests – or whatever you want to call the collection of politicians, unelected bureaucrats with immense power, and other stakeholders who actually decide how all this money is going to be spent – cannot agree on policy. A recent article in the Sacramento Bee entitled “Why San Francisco is joining Valley farmers in a fight over precious California water,” says it all. “Precious California water.” But what if water were so abundant in California, it would no longer be necessary to fight over it?

As it is, despite what by this time next year is likely to be $36 billion in water bonds approved by voters for water investments since 1996, the state is nowhere close to solving the challenge of water scarcity. As explained in the Sacramento Bee, at the same time as California’s legislature has just passed long overdue restrictions on unsustainable groundwater withdrawals, the political appointees on the State Water Resources Control Board are about to enact sweeping new restrictions on how much water agricultural […] Read More

California’s Transportation Future, Part Four – The Common Road

With light rail, high speed rail, and possibly passenger drones and hyperloop pods just around the corner, it’s easy to forget that the most versatile mode of transportation remains the common road. Able to accommodate anything with wheels, from bicycles and wheelchairs to articulated buses and 80 ton trucks, and ranging from dirt tracks to super highways, roads still deliver the vast majority of passenger miles.

As vehicles continue to evolve, roads will need to evolve apace. Roads of the future will need to be able to accommodate high speed autonomous vehicles. They will also need to be smart, interacting with individual vehicles to safely enable higher traffic densities at higher speeds. But can California build roads competitively? How expensive are road construction and maintenance costs in California compared with other states in the U.S.? How can California make the most efficient use of its public transportation funds?

PHYSICAL VARIABLES AFFECTING CONSTRUCTION COSTS

The Federal Highway Administration maintains a cost/benefit model called “HERS” (Highway Economic Requirements System) which they use to evaluate highway construction and highway improvement projects. One of the products of HERS is the FHWA’s most recent summary of road construction costs, updated in 2015. Its findings reveal both the complexity facing any cost analysis as well as the wide range of results for similar projects.

For example, on the FHWA website’s HERS summary page, Exhibit A-1 “Typical Costs per Lane Mile Assumed in HERS by Type of Improvement” data is presented in nine columns, each representing […] Read More

California’s Left-Wing Oligarchy Profits from “Scarcity”

There is no good reason for home prices and rent to be so much more expensive in California than they are in the rest of the country. The supposed shortages of land, energy, and water, as well as the poor condition of our roads and freeways, are all problems that might have been avoided by good government.

California’s punitively high cost of living is the result of conscious choices made by California’s state legislature, and the primary force behind these choices is not desire to protect the environment, it is greed. The people who profit by artificial, contrived scarcity, don’t want anything to change. They are the utility companies, the trial lawyers, the Silicon Valley “green” entrepreneurs, and billionaires who already own the artificially limited supplies of land and housing.

California receives between 150 and 300 million acre feet of precipitation per year. This, plus desalination and sewage reuse, along with reasonable conservation measures, guarantee ample supplies of water. There is no water shortage, only a shortage of creative policies to increase water supply.

California has 163,000 square miles of land, and less than one-fourth of that land is prime agricultural land. In fact, the absolute prime farmland is less than one-tenth of that amount. It is an absurd falsehood to state that new suburbs, even if they’re built to house another 10 million residents, are going to use up all of California’s open land. There is Read More

How to Reduce the California State Budget by $40 Billion

As of a few days ago, high-wage earners have a new reason to leave California: their state income taxes are no longer deductible on their federal income tax returns.

Can California’s union-controlled state legislature adapt? Can they lower the top marginal tax rates to keep wealthy people from leaving California?

The short answer is, no, they cannot. They cannot conceive of the possibility that California’s current economic success is not because of their confiscatory policies, but in spite of them.

Earlier this year California’s union controlled legislature approved a gas tax increase that will increase state tax revenue by about $5.0 billion per year. Next in their sights is changing property taxes to a “split roll” system, whereby all commercial properties will no longer be protected from steep tax rate increases. Also under consideration is extending sales taxes to services, along with taxes on water, marijuana, and, who knows, maybe even robots.

These new taxes have attracted a lot of attention, but in reality California’s state government derives most of its tax revenue, 58%, from personal income tax. In recent years personal income taxes have contributed as much as 65% of the California state government’s total tax revenue. California’s top marginal income tax rate of 13.3% is by far the highest in the U.S. Oregon has the 2nd highest rate, at a much lower 9.9%. The impact of this can be seen on the chart depicted below, which is taken from the […] Read More