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Texas, Taxes and Talk
From August 26 to September 4th, an estimated 65,000 folks from 174 countries will gather
in Johannesburg, South Africa to attend the World Summit on Sustainable Development. Secretary of State Colin Powell
will represent the United States. The conference will focus on five key areas: water and sanitation, energy, health,
agricultural productivity and biodiversity/ecosystem management. As anticipated by columnist James Glassman, there
are two sides that will clash over their underlying socialist/capitalist beliefs.
The majority, made up of leftist environmentalists and professional socialists, will present a strong and uncompromising
view that their values should almost always trump other values, especially those associated with development and
growth. Quoting authors Steven Hayward and Christopher DeMuth, Glassman says their "… modus operandi will
be the dramatic claim of impending catastrophe and the moralistic attack on anyone who makes a compromise in the
pursuit of environmental progress. They will prefer government bans and commands over markets and private property
and demand central government and national or even global regulations over state and local regulation."
Doing battle with them will be a determined minority made up of what Virginia Postel calls The Dynamists. They
will assert that economic growth is the foundation stone on which a clean, healthy environment must be built. Dynamists
will present an unswerving belief in sound science and rationalism, a strict weighing of the costs against the
benefits of any policy on the table and an understanding that as the people of the earth grow richer, they also
grow healthier, live longer, can protect themselves against calamity more effectively and find it easier to pursue
the spiritual goals that make life satisfying and productive.
It is poverty, not affluence, that is the number one enemy of the environment. Few, if any, rich countries have
environments as poor as poor countries. Thirteen of the 15 most polluted cities are in developing Asia. Pollution
rises in poorer countries until their inhabitants achieve an average per-capita income above $5,000. Then pollution
falls rapidly. World Bank researchers have shown the link between economic growth, rising living standards and
environmental health. Clean air and water, they say, are goods that a society can purchase - but only after it
has satisfied its basic needs for food, shelter and rudimentary income. Poverty has been relieved more in the past
50 years than in the proceeding 500 years. For 200 years, economic growth has been inextricably linked to environmental
progress.
The essential element in economic growth has been energy. Energy also has extreme leverage, Glassman states, a
little goes a long way. Restrict energy use and you cripple economies, especially poor economies. It is here that
the conference will have to square up to what a truly bad idea the Kyoto Protocol is. Nine-tenths of the energy
used today is the fossil fuels: coal, gas and oil. They are abundant and inexpensive. They are living proof that
the doomsayers who claim that the Earth is running out of resources are wrong. When anything is scarce, its price
rises. The commodity price index developed by The Economist magazine shows an 80 percent decline since 1845. The
modern era of OPEC-led pricing began in 1973. During those 20 years the price of gasoline has fallen 50 percent.
The bulk of the increase in energy use over the next 20 years will occur in China and India. High usage will also
occur in developing Asia, Central and South America, Africa and the Mideast. These countries have no choice. They
need to use fossil fuels now to speed them towards the kind of wealth that they can use later to improve their
environment. At this stage in their history, reducing CO2 emissions means slowing developing nation's economic
growth. In the shrewd world of EU economic attacks on the U.S., developing nations are exempt from Kyoto.
However, it is the developed nations that provide investment capital, customers and markets for goods from the
developing nations. The cost of Kyoto for the United States would be huge. The Clinton Energy Department estimates
are in the $400 billion a year range. Propaganda aside, the science remains unsettled. Computer models cannot make
projections about the future. They can only calculate the math for given assumptions. Even if one of the model's
assumptions proved to be correct, the reduction in global temperatures is marginal to non-existent. The answer
to fear of pollution, Glassman concludes, is to spread prosperity to developing countries - not to cripple the
world's economies through no-growth and anti-growth constraints.
It is the elimination of constraints on human achievement that will create sustained wealth, enough to provide
for environmental health. What Johannesburg is likely to produce is the opposite- Malthusian, agenda-driven "science,"
calls for limits on growth and endless subsidy of failed schemes. The World Bank, in its annual World Development
Report, projects the world deteriorating into a "grim home for nine billion impoverished people."
Meanwhile, back at the ranch, the stock market is bouncing around due to the effects of erratic government policy
- trade protectionism, a huge burst of government spending, the slow phase in (and threatened phase out) of the
tax cut, incompetent governance demonstrated daily by airline screeners and the potential for further congressional
mischief. The Crawford White House is said to want to propose initiatives to raise the limit on write-offs for
investment losses, raise the contribution limits on pension plans, cut capital gains and eliminate double taxation
on dividends. It has even floated the idea of indexing capital gains.
Other than garnering election year headlines, it is pretty unlikely that any tax proposals will pass. They will
be defeated by a lack of time, the cost to the Treasury and the Dems screaming about giveaways to the rich. On
the other hand, Democrat proposals all boil down to raising taxes during a recession. They won't get anywhere either.
The one thing that would help - accelerating implementation of the lowered and middle income tax cuts already in
the ten-year package - would require genuine bi-partisan effort immediately.
The art to winning elections on an off year is to get your base so mad or so scared that they turn out while the
other party stays home. In the heat of August, apathy abounds. As we get to sixty days until the election, the
truth of the matter is that the electorate is still split 40-40 and unknown October events will provide the spark
if there is any. As the mud wrestling continues, someone might ask, as Paul Craig Roberts did, why we expect a
strong recovery when we are exporting high-paying jobs and importing poor people?
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