Wednesday, October 29, 2014


Please visit this report at the PBS web site and share the story with your friends. And, if you're really touched, help out.


It's called "native advertising" -- advertising that's dressed up to look like editorial content.

Given The Atlantic magazine's generally pro-environment editorial position, is it really necessary or wise for so venerable a publication to use its brand and its social media pipeline to subscribers and followers to promote sponsored content, in this case from Chevron, that many of the magazine's subscribers will find offensive because of the anecdotal and generally false impression it conveys of the impact of the natural gas fracking boom on Appalachian economies?

As I've pointed out previously, the natural gas boom has had at best uneven economic effects in Appalachia -- from the merely disappointing results in Pennsylvania where the Chevron piece is focused to the nearly non-existent economic benefits in West Virginia where local economies have seen almost no net growth in jobs or commerce. And we haven't even discussed the long-term collateral damage caused by fracking, which includes noise, traffic, air, and water pollution that degrades the quality of life and creates an environment that discourages both families and businesses from wanting to locate nearby.

Sponsored content is not inherently evil as long as it is clearly and prominently identified as advertising, not editorial content. But, the Atlantic's decision to allow it's logo and its direct channels of communication to subscribers and followers to be used by the sponsor implicates the magazine in the message to the point that it feels like an endorsement. And that's a place no publication should go unless it wants to be identified with the sponsor of the content and, in this case, the misleading information that's being peddled.

Friday, October 24, 2014


Reporter Sarah Tincher of the State Journal is helpfully tweeting key points being made by speakers at the Governor's Annual Energy Summit, which is currently taking place at the Stonewall Resort in Roanoke, WV. The speakers thus far have been from the energy industry (although none so far from the renewable wing), academe, and government. And, not surprisingly, they are as a group highly supportive of the energy industry and of increased development of natural gas and coal in West Virginia.

Of course, in homogeneous gatherings where there is little risk of being questioned or contradicted, people are apt to say silly things. And that seems to be what's happening at Stonewall where the prevailing beliefs that West Virginia's fracking boom is an economic godsend and the coal industry would be one as well if only the EPA would allow it are being supported by a variety of claims that range from the merely doubtful to the wholly imaginary.

Here are a few.

That's Congresswoman and Republican senate candidate Shelley Moore Capito delivering her variation on a theme enunciated a year ago by West Virginia University Business School Dean Zito Sartarelli who told a group gathered to discuss West Virginia's economic outlook that we're witnessing an "economic miracle" in the northern panhandle thanks to the natural gas fracking boom.

The problem is that there is no economic miracle in northern West Virginia -- in fact, not even an uptick -- if you judge economic prosperity by measures such as job creation and income and population growth. Since 2007 at the dawn of West Virginia's natural gas boom, the five northern counties responsible for more than 90% of all of the state's fracking activity -- Ohio, Marshall, Wetzel, Doddridge, and Harrison -- have seen a net gain of exactly 451 jobs, a number so small that it's statistically insignificant.

Aside from property tax receipts the only economic indicator to which the fracking boom has made a major contribution is the state's GDP which between 2012 and 2013 grew at the third highest rate in the nation. But, the disconnect between GDP growth and local economic prosperity in West Virginia is legendary and illustrated by the fact that for years, while far outpacing the nation in GDP growth, West Virginia has had no job growth and last-in-the-nation income growth.

But, facts are no barrier to speakers at the summit.

When Paul Schreffler says that natural gas has been the biggest contributor to job growth he is, by definition, wrong because, again, there hasn't been any job growth. But, the point is semantic. What Schreffler is right about is that the natural gas industry, looked at in isolation, has added a few thousand jobs. However, even that fact exposes more holes in the prevailing narrative that casts natural gas as an economic game-changer.

First, the growth in natural gas employment was achieved almost entirely in the years 2007-2011. Since then, direct employment in the industry has been generally flat and, between 2012 and 2013, it actually declined.

But, the statistics also undercut a second main pillar of the argument for fracking as an engine of local prosperity. Depending on which industry-funded study you prefer, for every new job created by the natural gas industry it was expected that between 1.5 and 2 "indirect" or "induced" jobs would also be created in the rest of West Virginia's economy.

However, given that there has been no net job growth, if Schreffler is correct about natural gas generating 3,200 new jobs, that means the rest of the economy has been hemorrhaging jobs just as quickly, which means that when Mike Koon says, "The jobs are there for WVians, they just have to have the skill sets", he is also wrong as is, at least in spirit, Holly Kauffman, FirstEnergy president of West Virginia operations.

Kauffman, however, doesn't confine herself to one myth.

This is a "twofer". The energy industry, led by Kauffman's employer, has long warned ominously of impending catastrophe as a result of EPA regulations, claiming that compliance with clean air rules is unattainable and the effort of trying to achieve unattainable goals will result in lost jobs, higher utility rates, and even the loss of electricity.

But, as Sarah Tincher pointed out in another story from a few days ago, since the advent of the EPA and clean air regulations and contrary to the predictions of the industry, consumer rates for electricity have actually climbed less than the overall rate of inflation and now consume less of our incomes than they did decades ago.

The sad part of all this is that the governor's Energy Summit could serve a useful purpose by exploring some of the issues pointed out above:
-- Why has the natural gas boom failed to generate local economic prosperity and what can be done to change it?
-- How can West Virginia can achieve compliance with new clean air regulations and what are the associated opportunities?

Instead, our leaders seem locked in a vortex in which they vacillate between fantasy and a pursuit yesterday's failed dreams.

Sunday, October 5, 2014


This cringe-inducing clip of West Virginia Democratic Senate candidate Natalie Tennant struggling to respond to a question from a laid-off Logan County coal miner illustrates what happens to ostensible progressives who, whether out of ignorance or political cowardice, parrot the widely held misconception that the coal industry is an engine for job creation in West Virginia and that the loss of coal mining jobs is largely attributable to actions by the EPA.

Constrained by her many repetitions of these myths, Tennant cannot give the miner the compassionate, honest, and politically more effective response that he and many West Virginians have been misled by the coal industry and by self-interested politicians about the causes of mining job losses. She can't explain that his plight has almost nothing to do with the EPA and almost everything to do with market forces -- declining productivity and correspondingly rising labor costs in southern West Virginia mines and the ferocious competition from cheap natural gas and low cost coal from the Powder River Basin and Australia. Consequently, even outright abolition of the EPA would do almost nothing to restore lost mining jobs.

Just that little bit of honesty would have allowed Tennant to then shift the conversation to an issue on which progressives have a decided advantage -- the question of what government should be doing to help miners, families, and communities successfully navigate the journey to new careers and opportunities.

Monday, September 29, 2014


Yes, you read that right. According to Forbes Magazine and the West Virginia Department of Commerce, the nation's top 25 hedge fund managers received more pay in 2013 than did all 564,812 of West Virginia's private sector workers.

So, while West Virginia workers made an average of $760 a week, the hedge fund managers made $18.5 million a week -- just over 24,000 times as much.

Wednesday, September 24, 2014


When then-Governor Joe Manchin's daughter, Heather Bresch, was caught up in a scandal concerning her Executive Masters in Business Administration degree from West Virginia University, which it turned out had not been earned, she maintained a studied silence and stayed out of the public eye. To this day she won't discuss the matter publicly. It was a smart move. Bresch's degree was revoked, but she kept her job as CEO of Mylan Pharmaceuticals. Meanwhile, three WVU employees, including president Mike Garrison, lost their jobs over their involvement in the affair.

Given her past success as a result of remaining mute, one might have expected that Bresch would continue to follow that course. But, putting the letters "CEO" behind one's name can have an intoxicating effect that causes one to wander into situations that would be better avoided. Such was the case in July when Bresch agreed to be interviewed on CNBC about Mylan's announcement that it was acquiring the generics division of Abbott Laboratories, which is based in the Netherlands, in a process commonly called an "inversion".

In an inversion an American company sells itself to a smaller foreign company and, by ostensibly becoming a subsidiary of the smaller company, manages itself to become foreign-based and, therefore, not subject to certain US taxes. Of course, the management team of the larger American firm remains intact and takes over the ostensible "parent company".

The CNBC interview revealed a decidedly not-ready-for-primetime Heather Bresch. Faced with questions that can best be characterized as friendly, Bresch nonetheless stumbled when asked how much money Mylan would save in taxes as a result of the inversion. Rather than answer the question, Bresch became defensive and insisted that the move was not motivated by a desire to avoid taxes, but rather by strategic considerations.

Even the pliant program hosts couldn't ignore so awkward an evasion, so they asked again . . . and again . . . whereupon Bresch continued to refuse to answer. But, this time she embellished her refusal with a tirade about how the US needs to get its corporate tax structure in order to become competitive with other countries.

The tirade seemed to undermine Bresch's claim that the inversion was not motivated by tax considerations. And the embarrassing interview became a social media hit and focal point for those wishing to illustrate the shamelessness with which businesses use legal loopholes to evade taxes. Even Bresch's father and now senator Joe Manchin decried the practice of inversions without specifically condemning his daughter's company.

Fast forward to yesterday when Treasury Secretary Jack Lew announced a series of measures that the New York Times described as "intended to crack down on on the deals, in which United States companies reincorporate abroad to lower their taxes." The story went on to say that, while the changes would not stop all inversions, some would be crippled, particularly those involving so-called hopscotch loans, in which "a foreign subsidiary of an inverted company could lend money to the new foreign parent, bypassing the Internal Revenue Service." The Times goes on to explain that "the new rules will end the practice by treating the hopscotch loans of inverted companies as dividends, making them taxable in the United States."

Guess which company's inversion is the people's exhibit A. The Times goes on, "The one deal that is perhaps most threatened is Mylan’s acquisition of Abbott Laboratories’ branded generics business for $5.3 billion. That deal is a so-called spinversion, in which Mylan, an American company, is merging into an international spinoff of Abbott.

"The Treasury rules included provisions to prohibit deals structured this way, which might prompt Mylan to change course.

The Times concluded by quoting Ronny Gal, an analyst at Sanford C. Bernstein who said, "Mylan would need to reconsider its plans. On the mild side, the deal may go forward with fewer benefits and perhaps a reduced price tag. On the more severe side, the deal terminates and Mylan goes back to square one to rethink its expansion strategy.”

So, the question now is, what will Heather Bresch do? Go through with a deal that's no longer as lucrative or scuttle the deal and prove that her claim during the CNBC interview that the deal wasn't motivated by a desire to evade taxes was hogwash. If we take Bresch at her word, the deal will continue. She concluded the CNBC interview by saying no fewer than three times that Mylan "absolutely" would have done the deal with or without the tax inversion. But, when asked yesterday about the new rules and their effect on the Abbott deal, Mylan had no comment.

We'll see.

Monday, September 22, 2014


In today's commentary titled "Losing The War On Poverty" West Virginia MetroNews Talkline host, Hoppy Kercheval, regales us with the three great myths about poverty that pervade conservative talk radio. They are:

1. Government programs don't really reduce poverty.
2. Poverty isn't all that bad.
3. Economic growth isn't only a sure remedy for poverty, it's the only remedy.

The problem is that every one of these claims is false and, what turns them from myths into lies, is that Hoppy Kercheval and those who promote them know or should know they're not true.

Hoppy tells us, "According to U.S. Census figures, the poverty rate in America is 15 percent, and it’s held pretty close to that mark for the last 50 years. The Heritage’s Robert Rector reports that in the 50 years since President Lyndon Johnson launched the war on poverty, we have spent $22 trillion dollars."

What Hoppy neglects to mention is that prior to the War on Poverty fully a quarter of Americans were impoverished and had been for generations. In fact, had Hoppy gone back just four more years, to 1960, he would have discovered that 23% of American households lived below the poverty line.

Then, with the advent of anti-poverty programs first under President Kennedy and then under President Johnson, the poverty rate was almost cut in half, dropping to 12.5% in just six years. And it stayed well below the 15% that Hoppy alludes to until the 1980 recession. Since then, it has almost always been below 15%. In short, the War on Poverty had an immense impact by lifting tens of millions of people out of poverty.

Hoppy points out, " . . . the living conditions of those defined as poor by the Census Bureau are significantly better than they used to be." He goes on to say, "Eighty percent of poor households have air conditioning. Nearly three-fourths have a vehicle and 31 percent have two or more cars or trucks. Nearly two-thirds have cable or satellite TV. Half have a personal computer. More than half of poor families with children have a video game system."

We've heard it so often -- how the poor are coddled and have it easy. But, the truth is that in this country that's supposed to be the land of equal opportunity, growing up poor, while not a certain predictor of misery, makes that fate a lot more likely. Here's why.

Those who are born into poor families are much more likely to remain that way throughout life.

If you're poor, you're also far more susceptible to chronic illness.

And you're going to have a hard time climbing out of poverty even if you're smart.

To slightly corrupt Dean Wormer's admonition to Flounder, "Poor, sick, and uneducated is no way to go through life." But, that is the fate for immense numbers of those unfortunate enough to be born into poverty. Still, as Hoppy points out, at least they have air conditioning.

Hoppy concludes, "The best way out is by way of a thriving economy. As Nobel Prize winning economist Milton Friedman said, 'There has never in history been a more effective machine for eliminating poverty than the free enterprise system and the free market.'”

Anyone who ever held the notion that economic growth by itself is sufficient to lift people out of poverty should have been disabused of that misconception by the events of the past six years during which nearly all of the income growth that's been generated during our recovery from the worst economic crisis since the Great Depression has been confined to just the richest Americans. If you're poor or even middle class, you have seen your incomes shrink even as gross domestic product and the economy in general have grown.

A rising tide manifestly does not lift all ships. And this isn't just a recent phenomenon. Even if you go back to the late 1950's and early 1960's, we were coming out of a two-decade-long period of economic growth that was unrivaled before or since in American history and yet, as was pointed out earlier, a quarter of American households were still living in poverty.

Despite the avalanche of statistical evidence (and direct experience for those who deign to wander out of their broadcast studios and think tanks), the canards continue to be peddled by Hoppy Kercheval and others and they become excuses for doing nothing or at least less than we're doing now about one of America's most tragic and pernicious problems.