Wednesday, April 23, 2014

PRESIDENTS, EPA REGULATION, & JOBS: CONTRADICTING EVERYTHING YOU THINK YOU KNOW ABOUT THE COAL INDUSTRY

It's obvious -- environmental laws and EPA regulations raise the cost of burning coal, which drives down demand. And, when demand goes down, less coal is mined and jobs are lost. That's why President Ronald Reagan, who reined in the EPA and called the federal government "the problem", was great for coal and jobs. It's also why Barack Obama whose EPA has been aggressively pushing environmental regulation is killing the industry and thousands of jobs along with it.

To many people -- perhaps most people in West Virginia -- these points are, as I said, obvious. The only problem is that none of them is true.

First, consider the comparative change in employment in the coal industry in West Virginia during the first terms of American presidents since 1980.



That's right, Ronald Reagan, whose administration championed de-regulation and promoted domestic energy development, is neck and neck with Bill Clinton for the title of Greatest Killer of Coal Mining Jobs in West Virginia. It wasn't until George W. Bush came along that coal mining jobs grew during a president's first term. But, in that race, "W" is a distant second to one Barack Hussein Obama under whom West Virginia coal jobs grew more than under any president since FDR.

But wait, that's only looking at the first four years. It wasn't until Reagan's second term that his policies had time to take hold and the economy really took off.




In fact, it only got worse in Reagan's and Clinton's second terms. In all, West Virginia lost nearly HALF of all its coal mining jobs under Reagan going from 55,500 when he took office to only a little over 28,000 by the time he left.

But, how could that be? The economy grew rapidly during Reagan's and Clinton's second terms. Didn't demand for coal increase?

Yes, it did. But, as the following chart shows, even as West Virginia coal production grew after 1980, the number of industry jobs continued to plunge due largely to automation and the growing prevalence of strip mining, which is less labor-intensive than underground mining.



Still, the EPA's environmental regulations must have done some damage. Didn't they?

Perhaps, but if they did, it's hard to see it in the numbers. The following chart compares the change in West Virginia coal industry employment during the 42 years prior to the founding of the EPA (1929-1970) to the 42 years following the founding (1971-2012).



What one sees is no change in the employment trend. In the years before enactment of the Clean Air Act and the EPA, industry employment dropped from a high of more than 130,000 in 1940 to only 48,000 by 1970. Then, in the years following the EPA's founding, the number of jobs dropped to about 22,000 in 2012.

Still, we must ask, why? What is it about coal industry economics that makes seemingly obvious relationships between production, jobs, and regulatory policy completely non-applicable? And what does it say about the value of West Virginia's elected leaders' railing and whining about the EPA and the "War on Coal"?

The answer to the first question is that, because demand for coal has historically been highly inelastic -- meaning that it hasn't varied greatly in response to price changes -- increases or decreases in production costs have very little effect on total production and employment. Instead, coal producers have tended to convert the savings they've won through regulatory relief and tax incentives into added profits rather than investment and job growth. And, to the degree, they have invested, it's been primarily in technologies that increase productivity and reduce the need for workers.

In short, the common presumption that what's good for the coal industry is good for jobs in West Virginia is a myth. And, with our elected leaders operating under that myth, West Virginia has lost 110,000 of the 130,000 coal mining jobs it once had and, of those, 80% were lost before the EPA was even founded.

The irony is that in the last few years, a time when low-priced natural gas has risen to compete with coal in the power generation market, and at a time when the cost of extracting Central Appalachian coal is skyrocketing due to the depletion of the best seams, coal employment in West Virginia has been generally stable, which means that, all along, coal companies had far more profit incentive than they really needed to keep mining coal and, therefore, most if not all of the regulatory and tax concessions West Virginia leaders granted to the industry were unnecessary.

We not only gave up tax revenues, we also gave up our clean water and clean air and even compromised safety standards that resulted in injury and death for many miners. And the sad fact is that we got nothing in return -- certainly not jobs.


Wednesday, April 16, 2014

WEST VIRGINIA HAS FIRST YEAR-OVER-YEAR EMPLOYMENT GROWTH SINCE 2012

New WorkForce West Virginia data shows that for the first time since December 2012, West Virginia experienced a year-over-year rise in employment with 751,900 people working in March 2014 as compared to 747,900 in March 2013. West Virginia is still 31,900 below its pre-recession employment high of 783,800 in December 2006.

Despite the rise in employment, the number of unemployed and the state's unemployment increased in March due to workers re-entering the job market.

IS COAL ABOUT TO GET "THE OLD 1-2"?

First it was low-cost natural gas. Is solar next?

Tuesday, April 15, 2014

THE CHARLESTON DAILY MAIL BEMOANS "CLASS WARFARE" AND FALLS VICTIM TO WALTER WILLIAMS DISEASE

Today's Charleston Daily Mail editorial resurrects the canard that America's very wealthy pay a disproportionate share of taxes and quotes Dylan Matthews of the Washington Post who wrote a year ago, "America's taxes are the most progressive in the world".

Of course, Matthews said that specifically and only with respect to the federal income tax and followed it up by pointing out that ". . . when you take (income) transfers — that is, stuff like Social Security, Medicare/Medicaid, food stamps, the Earned Income Tax Credit, and other government programs designed to improve people's standards of living — into account, even though the United States has the most progressive tax system in the world, its overall tax and transfer system reduces inequality less than those in peer countries . . ."

The Daily Mail omitted that part. But, the editorial makes an even bigger omission. Like its co-religionists who profess to abhor "class warfare", when the Daily Mail complains about taxes on the wealthy and income redistribution, it carefully confines its remarks to the federal income tax, conveniently forgetting all the other federal, state, and local taxes we pay. The reason it does so is that, if you factor those other taxes into the equation, the notion that government taxation is a machine for the redistribution of income is obliterated.

I made that point two years ago when I responded to syndicated columnist Walter Williams who wrote a column on the occasion of "Tax Day" that made many of the same points as the Daily Mail editorial. At that time I wrote:

"Williams states that 'the top 1 percent of American income earners paid almost 37 percent of federal income taxes. The top 10 percent paid about 70 percent of federal income taxes, and the top 50 percent paid nearly 98 percent. Roughly 47 percent of Americans paid no federal income tax.'

This sounds grotesquely unfair and would be, if federal income taxes were the only taxes we pay. But, when pointing out that it took us 107 days to reach Tax Day, Williams included ALL federal, state, and local taxes. So, when complaining about uneven distribution of taxes, why does he mention only the federal income tax?

Because, had Williams included all federal and state taxes, his claim that the burden is distributed unevenly would have been destroyed.

When all federal and state taxes are included, the top 1 percent of taxpayers, who earn an average of $1.4 million annually, shoulders just 21.6 percent of the burden matching almost exactly their share of the nation’s total income – 21 percent.

Additionally, the top 1 percent’s total combined tax rate of 29 percent is almost the same as that of families making $68,000 per year whose combined rate is 28.3 percent. The only people who pay less than 20 percent of their income in taxes are the lowest earners whose average income is $13,000 per year. They pay 17.4%.

In short, the higher federal income tax rates experienced by the wealthy are almost entirely offset by Social Security and state taxes which exact a much larger share of incomes from middle and lower income earners."

That fact combined with the miserliness of our social safety net programs means that the United States does less to redistribute income than nearly any developed country.

COLLEGE ABOUT TO GET MORE EXPENSIVE FOR WEST VIRGINIANS WHO CAN LEAST AFFORD IT

Vox reports that new student loans are about to become much more expensive as interest rates begin a series of annual increases. This should be particularly worrying in West Virginia where we desperately need to have more young people earn college degrees. Already West Virginia has fewer 4-year college graduates than any other state and our students who are trying to earn bachelors degrees have the highest rate of student loan delinquency in the nation, which means we're more sensitive to the rising cost of college education than the residents of any other state and, therefore, more likely to be negatively affected by higher interest rates.

Sunday, April 13, 2014

THE FACTS BE DAMNED: PATRICK MORRISEY ON THE ECONOMIC IMPACT OF FRACKING

The narrative of West Virginia's natural gas boom generating an overall economic boom is now nearly a decade old and continues to persist despite the evidence on the ground and reams of statistics which show that the counties that host the bulk of drilling activity were economically downtrodden before the fracking boom and remain so. Instead of prosperity, they have experienced job loss, population loss, and general economic decline during the fracking era.

Still, the zombie-like "economic game-changer" jabber continues coming most recently from West Virginia Attorney General Patrick Morrisey who, in a February 27, 2014 article the The West Virginia Record, skillfully employed snippets of truth without the benefit of context or data to convey an utterly false impression of the fracking boom's effects on local economies.

The text is Patrick Morrisey's. The highlighting and comments are mine. Click on the image to enlarge.



For a more forthright account of the impact of fracking on West Virginia communities, see this recent Ian Hicks piece in the Wheeling Intelligencer about the experience of Wetzel County.

Friday, April 11, 2014

MY GOD! MAJOR WV NEWS ORGANIZATION ACKNOWLEDGES ABSENCE OF ECONOMIC BENEFIT FROM FRACKING BOOM

Finally, a major WV news outlet has reported that the fracking boom has been an economic bust for a West Virginia community. In a story titled "Little Impact Felt Locally" Ian Hicks of the Wheeling Intelligencer/News-Register describes conditions in Wetzel County, Ground Zero in WV's Marcellus Shale region, and makes many of the points I and others have been making about the almost complete failure of the boom to contribute to local economies.

-- Negligible or non-existent job growth
-- Continuing population loss
-- Prevalence of out-of-state workers
-- Residential real estate values that initially grew are now in decline
-- Damage to roads from heavy trucking

In fact, the only benefits that Hicks' story attributes to the boom are a rise in property tax receipts and the fact that a spike in crime that some predicted has not materialized.

Hicks' story is based on a study co-authored by Sean O'Leary, the smarter, of the West Virginia Center on Budget and Policy. The study compares conditions in Wetzel County to those of three nearby fracking counties in Ohio and Pennsylvania whose experiences have generally been more positive.

For further background on the myth of the natural gas boom being an economic "game changer" for West Virginia, see my earlier columns:

"Cursed -- West Virginia's Marcellus Shale" (12/19/2011)
"The Emperor Has No Natural Gas Boom" (12/13/2012)
"How We Were Fooled" (1/12/2013)
"The Myth That Ate West Virginia" (6/27/2013)