Tuesday, April 26, 2011

How To Destroy A State In One Easy Lesson

Energy, as we all know, is the stuff that makes thing go: light bulbs, even the squiggly, earth friendly, energy saving kind that, some say, may cause cancer; cars and buses, preferred by “smart growth” utopianists who drive their non-motorized, non-gas guzzling bikes to work; and computerized presses that produce newspapers of a kind for which Senator John Fonfara of the 1st District and Vickie Nardello of the 89th Assembly District write op-ed pieces.

Mr. Fonfara and Ms. Nardello are co-chairs of the General Assembly’s Energy and Technology Committee, and together they are promoting a bill that at least one non-utopian academic, Richard D. Pomp, the Alva P. Loiselle Professor of Law at the University of Connecticut Law School, considers highly mischievous.

Political watchers may have noticed that there are every so often within the Democratic Party sudden flare ups, quickly suppressed, of economic good sense. Mr. Fonfara and Ms. Nardello have escaped this human frailty. The two are perfectly well aware that the taxing power of the state, always a withering hand, may be used either to destroy or build up industries. A drop in taxes, usually in Connecticut through some form of tax credit – or, equally effective, through the selective use of the transfer mechanism available to every utopian legislator who wants to make the world over – does wonders to suppress unwanted products such as nuclear energy and promote politically desirable products such as wind turbines, provided the flickering blades of the turbines do not disturb the tender eyes of voters in Ms. Nardello’s district.

In a free economy – one not directed by proto-fascists such as operate efficiently in China and utopias elsewhere – the consumers of products direct the flow of goods and services through their purchases. Products considered by consumers to be desirable are purchased, and the industries producing them prosper and make profits that, like the farm in the Robert Frost poem, are “plowed under” to create jobs and an improved product. Under a free market system, whoever makes the most efficient mouse trap at the most affordable price succeeds and enjoys rich dividends. In command economies, the only kind considered tolerable by utopianists, the supply and demand structure is replaced by politicians such as Mr. Fonfara and Ms. Nardello, the invisible hand of a formerly free economy then made visible as a mailed fist. Even in free societies, the jump from a free to a quasi-fascist command economy is but a progressive baby step forward.

Mr. Fonfara and Ms. Nardello are well aware that the joint bill they are promoting -- Senate Bill 1176 (SB1176), An Act Concerning Electric Rate Relief -- slaps a massive punitive tax on Connecticut’s nuclear energy provider. The Bill unabashedly seeks to readjust radically the economic DNA of the state. Dominion Resources, the owners of Millstone, which provides HALF the state’s energy needs, is taxed so strenuously under SB1176 that the owner has threatened to shut down operations.

An idle threat, Fonfara-Nardello charge in a recent op-ed column that should be scrutinized with a jeweler’s eye.

F&N point out in their joint op-ed that the product produced by Millstone is LESS EXPENSIVE than that provided its competitors: “The Millstone nuclear plant, owned by Virginia-based Dominion Resources, generates some of the lowest-cost electricity in New England. For this, the owners of Millstone should be rewarded” – presumably by means of a tax that can only make Millstone’s product more costly for the company to produce.

Although less expensive, the product has never-the-less been economically burdensome to those who use it. Somehow the profits earned by a company that produces a less costly product “has caused all of our state's businesses to be less competitive and left many households on limited incomes to make choices between their electric bill, food or heat.”

But never mind the inherent absurdity: A lower cost product makes companies purchasing it less competitive than they would be were they imprudently to purchase higher cost energy from other companies. Look over here while F&N pull a rabbit out of their bill: The nuclear product is so hedged about by federal regulations that Dominion, F&N imagine, cannot pass along to consumers the increased costs generated by higher taxes. And indeed, it is precisely because such increased costs cannot be passed along to Connecticut consumers that F&N have chosen to put a crippling tax on the company. But just as there is no such thing as a free lunch, so there is no such thing as a tax without consequences.

Here are the real world consequences of F&N’s $330 million tax increase on Dominion:

F&N’s tax will kill nuclear energy production in Connecticut, because no other nuclear energy producer or distributor would enter the market in a state that imposes predatory taxation on nuclear energy. And the absence of competition drives up prices. In fact, that is precisely the thrust of SB1176: It seeks to eliminate a product that lowers the cost of business of everyone in the state using it because…

Because the only way to lower the cost of higher priced energy from undeveloped sources that please the utopianists is to take from Peter the profits he has earned by producing a low cost efficient product and give it to Paul, whose product is a) undeveloped, b) commercially untested, c) very costly to produce and d) favored by utopianists such as Mr. Fonfara and Ms. Nardello, whose dearest desire is to acquire more status and power than is good for either them or us.

Bill SB1176 is constructed in such a way as to permit the energy taxes it imposes primarily on nuclear resources to leech into the general fund. In this way, spine free politicians need not tax citizens to promote their fantasies, and the bill, if passed, will move Connecticut towards an operative command economy under the direction of a political elite that has shown itself to be inefficient and dismally stupid. To control the means of production, the most important of which is energy, is the utopian dream of proto fascists everywhere.

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