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People Vote with their Feet

Florida: Forward Progress in Student Achievement





LANDSCAPE Uncertainty Surrounds Relationships between America, Europe, and Russia


15 LABORATORIES OF COMPETITION AT WORK New Mexico’s Costly Renewable Portfolio Standard

17 WASHINGTON VS STATES More Federal Water Regulations or the Constitution?


The Torch is published monthly by the Liberty Foundation of America, Inc. (LFA), an independent 501(c)(3) public policy organization. All contributions to LFA are tax-deductible. LFA formulates and promotes public policy research and analysis consistent with the principles of free enterprise and limited government. The views expressed in The Torch are those of the author, and should not be construed as representing any official position of LFA or its trustees, researchers, or employees.

Cover Photo: Wikimedia/Andrew Butko


The Hope and Challenges

of a New Year


mericans should ring in a new year inspired by the thought that this year will be better than the last. A sense that we get to start over, to do it right this time. Yet we barely had time to put 2014 in the rearview mirror before waking up to the devastating news that multiple terrorist attacks in Paris killed 17 innocent people, including three police officers. Since one of the assaults was carried out on members of the editorial staff at the Charlie Hebdo newspaper, one of the first people I thought of was The Torch’s contributing editorial cartoonist Michael Ramirez. He shared how the events in Paris hit home, saying that even though he thought the cartoons were a bit over the top it was the larger issue that is so troublesome. “It is the attack on freedom and liberty that needs to be focused on. The world needs to recognize the evil behind the acts and the subversion of religion to justify acts of barbarism. That needs to be dealt with. The attack was just a symptom of a larger cancer. Having these ‘no-go’ zones where radicalism is allowed to breed more radicalism will consume Europe if they are not careful. The lack of assimilation, the hyper-political correctness and appeasement of these animals will endanger the civilized world as we know it.” And as Brutus explains in this month’s column, there is a direct connection between this new form of “just do it terrorism,” and the principle of federalism, or giving states the means to defend themselves. “The federal government must prioritize resources to face the evolved terrorist and other foreign threats. It also must decentralize non-core functions and funding back to the states.…We must get the power and money out of Washington around historically core state functions and let the states compete to come up with the best solutions to our toughest problems,” Brutus writes. We’ve brought you a great February issue. There are both an original Michael Ramirez cartoon and an article by Liberty’s Cameron Smith, on how Conservatives should not confuse splitting the Farm Bill into separate pieces of legislation with ending federal subsidies. Jonathan Small of the Oklahoma Council of Public Affairs writes on how the recent decline in oil prices, in response to human productivity and exploration, is a valuable lesson in economics that also carries with it a warning. Liberty’s Trent England has another great piece on federalism, this time examining the EPA’s overreach when it comes to enforcing the Clean Water Act. Finally, Paul Gessing of the Rio Grande Foundation takes a look at how New Mexico’s legislature is hurting taxpayers by raising the state’s Renewable Policy Standards (RPSs). The Torch has an all-star lineup of contributors this month as well. James Madison Institute President and CEO Bob McClure has written our feature article on school choice in Florida, and Dr. Bram Boxhoorn, the Director of the Atlantic Commission, offers a unique international perspective in his piece on the uncertainty surrounding the relationships between America, Europe, and Russia. And in our “View from Flyover Country,” political strategist and Executive Director of the Colorado Women’s Alliance, Debbie Brown discusses the nonprofit’s work with women voters and how they view their economic opportunities in this day and age. Thanks for allowing us to share our views on the importance of individual freedom, limited government, and economic opportunity with you again this month.




2010 to 2014 Census Data

The People Vote with Their Feet TOP
























THE TORCH • February 2015





amuel Huntington’s Clash of Civilizations and the Remaking of the World Order is one of the most influential books to hit over the last twenty years. Huntington’s thesis that civilizations clash based upon non-political elements, namely, religion and culture, is firmly established by history. His grasp of the issues is unparalleled and his case is very strong for the continued clash of civilizations into the future. Obviously, the clash between Islamic terrorists and the West over the last decade is one of the predictions Huntington made back in 1996. This fundamental clash becomes the key focus of the book. The one criticism I would have of the book is that it commits the same error that many other scholars have made about Francis Fukuyama’s The End of History and the Last Man. Specifically, Huntington erroneously concludes that Fukuyama’s thesis that liberal democracy is the best form of government to give man the greatest chance to flourish (i.e., we’ve reached the end of history in a political formation sense, as there is likely not a better form for that purpose) is wrong because other forms of government will arise to challenge liberal democracy. I personally think both men are right: Huntington’s clash of civilizations will continue, but Fukuyama’s end of history has indeed occurred. Liberal democracy will prevail as the ideal form of government for man as man. Most Americans don’t know who Ayaan Hirsi Ali is. That ignorance is too bad. Hirsi Ali’s life is a real world example that

movingly illustrates the points made by Huntington and Fukuyama. Her book, Infidel, is an autobiography of her life from her birth in Somalia to her move to America following the removal (and reissuance) of her citizenship in the Netherlands. Her story is a powerful one. It is frankly amazing that she survived her time in Africa. The courage and grit she showed repeatedly in her life is a testament to her will to survive. It was very hard to read some parts of the book without getting sick to my stomach, but her life is the life many women face in Africa, the Middle East, and, sadly, even in the West. Hirsi Ali gives readers a vivid account of life under Islamic rule and the second-class citizenship of women under that rule. I’ll acknowledge it isn’t entirely fair to paint Islam with the broad brushstrokes used by Hirsi Ali. Nonetheless, she raises tough questions that Muslims must wrestle with if Islam is to co-exist in the modern world without the violence that surrounds it today and the continued submission of women. Though most of the book covers her time in Africa, her journey to the Netherlands and, eventually, America is also a compelling read. For any parent of a young woman, this book should be required reading (once they are in high school). With the current rise in Islamic terrorist activity, understanding what drives it and what is at stake matters more than ever. Huntington and Hirsi Ali shed light on both questions.




“It is a truth confirmed by the unerring experience of ages, that every man, and every body of men, invested with power, are ever disposed to increase it, and to acquire a superiority over every thing that stands in their way.” –Brutus, Essay I (October 18, 1787)


e live in a resource-constrained environment that typically gives us little time, less talent, and finite funds. If the United States is to lead the world in the 21st century, the federal government must prioritize what it does and which activities are rightfully within the domain of the states. This requirement is not just a constitutional observation. It is a strategic imperative. In early December as part of a Liberty Foundation of America’s Global Security Summit in London, I received unsettling briefings from top European and U.S. counterterrorism experts on the growing threat from terrorist groups. They informed us that terrorists had fully adopted a “Nike” mentality of terrorism in which inspired adherents “just do it”—go out and cut off a head, shoot people at a mall, or some other small-scale, but disturbing terrorist attack. As evidence of the groups’ social media savvy, the experts noted, such terrorist acts should be done in full sight of cameras so that the images could be seen around the world to both inspire and, well, terrorize. Unlike the threat we have faced from al Qaeda, the new terrorist groups aren’t as focused on the big hit, but focused more on the psychological impact of a terrorist attack. Similarly, al Qaeda members don’t seem to have the same background as newer terrorist group members. These new zealots are leaving western countries to fight and train where they engage in beheadings and other depraved acts. This process desensitizes them, so when they return to Europe or America, they return as cold-blooded killers. The multiple attacks in Paris that killed seventeen people last month are evidence of this “just do it” terrorism. What does this have to do with federalism?


THE TORCH • February 2015

Milan, 10 January 2015: Milan residents pay homage to the victims of the Paris attack at Charlie Hebdo weekly, where islamists terrorists killed 12 staff on 7 January 2015. Dona_Bozzi / Shutterstock.com

After trillions of dollars and programmatic failures as far as the eye can see, contrary to the claims of progressives, a bigger federal government has not given the American people a more efficient and effective government. It gave them $18 trillion in debt, unpaid for entitlement programs, and, worst of all, a tired military stretched thin in an increasingly dangerous world. So, what should we do? Take guidance from our Constitution and get back to the fundamental federalist model that our Founding Fathers created. As the Preamble and Article I, Section 8 clearly state, the Congress shall “provide for the common Defense.” The very first duty of the President noted in Article II, Section 2 is to serve as the “Commander in Chief of the Army and Navy of the United States.” Conversely, when it comes to the powers of the fifty laboratories of

competition, the Tenth Amendment provides that the “powers not delegated to the United States by the Constitution…are reserved to the States.” Alexander Hamilton opined in Federalist No. 34: The expenses arising from those institutions which are relative to the mere domestic police of a state, to the support of its legislative, executive, and judicial departments…are insignificant in comparison with those which relate to the national defense. Yet, as noted in The Founding Debate: Where Should the Power Over Our Lives Reside, “Congress appropriated $670 billion for defense, which equates to roughly 19 percent of the federal budget. Congress doled out $802 billion for Medicare and Medicaid (23 percent), $768 billion for Social Security (22

percent), and $1,076 trillion for other discretionary federal spending (30 percent), which included $223 billion for interest on the national debt (6 percent).” So much for insignificant non-defense spending. The federal government must prioritize resources to face the evolved terrorist and other foreign threats. It also must decentralize non-core functions and funding back to the states. As detailed in LFA’s inaugural report, Competitive Federalism: Leveraging the Constitution to Rebuild America, we must get the power and money out of Washington around historically core state functions and let the states compete to come up with the best solutions to our toughest problems. Whether it is providing healthcare to the poor, strengthening our infrastructure, or teaching our kids, competition among America’s

governors and state legislatures invariably leads to innovation and results. If Washington’s one-sizefits-all solution fails, 310 million Americans are harmed. If a state’s idea doesn’t work, its neighbor’s success will spur reform lest that state lose business and citizens to greener pastures (see Texas versus California). The federal government can no longer sustain the Progressive Era model of centralized power in a giant and expensive administrative state. Our finances and military are in shambles. By reprioritizing, a reinvigorated military and national security force can meet and defeat the threats of today and tomorrow, as our states drive domestic reforms that broaden prosperity and allow America to lead the 21st century. Americans and their businesses are constantly forced to prioritize. The federal government should, too.

Watch out for Liberty Foundation’s Matt Mayer on an upcoming documentary by





Free Markets

Free women

Heidi Ganahl opend the first Camp Bow Wow in 2000. The Camp Bow Wow brand continues to grow at a fast clip with over 124 open Camps, 6 standalone Home Buddies, 150 franchises awarded, and a wonderful charity, the Bow Wow Buddies Foundation.


riving her Jeep, canine companion in the back seat, Heidi Ganahl is the picture of a successful, Colorado woman. She is the independent, creative business owner that young women need as a role model. Widowed in her mid-20s, Heidi poured her savings into starting a new business, Camp Bow Wow. She worked hard and grew the doggie daycare into a multi-million-dollar enterprise with 200 franchises throughout the U.S. and Canada. Her contagious smile and business acumen have been featured on television and magazines. Heidi’s Colorado story is inspiring, and she’s not alone. Christine Van Diest operates her own health and fitness business as a personal trainer to elite athletes and professionals while caring for four boisterous kids. Sarah Bouma, an enterprising millennial, just opened an online studio showcasing her art to supplement her


THE TORCH • February 2015

office day job. As Coloradans, we are fortunate to live in the United States where free markets, combined with private property, rule of law, and individual rights, form an environment where women can truly be free to create their own destiny. A free market is defined as a system in which the prices for goods and services are set freely by consent between sellers and consumers, and the law of supply and demand are free from government intervention, price-setting monopolies, and other authority. Government plays a role in preserving free trade by enforcing property rights, including intellectual property rights, rule of law, and freedom of contract. Free markets empower women to start new businesses and thereby achieve economic freedom. In societies where the market is highly controlled by government, it is much more difficult to start businesses, particularly if one is not well connected. There is a formidable glass ceiling.

Sadly the United States could go down that perilous road by adopting regulatory and legal burdens which create disincentives to open or expand businesses. Well-intentioned policy makers who strive to help women succeed, more times than not put policies in place that hurt the very women they are trying to help. While our research at the Colorado Women’s Alliance shows women are more welcoming than men to an active government in their personal lives, the term

“women’s issues” is misleading if it doesn’t also include areas like supporting our families, paying for the escalating cost of living, and achieving economic freedom and independence. Women, like men, cite concerns about jobs, economic prosperity, and opportunity as top issues. Rather than enacting laws to “protect” women or label them as victims, let’s have a real dialogue about successful ways for women to achieve economic freedom: choosing a college major, career

planning, salary negotiation, entrepreneurship, and other skills that help her create the life of her dreams. Not every woman will operate a doggie daycare, like Heidi. Or, run a personal fitness and training business, like Christine. Whether the choice is through entrepreneurship or homemaking, or balancing both, free markets provide an environment where women have the freedom to follow their dreams.



Uncertainty Surrounds Relationships

Between America, Europe, and Russia


he triangular relationship between America, Europe, and Russia has changed considerably since last year’s Russian invasion of the Crimean peninsula and the proxy war in Eastern Ukraine. This article takes stock of where we are right now and looks at the countries’ positions in the world. The international context Over the past 25 years, major changes have deeply influenced Europe, as well as the United States. What these changes really mean for us remains to a certain degree uncertain. But it is obvious that “old” patterns in international relations and old “beliefs” have disappeared. Yet it is not clear what the new patterns and “belief” are. We are likely going into the direction of a multi- or non-polar world with the U.S. and China as the main actors, a G-2 in short. It seems unlikely that Europe will play a major role in this new system. The U.S. and Europe Joseph Ney’s study, The Paradox of American Power

(2002), compared international relations with playing at three chessboards at the same time. Taking a look at his three imaginary chessboards of international relations, military strategy, and economic and cultural/ transnational, the U.S. has definitely lost ground, especially in the last two areas of economic and cultural power. The U.S. is certainly no longer the role model for the rest of the free world. The relative decline of the U.S. leads automatically to a less dominant position for the West. This is bad news for Europe. What will the world look like if the U.S. can no longer play a leading role in world affairs? Who will fill the vacuum left by the Americans, and is there reason for concern? In other words: will the world gain more stability? The values community that the European countries claim to represent does not flourish without a protective structure. The U.S. embodied this structure during the “Pax Americana,” but this situation is at least liable to erosion. The possibilities for “rough play” in international relations will probably increase if there Continued >>



is no “benign hegemon” – the role played by the U.S. during the Cold War. The preference of many of the European allies for a multi-polar world system is understandable because they want to be included, but too often based on the wrong assumption that multi-polar is the same as multilateral. This assumption is wishful thinking at best. In short: A situation in which the U.S. muddles through independently while Europe has no geopolitical weight is not unthinkable. Russia Putin aimed to bring Russia back into the game. He first needed to build up the Russian economy, so he allowed major reforms in Russian society like a new modern constitution and freer markets. He kept intact some familiar Russian prerogatives for the Russian leadership such as a limited free press in the hands of a few and state controlled and an indifference to human rights issues. Some have described Russia as an enlightened form of autocracy. Under Putin, Russia’s narrative is that ever since the collapse of the Soviet Union, the U.S. has wanted to keep Russia down. Russia is now a revisionist power that has succeeded by actively intervening in Georgia and Ukraine. By creating frozen conflicts, it is virtually impossible for these countries to join NATO or the EU. One must admit that he succeeded brilliantly, although at a big price for Russia’s economy and at the cost of its Western neighbors. Russia is now perhaps Europe’s biggest security challenge and no longer the “partner” that the West wanted it to be after 1989. With the benefit of hindsight, the ongoing expansion of NATO and the EU turned out to be incompatible with Russian’s strategic thinking. The enlargement of NATO and EU introduced the problem of what to do with the countries that bordered Russia. NATO will remain at the heart of any credible European security policy despite efforts from some EU countries to boost independent European capabilities. No doubt NATO’s Article 5 on collective security, together with deterrence, will remain the cornerstone of European security. The problem, however, is that there is no strategic unity among the Allies and there remains an uneven contribution of defense expenses. While burden-sharing has always been uneven, the U.S.


THE TORCH • February 2015

percentage far outstrips the European contribution. That won’t change anytime soon. Where do we go from here? The old Soviet aim to drive a wedge between the U.S. and Europe is still in place. Germany should be careful – again – not to overplay its hand and play the role of a “bridge builder.” There are definitely risks attached to this, due to its economic dependency on Russian energy supplies. In terms of security, Europe is still nowhere without America. The peace dividend of the 1990s has been

UKRAINE - Protest against “Dictatorship” in Ukraine turns violent on Euromaydan in Kiev. Internal troops waiting rebel attack on 18 February, 2014. S-F / Shutterstock.com

consumed. Unfortunately, the world has not turned into a happy, flat, post-modern utopian playground similar to the ideals of the flower-power generation of the 1960s. There are no easy solutions. It is not as “simple” as the Cold War as expressed in the famous words of President Ronald Reagan. To the question of how he considered the end of the Cold War, Reagan briefly answered: “we win, they lose.”



Florida: Forward Progress in Student

Achievement and Delivering Best “Bang-for-Buck” in Education School choice access leads to great gains for all


magine you’re seated in the bleachers watching your favorite football team try to stage a furious comeback against a relentless opponent. At a critical moment late in the game, you’re convinced your team’s head coach ought to call a running play to get a first down. Yet, inexplicably, the quarterback drops back to pass instead. You exclaim, “What in the world is he doing?” Then, the quarterback completes the pass. For a touchdown. To win the game. Now, if you’re a true fan of the team, you cheer deliriously – and admit the head coach had a better plan than yours. But if you’re a union official, watching Florida students fighting to overcome a long classroom battle against mediocrity and failure, you go away grousing that the Governor didn’t run the plays you wanted him to run. Even though the students you supposedly root for just experienced remarkable success. In many ways, this tale captures Florida’s education story over the last decade and a half. Our state, which once lagged behind most other states according to various measures of student achievement, staged an incredible turnaround in the early part of the 21st Century – yet you’d hardly know it from listening to the Florida Education Association. Florida’s education turnaround story Florida’s turnaround not only propelled the Sunshine State to the top tier in most national rankings of student success, but it put Florida students on the world map as well. For example, when a 2012 study compared the reading scores of Florida fourth graders with their peers in 52 educational systems around the world, the Sunshine State’s students scored well above the world average. In fact, Florida students joined those in

Finland, Singapore, Russia, and Hong Kong at the very top of the Progress in International Reading Literacy Study (PIRLS) rankings, outpacing students in 48 other countries. Importantly, Florida’s low-income and minority students outscored the international average on the PIRLS test. This continued a pattern that has been found repeatedly in recent National Assessment of Educational Progress (NAEP) scores for Florida. Indeed, Arizona researcher Matt Ladner has been barnstorming the country in recent years, showing education leaders around the nation that average NAEP scores for minority students in Florida now exceed average scores for all students in many states. What is instructive about these (and other) signs of Florida’s success is that they correlate to specific policy reforms adopted by Florida policymakers. And they represent a reward for policymakers’ boldness in seizing opportunities that other states were reluctant to pursue. Leading the nation in digital learning Consider, for example, Florida’s groundbreaking leadership in the area of digital education (reflected in our number 2 national ranking according to Digital Learning Now). This largely came about because the pioneering Florida Virtual School (FLVS) began providing innovative course offerings for students at a time when many policymakers elsewhere looked suspiciously at digital learning, wondering how students could possibly learn as much in online courses as they do in conventional classrooms. Today, FLVS course enrollments easily exceed 100,000 – more than in any other state. And a recent study of Continued >>



Advanced Placement (AP) test scores found that FLVS students matched the cumulative national average for passing scores on AP tests (58 percent). Moreover, FLVS students had a higher passing rate than the state average on 11 of 15 Advanced Placement subject tests – and a higher passing rate than the national average in AP Spanish, AP Computer Science, AP Calculus BC, AP Macroeconomics, AP English Literature, and AP Environmental Science. School choice programs helping students advance Of course, Florida’s learning gains have hardly been restricted to the digital realm. A 2012 study by David Figlio of Northwestern University found that low-income students attending private schools, thanks to Florida’s Tax Credit Scholarship program, are keeping pace with their national cohort. This is “the policy equivalent of saying they gained a year’s worth of knowledge in a year,” writes education analyst Jon East. What makes this finding so important is that it shows significant learning gains among a population that had previously fared poorly in conventional public schools. Indeed, Figlio found that instead of


THE TORCH • February 2015

skimming public schools of their highest-performing low-income students, the Florida Tax Credit Scholarship program tends to attract “the weakest prior performers on standardized tests” – and that this correlation “is becoming stronger over time.” A study by the Florida Department of Education found similar results for disadvantaged students now attending public charter schools. When compared to students in conventional public schools, Florida charter school students showed greater annual learning gains (in 79 of 96 categories) and higher percentages performing at or above grade level on standardized tests (in 50 of 54 categories). In addition, Florida charter schools had greater success (in 16 of 18 categories) in closing the achievement gap between minority and white students than did conventional public schools. A rising tide lifts all boats Lest there be any doubt, students in conventional public schools are also benefiting from education reforms adopted by Florida policymakers in recent years. Some of these gains appear to be the direct by-products of standards-raising reforms. For example, student achievement test scores have gone up in public schools

since Florida began issuing annual grades for such schools. Some of these gains appear to be the indirect benefits of choice-expanding reforms. For example, a study by economist Tim Sass found that conventional public schools in competition with charter schools saw larger gains in student math scores than traditional schools that lacked any charter school competition. Similarly, a Manhattan Institute study found statistically significant learning gains among special needs students in Florida public schools after the McKay scholarship program was created, giving Florida families the opportunity to send their special needs children to a private school instead. (Thanks in part to McKay, Florida ranked number 1 in the country for combined math and reading learning gains among special needs students, according to a recent analysis of NAEP scores.) So, a rising tide has been lifting all boats. And a wide variety of policy reforms have helped contribute to this tide. Indeed, Ladner says part of the genius behind Florida’s turnaround in education is that state policymakers adopted a multi-faceted strategy for reforming “everything all at once” rather than a takeit-slow, one-reform-at-a-time approach. This made it more difficult for defenders of the status quo to quash much-needed reforms. And this also made it easier to fashion creative strategies for meeting each student’s unique learning needs, oftentimes by combining course

offerings from different providers into a single academic schedule. Just as football programs can sometimes get stuck in the past, reliving days of prior glory, education reformers can get stuck as well – resting on one’s laurels rather than building upon successful innovations. Florida policymakers need to remember this, lest the many educational challenges that still face our state go unaddressed. Now is not the time for education reformers to rest, and it is certainly not the time for policymakers to go back to running the Florida Educational Association’s tired old plays that lacked imagination (“Just spend more!”) which resulted in high levels of failure and mediocrity. As the accompanying graph illustrates, Florida students achieved greater learning gains over the last quarter-century than students in just about every other state; yet, Florida’s per-pupil spending increases were among the very lowest in the nation. Taken together, these findings suggest that Florida is now delivering greater “bang-for-buck” in education than any state in the union. That’s something for Florida to be proud of – but also reason for Sunshine State legislators to keep expanding student learning options and other innovations that help promote student success.



Conservatives Cannot Confuse Splitting the

Farm Bill with Ending Federal Subsidies


y now, most people familiar with the 2014 Farm Bill remember last year’s attempt to separate the agriculture provisions from the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Again, the odd political alliance forged by incorporating food stamps and farm policy into the same bill garnered enough votes to likely keep the current structure of the farm bill through 2018. Political heat from fiscal conservatives eliminated

most direct payments to farmers, but other farm subsidy programs were simply reinvented, retooled, and increased. Instead of simply regrouping and waiting until 2018, now is the time for conservatives to start asking some tough questions: Is separating the food stamp provision from the agriculture programs really the win conservatives are hoping for? What is the difference between the type of federal subsidies that led to scandals like Solyndra and those offered in the Farm Bill?



Splitting the Farm Bill simply turns the omnibus bill into two or more pieces of legislation. That makes sense and ought to be done. But many conservatives trust that such a separation will carry further implications. Many believe that a split will mean the end to many of the bill’s subsidies and programs because they could not garner enough political votes if considered separately. First, that conclusion makes the dangerous assumption that members of Congress neither talk nor negotiate votes in advance. What would stop legislators

MINNESOTA - A farmer harvests corn in a John Deere combine.

from forming a “gentlemen’s agreement” to consider the pieces of the Farm Bill in succession, essentially having many of the same politicians voting for individual pieces? Next, it fails to consider that breaking the bill into separate sections that are considered individually might actually make them less noticeable and easier to speed through Congress. One of the most effective ways to move controversial legislation is to move it into smaller parts to make it less of a target. The current Farm Bill is a target largely because of the agriculture and SNAP provisions mixed together. Broken into two or more components, each piece could possibly become less controversial and more difficult to address. Even if SNAP is separated out, conservatives cannot simply declare victory. The real win would be ending crop insurance subsidies and farm programs that create price or revenue protections for producers. Many conservatives are more than happy to go after the SNAP portion of the farm bill with a fury, but they become significantly less confident when it comes to discussing farm policy. Americans generally seem to have a positive impression of farmers, and many of those farmers are


THE TORCH • February 2015

staunch conservatives themselves. Those realities make some conservative Republicans a little weak in the knees. Should Americans support our farmers? Absolutely. Whether it is allowing expensing for the purchases of farm equipment, ending the death tax for family farms, or even creating special savings accounts to permit farmers to self-insure against possible losses, our politicians are not without options to support such a critical industry to our nation. The problem is that conservatives cannot credibly assail the political left for doling out subsidies to cronies in areas like renewable energy while supporting the same type of special favors for powerful agriculture interests. There is no better indicator that the Farm Bill is cronyism of a different feather than the fact that the net income threshold barring farmers from participating in most of the farm programs is $900,000. Imagine a farmer making nearly a million dollars a year still receiving even a dime of taxpayer-funded support from the federal government. Every industry in America would love to have insurance subsidies to lower the cost of protecting itself against losses. Most would be delighted to have federal programs to cover declining prices year after year. The federal government even has a program for “geographically disadvantaged” farmers and ranchers to subsidize the transportation of certain commodities and crops. What business would not like subsidies for moving their products to market? Our nation should not operate that way, and it does not for the vast majority of businesses, especially small ones. If we are unwilling, or fiscally unable, to extend Farm Bill-style programs and subsidies to every industry, those programs are no better than any other special interest carve-outs so frequently assailed by conservatives as economic engineering by politicians. Whether the Farm Bill is ultimately divided into smaller bills or not, Americans need to be having conversations about these issues now rather than waiting until the Farm Bill comes up again in 2018. We should support our farmers, but conservative politicians should not provide that aid through a cronyist system that has continued long enough.



New Mexico’s Costly

Renewable Portfolio Standard


lectricity production has become a hotly contested political issue. This is largely the result of powerful environmental pressure groups turning man-made global warming, or more recently “climate change,” into hot-button political topics. The controversy began to manifest itself at the state level in the late 1990s when Nevada and Texas first adopted “Renewable Policy Standards” (RPSs). These laws require electricity supply companies to produce a specified fraction of their electricity from sources deemed “renewable,” such as wind, solar, and biofuels. During the early 2000s, the adoption of RPSs spread to a number of other states. One of these was New Mexico, which initially adopted such standards in 2004. Today, according to the Database of State Incentives for Renewables and Efficiency (DSIRE), 29 states have legally mandated standards and 9 states have voluntary goals. Not all RPSs are created equal. In fact, they tend to evolve somewhat dramatically over time. New Mexico’s RPS took its current form in 2007 when the Legislature and Gov. Bill Richardson amended the original RPS requirement that utilities get 10 percent of their

electricity needs by 2011 from renewables. Under the 2007 law, utilities must use renewables to obtain 15 percent of their electricity by 2015. That requirement will grow to 20 percent by 2020 absent further legislatively enacted changes. Also in 2007, New Mexico’s Public Regulation Commission (PRC) issued an order and rules requiring that Investor Owned Utilities (IOUs) meet the 20 percent by 2020 target through a “fully diversified renewable energy portfolio.” This regulation micromanages how utilities meet the legislature’s standard, requiring at least: • 30 percent of the RPS requirement be met using

wind energy, • 20 percent from solar power, • 5 percent from other renewable energy technologies, and • 1.5 percent from “distributed generation” renewable energy technologies for years 2011 through 2014, rising to 3% in 2015. Renewables mandates drive up electricity prices, which is why they are mandates. If the renewable technologies required were cost effective, utilities would adopt them on their own. The combination, in 2007, of the legislature increasing the overall RPS and the new Continued >>



NEW MEXICO - The San Juan Generating Station is a large power plant located 15 miles outside of Farmington in northwestern New Mexico.

regulation further micromanaging utilities sparked a rise in New Mexico electricity prices. The rapid increase in New Mexico electricity prices was both predicted and is likely to accelerate in the years ahead. According to a 2011 report by the Rio Grande Foundation and the American Tradition Institute, “Over the period of 2011 to 2020 these laws (New Mexico’s RPS) will cost New Mexicans an additional $2.3 billion over conventional power.” That price shock was predicted to be most pronounced in 2020 as the RPS is reaches the 20 percent level. According to the report, “consumers will pay $619 million more for power in 2020.” That prediction is borne out in the chart above (using data from the U.S. Energy Information Administration) and by the fact that Public Service Company of New Mexico (PNM), the largest electricity provider in the state, has requested a 12 percent rate increase that will take effect in January 2016 if approved. PNM’s request includes the cost of new pollution controls and elimination of two units (half of total capacity) at its coal-fueled San Juan Generating Station


THE TORCH • February 2015

near Farmington. This has nonetheless generated a great deal of controversy among environmental groups who want the facility completely and immediately shut down. Camila Feibelman, executive director of the Sierra Club’s Rio Grande Chapter, told the PRC in recent testimony, “We agree with shutting down two units at the plant, but we’re concerned that PNM’s plan will still lock us into continued use of coal for another 30 years.” Needless to say, the political battles over electricity at the state level are heated and they are just getting started. No matter what happens with the Obama Administration’s proposed federal “Clean Air” regulations, New Mexico and other states that have aggressive RPSs in place will continue to see electricity prices rise as the “low-hanging fruit” of relatively cheap and easy renewable generation is achieved and more costly, less economical renewable projects are embarked upon in order to fulfill those standards. In other words, for rate payers in New Mexico and elsewhere, the pain from the state’s RPS will only get worse in the years ahead.



More Federal Water Regulations or the Constitution?

The EPA’s False Choice Liberty Foundation recently led a coalition of state-based organizations to submit a letter to members of Congress reminding them of their constitutional duty and power to stand up to this latest overreach by the EPA. You can view the letter online at www.libertyfound.org.


he “straw man” or “false choice” is a classic, albeit shameful, debating tactic— redefine your opponent’s position into something easy to knock down. The false choice set up by the Environmental Protection Agency in support of a barrage of regulatory proposals is: Should we protect the environment … or not? The implication—the straw man—is that anyone who opposes the EPA’s will to power is ambivalent about despoliation of the natural world. Five years ago, the New York Times used this straw man to lay the groundwork for expanding federal power through the Clean Water Act (CWA). In a series breathlessly labeled “Toxic Waters,” the Times claimed “regulators may be unable to prosecute as many as half of the nation’s largest known polluters” due to a pair of U.S. Supreme Court rulings on the reach of the Act. Like many pieces of modern legislation, the CWA offers a vague, aspirational goal—clean water—atop thousands of words of legal and regulatory jargon. Congress and the courts have rationalized the CWA (and many other federal acts) as

resting on federal power “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Since the early days of the republic, the commerce power was understood to include regulating navigable waterways that carry such commerce. Over time, Congress and the courts have extended this power much farther, to include even wetlands and very small bodies of water that can affect the larger waterways. At best, this is a stretch. The text of the CWA says it applies only to “the waters of the United States.” From this vague phrase, federal regulators gradually expanded their claims of power. By 2000, federal officials argued before the Supreme Court that the occasional presence of migratory waterfowl extended the reach of the CWA to isolated, waterfilled trenches at an abandoned construction site in Illinois. The Supreme Court, in Solid Waste Agency of Northern Cook Cty. v. Army Corps of Engineers (SWANCC), disagreed. Five years later, the Court took up Rapanos v. United States. John

Rapanos owned land in an area dominated by corn fields that is mostly dry and far from any navigable waters. Nevertheless, officials told him it was subject to the CWA. Rapanos disagreed and, for backfilling a few areas with gravel and dirt, was sued and then prosecuted by the Army Corps of Engineers (one of the regulatory authorities under the CWA). In 2006, the Supreme Court sided with Rapanos. The EPA and its allies claim the mild limits imposed by SWANCC and Rapanos have upended environmental regulation and are compromising water quality. According to the Agency, the Court’s assertion of limits on federal power has introduced uncertainty that hinders the prosecution of environmental crimes. To provide “clarity,” the EPA has introduced a rule defining “waters of the United States.” In fact, sloshing around in the proposed rule are phrases like “case-specific basis” and “significant nexus.” These render the EPA proposal clear as mud. Yet because Continued >>



judges so often defer to agency interpretations of laws and rules, vagueness, within the bureaucracy, is a virtue. The proposed rule is an attempt by the EPA to take back control over defining the reach of its own power. If the rule were adopted, EPA bureaucrats would decide, case by case, which ponds are “significant” enough to warrant federal control. When initially introduced, the rule sparked an outcry from farmers, ranchers, and others. EPA administrator Gina McCarthy dismissed their concerns as “Ludicrous,” and the EPA is now mounting a publicity campaign around the question: “Do you choose clean water?” The truth is every state has its own government

agency or agencies charged with protecting human health and the environment. And where federal authority is limited, state governments have complete power to legislate and regulate for environmental protection within their own borders. The fundamental question in SWANCC and Rapanos—and in the debate over the EPA’s attempt to “clarify” the reach of the Clean Water Act—is the extent of federal power. Ultimately, all law enforcement and regulations must, at the federal level, flow from the powers granted to the federal government in the Constitution. Beyond these boundaries, however, the states are fully empowered to govern.



Decline in Oil Prices

Provides a Valuable Lesson


t some point in our lives, we’ve all been positively impacted by that bubbly substance deep within the ground that immortalized “The Beverly Hillbillies,”… oil. Much of our everyday life comes in contact with petroleum or its by-products, whether it is the mode of transportation we use, a container that holds our food, or numerous other products. Given oil’s impact on our daily lives, it’s no wonder how price sensitive the world’s economy has become to the source of what makes most transportation possible. Recent declines in the price of oil provide a valuable lesson. One of the basic concepts of economics is


THE TORCH • February 2015

that as more of a good is produced, with steady demand, eventually the price to acquire that good will decrease. For years, it seemed as if geo-political and government monetary policy would make the laws of economics inapplicable to oil prices. However recently, innovations in oil and gas extraction methods have become widely used. One process for extracting oil and gas from shale formations in the ground is known as “fracking,” which stands for hydraulic fracturing. This process isn’t new, it was actually invented in the 1940’s. As Investopedia. com notes, “Fracking refers to the procedure of creating fractures in rocks and rock formations by

injecting fluid into cracks to force them further open. The larger fissures allow more oil and gas to flow out of the formation and into the wellbore, from where it can be extracted. Fracking has resulted in many oil and gas wells attaining a state of economic viability, due to the level of extraction that can be reached.” Across the United States, oil and gas formations that used to be untapped or hard to access have now become a thriving environment for extraction. The production of oil and gas has been an incredible boon for the US economy because extraction also creates a vast array of jobs. Federal and state tax revenues have also benefited. In fact, authors

Steve Moore, Rex Sinquefield, and Travis Brown have noted that much of the private sector job growth in the U.S. since the Great Recession is a direct result of oil and gas exploration. Although it’s taken time, the enormous growth in the supply of oil and gas reserves and other available resources has led to a sharp decline in prices. This is great news for U.S. consumers. Some economists estimate that the drop is the equivalent of real income growth of more than $1,000 per household. The decline in oil prices, in response to human productivity and exploration, is a lesson in economics that also carries with

it a warning. Recent efforts by the Environmental Protection Agency to further attack coal fired energy production by restricting supply through its Clean Power Plan will have real consequences. As Oklahoma Attorney General Scott Pruitt and I recently noted in an op-ed for The Hill, “Those hurt most by the Clean Power Plan will be the most vulnerable among us-the poor, the single mothers, the elderly and minorities. Households earning less than $10,000 per year spend an astounding 60-80 percent of income on energy costs, and those earning between $10,000 and $30,000 per year spend greater than 20 percent of their income on energy. It is no surprise that the

inability to pay utility bills is the leading cause of homelessness in U.S. The EPA’s proposed rule could increase the typical household’s annual electricity and natural gas bills by $680, or 35 percent, by 2020, escalating each year thereafter as EPA regulations grow more stringent, according to a study by Energy Venture Analysis.” The concept of supply and demand matters. Let’s hope policymakers learn from the positive effects of an increase in the supply in oil, and apply that understanding to stopping the EPA from imposing the opposite effect on millions of families.



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Profile for Liberty Foundation of America

The Torch - February 2015  

Economic and Political Warnings

The Torch - February 2015  

Economic and Political Warnings