Tag: pension grab

Inslee’s Record on Picking Investments is Consistent. Consistently Awful.

Jay Inslee, candidate for governor, proposed using pension money to fund startups. The Seattle Times pointed out a glaring problem with this idea, saying, “his proposal to use part of public employees’ pension money as financial kindling to light a fire under ‘startup innovative companies’ abounds with unnecessary risk.

Most people realize that startups have a higher-than-90% failure rate. So it’s puzzling that Inslee would propose that pension funds be used in such a risky way. After reading Inslee’s book, Apollo’s Fire, I think I understand where he’s coming from.  Inslee has established his political identity as “champion of green energy” but has not reconciled his position with economic reality. In Inslee’s view, green technology startups would surely be a safe bet and a job creation engine, but in reality this is far from the case. If we look at Inslee’s claims and compare them against reality, it’s easy to see how he could think gambling other people’s pension funds on risky startups would be a good idea:

  1. Inslee says “[clean energy] is the greatest job creation engine that’s available to us right now.”  However, according to the Department of Labor, green jobs aren’t even projected to be in the top 20 fastest growing occupations through 2018, and the growth that is there is on life-supportfrom government subsidies. The Department of Labor is expecting more veterinarians than green jobs.Inslee has repeatedly claimed green job investments would yield tremendous returns. In his book he made specific claims of returns on investmentof 250% (pg 287), 415% (pg 265), 550% (pg 268) and even 830% (pg 279). And he claimed these investments would create hundreds of thousands and even millions of jobs.  Needless to say, investors wouldn’t need any government prodding to jump on 800% return-on-investment!And this was before the $800 billion stimulus, so the government actually did have a chance to make those investments. Needless to say, none of those numbers turned out to be even close to true. The LA Times reported that while the stimulus drove record spending, “few jobs were created overall and wind power manufacturing employment, in particular, fell.”  (However, the investments did result in some green job creation in China.)
  2. Inslee has been a constant champion of Cap and Trade and voted for it in 2009 (HR 2454), calling it a jobs bill.  Ironically, Inslee voted to keep Cap and Trade even if it drives unemployment past 15%. The U.S. is usually around 4% unemployment, and it’s currently at 9%.
    However, Cap and Trade acts as an energy tax which creates a negative job atmosphere. FactCheck.org estimates losses from 600,000 to 2.4 million jobs from the bill. Europe passed a Cap and Trade bill earlier and it has cost jobs and driven businesses out of Europe. Even Thomas Crocker, the economist who originally came up with Cap and Trade, recognizes it’s not the most effective way to regulate carbon emissions.
  3.  Inslee said $4-per-gallon gas was a good thing because “it’s an ally of action.” I understand his basic economic argument: as oil gets more expensive, the U.S. will use less of it and switch to more economically viable energy sources. The point he’s missing is that more expensive energy costs do not help the economy and create jobs.  The reality is that as oil prices go up,  businesses and consumers pay the price and are forced to cut jobs .
  4. Inslee talks about a vision of cheap, green energy. This is noble, but the reality is that green energy is significantly more expensive than traditional energy. The Wall Street Journal reported that green energy required significant subsidies to be competitive with fossil fuels. The solar and wind industries get about 50 times more in subsidies than coal ($24 per MW-hour compared to about $.44  per MW-hour).

This isn’t an exhaustive list. For example, Todd Myers lists some additional examples where Inslee guessed wrong about biofuels such as cellulosic ethanol and canola.

The environment is important and I don’t doubt Inslee’s sincerity about green technology companies. But somebody who has been so consistently wrong about economics and job growth should not be dispensing investment advice.

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[photo credit: flickr]

Inslee Plan to Ignite Washington Economy is All Smoke, No Fire

You have only to listen to Congressman Jay Inslee’s kickoff announcement of his candidacy for Governor to realize his is absolutely the wrong person to put in charge of running Washington State. Like all politicians, he says he wants to improve the state’s economy and promote job creation, but exactly how does he plan on doing that?

He says now isn’t the time to discuss raising taxes, but as we’ve seen with the current incumbent, Gov. Christine Gregoire, he doesn’t mean tax hikes are off-limits during a recession, but during an election campaign. Inslee’s already admitted he’s open to increasing tax revenues by eliminating tax deductions; does he believe that all businesses need to turn things around is more taxes?

He advocates the State taking greater action in providing capital to new start up firms and research centers, to boost high tech business across the state. He plans to get the money to do this from the state pension funds, making risky loans with the state employee’s retirement funds. These are the same plans that are already seriously underfunded, due to the effects of the market downturn in 2008 on the aggressive investing needed to attempt to get an 8% return.

There is, of course, the old standby of economic development through massive state projects, such as the new bridge across the Columbia. Whether a new bridge’s multi-billion dollar price tag is worth the cost, or whether the State can even afford the money to build it, is yet to be seen.

With the usual promises of improving the funding and quality of education in the state comes the idea of reducing health care costs by weeding out inefficiencies and putting the savings towards education. This is remarkable coming from a Congressman who voted for the Patient Protection and Affordable Care Act, which, in spite of its name, has actually driven health care costs up. Moreover, the PPACA threatens to completely overwhelm the state’s budget when it takes full effect and hundreds of thousands are added to the State’s Medicaid rolls.

Firmly committed to public sector employee collective bargaining rights, it is hard to imagine Inslee will be very successful in holding the line on escalating state workers pay and benefits. Likewise, we shouldn’t expect much budgetary restraint from a member of Congress that has run up trillion dollar plus deficits for three years in a row.

Jay Inslee talks of being committed to bringing “new blood to Olympia”, apparently spending two terms as a state representative before becoming a Congressman doesn’t qualify as “old blood”.  Still, it’s difficult to see how he can successfully portray himself as an outsider; I don’t think many people will be reassured by the slogan “I’m from Washington D.C. and I’m here to help.”

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[photo credit: flickr]

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