Wednesday, December 12, 2012

The New Energy Capital of the U.S. is Pennsylvania?

State governments are certainly interesting places these days. Take Michigan's historic vote approving right-to-work legislation, for example.

Getting the economy to grow is now very much on the mind of all American politicians, and that's a good thing.

As a consequence, the economy is properly taking center stage in many of their deliberations. That's due not only to the weakened state of economic growth in the U.S. but also the result of many of the states' changing political dynamics as well.

Pennsylvania's Fracking Future summarizes what Republican Governor Tom Corbett says about his state's future as the energy capial of the U.S.:

"Cynicism about politics is always fashionable, and quite justifiable these days given all the posturing in Washington over the misnamed "fiscal cliff.". . .But . . . we continue to be impressed by the number of state and local officials taking a serious approach to serious problems.

Pennsylvania Gov. Tom Corbett . . . explained . . . governors can't just print money when they get into trouble. Nor is punishing the rich out of a sense of fairness a good option when other states with friendly tax climates are out there waiting: "I do not see raising taxes as a solution when you are trying to grow business."

So what's the Corbett strategy? "We're going to be the energy capital of the United States," he says of Pennsylvania, which has lately been leading the way on hydraulic fracturing, or "fracking," to unlock natural gas. . . . The state is within a day's drive of 60% of the U.S. population, he notes.

Gov. Corbett, a Republican, dismisses environmentalist concerns about fracking. Texas and Oklahoma have been doing it safely for three decades, he says. Of New York Gov. Andrew Cuomo's dithering over his state's four-year-old moratorium on fracking, Gov. Corbett says with a smile, "I hope they keep the ban." Pennsylvania is benefiting from investments as a result of its neighboring state's backwardness.

The implementation of ObamaCare also comes up. "I'm waiting for the rules," Gov. Corbett says. "I have a fiduciary duty to the taxpayers of Pennsylvania to make a decision based on information, not politics." In particular, he worries about the potential costs to the state of ObamaCare's planned Medicaid expansion. After running through some frightening numbers he says simply, "We couldn't tax our way out of this."

That brute fact explains a lot. With the Treasury ready to issue unlimited bonds and Ben Bernanke on standby to buy them, it's easy to spend like Barack Obama. At the state level, reality is more present. It will be interesting to watch governors of both parties cope with the mess that is ObamaCare."

Summing Up

The federal government knows best gang is good at issuing unfunded mandates to the states. Unfunded or underfunded mandates result when the feds make laws that states are obligated to follow. The kicker is that the feds often provide no or not enough money to the states to be able to comply with those federal mandates.

Making the situation even worse now is that the national government is beginning to come to terms with its need to better manage its finances. Of course, that won't be good news for states as the feds will have less money to spread around than previously, even if the previous funds resulted in effect from borrowing from our Chinese friends. Now federal money will be even be harder to come by for the states.

Thus, states are finding ways to pay their own bills, and that means that the private sector becomes a vital piece of each state's future. Thus, Pennsylvania's desire to be the energy capital of the U.S. is driven by the same motives as Michigan's adoption of the right-to-work legislation.

If the gang in Washington pays attention to what's happening in many of our states, perhaps with states like California, Illinois and New York excluded, they will learn something extremely useful about how to properly manage an economy. Government needs to just stay out of the way.

In simple language, it's all about encouraging and allowing private sector players to do their thing without undue interference from either politicians or unions.

It's really that simple.

Thanks. Bob.

No comments:

Post a Comment