Crazy Mike's Discount Legislative Emporium
May 5, 2010 10:20 AM Subscribe
ComEd/Exelon is offering to buy a profit guarantee from the state of Illinois for $500 million, at a time when lawmakers are struggling to produce a budget in the face of revenue shortfalls.
In exchange for the borrowed half billion,
In exchange for the borrowed half billion,
The benefits Exelon and ComEd would get would dwarf what they’re offering.(the ComEd statement)
Chief among them would be enshrining in law a minimum 10.3% return on equity for the utility and automatically increasing customers’ rates when profits fall short of that mark. — Crain's Chicago Business
Is there anything in there about naming rights for the Bears/Cubs/White Sox stadiums? Cuz fuck that.
posted by spicynuts at 10:26 AM on May 5, 2010
posted by spicynuts at 10:26 AM on May 5, 2010
So the budgetary solution at issue is "keep digging"?
posted by Inspector.Gadget at 10:29 AM on May 5, 2010 [1 favorite]
posted by Inspector.Gadget at 10:29 AM on May 5, 2010 [1 favorite]
Lately I've decided that I'm against the death penalty for everything other than corruption.
It's still on the books as a punishment for treason, right? Crimes against the state? Couldn't this be argued as a kind of peacetime, economic treason? We could call it "cold treason", in analogy to cold war.
And then yes we could start trying and executing people for it.
posted by penduluum at 10:32 AM on May 5, 2010 [4 favorites]
It's still on the books as a punishment for treason, right? Crimes against the state? Couldn't this be argued as a kind of peacetime, economic treason? We could call it "cold treason", in analogy to cold war.
And then yes we could start trying and executing people for it.
posted by penduluum at 10:32 AM on May 5, 2010 [4 favorites]
Ah, so finally we reach the endgame. Rich people getting unfairly favored by the tax system was only a side-benefit. The long game was to reduce revenue to the point where BigCorp could simply buy government out.
posted by DU at 10:33 AM on May 5, 2010 [8 favorites]
posted by DU at 10:33 AM on May 5, 2010 [8 favorites]
The ComExelon phyle will look strong at first but their innate incompetence will undoubtedly lead to a poorly managed net of defensive nanobots. Sudden outbreaks of molecular decomposition amongst the ComExeloners will be a routine occurrence. And no one will care one bit.
posted by Babblesort at 10:37 AM on May 5, 2010 [4 favorites]
posted by Babblesort at 10:37 AM on May 5, 2010 [4 favorites]
Holy rent-seeking monopolists, Batman. That's pretty bald-faced.
I can't really fault ComEd for making the offer, though. That's kind of the first rule of sales, you always make the offer no matter how stupid it is. What ought to happen is the State just laughs, in the same way any reasonable person laughs when the salesperson opens by asking MSRP + $5k for that new car.
I'd save up my rage for the legislators, if for some reason the State of IL actually went for it. Then it would be full-on pitchforks, rope and torch time.
Moreover, I'm not familiar with the IL state constitution, but I would wonder if something like this would even be legal. A few years ago the jokers here in VA tried some shenanigans to avoid the appearance of raising taxes by delegating the authority to do so to a commission, which then went around creating a lot of creative little fees and crap. The courts eventually slapped them down on the grounds that an unelected body can't levy taxes; the legislature is the only body that can do that, and it has to do the deed itself. I wonder if IL has any similar language in its constitution and whether you could construct a workable argument that, if this deal were to go through, it would essentially be a delegation of a government function -- taxation -- to an unelected entity via a circuitous route.
Doing it by selling a profit guarantee and by allowing them unlimited power to raise electrical rates is less straightforward than what they tried in Virginia, but it seems like the net effect would be the same: it's nothing but a way for weaselly legislators to avoid facing the consequences of either raising taxes or cutting the budget.
posted by Kadin2048 at 10:38 AM on May 5, 2010 [5 favorites]
I can't really fault ComEd for making the offer, though. That's kind of the first rule of sales, you always make the offer no matter how stupid it is. What ought to happen is the State just laughs, in the same way any reasonable person laughs when the salesperson opens by asking MSRP + $5k for that new car.
I'd save up my rage for the legislators, if for some reason the State of IL actually went for it. Then it would be full-on pitchforks, rope and torch time.
Moreover, I'm not familiar with the IL state constitution, but I would wonder if something like this would even be legal. A few years ago the jokers here in VA tried some shenanigans to avoid the appearance of raising taxes by delegating the authority to do so to a commission, which then went around creating a lot of creative little fees and crap. The courts eventually slapped them down on the grounds that an unelected body can't levy taxes; the legislature is the only body that can do that, and it has to do the deed itself. I wonder if IL has any similar language in its constitution and whether you could construct a workable argument that, if this deal were to go through, it would essentially be a delegation of a government function -- taxation -- to an unelected entity via a circuitous route.
Doing it by selling a profit guarantee and by allowing them unlimited power to raise electrical rates is less straightforward than what they tried in Virginia, but it seems like the net effect would be the same: it's nothing but a way for weaselly legislators to avoid facing the consequences of either raising taxes or cutting the budget.
posted by Kadin2048 at 10:38 AM on May 5, 2010 [5 favorites]
If this goes through, all us little people should take the micro-loan model and offer California like 200 bucks each in exchange for guaranteed profit in perpetuity. That would be sweet.
posted by spicynuts at 10:41 AM on May 5, 2010 [2 favorites]
posted by spicynuts at 10:41 AM on May 5, 2010 [2 favorites]
I can't really fault ComEd for making the offer, though. That's kind of the first rule of sales, you always make the offer no matter how stupid it is. What ought to happen is the State just laughs, in the same way any reasonable person laughs when the salesperson opens by asking MSRP + $5k for that new car.
Here's why having a shitty government is actually a real problem: the state can laugh all it wants, it still needs $500 million. Now. How are they going to get it? By raising taxes. From the state's standpoint (not the individual tax-paying entity), if the burden on the economy of the huge electric rate hikes is less than the burden of the inevitable taxation, then is actually makes more sense to take the offer.
But from the taxpayers standpoint, the issue is confused. Not all people will be subject to higher taxes or in an equally higher amount. And some people can moderate their electric use better than others. So individuals may be able to craft a more optimal solution in the face of rate hikes that is not available to avoid higher taxation, so some individuals might actually choose higher rates.
Let me predict the solution: the state will publicly laugh and bluster. Then they will cut a deal that looks very different on paper but has exactly the same effect as the company's offer.
I say we all just accept that 2010-2012 is going to be a rebuilding year, and pass a national sales tax of 10% on everything, with the tax set to automatically expire at the end of '12 with no possibility of extension. The economy already sucks, we can stand it to suck a bit more. The advantage of this is that we won't have this corporatist corruption going on in which politicians are incentivized to cut deals that screw people over.
posted by Pastabagel at 10:47 AM on May 5, 2010 [2 favorites]
Here's why having a shitty government is actually a real problem: the state can laugh all it wants, it still needs $500 million. Now. How are they going to get it? By raising taxes. From the state's standpoint (not the individual tax-paying entity), if the burden on the economy of the huge electric rate hikes is less than the burden of the inevitable taxation, then is actually makes more sense to take the offer.
But from the taxpayers standpoint, the issue is confused. Not all people will be subject to higher taxes or in an equally higher amount. And some people can moderate their electric use better than others. So individuals may be able to craft a more optimal solution in the face of rate hikes that is not available to avoid higher taxation, so some individuals might actually choose higher rates.
Let me predict the solution: the state will publicly laugh and bluster. Then they will cut a deal that looks very different on paper but has exactly the same effect as the company's offer.
I say we all just accept that 2010-2012 is going to be a rebuilding year, and pass a national sales tax of 10% on everything, with the tax set to automatically expire at the end of '12 with no possibility of extension. The economy already sucks, we can stand it to suck a bit more. The advantage of this is that we won't have this corporatist corruption going on in which politicians are incentivized to cut deals that screw people over.
posted by Pastabagel at 10:47 AM on May 5, 2010 [2 favorites]
ComEd's ratebase is 6.9 billion. Assuming 50% Leverage and the current allowed return of 10.15% (I got that from a crain's article for '06 so it may be wrong) and that part of the deal doesn't seem egregious - less than 4 mil a year for 500 mil borrowed.
What is sort of crazy and I can't do the math on it off the top of my head is that ComEd is essentially asking the general public of illinois to sell them a swap locking in fixed energy/generation costs - given IL can probably worst case borrow at 8%? so 36 mil *4 difference to swap all of the energy risk for the next 4 years just seems like it must be too cheap? Probably someone else here can do that math better than I.
posted by JPD at 10:47 AM on May 5, 2010
What is sort of crazy and I can't do the math on it off the top of my head is that ComEd is essentially asking the general public of illinois to sell them a swap locking in fixed energy/generation costs - given IL can probably worst case borrow at 8%? so 36 mil *4 difference to swap all of the energy risk for the next 4 years just seems like it must be too cheap? Probably someone else here can do that math better than I.
posted by JPD at 10:47 AM on May 5, 2010
"Private-Public partnership..." This agreement seems like the wave of the future. Hollow out the government to a husk and occupy it with parasitic corporations. It will look like the government but it will be the corporation.
God, I hope this idea dies quickly.
Seconding what Kadin2048 said about legislators avoiding their jobs...
posted by zerobyproxy at 10:49 AM on May 5, 2010 [1 favorite]
God, I hope this idea dies quickly.
Seconding what Kadin2048 said about legislators avoiding their jobs...
posted by zerobyproxy at 10:49 AM on May 5, 2010 [1 favorite]
When liquidity is in short supply those with capital make a killing. See also, Canadian banks during the American credit crunch.
posted by dobie at 10:50 AM on May 5, 2010
posted by dobie at 10:50 AM on May 5, 2010
Right, sure, why not? Because the parking meter deal is turning out so well for Chicago.
posted by Windigo at 10:56 AM on May 5, 2010 [4 favorites]
posted by Windigo at 10:56 AM on May 5, 2010 [4 favorites]
It's only during this intermediate stage of corporate enslavement that things suck, while we're waiting for ED-209 and Robocop to show up.
posted by benzenedream at 11:00 AM on May 5, 2010 [3 favorites]
posted by benzenedream at 11:00 AM on May 5, 2010 [3 favorites]
Ah, so finally we reach the endgame. Rich people getting unfairly favored by the tax system was only a side-benefit. The long game was to reduce revenue to the point where BigCorp could simply buy government out.
Starve the beast, etc. I think people have made that prediction for ages now...
"In other news, final steps were taken in or near Washington to secure the merger of the US Government with TMZ General Corp. This former zinc bushing manufacturer..."
posted by Thorzdad at 11:02 AM on May 5, 2010
Starve the beast, etc. I think people have made that prediction for ages now...
"In other news, final steps were taken in or near Washington to secure the merger of the US Government with TMZ General Corp. This former zinc bushing manufacturer..."
posted by Thorzdad at 11:02 AM on May 5, 2010
Why down it in the bathtub when it can be put to profitable use?
posted by Pope Guilty at 11:03 AM on May 5, 2010
posted by Pope Guilty at 11:03 AM on May 5, 2010
To be fair there's been a lot of state imposed rate freezes and political what's-its playing with the utilities. And yeah, it amounts to a backdoor tax which is politically expedient so maybe they're just playing ball.
Some people completely lose their minds when they hear 'tax increase' (although there was a demonstration a bit ago in the capitol to raise taxes) so this might be an avenue to get revenue in a less political 3rd rail sort of way.
To be less fair, if Quinn had any balls he'd send some state troopers to ComEd and pistol whip their executives. They've pulled a LOT of unsavory things in the past and cost Illinois a traincar full of money in legal fights and other b.s. and this is a seriously big F.U. to the people of Illinois.
Of course, Quinn's only the governor. And, nice guy, but no real guts (so far, he's a pure party animal). And people have short term memories.
Still, Madigan's got most of the juice (no pun int'd), but he hasn't been saying anything. I'm not a big fan so any speculation on my part which way he might go would be colored by that.
(His kid though, she's awesome).
posted by Smedleyman at 11:06 AM on May 5, 2010
Some people completely lose their minds when they hear 'tax increase' (although there was a demonstration a bit ago in the capitol to raise taxes) so this might be an avenue to get revenue in a less political 3rd rail sort of way.
To be less fair, if Quinn had any balls he'd send some state troopers to ComEd and pistol whip their executives. They've pulled a LOT of unsavory things in the past and cost Illinois a traincar full of money in legal fights and other b.s. and this is a seriously big F.U. to the people of Illinois.
Of course, Quinn's only the governor. And, nice guy, but no real guts (so far, he's a pure party animal). And people have short term memories.
Still, Madigan's got most of the juice (no pun int'd), but he hasn't been saying anything. I'm not a big fan so any speculation on my part which way he might go would be colored by that.
(His kid though, she's awesome).
posted by Smedleyman at 11:06 AM on May 5, 2010
Here's why having a shitty government is actually a real problem: the state can laugh all it wants, it still needs $500 million. Now. How are they going to get it? By raising taxes. From the state's standpoint (not the individual tax-paying entity), if the burden on the economy of the huge electric rate hikes is less than the burden of the inevitable taxation, then is actually makes more sense to take the offer.Wow. That's one of the most -- confused -- arguments I've heard in a while. Neither taxes nor rate increases are going to effect the "economy*", since either way the money will get cycled back into the system.
Your confusion seems to rest on a belief that money, once taxed somehow exits the economy. That's obviously not true. The government spends the money it takes in in taxes. Just like Excelon would. So it's a non issue.
No, the real trick here, and the reasons conservatives would support this is who pays. With a tax, people would pay in proportion to their income. With guaranteed profits, people would pay in proportion to their electricity use.
And think about what that actually means. It means that people who make less money will have a much higher tax burden, given equal electricity usages.
Basically, this amounts to a tax on the poor, but that's obscured by the complexity of the deal. It's the same reason conservatives all love the idea of a VAT. (If you read Andrew Sullivan's blog, he talks about it and links to conservatives who write about how great it is. You remember Mike Huckabee was promoting this during the campaign)
The thing about a VAT, like baked in electricity rate hikes, is that poor people pay, because consumption is a greater portion of their income.
And, of course, the other issue is that this could be worth far more then $500 million dollars. A lot more. In which case tax payers are getting doubly screwed. Their taxes go down by their share of $500 million, but their electricity rates may go way up.
* when I say economy, I'm talking about the economy on the whole. The state economy is a bit more complicated, because money does leave the system. But I would think that tax money, which is paid to government employees, social services in the state, etc would have a much higher perportion stay in state for at least one 'cycle' then would with a publicly traded company with stockholders all over the world, actually
If Pastabagel's idea was correct, we could just replace all taxes with monopoly rents, which how things worked in ancient china. The government would sell government jobs, which allowed people to work certain jobs, and they would get rich skimming. And China had revolutions every couple hundred years. Coincidence? Probably. But the point is, it's hardly a modern idea, and people hated the corruption it bread. The government as legalized sleaze fest ideal of republicans seem to be promoting is mainly based on the fact that it means hidden taxes that mostly poor and middle class people have to pay.
posted by delmoi at 11:10 AM on May 5, 2010 [5 favorites]
I would make a counteroffer. They hand over 500 million in exchange for not charging them with bribery.
posted by dances_with_sneetches at 11:12 AM on May 5, 2010 [7 favorites]
posted by dances_with_sneetches at 11:12 AM on May 5, 2010 [7 favorites]
zerobyproxy: "Private-Public partnership..." This agreement seems like the wave of the future. Hollow out the government to a husk and occupy it with parasitic corporations. It will look like the government but it will be the corporation.This strikes me as optimistic because it looks to me like this has long since happened. Private contractors fight our wars, build our roads, write the textbooks to teach our children, and built the rockets that took us to the moon. They even tally up the taxes needed to pay for all those things. The entire American enterprise - from the earliest days of the Dutch East India company - has been building to this pinnacle. A thousand years from now, corporatism will be, for good or ill, the legacy the US is remembered for.
posted by Western Infidels at 11:12 AM on May 5, 2010
It will look like the government but it will be the corporation.
It's got all the best parts: the profit motive of the corporation coupled with the coercive power of the state. What could possibly go wrong?
posted by Kadin2048 at 11:14 AM on May 5, 2010 [8 favorites]
It's got all the best parts: the profit motive of the corporation coupled with the coercive power of the state. What could possibly go wrong?
posted by Kadin2048 at 11:14 AM on May 5, 2010 [8 favorites]
I say we all just accept that 2010-2012 is going to be a rebuilding year, and pass a national sales tax of 10% on everything, with the tax set to automatically expire at the end of '12 with no possibility of extension.
posted by Pastabagel
Sales taxes disproportionately affect low income individuals due to the fact that they spend a higher percentage of their income on sales taxes.
posted by haveanicesummer at 11:17 AM on May 5, 2010
posted by Pastabagel
Sales taxes disproportionately affect low income individuals due to the fact that they spend a higher percentage of their income on sales taxes.
posted by haveanicesummer at 11:17 AM on May 5, 2010
It's a 13 billion dollar deficit, so half a billion won't solve the problem. Time for other companies to step up! Every McDonald's drive-thru can charge a toll. Every classroom must take five minutes to discuss the benefits of Viagra. Judges will now wear Snuggies. Crops must be watered with Brawndo*.
posted by twoleftfeet at 11:34 AM on May 5, 2010 [2 favorites]
posted by twoleftfeet at 11:34 AM on May 5, 2010 [2 favorites]
Ah, yes, Omni Consumer Products. The Future has a Silver Lining!
posted by Joakim Ziegler at 11:58 AM on May 5, 2010 [1 favorite]
posted by Joakim Ziegler at 11:58 AM on May 5, 2010 [1 favorite]
All other comments aside, with a guaranteed 10% return on equity, they'd be able to point at that law as collateral, and borrow enormous sums at 3 or 4 percent, build new plants and facilities with them, and get a guaranteed 6 or 7 percent profit, nearly without limit. The plants actually being needed would be entirely optional. I'm not sure they'd have to even WORK, they'd just have to be equity to allow higher rates.
Further, I don't see that it would give them much impetus to ever contain costs... should their cost structures get high, there's no need for internal pain. Just open more plants to force the taxpayers to foot the bill instead.
posted by Malor at 12:04 PM on May 5, 2010
Further, I don't see that it would give them much impetus to ever contain costs... should their cost structures get high, there's no need for internal pain. Just open more plants to force the taxpayers to foot the bill instead.
posted by Malor at 12:04 PM on May 5, 2010
The entire American enterprise - from the earliest days of the Dutch East India company - has been building to this pinnacle.
Well, except for the fighting the East India Company from it’s earliest days (as the VOC lapsed before 1800).
Which, y’know, doesn’t really dispute the point about overreach and corruption, only sort of makes the fact more tragically ironic.
Especially since the anonymous company mouthpiece in the blog says it should be up to elected officials. This seems (and I might be wrong factually, but it does seem) like a convoluted form of evading representation for taxation. Of course, most of the warmaking in the U.S. looks that way as well. “No taxation without representation” started with the (English) king levying taxes (to go to war) without the legislature.
I don't have a problem with taxation with representation. I like public schools and parks and roads that don't rattle your suspension (or I would like 'em). People ask why I drive a 4x4 in a flat state like Illinois. They drive on state roads for a while, they stop asking that.
But there's too many entrenched career politicians who want to keep their jobs so they can't piss off the heavyweights and don't want to to the actual business of the state.
posted by Smedleyman at 12:12 PM on May 5, 2010 [1 favorite]
Well, except for the fighting the East India Company from it’s earliest days (as the VOC lapsed before 1800).
Which, y’know, doesn’t really dispute the point about overreach and corruption, only sort of makes the fact more tragically ironic.
Especially since the anonymous company mouthpiece in the blog says it should be up to elected officials. This seems (and I might be wrong factually, but it does seem) like a convoluted form of evading representation for taxation. Of course, most of the warmaking in the U.S. looks that way as well. “No taxation without representation” started with the (English) king levying taxes (to go to war) without the legislature.
I don't have a problem with taxation with representation. I like public schools and parks and roads that don't rattle your suspension (or I would like 'em). People ask why I drive a 4x4 in a flat state like Illinois. They drive on state roads for a while, they stop asking that.
But there's too many entrenched career politicians who want to keep their jobs so they can't piss off the heavyweights and don't want to to the actual business of the state.
posted by Smedleyman at 12:12 PM on May 5, 2010 [1 favorite]
I say we all just accept that 2010-2012 is going to be a rebuilding year, and pass a national sales tax of 10% on everything
Great for the Federal government, but does nothing for the states.
posted by coolguymichael at 12:17 PM on May 5, 2010
Great for the Federal government, but does nothing for the states.
posted by coolguymichael at 12:17 PM on May 5, 2010
Crops must be watered with Brawndo
To be fair, it does have what plants crave.
posted by Pope Guilty at 12:18 PM on May 5, 2010 [2 favorites]
To be fair, it does have what plants crave.
posted by Pope Guilty at 12:18 PM on May 5, 2010 [2 favorites]
Malor - No offense - you have absolutely no idea what you are talking about.
In theory they already have an allowed 10%-ish ROE - the issue is that its through a cycle and there is a lag related with commodity price swings, so time value of money and all they always end up marginally underperforming - so what they want (and they are underpricing - which is what the scam is) is to buy a put option from state that moves energy price risk onto the customers and away from themselves.
There is nothing in the plan that allows them build unlimited rateable assets, there appears to be nothing in it that allows them to claw back non-energy related costs. All those things have already been laid out in prior regulatory filings at whatever the Illinois Public Service Commission calls itself.
posted by JPD at 12:21 PM on May 5, 2010
In theory they already have an allowed 10%-ish ROE - the issue is that its through a cycle and there is a lag related with commodity price swings, so time value of money and all they always end up marginally underperforming - so what they want (and they are underpricing - which is what the scam is) is to buy a put option from state that moves energy price risk onto the customers and away from themselves.
There is nothing in the plan that allows them build unlimited rateable assets, there appears to be nothing in it that allows them to claw back non-energy related costs. All those things have already been laid out in prior regulatory filings at whatever the Illinois Public Service Commission calls itself.
posted by JPD at 12:21 PM on May 5, 2010
I say we all just accept that 2010-2012 is going to be a rebuilding year, and pass a national sales tax of 10% on everything
Yeah, fuck poor people.
posted by Pope Guilty at 12:23 PM on May 5, 2010 [5 favorites]
Yeah, fuck poor people.
posted by Pope Guilty at 12:23 PM on May 5, 2010 [5 favorites]
Great for the Federal government, but does nothing for the states.
Yeah. Illinois might be in good shape if they were not getting about seventy cents back from the federal government for every dollar in tax they pay out. Funny that California seems to have that problem as well....
posted by eriko at 12:23 PM on May 5, 2010 [1 favorite]
Yeah. Illinois might be in good shape if they were not getting about seventy cents back from the federal government for every dollar in tax they pay out. Funny that California seems to have that problem as well....
posted by eriko at 12:23 PM on May 5, 2010 [1 favorite]
You people should read up on utility regulation before you start spouting off on this. I think this is unfair but not in the way (or the magnitude) most of you do. Infact doing the math on how big the scam is ends up being really difficult and is a function of the future volatility of Natural Gas prices.
posted by JPD at 12:36 PM on May 5, 2010
posted by JPD at 12:36 PM on May 5, 2010
This amounts to a tax on heavy electricity users in exchange for lower taxes (or a smaller tax increase) on light electricity users, in a state that gets almost all its electricity from coal. It's a Pigou tax! Corporate rent-seeking is good for the environment!
posted by miyabo at 12:50 PM on May 5, 2010 [1 favorite]
posted by miyabo at 12:50 PM on May 5, 2010 [1 favorite]
I'm sure all you geniuses already know this, but ROE floors & ceilings are commonly used as rate-setting mechanisms. INCLUDING IN ILLINOIS. As JPD said, they already have an allowed ROE, but that's a full-cycle ROE averaged over a number of years. This is basically a technical adjustment to an existing scheme, not some outlandish scheme concocted by moustache stroking capitalist plotters in waistcoats. Now, granted it seems like a low-ball, but this is just their opening offer. If the state doesn't like it, they can counter-offer higher.
posted by atrazine at 12:52 PM on May 5, 2010 [1 favorite]
posted by atrazine at 12:52 PM on May 5, 2010 [1 favorite]
Cook County sales tax 10%. Property taxes in IL rising. I love living in Cook County, IL
posted by stormpooper at 1:13 PM on May 5, 2010
posted by stormpooper at 1:13 PM on May 5, 2010
That's one of the most -- confused -- arguments I've heard in a while. Neither taxes nor rate increases are going to effect the "economy*", since either way the money will get cycled back into the system.
I think you are confused. Of course taxes affect the economy. If you raise income taxes, people will have less disposable income, which means less spending, which means business and workers at the margin who depend on that spending go out of business. If you raise sales taxes, it affects the consumer the same as a price increase, which leads to less consumption. If you raise electricity rates, you affect disposable income only by the amount of the new rates, however you also affect electricity consumption (if the increase is great enough, people will change their habits, depending on the elasticity of demand for electricity.)
And think about what that actually means. It means that people who make less money will have a much higher tax burden, given equal electricity usages.
Which is a wrong assumption. Poor people do not consume as much electricity as rich people on a per household basis, mainly because rich people tend to live in larger residences, which naturally consume more power to heat, cool, and light.
And the money does not necessarily get cycled back into the state. It may leave the state. It may go to pay off debt in the form of municipal bonds. High taxes may drive consumption out of the state (consider how many PA residents routinely shop for big-ticket items in Delaware, where the sales tax is 0% instead of 6%). High electricity rates (or the knowledge of much higher rates in the future), will affect the consumption of high -power consuming devices and appliances.
Regardless of whether you've considered the effect of taxation or rate increases at the margins, I gave assure you that the idiots in the IL legislature haven't. They are looking at this strictly from the face-saving/maximize govt revenue perspective, which is assuredly sub-optimal for the people of the state.
Also,
posted by Pastabagel at 3:14 PM on May 5, 2010
I think you are confused. Of course taxes affect the economy. If you raise income taxes, people will have less disposable income, which means less spending, which means business and workers at the margin who depend on that spending go out of business. If you raise sales taxes, it affects the consumer the same as a price increase, which leads to less consumption. If you raise electricity rates, you affect disposable income only by the amount of the new rates, however you also affect electricity consumption (if the increase is great enough, people will change their habits, depending on the elasticity of demand for electricity.)
And think about what that actually means. It means that people who make less money will have a much higher tax burden, given equal electricity usages.
Which is a wrong assumption. Poor people do not consume as much electricity as rich people on a per household basis, mainly because rich people tend to live in larger residences, which naturally consume more power to heat, cool, and light.
And the money does not necessarily get cycled back into the state. It may leave the state. It may go to pay off debt in the form of municipal bonds. High taxes may drive consumption out of the state (consider how many PA residents routinely shop for big-ticket items in Delaware, where the sales tax is 0% instead of 6%). High electricity rates (or the knowledge of much higher rates in the future), will affect the consumption of high -power consuming devices and appliances.
Regardless of whether you've considered the effect of taxation or rate increases at the margins, I gave assure you that the idiots in the IL legislature haven't. They are looking at this strictly from the face-saving/maximize govt revenue perspective, which is assuredly sub-optimal for the people of the state.
Also,
posted by Pastabagel at 3:14 PM on May 5, 2010
Yeah, fuck poor people.
posted by Pope Guilty at 3:23 PM on May 5
What's your solution? Fuck rich people? And what will your solution be after graduating from high school?
posted by Pastabagel at 3:17 PM on May 5, 2010
posted by Pope Guilty at 3:23 PM on May 5
What's your solution? Fuck rich people? And what will your solution be after graduating from high school?
posted by Pastabagel at 3:17 PM on May 5, 2010
ComEd/Exelon is offering to buy a profit guarantee from BRIBE the state of Illinois for $500 million
Did I get that right?
posted by Sys Rq at 3:38 PM on May 5, 2010
Did I get that right?
posted by Sys Rq at 3:38 PM on May 5, 2010
Pastabagel: are you seriously proposing that the extra cost of powering a larger home is enough to ensure that the proportion of individual income going to electrical bills is effectively constant amongst income brackets?
posted by hoople at 3:48 PM on May 5, 2010
posted by hoople at 3:48 PM on May 5, 2010
"If the state doesn't like it, they can counter-offer higher."
The dice are loaded though.
Right now the state is in a serious crisis, which does make ComEd look like mustache stroking profiteering bastards taking advantage.
What, energy companies hosing states is something unprecedented?
California didn't have an energy crisis that put hundreds of thousands of people in the dark?
ComEd isn't running a charity, no, but given that in the past they've routinely violated the clean air act and safety regulations, ignored the terms of franchise agreements, and their execs enjoyed incestuous relationships with Exelon (which meant the more customers paid, the more money they made so genuine free market competition wasn't in their interest) - that and manipulating the state's energy auction boosting retail rates by (up to) 300% and astroturfing opposition to rate freezes and regulation, yeah , I'm going to go ahead and be cynical bastard here and say maybe they have a little too much leverage and maybe deregulation is bullshit.
They've been dividing (state and consumer) buying power while consolidating power generation and distribution profits through holding companies. And perpetuating it by influencing politicians and making legal prosecution expensive. At some point this is all going to come crashing down. I'd like to avoid that. I like Grandma Millie not dying of heatstroke.
I'm not an expert on energy, but I can recognize a divide and conquer strategy when I see it.
posted by Smedleyman at 3:49 PM on May 5, 2010 [1 favorite]
The dice are loaded though.
Right now the state is in a serious crisis, which does make ComEd look like mustache stroking profiteering bastards taking advantage.
What, energy companies hosing states is something unprecedented?
California didn't have an energy crisis that put hundreds of thousands of people in the dark?
ComEd isn't running a charity, no, but given that in the past they've routinely violated the clean air act and safety regulations, ignored the terms of franchise agreements, and their execs enjoyed incestuous relationships with Exelon (which meant the more customers paid, the more money they made so genuine free market competition wasn't in their interest) - that and manipulating the state's energy auction boosting retail rates by (up to) 300% and astroturfing opposition to rate freezes and regulation, yeah , I'm going to go ahead and be cynical bastard here and say maybe they have a little too much leverage and maybe deregulation is bullshit.
They've been dividing (state and consumer) buying power while consolidating power generation and distribution profits through holding companies. And perpetuating it by influencing politicians and making legal prosecution expensive. At some point this is all going to come crashing down. I'd like to avoid that. I like Grandma Millie not dying of heatstroke.
I'm not an expert on energy, but I can recognize a divide and conquer strategy when I see it.
posted by Smedleyman at 3:49 PM on May 5, 2010 [1 favorite]
What's your solution? Fuck rich people? And what will your solution be after graduating from high school?
Those who have more and can afford to pay more, pay more. That is the fundamental concept of progressive taxation, and that is the fundamental principle of taxation that our system is theoretically built upon. While I will admit to having essentially no sympathy for anybody who could throw away a high percentage of their income and still live comfortably, I do not believe that anybody needs to be metaphorically fucked; the wealthy benefit more from civil society, and therefore must pay proportionately more.
Your argument that the wealthy consume more electricity than the poor is silly because it is like the people who argue that there is something wrong with the top 10% in income and wealth paying more then 10% of the taxes. There is no level of expenditure which is not more burdensome upon the poor than upon the wealthy. In order for your argument to make sense, you would have to argue that the wealthy use more electricity at a rate at least commensurate with the disparity in wealth between the wealthy and the poor. Of course, the wealthy have the advantage of having greater reserves of pure liquid capital, so if a poor man spends $100 and a wealthy man spends $200, the burden is still disproportionately upon the poor man even if the wealthy man makes/has twice what the poor man has, simply because of his larger pool of wealth.
And the "high school" crack is stupid, petty, and insulting, but I suppose that calling somebody a child is, like lying, racism, and hypocrisy, something that only children care about.
posted by Pope Guilty at 3:51 PM on May 5, 2010 [4 favorites]
Those who have more and can afford to pay more, pay more. That is the fundamental concept of progressive taxation, and that is the fundamental principle of taxation that our system is theoretically built upon. While I will admit to having essentially no sympathy for anybody who could throw away a high percentage of their income and still live comfortably, I do not believe that anybody needs to be metaphorically fucked; the wealthy benefit more from civil society, and therefore must pay proportionately more.
Your argument that the wealthy consume more electricity than the poor is silly because it is like the people who argue that there is something wrong with the top 10% in income and wealth paying more then 10% of the taxes. There is no level of expenditure which is not more burdensome upon the poor than upon the wealthy. In order for your argument to make sense, you would have to argue that the wealthy use more electricity at a rate at least commensurate with the disparity in wealth between the wealthy and the poor. Of course, the wealthy have the advantage of having greater reserves of pure liquid capital, so if a poor man spends $100 and a wealthy man spends $200, the burden is still disproportionately upon the poor man even if the wealthy man makes/has twice what the poor man has, simply because of his larger pool of wealth.
And the "high school" crack is stupid, petty, and insulting, but I suppose that calling somebody a child is, like lying, racism, and hypocrisy, something that only children care about.
posted by Pope Guilty at 3:51 PM on May 5, 2010 [4 favorites]
What's your solution? Fuck rich people?
To be fair, rich people are better looking and have most of their teeth. Also? No scurvy.
posted by Smedleyman at 3:52 PM on May 5, 2010 [2 favorites]
To be fair, rich people are better looking and have most of their teeth. Also? No scurvy.
posted by Smedleyman at 3:52 PM on May 5, 2010 [2 favorites]
Also they can afford the really good drugs.
posted by Pope Guilty at 3:54 PM on May 5, 2010
posted by Pope Guilty at 3:54 PM on May 5, 2010
I think you are confused. Of course taxes affect the economy. If you raise income taxes, people will have less disposable income, which means less spendingPastabagel, this is a serious question: Do you know that governments spend money? What do you think they do with tax dollars? Snort 'em?
I actually took Econ 101 and this was actually in the textbook. The authors argued that taxation was more economically efficient because every dollar taxed is spent (and then some, usually) whereas individuals will save some of the money instead of spending it. (That is to say, tax revenue had a higher multiplier) And of course the government's spending is almost all on salaries and benefits, which go right back into the community.
I actually pointed that out in my other comment, instead of responding, you just re-asserted your incorrect and nonsensical belief.
Which is a wrong assumption. Poor people do not consume as much electricity as rich people on a per household basis, mainly because rich people tend to live in larger residences, which naturally consume more power to heat, cool, and light.
I seriously doubt there's a 1:1 relationship between house price and the electricity bill. And there's not a 1:1 ratio between home price and income either. So while rich people will slightly more in electricity cost then poor and middle class, I thought the effect was small enough to not bother mentioning in the comment, which was already getting long.
What's your solution? Fuck rich people? And what will your solution be after graduating from high school?The point is, the poor are already fucked, while the rich have plenty of money to spare now. Arguing that we should "rebuild the economy" by fucking over poor people extra hard for a few years is particularly, well, Republican at least.
--
The state's counteroffer should be: "How about imposing a 1-time power plant tax summing up to $500 million."
posted by delmoi at 4:39 PM on May 5, 2010 [2 favorites]
The thing about a VAT, like baked in electricity rate hikes, is that poor people pay, because consumption is a greater portion of their income.
...
I actually took Econ 101
Did you cover different forms of taxation in Econ 101? A VAT is less distortionary than other forms of taxation, and that there are really simple ways to account for its regressive effects.
The authors argued that taxation was more economically efficient because every dollar taxed is spent (and then some, usually) whereas individuals will save some of the money instead of spending it.
Savings = investment. Investment leads to higher potential output in the long run. As you just noted, government spending can crowd out that investment.
posted by ripley_ at 6:50 PM on May 5, 2010
...
I actually took Econ 101
Did you cover different forms of taxation in Econ 101? A VAT is less distortionary than other forms of taxation, and that there are really simple ways to account for its regressive effects.
The authors argued that taxation was more economically efficient because every dollar taxed is spent (and then some, usually) whereas individuals will save some of the money instead of spending it.
Savings = investment. Investment leads to higher potential output in the long run. As you just noted, government spending can crowd out that investment.
posted by ripley_ at 6:50 PM on May 5, 2010
zerobyproxy: ""Private-Public partnership..." This agreement seems like the wave of the future. Hollow out the government to a husk and occupy it with parasitic corporations. It will look like the government but it will be the corporation."
You've been to B.C., then? They call them P3s here, because it's cute. You can't sell the death of democracy without cute.
posted by klanawa at 8:07 PM on May 5, 2010
You've been to B.C., then? They call them P3s here, because it's cute. You can't sell the death of democracy without cute.
posted by klanawa at 8:07 PM on May 5, 2010
Investment leads to higher potential output in the long run.
Late 2008 might disagree a tad.
posted by kafziel at 10:39 PM on May 5, 2010
Late 2008 might disagree a tad.
posted by kafziel at 10:39 PM on May 5, 2010
No worries. It failed. The people of IL freaked out, Springfield put a stop to it, ComEd did a total "What? What? Sorry. Tried to help. Jeeze Louise."
posted by stormpooper at 7:02 AM on May 6, 2010
posted by stormpooper at 7:02 AM on May 6, 2010
Did you cover different forms of taxation in Econ 101? A VAT is less distortionary than other forms of taxation, and that there are really simple ways to account for its regressive effects.Please. There is no way that there will ever be transfers to poor people to make up for the regressive nature of the VAT in the US. Anyone who says "We'll have a VAT, but then pay payments to poor people to make up for it" is blowing smoke in terms of how the policy would be implemented in the U.S.
Also, I question this "least distortionary" claim anyway, A lot of economists tend to come up with whatever arguments fit whatever policy they want. Look at all the economists who said there was no housing bubble (like Greenspan, Bernanke, etc). Economics is far more subjective then it's practitioners would like to admit.
And even if another tax was more "distortionary" so what? Something like a carbon tax would be good for world as a whole. And just because one tax is less "distortionary" then another doesn't mean it's better if it's far less fair.
posted by delmoi at 7:26 AM on May 6, 2010 [1 favorite]
Please. There is no way that there will ever be transfers to poor people to make up for the regressive nature of the VAT in the US. Anyone who says "We'll have a VAT, but then pay payments to poor people to make up for it" is blowing smoke in terms of how the policy would be implemented in the U.S.
Yeah, that would never happen.
Economics is far more subjective then it's practitioners would like to admit.
Disagreeing with an academic discipline because it doesn't confirm your worldview: not just for the right anymore!
More seriously, there are some areas of economics without widespread consensus. In other areas, opinions tend to converge. Sadly, as Alan Blinder has noted: "Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently."
And even if another tax was more "distortionary" so what? Something like a carbon tax would be good for world as a whole. And just because one tax is less "distortionary" then another doesn't mean it's better if it's far less fair.
First, a carbon tax is not distortionary - it's correcting a negative externality.
Second, efficiency is important. I think you're far too quick to dismiss it.
Again, if policy is regressive but efficient the right answer is transfers - not dismissing that policy entirely.
posted by ripley_ at 5:51 PM on May 6, 2010
Yeah, that would never happen.
Economics is far more subjective then it's practitioners would like to admit.
Disagreeing with an academic discipline because it doesn't confirm your worldview: not just for the right anymore!
More seriously, there are some areas of economics without widespread consensus. In other areas, opinions tend to converge. Sadly, as Alan Blinder has noted: "Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently."
And even if another tax was more "distortionary" so what? Something like a carbon tax would be good for world as a whole. And just because one tax is less "distortionary" then another doesn't mean it's better if it's far less fair.
First, a carbon tax is not distortionary - it's correcting a negative externality.
Second, efficiency is important. I think you're far too quick to dismiss it.
Again, if policy is regressive but efficient the right answer is transfers - not dismissing that policy entirely.
posted by ripley_ at 5:51 PM on May 6, 2010
Disagreeing with an academic discipline because it doesn't confirm your worldview: not just for the right anymore!
Why not? The Sokal Affair happened because people disagreed with postmodern cultural studies, which is an academic discipline.
Some academic disciplines are rigorous, and some are not. The number of economists who disagree about fairly basic stuff is pretty indicative of how non rigorous stuff. Krugman vs. the Chicago school types on the effect of government spending would be like biologists arguing about whether or not mammals need oxygen to survive.
posted by delmoi at 6:44 PM on May 6, 2010 [2 favorites]
Why not? The Sokal Affair happened because people disagreed with postmodern cultural studies, which is an academic discipline.
Some academic disciplines are rigorous, and some are not. The number of economists who disagree about fairly basic stuff is pretty indicative of how non rigorous stuff. Krugman vs. the Chicago school types on the effect of government spending would be like biologists arguing about whether or not mammals need oxygen to survive.
posted by delmoi at 6:44 PM on May 6, 2010 [2 favorites]
The number of economists who disagree about he number of economists who disagree about fairly basic stuff...
Is actually very small. A large section of Brian Cowen's very short book The Myth of the Rational Voter is a survey of academic economists and the general public on basic economic policy issues. In almost every case, the economists have tightly clustered opinions, while the general public has spread-out opinions that often contradict the economists. He quantitatively measures the degree of agreement of economists and compares it to the degree of agreement of toxicologists (just as an example of another scientific field), and econ comes out fine.
Other scientific fields don't get front-page stories practically every day, amd I'd suggest that's where the problem is.
posted by miyabo at 4:27 AM on May 7, 2010 [1 favorite]
Is actually very small. A large section of Brian Cowen's very short book The Myth of the Rational Voter is a survey of academic economists and the general public on basic economic policy issues. In almost every case, the economists have tightly clustered opinions, while the general public has spread-out opinions that often contradict the economists. He quantitatively measures the degree of agreement of economists and compares it to the degree of agreement of toxicologists (just as an example of another scientific field), and econ comes out fine.
Other scientific fields don't get front-page stories practically every day, amd I'd suggest that's where the problem is.
posted by miyabo at 4:27 AM on May 7, 2010 [1 favorite]
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posted by Pope Guilty at 10:24 AM on May 5, 2010 [10 favorites]