Jay Reding.com

As the horrible devastation of Hurricane Katrina pushes the price of gasoline to ever-higher levels, the Bush Administration has stated that they intend to raise federal fuel efficiency (CAFE) standards even higher to promote greater energy efficiency and lower oil consumption.

The problem with this is that it simply won’t work. There’s a dirty little economic secret that few know about but has a profound effect on the world economy: Increasing efficiency doesn’t decrease consumption.

James Glassman at Tech Central Station provides an explanation for this phenomenon:

“The pursuit of efficiency,” write Peter Huber and Mark Mills in “The Bottomless Well,” their superb book on the future of energy, “has been the one completely consistent and bipartisan cornerstone of national energy policy since 1970.”

We’re told that higher mpg can even defeat our enemies. In a recent article that linked oil dependency with terrorism, Fareed Zakaria, editor of Newsweek International, concluded, “It’s true that there is no silver bullet that will entirely solve America’s energy problem, but there is one that goes a long way: more fuel-efficient cars. If American cars averaged 40 miles per gallon, we would soon reduce consumption by 2 million to 3 million barrels of oil a day.”

Increases in energy efficiency have been the rule in the United States for a century — and especially in the past 30 years. But, as Huber and Mills write, “Efficiency doesn’t lower demand, it raises it…. Efficiency has come, and demand has risen apace.”

Economists wouldn’t find that concept as strange as it may seem. Efficiency tends to lower costs - and lower costs tends to make people use more of something. Indeed, the numbers bear out this theory - over the past 30 years energy usage has increased at the same time energy efficiency has increased. Modern cars get significantly better gas milage than the gas-guzzling monstrosities of the 1970s - but the usage of gas continues to increase. Huber and Mills’ book is a fascinating look into the economics of energy, and why conventional energy policy tends to make things much, much worse.

For instance, take raising the CAFE standards. More energy efficient vehicles means less pollution and less gasoline usage, right? The problem is that increasing fuel efficiency requires technical tradeoffs in design. Instead of using stronger steel-frame construction, a manufacturer might use lighter aluminum that’s more likely to crumple in an impact. The difference in weight and fuel efficiency comes at the expense of passenger safety. Engineers understand these compromises, but politicians do not.

The economics also don’t make much sense once one gets beyond the surface of the issue. Newer cars are more fuel efficient than older cars. However, more fuel efficient cars can be more expensive, and the costs of increased fuel efficiency end up getting reflected in the sticker price. If someone has to keep running with a 1990s era car with less stringent emissions controls and less fuel efficiency, that represents less benefit than had that person gone to a car that would have been slightly less efficient, but cheaper.

Don’t get me wrong, fuel efficient vehicles make a lot of economic sense, and car prices are quite low now. The idiots who bought that road-hogging Hummer H2 a few years ago are finding themselves taking up the tailpipe every time they fill the tank, and good luck finding a car dealership that would be willing to accept one of those beasts as a trade-in. That’s the market in action - fuel efficiency is a selling point regardless of what the current CAFE standards are.

And that’s the other issue here - gasoline is in the middle of a price bubble. Speculators have driven the price of oil to a level that’s substantially above its true market value. Megan McArdle believes that $30-$40/barrel oil is the equilibrium price, and I’d tend to agree with that assessment. At that price, reserves like the tar sands of Alberta become economically feasible to extract. Canada could easily end up being the next Saudi Arabia at that price levels - except with nutty socialism replacing virulent Wahhabism.

McArdle points out a fact about price levels and commodities:

It is an odd fact of human psychology that if tight supply (or excess capacity) persists for long enough, people will start acting as if the trend line is permanent. It is odd because “long enough” isn’t very long. Five years ago, people were talking about $5 a barrel oil, not realising what is perfectly obvious in hindsight, which is that low oil prices were not a result of being overtaken by a bold new future, but of the widespread recession in Asia that followed upon the 1997/8 financial crisis. Now they’re talking about $100 a barrel oil.

Neither prediction was particularly realistic - while we may be getting close to Hubbert’s Peak that’s only for cheap and easy oil. The Canadian tar sands aren’t cheap or easy, but it will provide us with plenty of energy until we can find an alternate source of energy. Acting in a panic tends to produce poor public policy, and that’s one of the reasons why it’s important not to overreact now.

What are the solutions to our energy problems? The biggest is our lack of refinery capabilities. We’re already running American refineries at nearly 98% capacity, and Katrina will put us much further behind. We need to build more refineries, but environmental regulations have made that nearly impossible. People want gas, but they don’t want a refinery near their house. Furthermore, our ports are heavily populated, and refineries naturally need to be close to where the crude oil enters the country to avoid the costs of shipping crude over land. Unless people are willing to budge, gas prices will remain artificially high.

Furthermore, as always, government adds a significant amount of cost - not just in taxes, but in regulations. A blend of gasoline for use in Chicago can’t be used in Los Angeles - meaning that refineries have to produce “microbrews” of gasoline that can’t be shipped freely across the country. If Los Angeles has a shortage of gas, and Chicago has a glut, you can’t ship more gasoline from Chicago to Los Angeles to make up the difference. That sort of artificial inefficiency makes the refinery situation even worse and dramatically increases the cost of gasoline.

The rise in gas prices is more reflective of poor public policy than anything else, and the continuing calls for more the same will only make things worse. Efficiency helps the consumer, but it doesn’t reduce the consumption of oil. Measures like price caps only ensure that consumption increases and supply goes down - putting gas stations (who only make a miniscule profit on gas sales) out of business and making life difficult for all. The market has already evolved a system for dealing with changes in commodity supplies - prices. The price of gas is helping to drive down demand, which will increase supply, which will eventually lead to market equilibrium. Trying to control this process is like trying to legislate a hurricane.

Over the long term, energy independence lies with clear nuclear power - which is why countries like China are working hard at building a network of clean pebble-bed reactors that can produce massive amounts of power without producing pollution or significant amounts of nuclear waste. Even the French get this right - 70% of their energy is nuclear. An efficient and effective nuclear program based on standardized pebble-bed reactor designs is the Holy Grail of energy policy - when electricity becomes cheap, things like electric cars become economically feasible. Right now all the electric cars in the world would just shift emissions from cars to power plants rather than reducing pollution.

The problem is not SUV drivers, the problem is that we’re caught between our need for energy and our own irrational fears. Forcing everyone into hybrid cars won’t reduce energy usage, it will increase it. Electric cars only shift the source of pollution from gasoline to our already over-extended power grid. We’re trying to have a 21st Century economy on an energy infrastructure that is stifled by onerous environmental regulation and the completely irrational fear of nuclear energy.

We can’t have our cake and eat it too. If we want cheap energy that doesn’t fuel terrorism, we have to start looking at economically and technologically feasible ways of doing it here at home. Rather than force yet another rounds of increased CAFE standards, President Bush needs to be making the case for bringing the US into the 21st Century - creating a network of safe and efficient nuclear reactors that can not only provide our homes with power, but also power the next generation of fuel cell, hydrogen, or electric vehicles.

As always, politicians prefer to make highly-visible gestures that ultimately don’t fix the problem - and more often than not make them worse. We can’t force people to drive hybrid vehicles, nor should we. What we can do is let the market do what markets have always done - utilize the laws of supply and demand to create a natural equilibrium.

John Thune is breathing easier this afternoon as the BRAC Commission has voted 8-1 to keep Ellsworth Air Force Base open. The Commission decided on the merits of the case that the costs inherent in closing Ellsworth would overshadow any cost savings of closing the base. Ellsworth is the second-largest employer in South Dakota and a major economic force in the west-river region of the state.

Thune was feeling the heat after he said that his closer ties to President Bush would help in saving the base. As it happened, President Bush didn’t seem very eager to help Thune save Ellsworth, which led Thune to threaten a vote against UN Ambassador John Bolton. (Although he did do the honorable thing and vote for closure to give Bolton a fair vote - which ended up being obstructed once again by the Democrats.) In the end, however, it appears as though Thune has been given a reprieve by the BRAC Commission.

This means that Thune can breathe a sigh of relief - being a “maverick” in the Senate is hardly a dangerous position (see Chuck Hagel, John McCain, etc…) and the voters of South Dakota will credit him for working across party lines with Senator Tim Johnson and Rep. Stephanie Herseth in saving Ellsworth. South Dakota’s Congressional delegation and Gov. Mike Rounds worked very hard in persuading the BRAC Commission that Ellsworth was important to national security and that closing the base wouldn’t produce sufficient cost savings. It appears as though their arguments were successful.

Losing Ellsworth would be a major blow to the economy of South Dakota - a state with a population of less than 800,000 people. Even though Ellsworth has survived this round of cutbacks, the B-1B Lancer program won’t be around forever. The next major hurdle the state needs to overcome is diversifying and expanding the state’s economy and improving the quality of life in the state. Saving Ellsworth is cause for celebration, but as South Dakota continue to lose population and face the challenge of transitioning from a mainly agricultural state to a more diversified economic base, the real challenges may yet be ahead.

UPDATE: As you’d expect South Dakota Politics is all over this one - Thune’s rightly stating that saving Ellsworth was a group effort, which it was. Thune knows that he’s going to get political capital from this either way, and being able to reach across party lines is something that South Dakota voters appreciate.

ADDENDUM: The Rapid City Journal has a blog covering the understandably happy reactions in Western South Dakota…

ADDENDUM: Red State has even more on Ellsworth and Thune.

As the Able Danger scandal continues to unfold with more witnesses coming forth to say that the Department of Defense did ID September 11 ringleader Mohammad Atta, Captain Ed is doing an excellent job of analyzing the holes in the 9/11 Commission’s Atta timeline. There have been persistent rumors that in early April 2001 Mohammad Atta travelled to Prague where he may have met with an Iraqi intelligence agent by the name of Ahmad Khalil Ibrahim Samir al-Ani. Al-Ani was very likely to have been involved in a plot to blow up the Radio Free Europe transmitter in Prague - a plot that has both Iraqi and al-Qaeda ties. (The Prague meeting has been covered on this site previously.)

Czech intelligence maintains that Atta was in Prague, while the 9/11 Commission has said that the evidence points to Atta being in the United States. However, the Commission’s Atta timeline is full of gaping holes. For instance, they state that Atta’s cellphone was used in Florida during the time of the Prague meeting - which doesn’t mean that Atta was the one using it. The Commission also could not find evidence that Atta left the US and arrived in Prague at that time. However, they assume that Atta did not use an alias to travel, and they assume that Atta wouldn’t have been able to escape detection while in Prague. However, we know that Atta was in Prague on May 30, 2000, but he was only spotted by cameras for a few minutes. Atta did not have a visa to enter the Czech Republic, so he could not leave the transit lounge. That suggests two things: first that Atta (or his contact) knew enough about security in Prague that he could avoid being spotted by security, and second that he had a contact in Prague so important that an airport meeting was advisable — and had to be made on a very specific date and time.

Was that contact the Iraqi intelligence agent al-Ani? We don’t know, and it seems as though the groupthink in the intelligence community has stalled any investigation of these ties. US intelligence has not coordinated with the Czechs to try to get to the bottom of this affair.

Furthermore, Captain Ed also notes some curious connections between Spain and the 9/11 hijackers. We know that Atta met with now-captured 9/11 conspirator Ramzi bin al-Shibh in Spain in July of 2001. However, that meeting seems to make little sense, and even bin al-Shibh doesn’t seem to fully understand why Atta met with him in Spain rather than Germany where their al-Qaeda cell was originally based.

However, we now know that German counterintelligence had busted an Iraqi intelligence ring operating inside Germany at the same time. If Atta believed that Germany was simply too hot to arrange a meeting, that would explain the unusual side trip through Madrid. Spanish intelligence also contradicts the 9/11 Commission’s assertions that the only person Atta met with during his stay in Spain was bin al-Shibh.

The connections are murky, but the blanket assertion that Iraq and al-Qaeda are totally and completely unconnected keep crumbling more and more as new evidence comes to light. We have an Iraqi intelligence officer in Kuala Lumpur during the meeting in which the USS Cole and 9/11 attacks were planned. We have the April 2001 meeting in Prague, then a sudden and unusual meeting in Spain rather than Germany which just happens to coordinate with a major German counterintelligence operation against Iraqi agents.

Does this mean that Iraq and al-Qaeda somehow worked together on the 9/11 attacks. It is far, far too early to make that assertion. What this evidence does is prove that the “official” timeline of the 9/11 Commission is full of holes, and the findings of that body should be treated as suspect. The fact that there are all these open questions is in itself indicative of just how little we know about the circumstances leading up to the September 11 attacks.

It is time to reopen the file on September 11. If Able Danger did ID Atta, that is critical to understanding the multiple failures of intelligence that occurred before September 11. If Atta travelled to Prague, why did he do so. Who did he meet with on at least two occasions and for what purpose? Why would he travel there without a valid visa, and who gave him the information to avoid Prague airport security? If Atta did meet with al-Ani, there’s a major connection between an Iraqi intelligence agent and the ringleader of the September 11 cell. Is it mere coincidence that Atta’s next meeting was relocated at the same time German intelligence was moving against Iraqi spies in Germany? Or is there a connection between Atta, al-Ani, Prague, and Madrid?

It is time that these connections get the scrutiny and investigation they deserve. If the answers end up being far more prosaic than they appear, then at least we’ll know the truth. However, if this evidence indicates a much deeper connection, then the history of the last few years needs to be completely rewritten.

The Washington Post has the text of the proposed Iraqi Constitution that is currently being finalized before being brought to the Iraqi people for a vote. The biggest controversy is with Article II of the document:

The political system is republican, parliamentary, democratic and federal.

1. Islam is a main source for legislation.

a. No law may contradict Islamic standards.

b. No law may contradict democratic standards.

c. No law may contradict the essential rights and freedoms mentioned in this constitution.

This isn’t as bad as it could be. It’s quite similar to the Afghan Constitution which also has Islam as a main source of legislation. The problem is that the three conditions for law are contradictory. Strict interpretations of Islam systematically deny women basic political rights. So what happens then? A law granting women certain basic rights could well be determined to “contradict Islamic standards” but a law that was in accord with shari’a would most certainly not be in line with democratic standards. So, which side wins out in such a dispute?

Furthermore, who is the arbiter of what comprises “Islamic standards”? Is it the courts - in which case the courts would serve as both a religious and a political body, or clerics? If clerics, which ones? Shi’ites, Sunnis, and Kurds all might have wildly different opinions about what constitutes a law that contradicts “Islamic standards.”

As with all documents, the devil is in the details. Would this Constitution ban the sale of alcohol, which is already legal in many places in Iraq? Would it lead to discrimination against women? How will the compatibility of Islam and the law be judged? Expect the Iraqi people to be asking those questions quite often before this document is formally ratified.

2. This constitution guarantees the Islamic identity of the Iraqi people and guarantees all religious rights; all persons are free within their ideology and the practice of their ideological practices.

Does “ideology” mean “religion”? Does this document grant true religious freedom to Christians and Yezidis? Does it mean that synagogues will once again be open in Baghdad? That is the test for the tolerance of a society, and the Iraqi Constitution should make it quite clear that even if Iraq has an Islamic identity, that Islamic identity does not relegate those who are not Muslims to the second-class status of dhimmi. Then again, if no law can exist that contradicts Islam, would that not mandate dhimmitude and the payment of the jizya? But that would also be profoundly undemocratic as well. The Iraqi Constitution needs to make that issue clear, even if it means going back to the drawing board.

Article Seven

1. Any organization that follow a racist, terrorist, extremist, sectarian-cleaning ideology or circulates or justifies such beliefs is banned, especially Saddam’s Baath Party in Iraq and its symbols under any name. And this should not be part of the political pluralism in Iraq.

Now, the question is whether or not the Iraqis will apply this to radical Islam - not only terrorist groups like al-Qaeda, but also radicalist preachers or Wahhabi imams who spread incitement, anti-Semitism, and intolerance.

2. The government is committed to fighting terrorism in all its forms, and works to protect Iraqi soil from being a center or passage for terrorist activities.

That’s going to be the key mission of the Iraqi government for the next several years - if not longer. It is absolutely crucial that the Iraqi government do what they can to fight terrorism in Iraq and prevent Iraq from becoming a petri dish for terrorism. That means fighting off not only the open jihadis but those who train and support them while wearing a moderate mask.

CHAPTER TWO

Article 35

a. Human freedom and dignity are guaranteed.

b. No person can be detained or interrogated without a judicial order.

c. All kinds of physical and psychological torture and inhumane treatment are prohibited, and any confession is considered void if it was taken by force, threats and torture. The person who was harmed has the right to ask for compensation for the financial and moral damage he/she suffered.

No doubt these rules come in large part from the horrors of Saddam’s Iraq, where justice was arbitrary and violent. The Iraqi people have no desire to go back to those bad old days, and so a system that does its best to preserve the rights to a fair trial are critical.

Article 36

The State guarantees:

1. Freedom of expression by all means.

2. Freedom of the press, printing, advertising and publishing.

There is a huge problem here. The United States Constitution reads Congress shall make no law abridging the freedom of speech. The United States Constitution is a document based around the concept of negative liberty — the concept of negative liberty is absolutely crucial for a democratic society. Negative liberty assumes that you already have the right to free speech - a right that is innate to the human condition and not granted to you by the state. That means that the state can’t restrict that right in an arbitrary manner - freedom of speech is and always will be an individual right that should be as free as possible from state interference.

The Iraqi Constitution argues that the state “guarantees” freedom of expression. However, that is a positivist view of government - you have the right of expression because the government grants it. That sort of positive liberty tends not to produce a healthy society. If promises in a constitution meant something, North Korea and China would both be democracies. The only way to preserve individual liberty is to restrict the coercive power of government. The Iraqi Constitution should be based on the principles of negative liberty to ensure that individual freedoms are given adequate protection.

Article 39

Iraqis are free to abide in their personal lives according to their religion, sects, beliefs or choice. This should be organized by law.

The last phrase seems somewhat ambiguous to me, but it seems like that it means that all religious practices that do not contradict the law are permitted. However, assume that interpretation is correct, that means that if a law is passed mandating things such as mandatory prayer times, there won’t be true religious liberty in Iraq. This is a good start, but again, the Iraqi people need to demand clarification where clarification is due.

In terms of individual liberties, the Iraqi Constitution is not yet a document that will effectively protect the rights of minorities, and it leaves more questions than answers. The hard part isn’t drafting a Constitution, it’s making that document work. It took years for the US to get it right, and that includes a bloody Civil War. The Iraqi people don’t need to rush into creating a Constitution. The Sunnis have shown an increased desire to participate in the political process, and the Iraqi people tend to be some of the most moderate and progressive in the Middle East. Ultimately, the fate of the document is in their hands.

This is a good start, but the future direction of the Iraqi people lies in the democratic give-and-take that is the hallmark of a civilized country. The fact that Iraqi Sunnis, Shi’ites, Kurds, Turkomens, and others came to this point without bloody internecine fighting is itself a positive sign. A democracy doesn’t emerge whole like a phoenix from the ashes, it takes significant work and effort over time. However, the Iraqis are taking the democratic road, and while there will be setbacks and stumbles, they have made a commitment towards a democratic, strong, and free Iraq.

UPDATE: Michael Ledeen notes several positive reactions from Italy to the Iraqi Constitution.

It isn’t perfect, but it doesn’t have to be. It is revolutionary in the Arab world for creating a federal and republican form of government with the power vested in the people of Iraq rather than an autocrat or a sovereign. So far, almost no Arab country has anything even remotely like it.

Of course, a constitution is just a piece of paper without the civil society to back it. Iraqi civil society had been systematically suppressed for decades, but with the plethora of newspapers, TV channels, Iraqi bloggers, political parties, and civil organizations, the level of civil society in Iraq is quite possibly the most advanced in the Arab world - which is a very positive sign for the future of Iraq.

UPDATE: Glenn Reynolds has his usual compendium of insightful links.

Robert Novak has a scathing piece on the way in which President Bush has completely screwed over Sen. John Thune (R-SD). It appears likely that South Dakota’s Ellsworth Air Force Base will be put on the chopping block thanks to the BRAC list, despite Senator Thune’s tireless efforts. The White House has shown absolutely no interest in helping Senator Thune despite the fact that he was their hand-picked candidate for the Senate. As Novak explains:

President Bill Clinton saved Ellsworth for then Sen. Daschle during the last BRAC process in 1995, but President George W. Bush was detached in 2005. The resulting closure demolishes Thune’s home state prestige and threatens Republican domination of western South Dakota (where Ellsworth is located) by eliminating 6,000 civilian jobs. Local political setbacks may be reversed, but damage to Thune as a national fund-raiser and candidate-recruiter seems irrevocable. He has been transformed from regular to maverick. Bush might ask himself: Is closing one air base worth this?

BRAC’s defenders say the price is not too high because no military installations could be closed if politics prevailed. Yet, to ignore Thune and consider Ellsworth the same as big-state base closings contradicts the image of a White House that puts politics first. Instead, the Bush team looked like tone-deaf, old-fashioned Republicans interested more in going by the book than winning elections.

President Bush has no problems with being a big spender, so why in the world is he leaving Senator Thune out in the cold on Ellsworth? A base closing in Connecticut is a blow to the local economy. Losing 6,000 jobs in a state like South Dakota with a population of 700,000 is a major loss. Surely there are other uses for Ellsworth if the B-1 Lancer program isn’t enough reason. However, it appears as though the people of South Dakota and Senator Thune are being left completely in the lurch.

I’ve been critical of Senator Thune’s obstructionism, although I give him credit for at least voting to give Ambassador Bolton a fair up-or-down vote in the Senate. However, the treatment he’s received from the White House has been horrendous. Senator Thune represents the future of the Republican party - he’s young, charismatic, and a great political asset to the state of South Dakota. In a state where the Republican Party has suffered the atrophy of years of political power and patronage, Senator Thune was a ray of sunshine.

Now the White House has made Thune look like a fool and failed to give him the support he needed. They asked him to run for the Senate and now they’ve pulled the rug out from underneath him. That sort of action is politically idiotic - the White House should have known better.

The White House needs to realize that leaving one of their brightest stars out in the cold is simply unacceptable. The White House should work with Senator Thune on drafting a plan to either save Ellsworth or work on finding some way of spurring economic development in western South Dakota. Building someone up only to tear them down is not the way a party builds a lasting majority. The treatment of Senator Thune at the hands of the White House has been nothing short of shameful, and it is time that President Bush shows that his support is not confined just to filling a Senate seat.