Government changes, but morality has not ‘flip-flopped’

October 1st, 2015

Posted: Thursday, October 1, 2015 8:37 am
By Ford Peterson

In his Sept. 24 commentary, “Why liberals always win, as history’s tide flows left,” James Haught illustrates a common misconception about morality and the proper role of government.

The author points out that an act of sodomy is no longer punishable by prison. Two unfaithful spouses can commit adultery, secure a divorce (without fault), and unwed motherhood has become the norm in some neighborhoods — the public stigmas are gone. We prohibited and then ended the prohibition of booze. Government not only sanctions, but also pays for ending of an “unwanted” pregnancy. Although the commentary fails to mention the subject, we can add that marriage is no longer between men and women exclusively.

He continues, “Within my lifetime, morality flip-flopped. Conservative thou-shalt-nots lost their grip on society. Liberals won — yet it happened so gradually that hardly anyone noticed.”

I strongly disagree. Morality has not “flip-flopped.” Our licentious attitude towards others who commit conservative taboos has changed. Everyone has “noticed.”
Many have reacted to changes to the way our government responds to moral controversy: debates, lawsuits, Supreme Court decisions, fights at all levels of government, civil disobedience, and even riots. Progressives won the legal battles and the right to engage in seemingly errant behavior, but progressives did not “win” in the way that Haught means.

Moral people did not lose the moral argument. Rather, the machinery of government has been compelled to tweak its definition of punishable sin. Our collective history has decided that no man or elected body has the right to enforce the majority’s flavor of morality.

Controversy abounds, but marriage, abortion, immigration, waste, pollution, exploitation, violence against others are not controversial for those with moral convictions. The law only decides what we must accept as allowable, not what is right, useful, helpful, or kind. John B. Finch, chairman of the Prohibition National Committee in 1882, summed up government’s role when he said, “… your right to swing your arm leaves off where my right not to have my nose struck begins. Here civil government comes in to prevent bloodshed, adjust rights, and settle disputes.”

Make no mistake. Morality has not changed, but what we can expect our government to enforce on behalf of the majority opinion has changed. What we can expect our government to include in our children’s training — public school — has changed. The responsibility for moral education rests with parents, teaching by example what it means to be human. Society should never have delegated this important role to government, because the law rightly prohibits government from doing so. The human obligation to train children rests with parents, not public institutions.

Our quest for a “more perfect union,” in the words of Abraham Lincoln, is never ending. We cannot expect any party, or elected official, to enforce, or teach, true morality. All people of our communities, the moral and the immoral, must coexist without hostility. As the evening news bears witness to those living in places without the blessing of our heritage, we can thank all former Americans for creating this place of peace.

Of course, freedoms can only exist with limits — do not cry “fire” in a theater when there is no fire and do not swing your arms in a way to cause injury to others. These principles establish our civil society. Each legal battle that pushed for civil changes did so because the majority that established the rules bruised noses. Humanity must surrender to tolerance, or suffer the consequence and injustice of unresolved conflict.

While our nation has become more tolerant of the licentiousness of others, we must work to maintain strong family to teach morality without government’s help, and continue the moral vigil over ourselves. We must leave it to God — not government — to be our source of moral knowledge and our everlasting judge.

Meeker County May 26, 2015 Work Session

May 28th, 2015

By Ford Peterson, Dassel, MN  May 28, 2015

I welcomed the opportunity to attend the informal “Work Session” on Tuesday and ask questions with testifiers still in the room. It is a breath of fresh air to be able to see this administration taking steps to bring transparency to important issues related to county government, and provide a venue for feedback from the public. The press was missing, which is unfortunate. One disgruntled former employee narrowly escaped being escorted from the room! What drama!

The first topic of discussion was a proposal to add a Social Host Ordinance. Testimony from law enforcement was informative. My opinion, for what it is worth, is that government needs to stay out of the parenting business. Parenting is not a simple matter. A lifetime of “practice” is insufficient time to get it right. Likewise, to expect property owners to enforce laws is unreasonable. Property owners have little control over those who rent property. Tenants enjoy the “quiet use” of the property they lease. Expecting owners to hover down the street hoping to observe tenants in the act of violating “quiet use” is not appropriate. More laws on the books that charge good people with crimes will not improve our quality of life. More ordinances would create work for law enforcement, our courts, and county employees. It is questionable whether employees can be successful in rehabilitating the public’s parenting skill, or a land owner’s ability to control “quiet use” using tools like: violations, fines, criminal charges, and probation.  “Good government” should improve our quality of life.

Next on the agenda was a presentation of the Springstead Organizational Study. It appears that scope of this study was somewhat limited. An attempt to measure service delivery effectiveness was not included in the scope of study. The consultant’s assessment relied on interviews and an employee questionnaire. In my opinion, a “customer satisfaction survey” including only responses from employees falls short of a true assessment of an evaluation of effectiveness in the delivery of services by the county. Imagine how ridiculous such a study would be for a restaurant to evaluate their “customer satisfaction” using only responses from the wait and cook staff!

I welcome the study’s findings, and appreciate the opportunity to attend the meeting. Some actions have precipitated from the study and the public should applaud. Meeker County has a long-list of management issues, which I can only hope the Commissioners plan to address one-day.

Some on-going management issues between the auditor and treasurer are settled and a strategy in process for making it better.

The study addressed issues regarding how the commissioners interact with employees, each other, and the public. Reforms are needed, welcome, and applauded.

The study revealed that no county employee has been subject to a periodic review. Seriously? There has been no annual review of employees? How did this happen? Most private and public firms impose, at a minimum, an annual review of performance for every employee. Even the Board of Commissioners is negligent in this regard. Our Commissioners need to address the need for periodic review and the responsibility for this failure of good management practice placed at the feet of our County Administrator as a gross failure to impose this ubiquitous “best practice” in county administration.

The report was silent on the topic of “case banking,” a notion believed to improve efficient delivery of services. It also would improve how the employees interact with the public. Technology is the key to improvement, which takes time and thoughtful strategy.

No mention of the county’s use of unlicensed workers to manage guardianship issues involving parental and family custody rights. Parental and family rights are serious matters in need of serious reforms. Now I find these were outside the scope of study. Springstead presented no evidence that law enforcement was included in the study. I view this as a missed opportunity to start important reforms.

When asked to evaluate the work session, all I could say was it is a good start towards a very long process of reform. I welcome this as ‘step-one’ towards a new beginning in county administration. Godspeed!

Feel free to comment by clicking on the link below.

Minnesota’s Poultry Industry Solution for H5N2 Influenza

May 3rd, 2015

By Ford Peterson, May 3, 2015

The May 1, 2015 Almanac on KTCA featured an editorial describing a need for a bonding bill to build a H5N2 Avian Influenza testing lab in Willmar. Allow me to make an observation.

Growing government is a serious problem in MN. Budgets are exploding out of control due to the expansion of government services. There are pressing needs. I get it. The poultry industry emergency we are witnessing provides some urgency to organize the turkey industry and minimize the explosive growth of government in the process.

Some have proposed that the Willmar testing lab is a priority. I will leave it to the experts to debate that need. Asking government to solve this turkey industry problem will add another layer of state government to the landscape. If there is a need, characterized in the media as an “emergency,” the best and highest use of government authority is to help the turkey industry to govern itself.

Adding another department to the Governor’s payroll will be permanent unless it is formed as a quasi-government service. These independent farms are too small to build a lab. They are caught off-guard after failing to form a cooperative funded and managed by the industry patrons who own it. This is the reason there are cooperatives. Coop members pay a fee to fund a process of administration that provides benefits to membership. Coop patrons consider the annual dues as a “tax,” but also have representation in the administration. Dairy, fuel, feed, insurance, are typical ag coops. These tightly focused coops serve member needs. Members pay a fee based on production. This is a perfect opportunity to see government assist industry in properly organizing themselves.

Rather than a bonding bill to provide another government service, consider the coop alternative. The cost of setup is insignificant as long as it results in establishing an industry funded and industry governed quasi-government entity that serves the needs of the industry. Properly established, this quasi-government will naturally serve the best interest of the public in the process, and eliminate the need for another department on the Governor’s payroll. There is a call for an insurance pool for producers to pool their risks and minimize losses—another perfect application for a coop.

To add economic elegance to the approach I am suggesting, the cost of turkey on the dinner plate will naturally include the cost of maintaining this quasi-government. Exported product will be properly loaded with these administrative costs. Why should MN taxpayers pay a subsidy for food exported to other states?

Minnesota’s rapidly expanding poultry industry has never formed its own organizing body. If the Industry comes to rely on Minnesota State government to provide inspection, testing, and insurance, this is tantamount to a needless business subsidy that saddles the Governor, and MN taxpayers, with the added obligation of managing the turkey business in MN.  State Government run business quickly grows into a boondoggle that fails to serve producers, consumers, and taxpayers.

Consider an emphasis on industry owned quasi-government cooperatives to solve this turkey industry emergency.


March 16th, 2015

By Ford Peterson, March 16, 2015

What a country! Two billion people live on less than $1/day. Our state government extracted an extra $1/day, per person, and there is no revolution. I guess we are blessed born American and are accustomed to such waste! Headlines read: “You’ve Been Overcharged!” The average Minnesotan paid roughly an extra $1/day. (Editor: $2B divided by 5.5 million people) The debate is over what to do with that money—spend it or return it to the taxpayers.

I can honestly say my life would not be much different with or without that $1/day. Refunding this surplus is of little benefit to my family if they later ask for it back. In truth, spinning taxpayer benevolence at $1/day is a slap in the face. State and local government costs these same taxpayers, on average $4,912 a year. (Editor: 2012 Tax collections of $27.0 Billion and 5.5 million Minnesotans) The overcharge is effectively a 7.4% increase. (Editor: $2B divided by $27B)

Mental note to self… Add this overcharge to the list of other excessive taxes. Social Security and Medicare, for example, has been overcharging workers. The social security “trust fund,” which was rightly set up to be like a Ponzi scheme and not a savings account, was originally intended to extract from workers ONLY what is paid out to handicapped and retired Americans. The rhetorical spin is that the fund goes “bankrupt” unless we pay extra today. Current rates mean that costs and revenues are not in equilibrium until 2033. Add this latest “overcharge” to the gas taxes redirected to fund urban transit. Why must rural residents pay extra so others can have a subsidy for commuting to work? The public foolishly considers Corporate taxes paid as part of grocery and utility bills to be paid by somebody other than the customers. Then there are the Property taxes added to every business and passed on to the consumers they serve. The political rhetoric, common to both major political parties, is offensive to common sense.

Deficits and surpluses come and go. Most Americans yawn with indifference. Tongue firmly in cheek, and an apology to Job… What the government giveth, the government will taketh away.

A windfall refund has political appeal in every household—mine included. With a refund, most households would attempt to use the money in ways that make life more efficient. Pay off debt, or fix what needs fixing. What a concept! Spend the money on true needs and the taxpayers reap a dividend year-after-year in the form of lower taxes!

The Legislature should consider practical efforts to consolidate infrastructure. Pay it forward! Form mutually beneficial alliances between neighboring jurisdictions. Consolidate remote counties (or services they provide) and create a true investment in our future. Why not spend some of it engineering efficiency into our aging infrastructure! Consider making social services, roads, court system, law enforcement, and jails, more efficient! New urban sports stadiums, downtown retail space, and railroads for urban commuters, are of little value to the vast majority.

As morally bankrupt and administratively inefficient as it seems, the Minnesota Legislature indirectly dictates the hourly wages of teachers, medical care workers, municipal workers, and even construction workers. They attempt to provide a rural and urban difference through “equalization,” which is not equal. The practice is social engineering at its worst! Political solutions for engineering problems never work. Union protections are of little value compared to the power of the purse. The rural versus urban equalization process is substantially broken. Administrative rules routinely deny rural workers a wage similar to their urban counterparts, who enjoy higher wages due to back-door equalization subsidies. The subsidy of urban sprawl is abusive and destructive to the health and well-being of those living in rural Minnesota. An urban subsidy by any other name is still an urban subsidy. Our state government holds rural wages artificially low, and urban wages artificially high, by denying parity in equalization. Why should an urban employee receive more? Rural reimbursements and preferential rates on urban reimbursements are unfair and devastating rural MN. This is wrong, and morally bankrupt.

Whatever happens to this latest surplus, demand that our Legislators pay it forward. We need to see real benefits for years to come, or give it back! Deny the urban subsidies and repair the crippling disparity in rural versus urban reimbursements. At a minimum, end the Legislature’s systemic assault on rural wages.

Minnesota Needs A Miracle

January 8th, 2015

A call for Parity in Equalization!

By Ford Peterson, January 8, 2015

The 1967-1971 Republican legislatures moved to enact the first “Minnesota Miracle.” The 1970 Democratic Governor candidate, the then Senator Wendell Anderson, ran on a campaign pledge to make sweeping changes in the way we finance Minnesota’s local government and schools. The voters bought into his pledge by electing him. In 1971, during the longest special legislative session in Minnesota history, debate became law. Passage happened during a grueling legislative special session that lasted from May 25, 1971 until it adjourned on October 30, 1971. 159 calendar days of debate and no government shutdown! What a marathon! Minnesota witnessed a Miracle.

The disparity in the quality of public services was striking when comparing area-to-area. The disparity in services paralleled the disparity in resources across Minnesota. The economic engines that drive the tax capacity of local jurisdictions were, and continue to be, critical to controlling the local levy on real estate that fuels the machinery to provide services to our communities. The competition to attract commercial-industrial development was fierce. The growing need for “Equalization” was strikingly apparent.

Prior to this miracle, local government and our public schools had to levy local property taxes to fund the ever-growing demand for services. Passage of that bill changed the state’s then minimal role in funding local services into what we witness today. Formulas drive the daily “state aid” for students; per-bed-per-day allowances for the fragile elderly; housing allowances and renter’s credit for the poor; rationed health care for the destitute. The demand for money to fund roads and bridge repairs through local levy is putting significant pressure on local governments. To be blunt, many areas are becoming dilapidated with neglect and state-dictated “charitable” demands hijack local funding priorities.

The funding structure has remained largely intact since those great debates 44 years ago. A quick view of your property tax statement will show the result. Many municipal, city, county, school board, “local” jurisdictions are party to the public assessment against real property. The state leaves homeowners alone and goes after the commercial-industrial base to redistribute to the various jurisdictions. Over the years, tweaks to rules and gaming the system have created hundreds of different property classes, complex funding formulas for schools; healthcare; roads; etc. were frozen and reflect the differences in costs between rural and urban jurisdictions 44 years ago! Tweaks in the formulas along the way skew to favor the urban centers—surrendered by rural legislators as a bargaining chip.

What is striking is the way in which urban legislators have been able to achieve geographically favorable reforms to the rules and formulas to “bring home the bacon” to their district—their urban district. There seems to be money for parks, bike paths, rail lines, athletic stadiums, recreational facilities, higher education, and all at the apparent expense of rural infrastructure. The irresponsible budgets of the past have gamed the system to the brink of a rural collapse.

It costs no less to heat a square foot of school in rural Minnesota as it does in urban Minnesota, yet urban schools can receive double the daily state aid per student. There are also reasons why educators entering the profession must often start in rural Minnesota. School boards have no funding to pay for experience—teachers are released before tenure. Elaborate curriculum in urban schools is common—many languages, advanced instruction, science, art, music, athletics, etc. In rural schools, remote students are lucky to see basic language, math, and science. The disparity is striking. Disparity in funding results in the disparity in services.

Rural care for the elderly suffers a tragic formula misfortune. A new roof on a rural nursing home costs no less than a roof in an urban location. The electric bill is often at a higher rate in a rural area. Wages are minimal in a rural area—intentionally driven low by an urban controlled legislature with their thumb on formula to deny rural money.

If you want more of something, subsidize it. If you want less of something, tax it. Rural MN is vacating to the metro each day that passes. Why? Human existence in Minnesota’s modern funding mechanism demands the flight to subsidized urban sprawl. Are these people drawn to the metro or fleeing the wastelands of the prairie? Do we need wider roads and bigger trains to carry commuters to their urban jobs or a do we need to maintain rural MN so the jobs can move to the country?

The legislature is frequently funding research projects. How about this research project:

A comparison of income by zip code to sales tax collections by zip code and compare those disparities to the changes in property tax capacity over the years. The changes in commercial tax capacity are dramatic. Minnesota leadership needs to do regional analysis. The past 40 years has brought significant change to rural Minnesota. The ‘big box’ retail stores locating in regional centers are systematically starving small communities out of their tax capacity. To add insult to injury, residents of small communities are traveling to regional centers to deposit a handsome ransom in the form of a local option sales tax. Tax capacity has moved from deep-rural to mid-rural communities. Not only does the loss of tax capacity decrease the denominator causing an increase the local levy mil rate, there is an assessment paid by deep-rural residents to regional communities. Why? Without a corresponding change in the funding formulas, these changing trends are robbing deep-rural communities of their only access to money for repairing our aging infrastructure—local levy.

As of the date of this editorial, Minnesota Department of Revenue collects 56 different local option sales taxes. Local options as low as 0.25% and up to 7% additional, most often 0.5%, are becoming common. With a couple exceptions, like Lanesboro and Clearwater, all local option jurisdictions are either major metro or regional retail dynamos. The infrastructure within and the services provided by those regional centers do not support the local communities of many of their customers. This shift is harmful to the health and wellbeing of the deep-rural communities patronizing those regional centers.

Originally called “Equalization” in the formulas, today this is a call for “Parity in Equalization.”

Meeker Sheriff Candidate Jon Thoma

October 15th, 2014

October 15, 2014
By Ford Peterson
Dassel, MN

The upcoming Meeker County Sheriff’s election is important. For the first time in decades, the voters of Meeker have the opportunity to elect a Sheriff from two candidates, neither of which have an “Incumbent” moniker.

I make it no secret that I have supported Brian Cruze in this election. I also make it no secret that I have concerns about Jon Thoma becoming our Sheriff for the next four years. The controversy and rumor swirling about Thoma’s departure from Sacred Heart makes this a concern for every citizen in Meeker.

The Sheriff holds a special place of trust in Minnesota state law. The office of Sheriff is empowered with resources and entrusted to enforce our laws and protect our people from those who choose to break it. Our Sheriff must be a steadfast advocate for the rule of law and the protection of due process. This advocacy must start with good judgment and high moral character.

Jon Thoma becoming Sheriff is of great concern to me.

I took the time today to document just one of the many rumors by obtaining the Renville County Sheriff’s report regarding the apparent suicide of a Mr. David Wade Reiten on December 3, 1991 in Sacred Heart, MN. Jon Thoma was the Chief of Police for Sacred Heart, one of the first on the scene, and a frequent visitor to the home of Mr. Reiten’s estranged wife. The circumstances are horrific. The descriptions of the scene are offensively graphic. But many facts become known after an investigation into the circumstances surrounding this incident. Unfortunately, many questions remain. There is conflicting testimony. Most unfortunate is that the investigator failed to take a formal statement from Mr. Thoma. It is apparent on reading the investigator’s interrogation of the estranged wife that the Chief Deputy and Mr. Thoma had exchanged dialog that never made it to this report. Of particular note is the Chief Deputy’s statements during this same interrogation.

Grave concerns…

The report is 72 pages long. One of the most important elements of this report are in Thoma’s own words the day of the incident, a February 1992 interrogation of the estranged wife, and a friend in January 1992—all of which appear towards the end of the report. Comparing Thoma’s report to the investigator’s report of first-hand testimony collected from those at the scene and interrogated by independent investigators during the following 3-month investigation.


You can find a PDF of the Renville County Sheriff’s report here:



You can find my notes as to how I obtained this copy here:


Al Franken promotes lower wages for employees

August 16th, 2014

By Ford Peterson

Senator Al Franken boasts “3.5 Million Jobs.”

The truth: Al Franken is actually damaging wages! This is basic economics!

Think about it. If you are a welder, machine operator, truck driver, corrections officer, (pick any skilled occupation), your wages are determined in an established marketplace. If wages are better than average, it is because special skills are in high demand. An employer has to pay higher wages to keep and attract workers.

Read that again…

An employer must pay higher wages to keep and attract workers when those skills are in high demand. That is, until Al Franken skips econ 1001, lines his pockets with campaign contributions, and moves to destroy middle class wages! Employers (read—wealthy employers) likely provide Franken with campaign contributions while demanding cheap labor. Al Franken is quick to grab the money and promote low pay for workers! It is clear that Al Franken’s rhetoric deserves a big “thank you” from wealthy business tycoons as Al Franken works to destroy middle class wages.

Think about it… Consider the worker who makes $30/hour today. What happens when Al Franken floods that occupation with trained $12/hour 25 year olds? Are experienced workers more likely, or less likely, to enjoy overtime wages? Layoffs of higher paid experienced workers and a reduction in overtime pay becomes more likely because of Senator Al Franken! As the employer picks up newly trained workers (thanks Al) at lower wages, there is pressure to make experienced workers disappear! Some workers may even experience seeing his or her own wages slashed! It will be far cheaper for the employer to sign up readily available newly trained low wage workers (thanks Al) than pay the current work force overtime. There is no longer a natural upward pressure on wages when Franken starts flooding the market with cheap labor.

Meanwhile, these very same workers vote for this fool as they fall prey to “3.5 Million Jobs” rhetoric. Apparently, these same voters skipped the same Econ 1001 class.

Anyone voting for Al Franken is voting to destroy wages in America!

Meeker County Sheriff’s Illegal Activity Exposed

January 21st, 2014

Meeker County Courthouse, Litchfield, MN
Statement delivered to County Commissioners on January 18, 2014, at 10AM
(click on link above to download PDF version)

Thank you for this opportunity to address the board. My name is Ford Peterson, Dassel Township. I am speaking on behalf of a group of Meeker citizens, Lori Musolf, Litchfield, Chris Schiroo, Greenleaf, and Ben Smith, Grove City.

With the exception of Commissioner Huberty, the November 2012 election selected you in preference over your predecessor. The reasons for voter discontent would require the rest of the day. Today, I want to focus on just one of those reasons and express my concern that nothing has changed.

Each year the office of our State Auditor performs an audit to provide us with assurance that your activities are appropriate—and legal. At the December 2012 Truth-in-Taxation hearing, I complained about the former commissioner’s failure to recognize and approve the annual audit for two consecutive years. As of today, make that three years. The previous board failed to discuss audit findings in public and failed to approve or rebut the auditor’s work. Administrator Paul Virnig informed me at that time that there is no statutory requirement to discuss or approve the audit. THIS board knows that the lack of statutory requirement does NOT take precedence over good business practice and the exercise of good judgment whenever possible. Yet this board continues to ignore good business practice by failing to discuss and approve our State Auditor’s 2012 findings issued last September.

On January 6, 2014, the Third Judicial District of Minnesota released a “Partial Summary Judgment Order” in the case of various citizen plaintiffs vs.Wabasha County and other parties. In that order, Judge James A. Fabian ordered:

3. Plaintiff’s Motion for Summary Judgment is hereby GRANTED. The Safe Driving Class operated by the Wabasha County Sheriff’s Department is not legally authorized under Minnesota law and Wabasha County and the Sheriff’s Department shall be permanently enjoined from conducting all activities related to the Safe Driving Class until the program is legally authorized under Minnesota Law.

In our State Auditor’s 2012 Meeker County Audit report, issued last September, we find a recommendation on page 129 about County Attorney Spector’s Driver Awareness Class. On page 130: Other Findings and Recommendations:

Effect: The County’s Driver Awareness Class is unauthorized and in violation of Minn. Stat. §169.022.

As of yesterday, the Meeker County’s website contained links to a brochure for a similar class so I must presume that this illegal activity continues today. It has come to my attention that this class, characterized by one attendee as a discussion about the MN Vikings, confiscates $75 from its victims and illegally diverts public funds into the Sheriff’s budget. County Attorney Spector’s brochure describes the program as part of his office’s “Diversion Program.” What portion of the Sheriff’s budget contains the plunder? How many victims are there and how many dollars have been “diverted” from the public? It appears that by continuing to offer this “safety class,” Captain Thoma and Attorney Spector are essentially using public funds to buy votes in the upcoming 2014 election this November.

This board needs to institute immediate reforms, refund 100% of the victims of County Attorney Spector’s “diversions,” and provide an apology to the victims. I believe Sheriff Norlin, Captain Thoma, who administrates the program, and County Attorney Spector, should apologize for this county’s lack of good judgment.

This board must choose to act on the valuable recommendations arriving last September as part of the auditor’s annual report. Meeker expended considerable cost to obtain the auditor’s professional and independent opinion. The people deserve to benefit from the findings. The auditor described an abuse of power. This board must reform the practices of the former board, act on the auditor’s recommendations, and reform the Sheriff’s illegal activities.

Sustainable Alternative Energy

August 8th, 2010

By Ford Peterson  ©2010 (1)

The “free energy machine” (2) is an urban legend that persists today.  Some believe you can get 80 MPG out of an Olds V8 if you use the right carburetor.  Did you know city buses can be designed to run on water?  The 2010 election is filled with urban myths just as fantastic.  The notion of subsidizing business incubators to create alternative energy jobs defies the laws of physics—and economics.  Until the candidates start talking free market solutions, we’re headed for a long list of stone-aged subsidized tax-and-spend disaster programs!  Can a state infuse money into the market to create jobs and solve our energy problems too?  While the candidates are not kidding, like those elusive buses running on water, it is whimsical thinking.  Unfortunately the public is eager to buy-in to a plan—any plan—that gets us heading into a new energy direction.  This is a correct way for government to promote a sustainable alternative energy economy, heaping baskets of money into the street is not one of them.

Do you want “Free” or “Managed” market economics to rule?

The 2010 election speeches contain campaign rhetoric like “business loans” and “education grants” and “incentives” for “renewable energy jobs.”  They try to make you feel warm all over in hopes you will vote for their plan.  The truth?  The energy industry understands that the vast majority of alternative energy jobs are going to be Chinese and German jobs (they own the viable technology).  The quickest way to screw-up what’s left of our capitalistic system is to begin government subsidy of jobs, business income, or revenue—even if it’s for a well-meaning purpose.  Opening the fiscal spigots will cause love and treasure to pour out-of-our-pockets and overseas unless this is done correctly.  Government / Industry entanglements have repeatedly created caustic industry dependencies and economic disasters for those involved.  Many ethanol-from-corn plant investors have found that their original $10,000 stock certificates make great campfire starters. 

Managed economy methods have been tried repeatedly over the years and each time those pencil-pushing-smooth-talking-financiers-of-folly figure out how to game the system into redirecting government’s best intentions into their own pockets.  Attempting to “manage” problem using direct payments in exchange for initiative is simply bad policy.  Ask any sod-busting farmer how their annual cash payments are viewed by the public—most will admit that it’s public welfare for millionaire land barons.  A far better approach would be for people to pay what the food, fuel, or fiber is actually worth.  This is the free market approach.  When government properly exerts its authority to protect the free market from monopolistic abuse, or cannibalistic behavior (more on that later) the market will manage itself and find its own beneficial economies.  Proper structure to the market will mean that society benefits while lining the pockets of the innovators and entrepreneurs willing to bet their treasure on tomorrow using today’s ideas.  The state’s treasuries benefit from the revenue and society benefits from robust thriving markets (read: JOBS).  The best part?  Not one red cent is recorded as coming from the state!

A double helping of “free markets” please!

Before being asked to leave the unemployment line to queue up for your dark-gray government-issued jump-suit uniform with your name on it, you should decide to vote for:  “Maybe the free market approach would be best.”  Great!  That’s real progress!  Vote correctly in November or we’ll be set back 4 years!  And who should receive your support?  I don’t know.  None of the candidates on any side or from any party are making sense on this topic.  I can’t tell you who to vote for.  But I can tell you what they should support—a free and robust alternative energy marketplace.  I can also tell you what the alternative energy market should look like.

The “Feed-In Tariff”(FiT)

Wikipedia has a great description.  While I do not endorse the described approach 100%, I do endorse the concept, which needs a uniquely American solution.  The method is often seen as part of an energy policy with respect to the electric grid.  The technique needs to be applied to all energy sources and uses.

“A feed-in tariff (FiT, feed-in law, advanced renewable tariff, or renewable energy payments) is a policy mechanism designed to encourage the adoption of renewable energy sources and to help accelerate the move toward grid parity.

What does it mean?  It means an energy policy designed to price the consumption of power equitably across all users of said power.  The actual structure of the policy will depend on the category of energy consumption and the fuel source.  Valuing all energy consumption as being equal is not appropriate.  For example, heating your house has different options than powering your car.  Consuming aviation fuel does not equate directly to powering electric lights at the office or at home.  Frankly, one round-trip to the Orient can consume more petroleum (per person) than most families consume in their lifetimes.

I get the need to avoid monopolies, but how can an economy exhibit “cannibalistic behavior?”

If the consumption of gasoline actually cost $2.69/gallon to collect, refine, distribute, store, consume, provide profits to investors, pay tax to governments, mitigate caustic clean-ups, pay the medical costs associated with related pollutants, and pay for the wars (valued in lives and treasure) needed to sustain its use, then there would be equity among the users of gasoline.  If you read the list of ‘costs,’ you will notice that several line-items are not included in any standard cost-accounting formula.  Most notably, the last three items are Humvee-sized loopholes in the system.  “Cannibalistic market behavior” is a term I invented to describe how the markets consume the consumer by foisting hidden costs indirectly on society (the consumer).  In some cases these hidden costs dwarf the actual price paid by the consumer for the fuel. 

Does the cost of gasoline include the cost of accident clean-up?  While some would argue “Yes.”  I would argue that the taxpayer’s support a clean-up by subsidizing the tax deduction of all these costs as common “operating costs.”  Tax law generally prohibits the deduction of government penalties (such as traffic tickets for speeding) but most of BP’s costs are “ordinary and necessary” costs of doing business.  BP likely intends to deduct 100% of their costs associated with the Deep-Water Horizon disaster and get 35% of those costs refunded in the form of cash payments of tax refunds.  My guess is they will land a few choice tax credits along the way for “energy” and “innovation” and “job creation” and who knows what else the D.C. purveyors of pork will provide.  Did the users of gasoline pay for these subsidies?  Some of them did—every American gasoline consumer will pay for 65%.  But every American will pay 100% of the remaining 35% in tax bennies courtesy of your elected representatives in Washington D.C.

What about the degradation in the quality of life caused by pollution created while burning the fuel (gasoline, or diesel, or coal, or wood, or garbage, or nuclear fuel)?  Do the users of gasoline pay to have all the pollution damage to health and property?  Not at the pump!  How about cancer or birth defects?  Did you pay for those at the pump?  Nope!

Most would argue that if it were not for our dependence on foreign oil, we would not be leaving our children’s blood in the sands of Afghanistan, Iraq, Kuwait, or elsewhere.  We would not be spending our children’s otherwise good fortunes using bone crushing deficits.  Did you pay for these costs at the pump?  Nope!  What would have been added to the cost of boat gas you used this weekend if it had included the value of this week’s Afghanistan casualties?  What’s a Marine Private worth to you?  Put a value on that!  Even if you split the difference with the value determined by his widow, you would still have to sell that boat to pay the bill.

Fifth grade economics lesson:

A fifth grader can understand that there are indirect costs associated with the consumption of traditional energy sources (substitute any caustic chemical reaction based fuel source: petroleum, coal, shale, atomic, wood, garbage, etc.) and some of those costs have been foisted on society.  These costs are HUGE and very real.  And they are measurable (with the exception of the loss of a Marine Private, which should be determined by his widow). 

Feed-In and Tariff is not perfect, but it’s a reasonable start.

Feed-In and Tariff should use scientific analysis, along with responsible economic costing, and a healthy dose of common sense thinking, to determine the real price to be placed on consuming a gallon of 100 octane aviation fuel.  Determine the cost of coal by including the cost of fixing (or at least preventing) the damage to our beautiful Minnesota waters caused by acid rain.  Recognize the cost of storing spent nuclear fuel rods for eternity when pricing electricity produced from the destruction of uranium by fission.  Recognize that the cost of refining iron ore into 5,000 lb of steel to make that 5 door SUV entails more energy than that vehicle will consume in the 1st 100,000 miles of its life.  Add a Tariff to each caustic fuel to properly value these consumables and bring parity to the “grid” of the fuel of choice.  Use the revenue to lower the cost of alternative energy sources by reimbursing the favorable producer for the added costs of being “green.”  Include renewable energy in the analysis but include all costs, direct and indirect.  When measured at the meter, or the pump, or the mine, an energy policy can use a free market to launch viable solutions to our economic and energy problems.  The market will determine what’s best if the system is established, monitored, and enforced.  In the end, we all win.

“On budget” versus “over time.”

Candidates seem to feel that they can spend the public’s money to subsidize activities designed to redirect our energy use.  Yet more fanciful thinking.  Private money will sign-on and invest treasure when the ideas make sense.  T. Boone Pickens abandoned his wind farm hopes.  Without public subsidy, the notion simply fails to cash flow.  Properly structured, FiT can provide the long-term element desperately needed to justify many alternative energy ideas because it de-politicizes the process.  The state’s budget will not be a factor in the equation.  A wind farm can take 15 to 20 years (or more) before it ever produces a nickel of net income.  Meanwhile, design weaknesses, damage caused by lightning or storms, or poor maintenance procedures can limit the life of these installations, making them a risky investment.  Photovoltaic installations (solar cells) deteriorate over time (loss of 20% at 10 years is not uncommon) and they are expensive.

Any orchestrated plan that involves a legislature or congress to appropriate future funds is simply unworkable.  Government cannot be a trusted partner.  A better approach is for the utility to contractually guarantee cash flow for the future production of energy.  Viable installations should be eligible to receive a binding contract on future production.  Produce the electricity and guarantee a payment for (as an example) 20 years.  This makes the system predictable while providing a preferred method of production.

An example is in order.  Let’s consider a grid-tied 20 KW photovoltaic (solar cells) system.  Let’s assume an initial investment of $60,000 with an expected life of 20 years.  Let’s further assume said installation can produce 60,000 KWH per year.  The only other operating costs are repairs ($1,000/year) and insurance ($500/year).  Expected market rate for electricity is $0.07/KWH.  Return on investment is 8%.

If the utility creates a transfer payment of $0.0651/KWH ($0.07 plus $0.0651 for a total of $0.1351) to the producer of solar power, and initiates a target of 20% energy from solar PV cells, the assessment on all users of the grid would be $0.013/KWH, an increase of 18.6%.  In the event the array lasts longer than 20 years, 100% of those remaining profits would go to the investor since the transfer payment would have returned 100% of his equity, with 8% interest added.  (assumed tax rate = 0%)  Drawback to this is the initial investment of $60,000.  (I’m ignoring the federal and state tax credit subsidies for this discussion.  What I’m offering here for discussion is an alternative approach to the current system.)

What if that initial investment is reduced to $22,500?  Borrow $48,000 at 6% for 15 years, spend $60,000, but expect a return of 8% over the 20 year life?  The additional total cash outlay is increased from $60,000 to $70,500 but the extra equity is needed to cash flow the operation in years 6 though 15.  The transfer payment would be $0.0628%.  A goal of 20% energy from PV suggests an assessment of $0.0126/KWH, or a 17.9% increase in the rate.

Now these cash flows are based on reasonable assumptions I invented for illustration purposes.  An excel spreadsheet is available HERE.  Perhaps after public debate it’s decided that a 2% return is all society is willing to support.  Using debt and all other assumptions being the same, the new transfer rate for 20 years would be $0.0455, or a surcharge of $0.0091/KWH, a 13% increase.  For most homeowners, that suggests an annual assessment of $171, or about $14/month.  Even more impressive is that the total cash investment drops from $22,500 to $16,000, making this a much more plausible facility.

Similar cost accounting methods can be applied to coal, nuclear, wind, tidal, etc.  The winner is the energy consuming public.  What is important is that the utility could be compelled to enter into a 20 year contract to guarantee a rate.  In the event technology develops to out-perform the contracted method, the investor is still able to recoup the initial investment by completing the project and carrying it the full expected life of the system.  If done properly, this contractual arrangement can facilitate bank financing.  It also eliminates the politicians from the equation.  Future budget blow-ups will not prevent the producer from being paid.

It is the long-term nature of the guarantee that introduces the magic.  Current political rhetoric, if executed, puts the investor square in the middle of every year’s budget battles.  No investor will be willing, and no banker will finance, when the only benefit available is a future government grant.

Net Metering versus Feed-in Tariff (FiT)

Minnesota is a net metering state.  This means that the power utility must buy, at the retail price, whatever power produced by the consumer over-and-above what is used.  While this produces a side-effect of making tax-free income, it also ensures the consumer that they are, at a minimum, receiving retail values for the excess electricity produced while continuing to pay retail market rates for what they consume. 

Under a typical FiT arrangement, a consumer producing power using preferred methods (solar, wind, etc.) would sell all power produced at a premium rate to the utility.  What power can be consumed is charged back at normal retail rates.  In my example, a 60,000 KWH household would receive approximately $0.13/KWH or $7,800/year, and spend approximately $0.08/KWH or $4,800 per year in electricity costs.  The excess would cover repairs, original investment, etc. (3)

In Summary:

Dialogue involving tax credits, job creation, and education grants, are not viable alternatives to developing a workable Feed-in Tariff program for not only the electric grid, but other forms of energy consumption.  Using a free-market approach is a preferred method of bringing meaningful changes to our energy needs.  De-politicizing the industry will go a long way towards eliminating the financial risks associated with government / industry partnerships.  Providing long-term solutions augmenting production is preferred to subsidizing initial installations, which can later under-perform for any one of a number of reasons.  The notion of ‘grid parity’ should be emphasized for not only the electric power grid, but all forms of energy consumption—including transportation.

 1 This document can be quoted, copied, and published granting proper attribution.


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