-Caveat Lector-
http://www.mises.org/fullstory.asp?control=605&FS=California+Dreamin
g
California Dreaming
by William Anderson
[January 7, 2001] When we last left the Socialist Republic of California,
someone had switched off the lights. According to the latest news,
someone has switched them on again as the Democrat-dominated
California State Assembly has supposedly "solved" the state's
electricity problems. Like so many other "solutions" that come from
government, this one further promotes the fiction that government
solves problems that private businesses create. Furthermore, this plan
also encourages the belief that tax increases are justified in the face of
higher costs, but private price increases are evil.
These pages and numerous other publications have explained why the
nation's wealthiest state recently has experienced rolling blackouts
more identified with Third World banana republics. Politicians and their
environmentalist allies have kept new power generating facilities from
being constructed in California, which means electric utilities must
purchase power from out of state producers to satisfy the demand for
electricity. Furthermore, legislators capped the price utilities could
charge California residents at levels well below what utilities must pay
electricity wholesalers for out of state power. The whole scheme was
a recipe for disaster.
While California's governor Gray Davis and the legislature are being
praised for "solving" this problem, the government "solution" needs to
be scrutinized. Even a cursory glance at what the legislature did finds
that California politicians have committed fraud on a massive
level. Furthermore, we can easily deduce that the power crisis was
created not by private enterprise, but by the politicians in
Sacramento. It is also clear that this $10 billion "plan" also extends
the tentacles of state power even farther.
The legislation permits the state to sell bonds in order to pay for long-
term contracts with outside power producers - the very thing that the
legislature forbade private utilities to do. Furthermore, now that the
state is financing this "bailout," residents will now see rate hikes
and higher taxes, of course, to pay for the bonds. What is most telling
here is that the rate increases are being pushed through not to
compensate the private utilities which have been driven to near
bankruptcy by the legislatures policies, but rather to repay the state
government for power purchases.
The arrogance here is breathtaking. Gov. Davis and other California
politicians, along with the "consumer groups" that make up part of the
Democratic coalition, are insisting that the state be compensated for
its electricity purchases. Fair enough, but these same folks are the
ones who demonized private utilities for wanting to do the same - and
pushed through legislation that prevented them from doing so.
Of course, Davis and the politicians do not stop here. Consumers who
use more electricity than a state-approved baseline will be penalized to
the tune of 30 percent. Again, this is something private companies are
prohibited by law from doing.
Furthermore, until further notice California retailers who do not reduce
outdoor lighting during nonbusiness hours will be committing a crime
and will face penalties of $1,000 a day. On top of that outrage, the
state will spend nearly $200 of taxpayer funds to provide financial
incentives to individuals and businesses that buy "energy-efficient"
appliances, equipment, and lighting fixtures.
There is no word yet on whether or not the state will compensate the
private utilities that went nearly $13 billion in debt to finance the
legislature's Rube Goldberg electricity scheme that caused this crisis
in the first place. The present rhetoric coming from the legislature and
governor is that state funds should not be used to "bail out" the
"mistakes" of private companies, even when the state government was
directly responsible for the utilities' plight.
While this package seems quite logical to the political classes of
California and beyond, not to mention their media allies, in actuality it
is an admission of government failure on a massive scale. First and
most important, price controls in the face of high demand will always
lead to shortages. The laws of the State of California could not
supercede the laws of economics. By lifting price controls in order to
compensate state government, the legislature was implicitly
acknowledging that price controls are intellectually and morally
bankrupt.
Second, once again we see the state attempting to force something
upon citizens that they would not want themselves. Furthermore, the
legislators assume that the only way that individuals will cut back on
electricity use (at a market price) is for the state to force them to do
so. Indeed, individuals may not actually cut back on using electricity
even when prices rise, but they will compensate by cutting back on
other things. The legislature assumes that electricity should be
treated differently than other products, which is fallacious. In other
words, the political classes arrogantly assume that individuals do not
know what is good for them and that politicians must decide what is
good and what people can be allowed to possess.
Third, despite the fact that the politicians and consumer groups have
been insisting that price increases in the current situation have not
been necessary, in the end consumers will still have price
increases. However, now Californians have the added burden of
basically bankrupt utilities and the ongoing crises that condition will
continue to create.
Last, the state has become stronger by deceiving the public. Thus we
have more government, less liberty, and an even more ignorant public
than before. It seems that once again, California politicians have come
out on top.
* * * * *
William Anderson (send him mail) teaches economics at North
Greenville College.
--
If Gray Davis were governor of the Sahara Desert, he'd run
out of sand in 10 years. -Mike Gassaway
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