The notorious Amity Shlaes, the Bloomberg scribe  who drives liberals around the bend with her thinly sourced argument that the New Deal was a failure, has come out boldly in favor of at least one form government stimulus spending. In a jaunty column today, “Sin City on the Potomac Wounds Nevada’s Bordellos,” Shlaes faults President Obama for driving business from that engine of American economic recovery, the capital of casino gambling.

No, its not parody. Shlaes, who can be fairly classified as a libertarian neocon, is having fun tweaking the pieties of the liberal left and Christian right in the service of Las Vegas business interests who are complaining to Politico and any one else who will listen that Obama’s let’s-get-to-work exhortations prompted TARP-subsidized Goldman Sachs to cancel a scheduled convention in Sin City. As a quipster, Shlaes is amusing. As an economist, her ideas are half-baked, as this contorted passage reveals.

Government pork tends to produce junk gross domestic product, because even really smart government doesn’t allocate capital optimally. To dismiss what GDP Nevada generates as junkier than what Washington might generate is misguided, since Nevadans most of the time probably know better what investments make sense.

Her complaint that the president effectively discouraged the recipients of TARP money from scheduling Nevada getaways implies that taxpayer money spent in Sin City is as productive as money spent anywhere else, so why be a stick in the mud? Shlaes isn’t exactly contending that spending taxpayer money in Nevada whorehouse is as worthy a way as any to drive economic recovery (though her headline implies as much), but she is saying you’d have to be liberal to think its smarter to spend taxpayer money on solar power than on gambling junkets. At least she’s right about that.

Watch out for simplistic reporting on a new study on the impact of climate change legislation on the Midwest.

So far, reports on the study are highlighting claims that cap-and-trade, an idea that would monetize the cost of emitting carbon, would cause huge increases in electricity rates. The Milwaukee Journal-Sentinel claimed rates in Wisconsin “could rise as much as 63 percent from 2012 to 2030.”

Here’s how Platts, an energy industry publication, summarized it.

Midwestern states could see their electricity rates increase by $33 billion in 2030 to pay for greenhouse gas reductions, according to a report from a utility released Wednesday.

What everyone has failed to report is that the study was prepared by Bruce Edelston, a utility company veteran and John McCain supporter who spent the last seven years advising the Washington lobbyists of Southern Company, which owns the three highest carbon emitting power plants in North America. Edelston’s background doesn’t necessarily discredit his findings but it should make reporters cautious about his conclusions, but his method raises some questions about its reliability.

Edelston’s general finding is indisputable. Consumers will pay higher rates under the kind of cap-and-trade schemes proposed by President Obama and Senator McCain (R-Ariz).

What is misleading is that the utility rate figures are based on Edelston’s extrapolation of the effects of a cap- and-trade bill proposed last year by Sen. Barbara Boxer (D-Calif.) in which none of the revenues from the auctioning of emission permits is returned to consumers, as is the case under Obama’s plan.

Obama’s plan, as outlined in his budget here (PDF p. 21), calls for returning most of the auction revenues to consumers via a tax credit. The leading cap and trade proposal on Capitol Hill, a draft bill from Rep. Henry Waxman (D-Calif.), leaves open the possibility of allocating emission permits to utilities for free. In other words, the Obama and Waxman plans would not result in such dramatic results for consumers.

I’ll be reporting in more detail on Edelston’s report in the future. It needs careful analysis, not careless or manipulative reporting.

Editor’s note: The original version of this post incorrectly stated the coal industry group, American Coalition for Clean Coal Electricity authored the cap-and-trade study cited. The group is not affiliated with the study or its findings. We regret the error.

The prospects for congressional approval of climate change legislation this year have dimmed but not disappeared. Yesterday the Senate voted against using the filibuster-proof reconciliation process to consider climate change legislation by a 67-31 vote and the House-approved budget did not include cap-and-trade in its budget reconciliation provisions.

That makes it more likely that cap-and-trade legislation, now being drafted by Rep. Henry Waxman (D-Calif.), will have to win 60 votes in the Senate to become law. With Democratic qualms mounting (see Aaron’s post yesterday on Majority Leader Harry Reid’s meeting with coal state senators) and potential Republican supporters hanging back, 60 votes seems to be a tall order.

But cap-and-trade advocates are not deterred, notes The Washington Post today, with this significant aside: “Administration officials support leaving the door open in the budget blueprint when it emerges from conference committee for a final vote this month.”

President Obama might still ask congressional leaders to take the more partisan route to get climate change legislation passed this year. Keeping the threat of reconciliation on the table has its uses. It was only after Office of Management and Budget director Peter Orszag’s threat of reconciliation that GOP Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) reiterated their support for cap and trade. Sen. Benjamin Cardin (D-Md.) told the Post “a lot of us don’t want to give up without a fight.” Reconciliation remains a weapon in that fight.

That’s perhaps the boldest declaration in the joint statement from G-20 world leaders meeting today in London.

The communiqué, which pledges $1.1 trillion in global stimulus spending and tighter supervision and regulation of the global economy, did not commit the leaders to another round of stimulus spending as President Obama wanted, nor cross-border financial regulation as Germany and France hoped.

But it does announce a new tool of transparency: the formal blacklisting of tax haven countries that have not agreed to international information sharing agreements. Fast money operations like  AIG haved use these countries to claim they don’t have to pay  U.S. taxes. Estimates of lost tax revenue range from $40 billion to $123 billion annually, according to recent Treasury Department study cited by The Wall Street Journal. The communique strengthens Obama’s efforts get capture these revenues to pay for his ambitious domestic agenda.

Robert Pear’s story in today’s New York Times on Democratic health care plans exposes the beating heart of the congressional debate over President Obama’s reform proposals. Overall, the administration’s campaign to overhaul the health care system is going well, Pear reports, with the White House “displaying a surprisingly light touch,” as it herds disparate constituencies toward consensus. The rub for Republicans is Obama’s insistence on a public insurance option to compete with private plans.

The key point in Pear’s reporting:

Lobbyists and Congressional aides have discussed a possible compromise: Congress would authorize a new government-run insurance program, but it would come into existence only if certain conditions were met — if, for example, private insurers failed to rein in health costs by a certain amount after several years.

This is the negotiating point to watch. As managed care consultant Joesph Paduda points out, fears that a public plan will crowd out, and eventually eliminate, private insurance are overblown. If the Democrats buy into this insurance industry compromise, the drive for fundamental reform will falter.

All 41 Republican senators have signed an open letter asking Democratic leadership not to use the filibuster-proof reconciliation process to pass health care reform, a sure sign that the threat of reconciliation, which would allow the Senate to pass a health care reform bill with 51 votes instead of 60–issued again yesterday by Secretary of Health and Human Services nominee Kathleen Sebelius—is working for the Democrats.

The Weekly Standard (PDF) has the letter, which includes the usual minority party talking points: Reconciliation “would be a tremendous disservice to the country” that would “restrict the ability of Senators to amend and perfect” a health care plan, and so on.

The reality is that faced with possible exclusion from health care negotiations, GOPers have to at least pretend to be open to compromise. The threat imposes a choice: If Republicans don’t want a simple majority vote, then two more Republicans have to show they are serious about “amending and perfecting” health care by making real concessions and signing on to an Obama plan. Then the threat goes away—and the country gets health care reform. If all the Republicans choose the partisan route (as they did on the stimulus bill) then guess what? They’ll get the dreaded partisanship of a simple majority vote on health care—and the country gets health care reform.

Either way, Obama wins. Which is why Republicans are objecting more and more.

Secretary of Treasury Timothy Geithner’s credibility problems aren’t going away.

Elizabeth Warren, chief of congressional oversight panel for the Troubled Asset Relief Program (TARP), testified today that she still had not received any explanation of what TWI’s Mike Lillis called “Treasury’s $80 billion mistake” back on Feb. 6. In a statement submitted to the Senate Finance Committee today, she said “the appropriateness of the overpayment remains, at best, unresolved.”

The rest of Warren’s testimony about TARP was hardly more reassuring. As for the question, “What is Treasury’s strategy?” she said, “Congress and the American public have no clear answer to that question.” Treasury has also failed to ask basic questions about the Term-Backed Asset Loan Facility (TALF), its plan to partner with private investors in buying the bank’s so-called toxic assets, she said. “Until we receive detailed and accurate information, the panel cannot perform its oversight function,” she said.

No surprise that Geithner did not allow Neel Kashkari, head of Treasury’s Office of Financial Stability to testify. His absence left ranking minority member Sen. Charles Charles Grassley (R-Iowa) feeling “disappointed and frustrated.”(PDF). He’s not the only one.

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Though stymied on the Employee Free Choice Act, which would make it easier for workers to form unions, organized labor is about to claim a big consolation prize: the massive application of a law guaranteeing “prevailing wages” for hundreds of thousands of construction workers hired under President Obama’s economic stimulus program.

Secretary of Transportation Ray LaHood is now preparing guidelines that will expand the scope of the 1931 Davis-Bacon Act, according to a department spokesperson.

“In some cases, the Davis-Bacon prevailing wage provisions will apply to federal construction contracts in the same manner as they currently apply,” said spokesperson Dolline Hatchett in an email. “In other instances, the prevailing wage provisions will apply to certain projects that may not have been subject to the Davis-Bacon provisions in the past.”

LaHood’s action will put a floor under wages paid for the more than 678,000 construction jobs (pdf) that the White House estimates will be created by the end of 2010. It also marks a sharp reversal of U.S. policy on public works projects under President Bush, who in September 2005 suspended Davis-Bacon in the Gulf States after Hurricane Katrina.

“This is good news for American workers,” said Tom Owens, director of communications for the Building Construction Trades Department of the AFL-CIO . “Everything in the stimulus program is covered. Congress was very clear about prevailing wages.”

Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce, calls the Davis-Bacon standards “complicated and counterproductive” but conceded opponents have limited means to fight the measure because the stimulus legislation is so explicit.

The legislation, approved by Congress and signed by President Obama last month, mandates that all “laborers and mechanics” on projects “funded directly by or assisted in whole or in part” by the stimulus program have to be paid at least as much workers on similar projects in the same area, as determined by the Department of Labor. (pdf)

With $49.3 billion for transportation construction, $5 billion for home weatherization projects, and billions for other building projects, the application of Davis-Bacon standards will have rare historical impact.

“This is huge,” said Ross Eisenbray, vice president of the Economic Policy Institute, a pro-labor think tank in Washington. “The only uses of Davis-Bacon comparable to the stimulus bill are the Defense Highway Act of 1956 which created the interstate highway system and the New Deal programs of the 1930s.”

The stimulus “is the perfect example of why you need Davis-Bacon,” Eisenbray said. “If you didn’t have it, the contractors bidding for all this federal money could undercut prevailing wages in any given area by 20-30 percent, and they could get the contract and bring down wages in that area.”

The 1931 law, written by Sen. James Davis (R-Pa.), who had served as secretary of labor in the 1920s, and Rep. Robert Bacon (R-N.Y.), guaranteed “prevailing wages” as a way of protecting workers in a time of rapidly growing unemployment and government involvement in the economy. It was signed into law by President Herbert Hoover and has rankled free-market conservatives ever since.

Davis-Bacon relies on government-issued tables (available here) that tells employers in each of the 50 states, plus Washington, exactly what they must pay workers in four categories of federally funded construction–“building,” “heavy,” “highway” and “residential”—that are also carefully defined. The Wage and Hour Division of the Labor Department, determines who gets what.

The standards also include benefits in its definition of “prevailing wages,” giving local unions indirect influence over non-union pay. In Washington, for example, residential electricians on federal projects must be paid at least $16.10 per hour plus $3.10 an hour in benefits, according to the law. In Los Angeles, a residential electrician need only be paid $7.73 an hour under Davis-Bacon, and no benefits.

Contrary to popular belief, and a recent Fox News report, Davis-Bacon does not require the payment of union wages.

Conservative critics say the law will hinder the goals of the stimulus program.

“By inflating the cost of labor, Davis-Bacon means that less work will get done and less energy gets saveed” says James Sherk, a labor analyst at the conservative think tank, Heritage Foundation.

Despite efforts to repeal the law over the years through legislation introduced by Rep. Ron Paul (R-Tex.) or lawsuits brought by conservative-leaning groups, the law has remained politically popular. In November 2005 pro-labor Republicans, including LaHood, pressured President Bush into reinstating Davis-Bacon wages for Katrina reconstruction projects.

The Davis-Bacon standards are not controversial in the transportation construction business, according to Jack Basso, director of program finance management for the American Association of State Highway and Transportation Officials. “It has been pretty much factored into the cost of doing business,” he said. Basso said the law’s provisions will cover virtually all workers paid by the $49.3 billion stimulus money allocated to highway, aviation and public transportation projects.

More novel is the expected application of Davis-Bacon to the the Department of Energy’s Weatherization Assistance Program, which pays non-profits and local government to implement energy efficiency measures in low-income households. The $5 billion for weatherization stimulus spending is expected to create 87,000 jobs nationwide, according to the energy department.

In 2004, the Bush administration rejected the idea of paying Davis-Bacon wages for work done under the weatherization program. In a Powerpoint presentation found on the agency’s Web site, two Bush officials declared the weatherization program was “exempt from all provisions ” of Davis-Bacon. Earlier this month, director of the weatherization program, Gil Sperling, reversed that decision with a provisional memo that is subject to LaHood’s guidance.

“The last thing we want to see is weatherization jobs turning into a dead-end occupation where somebody caulks windows for nine bucks an hour and then is out of work,” said the AFL-CIO’s Owens. “We want green jobs to be good jobs, and prevailing wages help.”

Freedman of the Chamber of Commerce predicts administrative waste, saying the administration is “expecting organizations that have never administered Davis-Bacon to enforce it.”

One issue that LaHood will have to clarify, said EPI’s Eisenbray, is how the law applies to educational spending in the stimulus bill.

“There is stimulus money going to local education agencies that doesn’t really have any strings attached to it,” he said. “If those agencies use that money for school repairs or school construction, Davis-Bacon will be an issue. I would expect the secretary to say if the money comes from the Recovery and Reinvestment Act, you have to pay prevailing wages.”

In an interview with Roll Call last month, LaHood spoke positively of the law, saying “These are very skilled people that are going to be building roads and bridges, and Davis-Bacon provides an opportunity for them to be compensated in a way that reflects the kind of professionalism they bring to the job.”

Critics of Davis-Bacon have low expectations of LaHood. “[LaHood's] not a conservative on labor issues,” Sherk said.

Freedman said, “If the department issues a proposed regulation, not just a guidance, then we will be involved in commenting. But the law is pretty clear about ‘This is what thou shalt do.’ It remains to be seen if there’s any flexibility.”

The only consolation for labor’s opponents is that LaHood has delayed his decision. Last week, a spokesperson said he would issue the guidance within the week. On Thursday his office withdrew that schedule in favor of a statement that said he is still preparing the guidance.

With President Obama playing a cameo role in a recurring TV ad sponsored by American Coalition for Clean Coal Electricity (ACCE), you may be wondering just what the administration’s priorities are for energy innovation. Rest assured, under the stimulus bill passed by Congress, “clean coal” research will get less than a quarter as much federal money as energy efficiency, conservation and renewables, according to Department of Energy figures released last week.

With the announcement of $3.2 billion in block grants for local governments to spend on energy efficiency and conservation, the total stimulus spending on energy is now clear, notes Lane Burt of the National Resources Defense Council. Efficiency and renewable energy — including assistance to low-income homeowners, grants to state and local governments, federal office building improvements, and support for advanced battery manufacturers — will receive a total of $16.8 billion in the next two years while fossil energy research and development will receive $3.4 billion. That’s more than green crusaders like Al Gore  (“Clean coal’s like healthy cigarettes”) would like, but far from a top priority.

Office of Management and Budget Director Peter Orszag kept up the pressure on Senate Republicans over the weekend by continuing to raise the possibility that the White House may use the filibuster-proof budget reconciliation process to pass comprehensive health care reform if the Republicans don’t show more flexibility.

From a Bloomberg report on Saturday.

Democrats probably won’t decide whether to use the procedure until next month when they complete their budget plans for the fiscal year that begins Oct. 1. Orszag said lawmakers could use reconciliation as a backup plan if Republicans prove unwilling to compromise on health care legislation. “If, by September, nothing has happened, reconciliation would be a fallback option,” he said.

While Orszag singled out the Republicans, the threat actually applies equally, if not more, to Senate Democrats like Max Baucus (D-Mont.) and Kent Conrad (D-N.D.) who keep saying (Friday and today, respectively) that they oppose the use of reconciliation — which would allow passage with a straight majority vote, rather than the usual 60 votes required to overcome a filibuster and end debate –  to pass major legislation. As Jonathan Chait at The New Republic notes, at this point, it is Senate Democrats who are undermining President Obama’s agenda more effectively than Republicans.