COMMONWEALTH PARTY
OF AMERICA


Flag of the American Commonwealth Republics





Drought Strategy








The current drought effecting 36 states or so is best handled by applying free market principles to the price of a dwindling supply of the valuable commodity: fresh water. Instead of solely relying on requests to conserve water, water restrictions and punitive measures for those who violate water restrictions; the county, municipal and other governments should noticeably raise the price of water that comes out of the tap from the community resevoirs in proportion to drought severity and water levels. By taking the politically unpopular approach of raising prices of a commodity, the masses will have much more incentive to conserve water and the lakes and resevoirs will be better able to retain volume.

The price of water should be subject to the bidding process of supply and demand just like oil, gold, cattle and stocks. By letting market forces reflect the more valuable state of water during the drought, everyone will treat the resource respectively and only use more of it if they are willing to pay more to do so where their need of the water outweighs its higher cost. Once that need can be lowered or the price becomes too high then people will do without or with less and search for alternatives to using water or to the current methods of water utilization. Higher prices will more adequately distribute the water since only those in real need will bid up the price and those with less need will curtail useage and grumble over price. This will also promote the incentive for suppliers of water to get more water into the community in order to take advantage of the higher prices or it will help the current suppliers deal with the extra costs of supplying the water like digging wells, running pipelines to other resevoirs or lakes, trucking in water or maybe even resorting to access of desalinization plants. Once higher costs have provided greater balance to demand and supply, then prices can go back down as the water level improves, demand shrinks or drought lessens.

Doing the politically popular thing and keeping water prices the same (or not raising them high enough or soon enough) will result in the end with everyone having to pay drastically higher prices not just for water but for the loss of civic structure and function when the resevoirs start running dry. When the price is kept artificially low, there is not as much incentive for everyone to conserve so the resevoirs will empty. There will also be no extra income for the utilities to expand their efforts to get additional water. Those who are in less need of water will sustain use while those who vitally need it in the future will lose much more revenue when the system dries than what they would have saved for cheaper water now. Even if the lakes should not dry out, future droughts will arise. Without the added revenue assessed during serial interim droughts, any new or expanded resevoirs are not as likely to be constructed in time for say a more serious 100 year drought or even for the strains of population growth on the water supply over time.

Can you imagine what it would be like if the resevoirs do go dry and there is a frenzy to get water? The industries and businesses who use water will go broke. Populations will suffer as well leading to migrations or perhaps sickness and disease. Before all that, if prices are not properly heightened there will actually be those outfits who hoarded water who had no real need for it. They will make a killing at your expense when prices eventually have to seriously rise because there is now a rationing or a black market scenario. All of this because political officials don't want to be seen as "price gougers" and want to remain popular with the populists. Without the initial unpopular higher prices, then in the end the price of water or having to do without water will be much more severe than letting prices rise beforehand in more moderated market spikes.

The oil crises of the '70s through the Nixon and Carter eras which developed first of price controls and lax credit (gold decoupling) and then later manifested in inflation, higher gas prices, lack of gas and high interest rates illustrate the failings of such policies. The recent Hawaiian attempt at controlling gas prices, viability questions of their centralized health care plans and the nation's current real estate and credit debacles are more recent examples of how interfering with the supply and demand principle always backfires and the same will hold for water.











Links:





"Today, residents and businesses throughout Southern California face a three-in-four chance that they may soon feel the direct impact from drought and problems in the Sacramento-San Joaquin Delta that demand a comprehensive, sustainable solution." Emergency plan, mandatory rationing & reductions, conservation campaign, water transfers and water-saving rebates are called into action to fend off CA drought. Aspects of drought described.

http://www.ens-newswire.com/ens/feb2009/2009-02-27-093.asp





'Making problems worse are federal restrictions on how much water can be pumped out of the Sacramento-San Joaquin Delta in Northern California, the source of some water for two-thirds of the state....' Impacts on various businesses surveyed. 15% of nation's crops could be effected by the next stage of drought.

http://online.wsj.com/article/SB123190380534180339.html





Drought declaration and its measures for combat touched on . Water to Central Valley farms may be cut to 40% of usual. LInks to U.S. Drought Monitor map and seasonal drought outlook included.

http://www.usatoday.com/weather/drought/2008-06-04-california-drought_N.htm





'Thanks to funding provided by California Department of Water Resources (DWR), California Rural Water Association (CRWA) has a myriad of free resources to aid in dealing with water shortages in times of drought.'

http://www.cadroughtprep.net/





Nixon's disastrous repudiation of dollar gold exchange and the negative effects of his wage-price controls.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_nixongold.html





Prior Nixon price controls, Iranian revolution, effects of deregulation and ineffectiveness of rationing discussed per the second oil crisis.

http://en.wikipedia.org/wiki/1979_energy_crisis#cite_note-sowell-9





Carter inherited price controls but did not immediately rid them. Non-support of Shah and then putting forth an oil embargo in response to hostage situation culminated in second oil crisis. Malaise speech and no veto of Windfall Profits Tax Act cited as poor policies.

http://www.ibdeditorials.com/IBDArticles.aspx?id=265590277656184





Hawaii enacts gas caps despite predictions of resulting future price increases.

http://www.opinionjournal.com/cc/?id=110007155





'Gas is particularly expensive in Hawaii because of high state taxes and because of the costs of transporting oil across the Pacific. Last fall, Hawaii became the only state to cap the cost of fuel to try to give some relief to motorists.'

http://www.cbsnews.com/stories/2006/05/08/ap/national/mainD8HFSCNO3.shtml





Points out effects of price controls on supply. Hawaii's high gas tax, restrictions on domestic drilling and increasing world demand blamed for the high price of Hawaiian gas.

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=46067





Stats indicate Hawaii's centralized health care is not improving quality, accessibility or lowering price. Indicators of its negative effect on the state's economy included.

http://www.ncpa.org/pdfs/ba126.pdf





'State health officials argued that most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it. ' Budget shortfalls also cited as need to cut program.

http://www.foxnews.com/story/0,2933,440561,00.html





Lax credit and reserve policies of GSEs helped cause the current credit and real estate debacles we are in. Government's Fannie Mae and Freddie Mac take a large part of the blame with their mismanagement and their low capital reserves backing easy loans.

http://www.marketwatch.com/news/story/treasury-set-bail-out-fannie/story.aspx?guid=%7B46D1439E%2DA2C4%2D418C%2D9BE0%2D09BE0B9EE60D%7D










Commonwealth Party
Drought Strategy