Friday, April 18, 2008

Bush, Smoke and Mirrors.

George Bush has just announced his plan to address greenhouse gases, a major contributor to global warming. He pledges that by 2025 the increase of greenhouse gas emissions in the United States will come to a halt. Does this mean that the president has now fully embraced the imminent threat of climate change? No, he's actually relaxing earlier plans to accelerate the process of CO2 reductions. He has certainly spent a lot of time denying that there is a problem that the federal government can play a role in combating. Many of his public statements in the past have attempted to minimize the effect that human beings are having on the environment. In 2004 James R. Mahoney, director of the administration's climate change science program, stated that the largest influence on changing climate conditions was "water vapor". Conservative AM talk radio pundits have parroted the inanities, going so far as to target trees as the main culprit.

The Bush administration's recalcitrance on this issue is nothing new. It was during the three months of his very first term in office that Christy Todd Whitman (Dubya's EPA director at the time) announced that the United States had no intention of honoring the Kyoto Protocol. This took a few of Bush's supporters by surprise, as he had made a campaign promise that he would make sure to seek some sort of carbon dioxide limits. Still his economic adviser Lawrence Lindsay said that it was a very simple choice for the American people- "We have a major energy crisis ... We have a choice in this country of having the lights on or, at least in the short run, having more carbon dioxide.'' Apparently the Bush administration has never considered alternative (non-polluting) energies as a real possibility.

Whenever Bush or his cronies are confronted by the suggestion that we pursue cleaner energy, they respond that such a move will hurt our economy and American workers. They assert that the necessary infrastructure does not exist to make a substantive transformation. This is no doubt true... the only investments the federal government has been willing to make have been for oil pipelines and refineries. No surprise here- the Bush administration is jam-packed with men and women who have made their personal fortunes from the oil industry. That is patently obvious from their foreign policy agenda. Any true assessment of the costs of maintaining the current fossil fuel paradigm must include the resources the US has invested in controlling Middle Eastern affairs.

Another big obstacle to American participation in the Kyoto Protocol is the contention that none of the world's industrialized powers are on board with it. Why should the United States put itself at a competitive disadvantage? Indeed developing nations are expected to decrease their emissions less than first world nations. China and India are often cited as being the monsters within this subgroup. Chinese dependence on coal is the greatest threat to the well-being of future generations of human life. There is no doubt that the United States should build incentives into its relationships with these nations, and levy economic penalties against them until they adopt cleaner energy technologies. The only interests being served by 'free trade' with China are the global corporations that import/export large quantities of Chinese-made products (cue the Walmart jingle now). The American worker certainly doesn't profit from the current trade deficit.

An honest approach to the reduction of greenhouse gases does indeed require a substantial national commitment. If there was no benefit to curbing pollution (besides the potential health of the human race and its quality of life), then perhaps I could understand the resistance of the Bush administration and its 'free-market' libertarian allies. But that's not the case at all. Opening up new avenues of alternative energies will ultimately position the United States to regain its place as one of the economic giants of the world. We could become leaders in the emerging global industry of green technologies. The job growth and profit potential in this arena will help to offset the losses we would suffer in transforming our infrastructure. I understand that this is a huge project requiring the initial investment of large sums of wealth- and I think the project is absolutely necessary for our future.

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20 Comments:

Anonymous Anonymous said...

To be honest Merge, you are hardly a student of economic history. The first core problem-- is how is the government or any single central authority to determine which are the most reasonable technologies and balance out the countless tradeoffs involved. The history of the 20th century and all those before it is littered with well intentioned "investments in the future" made by state planners.

Jimmy Carter's syn fuels efforts mostly were boondogles. The more recent "bio fuel" fads like corn based ethanol also are considered by many to actually consume more resources than they produce and are a big factor in driving up global food prices. Palm Oil production in places like Indonesia and Maylasia is also a major motive behind de- forestation.

http://en.wikipedia.org/wiki/Palm_oil#Environmental.2C_social_and_cultural_impact

The one general rule that always applies is that single planners cannot outthink the millions of decisions that make up the marketplace.

Which brings one to an interesting question. Why are Democrats and many Republicans fighting the market? The democrats-- aledgedly want more conservation, and the development of alternative energy sources and the discovery of more oil while at the same time they complain about the major factor that will produce those results-- higher prices.

I personally made a large chunk of the money i used to start my gallery in oil stocks, bought at a time when the industry was suffering from very low prices. (oil came close to $10 a barrel in the mid 1990's) The few companies that continued to survive and invest in wise exploration plays now are told they should hand back the "windfall profits". Nobody cared when they lost money. I suppose they forced people to buy Hummers too?

The blunt fact is that we are now getting the blow back from years of very low prices. Most of the major players survived the period by cutting back investments.

The whole situation is weird, in that Jimmy Carter, who also aledgedly was intersted in conserving fuel was also the guy who wanted to keep prices artificialy low so we could waste gas.

6:20 PM  
Blogger Merge Divide said...

"anonymous",

First of all, I hesitate to engage in any exchange with someone who introduces his argument with a statement of what I am, or am not. It's nothing more than a weak rhetorical trick aimed at distraction. It's also a clear indication that said respondent has no intention of participating in a sincere discussion. But I'll extend the benefit of the doubt since some time was obviously put into constructing your response to my post.

Your main argument here is a comparison between employing 'central planning' to confront a serious problem vs. leaving the issue in the hands of some fantasy-world concept referred to as 'the market' (i.e. doing nothing). This is just more smoke and mirrors.

There is no such thing as 'the market', as you are trying to use the idea. It is simply an abstract concept invented to justify and maintain the interests of entrenched powers in our country. It's merely an argument for the status quo. It's an oversimplification and a 'straw man'.

If we can agree to have a discussion about the real world, then it won't be a waste of time. Can we agree to avoid calling upon the authority of mythological creatures such as 'the market'? If you leave your religion out of it, then I'll do the same. Be specific. Who are your referring to?

There is no "general rule that always applies". The marketplace consists of individuals (both within and without the government, and all degrees in between) that make decisions about the direction of our economy. They have varying amounts of power and influence on our society. Some are accountable to the public and others are not. I am in favor of shedding more light on these forces... I'm not interested in further obfuscations that include throwing around vague and meaningless terms like "the market".

Quickly- I am not a fan of biofuel technology, especially using corn. It's one of the most inefficient crops for this purpose. But here in America, agribusiness is subsidized by the federal government... and corporations are glad to accept this welfare while hiding behind defenses of "the market", as it is.

You bring up huge oil industry profits, and how you benefited from them... congratulations. The global oil industry is not a "free market". It's underscored by the strength of the American military, federal government foreign policy, and oil cartels that artificially set prices by cooperatively limiting or increasing production. This is the furthest thing from 'free market' deregulation. Why should my tax dollars go toward "stabilizing" the Middle East in order to protect your investments? Because "the market" will demand it? That's simply a dishonest and misleading argument.

1:40 PM  
Anonymous Anonymous said...

I have to admit to not having the time to lay out a point by point response.

One interesting thing you should admit to is that all planning is falable and that therefore concentrating authority and power in one place just greatly increases the chances that the mistakes made will be larger and more damaging.

The Ethanol disaster was one of the government's previous "solutions" to the energy problem.Like all government solutions, it then created it's own constituency of people dependent on it's existence. What makes you think the next solutions will be any better. In fact taking away the need for solutions to make money and be economicaly viable which is what most subsidies do greatly reduces the chances that these plans will work.

Are you aware of the ecological disaster the Soviet Union was in when it collapsed?

I will have to follow up later with my "solutions".

4:59 PM  
Blogger Merge Divide said...

Anonymous,

What does the Soviet Union have to do with anything?? I don't base my standards of government success on the Politboro or the Communist Party. Red-baiting doesn't work with me.

Why does everything have to taken to the extreme? I'm not talking about having the government itself do the work. I'm talking about withdrawing the vast sums of resources spent on trying to control the regions of the world with oil resources, and diverting that money toward alternative energy.

I'm talking about taking the vast sums of corporate welfare that we currently give oil companies, refineries, and distributors... and giving it to corporations willing to develop cleaner, more efficient, and more sustainable technologies.

Private companies would still be used to do the actual work. For profit.

It wouldn't have taken a genius to figure out the problems with ethanol- the important ratio is the amount of energy units created compared to the amount used to create that energy. Ethanol is ridiculously inefficient. And on that basis you want to discount everything other than oil and coal?

The nation's economy is sinking into the toilet as it clings to an outmoded paradigm, trying to extract the greatest amount of short-term profits before its collapse... and all you've got for me is "Let's do nothing. The market will sort itself out" (!?)

Sorry. That ain't gonna cut it.

6:08 PM  
Anonymous Anonymous said...

First of all Merge, I brought up the Soviet Union because it faced an extreme version of the problems all central planners face whether they be Communists ( advocate outright state ownership of production) fascists or advocates of a "mixed economy".

The first propblem they face is not just one of incentives- (rewarding people for productivity, hard work, invention etc...) but determining how much of each thing needs to be produced and figuring out the best method of providing those needs which by the way must be done on an ongoing basis in a world in which conditions are constantly changing.

In a marketplace, ( and you have well explained that we don't have much of one)this problem is regulated by the price system which allows people to rebalance needs and resources on an ongoing basis.

A person at the store doesn't need to know that a railroad strike is affecting the cost of shipping apples but this cost is reflected in the price. Likewise, the seller doesn't know the buyer is saving for college. The brother of price signals is the profit and loss statement which in the market determines what it is profitable to produce and invest in.

The end result is a system that tells people to conserve scarce resources and invest in developing alternatives.

A system in which non market players determine what will be produced is still a statist system even if one is going through the pretense of having private companies and it will face the problem all statist systems face.

6:38 PM  
Blogger Merge Divide said...

anonymous,

I don't see how I can continue in this discussion if you use such terms. You are setting up a false dichotomy. There is NO such thing as a non-statist economy, as all nations' economies are tied to their currencies. To try and make some kind of arbitrary distinction is a next-to-useless endeavor.

Public policy (by necessity) inevitably affects the marketplace. There's no avoiding it. I guess you could try to start building this fantasy by doing away with the military altogether- in which case you won't have an autonomous state for very long.

You tend to think in terms of overly-generalized and torturously abstracted models of macroeconomics. I'll leave that to the game theorists. I'm just not interested in those types of definitions. They are so broad as to be completely meaningless, and they are diverting the conversation from the subject of the original post.

10:58 PM  
Anonymous Anonymous said...

I think the central idea you raised was that the country would benefit in massive investments in new "green technologies" as determined by the state.

This obviously raises the question I raise about the record of state or any other non market driven investments. Please explain how a small group of planners and politicians are to find which of all the countless posible technologies or schemes they should fund.

The ethanol debacle should give you a clue that your thinking is flawed. As you stated, ethanol production consumes more resources than it produces. In other words, it represents something that would operate at a huge loss in a free market and be unlikely to recieve large scale backing. But in steps a few lobyists and in come billions of dollars in subsidies to keep the insane plan alive.

But as usual, we are to believe that the next five year plan will work out better because it will be run by people who care more or are somehow smarter.

The bright side is that since the feds are now so in debt that they are in no position to fund much.

1:47 AM  
Blogger Merge Divide said...

anonymous,

It's not like there has never been a successful project accomplished by state-run planners. Look at the numerous power plants and dams that have been built over the last century. What about the space program that culminated in an American on the moon? What about our crucial participation in defeating Germany during WWII? The list goes on and on.

Sure there's been a lot of failure as well. That's the nature of joint human endeavor. I don't think it helps anyone to throw up your hands and say, "Well... it's hopeless, anyway. It's bound to fail." We might as well petition to be accepted as part of China- a nation whose promising modernization is both state planned, and apparently threatening to Western civilization.

I find it very sad indeed when Libertarians such as yourself find a "bright side" in our federal government being bankrupt. That's a very troubling attitude.

8:36 PM  
Anonymous Anonymous said...

Merge, It is a sad situation when the entity one counts on to protect one's life and liberty reaches the point at which it is a nearly useless mortal threat to both but that is the situation we are in.

Your engaging in a conceptual shift here-- by replacing government action for all human action. I never said "nothing can be done" or that wise investments do not need to be made; I just said that the government(or any entity using force) should have no role in the process.

Well, in this case actually the government can do many things to dismantle all the twisted interventions it has already made in the energy markets and our economy in general that have helped lead us into this state.

One clue to the path out of this mess comes from yesterday's earnings report by Norfolk Southern a major railroad. While both the long haul truck operators and most of the short and medium haul passenger air industry are in near collapse, they are doing well. In spite of the trillions in defacto subsidies truckers and airlines get by operating on "free" government infrastructure, they are unable to come close to the per mile efficiency of railroads which are gaining market share. Private railroads have undergone the devestating effects of almost a century of price controls (removed in the 80's)regulations and have had to pay taxes to pay for the roads used by their competition.

http://hamptonroads.com/2008/04/norfolk-southern-earnings-rise-miss-expectations

I will try to get back with some concrete suggestions that can both save us tax money while likely resulting in a much more sound and energy efficient economy.

1:13 PM  
Anonymous Anonymous said...

Merge,

Since you brought up the issue of a nation's currency, I have a few thoughts on the topic. Money, or the medium of exchange used for transacting trade is not something the government should be determining either. In fact, mediums of trade precede large scale governments and until the late 19th century we had a fairly free banking system tied to a gold standard. Government "fiat" money in fact represents that largest and most dangerous distortion in our economy.

Interestingly enough, the current energy price runnup is closely related to America's debt crisis and the falling dollar. Oil is priced in dollars like a lot of commodities and the falling dollar is a large reason that oil is now so expensive for us.

Also, many experts think that 20% or more of the current price represents "speculators" and others looking for a stable store of value in a world of questionable "fiat" money issued by states deep in debt.

Using oil as a hedge is very wise. In the past, governments deep in debt have attempted to make holding gold or other alternative currencies illegal. Oil, since it is actually needed in the economy cannot be made illegal at the current time and thus might be a good place to store wealth.

2:06 PM  
Blogger Merge Divide said...

anonymous,

Oil is indeed likely to (at least) sustain its value over time.

7:19 AM  
Anonymous Anonymous said...

Hi Merge,

I still mean to get back with a list of positive suggestions but I have just been to busy. I feel I should do a good job.

6:49 PM  
Blogger Merge Divide said...

Anonymous,

I'll be looking forward to that.

8:48 PM  
Anonymous Anonymous said...

This is more a news flash than a sugestion.The Washington Post has a nice report on the rebound of rail.

"The freight railway industry is enjoying its biggest building boom in nearly a century, a turnaround as abrupt as it is ambitious. It is largely fueled by growing global trade and rising fuel costs for 18-wheelers. In 2002, the major railroads laid off 4,700 workers; in 2006, they hired more than 5,000. Profit has doubled industry-wide since 2003, and stock prices have soared. The value of the largest railroad, the Union Pacific, has tripled since 2001.

This year alone, the railroads will spend nearly $10 billion to add track, build switchyards and terminals, and open tunnels to handle the coming flood of traffic. Freight rail tonnage will rise nearly 90 percent by 2035, according to the Transportation Department."

http://www.washingtonpost.com/wp-dyn/content/article/2008/04/20/AR2008042002407.html?hpid=topnews&sid=ST2008042002409

9:49 PM  
Anonymous Anonymous said...

Well Merge,

I kind of give up on providing a fully comprehensive list of sugestions. The number of market distorting interventions that effect energy use is just too great.

Here are a few ideas. As, I stated these are mainly focused on removing the harm currently caused by the government. I am not an expert on the countless posible energy saving technologies or new energy sources that may come from the private sector. I will drop in more as I think of them.There is no order to the list which involves all levels of government.

Eliminate zoning laws and building height restrictions to allow dense mixed use land development.

Stop all government funding for new road construction.

Start the process of conversion of existing roads to toll roads.(privately owned)

http://www.tfhrc.gov/pubrds/06mar/06.htm

Explore embedded road tolling technologies.

Consider turning many road rights of way into rail corridors.

Explore congestion pricing. http://diggingpitt.blogspot.com/2007/08/congestion-pricing-debate.html

Stop government funding for water and sewer infrastructure which should be paid for by developers.

Eliminate all government built "free parking", parking garage construction.

Explore market based parking pricing.

http://www.youtube.com/watch?v=WgtF0B_mxuE

Privatise all government owned power projects most of which sell power far below it's true cost.

Eliminate the home mortgage deduction or at least limit it to homes below a certain cost.

This is not a complete list. A lot of this relates to the huge government distortion of the housing market.

9:19 AM  
Anonymous Anonymous said...

Well, I really rest my case.

The recent proposals by all three presidential candidates prove once again why government is the least likely entity to either conserve scarce resources or protect the environment.

The country is trllions of dollars in debt and has a backlog of further trillions in needed road infrastructure repairs,(cause the government spent the money on other stuff). which get major funding from federal gas taxes.

Even more dangerously, the country seems to be facing a sustained energy crunch as it's wastful lifestyle collides head on with global energy supply in an age of rising demand.

So one would think that politicians would be eager to get money invested in oil exploration and the search for alternatives. This money is in the market now in the form of rising prices and rising potential returns in energy businesses.

These rising prices are also, more importantly sending powerful signals to consumers and raising the returns on all forms of conservation which is good right?

Well, I guess not since the major suggestions out there are to cut government gas taxes and to hit energy companies with "windfall profit taxes" sure to discourage investment in new production.

3:35 PM  
Anonymous Anonymous said...

The NY Times had a good article on the oil markets that outlines the falling pace of new discoveries.

It also points out a new major factor at work-- rising demand for oil and exploding consumption in the middle east. The major factor behind this demand being the fact that all the middle east oil producers sell oil in their own countries far below it's market price.

"In the United States and through much of the developed world, the higher fuel prices have led drivers to reduce their consumption, and gasoline demand is expected to drop this year. But that drop will be more than offset by the rise in energy demand from developing countries. In the next two decades, demand is projected to jump by 35 percent, and developing countries will consume more oil than industrialized countries."

http://www.nytimes.com/2008/04/29/business/worldbusiness/29oil.html?pagewanted=1&_r=1&ref=business

4:01 PM  
Anonymous Anonymous said...

Tom Freidman has a nice editorial in the times about the latest gutless and senseless moves by Hillary and McCain to cut gas taxes. Some credit is due Obama for not supporting this stupidity.

"When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

No, no, no, we’ll just get the money by taxing Big Oil, says Mrs. Clinton. Even if you could do that, what a terrible way to spend precious tax dollars — burning it up on the way to the beach rather than on innovation?

The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: “Maximize demand, minimize supply and buy the rest from the people who hate us the most.”

8:46 PM  
Anonymous Anonymous said...

Sorry, here's the link.

http://www.nytimes.com/2008/04/30/opinion/30friedman.html?em&ex=1209787200&en=c74689f177717558&ei=5087%0A

8:48 PM  
Blogger Merge Divide said...

Despite the ridiculous sums I spend on gas, I am not at all in favor of a "gas holiday". This is one more reason to support Obama.```

9:09 PM  

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