Honeybees and colony collapse disorder: much of our food at risk

http://www.pbs.org/wnet/nature/episodes/silence-of-the-bees/introduction/38/
http://en.wikipedia.org/wiki/Colony_collapse_disorder
http://www.ars.usda.gov/News/docs.htm?docid=15572

Maybe you guys have been following this colony collapse disorder (CCD) crisis. But since 2006, as much as 90% of honeybee hives in US communities have suddenly died in a matter of months (this has been observed in EU nations too). Bees are some of the most evolved, beautiful, and efficient creatures in natural history, and the species is 100M years old (humans have been using them for honey for 6K years). Their mass deaths are likely attributed to human actions. Analysis of dead bees reveals symptoms similar to human AIDS - their immune systems were compromised, which hampers digestion, cognition, and makes it easier for fungi, mites, or other pathogens to attack them. Also, forager bees (that usually have excellent navigation and communication) fly out in search of food, but then don't communicate normally and don't find their way back, so the hive starves.

Weakly-supported culprits include wireless radiation, pesticides, global warming/pollution, and GM crops with anti-pest properties. Concentrated pesticides and pollution can definitely kill bees, but CCD also occurs in areas without high incidences of these phenomena. It's most likely a confluence of several of these factors, and maybe others that we haven't identified yet. The presence of a virus in CCD-affected bees seems to be the most prevalent stressor, but the virus alone can't account for all the deaths. Some research is now directed towards cross-breeding virus-resistant African bees with domestic honeybees, but that is no guarantee of eliminating CCD (and new GM species carry their own concerns). 

Bees pollinate over 100 key flowering crops (including some plants that our livestock eats), contribute to 30% of our food supply (pretty much all ag. products besides staple grains that self-fertilize), and their low-cost services are worth at least $15B in economic output to the US. 3/4 of all current plant species depend on animal pollinators to reproduce. There is no insect substitute but the less effective and more fragile butterfly, and as far as I know only one province in China is trying out another species. They use human workers to spread pollen in their lucrative pear orchards, after industrial pollution wiped out local bees. Already in the US, habitat loss from urbanization and air pollution have wiped out most indigenous bees prior to this CCD crisis. Now there is a need for commercial beekeepers to truck mobile domesticated hives around the nation to pollinate various crops when in season (if local bears don't get to the honey-rich hives first). But among that population, about 1/3 of them (or 800K hives) have collapsed. Now we depend on costly Australian bee imports to make up the shortfall.

CCD should be a reminder of how fragile our civilization actually is without the help of very simple organisms that we take for granted. But their destruction will almost certainly lead to ours (or at least a more monotonous, unhealthy diet), so it behooves us to be much more aware and careful. Is it worth it to risk this much just to squeeze out some bucks of profit from another megawatt, strip mall, or bushel of corn? It's easy for industrialists to keep up their damaging practices while they hide behind the excuse of "where's the proof?", and nothing will change without new laws or massive public uproar.

Scientists think we're almost "lucky" to observe CCD, because it serves as a reminder and indicator of environmental stress likely due to human actions. Who knows about all the other harmful, toxic processes and problems that go unnoticed? Companies should be required to strongly demonstrate safety before being permitted to sell new products, like we do with drugs and foods. The absence of evidence of harm doesn't necessarily prove safety. And environmental impact assessments are clearly lacking if we approve so many projects that still end up causing damage down the road. But I forgot, regulations kill jobs. Well irresponsible companies kill living things, including people. What do we prefer?

The US transconti​nental railroads: not exactly a poster child for capitalism​, or are they?

http://www.kqed.org/a/forum/R201109061000




Richard White, a Stanford professor, recently published a book on the history of US railroads and the tycoons who ran them. Contrary to the popular mythology about the "heroic" and "self-made" champions of industry like Huntington and Stanford, it turns out that those men and the companies they ran only made it into the history books due to massive corruption, abuse of gov't resources, and human/environmental damage. And we have the general notion from econ 101 that firms make money by providing demanded goods/services to consumers in a cost-effective way. But for the railroads, every sort of business and market perversion you could think of (prior to the derivatives era) was attributed to them. Though we still have this strange adoration of the railroads as a romance and celebration of America, Old West freedom, and industrial capitalism.



Yes it was impressive that we could lay track from the Mississippi River to the Pacific in just a few years, and made amazing technological advances during the process, but it turned out to be a net loss for the country. Despite our misconceptions, many railroads went bankrupt or needed gov't "bailouts" to survive. And it was hardly free-market: transcontinentals were just not needed in the late 1800's (the demand for long-haul freight and personal transport just wasn't there to justify the huge costs), and even after the railroads were built, it was still cheaper and quicker to use SHIPS to get from SF to NYC, around South America and all. So what was the point of building them? Railroads were not reliable (especially during the winter months), so merchants still favored ships. Like any great capitalists, the railroads didn't respond to this deficiency with improved performance, but engaged in anti-competitive practice instead. They bought up most of the excess capacity on freight ships, creating scaricty and bringing ship rates closer to railroad rates. They negotiated with ship lines to get them to slow down their vessels too. Why try to outdo your competitors when you can just pay them to come down to your level instead?



The most respected railroad men avoided transcont. projects like the plague, and what was left were speculators, washed-up entrepreneurs looking for another chance, and crooks (sound like other modern industries we know?). What was significant about this period was the advent of corporate lobbying. The US railroads were pretty much the first manifestation of the modern American corporation. They pushed for Washington to create the conditions necessary for their flawed businesses to survive, similar to a Maoist or Soviet failed central-planning project. They were justified as a necessary "public good", even though the public had virtually no need for their services at the time. But when something is a public good, we may irrationally spend to keep them going even if they aren't doing any good for us. And of course stakeholders needed to justify their decisions and get public buy-in with propaganda and marketing, hence the Manifest Destiny, pride, and nationalism angles. There's nothing that US industry can't do, we're settling the savage lands with good old US hard work, go west for adventure and riches young man, yadda yadda. Sadly, there was more public outcry against the greedy, inept railroad corporations back then vs. the current greedy, inept firms today. The author speculates that this is due to enhanced marketing and penetration of US corporations today (corps play a much bigger role in US life today), so we are less likely to condemn something that we are associated with.



DC gave the railroads (RRs) huge guaranteed loans and literally millions of acres of free land (that they still own today and don't pay taxes on), even on terribly risky projects with no evidence of future profitability. RRs sold junk bonds to eastern investors by hiding much unflattering financials from traders (in fact, the big 3 US ratings agencies were started to rate RR bonds). And still the incompetent RRs needed several public bailouts to break even (even though the tycoons and big investors made out quite well off the US dime). And worse, the RR bankruptcy terms were so lax that the same doofus execs were allowed to retain control of the firms (not like Obama forcing GM to change their leadership team in exchange for bailouts, just when their execs were getting effective). Their debts were written off, so now these failed firms had a huge financial advantage over the viable, honest RRs (also sound familiar?), and drove some of them out of business. Talk about dysfunctional markets: the weak kill off the strong? Like the fruit companies in Latin America, the RRs asked the gov't to step in to violently break up labor strikes, clear out local Indians, and such. As many people died working on the RRs each year as the Civil War battle of Shiloh, often without investigation, punishment to firms, and compensation to victims (especially if they were Chinese).



So now that these joke of RRs were built, what to do with them? The firms had to get people to use them to gain revenue, so there was a big push to encourage settlement (although net population transfer was eastbound in the early RR years), buffalo hunting, cattle ranching, and mining in the West. There was no real demand for increased cattle ranching, silver, and buffalo, but the demand was manufactured with major gov't incentives, often with terrible environmental consequences (overgrazing, buffalo near extinction, mining pollution). And all the booms associated with those economies of course ended in bust and disaster for many Americans too.



If we learned our lessons from the RRs, the current dot-bomb and housing crashes might have been avoided. It's ironic that the most ardent libertarian proponents of the free market are the ones who most strongly advocate for our most uncompetitive industries. It's not the free market principles that they love, it's just taking advantage of whatever system is in place (loopholes and all) to come out ahead, no matter the cost to others. Obama and others talk about the need to invest in the future so we don't fall behind. But the problem is investments are based on predictions and many of those made by gov'ts turn out to be wrong. Look at the CA high-speed rail project - another total boondoggle where the true demand just doesn't justify the huge costs. Considering all the areas where CA needs more cash, it is a huge opportunity cost to sink billions into another rail gamble. But this is the price you pay when ideology trumps economics.



We wanted to settle the west and make tons of money, so we thought building RRs would get us there. But it was ahead of its time and caused a whole bunch of other problems. If you believe in the free market, let the market demand tell you when it's time to build RRs. If they are so desirable and well-planned, then they will easily get their own funding and won't need gov't loans and bailouts. The author contrasts the Dakotas. South Dakota's RR network was built bailout-free, and turned out to be much more high-performing than the nearby gov't-supported RR in North Dakota. In Europe and Japan, RR firms had to raise their own private capital before breaking ground, so their networks were a lot leaner, better, and weren't subject to the moral hazard associated with US firms wasting other people's money without accountability. Or if the RRs are truly a public good, nationalize them with a set of transparent laws and public input governing their operation. Of course there is the opposite extreme with China, where the gov't invested billions into another un-needed high-speed network, just to create jobs and grease the palms of various bureaucrats. But projects were rushed, safety standards and training ignored, and many of their trains run with mostly empty seats.

Looking back on 9/11 and the "terror industrial complex" it spawned

Maybe you all are like me, already sick of the emotionally-manipulative 9/11 remembrance content all over the mainstream media. Instead of more footage of twisted rubble, crying women, and the stars-and-stripes, how about something that's actually thought-provoking:

http://www.npr.org/2011/09/06/140056904/the-top-secret-america-created-after-9-11

Some of this we already know, but the Pulitzer-winning author Diana Priest has documented many ways that the secrecy-antiterrorism industry has exploded since 9/11... to a point that it is literally "out of control" as evaluated by security experts. No one knows how much we are spending, what we are doing, and who we are employing. The gov't was so unprepared for this growth that they needed to hire contractors to be able to run background checks on all the new contractors they were hiring. It's incredible: now 800,000 Americans, or 1 in 375 of us, hold top-secret clearances (many of them have not taken loyalty oaths to defend the US, and instead serve the profit motive). For all the GOP complaints about the size of gov't and its inability to sustainably create jobs - I guess they meant all other industries but this one.

And security contractors are paid much more than similar "public servants", so the CIA saw a brain drain where junior analysts would accrue the necessary year or so to acquire the basic skills sought by the security firms. They would then leave the CIA, get hired by Blackwater types, and do the exact same job for 3X pay, with the gov't and ultimately taxpayers on the hook to cover the higher expense.

If we thought CIA was covert, they are getting one-upped by JSOC (Joint Spec Ops Cmd, that used to do hostage rescue but now is the gov'ts elite hit squad that nailed Bin Laden and others). JSOC has all the power and resources of the CIA (if not more), yet isn't bound by law to report its activities to Congress or others. Obama has given them the green light to step up their activities, and to their credit they have killed/captured many more "terrorists" than the CIA. But it is scary that some secret org can decide to put a name on a kill list, and then just go out and do it without asking anyone for permission (yet are funded by us). They represent us but don't answer to us, so we get the blowback if they mess up (like errant drone strikes in Pakistan whipping up anti-Americanism).

Let's also remember all this stuff on the anniversary of 9/11, including the tens of thousands of non-Americans who have died as the result of our wars.

Worker disengagment and poor management are very costly

Here's another doozy about workplace dysfunction from the NYT:




http://www.nytimes.com/2011/09/04/opinion/sunday/do-happier-people-work-harder.html?_r=1



"Since January 2008, ...Americans now feel worse about their jobs — and work environments — than ever before. People of all ages, and across income levels, are unhappy with their supervisors, apathetic about their organizations and detached from what they do. And there’s no reason to think things will soon improve... Gallup estimates the cost of America’s disengagement crisis at a staggering $300 billion in lost productivity annually."



Wow, that is bigger than the GDPs of most nations.



I don't get why firms seem to just accept this. This is big money. Even if the "touchy-feely" worker motivation stuff is probably beneath most execs, the middle and lower managers just don't ask the necessary questions (or are too busy to pay attention), and no one is holding them accountable if they don't. No one likes the "adult babysitting" part of management, but if you want productivity, loyalty, and high-functioning groups, this is probably the most direct and effective route. Corny rah-rah speeches at all-hands meetings (that usually do not resemble reality) and sending out cliched worker satisfaction surveys (yet not acting on the findings) only hurts morale further. Are leaders smoking something, imagining that their departments are perfect utopias where workers always come pumped up to give their best (because of their brilliant leadership, of course)? And obviously it's about more than compensation.



Some managers are awesome, but others seem generally clueless when it comes to knowing their workers. They make threats, falsely promise or delay rewards, and set unrealistic goals, and as they watch their people scramble to meet them, they think it's validation of their good leadership. Wow, look at them go for me, and I didn't even need to bribe them! Some managers think (or make it appear) that their groups are high performing despite heavier burdens on them, but they never ponder if that is the best way. And I don't mean, "Can I squeeze even more out of them?" It's a tough climate for job-seekers now, but that shouldn't be a green light for managers to abuse captive employees and impose unreasonable expectations. "It's dog-eat-dog out there and we have to get tough to survive." Well a lot of sick, immoral stuff has been justified that way over the centuries.



I think especially in the tech fields, emotional IQ is so lacking and there isn't a serious effort at manager training/improvement monitoring. Sure it's a two-way street and workers share some blame for not speaking up and proposing solutions, but due to asymmetric communication and reputation implications, this can be nearly impossible to pull off. Basically, bad managers and management systems aren't getting fixed because (a) workplace culture from the top down doesn't take employee satisfaction seriously, (b) the higher bosses don't collect the right data to evaluate management skills and incentivize improvement, and (c) it is too risky or difficult for workers to inform the proper parties on their managers' shortcomings. Blind leading the blind kind of stuff.



Management seems to prefer to reorganize, rotate VPs, and alter budgets (to make it look like they've got a plan), instead of getting to the roots of employee dissatisfaction - which seem to be plainly obvious and intuitive, so it's not like a Herculean feat. They just aren't willing to give what the workers need. Or maybe some managers are more concerned with their own career advancement, politics, and other BS, so they want to hoard credit/attention and don't allow their workers a chance to take on more responsibilities, feel more engaged, and get noticed, all of which strongly correlates with job satisfaction and productivity (workplace creativity, a critical part of business success, is highly correlated with positive mood as well). Maybe it's some subconscious, antisocial behavior where managers can't help but keep their people down to satisfy their insecurities, like frat hazing or abusive parenting.



Maybe firms like Google (with plenty of super-smart but bad managers I'm sure) are trying to get on the right track. Use data-driven methods to improve management and worker engagement. Try to close the gap between a manager's false assumptions and what workers truly feel (and what is actually happening on the ground).



http://www.nytimes.com/2011/03/13/business/13hire.html

Solyndra bankruptcy

http://www.forbes.com/sites/toddwoody/2011/08/31/what-solyndras-bankruptcy-means-for-silicon-valley-solar-startups/


http://www.kqed.org/a/forum/R201109020900



This is a terrible sign for US cleantech and manufacturing just as US jobs reports are quite bleak. Solyndra was the poster-child of green start-ups. They got over $1B in private VC funding, $535M of guaranteed loans from the DOE as part of the Stimulus Plan (the first private firm to get a DOE loan), and even a visit from President Obama as part of his campaign to push for a cleantech-fueled economic recovery. Obviously the GOP are jumping all over this, citing this example as proof that Obama is clueless about economics and jobs: http://www.sfgate.com/cgi-bin/blogs/nov05election/detail?entry_id=96638.



Solyndra was so confident about its business prospects that it rapidly grew to 1,100 workers and set up a huge $700M plant in Fremont (yes, expensive-as-hell Fremont) to manufacture thin-film cylindrical PV panels. The writing was on the wall, but it was still a big shock that the firm declared Ch. 11 recently and laid off its entire workforce. So why did it happen? Is solar just a flop? Well, Solyndra's competitive advantage was using cheaper but less efficient thin-film technology at a time when silicon PV panels (the industry standard) were fairly expensive and China's solar sector was tiny and unproven. But since the 2008 downturn, China launched huge in capital investment projects, including building up a solar manufacturing industry from stractch that quickly became the largest in the world. The global price of silicon plummetted (demand declined due to the recession and supply increased due to development in China), wiping out Solyndra's advantage. The 70% price drop is great for global clean energy, but not for US manufacturers.



http://www.greentechmedia.com/articles/read/contract-silicon-prices-fall-50-close-to-spot-price/



So China was already subsidizing its solar manufacturing sector (basically free land, credit, and labor) to undercut the market, and now it's priciest input just got cheaper. So Solyndra was pretty much screwed, even if it had the best technology (2 other Bay Area solar firms also recently folded). But maybe we should learn from this example that cleantech firms shouldn't try to win through cost leadership. China will own us there every time. Our businesses have to utilize sophisticated technologies, innovative product development, and strategies so that China can't easily copy and undercut us (think Apple). Sure let's outsource the cheap, easy stuff like manufacturing and logistics, but we can't beat China on their terms - especially when their gov't isn't paralyzed with debt and partisanship, and they are 100% behind rapid high-tech and economic growth.



So what do we do now? The libertarians say this validates their views that gov't shouldn't be in the VC business. Maybe Obama's people were so awestruck by "the green panacea," that they didn't perform due diligence on Solyndra's prospects in a recession and vs. Chinese competition. But plenty of savvy private sector investors (such as Richard Branson and the Waltons) also threw money at Solyndra and got hosed (and that was during a time when VC money was pretty tight, before the exuberance over Facebook and such). Some big-gov't folks would say to not change course because Washington funded the interstate highway program, Internet, and GPS, and all those radically changed history and exponentially increased economic growth. True, but how about all the projects Uncle Sam funded that were utter failures, that we don't know about? Like usual, I guess the prudent course is some sort of middle ground. Gov't involvement but vetted as well as possible to avoid pork and boondoggles. The problem is, China is bankrolling ventures big time, and they can afford to have a 5% success rate and still gain market share on us. We can't afford to be wrong as much, especially with so much political resistance to cleantech and gov't spending now.



Another challenge is the industry itself. Highways and the early Internet are fairly straightforward concepts to develop, just plan and do it. But no one knows which horse to pick in cleantech. I suppose it would be wisest to diversify and place many small bets, but then no single industry will get to economies of scale quickly. Imagine if the gov't had to pick a search engine to back in the dot-com days. So now we have geothermal, wind, solar, biofuels, and fuel cells, with several variants of each. The gov't doesn't have the expertise and resources to properly evaluate all these options. The private sector doesn't have all the answers either. For example, one of the big Mojave Desert solar farms just decided to retool its entire setup from mirrors (focusing solar energy to heat water and spin a turbine) to conventional Si PV panels, since the global price dropped. Conditions are changing so fast that firms need the flexibility and investor patience to be able to adapt, if possible. But with Washington dithering and private credit still tight, we are only falling further and further behind. Good times.

GOP hypocrisy over Bush vs. payroll tax cuts

http://news.yahoo.com/gop-may-ok-tax-increase-obama-hopes-block-124016578.html




Un-freaking-believable GOP hypocrisy over taxes and debt. Bush tax cuts (over 90% of them benefit the wealthy) set to expire - hold the nation hostage until they're extended, even if it drastically increases the national debt. Payroll tax holiday set to expire (that mostly helps the working poor and middle class, and has a smaller impact on the debt since its tied to future Social Security benefits), no way Jose. But of course this in no way means that the GOP is complicit in a tax increase (they signed the Grover Norquist pledge and all), yet that is precisely what they called the potential expiration of the Bush tax cuts. I think the problem is I'm not a multi-millionaire, otherwise this all would make perfect, consistent sense.



All we hear about from DC is "jobs, jobs, jobs," but nothing's happening. To be honest, neither the Bush nor payroll tax breaks can spur much job growth, but at least lower payroll tax on workers will give them more purchasing power at a time when consumer demand and our overall economy are wobbly. And their consumption will help preserve other jobs. Many companies are sitting on piles of cash but refusing to hire, and the long-term unemployed in America don't generally fit the profile that employers are seeking. It's always supply-side thinking with the GOP: cut business taxes and you magically get more jobs and prosperity. But firms have no obligation to use the tax rebates on hiring (unless Washington crafts the law as such, which they can do but won't), and frankly it may not be the wisest use of the money at this time for many firms. Remember that Paulson convinced Congress to give the big banks a huge cash infusion (the now famous 1-page bill with no strings attached) to spur consumer lending, but after that credit actually got tighter and the banks tended to use the money to snatch up other distressed banks at fire-sale prices. So if jobs are the ultimate goal of all this tax cut talk (and not simply profit-taking), they're going at it all wrong.



Observing the trends in 2011, I can't come up with a plausible explanation other than the Republicans are committed to blocking gov't progress and economic growth (for the bottom 95% of us), and any attempts by the president to encourage them, in order to make him look inept as the election approaches. And of course they'll blame him for the economic woes that they mostly created. Surely Obama is not helping his cause much, but from my perspective only one political party has shown that it is willing to sabotage this country (and the entire global economy by extension) simply to win some offices. I think we have a place for dangerous threats like that: Gitmo. The Tea Party freshmen are hurting this country more than Osama's driver ever did or could.



--------



And if you have time, try to check out "Inside Job" and "The Conspirator" recently out on DVD/on-demand. The former is an Oscar-winning documentary about the financial crisis. Most of the material is known to us by now, but the director also explores a different angle: how some top academic economists (funded by big banks and industry groups) promoted over-confidence in de-regulation and risky investment vehicles with their biased publications and lectures. This helped gov't to turn a blind eye, ratings agencies to inflate their scores, and investors to over-spend on risky securities. And the film also captures the Columbia Business School dean and other ex-Bushies looking really silly.



The latter is a Redford film about the outrageously inappropriate trial of Mary Surratt, an indirect acquaintance of J W Booth who was accused and eventually hung for conspiring to kill Lincoln. While not well received by the critics, it's an interesting examination of a dark chapter of US history that we don't learn about in school. Her trial demonstrated how war hysteria and political pressures will make even the highest offices in the land more than willing to trample on the Constitution and our most sacred values. A horrible crime was committed, and in order to "heal, move on, and maintain order and security", the guilty must be swiftly "brought to justice" (as in, whacked). And if no one fits the legal definition of guilty, then we'll manufacture someone and change the definition. Those who protest will have their reputations destroyed and patriotism questioned. This is especially pertinent as we're approaching the 10th anniversary of 9/11.

Jerks make more money, nice guys finish last?

http://www.huffingtonpost.com/2011/08/16/nice-women-finish-last-work_n_928207.html


http://www.kqed.org/a/forum/R201108190900



Most of us implicitly feel or observe this, but a team of business professors recent published a paper showing data that being more disagreeable at work is correlated with higher pay (especially for males, supposedly in order to fit the dominant, aggressive gender role), when controlling for industry, worker age, timing, and job level. "Agreeable" people are characterized by 6 facets: trust, compliance, altruism, straightforwardness, modesty, tender-mindedness, so I guess disagreeble would be opposite. A person 1 SD more disagreeable than the mean of their data set made on average $10K/18% more than a person 1 SD more agreeable than the mean. I believe the data was collected by self and peer reported surveys, so they're not fully objective and quantitative.



But this type of disagreeable personality is also correlated with less success in relationships, more stress, and generally less life satisfaction. And as you would expect, the "jerks" are less likely to manage others and receive promotions they are qualified for; they only seem good at negotiating raises. They are also fired more often, but find new jobs quicker. We know that women and minorities unfairly trail white men in terms of compensation, and the "advantage" for being disagreeable is diminished for them (probably due to backlash over the stereotypes of being a bitch or an uppity minority).



But this is a paradox. Jerks only succeed if they can differentiate themselves from and take advantage of nicer, more submissive coworkers. A company entirely staffed by jerks would likely fail. And if a nice guy reads this study and wants to get meaner in order to make more money, the rapid temperament change would probably be met with negative reactions. That person would lose the capital he has accumulated from being nice, and his "forced jerkiness" would probably be interpreted as phony or weak by his true jerk peers. And of course there are many other ways to try to get recognized and make more money at work besides being meaner. Though there's no guarantee that any of these measures will bear fruit; it depends on your org, bosses, economy, etc.



One hybrid solution is to be a jerk at work and nice in your personal life, but most of us know that it's hard to wear multiple hats and keep separate personalities totally separate. Plus salary is not the only measure of a person's worth and life satisfaction. We would probably agree that the most talented actors and artists are not the highest paid, and being a jerk and "winning" all the time isn't the last word for life (and clearly it costs you in other areas). Or if that is all you need to be happy, you probably have bigger problems.



Of course this stuff is just the tip of the iceberg and it's an age-old labor issue, or human social issue in general. We know that the workplace is generally a harsh, soul-crushing hell, and getting more so with time and economic pressures. We have to get mean at times to avoid being a doormat. Maybe it's all about picking our spots, and fighting when it will pay off most.

Shooting down the GOP argument against taxes

Very good discussion about the recent stock market volatility and tax reform (even the listeners calling in are pretty sharp, except the last one):




http://www.kqed.org/a/forum/R201108050900



The economists on the program (not liberal wackos) pretty much obliterate the GOP argument against any new revenue generation as part of a bigger plan to reduce national debt and put us on a better economic trajectory. The "educated people's" general strategy for economic recovery is like the opposite of the Tea Party's: increase short-term gov't spending (for infrastructure and other helpful investments), increase exports, and reform taxes (which will pay for that spending and also cut into our debt). And of course Warren Buffet, the poster child of all the positives of our free market, thinks taxes on high earners are too low as well. Taxing the incomes of the rich may discourage hard work and innovation to some extent (but not like the USSR), though there's little evidence that it's a net loss for society, especially considering all the good we could do with the extra revenue (even in the hands of inefficient Uncle Sam). It's true that the rich currently pay a disproportionate % of total income taxes, but that's how it's supposed to be. They also hold a disproportionate % of total national wealth, and that % is growing a lot faster than their tax outlays.



I don't know what is the deal with the GOP and taxes. They pay their country club fees, their PTA dues, and AMEX black memberships, don't they? We have to pay for the services and benefits we enjoy, right? Even if their vision of small gov't materializes, some private (profit seeking) firms will have to step in to meet the social demand for safety, conveniences, etc. If the rich aren't paying gov't for that stuff, then they'll have to pay Acme Corp. that may not have the customer's best interests at heart. Based on the track record, I would mostly prefer public service providers. The USDA and NPS have screwed over far fewer Americans over the years than Enron and Countrywide. We can't expect to live in a first world nation funded at third world levels.



Apart from raising some income taxes, ending some tax deductions is crucial. The mortgage interest deduction is the biggest culprit. I regret that I use it, but I wouldn't mind to see it disappear in a package of smart reforms. The interest deduction (and most itemized deductions in fact) just benefits select industries, political interests, and the rich at the expense of other national needs. The wealthy can hire accountants to best exploit the tax laws, and the more they spend, the more they get back (which encourages frivolous over-consumption and bubble creation). Many lower earning, less educated Americans are ignorant on some ways they could reduce their tax burden, and have trouble navigating our ridiculously complex tax code.



Does it make sense that the federal limit on full interest deduction for a married-filing-jointly couple is a mortgage of $1M? That's nuts, especially when the US median home price in 2010 was $185K. And you can even deduct on a second home that isn't heavily rented out. Those folks don't need a tax break. In general, affordable home ownership is good for our society, but of course it's not for everyone's budget. I could accept a meager interest deduction scaled vs. one's adjusted gross income and local median home price, but no way for entire jumbo loans, withdrawing equity to play the market, and any high earner. The rich are the last people who need rewards for purchasing stuff. Otherwise it incentivizes over-leveraging and buying too much real estate for one's budget. If the rich want a sweet crib, then why not pay more cash down rather than getting a reward for borrowing a huge sum? And now interest rates are very low (if your FICO score grants you access to credit), so it's not like interest is killing the average fixed-rate homeowner (assuming old mortgages can re-fi). The mortgage interest deduction is costing the US (that means you and I) about $90B/year. That's pretty much the size of spending cuts over 10 years that Obama-Boehner agreed to last week. Sure the real estate and banking industries would take a hit from this change, and maybe home prices would dip, but all that extra revenue could keep more people working/spending, and investments in infrastructure will yield future returns for everyone. It's better than a hand-out to upper-middle-class and rich homeowners.



http://www.irs.gov/publications/p936/ar02.html

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/21/AR2011012102256.html



Unfortunately a lot of schedule A deductions follow this pattern: a net loss for America. This is also somewhat true for educational incentives. America just doesn't get the most bang for buck by helping people attend college, sorry Dems. It's something people are going to do anyway, so why encourage it? And for those who aren't ready for college but get suckered in by shady Univ. Phoenix recruiters, they are going to drop out saddled with tuition debt, which hurts everyone but Phoenix. I know education is an investment and cultural priority, but probably our K-12 system needs the help more. Yes colleges are getting pricier and more competitive, but why credit families making more than $100K/year? If they care about their kids' futures, they will save money for school instead of taking another trip to Maui. As you can see, the poor aren't the only ones depending on "gov't handouts". I fully believe that the qualified poor should get education assistance to help climb the ladder, but deductions for the middle class are not the best use of funds (though mortgage interest is still way worse than this).



And maybe we as a country are just consuming too much, and should save better to take pressure off some gov't services. China's economy is growing like gangbusters, yet the gov't:consumer spending ratio is much higher than ours. This won't last forever, and of course China is an exports economy, but it just shows that it's possible. Taxes always lower total economic efficiency ("deadweight loss"), but some revenues are necessary so we can have a civilization. And some taxes hurt more than others. We should be taxing consumption, not production. Many economists feel that the value-added tax is the best way to go. It's not that different, and theoretically generates the same revenue as sales tax, but creates less distortion in incentives. Firms only pay tax on the gross margin or "added value" of their output (sales minus costs of production) and get tax breaks on exports, while the end-user pays VAT on the purchase price of the goods/services. So the system doesn't unfairly punish producers, and encourages consumers to buy more responsibly. It is not perfect, and there are some regressive elements to it, but maybe the poor (who still need to buy some stuff) could be compensated by lower income taxes and subsidies on essentials.



http://en.wikipedia.org/wiki/Value_added_tax



But the problem is, all these tax arguments can make perfect logical and economic sense (and be fully constitutional), but if they conflict with the conservative ideology of the role of taxes in our culture, then they are political non-starters. Obama has mentioned tax reform in his speech today and during his 2011 SOU address, but we probably won't do anything about it. It's like racism, seriously. You can date the nicest, cutest, smartest, most honorable black man in the world, but your parents still won't approve when you bring him home. Heck a racist could be trapped in a burning building, and refuse to be saved by a black firefighter. That's what the GOP is like, totally irrational. It just doesn't make sense to unconditionally reject something that can be good (or at least necessary) for our survival.

------------

Sorry, just had to add this:




Check out these idiotic news headlines (attachment). The press is suggesting (maybe inadvertently) that Monday's terrible stock losses are totally due to the S&P downgrade. This is ridiculous for several reasons, but I'm sure the deficit-hawks in the GOP will jump all over this crap and twist its meaning. First, if US debt is somehow less safe now, then why has the yield dropped again as investors are dumping stocks in favor of US bonds (and gold)? That shows the people with the money don't care about what S&P did. Second, Moody's and Fitch didn't agree with S&P's rating (and neither did Warren Buffet), so it's possible that S&P are flat wrong. Third, no credible entity should care how the ratings agencies score them anyway (who the hell cares if we are AAA or AA+, especially when those ratings aren't quantitative and both are still very good?). Ratings are less and less important as pension funds and other big investors rely on their own research. Lastly, this S&P downgrade was not a surprise. They were pretty much "threatening" to do this weeks ago unless the gov't could agree on $4T in cuts (which is a tall order). So why didn't the markets react then?



http://finance.yahoo.com/news/Dow-plunges-more-than-634-apf-1960115615.html?x=0

"The market is under a lot of stress that really has little to do with the downgrade." - $20B bond fund manager

If this is so, then Yahoo! picked horribly misleading headlines, and unfortunately headlines may be all that some readers see.



Correlation doesn't prove causation. The markets were headed down today even if S&P did nothing. The downgrade surely didn't help make anyone feel better, but it's our stalled economic recovery and worries about Europe that are fueling most of the losses. Probably investors are more concerned about Washington's inability to enact changes and react constructively and swiftly to crises more than our actual debt numbers.



So the Tea Party should think about that too if they truly love this country. Or do you think the GOP obstructionism and ultimatums are deliberately designed to tank the US economy leading up to the 2012 election? Then they will try to pin our troubles on the Dems and retake the WH. Because our economy will eventually improve of course, and they don't want to allow Obama to take credit (it's bad enough that the guy took down Osama). So if Obama isn't an idiot, he has to stop playing nice and call out the GOP on this, and I think many sensible voters will side with him. If GOPers are scared to raise taxes and face voter anger, they should also fear losing their jobs if they fail to accomplish anything, or worse block efforts to help the American people.



I know this theory sounds horrible, but it wouldn't be the first time. There was an investigation into whether the Reagan campaign worked with the Pentagon to delay the Iran hostage crisis resolution until after he beat Carter in the 1980 election, so Jimmy couldn't get credit for it. A gov't investigation later refuted the claim, but many high-level people still believe it, and the facts of the case are quite intriguing.



http://en.wikipedia.org/wiki/October_surprise_conspiracy_theory
 
------------

http://fivethirtyeight.blogs.nytimes.com/2011/08/08/why-s-p-s-ratings-are-substandard-and-porous/?hp






Clearly the S&P rating has SOMETHING to do with the market. There are plenty of non savvy investors in the marketplace to make that effect happen.





Also I take issue with this housing tax break allowance. Of course i own an expensive home so this is near and dear to me but as a rich person who works for my income i essentially have 1 tax break which is my home. Without the interest writeoff I would be claiming zero and paying extra every month to avoid a fine for not putting enough away for taxes. Champagne problems maybe but in an area whose average housing cost is somewhere between 300k - 500k is getting the total jumbo loan as a write off a crime?





On a somewhat separate note, how can you eliminate that writeoff without screwing the people who already own homes? The price of a home has priced in the fact that people get a discount on mortgages and if a lack of writeoffs makes homes less affordable prices will reflect that by dropping. So folks with mortgages would be less able to pay for them and go underwater as a result. So implementation would certainly be an issue.





I do understand this is a writeoff that mostly benefits the rich but this is one of those things where certain areas of the country (read LA/NYC/MIA/ETC) have plenty of "rich" people who couldn't be homeowners near their place of employment otherwise.
 
------------

Regarding the S&P downgrade and the market drop, sure there were some knee-jerk, ignorant investors who got spooked by the news, but I'm not sure how much they contributed to the overall decline. Maybe US debt is less attractive now, but it's still the best game in town, so people were more worried about stocks/overall economy and fled to bonds/gold. So maybe S&P warned us that the well water has some bacteria in it, but we're thirsty as hell and it's better than drinking piss.




It's funny how the blogger is saying it may be profitable to bet against S&P over its sovereign debt ratings. Historically, when S&P downgraded sov. debt from AAA to AA+, the yields on those 10-yr bonds tended to go down over the next month (as we saw with the US yesterday). This may be due to other economic events coinciding with a country under debt stress, but no industrialized nation downgraded by S&P has ever defaulted afterward, and investors seemed to pay no heed to the lower ratings.



http://www.businessinsider.com/average-yield-impact-of-a-lost-aaa-rating-2011-7



The link below describes how 90% of subprime securities that Moody's/S&P rated AAA pre-bust were later shifted to junk status. Is anyone in MLB batting .100 and keeping their job? Some of the big banks are being investigated for pressuring the ratings agencies to raise the grades of some of their securities. In some cases, bank execs called into those agencies to complain, and after some wrangling/bribes/threats, the agencies made exceptions to their risk assessment standards so the securities could be rated higher. That's like Michael Bay calling into Rogert Ebert's office and wiring him some cash to sweeten his nasty review of the latest Transformers slop. Maybe instead of relying on the big 3 agencies tainted by conflict of interest, we could have a crowd-sourced service from vetted financially-savvy contributors, similar to a Wikipedia or Yelp? I know there is plenty of independent investment advice out there, but something a little more official and trustworthy could help. Maybe it already exists?



http://www.bloomberg.com/news/2011-04-13/moody-s-s-p-caved-to-mortgage-pressure-by-goldman-ubs-levin-report-says.html



Regarding the mortgage interest deduction, sorry I didn't clarify before but any changes wouldn't be retroactive to existing mortgages. They would have to be grandfathered in or have the deduction withdrawn gradually. I know how you feel though. We obey the law, work hard, and haven't withdrawn much from the system (we haven't taken any unemployment, welfare, disability, etc.). Where's our damn reward for being good soldiers? But that's the thing, in a compassionate society the able have to sacrifice more for the less able. Is it "fair"? Well that's another discussion, but people like us really don't need any tax handouts, even if we're not living large and many of our neighbors seem to be doing a lot better (in their cases, even less justification to help them). I'd rather a handicapped person still get her home care, or a veteran get his physical therapy, instead of me getting a deduction. Of course I'd rather all the normal people get more help and the rich pay more into the system, so I'd fight harder for Bush tax cuts repeal before I fight for mortgage interest deduction repeal. Also, if we reformed other aspects of the tax code and labor market, you wouldn't need the extra money from deductions anyway.



The interest deduction is supposedly meant to make home-ownership more affordable and encourage people to do it. You and I bought during a time of really low rates, and even fed/state tax credits for first-timers. If interest deduction is the last bit of help a person needs to get over the hump and afford a mortgage, then maybe that person isn't ready to own. For your family and mine, we wanted a place of our own and our lifestyles/finances permitted it, so we would probably buy with or without the tax break. It's like Cash for Clunkers - the wealthy mostly took advantage of it, and in fact the program unintentionally put upward price pressure on the used car market (by destroying some supply), which hurt poor people who can only afford bad used cars. Like I said though, I could support a partial interest deduction adjusted for income/location, but not as generous as the current program. The bigger problem is expensive real-estate in the big coastal markets as you said, but that is a whole other can of worms that I don't know how to address.
 
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Yes!  MY point for the last 30 years with regards to 401Ks, etc.  I HAVE NO IDEA what to do with my money, but ever since that asshole reagan came along with the 'you know best how to invest your money' line of bullshit, I've HAD to put my money into the market. the ones who convinced us that this was for the best, certainly knew what to do with our pensions-line their own pockets with OUR savings.  They then burned me on the 401K bullshit, too.  So, now, once again, it's my fault for not knowing what to do.  I'm with the folks in the streets in london at this point.  burn, baby burn.
 
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Yes I'm frustrated and pissed off too. Our money is going poof (not that I had much to begin with). We can't compete with the resources and power of Wall Street investors, and we're not rich enough to hire them. So unless we have a crystal ball, the best we can do is diversify and let it sit. A mix of industries, company types, funds, bonds, commodities, and some liquid cash for quick emergencies. But others on this list know much more about finance and investing than I do, so please chime in and help us.




In general, the US stock market has been a very good and safe bet since WWII, and T-bonds even better. There will be shitty days and scams of course, but in the long run our investments should appreciate better than real estate or CDs (unless the 21st Century economy is vastly different than history). But of course an individual has to tailor his or her investments for their risk tolerance, values, and life circumstances.



I don't know about all the circumstances going on in England now, but it seems like the Rodney King riots. I just think it's sad when trouble-makers destroy property and wreak havoc only in poor neighborhoods. People have every right to protest and show their anger. So if they want to break the law, torch Harrod's and 10 Downing Street, not the poor immigrant flats of people on the margins who never did wrong to anyone. And Harrod's is insured anyway, though of course it is more protected by security forces than the slums.

Obama surrendered to the GOP on the debt issue

http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?_r=1&hp


http://www.kqed.org/a/forum/R201108020900



This debt bill doesn't have much to celebrate, but it's especially repugnant for progressives. There isn't a single cent of revenue generation, not even closing the corporate jet tax loophole (that Obama mocked in his debt speech) which would have just netted a few million/year and affected a tiny fraction of our population. He couldn't even get that. I know politically Obama is weakened and the debt issue is not all his fault. We're still paying off Reagan and Bush borrowing, and the stimulus was necessary to avoid a depression, yet the conservatives only want to tighten the belt now, when the economy is quite fragile and dependent on a healthy consumer sector (and gov't spending for that matter). While economists predict that these spending cuts (which won't take effect until 2013) won't hurt the economy much, it does lower consumer-investor confidence, and the rest of the world is wondering what the hell is wrong with Washington (and let's not underestimate what this ding to our reputation will cost us in the future, see Iraq). All that will impair an already sluggish recovery, and won't help create jobs.



Like his caving on the Bush Tax Cuts, Obama was in a tough situation though - the GOP knows that the buck stops with him and he doesn't want to preside over a gov't default. The GOP and especially the TP don't care if they wreck DC (and by extension, the US people whom they claim to represent). So it's like a parent bargaining with her child holding a family heirloom watch over the toilet bowl. The watch means a lot to the parent and nothing to the child. He is giggling and thinks it's a fun game to see the parent (an authority figure) panic and plead. The parent is at a major negotiating disadvantage. And yes, Biden was right, technically it's terrorism. When you control something precious to the other side, and threaten to harm it unless you get what you want, what else do you call that? I suppose Wall Street calls it "business as usual." But that worries me - will this become business as usual? We don't negotiate with (Islamic) terrorists because we don't want to send the message that their brutal methods will actually work to accomplish their goals. But now that Obama has caved on several occasions, the ultra-right/TP are only getting bolder with their demands. They see it works, and now every damn budget/spending debate from now on will probably involve this type of ludicrous brinksmanship, posturing, and blackmail (at least until the Dems lose the White House).



Some pissed off liberals think that Obama should have let the nation default, to show the people what the GOP wants and let them take the heat for America's suffering. But like the bank bailouts, he chose the lesser of two evils (moral hazard vs. financial freeze). He is a risk-averse president, and would rather compromise with the GOP than put the nation under unnecessary stress. Maybe that is a prudent decision, but at some point we have to put our foot down. He can't lead the nation being on the defensive all the time. Obama may have avoided a catastrophe this week, but it's not helping his re-election chances and it was a betrayal to his party's philosophy.



Instead, Obama could have raised the debt limit without Congressional involvement (as Bill Clinton recommended) and let the GOP try to take the issue to court. At least the gov't would still run and we'd be paying off our obligations in the meantime. All the panic about debt Armageddon was kind of misleading; sure it would be catastrophic if the US defaults, but that wouldn't happen. We have the funds to pay off our obligations, maybe at the expense of other federal spending, but we won't be deadbeats. As sad as it is, our debt/GDP ratio is still pretty comfortable (lower than France's and the UK's). Italy is one of the biggest economies in the world and their ratio is double ours (http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt). US debt is still one of the safest investments in history, so who cares if S&P threatens to downgrade us? Those were the same morons that gave sub-prime mortgage securities AAA ratings. The Euro has bigger problems, Japan's economy is gloomy, China isn't trustworthy, the stock market and commercial paper can be volatile, and some commodities have issues too. Where would you put your millions for safety? During this big debt debate, what happened to the yield on the 10-year T-bond? It actually went down (to ~2% now), meaning that investors are finding it more desirable vs. other similar investments. Demand for US debt is increasing, so the world is still very confident in us. In comparison, Greek 10-year bonds are paying out around 25% if you dare to sink your money there.



This bill creates a Congressional commission to decide how to make the remaining $1.5T cuts over the next few years. But how can we expect that such a group would show more cooperation than what we've seen? What if that group doesn't come to an agreement? An across-the-board gov't spending cut (not sure the %), including entitlements. I guess that is exactly what the GOP is hoping for, so the conservatives on the commission really have no incentive to compromise on any liberal initiatives. They now have the luxury to wait out the Dems because they are not scared of the fallback plan. Either they get everything they want, or they still get a pretty good outcome if the talks fail. No harm can come to them, except from possible voter ire in 2012, but there's plenty of that for the Dems too. I can't believe Obama agreed to all this.
 
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Obama's actions here are only surprising if you think he's a liberal. He isn't. He's a moderate conservative. He gives liberal-sounding speeches to establish his credentials, but his actions are moderately conservative. He's largely continued W's wars, and started a few of his own. He kept W's defense secretary and a bunch of the economic advisers (imagine FDR keeping Andrew Mellon). Gitmo. His health care plan rejected single payer and instead followed the template you can trace back through Romneycare to the Heritage Foundation's initial 1989 mandate + subsidies solution. He's gone after whistleblowers even harder than W. His opening offer in the manufactured debt ceiling crisis included big cuts to social security and medicare (which for a long time have been how you identify that someone is a Democrat at all).






And he's on track to raise a billion dollars, mostly from rich businessmen. Do you think they'd be paying huge amounts of money if they thought he was failing? He's doing exactly what he's supposed to do. Even early on he was telling people that the long-term goal was to cut social security - his aides explained this to David Brooks back in March 09: http://www.nytimes.com/2009/03/06/opinion/06brooks.html ("He is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security as well as health spending."). He's looking to be a sort of reverse "Nixon goes to China": the ostensibly indisputable liberal who because of those liberal credentials can be trusted to negotiate a fair deal to cut the left's core programs, and thus becomes the transformational politician who brings left and right together to do what's needed. In these debt negotiations he's not getting out-maneuvered, he's Br'er Rabbit saying "please don't throw me into the briar patch!"





The only real hope for the left is a solid primary challenge, to force a change in the dialogue, because the Bachmann bogey-man will guarantee no third party candidate affects the outcome. The current hope-and-prayer is Elizabeth Warren, even though no one seems to know where she stands on anything other than the economy.
 
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Obama is one of them. This is what he wanted, too. Get over it.


Try this on:



http://www.yourownhealthandfitness.org/blogs/?p=288



There is no debt crisis. We've been gutted like a flounder.
 
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Thanks, friends. Yes it may be true that Obama is not a liberal, but how the F did he convince the Dem Senate majority and at least a few dozen Dems in the House to approve this bill? What were Reid and Pelosi's roles in this? Apparently Obama's horrible at persuading conservatives, but great at keeping the Dems in line. The liberal wing of the House may have revolted but were powerless to stop it, though you'd think a few committed senators could have filibustered? Or they don't want to take the blame for missing the deadline?




Obama has clearly picked his backers (or vice versa), but what if he doesn't win? Despite lining Obama's coffers, corporate interests would prefer a GOP in the White House (even if there's not much difference with an Obama admin.), and they are ready to sign new checks for whoever emerges out of the GOP primary. By making deals with the devil, doesn't Obama worry he may get screwed? I'm not so confident about his re-election chances after all this, and there are more budget battles to come before next Nov. The US public doesn't seem to be very sympathetic to Obama over these shameful impasses, so what the hell is he getting out of all these concessions, politically?



Look, I understand the TP attitude. They think DC has overstepped its mandate and is spending out of control. They feel the need to block Dem initiatives tooth & nail, and hopefully they can roll back some gov't expansions for our own good. Forget their economic ignorance and political inflexibility, but I can understand why they would be motivated to subvert the gov't to serve their own interests and save the country. If I was a congressman during the W Bush years, I would feel the same way. It would be like de-funding the Iraq War to protest the immorality-irresponsibility of it. Dems would have been skewered for attemtping such a move in 2005, yet this debt blackmail is somehow OK? And stopping Iraq would save lives, but freezing the gov't is costing lives.



Obama was elected by a pretty big margin because America thought he could bring people together. Well he hasn't, and it's probably gotten worse. It's not all his fault, but if he is failing precisely in the area that he was supposed to excel in, what are the voters (especially Dems) to do about it in 2012? You think anyone would dare to challenge him from the left? Maybe the hopey-changey stuff was all BS, and he's not interested in forging relations and working with others. But he's not dumb; after a few months on the job he should have seen that the GOP and others weren't willing to work with him either on most of his "official agenda." Maybe he needed to play nice to get (minimal) health care reform passed, but that's a pretty crappy legacy to hang one's hat on. Why did he invest so much in that area, and totally fold on other critical issues like jobs and revenue?



Why the hell does he still try to work with the right after 2+ years? It's a divided gov't now and the Dems may take more of a beating in 2012. Why not try to get as much stuff done while you can? He's still the freaking president. Use executive orders and circumvent the checks and balances like Bush did. But as you said, I guess he's not interested in that. Though you'd think Pelosi and Reid wouldn't just sit idly by while Obama pisses away the rest of his term. Reid almost lost (to a total joke candidate) last election. They have a lot riding on this next year, what the hell? What is the Dems' strategy?

--------

Pelosi is the only reason things weren't worse, and she's clearly not
a big Obama fan at this point. In fact, Obama would have backed off of
that watered-down healthcare bill without her. These are trying times
for the "left," but it would be a good idea to invest in a few more
behind-the-scenes operators (even though she plays the good soldier in
public) like her.

http://www.thedailybeast.com/articles/2011/08/01/nancy-pelosi-takes-gutsy-stand-backs-disliked-obama-boehner-debt-deal.html

--------

Thx, S. The Prodigal Son has returned! That's interesting about Pelosi and Obama's desire to distance himself from her to not be perceived as a liberal. But these days, only FNC is accusing Obama of being one of those. I guess the best thing for Pelosi's career is to be a good soldier, help Obama get re-elected, and reclaim the House so she can become Speaker again. If she led a revolt from the left over the debt and other issues, I don't know what that would do to the country and the Dems, but it probably wouldn't help them in 2012. Though the TP is forcing the mainstream GOP to change, so why can't the progressive wing put pressure on Obama? If the GOP alternatives weren't so damn scary, I would hope for Obama to lose so he learns his lesson about picking the right backers and mistreating allies. And I do appreciate Pelosi putting her foot down on some issues so the debt package wasn't worse. She should bring that stuff to light so Americans can see that some people in DC are still trying to fight for them. A tell-all book 3 years later won't help.

J's link to the Brooks piece is pretty depressing too. I know centrists win the presidency, and a big chunk of Obama's support in 2008 was from middle-of-the-road or slightly-right folks. But if his agenda all along was to cut entitlements, benefits, and worker's rights, then what's the point of running for the goddam Democratic ticket? Some cutting may be necessary, but not right now, and especially with so many sources of untapped, fair revenue. And of course when you cut that spending in a recession, it has a magnifying effect in our consumer economy. Aid recipients have less money to inject back into the system, and we're talking about food and rent here, not Vuitton purses and shares of Apple. How do more broke, desperate people help our country recover? And they were some of the most marginalized, vulnerable Americans to begin with, which is why they were getting help. Sure there is some abuse going on, but it pales in comparison to tax cheating by the rich. Though it's easier to demonize the "welfare mom" than Ford. 

Of course a black man has no chance to win the GOP primary, but why the hell did Obama declare himself a Dem? He voted like a Dem when he was in the Senate at least, maybe just to make powerful friends like Reid and Biden? I just don't get what Obama wants out of all this. He was young and a Senate baby when he ran for president, it's not like there was urgency. Unlike the Clintons, he was already rich upon entering the WH. Sure there's always the lust for power, but why go through all the pain of the office when you're just going to be Mr. Status Quo and Don't Rock the Boat? Dozens of politicians can do that already - he was supposed to be the "game changer." His hair went gray like his predecessors, so clearly he's working hard on something. Just wish the non-rich American people had more to show for it.

L's link sends a powerful message, and it's what we were discussing here in the past. We know how big-business libertarians are bankrolling the TP, and the Dems are dumping labor in favor of corporate campaign support. We know about the great wealth divergence since the Carter admin. We know that the rich were barely scathed in the recent recession, while the poor-to-middle have given back much of their gains from the bubble '90s. The labor market is horrible. In the 1930s, we had the New Deal to jump-start the economy, but many critics say the Obama stimulus was actually too small to be effective. The Supreme Court is the most business-friendly in generations. The US worker is now pushed harder than his/her peers in all other developed nations maybe besides South Korea (and their economy is booming compared to ours). Now the US worker is so fearful for his/her economic future and with very little leverage in the market, that he/she will put up with just about anything to keep the paycheck coming. That's looking closer and closer to the Industrial Revolution, minus the black-lung and child labor.

I am so angry and ashamed of our country and our people, but unfortunately I am part of the 60% that doesn't want to feel bad about my inaction. Actually, I am kind of hoping for things to get so bad that the citizens have no choice but to rise up. It's time the rich assholes feel a little fear and pain like the rest of us. It's not class warfare, it's survival.

More consequences of climate change

http://www.loe.org/shows/segments.html?programID=11-P13-00029&segmentID=3

We know about rising sea levels, drought, and heat waves (going on as we speak). Ocean acidification and species extinction are also big problems too. But how about global warming's effects on human conflicts?

One example is opium poppy cultivation in Afghanistan. We keep trying to persuade Afghans to stop growing the smack that helps fund Taliban activities and sickens Westerners. We even offer them cash incentives to switch to less lucrative but legal crops like grains. But Afghanistan is currently experiencing its worst prolonged drought in recorded history. Poppies are way more drought resistant than the crops we and the Karzai regime are pushing for. Poor farmers just want to survive. The US is saying no to their livelihood, and the Taliban are saying yes. Even if they don't believe in Sharia and don't wish for America's destruction, what side do you think they're going to support? So climate change is directly impeding our national security strategy. Some may think that buying foreign oil funds terrorism. They may be right, but burning oil of any origin is also making it harder for us to fight terrorism.

Another example closer to home is Mexican immigration. Rising sea temp and El Nino in the 1990s created a massive, toxic algae bloom that wiped out highly productive fisheries in Michoacan and elsewhere. This put a lot of poor, young people out of work and hungry, so of course many migrated north for survival, despite the dangers of crossing into America and the hard life that awaited. Some were probably desperate and more amenable to participate in drug trafficking and violence. So climate change also exacerbated an economic and security crisis for us and the Mexicans.

Unfortunately climate change will hit the people living near the equator the hardest, who also generally happen to be the poorest humans on Earth, partly due to the repercussions of colonialism and Western exploitation. But you don't see a big effort in rich nations to help them cope, especially during the global recession. This is doubly insulting because our pollution and our direct or indirect destruction of their precious forests are the major contributions to the human side of climate change. Instead, rich nations seem to be taking the approach depicted in the disaster film "2012". High walls and lifeboats for those who can afford it, and the rest are left to face nature's fury on their own. Immigration policies and border security are getting tougher in most G8 nations (that happen to be in more northern, temperate zones). Of course there are other reasons for this besides climate change effects, but clearly no one is getting more welcoming. Plenty will die from climate change in the G8 as well (some as we speak), but proportionally much less. If we made certain political decisions, the suffering and death could be greatly reduced, but Washington can't even agree to extend its own credit line, so the prospects of worldwide cooperation don't look great.

More on living with more extreme weather due to climate change: http://www.npr.org/2011/07/25/138601271/weather-warnings-for-a-climate-changed-planet

The economic inefficiencies of our energy policies

A friend recommended "Environmental Economics and Policy" by Tietenberg and it's pretty interesting for those who are eco and econ novices. There's a big chapter on energy policy and how various government actions and corporate incentives reduce the "economic efficiency" of energy (or the total net benefits to society). In other words, we're not getting the most out of our energy use, and our poor decisions are making our energy problems worse. Dynamic efficiency takes the future into account, so it is the best allocation of resources that will maximize the net benefits to both present and future peoples. This is important because so often short-term thinking creates problems (Wall Street quarterly reporting, the House's 2-year election cycle, etc.). Many incentives exist to "rob from the future" in order to increase profit or look better today, and if only future peoples could invent a time machine to advocate for their interests now.

Environmental economics helps to inform policy decisions to increase "fairness" and "sustainability". Fair, sustainable decisions should not leave future generations worse off than we, in terms of aggregate natural and man-made capital available. Carbon trading operates on this principle. Although company X is polluting in the present and thereby hurting the future, it can become more sustainable by offsetting its damage with conservation/research outlays that benefit the future. So the general strategy is to find policies that satisfy sustainability criteria, and of those choices implement the ones with the highest dynamic efficiency. Of course the strictest sustainability criterion mandates that we should preserve the natural world exactly as it is for the future, so that our consumption is limited by the replenishment rate of the resource (forest, fishery, etc.). But that is a hard sell these days, and of course impossible for non-renewable resources like minerals and fossil fuels. Peak oil is probably behind us and the discovery/creation of new deposits is greatly outpaced by our consumption rate. If we can't leave our progeny the same abundance of fossil fuels as we enjoy now, at least our energy use should create profits that can become capital set aside to compensate the future. Alaska basically does this and pays its residents yearly dividends from its "permanent fund" (but really all of it should be off limits).

Republicans and some Democrats pre-BP spill were advocating "drill baby drill" to solve our energy problems. But from a fairness standpoint you can see that makes no sense (we're just leaving less oil for the future). And since domestic oil generally has higher costs of production (labor, regulatory compliance, insurance), we're retaining less profit, even if we were nice enough to set it aside for the future. Plus there's not much left to tap. "Easy oil" has already been exploited in the US, so untapped deposits entail a lot of risk and cost. Deep-water drilling blowouts, arctic pipeline leaks, and water pollution from natural gas fracking are not just hypothetical dangers, but we've witnessed them with horror. Even though the environmental costs of production aren't really included in the retail price of energy, exploration in hard-to-access locations is already super expensive. It's only cost-justified when the demand for oil pushes the market price above $70/barrel like it is today.

The booming tar sands industry in northern Canada and elsewhere is a consequence of this. If you're not familiar: building-size earth movers (that consume a lot of fuel as you can imagine) dig up tons and tons of dirt, transport it to giant boilers that heat up the sludge and separate the usable fuel from the sand. And all this takes place at the top of the world, so there are a lot of costs associated with moving equipment and people up there, keeping them warm and sane, and pumping the fuel back to civilization. Beyond the environmental damage and infrastructure concerns, it also costs about 3 gallons of cleaner natural gas to make 1 gallon of dirty oil from tar sands. Even a child could see that something is amiss with that paradigm. But just because the market says this transaction makes sense doesn't mean we should accept it at face value.

Speaking of natural gas, it's not a panacea either. Since methane is gaseous at normal temperatures, high-pressure transportation and storage is challenging. In order to be cost-effective, it has to be super-cooled to -259 F for international tanker transport. Although we've been lucky so far, LNG facilities are an attractive terrorism target, as an LNG fire is much hotter and harder to contain than an oil fire. Also, methane is much more potent than CO2 for greenhouse effect.

But shouldn't we drill more at home to reduce our dependence on imports? Only if it will make us better off, and it usually doesn't. It's just easier to buy foreign oil - that's why we still do it despite the risks. Yes our money goes to people who may not like us very much, but it's hard to quantify how much actual damage that is causing. What about Middle East terrorism? We are implicitly paying a "security premium" for foreign oil. Some of that is our taxes to fund the US Navy that is mostly in charge of keeping the sea lanes safe for tankers and other vessels. Other monies are allocated to maintain the Strategic Petroleum Reserve: a billion barrels of oil stored in caves in the South in case of embargoes or other supply disruptions. And of course there are the oil wars and support to oil dictatorships. The security premium is good in that it lowers consumption and makes domestic supply more attractive, but the bitter truth is the premium is more efficient than trying to be energy independent (that would require a major US economic downsizing). So we have to live with OPEC and volatile imports, but how can we reduce our pain? Conservation always helps, but it won't fix the problem because of the oil we still need to use, much of it will be foreign. In addition, the government can impose tariffs equal to the security premium. The revenues collected could fund alternative energy research and pollution control. But tariffs piss people off (people we depend on), so DC would prefer to subsidize domestic suppliers (but that won't make oil any cheaper to consumers).

Price controls are a touchy issue too. We know that the middle and lower classes are getting squeezed by higher energy prices, and we don't want people to lose their jobs because they can't commute or die because they can't afford to keep the heater/AC on. It isn't humane if some people are priced out of access to energy. Of course OPEC and other local monopolies reduce supply in order to capture more "economic rent" or resource royalties. But when the gov't holds commodity prices below their market price, it causes consumption to increase, which exacerbates climate change, hurts the future more than it helps the present, and makes it harder for alternative energy to gain market share. If price controls are in place long-term, consumption will be so high that all the cheap gas will be used up until the extraction costs of harder sources equal the price cap. Then producers have no incentive to sell gas. And even though prices are forced lower, during shortages there's no guarantee that poorer people will get access to fuel. Subsidies make a lot more economic sense. Let prices rise to the market rate, but compensate the poor so that they can afford it.

Price controls also create perverse incentives for suppliers. Politicians may cap prices to look good in an election year, but if producers know the cap will expire next year, they may cut back supply to make more money in the future. So we'd have over-consumption plus supply shortage. This happened with natural gas in the US in the 1970s. For some reason, the gov't put price caps on interstate gas purchases but not intrastate. So suppliers preferred to sell locally, which totally screwed people in gas-poor states.

And then there's the whole issue of energy deregulation. Traditionally, utilities were regulated monopolies where gov't would set price, but suppliers were obligated to service all customers in an exclusive area. But in 1992, Congress decided to let suppliers sell electricity on open markets, and lower prices to compete for customers. Well, that was the plan at least. If price leadership is key, firms have incentive to cut safety corners and use the dirtiest inputs to provide the cheapest watts. Dysfunctional California joined the party in 1995 since the state was paying power rates about 50% higher than US average. But a perfect storm ensued to cripple the state. Drought reduced hydroelectric productivity and many fossil fuel plants were due for scheduled maintenance shutdowns. This boosted wholesale costs, but suppliers couldn't pass them onto consumers due to a price cap that was law. So rolling blackouts ensued, and some firms like Enron affiliates (famously) exploited the chaos. They deliberately withheld power in various markets to take advantage of short-term supply inelasticity, which raised prices and allowed them to reap monopoly profits. So the poorly and hastily designed "free market" turned monopolistic anyway. PGE even had to declare bankruptcy in 2001, the voters blamed Gov. Davis, and replaced him with the Terminator.

Even China knows that coal is literally a dead-end, but how about nuclear? If the energy market functioned properly, nuclear power would never exist. Besides the yearly tax breaks, gov'ts had to offer huge assistance to promote plant construction, because if suppliers had to absorb the real costs of nuclear accident risk and waste disposal, there would be no takers. We passed the Price-Anderson Act in 1957 to cap liability damages at $560M for a nuclear disaster (and the taxpayer would cover 90% of that, though not sure if those are 1957 or 2011 dollars). It was supposed to expire in a decade (by that time nuclear plants were supposed to figure out safety so that accident risk was a nonfactor), but it hasn't. The gov't share has fortunately shrunk, and now private insurance covers the difference.

Like other insurance, plants pay premiums into a big accident fund, but in this case the sick pay as much as the healthy. Plants with great safety records and top-of-the-line equipment don't get rate discounts, so there's no incentive to provide sufficient safety. But no one wants another Chernobyl, right? Well economically speaking, it makes no difference for nuclear firms. Due to gov't and insurance risk underwriting, they are no worse off if they wet the bed. And I'm not sure how much responsibility companies bear for waste disposal (my guess is not much, otherwise they wouldn't be in business). How scary is that? Sure I believe they still have a conscience and don't want to take the PR hit from an accident, but it concerns me that negligence can't really be punished financially. As we've already discussed, the NRC that oversees nuclear facilities is underfunded and bullied by Congress to back off the plant operators. A fair alternative would be to tax the nuclear firms to compensate those affected by nuclear power issues. France already forces plants to sell cheaper power to those living nearby, and the same should be done for those living near waste disposal sites, in order to make up for lost property values and potential risks. Then future residents can decide whether those incentives make it worthwhile to live there. But after Fukushima, I think nuclear won't be experiencing growth for at least a generation.

To close, energy use is a double-edged sword. Low or high prices are both good and bad for the environment. Low market prices increase consumption (and pollution), but will cause us to deplete our resources faster and transition to sustainable renewable energy. But this will exacerbate scarcity conflicts, force us into riskier exploration before the tech is ready, and probably make the energy transition more traumatic. High market prices will reduce consumption and conserve more resources for future peoples (who can hopefully extract the remaining energy more safely and efficiently), but most of the profits will go to OPEC and other suppliers. High prices will also make alternative fuels more attractive and stimulate research. And of course if energy prices truly reflected social and environmental costs of use ($100-200B/year in the US according to the author), they would be much more expensive ($10/gallon for gas). I am not sure which scenario I am rooting for, but higher prices seem probable. Any way it goes, fossil fuels will dwindle until the remaining supplies are as expensive to extract as renewable alternatives (hopefully by then hydrogen and clean electricity will be viable for vehicles). But if we plan intelligently, we'll be ready that day for a smooth transition instead of furiously struggling to cope.

DSK released

http://news.yahoo.com/strauss-kahn-free-house-arrest-charges-stand-154714378.html


I can't believe these idiot prosecutors who just accept accuser testimony without due diligence. Like Duke Lacrosse or Kobe, they are so hungry to win a big celebrity conviction (and move out of the shitty DA office to politics or a corporate job) that they're not doing their jobs. Confirmation bias - just like the "sources" we used to justify the Iraq War. Or in the case of Ted Stevens, maybe they had a case but they muck up the evidence and procedure so badly that they blow it. Maybe the accuser is telling the truth despite questions about her personal issues, but if the DA doesn't have enough of a case to convince a jury or push for a plea bargain, why destroy someone's career and possibly your own?

I find it interesting that the French public pretty much never waivered in its support for DSK through all this, while in the US accused pretty much equals guilty in the media. By some accounts, socialist DSK was doing a good job at the IMF with the European debt crisis, and was slated to replace the unpopular conservative Sarkozy in the next French election. He may still have a chance, but this fiasco cost him his job and maybe future office. To me it seems similar to the Eliot Spitzer mess, a brash leftist politician taken down by dubious scandal. Sure both men are womanizers and have some personal failings. But other forces might have been at work to bring about their public downfalls.

http://www.client9themovie.com/
 
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http://www.nytimes.com/2011/07/05/opinion/05nocera.html?src=me&ref=general
 
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I think the NYT author has some good points and I know my DSK email was more on the knee-jerk side. I do respect the DA for coming clean with doubts about the accuser early, rather than dragging on. I assume the NYC DA must be one of the best in the country, so they probably weigh their decisions heavily, especially concerning suspects of high profile. But I don't think America's history with Roman Polanski is relevant to the DSK case. Maybe if DSK was a criminal and was able to flee, it would be very hard to bring him to justice. But Americans like Kissinger and maybe some of the Bushies have been accused of war crimes by other nations, and we haven't allowed them to be extradited either. We should expect nations to protect their own, but that shouldn't make us rush our justice system decisions. I believe that even if DSK fled, if the US presented a compelling case to France, some arrangement for trial could be reached. Rape is still illegal in France, unlike their gray area concerning sex with minors. And sorry to be vulgar, but bruises and semen on clothes can occur in casual, consensual sex as well.


I don't agree with the author's comments about classism and such in the 2 countries. The poor in France generally have better access to social services than those in America. Of course both nations struggle with immigrant and Muslim issues, and US Muslims are flourishing in comparison (but the demographics of Muslim immigrants in America are vastly different than those in France - education, economic circumstances, etc.). Despite America's reputation, social mobility is higher in France and other EU nations(http://news.bbc.co.uk/2/hi/americas/8162616.stm), and the US has plenty of problems with wealth inequality and class as we know (http://www.nytimes.com/pages/national/class/index.html). Although the justice system often favors the rich over the poor (or corporations over normal people, as we've seen in the Roberts Court), I fear that cases like DSK's (if decided in favor of the accuser) may encourage other lower-income, desperate people to entrap or fraud rich people in their vices, in order to get a settlement. Maybe they deserve it, but it opens up another can of worms for justice.