Friday, June 26, 2009

CBO: Climate Change Consumer Cost Estimates: Just Wrong

After all these years of carefully observing government data and its continuous revisions, now we are being told by the Congressional Budget Office that the Climate Change Legislation before Congress for a vote today, championed by Congressman Henry Waxman of California, will cost consumers pennies a day.

Common sense says changing an economy from a carbon dependent economy to a "renewable energy" economy will save Americans money in the "long-term." The old common sense quip, my grandmother used to say was, "in the long-term we are all dead." Who will be around in the long-term to hold the politicians and environmentalists accountable if they are wrong?

Leaving the conflicting analytics on both sides of the debate out for our purposes, I would like you to consider how such a sea change in energy will occur without totally rupturing our already tenuous economy. I am not talking in the abstract but rather about whether there will be "green" fuel to power our cars, boats, snowmobiles, four wheelers, etc., energy to cool us in summer and keep us cozy in winter with less oil and coal use at virtually no change in price from our current circumstance. Wow, that is a mouthful.

For myself, I do not trust them any more than I trust the large private sector banks together with the housing advocates (special interests) or the same politicians who promised "affordable housing" for all. Affordable housing, affordable energy, affordable health care...government has never demonstrated taxpayer affordable anything when compared to the ability of uncontrolled market competition. Sure, markets have weaknesses but they also have "creative destruction" to purify themselves when they go awry. What does government have to hold it accountable? Uninformed voters who are easily manipulated by hollow political promises driven by special interests. Remember, I am the guy who supports taking away all business subsidies provided by government. In order for free markets to work, they have to be free of all government attachments.

The cost to consumers and the macro-economy of this Waxman Climate Change legislation will be enormous, beyond the comprehension of most people to comprehend. If not, why did Congressman Peterson demand that agriculture, a major emitter of green house gasses, be exempted from the bill by having the fox guard the chicken coop rather than EPA?

Our hope is that the Senate sees the coal/nuclear provided light before unemployment hits 12-15%!!!


According to the EPA, "the cap & trade policy has a relatively modest impact on U.S. consumers assuming the bulk of revenues from the program are returned to households.–Average household consumption is reduced by 0.03-0.08% in 2015 and 0.10-0.11% in 2020 and 0.31-0.30% in 2030, relative to the no policy case.
–Average household consumption will increase by 8-10% between 2010 and 2015 and 15-19% between 2010 and 2020 in the H.R. 2454 scenario.
–In comparison to the baseline, the 5 and 10 year average household consumption growth under the policy is only 0.1 percentage points lower for 2015 and 2020.
–Average annual household consumption is estimated to decline by $80 to $111 dollars per year* relative to the no policy case. This represents 0.1 to 0.2 percent of household consumption.
–These costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital. Cost estimates also reflect the value of some of the emissions allowances returned to households, which offsets much of the cap & trade program’s effect on household consumption. The cost estimates do not account for the benefits of avoiding the effects of climate change.
–A policy that failed to return revenues from the program to consumers would lead to substantially larger losses in consumption."

Think about this last sentence for a minute. If the Climate Change Legislation (Waxman-Markey) "failed to return revenues from the program to consumers would lead to substantially larger losses to consumption." In common sense speak, this is consumer cost increase. So, please ask yourself, if this program generates billions in revenue, what is its cost to implement? Do you trust the politicians to continue to return the revenue to you to offset the costs for the next 20-30 years? I do not. All of this ignores the fact that if consumers do not feel the cost of the transition from a carbon-intense economy to a less carbon intense economy what will force them to change their behavior to a more conservationist mode.

Finally, remember, when Medicare was awaiting Congressional vote in 1965, President Lyndon Johnson and most Congressional Leaders promised long-term savings by insuring senior citizens. At that time they used the Social Security suprlus to pay for the program. Since then, of course, in the "long-term" the medicare tax was imposed at 3% of income. Now Medicare is on the verge of bankruptcy and rather than fixing it what are our leaders doing, inventing another critical program that, we are told will create millions of green jobs in the future and save Americans billions of dollars while "saving the planet."

Remember the old adage, "Fool me once, shame on you. Fool me twice shame on me."

Monday, June 15, 2009

Obama Is Pressed to Tax Health Benefits

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/14/AR2009061402769.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

Let's analyze this. The goal is to cover those 40 million, approximately 16% of all Americans without health insurance and this proposal taxes the 84% of Americans who do have health insurance to raise the revenue to do it. Have we now surrendered our belief in the microeconomic fact that when we raise the price of a good or service, whether through market forces (supply and demand) or government taxation, we get less of it? Maybe someone has a new "feeling " that negates this market principle. I think this is crazy.

My solution to the problem. First, mandate through law that all Americans have health insurance the same way we have for car insurance, making sure that those who opt out on their own accord can no longer do this. Second, raise the medicare tax by the amount necessary to add the those uninsured, making certain that when they can afford to pay for their own insurance the government coverage ends. For states like Minnesota that have their own "Minnesota Care" - Medicare type program, -the Federal Program would be pre-emptive. Under this scenario, like Medicare, all currently uninsured Americans would get equal insurance regardless of the state they live in. This does not, of course, guarantee equal care. That is not possible.

Unless there is a public consensus that Medicare is a bad program or that seniors are more important Americans than the rest of us, this is the only common sense way to proceed.

Edward Harrison: 2009 --A Great Depression Scenario?

Is 2009 Following a Great Depression Scenario? by: Edward Harrison June 15, 2009

http://seekingalpha.com/article/143204-is-2009-following-a-great-depression-scenario?source=email



With more and more major economists predicting recovery sometime later this year, many have forgotten that downside risks remain. Berner, Roubini, Volcker, Krugman and Bernanke have all come out essentially saying they would not be surprised to see a ‘technical’ recovery at some point later this year. Robert Gordon has gone as far as to suggest we could be in recovery already – at least in the United States. I too have called for a Q4 or Q1 recovery. So, is it off to the races?

Hardly. I don’t have to convince many readers at Credit Writedowns or Naked Capitalism that there is a darker scenario which threatens recovery. Many of you see this according to preliminary results from a recent poll I conducted.

Nevertheless, let me use this post as a reminder of that downside scenario with some commentary from economists. David Rosenberg is not the only major bearish economist that sees a very troubling economic outlook.

First, a post by Wolfgang Munchau in the FT reveals that much of the economic data of late has actually been disappointing despite the rally in shares and corporate bonds.

Last week, the green shoots shrivelled. In South Korea, China and Germany, exports were declining once again. In the US, the Federal Reserve’s Beige Book said “economic conditions remained weak or deteriorated further during the period from mid-April through May”.
The March signs of revival turned out to be little more than a technical inventory correction, with no change in the underlying trend. The world economy is still contracting, though perhaps not quite as fast as at the start of the year.

As an analysis by economists Barry Eichengreen and Kevin O’Rourke* shows, global industrial output is still on the same trajectory as it was during 1930. The only question is whether we can avoid 1931 and 1932.

Munchau argues we can avoid a 1931 and 1932 scenario only if we see a marked change in the present policy response in major economies. But, Munchau’s analysis begs the question as to why he finds the situation so dire for the global economy. Why does Wolfgang Munchau think 2009 is tracking 1930? The answer comes in the Eichengreen – O’Rourke data he references. It is truly stunning: when one looks at statistics like industrial production, this downturn is looking as bad as the Great Depression. Here is how it is summarized at the economic site Vox.
The 6 April 2009 Vox column by Barry Eichengreen and Kevin O’Rourke shattered all Vox readership records, with 30,000 views in less than 48 hours and over 100,000 within the week. The authors will update the charts as new data emerges; this updated column is the first, presenting monthly data up to April 2009. (The updates and much more will eventually appear in a paper the authors are writing a paper for Economic Policy.)

New findings:

World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.

World stock markets have rebounded a bit since March, and world trade has stabilized, but these are still following paths far below the ones they followed in the Great Depression.

There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.

The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.

Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.

Now I happened to listen to Barry Eichengreen make his case on Tom Keene’s show at Bloomberg Radio this past Thursday. The interview makes for interesting listening and it gives you greater granularity on his view for the global economy. I have provided the podcast clip below. (By the way, if you don’t already subscribe to Keene’s podcast, Bloomberg on the Economy, do it. They have great guests. Here is the link.)

I recommend you read the Eichengreen – O’Rourke article (the graphs are amazing). With that as background, the Munchau piece will be more powerful. Afterwards, have a go and listen to the Bloomberg podcast. The combination will leave you with a very good understanding of the downside risk for the global economy.
Enjoy.

Wednesday, June 10, 2009

US carbon market worth $60bn in first year: CBO

http://www.pointcarbon.com/news/1.1134273

According to a new analysis by the Congressional Budget Office, the Waxman-Markey Climate Change Legislation currently moving toward passage in the U.S. House would create a $60 billion dollar carbon market in the U.S. Sixty billion dollars chasing carbon dioxide reduction. It reminds me of the great housing finance ideas of the past 10 years that led to our cuurent economic crisis.

Now the same politicians that helped to create our current crisis, prodded along by environmental and business interest groups, want us to trust them on this new money machine ponzi-scheme.

That would be a mistake of terrible propostion.

Tuesday, June 9, 2009

New rules to restrain federal spending? What?

Congress is sure to adopt this policy immediately (sarcasm added). Is President Obama beginning to manage politics by polling? A better solution would be the repeal of the Bush-Congress Prescription Drug boondoggle/entitlement for seniors. It was the largest expansion of entitlement spending since Medicare in 1965. Additionally, Congress could adopt a policy of no bailouts for private companies or public pension funds. That would save us all billions and be fair. Politicians picking winners and losers to subsidize in the private sector has always been a miserable failure (Chrysler anyone).

Our President wants us to belive that he is going to restrain spending while he pushes Congress to pass national health insurance, expand federal control over our energy and create peace in the world with the consequent billions in foreign aid that will require to grease the squeaky countries.

By the way, if single payer, government provided health care is such a bad idea, why doesn't Congress repeal Medicare? And since it will not, how can any of those politicians stand up and oppose the same coverage for all Americans? Because they are hypocrits of the highest order.


http://www.washingtonpost.com/wp-dyn/content/article/2009/06/08/AR2009060804114_pf.html

Obama Seeks Rules to Restrain Spending

By Lori MontgomeryWashington Post Staff WriterTuesday, June 9, 2009

With the budget deficit soaring toward a record $1.8 trillion, the Obama administration is planning to propose tough new rules that would require lawmakers to pay for new initiatives -- including an overhaul of the health system -- or face automatic spending cuts.
The new rules, which could be rolled out as soon as today, come amid growing anxiety among the nation's foreign creditors and some of its top economic policymakers about the tide of red ink. Surveys show ordinary citizens, too, are growing concerned, with the public divided in a new Gallup poll on President Obama's handling of the deficit.
Obama has said since taking office that he would support a push to enact budget rules similar to those that were in effect during the Clinton administration, when big deficits were briefly transformed into surpluses. Obama plans to make good on that promise by proposing his own set of pay-as-you-go initiatives, known as PAYGO, according to congressional sources.
If approved by Congress, the rules would forbid lawmakers from expanding entitlement programs such as Medicare and Social Security, creating new entitlement programs or cutting taxes unless the cost is covered by spending cuts or tax increases. If lawmakers fail to pay for their initiatives, Obama's rules would subject entitlement programs to automatic cuts, said sources who spoke on condition of anonymity because the plan has yet to be announced.
Deficit hawks applauded the move, saying the automatic trigger, known as sequestration, would mark a return to more serious budget restraint.
"If the administration is going to say, 'We need to start afresh here and go forward on a pay-as-you-go basis, including health-care reform,' this is a good way to start out," said Robert Bixby, executive director of the nonprofit Concord Coalition, which champions deficit reduction.
The administration will propose that many costly items get a pass under the new rules, sources familiar with the proposal said. Lawmakers would be able to extend the tax cuts passed by the Bush administration past their 2010 expiration date, prevent the alternative minimum tax from ensnaring millions of additional taxpayers and increase payments to Medicare physicians without offsetting the enormous costs. Administration officials have argued that those actions would merely extend current policy.
That part of the plan is less appealing to fiscal conservatives, who argue that the nation cannot afford to keep the Bush tax cuts in place.
But Obama's plan "does reinforce the importance of paying for health care reform," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. "And that's the fight that the administration is pinning its fiscal responsibility credentials on this year."

Tuesday, June 2, 2009

Everything is Improving: Here are the Facts?

Be careful out there was the fore-warning that the Sargeant gave to his police officers on the old cop show Hill Street Blues. It deserves our continued attention. The people who told us two years ago that we had no housing worries are now telling us the worst is over for the economy. They say the data are improving. Here are the most current facts arguing that the popular wisdom is still wrong.

Our psuedo, taxpayer subsidized recovery has no market foundation and is another government sleight of hand that will falter sometime in the near future (next 6 months) and add to the already high consumer distrust of our so-called experts. Once again, the solution, as painful as it is, is for consumers to reduce their personal debt, and for government to sit quietly on the sidelines awaiting a market-driven recovery. Painful is an operative word since without it we learn nothing and continue to repeat past mistakes over and over again.

Auto Sales: More Reasons for Optimism?

Auto sales fell significantly last month — no surprise there. But there was a surprise in who took the biggest hit: the Japanese automakers:

Toyota plunged 41%
Honda 42%
Nissan lost 33%
BMW fell 27.7%
Volkswagen fell 12.4%
Mercedes-Benz sales were down 33%
Porsche Sales Down 29%
Hyundai lost 15%
General Motors fell 30%
Ford Motor 24%
Chrysler dropped 47%

The industry’s seasonally adjusted sales rate tumbled to 9.2 million in May. While these numbers are pretty bad, the US companies fared better than expected . . .

More...

Bank Profits (Federal Reserve):

follow the address to the chart they do not want you to see.

Source:Profits and Balance Sheet Developments at U.S. Commercial Banks in 2008Morten L. Bech and Tara Rice,Federal Reserve, June 2, 2009http://www.federalreserve.gov/pubs/bulletin/2009/pdf/bankprofits09.pdf

A Substantive Site Worth Visiting

For those of you interested in a great site on matters of substance:

THE FREEDOM NETWORK AUDIO PORTAL - Free & Easy Access to worldwide Broadcasts on Economics, Social Security, Policy and Strategy:
"Podcasts on Economics, Social Security, Strategy, Liberty & Public Policy"

My Son's Accomplishments are a good news for humanity...

AJWS Names New VP for Programs
Media Contact: Joshua Berkman, Associate Director of Media and Marketing212.792.2893
New York, NY; May 27, 2009—

AJWS has named Aaron Dorfman its new Vice President for Programs.
As AJWS's Director of Education since 2005, Dorfman has created and implemented educational programs and resources that encourage American Jews to think critically about and engage in the pursuit of social justice for all, worldwide.

Prior to joining AJWS's staff, Dorfman spent nine years teaching and leading youth programs at Temple Isaiah, a Reform synagogue in Lafayette, California. As a Wexner Fellow from 2001-2005, Aaron received a master's degree in public policy from the Kennedy School of Government at Harvard University and a certificate from the Pardes Institute of Jewish Studies in Jerusalem. Aaron holds a B.A. from the University of Wisconsin–Madison.

"Aaron has a deep understanding of AJWS's mission, a strong ability to interweave our international grantmaking with our domestic work, and most importantly a commitment to proactive strategic thinking and collaborative teamwork," says Robert Bank, AJWS's Executive Vice President. "We are pleased that come mid-July we will have a complete executive team that will allow us to fully embrace the many challenges and the great opportunities that lie ahead."

In his new position as VP for Programs at AJWS, Dorfman will be responsible for overseeing the organization's grantmaking, education, service and advocacy programs. In addition to supervising day-to-day operations, he will work to broaden and enhance existing programs, explore opportunities to launch new partnerships and initiatives and further develop the strategic framework for each of the programmatic functions under his purview.

"I am honored and excited to take this next step with AJWS and am eager to support the work of our outstanding grants, service, advocacy and education teams," Dorfman said. "I look forward to working with my colleagues to strengthen the real partnership that AJWS is building between the American Jewish community and the people of the Global South."