Carbon Tax

It makes sense to me. But, as a proper skeptic, I have to believe there are downsides.

That being the case I ask, what are they?

Please read Steve Chapman's article first, then let me know, why shouldn't we do this?

[H/t to Andrew Sullivan]

[UPDATE: In comments Dan recommends checking out the Carbon Tax Center for additional information. I recommend it too -CK]

Presidential parallels

The news that our OPEC masters are planning to lower oil production took me back to my youth in the early 70's, to bad haircuts, mediocre rock and roll, and gas lines around the corner.

Ahh, the good old days.

It also brought to mind the political situation back then and its present-day parallels.

President Bush is, apparently, fond of comparing himself to another president, Harry S Truman, which, given Bush's penchant for wishful thinking (e.g. his entire foreign and domestic policy), is hardly surprising.

From the Washington Post:

He led the United States into war and saw his popularity plummet, yet some 60 years later his reputation has never been higher: It's small wonder Harry S. Truman seems to hold a special fascination for President Bush these days.

I'll leave it to others to discuss why that comparison is a load of horses**t, but I would like to put forward my own, and I believe original presidential comparison.

The modern presidency which most closely parallels that of George W. Bush is that of

...

wait for it...

Gerald R. Ford.

Huh?

Let me explain.

Gerald Ford took over the presidency after Nixon resigned in disgrace.

At that point in time Viet Nam was lost, Democrats controlled congress, and US and Republican credibility was at an all time low.

Ford himself was, by all accounts, a likeable guy, totally out of his depth, and totally ineffectual as president.

He was much more comfortable on a golf course than in the oval office.

Substitute the ranch for the links and he was, essentially, George W. Bush.

At least as Bush might have been had 9/11 not happened.

But 9/11 did happen. And Bush mislead us into war in LB Johnsonian fashion, and gathered the reigns of the imperial presidency in a manner that no doubt had Nixon smiling even as he burns in hell.

As I view it George W (though he might question the possibility) has evolved, albeit involuntarily, and has now become, after the last election, Gerald R. Ford: a (to some even still) likeable, ineffectual non-entity, marking time until he has to vacate the whitehouse in a few years.

How's that for a legacy?

I guess it just ain't "news"

Yesterday, the Guardian revealed that oil giant Exxon played an important role in developing US policy towards climate change and that BushCorp™ rejected the Kyoto protocols based on input from Exxon, as well as other Big Energy companies:

In briefing papers given before meetings to the US under-secretary of state, Paula Dobriansky, between 2001 and 2004, the administration is found thanking Exxon executives for the company's "active involvement" in helping to determine climate change policy, and also seeking its advice on what climate change policies the company might find acceptable.

Other papers suggest that Ms Dobriansky should sound out Exxon executives and other anti-Kyoto business groups on potential alternatives to Kyoto.

Until now Exxon has publicly maintained that it had no involvement in the US government's rejection of Kyoto. But the documents, obtained by Greenpeace under US freedom of information legislation, suggest this is not the case.

"Potus [president of the United States] rejected Kyoto in part based on input from you [the Global Climate Coalition]," says one briefing note before Ms Dobriansky's meeting with the GCC, the main anti-Kyoto US industry group, which was dominated by Exxon.

The papers further state that the White House considered Exxon "among the companies most actively and prominently opposed to binding approaches [like Kyoto] to cut greenhouse gas emissions".

This story to date has garnered a total of 10 citations in Google news (as opposed to the almost 1,400 citations for Michael Jackson's return to the hospital).

I should be outraged, but I suppose that it's been so long assumed that BushCorp™ is in the pocket of Big Oil that confirmation of that belief just doesn't constitute "news".

The same could be said for the media yawn which greeted the minutes of a Downing street meeting confirming that BushCorp™ was "fixing" the intelligence to build a case for war in Iraq. Everyone has known all along that Georgie was aching for any excuse to outshine Daddy Bush.

You have to hand it to Rove and the boys (and girls) of BushCorp™ for a brilliant and unorthodox tactic. If you carefully cultivate a reputation for corruption, no-one's surprised by evidence that you are indeed corrupt. Way to go.

Saddam Oil Kickbacks: U.S. Biggest Offender

In news that will suprise only Republicans, the biggest offender in violating UN snactions against Saddam Hussein was, drumroll please, the US.

A report released last night by Democratic staff on a Senate investigations committee presents documentary evidence that the Bush administration was made aware of illegal oil sales and kickbacks paid to the Saddam Hussein regime but did nothing to stop them.

The scale of the shipments involved dwarfs those previously alleged by the Senate committee against UN staff and European politicians like the British MP, George Galloway, and the former French minister, Charles Pasqua.

In fact, the Senate report found that US oil purchases accounted for 52% of the kickbacks paid to the regime in return for sales of cheap oil - more than the rest of the world put together. [Emphasis mine]

"The United States was not only aware of Iraqi oil sales which violated UN sanctions and provided the bulk of the illicit money Saddam Hussein obtained from circumventing UN sanctions," the report said. "On occasion, the United States actually facilitated the illicit oil sales.

So, yet another chicken comes home to roost.

First there was the Downing street memo revealing that BushCorp™ was cooking the intelligence books to jury-rig a case for war in Iraq. Now we learn that at the same time it was turning a blind eye to illicit US-Iraqi oil sales that would dwarf Kofi Annan's most terrifying nightmares.

And speaking of the UN S.G. who's been hounded by US conservatives for his almost certainly negligible involvement in the related UN "Oil for Food" scandal (sic), will those same critics now demand Bush's resignation as well?

And my, oh my, what will the Russians say?

BushCorp™: redefining American hypocrisy.

Tilting at windmills

Shortly after my parents retired to Palm Desert in the Coachella Valley I took my first ever drive on the I-10 east from Los Angeles. After passing the San Bernardino county line and the fast-food haven of beautiful downtown Beaumont, the two highlights of the trip are the dinosaur park at Cabazon and the windmill farms of the San Gorgonio pass.

And of the two (trust me on this) the windmill farm is by far the most impressive. Acres upon acres of immense white windmills whirling in the breeze that squeezes through the pass on its trip from the Pacific Ocean to parts east. Clean, renewable energy, and they're really cool looking too. What's not to like?

Well, apparently my impressions while zipping by at 80 mile per hour (er, um, I mean 70 mph officer) are not the end of the story.

Today's Christian Science Monitor looks at some of the issues surrounding a more controversial mid-western windmill development:

Birds, including threatened and endangered species, are at the center of a dispute over a $250 million wind-turbine complex that a Chicago company wants to build in east central Wisconsin. Invenergy Wind LLC hopes to erect 133 turbines, each standing 389 feet tall, across 50 square miles of farmland just east of Horicon Marsh, a federal and state wildlife refuge described by bird experts as one of the largest and most important wetlands in the Midwest.

But birds are not the whole story behind local opposition. And perhaps I'm being cynical, but since the project is heavily favored by farmers in this predominantly farming community, I suspect this dispute would be much less heated were it not for the other source of opposition: the windfarm may lower property values in adjacent properties.

The rising exurbanites that moved to the country don't want enormous windmills blocking their view of the countryside.

In fact in many areas where windfarms represent relatively little environmental impact simple NIMBY mentality is their worst enemy.

Elsewhere, resistance has been stiff. In Massachusetts, a citizens group has been fighting since 2001 to stop 130 turbines from going up in Nantucket Sound. In New Jersey, acting Gov. Richard Codey in December imposed a 15-month moratorium on coastal wind-energy developments while a commission studies their effect on marine life, tourism, and views. "There are many people who live along the coastline that are concerned about the aesthetics of these things," says Kelley Heck, a spokeswoman for the governor.

As a citizen of a state who's long battled to protect its coastlines from off-shore oil exploration, I have some sympathy for such concerns. But I have to ask, given America's increasing need for domestic energy resources, wouldn't a shiny non-polluting windmill be rather an improvement over an oil (leaking) derrick?

Is God Talking?

You've probably heard this one:

The Big Flood

It had been raining for days and days, and a terrible flood had come over the land. The waters rose so high that one man was forced to climb onto the roof of his house.

As the waters rose higher and higher, a man in a rowboat appeared, and told him to get in. "No," replied the man on the roof. "I have faith in the Lord; the Lord will save me." So the man in the rowboat went away. The man on the roof prayed for God to save him.

The waters rose higher and higher, and suddenly a speedboat appeared. "Climb in!" shouted a man in the boat. "No," replied the man on the roof. "I have faith in the Lord; the Lord will save me." So the man in the speedboat went away. The man on the roof prayed for God to save him.

The waters continued to rise. A helicopter appeared and over the loudspeaker, the pilot announced he would lower a rope to the man on the roof. "No," replied the man on the roof. "I have faith in the Lord; the Lord will save me." So the helicopter went away. The man on the roof prayed for God to save him.

The waters rose higher and higher, and eventually they rose so high that the man on the roof was washed away, and alas, the poor man drowned.

Upon arriving in heaven, the man marched straight over to God. "Heavenly Father," he said, "I had faith in you, I prayed to you to save me, and yet you did nothing. Why?" God gave him a puzzled look, and replied "I sent you two boats and a helicopter, what more did you expect?"

Maybe it's God talking, or maybe it's the "invisible hand" of the market, (and doesn't that "invisible hand" sound like God anyway?) but is it possible that She is talking to us if we had the ears to hear?

Two articles at Google News caught my eye, appearing as they did in separate columns, though on the same screen. The first spoke of rising oil prices while the second spoke of shrinking glaciers in the Antarctic.

Co-incidence? Almost certainly.

And yet, the price of oil tells us that fossil fuel reserves are being depleted. Shrinking glaciers tell us that the Earth's climate is warming, quite likely because of human use of fossil fuels. Hmmm.

Now, as an agnostic, I am far from claiming that God is trying to tell us something.

On the other hand, if She DOES exist, is it too much of a stretch to imagine that she'd speak through Google? And if She is doing just that, is it the rowboat, speedboat or helicopter?

House approves Oil Corp welfare bill

Not satisfied with the windfall profits the major oil companies are currently receiving from the latest boost in oil profits, the Republican House approved an $8.1 billion energy bill including both in tax breaks for fuel producers and immunity for MTBE producers.

And though House Republicans claim that the recent rise in gas prices is a motivation, even President Bush has admitted the bill will do nothing in the nera term:

"An energy bill wouldn't change the price at the pump today. I know that and you know that," Bush said in a speech Wednesday.

Screamingly absent from the bill, and virtually all media discussion is that production incentives for traditional energy sources will never have more than a marginal effect on either prices, or, much more importantly, our continued dependence on fossil fuels.

And, as I've argued before, the best near term solution for that dependence is conservation. Unfortunately, the most simple way to encourage significant conservation doesn't involve reducing gas prices. It requires raising them.

Unfortunately, few voices in power on the right or left are willing to level with us. And until that happens US energy policy will never be more than corporate welfare.

Energy futures up. Oh Boy!

Nothing illustrates the divide between everday Americans and the corporate world so beloved by BushCorp™ Republicans as the business page articles hailing the health of energy prices:

Energy futures up after data
By Lisa Sanders, MarketWatch
Last Update: 4:09 PM ET April 20, 2005

DALLAS (MarketWatch) - Crude and its products added to gains Wednesday on the New York Mercantile Exchange after the Energy Department and the American Petroleum Institute reported an unexpected drop in U.S. crude and gasoline supplies.

May crude was last up 11 cents, or 0.4%, at $52.40 per barrel after trading as high as $53.10; June crude, which becomes the front contract on Thursday, gained 0.4%, or 18 cents, to $53.85 per barrel; May gasoline were flat at cents to $1.57 per gallon, having earlier touched a high of $1.5950; and May heating oil was up 0.1 cent at $1.50 per gallon.

Woohoo energy futures are up! I made a bundle on the futures exchange. Tough luck for the poor suckers who'll have to cut back on food to pay for their heating oil and enough gas to drive to their minimum wage jobs. What can I say? Stuff happens.

So. If you ever wonder why the Prez and his Wallstreet buds are so bullish on the economy while you're scraping the sofa cushions for enough change for Taco Tuesday, this is why. The megacorps are happy when oil prices go up, just more money in their pockets.

Keeping US hooked on oil

It's become common wisdom (and therefore suspect in my book, but go with me on this) that until Democrats can somehow earn some kind of national security street cred we'll never win a national election. Happily the brain-trust at BushCorp™ is giving the Dems a terrific opportunity through its corrupt and disingenuous approach to US energy consumption. Or perhaps they're just fools.

The oil-pushing potentates at OPEC are certainly no fools, however, as they demonstrate by acting this week to increase oil production:

Oil analyst Victor Shum at Purvin & Gertz in Singapore said he expects prices to ease further due to the seasonal drop in demand in the second quarter.

"In the short-term, the crude oil market looks to be well-supplied," he said. "There will be some downward correction."

However, other analysts caution that strong demand from China and other growing economies would probably keep prices high over the medium term.

The Organization of Petroleum Exporting Countries said Sunday that the group will take its time in increasing output quotas by an additional 500,000 barrels per day due to global petroleum market fluctuations.

"Oil prices have witnessed fluctuations on world markets in the past two days, which prompted the organization to take its time in implementing the second increase," Abdel-Rahman al-Khreiji told Kuwait's state news agency, KUNA, in Vienna.

OPEC agreed earlier this month to raise production quotas by 500,000 barrels per day and said it would consult on whether to increase them by a further 500,000 if prices continued to rise.

Khreiji said OPEC will monitor petroleum prices in the coming few days.

"If it finds that there is a need to interfere, the cartel president will consult with the remaining ministers to specify a date for implementing the new increase," he said.

The trick for OPEC is to keep edging prices up while at the same time not raising them so high that consumers (especially in the US) might adjust their usage. The worst thing that could happen as far as OPEC is concerned is a sharp spike in prices (say to Arab oil embargo levels) that might create enough political will for us do actually do something to kick the fossil fuel habit
In fact OPEC owes its very existence to US efforts in the late 50s to limit our reliance on mid-eastern oil:

In 1959 the U.S. government established a Mandatory Oil Import Quota Program (MOIP) restricting the amount of crude oil (and refined products) that could be imported into the United States. The MOIP gave preferential treatment to oil imports from Mexico and Canada. This partial exclusion of the U.S. market to Persian Gulf producers depressed prices for their oil…

In September 1960 four Persian Gulf nations (Iran, Iraq, Kuwait, and Saudi Arabia) and Venezuela formed OPEC, the purpose of which was to obtain higher prices for crude oil. By 1973 eight other nations (Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon) had joined OPEC. Ecuador withdrew on the last day of 1992.

By failing to adequately encourage both conservation efforts and alternative fuel and energy use technologies, the US government continues to leave the American public at the mercy of these petroleum pushers. And as with our loan-sharks in totalitarian China, as oil junkies, the US is in no position to offend its oil suppliers. How comfortable are you with Chinese and Saudi Arabia holding de facto veto power over US policy?

BushCorp™ will, of course never betray the members of its special friends and family plan (otherwise known as big oil), by taking steps to decrease US oil dependence (and of course reduce the donor class' profits). Since the simplest way to achieve conservation and finance new technology is through a substantial gas-tax (Tom Friedman recommends a tax to keep gas at $4/gallon) the Republicans, who won't even support a tax increase to support a war effort, will never summon the will to do what needs be done. This leaves the "energy as national security" issue wide open to Democrats.

Oil and the economy: a primer

As Alan Greenspan muddles further into obscurantism and partisan irrelevance (seriously, he's against deficits, and yet in favor of tax cuts for the rich, and trillions in debt to pay for Social Security privatization? Jeez.) the nation yearns for clear-eyed economic wisdom. And so I, despite the personal sacrifice, as well as my utter lack of qualifications, yet offer my humble services.

Sure my formal economic training is limited to macro and micro courses at San Diego State back in the day. But perhaps that will suffice.

To begin.

Oil prices 101
Perhaps the most basic of economic ideas is that of supply and demand, that is: if supply is greater than demand, prices go down, if supply is less than demand, prices go up.

A corollary: If supply is fixed, but demand rises, prices go up.

This last is relevant to the world's current oil-price situation.

The oil producing nations are currently producing oil at or near capacity, and there will be no increases of capacity available in the foreseeable future. And yes that includes the Alaska National Wildlife Refuge, which may provide at most 3-6% of US daily consumption. A relative drop in the bucket.

Meanwhile, in addition to the always thirsty US oil market, two burgeoning economies, India, and most dramatically China have significantly increased their demand for oil, and will continue to do so, again into the foreseeable future.

So, classic economics: oil supply is static, demand is rising, and prices are going up. Easy.

Take the dollar, please.
Supply and demand also applies to international currency valuation. Currently the US is flooding the world market with dollars. And it is doing so in two ways.

The first way is through the US government's massive operating deficit. That is, the government is spending more money than it is taking in, currently at the rate of about $2.27 billion per day.

So where does the money come from? Well, unlike individuals, or even the several states of the union, the US government has a unique ability, if it needs more money, it can just print more. Now the US doesn't just print regular old dollar bills, it prints special kinds of currency like bonds and Treasury bills (T-bills). The main difference between a dollar bill and a T-bill is time. That is, a dollar is worth its full face value right now, while a T-bill is only worth its full value at some specified point in the future. And that, though vastly over-simplified, is about it, T-bills, treasury bonds, even US savings bonds are just a type of money.

So when the US government operates at a deficit, it finances that spending by issuing Treasury bills and the like. The current US deficit stands at about $7.7 trillion, ($7,791,779,810,738.91). Which means that $7.7 trillion in T-bills and such are out there on the market, held by individuals, companies, and especially countries. That's one part of the dollar supply.

The second source of dollars on the open market is the US trade deficit, that is, the difference between what we in the US spend on foreign goods and services, and what people in foreign countries spend on US goods and services.

In 2004 the US trade deficit was a record $665.9 billion, a 25% increase over the 2003 deficit. That is, the US (you and I) spent almost $666 billion more buying stuff from overseas than folks overseas spent buying stuff from us.

In essence we're shipping boxcar loads of cash overseas in exchange for boxcar loads of fuel-efficient cars, home electronics and all the crap they sell at Walmart.

So, is this a problem?
Maybe, maybe not. Here's the deal:
In the past, moderate outflows of US dollars have been essentially beneficial both to the US as well as our trading partners around the globe. Historically the dollar has been one of, if not the most stable currency in the history of human trade. As such it has been a boon to international trade and has become the base currency for the majority of international business transactions. Good for us, good for everybody.

But as the Bush administration continues profligate borrowing to finance its tax-cuts and wars, countries holding large numbers of US dollars can begin to wonder whether the dollar's value will maintain its stability. Even the barest hint of such a doubt can send global markets into a tizzy. In short, if the perception grows that there are too many dollars on the market (that is, to use the classic economic paradigm, the supply of dollars exceeds the demand for them), the value of the dollar will fall.

In fact, international markets have begun to recognize exactly that, and the value of the dollar has begun to slowly drop relative to other currencies, most notably the Euro, which is increasingly becoming the alternative to the dollar in international trade.

I have always depended on the kindness of strangers.
How'd that work out for you Blanche?

Currently the main bar to a radical decline in the dollar's value and resulting inflation, (quick primer on inflation: if dollars are worth less, it takes more of them to buy stuff) is the self interest of the other economies which are inextricably entwined with that of the US. All it would take to precipitate disaster would be for one of the major US donor states to decide to get rid of its dollar holdings. If say, China, for reasons either economic (worries about the dollar's declining value) or political (US support for Taiwanese independence) decides to dump dollars, the results would be devastating. (Good article on the dollar dump potentialhere.)

Now here's where it gets scary
Remember those oil prices?

Another interesting thing about oil is that it is one of those commodities whose trade is done in US dollars.

So now there are actually two things at work driving oil prices: the laws of supply and demand for oil, and the laws of supply and demand for US dollars.

So even as increasing demand for a limited supply of oil drives prices higher, it also takes an increased number of devalued US dollars to purchase that oil.

And given continued US demand, those same oil purchases will drive increasing US trade deficits, leading to further devaluation of the dollar and increasing costs for oil ad infinitum.

Good news/Bad news
There is a way to stop or at least slow this death spiral: conservation. Even small gains in energy conservation can have important effects. Reducing consumption:
1. reduces our trade deficit, reducing downward pressure on the dollar; and
2. reduces our portion of global demand, easing our significant contribution to oil price pressure

Conservation has, of course, some other benefits as well, reducing pollution and decreasing our dependence for our oil fix from countries like Saudi Arabia and Venezuela. As I've argued before, US energy policy should be an inherent part of US Security planning.

So, that's the good news, the solution is simple, conserve. The devil is, as always, in the details: how do we implement a meaningful conservation regimen?

A gas tax of course.

And of course, there may be a few implementation problems, such as the conservatives screaming that it'll be bad for business, and whose money is it anyway? Liberals ranting at a gas tax's regressive, disproportionate affect on the poor. That sort of thing.

Both of which are, of course, true.

But consider, it takes neither a crystal ball, nor a Ph.D. in economics to foresee a time in the very near future where, as a consequence of the aforementioned factors, the price of oil will be much higher anyway. Does anyone seriously doubt that?

When that happens (next year, the year after?) GM indeed won't be selling any Hummers, the poor will be crowding what little public transportation exists, and those dollars spent ($4, $5, $6 per gallon?) will go to stuff the silk-lined pockets of some of the most regressive regimes in human existence, that's whose money it'll be.

Instead why don't we pay ourselves first by taxing gas at the pump to encourage conservation?

Why don't we pay ourselves first and pay down the inflationary and destabilizing Federal deficit?

Why don't we pay ourselves first and invest in conservation , alternative fuel and transportation technologies?

Why don't we pay ourselves first and establish US dominance over the only technologies absolutely certain to become vital over the next century as fossil fuel reserves are depleted?

We're going to be paying anyway. Why don't we pay ourselves first?

A would-be economic demiurge can dream can't he?

Now that global economic forces are combining to push oil prices so high even the plutocrats of BushCorp™ might notice them, perhaps we'll see some movement towards policies that might actually impact our energy consumption.

My fear though, is that the economic purists will win yet another ideology versus reality battle within the walls of the West Wing, and that BushCorp™ will let the holy market decide. And certainly the invisible hand of the market will eventually bring the death spiral to an end, though that end will not be much to our liking.