Relevant and even prescient commentary on news, politics and the economy.

Energy control

The NYT has an opinion on the current energy bill.

The centerpiece of the bill is the first meaningful increase in fuel efficiency standards in three decades — from today’s fleetwide average of 25 miles per gallon to 35 m.p.g. by 2020. To win necessary Republican votes, the Senate leadership agreed to drop one valuable provision contained in a measure passed earlier by the House: a requirement that all utilities provide 15 percent of their power from renewable sources by 2020.
Even so, the bill, as it now stands, contains not only the new fuel standards, which is a huge step forward, but also generous incentives for energy efficiency, for cleaner alternative fuels and for the new technologies that will be required to reduce the country’s output of greenhouse gases. By almost any measure, it is the most important energy bill that Congress has entertained in many years.
It is thus astonishing that President Bush would even think of vetoing it, especially since he called for much the same improvements in automobile mileage as those contained in the bill. In a statement Tuesday, however, the White House demanded that the bill be amended to make the industry-friendly Transportation Department solely responsible for regulating fuel economy as well as carbon dioxide emissions from automobiles.This would directly reverse the Supreme Court’s historic decision in April declaring that greenhouses gases are air pollutants under the meaning of the Clean Air Act and giving the Environmental Protection Agency the power to regulate them.

(italics are mine)

Why wouldn’t we use Homeland Security as the agency of choice?

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Southeast water update

The Georgia Public Policy Foundation suggests tiered pricing as a long term solution to their water problems.

Worse, water restrictions can harm conservation efforts by considerably reducing revenue to utilities and local governments, forcing rate hikes or shrinking funding opportunities for growth, maintenance and improvement of aging systems. Repairs and maintenance are a serious concern: Earlier this year, Baldwin in northeast Georgia revealed it loses half the water it buys before the water reaches customers. A leak-detection specialist said the city is just one of 54,000 water providers across the country experiencing high amounts of water loss – and that the loss is typical for North Georgia. The Environmental Protection Division’s goal is a maximum of 10 percent of water unaccounted for; utilities need the revenue to meet the goal.

Worst, Georgia’s mandated water restrictions make a mockery of conservation by offering so many exemptions that they pick only the lowest-hanging fruit: the hapless homeowner. Georgia’s conservation campaign includes a long-term public awareness program to reinforce the sought-after culture of conservation, and perhaps that will work. But nothing is more certain to promote efficiency among homeowners, business and water providers like an appropriate pricing structure will.

Appropriate pricing means eliminating flat rates for water use and encouraging the use of separate meters on every unit in Georgia’s apartment complexes. Of the 21 percent of Georgians who live in multi-family structures, many pay a flat rate to landlords, or utilities are included in the rent. Now that the federal government has lifted the regulatory burden surrounding sub-metering, landlords will find it easier to install meters to bill tenants for the water they use, and tenants will become conscious of the value of water and the price of excess.

Dynamic rates, which usually reflect seasonal supply and demand, also encourage customers to weigh their priorities. Long hot bath or shower? Sprinkler or soaker hose? New pond or xeriscaping?

In Georgia, one of the few water providers that come closest to an appropriate pricing structure is the Cobb County-Marietta Water Authority, which establishes a customer’s average water use at 125 percent of winter usage. Customers face a surcharge of 90 cents per 1,000 gallons in excess of the average; the excess is assumed to be used in outdoor watering. Cobb County and its cities and Gwinnett and Cherokee counties have implemented these summer surcharges.

Tiered rates don’t harm an average user; they motivate customers to use water more efficiently, and they bring home the value of the resource by charging more for excessive use. They delay the need for immediate utility expansions. Best of all, they allow utilities to recover the cost of providing services and adequately fund a business plan for the infrastructure maintenance, capacity expansion and upgrades required by aging, growing systems. Cobb’s good business plan is reflected in the fact that it has met the EPD goal of 10 percent of water unaccounted for.

The market approach is successful without being punitive. A 1999 survey of 12 utilities using a conservation rate structure revealed that yearly average consumption dipped 8 percent and peak-demand-month usage declined 7 percent.

Further articles and information can be found here.

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Cost benefit analysis and OIRA

OMB Watch has some strong views on current trends in federal agency regulation.

Federal regulators commonly use cost-benefit analysis as a means for assessing one or moreregulatory policy options. However, cost-benefit analysis is an unreliable and often inappropriate tool.The results of cost-benefit analysis obscure uncertainty and mask the value of those benefits thatagencies cannot translate into dollars and cents. For this reason, cost-benefit analysis should be onlyone of several analytical tools in regulatory decision making.Cost-benefit analysis should be an especially minor tool in the consideration of public healthrulemakings. Monetizing certain benefits of regulation, such as lives saved, is both economicallyflawed and morally suspect. In such cases, the results of a cost-benefit analysis are useless for policymakers.As illustrated by the debate over the revision to the ozone standards, executive power in theregulatory process, especially when wielded by OIRA, may trump any congressional mandate or needfor public protection. OIRA uses cost-benefit analysis to influence the regulatory process in twoways. First, E.O. 12866 and Circular A-4 mandate the preparation of a detailed cost-benefit analysisfor all rules carrying the “economically significant” designation. Such a broad and unyielding policyforces agencies to prepare cost-benefit analyses even in situations when Congress prohibits economicconsiderations or for public health rulemakings.Second, OIRA has granted itself final editorial authority over the content of RIAs and has becomeadept at using this authority to change the tenor of the debate over regulations. By elevating the RIAas the primary decision making tool for federal regulators, OIRA places the onus on agencies toestablish the economic viability of a regulation, rather than the public need or the requirement to fill acongressional mandate.These points highlight, in the view of OMB Watch, the need to reform the regulatory process toachieve a more equal balance between legal requirements and the political power exerted byexecutive branch offices, particularly OIRA. The manipulation of the regulatory process through the use of administrative tools like cost-benefit analysis distorts the balance of power between the twobranches and usurps agency expertise and discretion.It is the duty of Congress and the executive branch to choose the policies most responsive to public need and desire. Federal agencies and the White House should faithfully execute their congressionalmandates as a means of achieving the constitutionally intended balance of powers. Without appropriate balance, the federal government will find increasing difficulty in its ability to protect the public through effective health, safety, and environmental regulations.

(This is a pdf)

There have been many regulations that have changed in a very systematic way with the view to lessen the scope of the regulation, the personnel assigned to a task, penalties and fines, mission expectations, and of course then through the agency of a politically correctness officer.

‘Politically correct’ is a term used to trivialize information or a viewpoint, but in this case is more often pernicious.

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FTA and WTO progress

The GAO has published an interesting analysis of Free Trade Agreements made since 2002(WTO GATTS style).

Congress granted the President Trade Promotion Authority (TPA) in 2002 through the Trade Act of 20021 to negotiate agreements, including free trade agreements (FTA), which aim to reduce trade barriers and expand trade with selected trade partners. The legislation granting TPA stipulated trade negotiating objectives and procedural steps to guide the administration in these negotiations. These include mandatory consultations before, during, and after negotiations with Congress, as well as reports on the likely impact of trade agreements from the formal trade advisory committee system. This congressionally created trade advisory committee system, which includes both policy-level and technical committees, also provides ongoing advice throughout negotiations.TPA authority lapsed in July 2007, amidst questions about how this authority was used, the economic significance of the FTAs pursued, and the conduct of required consultations before, during, and after negotiations. Yet, the World Trade Organization’s (WTO) Doha round of talks aimed at liberalizing trade on a worldwide basis,2 as well as FTA negotiations with Malaysia, are still ongoing, prompting the President to urge Congress to renew TPA.To address these issues, we reviewed: (1) What FTAs have been pursued under TPA and why? (2) Overall, what is the economic significance of these agreements to the United States? (3) What is the nature of the consultation process for Congress and how well has it worked in practice? (4) What is the nature of the consultation process for private sector trade advisory committees and other stakeholders, and how well has it worked in practice?

As agreed, we will provide a second report in spring 2008 that will provide more information and analysis on the economic and commercial significance of FTAs, as well as a review of progress made by FTA partner countries in strengthening labor and environmental laws and enforcement.
1Pub. L. No. 107-210, Div. B, 116 Stat. 933, 993–1022 (codified at 19 U.S.C. §§ 3801-13).
2Launched in November 2001 in Doha, Qatar, these negotiations involve 150 nations and encompass a far-reaching agenda for liberalizing trade and bolstering development in poorer countries. Among other things, they involve efforts to reach agreement to reduce barriers such as tariffs (border taxes) and trade-distorting subsidies on agriculture, manufactures, and services trade. For further background see www.wto.org and GAO, World Trade Organization: Congress Faces Key Decisions as Efforts to Reach Doha Agreement Intensify, GAO-07-379 (Washington, D.C.: Mar. 5, 2007). Page 1

I have only scanned it but thought it worth attention.

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Sewerage in the Shenendoah and Chesapeake Bay

The other end of the the water problem continues as well.

A group of environmental advocates is suing Virginia over a decision it says allows a sewage plant to continue polluting waters that flow into the Potomac and Chesapeake Bay.
The discharge from the North Fork Modular Reclamation and Reuse Facility was considered so harmful that a Rockingham County judge in February deemed it “a substantial threat to public health and the environment” and ordered the owner to install millions of dollars’ worth of new control measures.

But the commonwealth has now abandoned those mandates, said Shenandoah Riverkeeper and Potomac Riverkeeper, the nonprofit groups that first filed suit last year against the plant’s owners.

Since the owner, S.I.L. Clean Water LLC, went bankrupt, the Shenandoah Valley town of Broadway inherited the plant. Virginia then brokered a consent order with the town that sets a much slower schedule for cleanup, the groups said Friday.

The continuing discharge includes nitrogen and phosphorus — both linked to the Bay’s “dead zones” — that flow into the Shenandoah North Fork, which flows eastward.

The Environmental Protection Agency has also objected to the terms of the order, which allows the town more than three years to bring the plant into compliance.

“I’m very disappointed in how this was done,” Shenandoah Riverkeeper official Jeff Kelble said.

It’s an ironic fight, considering that the commonwealth had joined the environmental groups in suing the plant’s private owners. Now, the former allies will square off in the same court over the consent order.

Bill Hayden, spokesman for the Virginia Department of Environmental Quality, said the agreement will “allow time for the town to bring its systems up to standards.”

Broadway Town Manager Kyle O’Brien called the new lawsuit counterproductive, arguing it shifts the focus from cleaning up the discharge to fighting a court battle.

“One of the key things that we have to remember here is we’re walking into this plant that has been nonfunctioning for the last eight years,” he said. “Nobody … can walk in the next day and wave a magic wand and bring this plant into compliance.”

The plant serves nearby towns and two major chicken slaughterhouses.

Eight years of dumping is a long time, public or private. And compliance probably will take longer than expected. How common is this problem that is rarely reported with a clarion call of “iiiiiiick”?

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OldVet writes about strong dollar policy


We know who’s smart and who’s not. It isn’t Secretary Paulson, who’s been speaking platitudes about a “strong dollar policy” for his entire term. Now China, main beneficiary of its basket-peg to the Dollar, makes pious noises that echo Paulson. Two birds are singing the same song, and neither is very sincere.

Strong Dollar Policy
“China supports a strong dollar,” said Zhou Xiaochuan, governor of the People’s Bank of China, at a press conference today. The Federal Reserve’s decision to cut the benchmark U.S. interest rate also affects China’s monetary policies, the effects of which must be studied, he said.
“The Fed decision has quite a big impact on China’s rate policy,” Zhou said. “What we’re concerned about is whether the Fed’s looser monetary policy will create new financial liquidity, because China’s liquidity problem is connected with excess cash in the world’s markets.”

The US trade deficit isn’t declining much, even with some recent weakening of the Dollar against European currencies. Why?


from census

One reason our trade deficit isn’t narrowing very much? Predatory currency manipulations by China, Russia, Japan (via its interest rates), and the GCC which sells us oil. With Europe and countries where we have mutually free and flexible exchange rates, our currency has moved more towards it’s trade-predicted value and the balance-of-trade moved more into balance. Japan charges zero interest to borrow money, which investors borrow and then sell the Yen by the bucket full to make investments elsewhere – an indirect manipulation that keeps the Yen very cheap. The others intervene directly to keep their currencies cheap and the US buying. They call this “vendor financing” in business.

And now China has the nerve to complain? Ha. China has created its own problems in order to strip the manufacturing capacity of the world and plant it in China, and to employ massive numbers of Chinese workers.

A second reason for our ongoing trade deficit is the rampant US consumerism more worthy of a pack of wild glut-hogs than of human adults. This is financed, not by wages earned but rather by money borrowed. Aiding and abetting consumerism (up till now) has been cheap long term credit pushed by every bank and financial institution in the US. Too much has never been enough, no excess too extravagant. Since the borrowing is used largely for consumption, and not productive investment, consumers get deep in debt.

A word of advice to US policy makers: There is no such thing as a “consumer economy.” That term describes only half an economy. Without an equal amount of production, your policy creates impoverished parasites and billionaires. Let’s hope the next crop of business leaders and politicians makes more sense than this lot, and sings a different tune.

This one written by Old Vet.

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ken melvin writes about Black Holes

This is written by KenMelvin

Black Holes:

Just for the sake of discussion, let’s say that there were five hundred billionaires in the US yesterday, and that, on average, each was worth $10 billion, i.e., their total net worth was $5 trillion. Further, let’s assume that, being both smart and powerful; their average return on their net worth was ten per-cent for a combined total return of $500 billion. Now it seems evident that this very same half-trillion dollars is equal the income of some ten million American families of four, or, from another perspective, this same said half-trillion dollars could lift more than twenty million American families of four, representing some eighty-million American citizens, out of poverty. Alternatively, at two thousand dollars a year, the half trillion could provide health insurance for two-hundred-fifty million US children and adults.

Whence the half-trillion return? Ultimately, all of it comes from the production of goods or services. In a stable universe, the tradespersons or merchants, with merchants including retailers, owns or rents at a price that allows them to earn a decent living, and the employees (all except the rich are either employees, tradespersons or merchants) are paid a living wage. Now, today in this same said universe, what happens if these same said five hundred billionaires decide they need a greater return; what happens to the tradespersons, employees and merchants? Or, suppose that the number of billionaires doubles and so the expected return; what of the tradespersons, employees and merchants? Finally, what if one-half the US population decides to join the five hundred billionaires and live off return on investment; what happens to the tradespersons, employees and merchants?

This written by KenMelvin

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What is the least water you need?

Pricing mechanisms make for some odd thinking, or thinking of odd things, whichever is more useful at the time.

$100 oil. Will this be the iceberg that rips open the prow of our economy? Perhaps I have an odd take on this, but when I look at ‘C’ note oil I still see a bargain for the user. Consider what petroleum provides us: hours of additional leisure each day, freedom from the exhaustion of providing our own locomotion, travel in relative comfort instead of exposure to the elements. And is $100 really all that much for 42 gallons of freedom? Consider some other liquids:

Coke Zero (NYSE: KO): a barrel of oil holds 42 gallons, or 5,376 oz. A 12-oz Coke Zero at vending machine prices would cost $448 a barrel.

Deer urine: Used by hunters to attract their prey, runs $10 for 2 oz. for the good stuff, fresh from a buck in rut, from Timber Valley Freshscent (“100% Fresh Urine. Shipped Cold From Our Deer To Your Door.”), or $26,880 per barrel.

Starbucks latte (NASDAQ:SBUX): at around $4 for a 12-ouncer, this black gold will set you back $1,792 a barrel.

Whiskas: a milk specially made for lactose-intolerant cats sells for $1.29 for a 6.75 oz box. A barrel would retail for $1,027.

And while oil provides essential transport, it pales by comparison with fluids that offer divine regard. In that respect, how could one complain about the cost of a Transparent Virgin Mary full of water from Lourdes, the site of St. Bernadette’s miracle. The bottle sells for a mere $26.71 for 350 ml, or roughly $11,996 a barrel.

Tap water is not often priced by market forces, and for some good reasons. If, however, it did increase to a level more in line with costs, I wonder:

1. What is a reasonable price to obtain potable water?
2. What is a resonable expenditure to improve infrastructure to avoid high volume leaks of a valuable product (50% often) in closed pipe systems, or what price to have access just in the neigborhood? Imagine half the cola produced leaking out into the neighborhood.
3. How does sewerage relate to water costs? The charges are increasingly becoming less tied to volume use of water, and more an across the board charge.
4. If agricultural pricing of water cannot actually compete with city prices, what is the cost to us in food prices to adjust production costs such as changing from open irrigation?

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Is forgetting the means to forgive

The NYT has an article that brings back memories.

The ads are filled with images like Volkswagen buses festooned with groovy graffiti, daisies and other power flowers, peace signs, psychedelic drawings in DayGlo colors and hair, long beautiful hair, shining, gleaming, streaming, flaxen, waxen (to quote a lyric from the era).

Music, too, is being used to invoke the 1960s. Commercials on television, radio and the Internet play tunes like “Daydream” by the Lovin’ Spoonful (1966), “Gimme Some Lovin’ ” by the Spencer Davis Group (1967) and “On the Road Again” by Canned Heat (1968).

The trend may have started in summer 2006 when Ameriprise Financial introduced a campaign with Dennis Hopper, a symbol of the counterculture for his roles in films like “Easy Rider.” It has since expanded to brands like Geico insurance, Lucky jeans, Total cereal and U. S. Trust.

I am a firm believer in remembering and forgiving, but not so much forgetting, which unfortunately means forgiving for a lot of people, as in the phrase “forgive and forget.”

I bought a VW bus from the special education school where I worked in 1973 (thoroughly pre-owned), fixed it up, and went on a trip to Prince Edward Island with GF. Along the way there were was second furniture in barns to be bought along Rt. 1.
I remember fondly many moments, very good music, and having come from the mid-west being considered a troll for political ideas in 1965 high school.

Tom Brokaw also had a special on 1968 the other day…not a good year. Is it impossible in the general psyche to remember both at the same time? (not in a commercial, of course) And why should we?

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Subprime becomes prime time lawsuits?

Lawsuits as noted in an earlier post might be the real problem for traders and some bankers unless the government figures out a fix.

Now, just unveiled Thursday, comes the “freeze,” the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of “teaser” subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the “freeze” is just another fraud – and like the other bailout proposals, it has nothing to do with U.S. house prices, with “working families,” keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value – right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It’s in the loan application documents, and it’s in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies – all the way up to senior management – knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new “hot” industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer “he can’t refuse.”
Despite Thursday’s ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

I believe many have contracts that have some sort of guarantee of return of principle written in as part of the sale, especially in the last year and one-half of the grand financial innovation.

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