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Report on oil speculation

by Divorced one like Bush

Anyone else see this report?

The report by Masters Capital Management said investors poured $60 billion into oil futures markets during the first five months of the year as oil prices soared from $95 a barrel in January to $145 a barrel by July.

Since then, these investors have withdrawn $39 billion from those markets as prices have retreated dramatically, the report said. Oil traded at about $102 a barrel Wednesday on the New York Mercantile Exchange

WSJ notes there is a second report to be out probably by tomorrow from Commodity Futures Trading Commission.
Of course, there has to be an ulterior motive:

Critics said Mr. Masters is trying to buoy his own investing portfolio, which is laden with transportation-related stocks, and lawmakers are trying to show they are addressing high gas prices.

Or maybe not:

European Central Bank President Jean-Claude Trichet last week told attendees at a Frankfurt conference that speculation had contributed to the oil-price shock that has hindered global growth. The two presidential nominees, among others, have attacked the trend.

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Oil as an excuse for Bush et al’s economic performance

by Divorced one like Bush

From comments in Cactus’ post:
“Now in the last couple of years we have seen unprecedented oil prices that have sapped our economy’s strength.”

Yes, we have. Others have presented this argument. However,there was plenty of information in existence long before the “last couple of years” regarding the issue of oil price on economic performance. This report from the IMF, The Impact of Higher Oil prices on the Global Economy from 12/8/2000 suggests that we have been living with such a predicament and certainly had tasted such and thus should have had better policy responses. It is a report in response to the World Economic Outlook report of 9/2000 which “contained an extensive discussion of the potential impact of higher prices.” It is written such that it: “includes a discussion of main policy implications for developed and developing countries. An Appendix reviews lessons from earlier oil price increases.”

Discussing consumption and production:

In 2000, the price of oil has been at its highest level since the mid-1980s, excluding the brief price spike at the end of 1990. The current price hike, if maintained for any significant length of time, is likely to accentuate the trend towards energy conservation and the shift from oil to other sources of energy, especially in sectors other than transport.

Well, Bush et al sure proved that prediction about shifting toward conservation was wrong? At least for US.

The report notes 5 means by which rising prices will effect the global economy(paralleling the WEO):

There will be a transfer of income from oil consumers to oil producers.
There will be a rise in the cost of production of goods and services in the economy, given the increase in the relative price of energy inputs, putting pressure on profit margins.
here will be an impact on the price level and on inflation.
There will be both direct and indirect impact on financial markets. Actual as well as anticipated changes in economic activity, corporate earnings, inflation, and monetary policy following the oil price increases will affect equity and bond valuations, and currency exchange rates.
Finally, depending on expected duration of price increases, the change in relative prices creates incentives for suppliers of energy to increase production (to the extent that there is scope for doing so) and investment, and for oil consumers to economize.

In the conclusion:

For much of the period since the October 2000 World Economic Outlook was completed, oil prices have averaged $5 per barrel higher than assumed in that exercise. A sustained oil price increase of that size would imply a permanent transfer of about ¼ percent of GDP from global oil importers to oil exporters, relative to the WEO baseline, with additional transfers of income from oil consumers to oil producers within countries.

Get that last bit? From us heart of America, working class local yokels to the producers. Windfall profits anyone?

The suggested policy for countries like US:

With regard to policy implications, as experience in previous oil shocks shows… monetary policy in advanced countries will need to prevent second round price effects. This will help ensure that there is only a price level effect, but not a continuing impact on the rate of inflation.

I think they are saying raise the rates or at least not drop them without caution? We went from4.99 in 7/1999 to a peak of 6.54 in 7/2000 to 3.77 in 7/2001 and 1.73 by 7/2002. OH Well.

In the WEO report it notes specifically for the US:

In the short term, the current fiscal stance should be maintained—and to the extent possible, strengthened—by resisting calls for tax reductions or additional expenditures. Over the longer term, the authorities’ intention to substantially preserve the fiscal surpluses in prospect, and to pay down the public debt, will help support national savings, as well as prepare for the coming long wave of unfunded liabilities associated with the retirement of the baby boom generation.

We can list all sorts of “events” that happened to cause a less than desirable outcome, however, it is the response to the events that ultimately determines the final experiences. The response is materialized in the policy adopted. To date, the policy has failed to stabilize our economic performance, never mind improve it over the course of 8 years. I would accept “events” as a reasonable argument for our current status if Bush et al had not performed worse than historical. That is the real GDP rate from 1930 to 2000 being 3.66% vs 2001 to 2007 of 2.58%.
Or real GDP per capita of 2.44% 1930 to 2000 vs 2001 to 2007 of 1.61%. Bush et al could not even perform as well as 1930 to 1940 when real GDP and GDP/capita were 2.72% and 2.00% respectively. This 10 year period included negative growth of GDP/capita for 4 periods of: 7.14,13.46, 1.86 (1930 to 1933) and 4.19 (1937/38).

Bush et al’s results are pure policy and that is based on ideology and that is what this election is all about.

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No laboring in economics

by: Divorced one like Bush
at the beach on vacation Ha!

Gee the economics profession is ignoring labor. I wonder why. Could it be who we follow? It’s not like we don’t quote old Adam often. Free market and ghost hand ideas are mentioned all the time as we follow Milton:

According to The Economist, Friedman “was the most influential economist of the second half of the 20th century…possibly of all of it”.[2] Former Federal Reserve Board chairman Alan Greenspan stated, “There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people.”[3]

I would add, a mind who focused on….wait for it…. MONEY.
“Monetarism is a school of economic thought concerning the determination of national income and monetary economics. It focuses on the supply of money in an economy as the primary means by which the rate of inflation is determined.”

In an interview at Right Wing News by John Hawkins (sorry no date)of The Man who is introduced thusly:

But I think the fact that Mr. Friedman finished in a tie for the 15 slot when RWN had conservative bloggers select, “The Greatest Figures Of The 20th Century” gives you some idea of Mr. Friedman’s stature.

we get responses to the questions by Mr Influence of the 20th century of:

From my point of view, we in the United States have gone overboard in respect to the extent of regulation and detailed control of labor standards, industry, and the like. It’s bad for us, but fortunately we had two hundred years of relatively free development to provide a strong basis to sustain the cost.

Well, they only consider half of the problem. If you move jobs overseas, it creates incomes and dollars overseas. What do they do with that dollar income? Sooner or later it will be used to purchase US goods and that produces jobs in the United States.

If the White House were under Bush, and House and Senate were under the Democrats, I do not believe there would be much spending.

How do you get them together by forming industrial cartels and keeping prices and wages up? That’s what Roosevelt’s policies in the New Deal amounted to. Essentially, increasing the role of government, enhancing the monopolistic position of labor, and creating as I said before the equivalent of price fixing cartels made things worse.

Well, who would provide the funds, the capital, and the entrepreneurship for the new industries? In a world in which there were no rich people, how would you have ever gotten the capital to produce steel mills or automobile plants? You can do it through the state, but the world tried that with the Soviet Union.

Well, Social Security is having a bad effect now through the tax system.

So we have a profession which followed a man whose focus was minimally on labor and by the above quotes maybe even condescending to labor as a factor in economics and wonder why the profession of this man has de-emphasized the subject? HELLO!!!!!!!!!!!!!!!!!!!

Maybe the profession really only needs to follow one piece of advice from Mr. Milton:

John Hawkins: Are there any political websites you’d like to recommend to our readers?

Milton Friedman: No, I don’t really follow any political websites. I think they’ll do better reading theWealth of Nations (laughs)…

Ok, lets read the words of the originator of the ghost hand theory:

“Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities. The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”[3]

If you will allow me, let’s put a picture to Mr Smith’s concept as it relates to why the economics profession needs to follow this one piece of Mr Influence’s advice.

Then there is this. And this as to why the economic profession needs to study this. Of course if the profession would just think about how the majority (like super duper majority) acquire their money, then maybe they would have not passed on this currently wide open, you can own it, make a name for your self aspect of money making.

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Oil prices VS Storms

By: Divorced one like Bush

Being that there is a lot of “authoritative” talking going on about the cause of the up’s and down’s of oil and one cause being suggested is the anticipation of storms, I thought looking at the history of storms and oil price would help toward answering the hypothesis of oil prices rising in anticipation of storm damage.

Using the daily price of WTI Cushing/Oklahoma oil I charted the relationship of price to the storm dates. I use 6 price points. A. 2 Monday’s before, B. Friday before, C. Monday before, D. Day of Storm, E. Friday after, F. 1 week after day of storm. Any number in parenthesize is the price for the next open trading day. When the storm fell on a week end, I counted 1 week after and used the next Monday.

Chart after the fold.

I do not do correlation calculations. But, I think this chart shows that there is no significant speculation in pricing based on Gulf storms. There are 4 times that the price 1 wk post storm is lower than 2 Monday’s prior to the storm. They are in order: Dolly 7/23/08 down $22.95, Dennis 7/10/05 down $2.66, Rita down 2.58 9/24/05 and Opal 10/4/95 down $0.10. Of these 4, Rita has the highest pre-storm climb of $3.92 or 6%. Dolly only showed a 2% climb pre-storm but there has been a 16% drop since her high 2 weeks before she hit.

The interesting string is the 4 storms of 2005. Katrina and Rita are the only storms that show some possibility of a storm pricing effect within this series. Katrina with an almost $2.00 (3%) rise in 2 wks and then a decline of $4.50 until the price jumped $4.30 in 1 week before Rita. However, the next trading day after Rita, the price was down $1.23 and 1 week later it was within $0.93 of the 2 weeks prior to tropical storm Cindy of 7/5/05 ( 2.5 months time between the two). As to this year, the price is just plain going down since the peak 2 weeks before hurricane Dolly which is 1 month of downward trend before the republicans started filling hot air balloons.

It appears that if there is a storm pricing effect, it is a recent phenomenon and of a rather small and short lived event. Being a new event in oil pricing, I would suggest that what effect there is, is purely emotional and related to the emotional climate we are living in. Gun shy? We only have fear to fear? Or, maybe it is an herd mentality learned that a storm is a good excuse to make a quick dollar. That would be herd mentality market manipulation. Oh no, did I just ruin it for everyone?

Guess we are going to have to find someone talking with more authority than what we have had so far regarding the cause oil pricing.

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Money = Wind, Bush and Fox News?

By: Divorced one like Bush

Yes, you read that correctly. The right is reporting there is money to be found in wind. Sacrilege in their church of oil. In an article, May 17, 2008 we learn about a Bush administration report on wind.

A little back ground first:

With major government investments in wind in the 1970s, the U.S. was poised to be a dominant player in what was clearly going to be one of the biggest job-creating industries of the next 100 years. As late as the mid 1980s, we had over 85 percent of the world’s global installed capacity, and U.S. companies possessed the most critical knowledge about how to develop wind farms cost-effectively.
President Reagan cut the renewable energy budget more than 80 percent after he took office, and eliminated the wind investment tax credit in 1986.

Since the turn of this century, wind has been growing explosively. From 2000 to 2007, the industry increased fivefold in size. Last year, $36 billion in wind investments were made around the world, with $9 billion invested in U.S.-based projects. In 10 years, it is expected to nearly quadruple in size.

In fact, because the new wind turbines are tall, and don’t interfere significantly with grazing or farming, they have become popular in the central U.S., where the wind resource is best in the country. Some ranchers make half a million dollars a year by leasing only a fraction of their land for turbines.

From 2004 to 2007, the company’s wind turbine production has grown 500 percent, and the division brought GE revenues exceeding $4 billion in 2007.

While the multi-decade drop in wind prices has stalled temporarily, prices for the competition have gone up the smokestack. New nuclear plants, for instance, have tripled in price. Analysis for the California Public Utility Commission puts the cost of power from new nuclear plants at 15 cents per kWh. It also puts the cost of coal (without carbon capture and storage) at more than 10 cents/kWh. That’s a major reason why, since 2000, Europe has added 47 GW of new wind energy, but only 9.6 GW of coal and a mere 1.2 GW of nuclear.

The report:

…the recent Department of Energy report, called “20% Wind Energy by 2030.” With improved efficiency and a decrease in capital cost, the report found that wind power should cost 6 to 8.5 cents/kWh, unsubsidized, even including the cost of transmission to access existing power lines. And the cost of integrating the power into the U.S. grid would be under 0.5 cents per kWh. This effort would only add about 50 cents per month per household, or under 2 cents a day.

The study notes that “few realize that electricity generation accounts for nearly half of all water withdrawals in the nation.” By 2030, wind would be cutting water consumption by 450 billion gallons a year, of which 150 billion gallons a year would be saved in the arid Western states, where water is relatively scarce — and poised to get even scarcer thanks to climate change. And on top of that, we get half a million jobs, of which nearly a third are high-wage workers directly employed in the industry.

So, this is what could be. Being that we are a “global economy”, our companies need to be able to compete, correct? Here is the competition environment:

By 2020, many European wind farms will be generating electricity at 2¢ per kilowatt-hour, making it cheaper than all other sources of electricity.

Wind-generating capacity worldwide is growing at over 30% per year and has jumped from less than 5,000 megawatts in 1995 to 39,000 megawatts in 2003—an increase of nearly eight-fold. The fossil fuel with the highest growth rate—natural gas—grew at just over 2% annually during the same period. Oil grew at less than 2% annually, and coal at less than 1%. Nuclear generating capacity expanded by 2% annually.

One would think that an industry growing at 30% would be far more inviting to the “free market” entrepreneur than one growing at 2%. But, that is not where we are seeing money flow. No, we felt it was wiser to spend it creating a democracy in an oil rich country. Then again, in 8 years of neocon election policy and 50 plus 1 strategy, we have not seen any major news organization go after the 49% not being ideologically serviced. Think that might have something to do with the policies we vote for?

But, back to the environment to be competing in:

With wind-generated electricity, the principal production cost is the capital outlay for initial construction. Since wind is a free fuel, the only ongoing cost is for maintenance.
Many countries in Europe are pushing hard to bring in more wind power. Here are a few examples.

The United Kingdom is requiring an investment of over $12 billion in off-shore wind farms that should satisfy the residential electricity needs of 10 million of the country’s 60 million people.
Tiny Denmark, which led Europe into the wind era with the development of its own wind resources, now gets an impressive 20 percent of its electricity from wind.
Germany overtook the United States in terms of wind-based generating capacity in 1997. Now Spain is close to overtaking the United States as well.

As to investments being made, it is just as we are seeing in beer:

Regulatory issues do not appear to have deterred energy companies from making US acquisitions. Energias de Portugal paid nearly $3 billion to acquire Horizon Wind Energy from the Goldman Sachs Group. The purchase doubled the amount of wind power operations in the Portuguese company’s portfolio. German utility E.On has agreed to acquire the North American assets of Irish wind power company Airtricity Inc. for $1.4 billion. Acciona Energia has acquired the wind farm development rights of EcoEnergy, a company based in Illinois. Spanish energy giant Iberdrola has acquired Oregon wind development company PPM Energy, as well as Community Energy of Pennsylvania, and more recently US wind farm companies Greenlight Energy and Orion Energy.

But get this, Fox News titles their article: Denmark Points Way in Alternative Energy Sources
Fancy that. Fox News says we can learn from the foreigners.

…most of the Western world was subjected to an Arab-led oil embargo. The crisis forced Denmark, which was 99-percent dependent on foreign oil at the time, to develop an alternative-energy policy.
In the 30 years since, Denmark has worked tirelessly to develop new technology and new policies.
Twenty percent of Denmark’s energy needs are now met by electricity generated by wind turbines, and the proportion is steadily increasing. Thanks to advances in technology and turbine design, the cost ofwind power has been reduced by 75 percent since 1970, when the programs began.
The Danish attitude toward energy conservation means “people don’t have as many appliances, or gizmos,” said Griswold, a frequent visitor to Denmark. “Also, there are stringent requirements for insulation when building new homes. Every individual mandate like that means the nation uses less energy.”
A major part of that success is the Danish commitment to and attitude toward its energy policies, Griswold said.

“After the [1973-74 oil] embargo, Denmark had the attitude that they were going to become less dependent on the outside world and more self-sufficient,” he said. “And upon making this commitment, they’ve gained benefits, including lower national debt, cleaner air and less dependency on other countries.”

Let me repeat the important part of that last sentence: “And upon making this commitment, they’ve gained benefits, including lower national debt, cleaner air and less dependency on other countries.”

One final point Fox News wants us to learn: “Danes would say, ‘Thank goodness we have a government that plans so well that we are only minimally impacted.'” he said. “The average Dane isn’t terribly conscious of being in an energy-saving environment because it’s so natural to [him or her].”

Now there is a message I would have never expected Fox News to promote.

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The myth of the argument is in the conflation

By: Divorced one like Bush

I am responding to a post put up at Crooks and Liars: The McCain campaign small business myth.

It presents that the myth is found in the number of small businesses in existance and what percentage of them earns $250,000 or more. I love C and L, but this is just totally missing the ship (notice I did not say boat).

The lie to the McCain position on Obama’s tax plan is not in the number of small business in existence or in the number of small business making over $250,000/yr.

The lie to the McCain position is in the conflating of business income with personal income. An S corp or a solo proprietorship business or any other similar configuration that is paying income tax on $250,000 is paying income tax on that money not because the business made that income and is keeping it because the business had plans for it. No, no, nooooooooo. It is the owner of the income generator that made that income and they made it as personal income. It is the amount of money remaining AFTER the business did it’s complete business thing for the year. It is the money remaining AFTER the business spent on expanding jobs, or buying more equipment, or marketing, or adding new facilities, or expanding to China, or hedging its energy costs or PAYING IT’s BUSINESS RELATED TAXES. It is the money that the owner of the income generator walked out the door with at the end of the year and then proceeded to use on their personal needs like: food, housing, transportation, oil futures, corn futures, GE, Haliburton stocks, boats, collectable cars, art, entertainment, lawn care, maid services, tuitions, security systems, etc.

In fact, anyone who has started a business has experienced that moment when their accountant calls them up and says: “You owe income taxes.” The rest of the conversation goes something like this: But, but, but, but, but…how can I owe taxes when I have no money left? “Well” responds your accountant, “did you buy food?”. Why yes I did, but I have nothing left. “Then the money you bought food with is the income your business paid you and now you owe Uncle Sam”. At that moment your stomach is getting ready to pay Uncle Sam as your legs are giving out. Later on, when you are humming along and you are taking $250,000 out of your S corp because you had no more expenses the true nature of you spirituality shows through. Either you think your taxes are too high, or you understand the benefits of paying taxes but think that spending more than the rest of the world combined on military is crazy.

Why the pundit’s on the Obama side have not pointed this conflation out, I do not know. Do they not believe in education? But, focusing on the number of businesses when the issue is personal income only allows the presentation on taxation and income to continue in the same vein as it has been continuing since Reagan. It is a continuation of the same argument that has allowed us to accept that Walmart cheap is the same as more money in your pay check; or that the increased cost of your benefits are the same as more money in your paycheck; or that the rising share of income going to pay all your taxes owed is the results of some waste and greed and civil service unions and teacher unions and not the results of less income earned from your labor; or taking a pension fund away is OK because it was not money earned but money gifted.

Yes, I’m an S corp, I was a sole proprietorship and the other business is an S corp.

If we don’t stop watching the shells we will never win the game of find the pea.

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How dry I am…

By: Divorced one like Bush
No body knows, how dry I am. I went home, I rang the bell, my wife came out and gave me hell.

Juan posted a link to this paper: OPEC Pricing Power, The Need for a New Perspective

Besides the issue of how oil is priced, and the relationship of the futures market (yes, it is related to the real thingy) there are some numbers presented as to future expected oil production via IEA.

In an exercise which focuses on Middle East and North Africa (MENA) oil and gas resources, the IEA (2005) projects in the reference scenario a rise in MENA oil production from the 2004 level of 29 mbd to 33 mbd in 2010 and 50 mbd in 2030. In this scenario, Saudi Arabia will remain the largest supplier increasing its output from 10.4 mbd in 2004 to 11.9 mbd in 2010 and over 18 mbd in 2030.

MENA was projected to pump 50,000,000 barrels per day in just 22 years from now.

From this paper: Analysis of Crude Oil Production in the Arctic National Wildlife Refuge May 2008

In the low and high ANWR oil resource cases, additional oil production resulting from the opening of ANWR peaks in 2028 at 510,000 and 1.45 million barrels per day, respectively.
Between 2018 and 2030, cumulative additional oil production is 2.6 billion barrels for the mean oil resource case, while the low and high resource cases project a cumulative additional oil production of 1.9 and 4.3 billion barrels, respectively.

So, let us apply some Angry Bear thinking. At the pumping rate in 2030 of MENA, under the best of realizations of ANWR (4.3 billion barrels of oil waiting for our binge), MENA could pump it dry in 86 days! Three months. A lousy 3 months.

But you say: Hey bartender, Hey man, looka here
In 2003 they say we have 59,090,000,000 barrels of oil in the lower 48 and off shore. With ANWR’s best reality, that gives us a total of 63,390,000,000 barrels of oil. Billions and billions of barrels.

A draw one, draw two, draw three four glasses of beer… at 50,000,000 barrels a day we can drink for 1267.8 days. That is 3.47 years. That’s it. No more home brew. At our rate of use, 20,687,000 barrels/day, we’re dry in 8.4 years. That’s only about 2/3rds of the amount of time I keep a vehicle. I won’t be able to wear out my car!

Still not convinced that drilling is not much of an answer? Then consider that in 2005 the US drank 7,500,000,000 gallons of beer. There are 42 gallons in a barrel of oil. That means the US drank in that year 1,785,471,428.6 OBB (oil barrels of beer). Thus, at the rate we drink beer, we could hit the bottom of the barrel in 35.5 years. If EIA’s highend is correct, we can drink ANWR beer for 2.4 year. If not, then we’re going to be jonesing in just over 1 year.

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Senator Obama chooses Jason Furman econ advisor

By: Divorced one like Bush

From this story at Common Dreams comes the news that Senator Obama has chosen Jason Furman as an economic advisor. The story notes Mr. Furman’s fame for his defending of the Walmart model. The one that states Walmart is helping the less fortunate. I don’t buy it in the big picture scheme of viewing. In fact, we at AB have had this discussion and I even posted a link to a report from the EPI which noted not everything related to ones financial well being can be bought at Walmart. Frankly, there are some very big items that are not on Walmart’s shelves that take up a large portion of ones budget.

He has held a good position at the Brookings. Note that bit about director of economic policy for the Kerry/Edwards campaign. Not to keen on the Hamilton Project though:

The offices belong to the Hamilton Project, a small think tank created by Robert E. Rubin, Bill Clinton’s Treasury secretary and key economic adviser, and former Treasury deputy secretary Roger C. Altman, who would be a front-runner for the same job in a new Clinton administration.

Is this the concession the Clinton/Blue Dog group was looking for? The DLC still keeps control of the money issues? This article suggests some recent Hamilton Project influencing.Do we really need Chicago School lite? Are we that timid that we couldn’t try another school of thought? Now that would be “change”.

Then I read this in the Common Dreams article:

One economist who has disputed some of Mr. Furman’s findings on Wal-Mart said the disagreement shouldn’t disqualify him. “That’s small potatoes. Jason’s economic agenda goes way beyond that,” Jared Bernstein of the Economic Policy Institute said. “That’s not anything close to a deal breaker.”

Well ok? If the EPI can say there is more to this young man than Walmart, I need to go looking. I found this from Mr. Furman’s article on corporate taxes:

“We should consider tax reform in the classic 1986 mode: lower tax rates and broaden the tax base by limiting special exemptions. Both halves of this classic equation have the potential for helping the economy by eliminating the perverse incentives to invest in tax-favored activities rather than in more economically productive activities. “

Alrighty, there is more to his thinking. He relates our health care problems to the tax code also:

Not only do we spend more than any other country on health care, nearly 50 percent more per capita than the second-highest-spending nation, but citizens in 28 other countries have a higher life expectancy and 33 other nations have lower infant mortality rates.

If this were a government-run health care system, the voting public and policymakers would be up in arms. Yet, perhaps because health care is largely perceived as a private-sector concern, there is relative quiet: while voters tell pollsters that it is a top priority, there appears not to be comparable political pressure for serious reform or any fundamental change in the government’s involvement, either in the provision or funding of health care. This is in part because much of the federal government’s involvement with the health care system is through the hidden backdoor of the tax code. An importantprinciple for modern progressives is that when the government has to intervene in the marketplace, it should not prop up failure. Yet the federal government is, in fact, deeply involved in perpetuating the current “private” health care system and all its flaws, spending approximately $200 billion annually in subsidizing employer-provided insurance. It is the single biggest subsidy in our tax system, more than twice as costly as the mortgage interest deduction. The only government programs that cost more are Social Security, national defense, and Medicare.

Interesting perspective…yes? But, I’m not so sure he is correct with the solution, though I can now see why Senator Obama has put him at the table:

In fact, if we turned our irrational health tax subsidies right-side up–by curbing subsidies for higher-income workers and those with more generous health insurance plans–we could raise tens of billions of dollars annually, money that could go toward increasing access to health insurance. Taking it a step further, we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance.

Not exactly a Mrs. Edward solution if I have read her correctly.

This person, Mr. Furman seems to fit well with Senator Obama’s other econ advisor, Mr. Austan Goolsbee. I think we can now start making some educated guess on what to expect for proposed solutions to the shift of income share to the top 1%. You know: It’s the economy stupid, Show me the money, declining real wages, consumer economy with little to spend, (add your’s here…). We’re going to try a new version of trickle down which has some form of tax code tightening, but no direct social policy influencing. Social influencing, like say, we use the tax code to make it more profitable for the company to pay the help as oppose to paying the very top management and shareholders.

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Buffet’s Import Certificate idea. What about the people?

By: Divorced one like Bush
Update: Link for Import Certificates fixed

Via Howard Richman’s blog comes this by idea by Buffet: Import Certificates. You have to read down a ways before he gets to the idea.

“We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties — either exporters abroad or importers here — wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.”

Carbon Cap anyone? Think Walmart is on the side of this plan? First of all, what is it with this new approach of solving our externalities via the development of an entirely new market. Have we not had enough with Milken’s Junk bonds, Secure sub prime mortgages, greenmail, etc? Is the creation of new trading cards of stated value the equivalent of polishing a rock and creating a wanted jewel? Maybe so for a “service economy” that makes money from money. You know… have a hammer, everything is a nail.

I’ll admit I’m intrigued by this Import Certificate thing. (But then, I’m intrigued by the APT tax concept.)Seems to capture the benefits of a tariff without having to actually choose (be responsible for the decision). Now that’s American!

How are they to be valued initially? Is this approach to solving problems that are the result of using money to smooth the relationships of people not just another form of printing money by the government? I realize bartering can not take us everywhere we would like to go with our social development, but is this concept just throwing money at the problem?

Buffet notes negative issues. One, a rise in cost to the US consumer. I have a few concerns that piggy back on his.

Like: 1. The certificates being traded on the open market, and the resultant speculation pricing?
2. What would assure that the certificate values do not become the enabler of American junk? Like the US auto industry was back in the 70’s.
3. What protects the consumer from the ability of a US company to gain all the benefit of improved exporting? Are we to just assume that the increase in world demand for our products will increase the demand for labor such that pay for labor will rise? Didn’t happen early on in our history. It took the bloodied rise of unions to force it.
4. What is to stop a company from setting up shell corps in the US, do some fancy booking and benefit from exporting to its self? Kind of like the transfer payments for tax evasion. Can you say Corporate Welfare?
5. Can this work in a global trade system that has let a new virtual nation come into existance: The United Corporations of Global. Does not a nation actually have to have possession of it’s corporations for such to work for the benefit of the nation?

Frankly, I think some of these issue will be issues of the Carbon Cap and trade approach also. They are approaches that address an externality, a single issue solution, but continue to fail to address the most inclusive of issue for all of us (citizens of the world): monetarily benefiting from trade such that our lives are freer to pursue life, liberty and happiness. To steal a line: Show me the money.

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