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The Case for Carbon Taxes, Part II:  Political Sustainability

by Eric Kramer

The Case for Carbon Taxes, Part II:  Political Sustainability

In a prior post, I argued that carbon taxes are not vulnerable to political subversion by hostile courts and regulators, and that this is an important advantage of carbon taxes over traditional regulation based on mandates, and also an advantage over subsidies.  Once they are passed, carbon taxes can work more or less on auto-pilot to drive a clean energy transition, unless they are affirmatively repealed by Congress.  In this post I consider whether carbon taxes are likely to sustain the support they need to remain in place.  There is certainly no guarantee of this; any ambitious climate policy is likely to remain controversial.  However, there are reasons to be optimistic that a carbon tax will not provoke a self-defeating backlash, and mandates and subsidies will also encounter political headwinds.

When it comes to political viability, it is natural to think that subsidies are the best policy, mandates are second-best, and carbon taxes rate poorly.

Subsidies are politically popular – at least if they are funded through deficit spending – because the benefits to voters are clear and they seem to reward people for virtuous behavior (like buying an electric vehicle), but the costs of deficit spending are indirect and hidden from view.  Subsidies do not force anyone to do something that they would rather not do, like convert from natural gas to electric heat, or purchase an electric vehicle.  They are all carrot, no stick.  (This advantage of subsidies is entirely dependent on deficit financing.  Telling people that we will give them a $10,000 tax credit to use on the purchase of an electric vehicle at some point over the next ten years is not particularly appealing if we also tell them that their taxes will go up $1,000 per year to pay for it.)

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Chaos Theory And Global Climate Change

Chaos Theory And Global Climate Change

I am currently attending the Southern Economic Association meetings in Fort Lauderdale, where the street facing the hotel was underwater during the most recent hurricane to pass through.

Anyway, I saw a talk today that took me back to when I first learned about chaos theory, actuallly in the early 1970s before the word “chaos” was used for it. I learned about it and the butterfly effect, aka sensitive dependence on initial conditions, while working on a combined model of global climate change and food production.  It was called “irregular dynamics” back then, and the model showing it was climatologist Edward Lorenz, published in 1963.  Blew my mind then.  Anyway, it is widely accepted that the global climate system is chaotic, which is why one can only make weather forecasts for fairly short periods of time into the future, although one can forecast longer run average changes of averages such as average global temperature.

Anyway, I saw a talk by Emmanuele Masssetti of Georgia Tech that reminded me of all that, a talk thet explicitly drew on this chaotic effect.  So he has been simulating future climate using different assumptions for the various climate models the UN has been using for its IPCC reports.  What he found was that indeed the overall average temperature change projected did not vary as he varied initial conditions by small amounts. But what the projection for particular regions of the world did vary, indeed very much so as in the butterfly effect. So, for exmple, the Great Plains of the US would warm a lot under one simulation, but then actually cool for a simulation following a slightly changed initial conditions.  This is atunning, but not really surprising given the underlying chaotic nature  of th global climate system.

Another talk was a keynote  by Richard Zeckhauser of Harvard, who was pushing for us to study geoengineering.  He made a strong case for it.

Barkley Rosser

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The End Of Decades Having Identities In The USA?

The End Of Decades Having Identities In The USA?

We are closing on the centennial of the beginning of decades having identities in the USA, the “Roaring 20s” of the 20th century.  It may be that this centennial will clearly mark the end of this odd phenomenon that we had been used to, but which was always a bit odd.  Why did this start and why might ibe ending?  I have a few thoughts on this.

My theory oon why it started in the 1920s is that this was the first appearance of national news media in the form of radio, which was the first time we could really have aunified discusson and consciousness in a way not possible previously.  Certainly there were decades earlier that had the potential for having identities. The 1860s had arguably the most dramatic event of US history, the Civil War, but nobody has ever talked about “the 60s” meaning the 1860s rather than the 1960s. Likewise, there serious economic downturns through most of both the 1870s and 1890s, but nobody has ever talked about the 70s or 90s referring to those decades.

Indeed this continued into the beginning of the 20th century, with many dramatic events in the first decade and, of course, WW I in the second, although the US was in that war for less than two years.  But it was the 1920s that got an identity for the first time in US history.  Maybe it is not the spread of radio, maybe it is the spread of automobiles, which became the dominant form of personal transport in that decade, which helped increase social mobility and communication.  So add the auto to radio, and maybe some other things, jazz, although we also got the spread of records and movies also.  So, there we had that roaring decade.

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What quid did the president quo and when did he quo it?

What quid did the president quo and when did he quo it?

Aside from the headline news about a July 26 phone call, I learned four big things from the impeachment inquiry hearing this morning. First, the specific corruption surrounding Burisma Holidings had to do with self dealing by company founder Mykola Vladislavovich Zlochevsky — issuing oil and gas licences to his own company when he was Minister of Ecology and Natural Resources. In other words, Zlochevsky did exactly what Donald J. Trump attempted to do with his Doral Golf Club and the G7 summit.

The second thing I learned is that President Trump was nursing a grudge against Ukraine because some Ukrainian politicians said some nasty things about him after he made a comment about letting Russia have Crimea. That’s why he felt Ukraine “owed” him. The third thing is that the Ukraine shit made fanfall just about exactly the time that Trump was extemporizing about Hurricane Dorian hitting Alabama. Who knew Trump could multi-task?

The fourth thing I learned is the big one. There was not one quid pro quo but two. One involved Zelensky, the other Putin. That’s the significance of the timing of the Trump-Zelensky phone call — the day after Robert Mueller’s congressional testimony was a dud. Humiliating Zelensky by forcing him to make a public announcement of a politically-motivated investigation of Biden-Burisma-2016 would hand to Putin his reward — a weakened negotiating partner — for the favor of having helped put Trump in the White House. The art of the deal, indeed.

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Buried Lede … all time record

They got the goods, but some editor made them semi bury them.

By Mark Mazzetti, Eric Lipton* and Andrew E. Kramer note that the first shipment of Javelin missiles to Ukraine was mysteriously held up by the OMB until April 2018 when then prosecutor general Yurii Lutsenko froze the investigation of Paul Manafort. This isn’t a scoop. Both events were reported at the time.

To me the odd thing is that the key evidence is reported in the second to last sentence of the article. The two references to April 2018 are separated by Ten (10) paragraphs. In any case, the facts are devastating for Trump

Near the end of 2017, just as the government in Kiev was trying to get final approval from the Trump administration on the sale of the Javelin anti-tank weapons, Mr. Poroshenko’s prosecutor general, Yuriy Lutsenko, had begun freezing cases in Ukraine relevant to the Mueller investigation, including an inquiry tracing millions of dollars that Ukrainian political figures paid to Mr. Manafort.

The other two involved the law firm Skadden, Arps, Slate, Meagher & Flom, which wrote a report with Mr. Manafort’s help that came to be seen as whitewashing the arrest and imprisonment of a Ukrainian politician.

[skip]
No evidence has surfaced of an earlier quid pro quo of making the Javelin missile sale contingent on the halting of investigations relevant to the Mueller inquiry.

Except for the timing which makes it very clear what happened (it was clear at the time, but no one was interested)

Mr. Lutsenko took further steps to slow walk the Ukrainian cases related to the Mueller investigation in November and gave an official order to freeze them in April 2018.

One examined possible money laundering in a $750,000 payment to Mr. Manafort from a Ukrainian shell company. Another scrutinized a Ukrainian politician who signed entries designated for Mr. Manafort in a secret ledger of political payoffs uncovered after the 2014 revolution in Ukraine.

The other two involved the law firm Skadden, Arps, Slate, Meagher & Flom, which wrote a report with Mr. Manafort’s help that came to be seen as whitewashing the arrest and imprisonment of a Ukrainian politician.

[skip]

the White House Office of Management and Budget briefly held up the weapons sale after the Pentagon and the State Department had both approved it. The reason for the holdup, first reported by The Daily Beast, is unclear.

The logjam eventually broke, and in April 2018 the first of 210 Javelins and 35 launching units were shipped to Ukraine.

The second “April 2018” is in the second to last sentence in the article.

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Republican Renegade Emulates Warren’s Student Loan Cancellation, but it’s Still Problematic

Today we have a commentary  by Student Loan Justice Organization Founder Alan Collinge with support from an Angry Bear editor.

Alan:

A key Republican Education Department official and Trump Appointee, A. Wayne Johnson, recently resigned his position at the Department and later made a radical call for student loan cancellation. Johnson noted the lending system was “fundamentally broken” and called for loan cancellation for all loan holders up to $50,000. He also called for a tax credit of the same amount for those who have already repaid their loans. Interestingly, Johnson’s plan sounds very similar- and even more generous- than what presidential candidate Elizabeth Warren is proposing.

The proposal is strong stuff coming from a Republican and his comments could indicate the problem is far worse than the Department of Education has said publicly on student loans. He noted that he came to this conclusion after having a “firsthand look” at defaults, which we already know are running at about 40% for 2004 borrowers, who had borrowed a third of what is being borrowed currently. One can only wonder how bad the internal projections are for more recent students.

Johnson is to be applauded for calling out this big-government lending monstrosity, and even, perhaps, for his call to get the government out of the lending business altogether. In the absence of both bankruptcy protections and statutes of limitations, the Department of Education has become one of the largest lenders on earth and a viciously predatory one at that. In his commentary, Johnson is correct in pointing out the various forgiveness programs run by the Department are failing badly.

Editor Comment:

Dependent upon which manner of accounting is used, student loans can be considered to be profitable or unprofitable. Using the Federal Credit Reform Act (FCRA) accounting methodology, student loans are profitable. Regardless, student loans have no escape unless one dies or becomes disabled. Student Loan Bankruptcy was effectively thwarted by Senator Joe Biden’s efforts since the nineties. If in default, the government will garnish wages, Social Security, and whatever else they can in order to get back their funds.

Others such as Jason Delisle of New America advocate using the Fair Market Value methodology of accounting to assess the risk of default for student loans. Delisle claims the interest rate of a student loan should be set at 12% as there is risk and yearly losses with making low interest rate student loans that do not cover risk of default which is not assessed in the beginning.

Disputing Jason Delisle’s commentary; Malcolm Harris pointed out on Twitter, it’s worth noting that the CBO’s fair-value accounting analysis finds no subsidy for PLUS loans and unsubsidized Stafford loans, but a big one for subsidized Stafford loans, where rates are rising. Overall, there’s a negative subsidy – profit. That’s a way the government could be making a profit even under other accounting specifications, though obviously skeptics like Delisle dispute that.

Outside of student loans, a student could walk into a car dealership, purchase a $30,000+ automobile, which is about the cost of an education, have little down payment and maybe a second signature, and both people could still escape through declaring bankruptcy. This is something major businesses and people such as President Trump have been doing for decades without having wages and benefits garnished for a lifetime.

Alan:

Some of the $50+ billion the Department books in profit every year is being used to fund unrelated social programs. In 1965, President Lyndon B. Johnson declared that these loans would be “free of interest.” The former should not be the case and the later has not happened.

However previously, there were problems with Warren’s plan of student loan relief and these have not gone away under Johnson’s current proposal.

For example: while it is clear that the default rate is screaming upwards and this is crushing many borrowers, many are doing fine, and there is no particularly good reason to cancel their debt. Conversely, there are many borrowers who owe far more than $50,000, who have seen their debt explode with penalties, fees, and interest, such that writing them down by $50,000 really wouldn’t make much of a dent. So this “one-size-fits-all” approach makes little sense. And at an estimated $925 billion, it’s expensive.

Editor Comment:

What is clear to me is people complaining “what about.” Those who paid their loans have little  idea of what has been happening in the student loan industry which is profit driven. There are any number of stories being told of hucksters signing up students into for profit schools which sadly go bankrupt or steer students into course curriculums which will not lead to employment in a job to which they were trained. The system protects the servicer and the loan originator until that loan is paid off.

Does it make sense for people to be entrapped in a loan which can not be paid off thereby keeping them as an economic burden rather than a productive, taxpaying member of society? What about-isms and false equivalencies offers no solution other than indenture.

Alan:

Also, any cancellation program would be administered by the Department of Education, which has a well-documented history of bungling such programs, as Johnson rightly points out. For example, of the roughly 40,000 people who thought they were getting cancellation this year through the Public Service Loan Forgiveness Program, fewer than 100 (less than 1%) actually will. Similarly, a whopping 57% of people in the Income Based Repayment Program (IBR) were disqualified for administrative reasons. So the borrowers are cruelly left owing far more than had they never tried!

The Department of Education cannot be trusted to administer yet another loan cancellation program. As they have done before, they will surely find ways to disqualify the vast majority of borrowers so that the agency captures the wealth rather than those who it was intended.

Editor Comment:

The Department of Education has always been troublesome in administering programs impacting students. The public service program has been haphazardly run and has left many who have paid back loans over ten years in service to the nation without forgiveness of part or the rest of their loan. The current Secretary of Education is a ditz who did not understand the training leading to gainful employment rule was for both nonprofit and for-profit schools and not just about for-profits as she claimed. I too would look for someone else to administer programs given the circumstance.

Alan:

A more efficient solution to this problem is simply returning standard bankruptcy protections to these loans. The Founders called for uniform bankruptcy laws ahead of the power to raise an army, and declare war, and this lending system proves their wisdom. Borrowers must have bankruptcy on their side in order for the lending system to be fair. It is only with this threat that the lenders will act with a modicum of good faith.

Bankruptcy is also a far less expensive solution. While there would be an unavoidable spike in filings initially, bankruptcy scholar Robert Lawless estimated that in the “steady-state,” annual discharges would come to less than $3 Billion per year. Even if it turned out to be double or triple this rate, that is still far less than the proposal in question. Not to mention, no tax hikes would be required. This could be achieved by simply repealing the one line of federal code that exempts student loans.

There is legislation in Congress that would achieve this: HR. 2648, a bipartisan bill, and its Senate companion, S. 1414. Alternatively, President Trump could simply direct the Department of Education to stop opposing student loan borrowers in court. Either way, we would get a much more efficient and well suited outcome.

And the Founders? They would agree with returning bankruptcy capability for student loans.

Alan Collinge is Founder of StudentLoanJustice.Org, and author of The Student Loan Scam (Beacon Press)

Angry Bear: Thank you Alan  .  .  .

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Looking for An additional Editor for Angry Bear

Dear Readers,  Commenters, and Bears,

Bill and I are looking for an additional editor:

  •  a participant in running the Angry Bear site and interact with contributors and readers to encourage responses and moderate threads as administrator
  • add consistent points of view in posts and finding topics to supplement contributors efforts,
  • become knowledgeable with the administration of our site ranging from problem solving WordPress to registrations like Go-daddy, updates, liaison to host platform and advertisers,
  • and add new ideas and counsel with us.

Angry Bear is an older site (2003) which has been ahead of the national and global trends and events.   [We think we are good and also believe we can be better].

Please contact  me (cdansplace2@aol.com) or Bill (run75441@hotmail.com) for more information or questions you may have.

Dan

 

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To Be Sure Jennifer Senior

(Dan here…lifted from Robert’s Stochastic Thoughts)

by Robert Waldmann

To Be Sure Jennifer Senior

I just read an op-ed by Jennifer Senior. I am not 100% satisfied. To be sure, she denounces the Republican Party in no uncertain terms. The op-ed is not completely Balanced. However, old habits die hard. The op-ed contains a good bit of nonsense. Some of it is there to give the essay a beginning a middle and an end. More of it is a bit of reflexive bothsidesing.

First it begins “It’s that time of the campaign season when some Democrats are starting to feel — as President Jimmy Carter might have put it — malaise.” This is a reference to anectdotal evidence. It is not supported by polls of voter interest and enthusiasm or data on the number of campaign contributions. Basically, it is Senior arguing that Democrats need her advice (the pundit’s fallacy). Mainly it is a link to another op-ed by Jonathan Martin which begins ” When a half-dozen Democratic donors gathered at the Whitby Hotel in Manhattan last week, ” so the sample size is 6. Also, the “Democrats” in question are rich Democrats. Senior does not mention the possibility that rich people are out of touch with the forgotten man.

Is it the New York Times’ official position that 6 rich people in Manhattan deserve more attention than say the 940,000 people who donated to Warren or the 1.4 million people who donated to Sanders in the third quarter (of the year *before* election year). If that is malaise, I don’t think I could handle enthusiasm. I guess the idea is that 6 rich people in New York are more sophisticated than the small donors, because the 6 rich people are pragmatists who consider the pulse of the nation not their enthusiasm and so are more in touch with ordinary voters than regular people are.

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The Famous Baseball-Watching Equality-Equity Graphic, Scrutinized

The Famous Baseball-Watching Equality-Equity Graphic, Scrutinized

Here’s the graphic, widely used to explain why equity outcomes require unequal treatment of different people.

Benjamin Studebaker (hat tip Naked Capitalism) doesn’t like it at all: “I hate it so much.”  But his complaints, about the way the graphic elides classic debates in political theory, strike me as being too redolent of grad school obsessions.  The graphic is not trying to advance one academic doctrine over another; it just makes a simple case for compensatory policy.  I agree in a general way with this perspective.

Consider the Americans with Disabilities Act of 1990, which mandates special facilities in public buildings to accommodate people in wheelchairs or facing other mobility challenges.  This is unequal treatment: extra money is spent to install ramps that only a few will use, rather than for amenities for everyone.  But it’s a great idea!  Yes, compensation is concentrated on a minority, but it aims to allow everyone to participate in public activities, and in doing this it embodies a spirit of solidarity that ought to embrace all of us.  By making a simple, intuitive case for focused compensation, the graphic captures the spirit behind the ADA and many other policies that take account of inequalities that would otherwise leave some members of the community excluded and oppressed.

Unfortunately, however, there are serious limitations to the graphic; above all, it embodies assumptions that beg most of the questions people ask about compensatory programs.  Some are challenges from conservatives of a more individualistic bent, others might be asked by friendly critics on the left, but all are worthy of being taken seriously.

 

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Whither Lebanon?

Whither Lebanon?

Yeah, yeah, yeah.  I should probably write about the “big success” we have in Northeastern Syria thanks to Vladimir Putin talking the Turkish president, Erdogan, into holding back some from his nation’s invasion of Kurdish territory.  But, heck, it is still hard to know what is going on there.  So instead I am going to look at events happening in Lebanon mostly under the radar, but that are both connected to the broader war in Syria as Lebanon has been challenged by receiving over a million refugees from that war, but also is experiencing something that resembles events happening in several other nations and that may lead to deep changes in that complicated and  long-suffering nation, things that may actually be hopeful for an improved future, more likely than what is happening to the Kurds in Northeastern Syria.  Lebanon is experiencing massive street demonstration involving hundreds of thousands of people.

Lebanon became independent from French rule in 1943, having been carved out of the Ottoman province of Syria by them following the 1916 Sykes-Picot Agreement with the British in order to favor the elite Christian Maronite group, who follow eastern rites but are under the Catholic Church, with the wealthy Maronites having had close relations with the French dating back to the Crusades.  With 18 recognized ethnic/religious communities, the French set up a system based on these groups, but favoring the Maronites, then the largest group.  The president, as well as the Chief of Staff of the military and the Head of the central bank, were to be Maronites.  The premier would be from the then-second largest group, a Sunni Muslin, and the Speaker of the parliament would be from the poorest group, the Shi’a, who were predominant in the South next to Israel.  The Sunnis would increase in population as waves of Palestinian refugees entered, fist in 1948, and then in 1970 after the failure of the Black September uprising in Jordan, with the PLO taking power in various parts of Lebanon then.  However, the poor Shi’a would become the largest group in population.

 

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