December 2008

Man Made Crisis?

by Bill O'Connell on December 28, 2008

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As I continue to read the book I mentioned in my last post, I become more wary of the politics surrounding it.  Man’s contribution to global warming is “settled science”, or in other words, no more debate folks the discussion is closed.  The suggestion from a politician in Australia that any Australian that doesn’t believe in man made global warming should be stripped of their citizenship until the are re-educated.  Does that kind of talk scare you?  It scares me.  The American Meteorological Society (AMS) has issued a statement on climate change that reads:

“There is convincing evidence that since the industrial revolution, human activities, resulting in increasing concentrations of greenhouse gases and other trace constituents in the atmosphere, have become a major agent of climate change.”

Heidi Cullen, the Weather Channel’s climatologist believes that any meteorologist who carries an AMS certification should lose that certification if they do not toe the company line.  If their science and their logic are so convincing, why resort to the threats and coercion?

There is an alternate theory that is not even addressed in the book and that is that the temperature increase that we are seeing is caused by solar activity.  In the book the author touches on the effect of the sun, but only with regard to the position of the earth relative to the sun, not solar activity and since the position hasn’t changed that much, he says it is not a factor.  But it is not the position of the sun that is the factor, it is the amount of solar activity.  There have been very high levels of solar activity between 1940 and 2000.  That activity has since decreased and has been low for several years now.  If you listen carefully you will hear news stories that global warming peaked about ten years ago.

The book states that from 1990 to 1999 global CO2 emissions increased at a rate of 1.1 percent per year.  In the years 2000 to 2006, the rate tripled to over 3 percent per year.  So with such a dramatic increase of CO2 being released into the atmosphere and it being “settled science” that CO2 causes global warming, why did the temperature peak in 1998, and begin falling while the amount of CO2 being pumped into the atmosphere accelerated?  Another study concludes, “if you shut down all the world’s power plants and factories, ‘there would not be much effect on temperatures.’”

My concern is that we have a rush to solve a problem that may no longer exist, or worse may be going in the opposite direction, and our “leaders” are clamoring for massive spending and changes to our economy.  But what about all the proof of CO2 emissions leading to increases in temperature?  The question should be what is the cause and what is the effect?  Has the increase in CO2 caused the increase in temperature or has the increase in temperature, caused by solar activity, led to an increase in CO2?

The author unintentionally makes this point when he mentions that increasing temperature in the oceans caused CO2 to bubble up and be released into the atmosphere.  He also mentions that if the arctic tundra should start to thaw then methane, which is a more potent greenhouse gas than CO2 will be released into the atmosphere.  I think he was trying to say that an acceleration effect would occur where CO2 warms the earth and thereby releases more CO2, but if this was the case we would have baked long ago.  There is a study that indicates that based on past data going back 250,000 years that CO2 concentrations actually lag temperature change, meaning the temperature increase caused the CO2 increase and not the other way around.

With this in mind, any proposal to immediately change to renewable fuels on a massive scale could actually have the opposite effect.  I believe we should convert to renewable fuels when and as they become economically viable.  We recently saw a dramatic climb in the price of a barrel of oil.  With that there came an economic incentive to switch to hybrid cars, build wind farms, install solar systems, etc.  With the housing bubble and the subsequent fall off in economic activity, the price of a barrel of oil has decreased just as dramatically.  Sales of hybrids have sharply curtailed.

So if we artificially push to change from oil to renewable energy now: 1) it will be disruptive to the economy; 2) if the Indians and Chinese do not increase their consumption as fast or faster than we would wean ourselves off, the price of a barrel of oil will continue to fall.  As the price of a barrel of oil falls, the economics of renewable energy will get worse not better, and therefore more coercion would be required through tax incentives and regulations to continue the process.

I believe we should put our energy in driving down the cost of the technology through manufacturing improvements and R&D, so that alternative energy can compete with fossil fuels without subsidies, and let the market determine the pace of the conversion.  We tried the massive government energy program with the Synfuels Project in the late 1970s and every one of those projects failed because they were not economically viable. An enormous amount of money was spent in that effort but it was shut down.  Command and control economies do not work, the collapse of the Soviet Union and the injection of capitalism in China have proved that.  Markets do work, if artificial constraints are not placed upon them by bureaucrats.

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Government Help

by Bill O'Connell on December 26, 2008

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I just started reading a book that was recommended to me on the need for a Green Revolution.  I won’t disclose the name of the book until I have finished it and will provide a review, but there are some interesting points to be made.

The author approaches the subject from a liberal perspective.  Now, I know that many conservative pundits will read Green and see red.  They believe that the effort to go green is to subjugate us all to living back in the stone age.  I approach the subject with a different view.  I personally believe we will stop using oil long before we run out of it.  I also believe that people who carelessly pollute the environment should be stopped and punished.  This is particularly true when I am stopped at a traffic light behind a car bearing an Obama bumper sticker and they roll down the window and toss their cigarette butt on the street.  Serious hunters and fishermen tend to be conservationists as well since carelessness on that front is only going to come back and prevent them from doing what they love.  So if we start with the premise that we all want a planet we can inhabit and enjoy for a long time, both liberals and conservatives, we’ll probably come up with some pretty good solutions.

I also believe that if we can produce energy cleanly, why not?  The more we do that and learn how to do it more efficiently then the sooner we can fulfill my previous prophesy of not needing oil it long before we run out of it.  My main beef with the book so far is its belief that the solution lies in government “leadership” which I consider an oxymoron of the highest order.

I believe that many of the problems that we are now addressing are the direct result of government programs.  And as government continues to grow and take away our liberties and impose more “solutions” on us that don’t work, the deeper our problems will become.  Let me cite some examples:

  • The Financial Crisis — the current financial crisis was triggered by the collapse of the housing bubble.  At the core of that collapse was Fannie Mae and Freddie Mac.  The former was created during the Great Depression, but like many government programs that might be a good idea when they start out, they are never shut down when their intended goals are achieved.  The bureaucrats, in a scramble to keep their jobs, go find another mission which eventually leads to trouble.  In the Johnson administration Fannie Mae was “privatized”, however, government backing was always assumed.  Johnson didn’t want Fannie’s debt on the federal balance sheet when he rolled out another massive government “solution” the Great Society.  Along comes the Carter Administration and the Community Reinvestment Act which compelled lenders to make riskier mortgage loans.  In the Clinton Administration, Attorney General Janet Reno got a lot more aggressive in threatening banks that didn’t step up lending of more and riskier mortgage loans.  President Bush may have called for more oversight of Fannie and Freddie, but at the same time he wanted to increase the level of home ownership.   All of this increase in demand drove home prices to unsustainable levels and once those who should have never gotten a loan in the first place couldn’t pay them back, the whole house of cards collapsed.
  • Social Security — Now here’s a ponzi scheme that would make Bernard Madoff look like a piker.  It was a government program that started out with good intentions, that no one has had the political courage to fix so the government keeps kicking the can down the road for the next generation to deal with.
  • Education — In the Carter Administration there was concern that we were falling behind in education.  The government’s solution?  Split off education from the Department of Health, Education and Welfare, into a stand alone Department of Education.  Since it’s inception in 1980 Congress has appropriated $1.06 trillion to the Department of Education. So how did that work out?  Now we graduate high school seniors that many colleges have to teach them high school skills so that they can succeed in college.  What about the free market?  If you mention school vouchers the liberals will scream.  School vouchers will ruin the public school system.  But almost everywhere it is tried, it is successful.  Where is Barack Obama going to send his children to school?  Not to public school.  At least Jimmy Carter sent his daughter to public school, so let’s give him points for not being so much of a hypocrite.
  • Energy — After the 1973 Arab Oil Embargo, when nuclear engineer Jimmy Carter took office, the Department of Energy was created adding another huge bureaucracy to the already massive government.  Some of the arguments you hear today is that Brazil is energy independent and one reason for that is that they make ethanol out of sugar cane.  If the Brazilians can do it, why can’t we?  During the Carter Administration they used the argument that during World War II the Germans made petroleum out of coal.  If they could do it, why can’t we?  That brought about the Synfuels project.  Congress appropriated $100 billion for this boondoggle and every project under this program failed.  A proven energy technology is nuclear.  However in this country, since 1979, environmentalists and liberals killed the industry.  On Long Island a $5 billion nuclear power plant was built and all but ready to throw the switch and provide clean nuclear power to replace or cap the oil fired power that had until that point supplied Long Island’s needs.  The plant was ready, but protests that evacuation was impossible, shuttered the plant.  The cost of the plant was dumped on the taxpayers and now the hue and cry is that we are producing too much CO2.  The book mentioned the ignominy of President Bush going to Saudi Arabia to ask for a price break when oil prices were skyrocketing.  I think the true ignominy was that we were begging foreign governments to give us a break when our own government said we couldn’t expand oil exploration here.  Cuba and China could drill off of our coast but we couldn’t.  If the issue is a lack of oil refining capacity, put yourself in the position of an oil company CEO. You know that you can build a new refinery at a profit, but when you look across the bargaining table you see your government putting all kinds of obstacles in the way and at the same time pumping subsidies into ethanol providers who are your competition.  Are you going to place that bet on a refinery, or make do with what you have?  And while we’re at it, how efficient is it to stop the refinery to re-formulate a dozen or more different gasolines for different parts of the country?  That’s our government’s energy policy.  But, we’re supposed to believe that government can really tackle and solve our energy problems going forward.
  • Food — While government subsidizes the ethanol producers to make a product that no one would buy if not for the heavy hand of government, they are at the same time paying farmers not to produce so that prices will remain high.  So corn is diverted from feeding cattle, producing corn syrup as a sweetener substitute for sugar (which is subsidized at twice the world price), and being used as a food by itself, driving up the price of all foods that have corn anywhere in the chain, our government is also telling farmers not to produce and pays them for it.  So call me skeptical if I don’t think that in the absence of government interference, we couldn’t feed the world.
  • Automobile Bailout — We are now faced with bailing out the Big Three Auto Companies.  Why?  Well there are many reasons and I think chief among them is the government mandated CAFE standards.  When the first Arab Oil Embargo hit in 1973 people who wanted better mileage cars could buy from the Japanese and they did.  For years, you could get a high mileage car if you wanted to by buying a Volkswagen Beetle.  So why did Congress feel it was necessary to get involved?  The market provided the full gamut of choice that people had the liberty to make.  But government felt they had to intervene.  Was the motive to provide high mileage cars to help the environment or was it to appease the United Auto Workers (UAW) by limiting Japanese cars?  If you look at the history further the motive may become a little clearer.  When that didn’t work, because people still wanted to buy Japanese, the UAW figured it must be because wages are so low in Japan they couldn’t compete, so let’s make them build the cars here in the U.S.  The idea behind that was that the UAW would organize those plants and make them just as expensive as the Big Three.  With CAFE, and UAW organizing the foreign owned plants, the problem would be solved.  It turned out that the workers at the foreign owned plants didn’t want to be organized by the UAW.  So GM, Ford, and Chrysler were saddled with the costs that the union and management agreed to, and the CAFE standards were forcing them to build cars they couldn’t sell at a profit.  The Big Three could still sell cars at a profit, such as trucks, Cadillacs, Lincolns, but having to average the mileage of those vehicles with higher mileage cars, they might have to sell seven subcompacts for every Cadillac to meet the CAFE requirement.  Since Americans can buy a Toyota, Honda, Nissan or many other brands if they want a well priced, high quality, high mileage car, the Big Three have to price theirs at a loss to compete, because if they don’t sell the small ones they’re not allowed to sell the big ones.  What would happen if the market were left alone?  The foreign makers would supply the high mileage end of the market, the Big Three could make money selling trucks, SUVs, and high priced cars.  They could plow those profits back into the next generation of vehicles and as the price of gasoline climbs they would either continue to shrink to become smaller companies or they would develop a competitive product.  The problem is our government, through the CAFE standard has bled them of any profits.  They have nothing to plow back in to R&D to make a new generation of fuel efficient cars, all they can do is demand a bailout or cost the economy 3 million jobs.
  • The New New Deal – This is the one that scares me most of all.  To address the current economic calamity we here that the Obama administration, nostalgic for the days of FDR, is going to create a new New Deal, only bigger and bolder.  The problem is that many people believe that FDR and the New Deal actually got us out of the Great Depression.  Folks, the Great Depression was ended by World War II, not FDR.  It dragged on for twelve years, and many of the steps intended to “fix it” made it worse and prolonged it.  From the Smoot-Hawley tariffs that killed international trade, to contracting the money supply instead of expanding it, to raising taxes instead of cutting them, to having government entities like the TVA competing with private utility companies, I shudder to think of the fixes this new administration is going to attempt.

Government just grows and grows, takes more and more of our liberties away, and screws up the economy with program after program.  It’s time we went program by program and measure its performance against its original goals and shut down any program that isn’t working, cut taxes that were needed to fund these beasts, and return the money to the people.

As far as going Green, I believe it is something that is important and that we should do for our long term benefit.  However, I believe it should be market based, not driven by some bureaucrat in Washington, that decides that this technology is better than that one.  They are not smart enough.  No one is.  If we need the government to help to fund basic research because there is no commercial application on the horizon for a private company to fund such research, fine.  If some financing help is needed to reach a tipping point for some early adopters similar to SBA backed loans, I think that would be okay as well.  But the focus should be on letting the market decide.

The idea that today the world is too crowded also makes me wonder.  If you took the population density of Manhattan island, then 3 times the current world population would fit in the state of Texas.  That leaves a lot of space remaining.

Are there problems to overcome?  Yes. Do we have the ability to overcome them?  Yes.  Is it better we start working on them sooner rather than later? Yes.  But, is it a good idea to expect our government to lead us there?  No.  Not by a long shot.  Let’s dispense with the scare tactics.  Let’s get the government out of our way rather than looking to government to come up with a solution.

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Stand and Deliver

by Bill O'Connell on December 21, 2008

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An interesting op-ed piece in the New York Times Nicholas Kristof nicely sums up what many conservatives have known all along that leaving aside that conservatives want to push grandma in her wheelchair down the stairs, keep children from getting a good education, and are generally racists to boot, when it comes to being charitable, conservatives are far more generous that those compassionate caring liberals.

Many studies have been done on the subject and a number of them by liberals, who started out with the objective of proving how cold and uncaring conservatives are, only to find the opposite is true.  Liberals are generous as long as it’s not with their own money.  They insist on using the overwhelming power of the state to steal your money (increasing taxes) and give it to special interest groups in return for votes and by extension, power.  Do I seem too cynical?

Let’s take education.  The Department of Education was started in 1980 at the end of the Carter Administration.  From 1980 to 2008 Congress appropriated $1.06 trillion dollars to the Department of Education.  What have we gotten for our “investment” as liberals like to call expenditures?  The statistics are hard to come by but I found a comparison of math scores of fourth and eight graders between 1995 and 2007, about half the time the Department of Education has been in operation.  In that period test scores improved about 2% in fourth grade and 4% in eight grade.  If someone came to you in 1980 and said I’ve got a great deal for you, if you give me a trillion dollars, I’ll improve test scores 2-4% over twelve years, would you buy it?  Imagine where we would be today, if we kept that trillion dollars in the hands of taxpayers to use as they saw fit?

If all that money didn’t improve test scores, what did it do?  What about employment?  Again, it was a challenge finding a comparable period, but I did come up with information for the period 1999 to 2007.  From the Bureau of Labor Statistics, the class Education, Training and Library occupations grew 50.8%.  The mantra that we have been hearing, “for the children” mostly trumpeted by the teacher’s unions has been for smaller class sizes.  That sounds good but what does it really mean?  If you have smaller class sizes, you have to have more teachers.  If you have more teachers you have more teacher’s union members. If you have more teacher’s union members you have more contributions to the Democratic party, more votes for Democrats and in turn more education spending to continue the cycle.  The students are marginally better educated, the taxpayers get hosed, and on the local level property taxes go through the roof.

How about “Buck-A-Day” Biden?  I call him that because that is the average amount that this devout Catholic has given to charity over the past ten years.  But pay more in taxes?  He says that’s your patriotic duty!  The government needs more money.  Times are tough.

The problem I have with many government programs is that once passed into laws, rules have to be written on how to execute them and the rules have to be followed explicitly or the lawsuits follow.  That means that there will be cases of deserving people, who for one of the rules does not qualify.  That also means that there will be cases of undeserving people, who because of the rules qualify for benefits even though they don’t need them.

If liberals followed Mr. Kristof’s lead, in his attempt to shame them into giving more, maybe we could have government take less.  That would allow us all to give more, and do it a lot more effectively.  Or how about this for a novel approach.  Before we implement any government social program, the first 10% of funding has to be raised privately, through charitable donations.  If the liberals, who largely favor these kinds of programs can raise the cash, perhaps the program is worthy.  If not, perhaps we could be spared another Department of Education bleeding $1 trillion from the economy when most school decisions are made locally anyway.

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Obama Watch — Week 4

by Bill O'Connell on December 1, 2008

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Here’s where we are four weeks after the election:

  1. Appointments — With the Thanksgiving shortened week, it was mostly packaging of the previously announced appointments.  Monday was going to be the big day, with the formal announcement of Hillary and Holder.  They had to get Bill Clinton’s ducks in a row, and have him measured for a leash.
  2. Dow Jones Industrial AverageUp 675 points. Team Obama finally got a win.  One of the reasons is that Obama has stopped talking about eliminating the Bush tax cuts early, but letting them expire in 2010.  Also, he seems to be assembling an experienced economic team, well known to Wall Street, which doesn’t hurt.
  3. The New Leader – Obama has answered critics who say the team he is assembling looks a lot like the old Clinton White House, by saying that they are “Experienced, Yet Fresh.”  He is facing grumblings on his left, which brings into question how is he going to keep this team of wild horses under control?

The Challenge for Obama

Where is Obama’s base of support?  Where can he fall back on for strength?  He may well be pulling together a team of experienced hands for the various departments, but not all of them are cut from the same mold and there will be some tugging and pulling.  How does he keep them in check and how does he get them back in line?  In other words, where are his reinforcements?

In another post, I mention how past presidents, most of whom had executive experience as governors, brought some of their loyal people with them.  These were people who believed in their candidate and had been with him for a number of years.  That loyalty can be called in, like chits, when you need to win a battle.

It took Johnson a while, about two years, to get his people in the administration since he had inherited the Kennedy team when he ascended to the presidency, but he did have eleven years in the House and twelve years in the Senate, including six years as Senate Majority Leader.  So he had a lot of markers to call in if he needed them.

Kennedy was probably closest to Obama in lack of experience including no executive experience outside of the Navy, but he did have eight years in the Senate.  In addition, he had Papa Joe Kennedy, who had many strings of his own including being a former Ambassador to England; he had his own blood brother as Attorney General; and another brother Ted would be elected to the Senate two years later.  So while Jack Kennedy may not personally have had a lot of pull, his family had plenty.

Nixon was a former two term Vice President.  Ford had been House Minority Leader.  Carter had been governor and was able to bring some of his former team with him, as was  Reagan who had served two terms as governor of California, and Bill Clinton who was both Attorney General and Governor of Arkansas.  George Bush Senior was Vice President, and George W. was governor of Texas.  They all had many connections and a lot of political IOUs.

But what does Barack Obama do, after the glow of history is replaced by the hard work of governing?  It is more likely that Barack Obama wrote a lot of political IOUs rather than him holding them.  Many of his confidents uncovered during the campaign, turned out to be less than appealing to the nation as a whole.  When the going gets tough, who’s going to have Barack Obama’s back?  Who can he turn to and say, I need this one and because of thus and so, without having to say it, you owe me?  He has very little history with his team.  So when he needs a favor, he will have to deal almost from the get go.  Whose career has he made, such that he can ask for payback?

Experience Counts

Experience counts not just in knowing how to do a job, but it also counts in terms of who you know.  Rarely in our history has there been someone who has so little experience inside or outside the beltway.  This may well result in a very weak president.  For all of our sakes, I hope I am wrong.

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