Do you like to breath?  I do.  Do you like trees and enjoy their beauty?  I do.  So what’s the problem?  The problem is that Obama’s EPA is considering a ruling that would declare Carbon Dioxide a “dangerous pollutant“.  So what do you do with a dangerous pollutant?  Well, you stop it, ban it, eliminate it so that it no longer harms us or the environment.  No?

Carbon Dioxide as a Pollutant

The problem is that every time you exhale, part of what you are exhaling is carbon dioxide.  So with every breath you are dangerously polluting the earth.  You must be stopped.  Your breathing must be banned.  You must be eliminated.

What about all those dangerous trees and plants?

“When the sun is shining, plants perform photosynthesis to convert carbon dioxide into carbohydrates, releasing oxygen in the process.”

Trees and plants absorb carbon dioxide and convert it into oxygen.  So if we eliminate this dangerous pollutant, wouldn’t it stand to reason that plants would die?  If plants die, they don’t produce oxygen and people and other oxygen breathing life would die. What a great idea! Let’s ban a dangerous pollutant and in doing so, kill all life on earth as we know it.  Why didn’t I think of that?

Global Warming, I mean, Global Climate Change

Since we have been seeing record cold temperatures across the country and it seems to snow everywhere Al Gore goes to speak (is GOD playing with him?), we hear less and less about global warming.  Now it’s called global climate change, which in my observation happens every day, season, year for as long as I can remember and I expect that it will continue to do so.

The problem is that those who advocate the declaration of carbon dioxide as a pollutant are the same people that say it is settled science that the increase in temperatures, or as it is now called climate change, are man made.  The truth is that there is significant evidence to the contrary that increases in carbon dioxide are not the cause of temperature increases, but the result of temperature increases caused by solar activity (see previous post).

Let Cooler Heads Prevail

I have no problem in working toward reducing the amount of anything that is a byproduct into the atmosphere.  Recycling is good.  Cutting back on energy waste is good.  Renewable energy helps us get off foreign oil from despotic dictators which is good.  But we have to avoid going around the bend and taking extreme positions that the very act of breathing results in a dangerous pollutant.  Once you give that power to the government, more of you liberty vanishes and there is no telling how far they will go with it.

Speaker Nancy Pelosi has released a draft of the proposed stimulus package that is now standing at around $825 billion.  It didn’t take too long to grow $50 over what Obama was asking for (read draft here).  Needless to say, that in order to get bi-partisanship off on the right foot, she had to make sure to give Bush a parting shot by indirectly blaming him for the current crisis (“Since 2001…” gee, who began their presidency in 2001?).  I also found this statement curious:

The economy is in such trouble that, even with passage of this package, unemployment rates are expected to rise to between eight and nine percent this year. Without this package, we are warned that unemployment could explode to near twelve percent. With passage of this package, we will face a large deficit for years to come. Without it, those deficits will be devastating and we face the risk of economic chaos. Tough choices have been made in this legislation and fiscal discipline will demand more tough choices in years to come.

The first interesting point concerns unemployment.  In Obama’s economic team’s analysis they said that with a stimulus plan unemployment would rise to 8% and without it, rise to 9%.  Pelosi is now saying it could explode to 12%.  Can we get on the same page, here?  Which is it?  The next point is that with the stimulus we will face large deficits for years to come, but without the stimulus the “deficits will be devastating and we face the risk of economic chaos.”  So we’re damned if we do, and damned if we don’t because Congress can’t keep themselves from spending more damn money than they take in.

But don’t worry folks, this time (really) there will be unprecedented accountability.  Do you feel better? I do.  After all, don’t we have Barney Frank to thank for making sure Fannie Mae was fically sound?  No?  Let’s recap.

In 2000, then-Rep. Richard Baker proposed a bill to reform Fannie and Freddie’s oversight. Mr. Frank dismissed the idea, saying concerns about the two were “overblown” and that there was “no federal liability there whatsoever.”

Two years later, Mr. Frank was at it again. “I do not regard Fannie Mae and Freddie Mac as problems,” he said in response to another reform push. And then: “I regard them as great assets.” Great or not, we’ll give Mr. Frank this: Their assets are now Uncle Sam’s assets, even if those come along with $5.4 trillion in debt and other liabilities.

Again in June 2003, the favorite of the Beltway press corps assured the public that “there is no federal guarantee” of Fan and Fred obligations.

A month later, Freddie Mac’s multibillion-dollar accounting scandal broke into the open. But Mr. Frank was sanguine. “I do not think we are facing any kind of a crisis,” he said at the time.

Three months later he repeated the claim that Fannie and Freddie posed no “threat to the Treasury.” Even suggesting that heresy, he added, could become “a self-fulfilling prophecy.”

In April 2004, Fannie announced a multibillion-dollar financial “misstatement” of its own. Mr. Frank was back for the defense. Fannie and Freddie posed no risk to taxpayers, he said, adding that “I think Wall Street will get over it” if the two collapsed. Yes, they’re certainly “over it” on the Street now that Uncle Sam is guaranteeing their Fannie paper, and even Fannie’s subordinated debt.

By early 2007, Mr. Frank was in charge of the House Financial Services Committee, arguing that he had long favored some kind of reform. “What blocked it [reform] last year,” Mr. Frank said then, “was the insistence of some economic conservative fundamentalists in the Bush Administration who, to be honest, don’t think there should be a Fannie Mae or a Freddie Mac.” What really blocked it was Mr. Frank’s insistence that any reform be watered down and not include any reduction in their MBS holdings.

In January of last year, Mr. Frank also noted one reason he liked Fannie and Freddie so much: They were subject to his political direction. Contrasting Fan and Fred with private-sector mortgage financers, he noted, “I can ask Fannie Mae and Freddie Mac to show forbearance” in a housing crisis. That is to say, because Fannie and Freddie are political creatures, Mr. Frank believed they would do his bidding.

So, I for one am really glad that we will now have A Recovery Act Accountability and Transparency Board, to keep an eye on things.  Whew, I was concerned there for a minute.

What’s Included in the Package

• Clean Efficient, American Energy
• Transform Our Economy with Science and Technology
• Modernize Roads, Bridges, Transit and Waterways
• Education for the 21st Century
• Lower Health Care Costs
• Help Worker’s Hurt by the Economy
• Save Public Sector Jobs and Protect Vital Services
• Tax Relief

Clean Efficient, American Energy

“To put people back to work today, and reduce our dependence on foreign oil tomorrow.”  Wow, sounds like, Drill Here, Drill Now, doesn’t it?  Not a chance.  Oil drilling is no where to be seen.  After over 1 million signatures on a petition to tell Congress to stop blocking our ability to drill for our own oil, Congress agreed, until the election that is, and then nothing more.  Also, nothing about nuclear energy either.

What is included:

• Reliable electric energy grid — $11 billion
• Renewable energy loan guarantees — $8 billion
• Renovations and repairs to federal buildings, including energy efficiency — $6.7 billion. Why are our federal buildings in such need of repair?  Why hasn’t Congress been maintaining them?
• Local government energy efficiency block grants — $6.9 billion.  This is taking money out of the left pocket and putting it in the right pocket.  The federal government’s money comes from individuals and businesses in all fifty states.  Why do we send our money on a round trip ticket to Washington, only to have our local politicians grovel to get it back?
• Energy Efficiency Housing Retrofits for HUD sponsored housing — $2.5 billion
• Energy Efficiency Research and Development — $2 billion
• Advanced Battery Loans and Grants — $2 billion.  I’ve got a better idea.  Do you want to see innovation in battery and energy efficiency?  Eliminate the Capital Gains tax.  It will boost the stock market and bring in a lot more investment in new technologies
• Energy Efficiency Grants and Loans for Institutions — $1.5 billion
• Home Weatherization — $6.2 billion.  That’s $20 for every man, woman, and child in America.  Does every house in America need weatherization or is this a but much?
• Smart Appliances (rebates for new appliances) — $300 million
• GSA Federal Fleet (replace older vehicles with alternative fuel vehicles) — $600 million. Are they saying that today the Federal Government buys inefficient vehicles?
• Electric Transportation (new grant money to encourage electric vehicle technology) — $200 million.  Did any of these politicians go to the Detroit Auto Show?  It was chock full of electric vehicles.  Didn’t we just give GM and Chrysler $14 billion?  Are we saying they need another $200 million for encouragement?
• Cleaning Fossil Fuel — $2.4 billion
• Department of Defense Research — $350 million
• Alternative Buses and Trucks for state and local governments — $400 million
• Industrial Energy Efficiency for demonstration projects — $500 million.  There are dozens of things we can do to improve Industrial energy efficiency.  We need demonstrations?
• Diesel Emission Reduction — $300 million

That’s just the energy piece of the package.  With regard to the renewable and efficiency spending on government buildings, there should be a reduction in energy costs going forward.  Are the operating budgets for those buildings going to be reduced in future budgets to reflect the savings or is that money just going to be diverted to other uses?

It seems to me that we could get a lot more stimulus with some immediate tax breaks and if the problem with the economy is a lack of credit, perhaps loan guarantees is a better way to go.  Having the government pick winners and losers, or set dollar amounts on each of the slop troughs, just opens the door to lobbying, corruption, and mismanagement.  Who gets the money?  How is it determined? Who gets to decide?

Tax cuts are there for everyone.  As I have said many times, to me, many of our problems have been caused by the government.  The government is not the answer.

I was having lunch with a colleague the other day and the conversation turned to the economy. He spoke of some recent analysis of the number of jobs that would be lost if the Big Three failed.  He recounted not just the employees of the auto companies themselves, but the employees of their suppliers, advertising firms that produce car ads, and on and on.  His final tally was well over 1 million jobs lost.  He concluded by saying it would make the current financial crisis a walk in the park.

Getting enough exercise?

Does that mean that we are all going to start walking?  Not that that would be a bad idea, we could all stand to lose some pounds, but for someone who has a 23 mile one-way commute with no option for mass transit, it’s just not going to happen.  So what do we do?  Well, one of several scenarios is going to happen.

Scenario 1:  The Big Three Close Their Doors

If this scenario came about, what would we do?  We would go buy Toyotas, Nissans, Hondas, Volkswagens, etc.  Those companies would have to scale up to fill the void caused by the Big Three closing their doors.  That demand would need people.  So a significant number, but by no means all, of the laid off workers from Detroit would move to North Carolina, Alabama, and other points south, and join these auto companies at their U.S. plants.

Likewise the suppliers would form new alliances to supply these car companies, as would all the other ancillary companies that currently support Detroit.  Would jobs be lost?  Yes.  Would it be anywhere near the number of jobs my friend projected?  No.

Scenario 2: The Big Three Reinvent Themselves

The liberty of the car companies to reinvent themselves is constrained by government regulations.  Surprise!  If the Big Three have any hope of reinventing themselves, they have to have the freedom to do so.  Start by eliminating the CAFE standards.  CAFE, which stands for Corporate Average Fuel Economy, is the mileage standards dictated by the government that the auto companies must comply with or face heavy fines, draining more money from the Big Three’s coffers.  So for every car that the Big Three build that may get 20 mpg, they may have to build and sell perhaps 3 that get 30 mpg, in order to meet the standard.  But what if they can make money on the 20 mpg car, but they lose money on every 30 mpg model?  What if the reason they can’t make money is because of their labor costs per vehicle, their pension costs per vehicle, their health care costs per vehicle, when added up are too high compared to their foreign competitors.  They are basically forced by the government to make an unprofitable product.

Why not abandon the CAFE standards?  Let Detroit build the cars and trucks that they can make at a profit.  Let the foreign manufactures make cars that they can make at a profit, including high mileage cars.  Let the American people have the freedom to choose which they want.  As the price of gasoline climbs as it did, and will again, people will want to buy high mileage cars, hybrids, electric cars, but they will also want to buy SUVs, luxury cars and light trucks.  Why does a particular manufacturer have to produce all kinds?  When has government ever made the right call on what products to produce? (Hint:  think of all the five-year plans and Great Leap Forwards from the Communist world).

Scenario 3: The Government Bails Out the Big Three

The government prints up a bundle of cash, $25 billion or more, gives it to the auto companies and hands the IOU to you and me.  The new Democratic Congress and Administration will toe the line for their backers in the environmental movement and demand higher CAFE standards for the auto companies in the interest of addressing: our dependence on foreign oil; green house gases; and helping consumers.  This will put increased pressure on the Big Three to make more unprofitable products and we will find ourselves back in the same place a few years hence.  More liberties will be vaporized as the government appoints a czar to oversee the auto companies to be sure they are building the right products, that management is not getting paid too much money, and well let’s face it, they would basically be nationalizing the auto companies.  Management talent would dry up, and socialism would make greater inroads into the U.S. economy.

The Best Scenario

The Big Three file for bankruptcy, if that is what they need to do.  The stockholders would probably be wiped out, the management team would be replaced, and this will let them re-negotiate their labor agreements.  Congress and the new Administration realize that people will want to purchase cars with higher mileage as the price of gas climbs regardless of any government requirement.  There is no justifiable reason that any particular auto company has to build a particular car because the government says so.  Achieving this state of enlightenment, Congress repeals the CAFE standards.  With the liberty to manage the company to make a profit rather than meet the constraints of a bevy of interest groups, a more energized management team takes the reins, and returns the Big Three to competitiveness.

Drawing a line in the Sand

If we don’t take a stand here and now, every company that wants a cash cushion will be working the halls of Congress to get their hands on your money.  There is not enough to go around.  In addition, many of the problems we are facing were created by government initiatives.  The mortgage mess was not the result of not enough regulation but by government programs that compelled lenders to give loans to people who could not afford them.  Detroit’s problems are a result of CAFE standards and onerous union contracts.  Since government created many of these problems why do we think that government knows how to fix them?  What we need to do is tell them to back off and let the free market work.