We have to balance environmentalism with income inequality.

The USA is a very unequal society. Median household income is about where it was was 1973. Yet GDP per capita is up by 86%. A family of 4 living on $32,500 (at the 34th percentile) or one living on $55,000 (at the 58th percentile) cannot afford higher energy costs. They can barely make ends meet as it is. They have bigger fish to fry.

That doesn't mean that I don't think we should address global warming. I just don't want to do it on the back of the poor. We live in a very unequal society that has become increasingly so since 1973. So here are some ideas:


1. Sources of Revenue

i. A federal tax on second homes - 2.5% of the market value.

ii. An escalating tax (the tax rate goes up every year by 5%) on new cars that get less than 30 mpg. Then raise the minimum mpg every year by 5%.

Year 1 - less than 30 mpg - 5% federal sales tax.
Year 2 - less than 31.5 mpg - 10% tax.
Year 3 - less than 33 mpg - 15% tax.
Year 10 - less than 48.9 mpg - 50% tax.

The tax would only charged on new autos when first purchased. This very quickly raises fuel efficiency and lower carbon emissions without penalizing the bottom 50%. The same concept for SUVs, vans and trucks just starting from a lower threshold and with the mpg rising more slowly.

iii. A 10% federal tax on private and corporate jets and a 10% sales tax on aviation fuel for them.


2. Sources of spending cuts

i. Cut defense spending from 5% to 4% of GDP


3. Sources of spending


i. Direct electrical power substitution. Starting with coal which is by far the worst polluter. Close down coal power plants replacing them with subsidized nuclear, solar, hydro electric and wind power stations. The subsidy need to be large enough such that he cost of power to the consumer is no higher than it currently is. Then move to oil and then gas. It will take 30 - 45 years to complete this process.

ii. We need a modern version of the Manhattan project - 1% of GDP spent on r&d on clean energy every year. We spend pitiful amounts right now on clean energy. This should include mechanisms of generating energy (solar, wind and hydro), mechanisms of storing energy (batteries and hydrogen fuel cells), methods of manufacturing that are environmentally sustainable while concurrently studying the economic, social, environmental, health and national security implications of the new technology. This would involve looking at the trade offs between these competing interests.

iii. Subsidize 'clean concrete' and use zero emissions electricity to make it. (There actually is research going on in this field right now.) Same concept for paper and aluminum manufacturing.

iv. Heavily subsidize home insulation upgrades - they currently do this in parts of the EU.

v. Aggressive energy saving standards on appliances. But it has to be subsidized! I know all about this personally because 2 years ago when I bought a washing machine, the price of a basic but reliable one doubled overnight because of fuel efficiency standards. If you are poor it's a big deal spending $350 vs $175 on a washing machine.


4.General policy


i. Abandon carbon sequestration - from an engineering point of view it's just not practical.

ii. Right now building solar and wind farms gets tied up in litigation. We need a federal 'fast track' approval process that is quick and environmentally responsible while realizing that there will always be NIMBYs. (e.g. The Cape Wind Project which is 5 miles out to sea. Cape Wind originally applied for a permit in 2001. It's 2010 and they only just got permission. And yet it was vigorously fought. The same thing happens with solar panels in the desert. Without a fast track approval process clean energy progress will be glacial.)

iii. We have to balance what we do with respect to further restrictions on industry with the effect on unemployment and wages. Manufacturing is one of the last places where people can earn living wages without being highly academically qualified. So I would be very opposed to forcing a facility to shut down (e.g. an auto plant) because of new environmental regulations where workers make $30 - $50 an hour. Once it's shut down it's very likely that the newly laid off workers would only make $10 - $20 an hour if they find any job. This economic reality has occurred a lot in the mid west - especially in Flint MI.

The graph above shows global monthly average lower troposphere temperature since 1979. This data was obtained by the National Oceanographic and Atmospheric Administration (NOAA) TIROS-N satellite, interpreted by Dr. Roy Spencer and Dr. John Christy, both at Global Hydrology and Climate Center, University of Alabama at Huntsville, USA.

You will note that the earth has not warmed since 1998. Why hasn’t it?

The economist blog raised this issue of how to pay for the upcoming massive deficit for social security sand medicare.



Here are some ideas:

1. Raise the age at which people can get benefits for social security and medicare. Given that people live longer they are going to have to work for longer. I would propose raising it immediately to age 70 and then indexing it life expectancy. Put it at 0.9 of life expectancy - that way you would always have a reasonable number of people paying into the system relative to those receiving benefits.

2. Abolish the Social Security Wage Base - currently set at $106,800. Right now you pay 6.20% up to $106,800 - so the marginal rate goes down when you earn above that figure. That is bizarre and unconscionable - it needs to be instantly changed so that the tax is applied to all income.

3. Reduce heavy duty health spending on those over age 80 or 1.03 times life expectancy. Look, we don't 'mind' if a 10 year old kid dies because of lack of insurance, but we are willing to spend $500,000 on a double bypass for an 80 year old. Once your 80 years old - you've had 80 years of life - now its time to let someone else have health care resources. Cap medicare spending on those over 80 at $50,000 a year and index that amount to GDP per capita.

4. Provide automatic medicaid for all uninsured up to age 25 (providing health care early in life helps in ensure better health and lower costs later in life + the young are the least able to get it independently.)

5. Apply a medicaid tax on all employers who don't provide health insurance and apply it proportionately to part time work. - 10% of payroll. (Yes I know there is something like this in the works but it doesn't do enough. This tax is above and beyond it)

5. Negotiate severely discounted prices for drugs for medicaid - similar to prices paid in the EU.

Until health care costs in general are dealt with (that would require a whole separate post) you cannot truly solve the whole problem but applying the solutions above would completely eliminate the fiscal deficit.

Robert Reich gave a speech at the Goldman School of Public Policy at UC Berkeley entitiled 'How Unequal Can America Get Before We Snap?'. He also recently commented on problem of declining real wages for most Americans in his blog. He also correctly points out that since 2001 even wages for those with undergraduate degrees have stagnated or declined (I am not counting those with grad school.)

Dr Reich talked about ‘snap back’ versus ‘snap break’ UC Berkeley speech. ‘Snap back’ being some kind of natural self correcting mechanism to the rising economic inequality operating within legal and normal political channels. ‘Snap break’ being something more radical.

I do not see people seeing a decreased value in their paycheck and somehow blaming government - at least not initially. People seem to want to blame themselves for their own failures. This is even more the case when looking at other people who have 'failed' economically.

Conversely people see the causality of success due to the individual who achieves it.

Now if the situation becomes rather more extreme I still do not necessarily see any meaningful snap back for a few reasons.

1. There is a sense that Lyndon B. Johnson's great society failed. This is now coupled with the failure of communism. This culminated in the 1990s where People saw ‘welfare’ as a black mark. The flip side of the coin on this issue is that people ironically do not have a problem with privileging rich interest groups while they are stingy to welfare mothers. Look at farm subsidies for example or the billions given to telecoms companies to build out a high speed internet infrastructure.

2. People will blame easy targets like immigrants, minorities, criminals, a lack of patriotism or a lack of social morals before dealing with a complex economic system.

3. As I said above we love to blame the individual for their own failings.

4. If we do get to 2020 and there is no change we will be faced with the following situation. We will find that all of a sudden we can’t fund Medicare and we have massive structural deficits, there will be millions more uninsured Americans, a majority of new college graduates will find themselves in crushing debt and the majority of the middle class will find themselves in significantly depressed economic circumstances.* Under such strains I am not sure that the populace will be particularly enamored by 'moderate' solutions. Such a scenario will be a platform for demagogues, not for thinking people. I see a snap break. (Of course if we get to 2030 and no such thing has occurred I will be relieved to be proven wrong.) I.e. if it gets bad enough for people to finally notice the problem we will have problems that challenge our political system as a whole.

*The paradox of such a situation is that real GDP per capita in the USA will probably be at least 25% more than what it is currently. Economic growth as a whole will not necessarily be in peril - its benefits will just be allocated to a very few.

Iran and its Credibility

Iran refuses to budge on nuclear plan. 'The European Union's foreign policy chief said Friday he was "disappointed" by the latest talks with Iran over the nation's nuclear program, a failure that could result in more sanctions for the Middle Eastern nation.' (CNN)

It is sheer madness to expect Iran to climb down on the nuclear issue. They wont. It goes to the core of their national self esteem - their credibility. It is why countries hang on in crazy situations. It is why the US holds on now in Iraq and why it held on so long in Vietnam and the USSR held on so long in Afghanistan.

Déjà vu - The madness of it all

There is no obvious rational for the placing of sanctions on Iran. Hell will freeze over before they work. This reminds me of the madness of invading Iraq in 2003. What did Saddam have to do with events of 9/11? Why was suddenly more of a threat that a few years earlier. Would not the consequences of invasion be awful for everyone involved?

Same points here:

Faulty Rational:

If the ostensible reason for sanctions is to prevent or inhibit the development of nuclear technology it will not work.

Negative Consequences:

Imposing sanctions on Iran will just make them even more intransigent and even more determined to develop nuclear technology.

Perhaps we should engage Iran in meaningful dialog? Yes clearly they are adversaries as of right now. But we did engage the USSR during the cold war. Yes, it does seem quite obvious that they are pursuing nuclear weapons - however we need to consider what is realistic in that regard.

Why the hell does anyone bother with sanctions on Iran?

I do not understand why anyone is advocating placing sanctions on Iran. The regime is hell bent on ignoring them. The population by large margins supports the use of nuclear technology. Sanctions have the effect of bolstering the popularity of the regime. Is this a game as a pretext to later bomb Iran? By using sanctions when they are quite clearly impotent one devalues their importance. It also makes the average Iranian suffer enormously. So why is it morally acceptable to impose sanctions?