Saturday, June 27, 2009

Waxman-Markey Cynical or Gullible?

In 10 years the Waxman-Markey bill intends to dictate that energy consumption will be reduced by about 16% for the USA. This is an incredible statement and it is hoped this is not the administration's true objective.

We will hope that Waxman-Markey will not be achieved as it is an anarchistic luddite dream, a scholl boys romantic social engineered idea as to what the good society is all about. If reduction of 16% in energey is achieved, then this will have adverse consequences similar to the great Stalinist social engineering experiments - such as Aral Sea irrigation schemes or collectivization of the Ukraine agricultural regions. Only by going to Stalin's record can one find what are the results of such statist edicts which would reflect similar size of impact on a nation's GDP. (I am not even going near Pol Pot's "green" policy of deciding everyone deserved the farm life versus the terrible urban life)

The Waxman-Markey 16% reduction of carbon in ten years, if achieved, will result in an almost .5 reduction in GDP % from projected 2020 levels for every 1% drop in carbon emissions; which would mean the size of the 2012 GDP would be close to current recession 2009 levels.

A 16% reduction in carbon would therefore, if achieved, force a Japanese lost decade on the USA. But that is not taking into account that the base starting GDP, 2009, is in the midst of a serious economic crisis. In normal times the above would result but considerign where we are now, in addition to the above, Waxman-Markey would hit head on the Fed Reserve attempts to "never again" let the 1930s monetary tightness occur (Bernanke's apology to Freidman and Schwartz 2003), the Fed's 2 trillion growing to 3 trillion balance sheet, and would likely end with ruin of the nation likely making a Wiemar Republic like stagflation a sure thing.

So one is hoping Waxman-Markey is being cynically imposed with no desire to reach the intended reduction of carbon, but the real objective is to raise de facto tax revenue. The CBO has already calculated and the Obama administration has stated, cap and trade will generate approximately 1.2 trillion, reaching $300 billion per annum, of funds for the public sector by 2020.

It is hoped Obama has no intention of achieving the reduction in carbon as outlined and that cap and trade is a tax directed at the most ineffective area of the economy to tax - the corporations. Taxes imposed on corporates are immediately down streamed to the household in the forms of after tax cost of borrowings, return on dividends, corporate bonds, and the pricing of goods and services.

If this is the Obama administration intent with Waxman-Markey - then this is a most "European" cynical attempt to enlarge the public sector share of GDP and shift power and revenue from the private sector to the public sector, using "global warming" as a Trojan Horse. This is breath taking in the application of cynicism.

The reduction of carbon by 1.2 billion metric tons objective of Waxman-Markey from the levels assumed to be in place in 2020 can not be achieved but by a reduction in GDP. USA is already has the most efficient use of energy per lifestyle of any OECD countries. The increased demand on margin for crude per increase in GDP use to be a 1:1 relationship in the 70s and 80s, but since the mid 80s that has dropped to roughly .5 increase of crude to 1 increase in GDP. No other country is showing such efficiency in use of crude.

Barring a radical discovery or re-application of energy - the only ones on the horizon being nuclear fission or fusion - there are no more efficiencies to be wring out of the system.

Obama's Chicago guys know this, I think.

As Rahm says : "never let a crisis go to waste" - well he also would say "never let a mass emotional religious hysterical movement go to waste"

Notice I have not even approached the veracity of "global warming". Guess I just did. What I strongly suspect is the likes of Rahm have done what I did and spent several hours researching "global warming". Something about the man tells me he would not just blindly accept the likes of Gore's prattle just as I do not. Something tells me his research has come to the same conclusion of anyone who has spent more than 10 hours looking for primary sources and trying to achieve a direct comprehension of the math and methods of the scientific "evidence" applicable to global warming. I am certain Rahm is as bright and as industrious as I am - likely much more so in both categories - so I can only conclude that Rahm came to the same conclusion that I did after doing that. Rahm likely thinks "global warming" is religious emotional humbug. But this is where Rahm and I part path's - Rahm would never let anything like this go to waste and has proceeded to champion cap and trade as the answer to a global crisis which in his heart of hearts he doesnt think even exists.

These are bad fellows, I suspect.

The increased savings rate and reduction in consumption from this crisis is coincidently about 1 trillion dollars over the next few years. This is similar to the revenues raised for the public sector by Waxman-Markey. Therefore the de facto increase of tax via this Waxman-Markey will double the adverse impact of the core cause of the current economic recession. Then, as there is pretty well no offset in public sector investment a la Keynes to offset the current drop in consumption, and now with the addition of the planned increase in corporate tax from Waxman-Markey, we can likely be assured of a 15% unemployment rate and savings now motivated to go to about the same level. Waxman-Markey is answering a crisis with a catastrophe.


Unless Obama shows up with not windmills in the sea and other nifty romantic and totally silly green blather in terms of public investment, butObama starts to outline a public investment program in terms of about 2 trillion in public sector investment in either war or permanent services or infrastructure [but infrastructure cannot be done as this would by definition "cost" about 1 bil in carbon emissions], a depression is pretty well baked in the cake.

The major effort for what I think Rahm et al are truly after - a 50 year Democratic power control similar to the years of FDR and Rayburn and LBJ, will be dashed in terms of acheiving this power status as enraged folks from both sides of the spectrum and especially the middle will never trust a national level Democrat for a century to come.

The left-green side will see what cynics the Dems are and how they were used to impose large structural taxes (Greenpeace is already sniffing this out) and the right wing will carry on fighting the Dems for obvious reasons; but more importantly the middle ground, after going through 10 years of quasi-depression and recession, will return to Reagan like nationalistic centric leadership - shedding once and for all any European sensibilities.

And of course just about then, around 2020, the nature of sunspots influence and real science emerge (there are some Galileo's out there not saying a word as they keep away from the "Church of Global Warming" inquisition) and "global warming" goes the way of that last great social science - Marxist-Leninism.

Waxman-Markey is either the just about the most cynical and wicked legislation ever offered or is the most innocent, foolish, and gullible. I can not determine which.

Byron's Don Juan on today's economic crisis

A good "devotion" , a meditation that I am almost finished with is reading Don Juan by Lord Byron entire. I am now on Canto XIV.

Most of the poem cloaks Byron's deeper concern, almost as if he were worried that folks would see through his public personae and see his true contemplative soul. So one has to patiently read stanza after stanza of tongue in cheep and near flippant wit. But it turns out these pages upon pages of light wit frames the value of the core seminal observations all the more, and thereby serve the purpose of outlining and supporting the important thoughts. I now have the view one cannot read excerpts of Don Juan as this framing is then missing.

Here was the start of Canto XIV which though Byron was addressing t0 societal philosophy of his day and age seems of interest today:

If from great Nature's or our own abyss
Of thought we could but snatch certainty,
Perhaps mankind might find the path they miss,
But then 'twould spoil much good philosophy.
One system eats another up, and this
Much as old Saturn ate his progeny,
For when his pious consort gave him stones
In lieu of sons, of these he made no bones.

But System doth reverse the Titan's breakfast
And eats her parents, albeit the digestion
Is difficult. Pray tell me, can you make fast
After due search your faith to any question?
Look back o'er ages ere unto the stake fast
You bind yourself and call some mode the best one.
Nothing more true than not to trust your senses,
And yet what are your other evidences?

For me. I know nought. Nothing I deny,
Admit, reject, contemn; and what know you,
Except perhaps that you were born to die?
And both may after all turn out untrue.......

Canto XIV, 1-3, Don Juan, Byron.

All fine advice to current pundits and economists.

Blog - what it is worth, is reopened

Closed this down to make certain no work related conflict of interest occured.

Back to bathos.