Money by TW Collins
The election is over. The partisan battles, never dead, have quieted to a dull roar as opposing sides regroup for future battle. Meanwhile, in America, the economy is sinking into what will probably be judged the worst post-war recession. So let’s take a look at what America’s economic problems are, and what real change would look at.
For today let’s discuss two of the economy’s main long term problems an oil bottleneck and massive maldistribution of resources. We’ll talk about other issues, like trade, another time.
The Oil Bottleneck
This is probably the easiest problem to solve, for all that many suggest it’s the largest problem the US has. The problem is just this: you can’t really substitute away from oil. The world is very close to using all the oil around. Whenever the world economy is doing even reasonably well, the price of oil will soar. This is not precisely because of supply and demand, supply and demand only makes it possible. But when the economy revs up and supply and demand tightens, speculators pour into oil. They act in an amplifying manner, raising the price significantly. And at about $150/barrel, or $4/gallon for gas the US economy starts to rattle apart.
What’s most likely to happen over the next half year or so will make it look as if the oil bottleneck is not a problem. A combination of a worldwide recession damping down demand, and a strong dollar policy intended to cause an overseas dollar drought (the fundamental Rubin/Clinton play of the 90s) will push the price of oil down. Within a couple years I wouldn’t be surprised to see it drop as low as $30/barrel.
The supply of oil, over the long term, is simply not growing as fast as the demand for oil, and that isn’t going to change. Any time the US economy and the other major economies like China and India are performing even reasonably well, oil prices will increase. If the US economy were to really take off in a genuine boom, oil prices would rush back towards the stratosphere. What will probably happen over the next two years is a crash of oil to around 30, then monetary authorities will loosen the money spigot, and oil will crawl its way back up to about $70. Which is fine, the world and American economies can stand that. But if the US economy really booms, and the rest of the world is allowed to boom along with it, it will then pass that and make its ascent to $150.
So, you can have a sort of ok economy, and moderately priced oil, sort of. But you can’t have a really good economy for long, or oil price increases will shake it apart.
This limit on how good an economy the US can have has to be broken. The methods to do it are simple enough. First the US needs to increase CAFE standards. This can be done as part of the auto bailout. Carmakers need to be directed to stop making and selling so many trucks and SUVs. The worst performing vehicles on the road need to be taken off the road, which can be done by simply having the government buy them, scrap them, and give the sellers a credit towards a fuel efficient car.
Second, the US needs to heavily encourage telecommuting. Jobs that don’t need to be done in an office, shouldn’t be done in an office. This means a large broadband buildout. It can be done through fiber, or it can be done through the spectrum which the FEC has recently released. While doing so, forcing the major cable and phone companies to allow anyone access to their networks to sell broadband time will also be required. It’s that rule which made early internet access in the 90s so plentiful and cheap, and it’s that rule that has allowed Japan, for example, to have far faster broadband than the US for far cheaper. To make the broadband truly useful the telecom networks will also have to be forced to allow any device which meets basic engineering rules to connect to the internet, rather than having them refuse to allow features which won’t make them money to be enabled. (European phones, for example, have to be dumbed down to be used on American networks, with multiple features disabled by the telecoms.)
There are also some significant short term measures which can be taken, the simplest of which is to enforce a 55 mile an hour limit for a year or so. The second would be to move to having companies allow workers to work 9 hours for 9 days, and take a long weekend every second week. Most employees certainly wouldn’t mind.
Next you would energize America’s building stock. Although much of the energy used to warm and cool buildings is not produced by oil, peak power is often generated through oil powered turbines, and for other reasons such as global warming, moving off coal is a good idea in any case. Have builders refit homes and office buildings for passive solar, active solar, geothermal and so on. The government pays them for doing so after a government inspector inspects the work. The homeowner gets, in exchange, a much lower power bill or even the ability to sell power to the local utility. This puts the nations builders back to work during a time when there will be little building for them to do, and trains them to make buildings which are not just energy efficient, but energy producers. To make this work you will have to put meters in every house which allow people to see the cost of power hour to hour and to sell power to the local utilities, all of whom will be required to allow microproduction of energy.
Doing this rebuild is expensive, sure, but it’s no more expensive than the bailout. And it will have much more lasting, long term benefits. It is an excellent way to do a stimulus, and puts people to work doing useful things.
Maldistribution of Resources
The second problem is that the US has been using its resources for things which have very little economic gain, or which are inefficient or unproductive.
See what happened to Canadian costs?
The easiest and simplest gain here is single payor universal healthcare. About 5% of the US’s GDP can be repurposed by moving to universal health care, which in every country which has it, reduces costs by about 1/3. Politically this is now much more possible than it has every been. Not only do many more people want it, but while all this money is being thrown around, health insurance company objections are most simply met by buying out their insurance books and telling them to wind the business down. It’ll cost hundreds of billions, but a country which has spent 5 trillion in the last year and a half on the financial crisis can find the money. And in the not very long run it will pay back.
Comparative Military Spending
The next step is to take a very serious look at the military. I would suggest not so much cutting the military budget (though some of that is needed) as repurposing it. Get rid of many of the most expensive equipment projects and tell the firms which are connected to the military industrial teat that you will support them for a couple years while they retool for things the US actually needs, such as solar power, geothermal, telecomunications networking, civilian aviation and so on. Meanwhile retrain a significant part of the US military for nation building, and set them to work rebuilding America by fixing roads and bridges, building and repairing schools, setting up power networks and so on. This stuff really is fundamental to the sort of wars the US fights these days, and as with GI training in WWII, the soldiers trained in these skills will eventually go into a civilian economy with skills which are in high demand.
Money also needs to be shifted away from the financial sector. In recent years, depending on how you count it, the US financial sector has gone from producing 10% of the nation’s profits in the 60s to producing between 30 to 40%. Returns in good years have often exceeded 15%. Since the US economy, even by the most generous definitions, was not growing by 15% a year, that meant that all that was happening is profits were being shifted from the real economy to an industry whose job is just supposed to be to get resources where they’ll do the most good. And, in fact, the financial sector didn’t actually produce profits. By the time the full bill for cleaning up their mess is totalled, it will be clear that all their declared profits have been used up and then some.
World Derivatives to 2007
So, while a financial sector is necessary, the current organization of the financial sector can’t be allowed to continue. By whatever means they have to be reduced back down to 10% or so. The simplest means to do this would be a financial transactions tax on every single transaction. Even a 1% fee will slow the sector down significantly. This will require the cooperation of other major economies, but there’s every reason to believe that if the US pushes this Europe, Japan, Canada and China will probably be willing to go along. Add in some currency exchange controls for flows from outside the area where there is such taxation and this will dry up many of the financial games. Add in rules limiting leverage, regulations against allowing leveraged instruments to be used as collateral, and a variety of other tightenings of regulation, and you’ll reduce profits a lot.
This is important because money in the US has been going into the wrong things. The private sector, thinking it could get 15% plus returns by playing financial games, did so, and didn’t spend money on real businesses which only earn 5% or even an astounding 10%. This needs to be brought to an end. In large part this will be done by making sure the financial sector is not as profitable as it used to be, but however it is done, it must be done, or there will be more financial bubbles and the real economy will never get the investment it needs.
Wages of the top 1%
The next way that resources have been maldistributed in the US is in terms of income. The rich have become too rich, and the middle class has taken on too much debt, mainly because it hasn’t had a raise in about 30 years if you look at individual incomes (family incomes have gone up because more and more families are now two-earner.) The price of health care and university has likewise gone up. This is a problem because it has led to a debt society where the savings rate has actually at times gone below zero, meaning the US has to borrow too much money from overseas. This need to have paper to sell in exchange for money was at the heart of both the dotcom bubble of the 90s and the housing bubble which we’re seeing collapse right now. Likewise, a healthy middle class increases demand and provides a better workforce.
This is simple enough to solve, you simply go back to progressive taxation, with incomes over $500,000 taxed at 80% for every dollar over half a million, incomes over 1 million taxed at 90%, and incomes over 5 million taxed at 95%. Loopholes must be closed, corporate tax loopholes must be closed as well (probably by making it so that if you declare a profit to shareholders you have to pay tax on that profit), and capital gains and other forms of unearned income must be taxed at the same rate as earned income. Contrary to screams by the conservtive ideologues who told us that low capital gains taxes would mean "trickle down" good times for ordinary folks, this will not destroy investment.
Foreign Debt Holdings
The next thing to do is to stop stealing from the future to live well today by selling that future to foreigners. Nothing epitomizes this better than California proposition 13, which sharply limited tax increases. At one time California schools, roads, universities… and economy, were the wonder of the United States. Then Californians decided they didn’t want to pay for all that. The end result has been crumbling schools, repeated debt crises, and a sickly economy. But this hasn’t been limited to the US. For decades now the US has simply not reinvested in the basics. Infrastructure has run down, the school system has gotten worse and worse, university costs have soared to the point where most lower class kids don’t make it through any more and basic research has been all but abandoned.
The savings rate has dipped to essentially zero, even dipping below zero, and foreigners have financed both consumer consumption and US government debts. The cost of that dependence on foreign money has been reinvestment at home and loss of effective sovereignty (as with the decision to allow foreign banks to get bailout money, done because they threatened to dump their dollar denominated assets if they didn’t get it). Money has been found to allow people to continue to live beyond their means by selling America’s future (that’s what debt is, a promise to give future money) and its assets to foreigners.
This did allow Americans, or rather the America’s rich, to live beyond America’s means for a few decades. The best description of it was the "death bet". If you died before the bill came due, well, you won the bet. But if you’re alive now, you didn’t win the bet.
Now this doesn’t mean "don’t run deficits", but what it does mean is "don’t run deficits to fuel consumption spending or to pay salaries and maintanence." If you’re really rebuilding infrastructure, building new schools, making the housing stock more energy efficient—if you’re really doing things which will lead to more income later, that are an investment in the future, then deficit spend. The future will get the benefit as much as the present, or more, and it’s fine for the future to pay. But it’s not fine for the future to pay for salaries today, or for basic maintenance today.
In order to stop this you change how you do accounting. You go to a balanced budget for things like salaries, you allow deficit spending for activities which will help the future. You allow exceptions only during recessions, for stimulus spending on items that aren’t long term, like unemployment insurance extensions, aid to the states, food stamps, and so on. But if that spending becomes regular, it goes into the regular budget and revenue must be found to pay for it.
Another way the resources have been maldistributed is in housing and education. I list these two things together, because in America they are intimately intertwined. Since property taxes pay for schools, good schools tend to cluster in areas with high property values. However high property values are maintained in many areas by good schools. Folks with children move to districts with good schools deliberately to give their kids a better chance. Those who can’t afford to move into a good neighborhood simply suffer with bad schools. This housing/education link needs to be broken, it has led to far too many people just not receiving a good education, and not having a fair shot and the fact that so many Americans are badly educated, or even functionally illiterate is a huge drag on the US economy.
The way to fix it is to simply have the federal government start topping off school district budgets. Sure, right wingers will scream, but really, should how good your education is be dependent on where you live? Really? There will have to be controls on the money, and standards that have to be met and which if not met will allow the feds to take over the district and fix it. There would need to be some agreements between districts not to get into bidding wars—once you’re taking the federal money, you can’t take it and also spend huge amounts of additional money. And yes, it will cost a fair bit. But the price of not doing it is higher.
It’s also necessary to end using houses as retirement accounts, which is what happens amongst far too many Americans. They have a house and a job in an economically active area of the country, and the house appreciates far beyond the growth in incomes Americans are experiencing. When they retire they sell it, move down south into an economically depressed area of America and pay people without much education to take care of them in houses that are a lot cheaper. Or they use the money to pay for care in a seniors home.
Seems like a good way to do it, but it’s not, because it relies on housing prices increasing faster than wages or general inflation. Even when that doesn’t lead to a bubble it does lead to making it less and less possible for younger people to buy a house until later in life. More importantly, it makes mobility in the economy, the ability to quickly buy and sell houses and move from location to location where the new job is, difficult. An economy which is inflexible in this way, which does not allow geographic mobility of people, is not operating at as high a level as it could.
Home prices vs. median income
Likewise the more people are spending on housing, the less disposable income they have and the less they are saving for the future. Since household savings are the best source of investment for the US economy, low savings rates, caused in part by high mortgage payments occasioned by too high house prices decrease both saving and consumption. The simplest way to fix this is to either allow the housing bubble to collapse properly, or to buy up and reset mortgages at a much lower effective amount based on reasonable housing evaluations. Once the prices have dropped, credits for buying houses in the tax system should all be ended. There should be no preference between buying a house and renting, in law. We do not actually care much if people own or lend, what we should care about is that either way it’s relatively cheap to do so.
This is also important because housing amounts to a protected sector in the economy. If real-estate returns much better than export industries (and it has) then money tends to flood into it and rather into those export industries. And the US desperately needs to export more. To make that happen, you have to make it so that staying in protected sectors doesn’t make more money than being in export industries.
Concluding Remarks
Some of the suggested policies may seem to be fairly sweeping, and they are. But the US is in serious trouble, and while the immediate culprits can be summed up as energy, financial excess and housing bubble, the deeper problems include the ones I’ve listed. Really getting the US economy working again requires a fundamental overhaul of how it functions. Without that overhaul, even once the immediate crisis is over, the middle class still won’t see any pay increases. In fact, what will happen is that the stagnation will turn into an outright, undeniable, decline in the standard of living as the US lurches towards meeting Chinese and Indian standards somewhere in the middle. But the middle is a long ways down for most Americans and getting there will be very very painful.
The economy needs to be made to work for everyone again by taking away bottlenecks to growth, moving investment to where it can create real growth, by providing services like healthcare much more efficiently and by making sure that the productivity of the US is spread amongst the entire population, rather than pushed towards the top. Do this, and the good days will come back. Fail to do it and they most definitely won’t. The best you’ll get is a couple years of sort-of good times, followed by really substandard years, as has been the pattern for the better part of thirty years.
This is a choice Americans and their elites can make. America has the ability to change its path and choose prosperity and vitality again. The question is just, is this the change you want?
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Hey, Ian, this will take a while to read!
Yup, haven’t hit you folks with a long one in a while.
Looks very interesting Ian. Question, is it up at the right time? The Book Salon is going on now.
But the author did not show, so yeah. If he does make it in we may flip the book salon back up top.
Very debatable.
Don’t allow it. This is not inevitable, like the sun rising in the east, or water being wet.
First off, there should be total transparency in who is trading the futures contracts.
Secondly, restrict trading to entities that will take possession of the oil.
okay, good. i’m busy reading your article. see you in a bit.
You don’t believe in peak oil? Yeah, oil supply is just not going to keep up with demand, unless you’re willing to go to sources like Shale and oil sands, and that’s a really really bad idea for a number of reasons. It’s also not cheap oil.
Agreed that speculation could be slowed down. It can’t be stopped entirely unless you’re willing to live without an oil futures market.
Never.Gonna.Happen.
Nor should it.
Yes, the very well off should pay much more than they have, but 80-95% of the last dollar over $500,000 (I thought you had it at $250,000 in a previous post) is too much.
You might be able to get 50-60% passed, however.
re the Oil Bottleneck Section:
I like all the other ideas a lot. I’m not fond of encouraging telecommuting to a high degree as that could have a large impact socially with people isolated in their homes instead of interacting together at the office. It’s anecdotal, but just about all the people I know who work in their homes feel more socially isolated than when they worked together with other people.
Good gawd, Ian, I hope you’re being paid well for this. Heck, I could take a few bits of what you’ve written, call it my own, and impress all of my friends and relatives. They’d be hanging on my every word forevermore. ;o)
You’re certainly free to think that, but the fact is that the economy performed much better at those sort of numbers, and that the rich need to make less money so they don’t engage in BS like the stuff that caused the financial bubble. when you know you can make enough in 4 years to live on for life, you don’t care much if the entire edifice is going to crash in year 5.
A lot of good ideas, but many of them will generate substantial pushback.
My experience at trying to get management to allow widespread telecommuting was pretty dismal (this was as an officer in a federal sector union). They didn’t want to admit it, but they really thought the employees would simply stay home and play with the cat (kids, whatever). Didn’t want to admit that they had no really meaningful measures of productivity that couldn’t be gamed. If the employee was physically present their asses were covered.
Most of these ideas aren’t unique to me. I’m just collating them all in one place. In particular Stirling deserves a lot of credit for many of the ideas. Oldman and I worked on the housing stock idea together, stuff like progressive taxation has been around forever, financial transaction taxes have been around forever, the housing/education link is something even Schumer understands (it was in his book, along with a good plan to fix it), stealing from the future has been discussed by every economist for ages, the rich/poor stuff was very well explained by Phillips (though I was talking about it independently before that, as were many others), and so on.
This is mostly synthetic work, putting together a lot of different ideas in one place.
You lost me at
Meanwhile, in America, the economy is sinking into what will probably be judged the worst post-war recession.
You can write all you want, but, I can’t even understand the Post-War Recession. Pretend I’m stupid. /s
yes, they will produce pushback. Still, there is a crisis right now, and if not now, when? Sometimes things have to be done, and if not done the consequences will be very bad. I think Americans think they can still muddle on without severe consequences. They can’t. A radical restructuring is required, or in 10 years your standard of living will have declined a minimum of 20% as a very generous guesstimate.
Muddling through is no longer an option, unless folks are willing to really accept the consequences.
Of course, most great nations know what to do to stop their decline, and at some point they decide not to do it anyway. This may be America’s time.
It’s a pretty clear statement. I can’t simplify it any further.
You can’t write about energy without looking at water:
USGS: Electricity use 58% of total US irrigation withdrawals.
Bloomberg: “The Next Petroleum” – Deane M. Dray
Forget
-Coal
-Nuclear
-Natural Gas
-Solar Thermal
It all needs Water
We need a systems solution. Not point solutions. Electricity cannot replace Oil as currently generated, there is neither enough fossil fuel, nor enough water.
We should not compete with our cars for food (biofuels) nor water (thermal electricity).
Yeah, I worked as a DoD contractor and at one job, I was part of a source selection (”Non-Government advisor to the Source Selection Evaluation Board”). We were working in an isolated series of offices away from the normal day-to-day. They got a new commander in the day-to-day offices and for the first few months he was around, he either never saw me or I was on the phone doing past performance surveys or waiting for call backs.
In his eyes, I wasn’t doing anything as I wasn’t in his direct line-of-sight every day.
That’s quite a laundry list. It really does seem a little unrealistic though.
I didn’t ask you to simplify it.
Getting snotty with me doesn’t help me understand.
It feels like we are still at war. By the numbers.
Nothing in my life feels “post war”.
Is that clear enough?
Post-war means post world war II. Worst post war recession couldn’t mean anything if I was talking about the Iraq war, which hasn’t ended yet.
I’m not totally sold yet.
Yes, the easy oil is going fast, but technology is allowing us to get to (and find) oil in places we couldn’t before.
Plus, I don’t trust the oil companies as far as I can throw them, and it’s in their interests to promote the peak oil theory for price support.
I certainly believe in conservation and pouring resources into alternative energy, however.
Speculation will continue to ease since the leverage has gone away, and with regulation and transparency coming, when prices do rise again at least it will truly be because of supply and demand. That will lend itself to more orderly price action.
Ian – Have you seen the Salon article Obama and the dawn of the Fourth Republic by Michael Lind? He is saying that we are entering into a new era. It’s sort of on topic. ;)
Oh well. Kiss off that 20% standard of living, and probably 50% in a generation. I really am going to have to write an article on what happens when a bear is chasing someone and they decide they don’t want to run fast enough to escape. Americans still don’t seem to get that the bear is about to rip them to shreds.
Or, as Cap’n Jack Sparrow once said “all that matters is what a man can do and what a man can’t do”. If the US can’t do the things that are necessary, and at least some of these “politically infeasible” things are going to be necessary, then that’s fine. The consequences of not doing them will then ensue.
Well, I believe in peak oil, and that assumption is embedded. If you don’t believe in it, you won’t agree with my section on oil.
Post-war means post world war II.Thank you for the clarification.
Forgive me for being stupid.
Actually, the concept we had where I used to work was 1-3 days per week (which was usually, when allowed at all, cut to one day/week). Should be possible to allow that and avoid the isolation while cutting fuel consumption for commuting in half.
Long term solution would be to design communities where work, school, shopping and home are within walking distance. Urban planning, considered a bad thing by the conservatives.
I would like universal health care but….. that just ain’t gonna happen. Obama’s plan isn’t there and he will have to fight tooth and nail just for that.
80 percent tax rate above 500 grand a year? Also not going to happen. You also talk about education but there are powerful forces that don’t want general education. They want private ed for them and nothing for everyone else. They hold considerable power.
There is a risk of attempting to do too much and then failing. So far, from what I’ve read, the Obama team is doing it right. Time will tell.
Thank you. Yes, gov’t management has very little imagination or insight into jobs they haven’t actually performed, IMO.
Don’t get me wrong; I’m essentially right with you.
If we could wave a wand and make the greedy bastards accept your proposed tax rates, I’d do it in a heartbeat.
I just don’t think it would ever pass.
Isn’t the purpose of posting your articles to educate people?
Ivory tower man, I said you’re not reaching me.
That doesn’t resonate with you? Anywhere?
You have a lot to share with us, but, if we get stuck, you might want to help instead of being hurtful.
I think you’re right, this has to be the time to put these ideas forward. The really hard part will be to organize around them and force a response from the staid, complacent power structure in WDC. IIRC, FDR told an advocate something like, “That’s a good idea, now make me do it.”
Yes. I can feel really good about telecommuting some of the days and even better about designing communities where we walk to work, school, shopping, entertainment, community and outdoor activities.
Oh well. Kiss off that 20% standard of living, and probably 50% in a generation.
I’m unclear about what you mean Ian. There is something you should know about me. I live in a supportive housing building for the homeless. I don’t own a car, I need a new pair of shoes, I have broken teeth because there is no dental care for me, and I just had a nice meal of hamburger with mushroom soup over rice and I’ll have that the next three days. So I don’t know what you mean about kissing off a %20 standard of living. I’m already there.
I also don’t know what you mean about bears chasing us and all that. I try to read up on things but I don’t know what you mean. How can I run away from a bear if I can’t see it, can’t smell it and don’t even know it’s there?
Great article, Ian. I’m still only a third of the way through, but by the time I’m done reading there will probably be another article here. Meanwhile, a couple of things jump out at me so far:
* I think part of the reason so much speculation happened in the oil market this time is that there weren’t many other places to put the money. Real estate was going south, and most everything else had become much less attractive over the last few years. Opportunity cost, in short, bit us in the ass for a while.
* I’d be able to answer the caption under that chart about relative health care costs if I knew when Canada went to single-payer. Looks like it might have been in the 1970s, if I take the meaning of the question correctly.
Ian,
Thank you for this excellent summary of some major economic problems and their solutions.
I agree with your assertion that an understanding of the reality of peak oil is key. If we don’t take major steps to address this problem now it will certainly come back to haunt us by the end of Obama’s first or second term.
Another major shortage that will soon appear on more radar screens is ”peak water”–the availability of affordable clean water. I don’t have the link in front of my, but I recall that officials in Kansas City told residents that they needed to invest $1 billion plus over the next 20 years. I’m sure this is true all around the country. And rural water supplies, especially those used for irrigation, are also very stretched.
Put together, the future high cost of water and oil will bring about a much greater food crises, even in the United States.
Michael Pollan’s excellent article ”Farmer in Chief”
http://www.nytimes.com/2008/10…..Ov/EMiRN6w
address many of the actions that must be taken to address the food crises. Many of these actions, if taken, will also help address the economic and energy problems.
(Obama has read this article, according to an interview http://swampland.blogs.time.co…..interview/
(((Brenda)))
Life is hard for a lot of people right now.
I’m feeling for you, sister.
Hugs and much positive, oh, hell, let me just say it…
Love!
One more thing, regarding the military. I’d suggest just letting the military do those jobs on their own bases. Most of the maintenance on bases now is done by contractors. Let the military tech people do as much of they can, and they can learn on the job.
I agree with every point you have made and have one to add to the laundry list. In general, I think we need to break up “mega” corporations and return to local, sustainable consumption/production. This month’s Harper’s had a series of essays about “saving capitalism”. Bill McKibben wrote about localizing food production, which would reduce use of petroleum by agribusiness, and develop local farming jobs again. An initial step might be to redirect farm subsidies from agribusiness to small farmers.
I don’t think pushback will matter. The next year will be so bad that critics will have to sign on to this agenda.
Or perhaps more accurately, why should I fear the bear I already live with.
I suppose I could show the prime mortgage meltdown homeless where the best dumpsters are. The first time you eat from one is the worst, it gets easier.
(((demi))), i don’t feel like ian’s being arrogant or hurtful, just that he didn’t understand what about the phrase wasn’t clear to you. i didn’t know what that phrase “post war recession” meant either so i was glad you asked the question. when you explained that, because of us still being at war with iraq, you didn’t relate to “post-war”, then ian could understand what was confusing to you about that phrase.
i hope that helps.
“as much of they can” should read “as much of that work as they can”
Peak oil is not just about demand outstripping supply. It is that around 85 million bbls/day of liquids is probably the peak. This means that oil producers will be physically unable to pump more than this and that in fact their capacity to pump will actually begin falling from this. The concept here is that older, larger, cheaper to produce, and more easily accessible oil fields will go into decline (many already have). When this happens production falls on average 6% a year in the declining field. Now not all fields are in decline and new fields though smaller, less accessible, and more expensive to produce can reduce although not reverse the overall rate of decline when peak oil hits.
Another problem is that because the oil market is so complex and there are external factors (like the current worldwide recession) which impact usage we will only know for sure that peak oil has hit a few years after it happens. There is also a misconception that peak oil means that there will be a single point after which the decline begins. As we have seen for the last few years, peak oil is more like a plateau and in this sense we are already in the era of peak oil and probably have been since 2005. We probably will be up to 2010-2012 but after that contraction in the oil supply on a year to year basis will be inevitable and inexorable.
Re excessive market speculation, there are a whole host of ways of limiting speculation from restriction to commercial traders, increasing margins, restricting large trades, and transparency, transparency, transparency.
(((brenda)))
thank you so much for sharing yourself. i really appreciate it.
Thanks demi. I’m doing just fine actually. It’s not quite as bad as all that. I have access to healthcare but under Bush it’s a nightmare. I’m hoping Obama improves things.
The reason they didn’t want the war to end on their watch was to preclude the economic disaster that will come when that winds down. A war being waged with tax cuts instead of tax increases, no oversight on the Pentagon and the contracts being doled out on a no-bid basis.
If there wasn’t already an economic tsunami facing us, the end of the “war on terror” would bring one.
Yes, that is helpful.
I’m glad you’re here to translate.
Sometimes I’m just over sensitive to the lingo that I don’t understand.
Not true. There’s lots of stuff I agree with, starting with the statement “The supply of oil, over the long term, is simply not growing as fast as the demand for oil.”
I don’t find my view on peak oil and that statement mutually exclusive.
Where we probably differ is how fast the price of oil will rise solely because of supply and demand vs. hedge funds using 35-1 leverage to game the system.
I also find myself in agreement with your position that oil prices will probably stay low (under $3/gal.) over the next 2 years.
But I don’t believe for a moment that the $147/bbl oil we saw had anything to do with supply and demand at the time.
China and India’s economies are slowing (as is ours) but not down 60% like oil is.
We must step away from unregulated capitalism. In my town we will have three fiber optic systems. One is inoperative, but cablevision wired the town and now AT&T is doing the same. Other communities don’t have one system. Hopefully competition will bring my price down, but two fiber optic systems for one town is foolishness. We need regulate both installation and price, like it was before regulation became a dirty word.
McCain made some hay charging Obama as an income redistributer, a claim taken up by right wing talking heads. It does not require an economics degree to realize that in a system where people need jobs to literally eat, when wealth get concentrated in the hands of a few, demand for goods, services etc declines. The rich buy only so many cars, houses, clothes etc, certainly not enough to keep an economy going. When demand dries up, as it is today, it’s because your average person cannot afford to buy much. This vicious circle feeds on itself. Lessened demand breeds ever more diminishing demand. Printing money and giving it to the middle and lower classes (not that that’s what’s happening) is inflationary-perhaps very inflationary. Taxing the rich has little general support because the American dream says anyone can be rich. People don’t want the music to stop until they’ve had their turn on the floor.
Ian writes: In order to stop this you change how you do accounting. You go to a balanced budget for things like salaries, you allow deficit spending for activities which will help the future.
What local governments do for that sort of thing is have bond issues. These generally have to be approved by voters. Some sort of national system of doing this might be in order, though having voters approve all projects is probably a bit too much complication.
ok ian, i’ve read the article and it’s excellent. i’ve believed for a couple of years now that we’re already into the era of peak oil so i have no problems with those assumption. i really love having all this in one place and also completely agree with the commenters here that clean water resources are crucial in this picture.
Economists generally mean post-WWII when they say post-war. (U.S. statistical collection really ramped up then too, making analysis of that entire, now half century era a lot more fruitful.) But since the U.S. has had so many wars, it is really anti-social to use postwar without specifying which one.
There’s a joke in Manhattan that every new war turns so many more apts into prewar apts. That cache also relates to WWII, or even WWI, when walls were solid, ceilings high, and decorative accents affordable.
I’m making tuna noodle casserole for dinner — maybe too heavy on the noodles, but you get where I am.
I’d be happy to share some….
I keep telling the kids, this is depression-era dinner.
And, I think there are a few chocolate cookies left from yesterday.
Excessive speculation began back in 2004 when oil prices increased by a third. This is actually about when the housing bubble really took off. Housing burst first. Money did flow into commodities after, but with the financial meltdown and the credit crunch it has become almost impossible to finance excess speculation.
If gas remains under @3.00 per gallon and Exxon/Mobil still rakes in obscene profits far outpacing anything they’ve done previously what does that tell you?
I’ve been watching the talking heads on CNBC lately and I swear Bartiromo’s head is going to explode over the thought that she’s going to have to pay more taxes. She was absolutely apoplectic on Election Day, I thought they were going to have to sedate her.
The only sector the analysts are telling people to stay away from is health care.
Personally, when I see the market dropping while Obama is speaking then I think he’s probably moving in the right direction. Anything that disturbs the capitalist class encourages me.
i really debated if i should say anything, so thanks for letting me know that it helped. :)
You have multiple systems because every company that wants to get on the poles owns their own cable and they are not about to ’share’ the fiber with anyone. They might lease fiber or fibers to other providers and lease them space in their CO for racks and panels, but every company is going to want to put the biggest honkin’ hose in the communication space that they can because the way the FCC regulations and federal law now read, the pole owners(usually the utility, or the incumbant local telecom..Verizon, Frontier, etc.)can charge them up the wazoo for putting their cable on the pole in the first place. If they want to increase their capacity without taking it down, paying AGAIN, and putting another one up, they can do something called ‘overlashing’, but again, not every ILEC will allow that.
But you have brought up an interesting point – the great big fiber build-out. I can tell you that we already are seeing ILECs like Verizon abandoning areas that are poorly served already(such as their complete pull out from the state of Maine)because they can’t make ‘enough’ money. The problem is numbers of customers on a line in a given area; rural areas always get the short end of the stick because it costs companies the same to run a mile of fiber on the poles whether there are three customers per mile or 30 – so they are much much more interested in running fiber on poles in areas where they can capture 30 customers per mile of fiber rather than 3. So, I don’t have an answer to ‘making them do’ anything.
That’s a good point. I would say energy, water, and food are the big 3 in terms of endangered resources. Given increasing world populations, that is a whole other train wreck that is going to hit in this century. It is why people like me think that the world population in 2100 could be a billion or less.
I just don’t believe that.
First, the economic disaster is already here. And the resources used for war can be for more constructive domestic purposes.
I think the reason they didn’t want the war to end was solely related to stuffing the pockets of their cronies, the same cronies that will recycle much of that money back to them starting Jan 21st. 2009.
Ian writes: Seems like a good way to do it, but it’s not, because it relies on housing prices increasing faster than wages or general inflation. Even when that doesn’t lead to a bubble it does lead to making it less and less possible for younger people to buy a house until later in life.
I wrote about this irony last month. The sad part is that an economics idiot savant like me could see this wasn’t going to last, and yet we kept being told that everything was just fine.
I think having a house as part of a financial portfolio still ought to make sense, but the prices of houses can’t be set so artificially high that people can’t afford them. We’re there now, of course. We’re due for some serious, what do the Wall Street folks call it?, correction there. Hopefully, my house will be worth what I paid for it more than a decade ago.
Water will be the new oil.
Great post Ian — thanks. I’m particularly interested in your ideas about housing. I’ve been having an ongoing discussion with a friend the past couple of months about home ownership. She thinks the push for all Americans to own their homes has been a disaster. I’ve generally viewed it as a good idea.
In your example, you paint the homeowner as well-to-do having got a lot of money from the sale of their upscale urban home which allows them to move to a depressed area and hire help.
Lets consider another example, lower middle class Americans in a rural area who could afford an inexpensive home, that accrued a moderate increase in value over the time they owned the home. Lower middle class Americans don’t generally have the financial wherewithal to invest to any significant degree in stocks and bonds. For the most part, they cover their house payments, groceries, car, clothing and at the end of the month they haven’t got much left.
It seems to me that if you’re making a mortgage payment of say $1000 per month v. paying a rental of $1000 per month. Then at least you get some money back out of the house when you sell it, whereas the rental money is gone.
If I understand you correctly, you want to change our current system such that the mortgage is much lower — say $500 per month, in order for the person in question to be able to save for retirement elsewhere (presumably stocks and bonds). So what would a rental price look like? If it is still $500, then one would still be better off owning something at the end of those payments (even if house prices stayed the same, you would still get money back on the house at the time of sale, where a renter would not). Unless rents are much much cheaper than mortgages (unlikely since landlords often have to pay the mortgage on the rental property), I don’t see how renting v. home ownership is ever an advantage for someone who remains in the same geographic region for a long period of time.
Nest eggs aside, some people need the mobility that renting affords them, but something like 50% (from memory — it may be different from that but it is a large fraction) of the population of the United States never lives more than 50 miles from where they grew up. Renting a home rather than owning it, in that case makes no sense to me. I’m sure there is something that I am overlooking here though, so if you could help me understand this I would really appreciate it…
One of those stories that never seems to get any play is that the telecoms were allowed to collect some $200 billion in customer fees which were supposed to go to pay for a nationwide fiber optic system. The telecoms took the money but never built the system. No one in government has ever asked for that money back.
thanks. given all the discussion on the thread re post-war and the economy tonight, i’ll probably remember what it means forever now.
That is soooo effing true!
All of those a-holes are losing it over the election.
The other thing they’re fretting about is the reduction of the big shrimp/ top shelf liquor parties in Manhattan and the Hamptons.
Heaven forbid they have to buy their own drinks and cocktail weenies again.
Real solutions to real problems. Emphaticlly argee on this statement of the status quo and your solutions. A job well done. Now to advance this to the US Congress. Think I will forward it them all.
I don’t understand the 9 hours 9 days a week. That’s 81 hours over a 2 week period. Working 10 hours a day 4 days a week does much the same and gives a 3 day weekend every week. That comes out to 80 hours over 2 weeks and seems a lot easier to sell and more sensible.
My Bold oil at $30 again my you are an optimist.
Obama may be too centrist for our tastes. I don’t think he wants to rock the boat too much. We may end up needing to follow the pattern of the French Revolution. They used the guillotine on the royals. The Royals in the USA are the wealthy (50 – 100 million plus net worth). They still maintain serious control. Included among them are the talking heads on tv and their masters.
We may have to unite. All the people. Black, White, Latino – all of us together. Obama is another centrist like Clinton.
bad telecoms! very bad telecoms! maybe our new government can do something about this after january. somehow this doesn’t seems like something obama will make a priority.
me, the first thing i want back is habeas corpus.
I agree that water is going to be a big problem. The oil situation will probably be worked out one way or another. Lack of fresh water supplies is something you can’t just work around.
That’s my favorite kind of knowledge to acquire, the kind that is yours forever after. Typically, though not in this circumstance, it is something obvious that you never thought of before (because no single person can think of every obvious thing).
She thinks the push for all Americans to own their homes has been a disaster.
She’s right. Individual homes on their own plots of land are far more wasteful of our resources than higher density housing. Everything is more efficient and people could own condos. So at least they have property, I guess.
Moving that capital cost for oil to the soveriegn funds mad OPEC is also draining capital for all the other programs you stated. Turn that around ASAP.
We do that where I work, except that the last Friday of the pay period is eight hours. It’s nice having an extra day off, and nine hours is scarcely longer than eight in a typical job.
AND, Hugh, something people not only do not know but certainly no one seems to want to tell anyone, is that when the ILECs got started(and in the beginning, what you had was THE BELL SYSTEM and that was it), they got municipalities to give me space in the public rights of way for their poles and underground conduits – FOR FREE – because the agreement was that they were utilities – they would serve everyone. Now, if one of the CLECs wants to bypass the ILEC/utility monopoly in terms of poles and conduits, they would have to pay major dollars to put in their own poles and conduits, so they are at the mercy of having to deal with the ILECs and utilities to get on the poles that are already there. So, the ILECs and utilities make money for poles that they got to put in for free…AND you’ve got companies like Verizon that NOW are saying, ‘we can’t make what we consider enough money, so we are abandoning our customers here and selling our stuff to xxxxx rinky-dink telecom – have a nice day.’
Off to read, for now.
This idea I like a lot but how much money would it take to either help the economy by putting enough people back to work or help the economy by cutting energy use?
i’d include what we are doing to the environment and ecological diversity in this one. the destruction we do today is, among other things, stealing from the future.
p.s. thank you – i think this is just the kind of useful conversation we (not just the blogs) need to be having about the issues that confront us and what we can and want to do about them.
I think there could be distortions if we went mostly rental. If you want to move away from homeownership, I think a better way would be to owing your own apartment.
If Obama leaves Lieberman in position to protect dual-citizen, Chertoff, AND brings more dual-citizens into his inner-circle, you’ll know (sadly), that the Israeli fix is in, and nothing has changed except the color of the puppet.
We can steal Canada’s water. If they don’t like it we can lambaste them in the press, accuse them of terrorism, call them communists,…/s
Obama is another centrist like Clinton.
The ultimate irony of all the Clinton-bashing and Obama-fluffing I saw around here. They weren’t all that far apart on anything.
Ooooh, those Canadians. Who said they could have our water anyway?
Obama may be too centrist for our tastes.
I am fairly centrist and pragmatic. The French Revolution, the song of the guillotine? Seriously? Or are we in fantasy land?
I just want better healthcare.
My bold How long to pay back? Also how many jobs will be effected I think people in the industry are afraid to lose their jobs. What can or should be done?
That is yet another of the great untold stories of our times. Investment banks like Goldman Sachs which Henry Paulson headed until mid 2006 were the prime movers in what was a massive transfer of wealth in the range of $500-700 billion a year from the US economy to oil producers and Congress, the media, and the Bush Administration did not raise a peep over it. If it was mentioned at all, it was always described as if it was an act of nature.
Thank you Ian for a most informative post. I have had thoughts of a lot of this stuff but it was very nice to find it summarized here with your excellent thoughts as usual.
I guess I would just like to say that instead of just denouncing some of your solutions as just-not-going-to-happen, I would like to see more of hou we could actually MAKE them happen.
For instance – top tier tax rates. We had those in the past. How did we get them? Obviously Congress passed them so I would like to know just what were the arguments in favor and against that convinced a majority of legislators and the President to sign this?
I think one common thread that can/needs to run through all this it to bring back a sense of shared responsibility for everyone and everything. We have lost that, and this me-first at all costs thing is one of the major underlying factors in why we are in this mess in the first place, IMHO.
Obama’s skills as a community organizer will be more and better utilized if he can be convinced to use his oratory to re-develop that shared sense of community. Then we WILL all be able and willing to do the things that are necessary as Ian has suggested, or at least to be able to agree on substantial steps down that road.
Oops, that should read “owning” one’s apartment:
I appreciate your point, but for the sake of argument, we have been contemplating the question in terms of the economics of the homeowner.
I think the fastest way to save a lot of energy at low cost would be to require every flat roofed building in the country to be painted white. Not shiny – just flat white. There are coatings out already that can be used on the membrane systems, but the amount of energy saved from NOT having a black rubber roof on a building is huge.
Also how many jobs will be effected I think people in the industry are afraid to lose their jobs. What can or should be done?
Most healthcare workers are over worked. The people we don’t need right now are those who sit at a computer and enter insurance codes into the database. There are a lot of people like that in our current economy. People who don’t do anything truly productive. We need more people like nurses and doctors, people who actually deliver healthcare.
A lot of the people working in the insurance industry can be retrained and used to help process the claims under a single-payer plan. In fact, Medicare does that now. The claims processing is put out to bid every two years, and private insurance companies now do all the processing. Appeals are handled by the Medicare dept of Social Security but the majority of the scut-work so to speak is already done by private companies. It is interesting to me that these companies manage to turn a profit using the Medicare funds of only 3% overhead, but cannot seem to manage without 30% on the private insurance. Hmmmmm.
Anyway – I have proposed that they just expand the SCHIP program to include every child in the country – and then the kids never age out of the system. Over time, as each year passes, the gap between single payer SCHIP and single payer Medicare gets smaller until it is gone entirely. This would give the insurance companies time to rethink what they do, find other ways to make money or change businesses. Even in Canada, they still have private insurance for cosmetic stuff and certain other things – so private insurance still exists – although a much smaller sector than what we have now.
Thanks for a thoughtful post, Ian.
What to do about the rich and ignorant talking heads in the media and press?
I say courtly o’l Bob Scheiffer interviewing Emanuel today, and courtly ol’ Bob started his neo-Hooverite act “How are you going to pay for all this?” Like Emanuel or not, he is very articulate (though ‘kick the can down the road turned into ‘kick it down the can’ somewhere along the line).
Emanuel explained succinctly and clearly the difference between the need for short run fiscal stimulus policy in a recession and long run policies that encourage deficit reduction.
Courtly ol’ Bob just sneered and told Emanuel that he had dodged the question. So is courtly ol’ Bob ignorant, stupid, brainwashed, or bought?
Obama said that he wants to carry the campaign into the adminstration.
We need to do that to. We need to keep the pressure up.
We will all disagree with some of what Ian wrote, but much of it is standard advice that most non-reactionary economists would give. Especially regarding the financial sector, energy conservation, and housing princes, national savings. Unfortunately that type of economist is considered suspect these days.
We need to keep up the pressure on the media and press as if the campaign is still in full swing -because it is for them and their corporate masters. For them, the midterms have already started.
I’m a pragmatist, too. Yet I fear this is where we are headed. The people who run this country are so far removed from the reality that the rest of us live in that they don’t seem understand them, much less care. In the past, things like the French Revolution were what changed such situations. Eventually, so many people will be unable to make a decent living here that something will have to change radically.
Hopefully, we can be more civilized, but I really wonder at times.
The ultimate irony of all the Clinton-bashing and Obama-fluffing I saw around here. They weren’t all that far apart on anything.
Which answers the question at 84. Let’s say that the guillotine is a metaphor for justice in a court of law. What is the price to be paid by the Mafiosos (Bushco) who have raped us, killed us, poisoned us and pillaged our bounty? If any major players see a day in court, I will be shocked.
What happens after 4 years and we are still in pretty much the same boat? To be realistic, Obama will be lucky to simply slow the destruction (like Clinton did – mostly).
Sorry, I meant housing prices, not princes.
Though the idea that we could all become a prince through rapid and unrealistic appreciation in housing prices was a big part of Bush’s incoherent ownership soceity idea. Either incoherent or another dishonest gimmick to manipulate the population into supporting economic policies that harmed them in the long run and enriched the few. Probably a muddle headed mix of both.
I understand phred but homeowners don’t exist outside of the larger economy. There is a dead zone the size of Texas in the Pacific and at least part of that is due to pesticides and fertilizer runoff from lawns. That’s a cost. The suburban life style also imposes a cost in terms of transportation and energy.
Suburbia is coming to an end. I don’t think that can or should be avoided.
I think that the media needs to enforce term limits. *g* For every Bill Moyers we have who can still entertain new ideas, we have dozens of fossils like Schieffer, Gibson, Broder that stopped having anything useful to say decades ago.
Thanks Hugh, I agree with you — but again, I seem to have muddled my question, because it is not about what is owned (apartment/condo, lean to, yurt, cabin, or house – to me a home is where you live, not necessarily a house), it is about ownership itself. I simply fail to see how at the end of the an elderly person’s life they will be better off having rented rather than owned.
I can imagine for example, if mortgage interest rates are really high, that a person would be better off paying less for housing and investing in some other savings vehicle (lifetime returns of 5-10%), but if mortgage rates are high, then I would think rent would also be high (both due to landlords needing to pay off the mortgages of the rental property and to higher demand for rentals), so I just don’t see where not owning pays off in the end.
Yes, and the mudslinging has not stopped even for 24 hours after the election. I totally agree that we must not sit back on our hands, but must keep up. Everyone needs to pick an issue, and then get actively involved in forging a solution and then working to push the legislation. Obama has some power of the executive order – but anything that requires any money must go through Congress. And if anything, the Rethugs that are left after this election are more right-wing and entrenched as a group than the last session (we picked off all the moderates and easy targets). They are firmly entrenched in the smear-and-scorched-earth way of doing business and they see no reason to stop.
We also need to gear up for 2010 – for the ‘better’ Dems part of it. Steny Hoyer is at the top of my list to get rid of, and there are a raft of others (members of the Blue Dog coalition). Find and recruit good progressive candidates and then help them get elected. We cannot give up now. It is going to be really tough to get any of this stuff done – but we can use the “shock doctrine” and must learn to help our congresscritters understand that we the people have their backs and we WANT them to do what they promised. Ignore the ‘concern trolls’ in the FCP telling us we don’t have a mandate. Bush had a mandate of just one vote – and look what he did with that!
I heard there is a petition to turn some of the WH lawn into an organic garden. Good produce for state dinners and give away the rest to foodbanks for whatever local charity could use it. That would be a nice use of the bully pulpit.
But I am an ex-farmboy who thinks a large proportion of supermarket produce is tasteless fraudulent junk, so I am prejudiced.
Brenda, Lokywoky I liked both your answers but we need to get this information out there more I think the GOP is going to try and use the fear of job losses in the healthcare industry to stop national healthcare.
i think we’re going to have to fight the dems on this one – just take a look at the HCAN ads that have been running here and everywhere. while i’m glad they are giving fdl $, they are also selling a big con. as i’ve said before, it’s goal is to manipulate expectations so that party leaders can craft halfway measures that have corporate support (insurance and pharmaceutical companies) without antagonizing the voting public too much. this is the essence of clinton’s third way that has now become so central to Democratic party governance and something that we’ve got to work to change if we’re going to be able to advance anything like what ian is proposing.
the single payer story is that conyers introduced a bill for single payer in 2003, 2005 and 2007. each time there have been a lot more cosponsors (the last one got 93) and groups like Physicians for a National Health Program (PNHP) and Healthcare-Now (HCN) have been working for years to educate and push for single payer.
but there was a slight problem this year. the democratic presidential candidates proposed health care plans that were a far cry from single payer.
so… a bunch of “progressive” organizations got together and pooled resources ($40 million) to start a “grass roots” campaign they call “Health Care for America NOW!” (HCAN – i’m sure there was no intention to confuse people by choosing a name so similar to the single payer advocates’ organization /s). they came up with a set of “principles” that don’t require single payer and asked us to lobby congress to support it. we did. congress pretended – obama just signed up on oct 6. i think the idea is that they now think that they can do what they wanted to do while pretending that they are responding to the people
the whole thing stinks and a lot of good people got suckered. i hope it isn’t successful in preventing us from moving to single payer.
In your education section, you mention “standards” that “have to be met”.
A very tricky phrase. Behind the establishment of these standards is the question of just what education is all about.
Is it to teach future citizens? Or future workers? Or both? And how is the achievement of these standards evaluated without corrupting the education process by forcing teachers to teach “to the test”?
Tricky.
oops “congress pretended” should read “congress pretended to respond”
The economics profession will surely take another look at financial panic and depression economics. I have not kept up with macroeconomics recently, but the most popular theories of the onset the the Great D seem to have taken a big hit.
Structural explanations involving distribution of income, and misallocation of resources due to badly regulated financial and credit markets took a back seat to the idea that proper monetary policy would be enough to get the markets to do the right thing again. Structural problems, instituional problems were swept asid.
Bernanke is the brains behind one of these “proper aggregate monetary policy is all we need” theories, and it looks to me like it is now a smoking ruin. The others are variations, some minor, some moderate, on that theme.
Will any of the current theories survivie the last two and next two years?
Economists of all kinds will rip into this issue, the question is whether anyhing can be discussed in the national media but the mindless reactionary point of view.
I don’t know of Ian has followed this issue.
Kucinich was the only single payor candidate. He was laughed out of contention supposedly because he is small in stature and funny looking.
Ignore the ‘concern trolls’ in the FCP telling us we don’t have a mandate.
Mandates, at least as discussed in the popular press, are nonsense. Each voter votes for a candidate based on his own reasons (or lack of same). Each President has power based on the office and his alliances with Congresspeople, and other powerful people and groups. Bush proved that beyond doubt. He got away with murder, and few tried to stop him.
You are absolutely right, TCU, and that’s why we should all join a group like Elizabeth Edwards’ Healthcare Now group. By joining forces, we all have a bigger voice than if we try to do individual actions.
The Rethugs always use the ‘job-loss’ thing but they are the most guilty of causing job losses through outsourcing (which is where 60-70 percent of health INSURANCE jobs actually are – overseas). People also need to stop using the word healthcare to describe health insurance. They are entirely different things.
Single payer health insurance is what Medicare is – and 95% of people like that – we just need to emphasize that single-payer is that – and it is no different. You still get to choose your own doctor, hospital, lab, clinic, etc. Ask your parents or grandparents if they don’t like Medicare!
We must not let the Rethugs define this as ’socialized medicine’ although that is not all bad either – the VA is socialized medicine. If it’s good enough for our veterans…
Edwards’ plan at least mentioned that it could lead to single-payer somewhere down the road. I thought it was a plausible assertion, given that the plan included a federal insurance plan.
But, like Kucinich, he was eliminated early. And he wasn’t even short or funny-looking.
Ian,
Wrap your head around this for a while.
I’ve not seen a discussion yet about the planet earths need for oil to function in anything I’ve read.
There is no oil bunny hiding oil for us to find.
Think of your car for the lack of a better analogy and the oil in the crankcase makes up a less than 1 % of the weight of the car. Now imagine the plug falls out of your pan. The car would continue for a short distance relatively then the engine freezes up. If we can extract every last drop, do you believe the mechanical machine that is our planet earth,will still function. I don’t. For what, to power hummers and warm mc mansions?
I hate to sound like a commie, but I think that the only really reliable way individuals as a whole society can save a nest egg for retirement successfully is large scale social programs.
The beauty of social security is that it provides you with the widest possible portfolio -the productive capacity of the whole economy. So, need social insurance. Any add-on for additional savings would have to be large government sponsored investment pools -as provided by Canadian or Swedish governments in their partial privatization schemes. These also provide only competition for private firms to provide a good product.
Investment in a single plot of real estate, or the stock market, are very much too narrow, and do not spread risk enough for a reliable return over decades when you only have one shot at it (which is essentially the case for any individual who wants to spred risk over his or her entire lifespan).
IMHO that is another reason why getting rich through owning a house, or investing in the stock market is an illusion.
Ha! No, he was just a rich guy trying to advocate for poor people. Can’t have that – no way a rich guy could do that (except the Kennedys apparently). $400 haircuts look cheap compared to the Palin wardrobe thingy!
i don’t think obama needs to be an impediment to single payer – but only if we don’t let ourselves be conned by the HCAN type thing.
Here we go again. Commie is not the same thing as socialist. Again – words have different meanings and we confuse issues when we use them interchangeably when they aren’t.
Socialism is what the Social Security system is – it is designed to provide for the social welfare of the citizens of the country. We all (or most of us) pay into it and it gets distributed back at the appropriate time. The system was voted in by a majority of our representatives. Most of the countries of Western Europe are ’socialist’ countries – even though we don’t like to admit that. The Rethugs commonly call them ‘nanny states’. However, the citizens of those countries are substantially much happier than we are as a nation – even though they pay very high taxes, but they get a lot back in ’socialized’ services.
Communism is mandated ownership of everything by the government (the collective or commune if you will). All decisions about management, expections, production, profits and everything else is decided by the government and the people have no say at all. In pure theory, all the rewards of the system would be distributed equitably among everyone – but as we know, no political theory is actually pure in its actual operation.
Let me flesh out just one single aspect to further explain.
Simple the earths core is molten and hot.
Oil conducts near zero heat making it one of the perfect insulators known to man.
When we drill not only do we remove that perfect insulator but to extract the very last drop we inject boiling WATER (natures perfect heat conductor) into the holes. Can your car run on a oil water mixture in the crankcase?
This reverts to your argument about being dead, skimming profits before the s*** hits the fan.
The damage will be nonrepairable. Global warming may very well be from the bottom up.
Sorry, I forgot the snark tag. I was making a joke with the commie word.
Ian, I enjoyed your post a great deal and you echo a lot ideas that I have wondered about. I have a couple of questions for you, though, if you can take the time to answer them…
1)What would happen if, instead of the progressive income tax, everyone just got taxed at a flat 10% tax rate? It seems to me that that would eliminate a huge element of the financial industry that is built around avoiding taxation. (In other words, it does not really produce anything…) The flat personal tax rate would also eliminate the screams about unfair burdens on the wealthy. There is also an argument that a flat tax for everyone would raise more money than the current structures would.
2)I have seen numerous mentions over the last couple of years about the belief that corporations are beings just as ordinary citizens are (I think that I am saying this correctly). Business schools teach that a corporation’s reason for being is to make money for shareholders. However, it seems that in recent years payment of shareholder dividends has prevailed over everything else. In other words, corporations go unpunished for poor decisions so that no one suffers. There is so much volatility in economic markets based around earnings reports! How could that be reduced?
I am probably saying all this badly and hope you understand where I am going. Again, though, I loved your post!
is this HCN (single payer) or HCAN (NOT single payer)?
see my 104 and be sure you know which one it is – a lot of good people are getting suckered by HCAN.
some links for more info from the good guys: pnhp, hcn
Wow, I hadn’t thought of that. One more reason we need to switch to solar/wind, etc. Not only are we pumping out all the oil from where it is, we are pumping the water out from where it belongs and putting it somewhere else – draining a support structure that holds up huge areas of land and leaving air (?) instead? And now the water we put back into the different place is contaminated so we can’t drink it any more too.
Nothing like making a complete mess of everything while we’re at it!
Just to be clear, in my view, social insurance is neither commie nor socialist. Merely efficient and reliable and fits nicely with capitalism (except the predatoary rapacious kind fo capitalism, which we have seen much of the time over the last 25 years)
Read up on what occurred during the French Revolution and it’s consequent 80 years in France. It wasn’t just the “royals” that were nodding to the choir of the guillotines. It went through phase II and phase III…before ending up with Napoleon and his dreams of a French empire.
Currently reading the Sarah Caudwell mystery series, fantastic and set in 70s Britain under the 90% tax rate. Fascinating how everything ends up turning around avoiding tax. Including murder. Written by a tax lawyer of the times, highly recommended.
Brenda – what could happen is your losing your supported housing.
Remember, the most dangerous thing to believe is that things can’t get any worse.
No prob – I just get aggravated when anyone uses words interchangeably when they really can’t be. We all (me included) need to be careful about it.
Health Insurance – Health Care
Communist – Socialist
Religious – Spiritual
Morals – Values
I think you get the idea. I understand you were joking – I am just trying to help the level of discourse by doing my infinitesimal part to remind us all that words really do matter. We all have frames in our heads that are set there in most cases when we are really young. These words evoke those frames and it is bad when the words evoke the wrong frames.
I wasn’t trying to criticize you in particular – you just allowed me an opening *g*
Here’s a gedankenexperiment on very high marginal tax rates.
You’re part of a musical group that provides you $200,000 per concert. Your fans want you to play a lot of shows. You want time to write new material, time off with friends and family. Each concert you play puts substantially less money in your pocket compared with the first two. You net after taxes $120,000 for each of the first two shows (40% rate). The next show you earn $80,000, then $40,000 for the following two shows. At this point you’ll make $20,000 per show until your reach the 25th show at which point you’re earning $10,000 per show.
What’s your incentive to play additional shows? Or to release new music? Beyond keeping fans happy and the pleasure of performance?
A musician in this situation is not going to tour 20 cities. She’ll take the advice of her manager and hang around studio. Maybe play a few benefit shows.
Progressive taxes are one thing. 80% isn’t progressive it’s punitive. It disincents some productive activity. You can construct a similar situation with athletes, medical specialists… high income isn’t just from speculative activity. It is worth giving a heart surgeon incentives to save your partners life even if he’s already earned $500,000 on his first 50 patients. Humans aren’t angels and there are SOBs that would rather golf than earn $2000 rather than $4000 for saving another life.
I would recommend a course in geology. Oil has nothing to do with the functioning of the earth in the manner you suggest. However, you are right that oil has absolutely everything to do with global warming, but only as a carbon reservoir. Transferring copious amounts carbon stored well below the earth’s surface into the atmosphere predominantly in the form of CO and CO2 is what is causing global warming.
Sorry selise – I was confused – thanks for pointing that out.
You make a good point. The false alternatives of traditional, conservative dogmatic religion vs. materialistic atheism is a particular pest in the media. Lumping anything but the magial-thinking unregulated dog-eat dog capitalism into a vague socialism/communism complex is another.
You’ve convinced me to avoid that type of joke for awhile.
Proof?
I’m just curious how our society functioned at all according to your reasoning when we HAD tax rates that high? Because we did, and did well. The income disparities were not anywhere as large as they are now – and workers wages kept up with inflation and productivity – and the rich were still rich. Just not AS rich.
85 million barrels a day doesn’t come out of thin air but rather from somewhere. We have no intention of easing up or slowing down till we extract the last drop. You better hope you’re right and I’m dead wrong and what do you suggest we would do if you’re wrong?
Do you believe in the plate movement theory? And what greases that movement- water?
The entire set of scientific literature on climate change. Or you can cut to the chase and just read the work of the Intergovernmental Panel on Climate Change (IPCC). Those were the folks that won the Nobel Prize with Al Gore.
i think it’s meant to be confusing. :(
Is there a name for this theory so I could look it up? I’d like to know more about it if there is.
We think we know everything, but the re-introduction of wolves back into the Yellowstone ecosystem proved we know next to nothing about the role of top predators in that environment. The obvious ones of them eating elk and bison were all anyone was concerned with. But there were huge impacts on trout, sage grouse (not a wolfe prey species) coyotes, and certain birds – including big vultures and eagles. Scientists looking at what happened were completely amazed.
I’m always interested in looking at other explanations for stuff – although I do believe the CO2 emissions are a huge problem. Too.
Lovely. As if we aren’t already so confused we can’t think straight. *g*
Oddly enough, most of us are not rock musicians so the whole making money off concerts thing doesn’t work. Executives are not going to quit after they make their first $200,000 and wait until the following year to start working again.
The movement of the continental plates has nothing to do with oil. Their motion is not greased. A better way to think of the earth’s plates would be a cold solid crust floating on a hot fluid core. One analogy might be ice floating on water. Imagine polar ice pack where you can see fractures throughout the ice where separate chunks of ice crash into each other as the water underneath them moves.
I don’t have an answer for you. I do know when I think through those scenarios I easily can see high paid individuals choosing to do things that don’t result in compensation.
Artists and athletes seem overpaid to me. CEOs seem to be paid far over the value they add. I’m not so sure about physician’s compensation, the value of their work is incalculable to those whose life is saved.
They may, but that’s easily shot down.
With 47 million people entering the system, there will be plenty of new jobs to replace the old ones.
One thing we can do is stop giving subsidies to oil companies which already make enough profit to take care of themselves. This socialism for the rich is crazy.
Another is to continue investigating new energy sources and ways to use them efficiently and sustainably.
http://www.guardian.co.uk/envi…..ry-science
Oops, I didn’t properly answer your question, both the mantle (the earth’s fluid upon which the crustal plates float) and the crust itself are essentially rock, with the outer bit solid and the inner layer liquid.
Tectonic plates are not lubricated by oil. If they were you would expect oil fields to occur at plate boundaries. They don’t.
I was kinda thinking I wouldn’t mind having $10,000 for just a coupla hours of ‘work’. That’s more than some people get for a whole year of back-breaking menial labor.
it’s meant to make one think through what punitive taxes could do. I’m not a rock star either. I doubt I’ll ever earn more than $200,000 in a year from work.
The idea that a surgeon would take home half as much for surgery number 51 compared with surgery number 50 is pretty frightening to me.
Ummm. The Beatles. The Rolling Stones. Led Zeppelin. The Who. David Bowie. Cream. Elton John. The list goes on.
All of these bands recorded and performed in England during the 90% tax regime. Some did become tax exiles for a while, but the argument stands. People compare themselves to their peers and that is the playing field they compete on. Artists produce art because they need to, not for the riches. When the riches become so great that producers come in to take all the money, art suffers. Like in our current era.
Elvis Presley, Frank Sinatra, Ella Fitzgerald, Jerry Lee Lewis, The Beach Boys… all American recording artists back when the top tax rate was a “why bother” seventy percent.
One advantage of punitive taxes is Rush Limbaugh would not be on the air for more than a week or so!
I agree with you about physicians. But a lot of people work for a lot less than they could earn because of lots of different reasons.
I get my care through the VA. A couple of my doctors were very very successful in private practice. They both gave up huge incomes to work within the VA system on a salary. One wanted to change lifestyles from big-city stress, and the other just got tired of fighting with insurance companies over every little thing and the hassles of ER scheduling required if he wanted privileges at the big-city hospital he sent his patients to.
Both of them are now in the ‘outback’ of Montana – working for peanuts – helping our veterans. And they both say they are really happy – with the work, the way they live now, and with they salaries they get paid. They are definitely NOT in the high tax bracket now – although they most certainly used to be.
I don’t think people look at their incomes that way – they look at the total at the end of the year – not how much they get to keep on any given day.
If that was the case – all workers in this country would have a general strike since the calculation says that we work from January to nearly the end of March and don’t get to ‘keep’ one red cent – it is all taxes.
Of course, it’s just a figure of speech – but I find the analogy to be similar to yours.
The doctor doesn’t look at each individual patient and think to himself/herself “gee – I’m only going to get x dollars for this patient so I’m not going to do my best on this procedure, unlike last week when I got twice as much”.
While I agree with the sentiment I think it’s a little dangerous to begin applying some kind of restraint on how much a person can make IF IF they do it legitimately. Would you resent people like Wozniak and Jobs making a lot of money for having created (what essentially was) a new industry for personal computers? We’ve gotta differentiate between paper shuffling and real stuff.
Nah. That One will get it done by 5pm on inauguration day!
It’s just my common sense. I view the earth as an incredibly complex machine but a machine none the less.
This machine must be in perfect balance or we spin out of control not in a week or a year or decade but eventually. Yes the oil we burn is an obvious cause of global warming but I haven’t seen any study to conclusively determine that burning fossil fuels is the only cause of global warming. 85 million barrels a day times 45 gallon per barrel adds up to quite a large volume of space, again as a near absolute perfect insulator. On a scale of 300 (according to the Wolston study) oil has a heat conductivity rating of around 50 where boiling salt water has a heat conductivity rating of about a near perfect score of 295.
Most of the fighting was in the election campaign. Now we’ve got an amenable Congress and it will mostly go through. That he didn’t ask for the whole enchilada indicates the other side won that constraint from him. But, we got some of what we want in terms of public support. Now the pols just have to execute the plan into Law.
No possibility of high pressure hot oil greasing the skids between those two layers?
This is because you segment the work into discrete units, each individually and separately paid for. This simply isn’t the way most people are paid. It doesn’t have to be the way surgeon’s are paid either. Some practices pay their physicians a base yearly pay. Does this make the 51st surgery easier to do?
I think Obama bats from the right side of the plate more comfortably. He is a practical guy and wants to keep some of his Republican base. Hence FISA…security, Bailout…investors includes retirees pasion funds local and federal government retirement funds, Isreal. So he paid for losing Arab support but has cred with the Muslims…1.5 billion. He seems weak on the constitution but will clean up thee DOJ.
He will try to address the economy…so far? To early to tell.
I think what gets lost in this discussion is the fact that at 70+ percent, there were a lot more deductions available then that were taken away once the rates were lowered.
One favorite, of particular note given some of the artists you mentioned, was the infamous ‘3 martini lunch’.
I’ve heard variations on this before. What do Wozniak and Jobs owe the society which provided them with the education, work force, political stability, roads, electricity, and markets which made their industry and fortunes possible?
Forrest Gump says, “I like big shrimp.”
Somehow I have a feeling it isn’t cocktail weenies they’re worried about. It’s probably the tax rate for investment income — capital gains tax!
Though I’ve seen Obama’s plan for individual income taxes I don’t recall hearing his ideas on corporate or capital gains tax rates.
I think the Rich can afford the sunsetting of Bush tax cuts and aside from the middle-class tax cuts and small business tax cuts there’s not likely to be any other big changes during this crisis. However, after that I think there will be a pretty good discussion on new tax policy.
Yes without a doubt whatever size housing should be structured lease or rent to own. That is you down payment after a few years of payments. Then you have an interest in upgrading and maintaining. Smarter, and there is equity to move up the housing market. Then everyone is a potenial buyer making the real estate market more liquid.
Sounds like a relatively cheap low tech solution. Got a web page that talks about it?
Well, burning fossil fuels is not the ‘only’ cause of global warming – but it is the one we control and have the most impact on. We decreased the earth’s shield from the sun’s heat by our use of CFC’s in the 70’s and 80’s. We’ve stopped using them now, but the damage will take another hundred years to repair.
Now that the globe has started to warm – it begins a whole bunch of ‘negative feedback loops’ so to speak. Melting the tundra releases huge quantities of CO2 – not burned, just stored in the rotting vegetation that is now not frozen. Methane is actually a worse greenhouse gas than CO2. But this one we really can’t control.
When the ice melts off the ocean (at the North Pole), it leaves dark, open water. That absorbs more heat – further melting more ice, leaving more open, dark water. And so on.
Some people are complaining about methane from cattle production. It’s true – and is mostly because of our industrial feed-lots giving cows stuff to eat that their digestive systems are not set up to utilize efficiently. So a cow in a feedlot produces 15-20 times the amount of methane as one eating grass in a field.
CO2 is the largest component of greenhouse gasses, and the one we can and should be able to do something about – and quickly. The others – while they contribute, are much harder to deal with, and have a smaller impact. At least at the present time anyway.
They want Dems to eat crow for saying ‘pay-go’ could be held to even in face of the Repub debt and deficits and the economic crisis. But, those bastards created this mess, so Dems should feel absolutely no responsibility for it. We just get on with solving the problems, as Emanuel described, and aim to get back on track as sensibly and responsibly as we can — and that’s a long-term thing.
I’m thinking back a few years – can’t remember exactly when, but when the changes to the capital gains tax and the estate tax were first proposed, a group of about 900 really rich people (included Bill Gates, his father, and Warren Buffet) took a petition to Congress to tell them NOT to do this. They all said they could well afford to pay these taxes, and the country could not afford for them not to. It passed anyway.
I think the people who yell the loudest in these arguments about taxing the rich aren’t ‘really’ rich, they are just sort-of rich, and they are really afraid of going back to the middle class from whence they came. They view any tax at all as an attempt to strip them of their ‘rightful riches’.
However, I also agree wholeheartedly with Hugh @ 158. These people are rich because of the very advantages of living and working in this country. They DO have an obligation to help pay for the things that allowed them to get rich.
What I DO resent is that a guy like Warren Buffet gets to pay a lower percentage of taxes on his money that he ‘earns’ shuffling paper and moving money around than my dad the truck driver or some guy out digging ditches. Even Warren Buffet sees how inherently unfair that is.
Clinton could have tried to aggressively solve more problems, but at that time the political discussion didn’t even consider that possible. At that time to even vote for sound taxes and budgeting got Republicans snickering and laughing…and politically they won in ‘94. But, that argument has moved on and though they won politically they showed they didn’t have any answers (and in fact made things much worse), so now we’re back to the smart sensible people trying to fix things. It took the American people a while to get it, but now we’re back on track..or at least will be in January.
Political debate and reality often take a while to work out.
Yes, and remember that Clinton was attacked from the day he took office until…well it has never really stopped.
Obama is being attacked already – and he has not even taken office yet. He will be attacked and even more viciously than Clinton ever was. Here we have a President-elect who is going to take office having one of the worst messes on his plate than any previous president in our 221-year history. And rather than help – since they created most of the messes – the Rethugs are already geared up to make his job twice as hard by trying to obstruct everything he wants to do. Then add the same vile smears and lies that were used against him in the campaign – yes they are continuing – to try and hide what the Rethugs are doing and convince the sheeple that they need to tell Congress NOT to act because everyone knows each bill Obama wants is ‘just the first step down the road to an Islamunofascistcommieterrorist society.
Still, it’s important to precisely nail down the ideas and principles behind your policy. If you begin with punishing the Rich, then you can get to a 90% tax rate and create great disharmony in society. If you begin with minimum taxation to keep everything running properly, then you will have more rich, but so long as they’re not hurting everybody else…
With regard to a high tax rate the debate about wealth redistribution is very important. I don’t tend to like it except that our current system of giving EVERY SINGLE dollar of new prosperity to the already rich is crazy and leading us to disaster. To remedy that financial problem is not a moral issue, though solutions might include the technically socialistic wealth redistribution. The EITC, progressive taxation, a safety net and many other things are in existence and aren’t really solving the problem. We need a better set of policies to address the issue. I think improved unionization, a safety net, wealth redistribution during times like these are good, but must be watched to see if they’re working. Just chanting ‘wealth redistribution’ doesn’t get it.
There is also the Laffer curve idea that a relatively low tax rate allows more business profit and growth and wealth creation. I like that except it doesn’t trickle down.
So, I favor a flat income tax and some wealth redistribution during times like these. I also think that if a corporation is NOT a person, then it becomes very difficult to justify taxing it.
In the shorter-run if we’re shifting from our current system then raising the EITC makes sense and adjusting toward one rate for all incomes (over some time) AND making sure corporate tax rates are no higher (preferably lower) than individual rates helps ensure people use their wealth in business instead of sitting on it.
“owe”? Why should they owe anything? Don’t we create a society so all of us can benefit? I don’t recall anything in the Constitution about ‘paying back’ or ‘owing’. Besides, don’t we all benefit from our ‘investments’ in education and such when we get to use those new computers and ipods and such?
I really don’t get ‘paying back’.
No cows fart for me because I haven’t eaten any beef or pork for the last 25 years. It’s not that tough.
The oil addicted society sounds like a drug addict rationalizing the need for money for the next fix the mortgage be damned. In less than twenty years meat consumption will wither. Whatever I posted tonight is based on a belief we can have a Manhattan project to harness the abundant solar, wind and tidal and cut our oil consumption by 90/95% .
Yep. But the political discussion has moved on and those people attacking Obama can’t dismiss that Clinton did well and they failed utterly. Obama has a window of opportunity to show his stuff.
Well, they definitely ARE doing just that. And they are all crying that it was the liberals who caused the financial meltdown because Barney Frank had an affair with some guy at Freddie Mac and he’s been in charge of the Banking Committee for a whole year and a half. And it was the liberals who forced those poor banks to make all those sub-prime loans and by the way they forced the government to give money to those radicals at ACORN. And those liberals are just shrieking about global warming so they can make some money off of it – it’s not real dontcha know. And those tax and spend liberals are always at fault for every single thing that goes wrong in this country – whether they are in power or not.
I don’t see that Obama has any kind of window at all. He’s starting to work on the worst mess in history and will be hammered on all sides by everyone no matter what he does. From the left and the right. From the right because of all the above, and from the left because he isn’t living up to every single thing we each think he should do.
no one does. and i don’t hammer on everyone – jeeze i’d have to be hammering on myself every day – the big reason imo to hammer on obama from the left is to provide a counter to hammering he’s getting from the right.
That will be a blockbuster of an essay, I dare-say. When the people style themselves sovereign as they do in a democracy, they take upon themselves the responsibility to obtain and maintain the education required of sovereigns. The last time this has been met was in response to Sputnik and the ensuing call for excellence in education to meet the challenge. What passes for education since hardly holds a candle to that effort. Rarely will be heard a public discourse concerning those subjects required to be known by sovereigns, law, polity, diplomacy, economics, policy, history – just for starters. In all, the American people fail to even carry on an intelligent conversation let alone arrive at a considered opinion on anything more complex than sport trivia. Anywhere else, they have failed carpe diem and the sun sets on such ambitions most rapidly. I hope your efforts are not more pearls to pigs.
back to reading responses…..
None whatsoever.