Opinion

Felix Salmon

Hedgies vs Obama

By Felix Salmon
December 9, 2011

Jim Chanos claims not to understand why hedgies are so critical of Barack Obama: after all, they’ve done pretty well for themselves over the past three years. But maybe this chart, from Thomas Piketty and Emmanuel Saez, might help him out:

SaezFig1(1).gif

What we see here is the very strong correlation between tax cuts for the rich (on the x-axis) and increased wealth for the rich (on the y-axis). This correlation comes as no surprise, of course. But Obama doesn’t want tax cuts for the rich: he wants to roll their taxes back to Clinton-era levels. Instead, he wants lower taxes for the middle classes, which won’t help hedge fund managers at all.

As Piketty and Saez note, lower top marginal tax rates don’t translate into higher growth — which means that the extra wealth going to the 1% really is a zero-sum game, and being taken out of the pockets of the 99%.

SaezFig2(1).gif

But it’s hard for a gazillionaire to come out and say that he wants more of everybody else’s money. So instead we get this kind of thing, wherein Leon Cooperman pulls out every rhetorical trick in the book in an open letter to Barack Obama:

What I can justifiably hold you accountable for is your and your minions’ role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterized as “class warfare”. Whether this reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them. It is a gulf that is at once counterproductive and freighted with dangerous historical precedents. And it is an approach to governing that owes more to desperate demagoguery than your Administration should feel comfortable with.

The first thing to note, here, as Piketty and Saez show, is that the 1% are not actually the people “best positioned to help” the 99%. When the 1% do well, the 1% do well. But that rising tide is nowhere to be seen.

But there’s another question raised by Cooperman’s letter, and Andrew Ross Sorkin phoned up Cooperman to ask it. What, exactly, is he referring to when he talks about Obama’s “divisive, polarizing tone”? Go on, take a guess. Here’s the answer:

“What pushed me over the fence was the president’s dialogue over the debt ceiling,” Mr. Cooperman said, explaining that just when it seemed like a compromise was near, President Obama went on national television and pressed harder on “millionaires and billionaires,” a phrase that has stuck in the craw of many of the elite. For example, Mr. Cooperman zeroed in on what he described as the president’s belittling remarks about taxing the wealthy: “If you are a wealthy C.E.O. or hedge fund manager in America right now, your taxes are lower than they have ever been. They are lower than they have been since the 1950s. And they can afford it,” the president said back in June. “You can still ride on your corporate jet. You’re just going to have to pay a little more.”

This just doesn’t make sense. Cooperman supported Obama in the 2008 election, when he trotted out the line about “tax cuts for millionaires and billionaires” many times. And the corporate-jet line was a specific reference to a specific tax break which Obama wanted to abolish as part of the deal.

I think the real reason that Cooperman has started throwing his toys out of the pram right now is Occupy Wall Street — a movement which is more opposed to Obama than aligned with him. But saner heads, like venture capitalist Nick Hanauer, understand that higher taxes on millionaires and billionaires are a necessary part of any successful fiscal policy going forwards:

Without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

And that’s what has been happening in the U.S. for the last 30 years.

Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.

Hanauer’s absolutely right: the idea that millionaires (that is, people with seven-figure incomes) are job creators simply isn’t borne out by any empirical evidence whatsoever. And I particularly like NPR’s idea of asking the GOP to point to a single business owner who would hire fewer people if the top marginal tax rate were to go up. Astoundingly, in a country of 300 million people, they couldn’t find a single one.

So while people like Cooperman are interesting as a political phenomenon, their rhetoric doesn’t stand up to scrutiny. I do, however, continue to wonder at the ability of the Republican Party to sell higher incomes for the 1% to the public as a whole. Is there any other country in the world where a major political party panders so cravenly to such a tiny base — and gets broad political support for doing so?

Comments
36 comments so far | RSS Comments RSS

Agree with your overall point, but question some of the presentation.

The top chart shows change. But of course, U.S. hedgies are already way above their compatriots in other countries.

The other context that’s missing is that Cooperman and the federal government were at war over his tax bill. That’s not just tone, that’s dollars.

Posted by Muckety | Report as abusive
 

Felix, these charts are barely comprehensible as presented. What is the time frame on each?

The arguments in the middle of your column are offensive and conveniently ignore notable facts -

“As Piketty and Saez note, lower top marginal tax rates don’t translate into higher growth — which means that the extra wealth going to the 1% really is a zero-sum game, and being taken out of the pockets of the 99% …

But it’s hard for a gazillionaire to come out and say that he wants more of everybody else’s money.”

Take any reasonable survey, and the top 1% (or 5%, or 10%, etc.) in total pay higher marginal and average tax rates than the population as a whole (i.e., the percent of total taxes paid by high earners exceeds their percent of income). You feel that this amount is still too low. In no way, however, are the wealthy seeking to “take more of everybody else’s money.” In fact, you want to take more of their money.

Please don’t sidestep the issue with talk of too big to fail, or the Fed, or other charges of crony capitalism. To the extent that these are issues, surely they should be addressed directly rather than by the crude instrument of higher tax rates on a group of individuals who may or may not be the beneficiaries of these policies.

Right now someone in the highest tax bracket living in New York or California pays a combined marginal rate of approximately 50% on ordinary income. The headline rate is admittedly lower on capital gains and dividends, though there also double-taxation issues to consider on these classes of income. Felix, I’ll ask you – at what point are we taking enough of a “gazillionaire’s” money? At what point is talk of fairness turning into pure jealousy of people who have done well in life? And, even if you think the wealthy should pay more in taxes, why can’t people like you or the President at some point thank high taxpayers for paying so much to support shared government services instead of adopting a tone of seeking to punish people?

Posted by realist50 | Report as abusive
 

Can we assume these researchers used the headline rate of tax and not the actual tax rate paid?

Posted by Danny_Black | Report as abusive
 

“High earners”? That’s a non sequitor.
This issue isn’t about neurosurgeons and others who earn high wages for their highly talented work. It’s about the high-capital-gainsers, who merely manipulate a rigged financial insiders’ game to obtain the greatest work-free return on the capital they begin the game with. Despite all the indignant puffing and pretension, that’s not actually earned money.

Posted by melior | Report as abusive
 

I don’t think there is another nation that allows a 24/7 anti government propaganda machine. The abandonment of The Fairness Doctrine and allowing media consolidation for efficiency, all going back to Reagan and Carter, has created a uniquely money friendly propaganda environment here in the US. What agent other than the government can stand up to a non-stop corporate propaganda campaign? Having been convinced by the propaganda campaign that the government should not stand up against a non-stop anti-government propaganda campaign its no wonder after thirty years the public is confused:

http://publicmind.fdu.edu/2011/knowless/

Posted by jnewman | Report as abusive
 

Michael Kinsley, who is nobody’s idea of a conservative, makes some interesting points on this topic, particularly taxes as revenue generation vs. taxes as punishment –

http://www.bloomberg.com/news/2011-12-09  /when-obama-s-music-stops-class-warfare -starts-michael-kinsley.html

Posted by realist50 | Report as abusive
 

On that NPR hunt for the Oppressed Job Creator, Bill Gates Sr. did that several years back, offering $10,000 to anyone who could produce a family farmer who had lost the farm due to the inheritance tax. Nobody so far, at least 5 years later. There should be more of this BS calling when it comes to lies from the Oppressed Job Creators.

Posted by Dollared | Report as abusive
 

Taxes are going up and I’m ok with that.
The very rich will stay very rich and I’m ok with that too.

I’m not ok with the debate on taxes becomming so polarized that even normally even-handed open-minded people like Felix are pulled to one extreem or the other.

Felix I read the embeded “specific tax break” link 5 times and unless I’m blind there isn’t one there. I would like you to update your readers that there is infact no “specific tax break” for corporate jet travel, and there never has been. All business travel runs through the income statement as an expence… taxi, coach, business class, or G-6… it’s an expence. Expences lower income. Lower income lowers taxes.

There are also no “specific tax breaks” I’ve ever come across for big oil. Depreciation effects nearly all industries in exactly the same way. It’s just a bigger deal for big oil because big oil is the biggest business there is.

I’ll close by clarifying who gets “specific tax breaks.” Me. I get a specific tax break for each of my kids. I get a specific tax break for owning my home. Specific tax breaks are how the middle class in the richest nation on earth makes a minimal contribution to their federal goverment… and don’t even start with payroll taxes… those flow to entitlement bills they don’t come close to covering over the average lifespan.

The difference between me and most left leaning voters is that I know I’m getting one hell of a deal and I’m greatful for it.

Posted by y2kurtus | Report as abusive
 

@y2kurtus: Impressive, my friend, impressive. Keep it coming.

Posted by Abulili | Report as abusive
 

“Depreciation effects nearly all industries in exactly the same way. It’s just a bigger deal for big oil because big oil is the biggest business there is.”

…and because it is a highly capital-intensive commodity business.

Well put, y2kurtus. Would love to have a system with fewer “specific tax breaks”. Either that, or grant me a specific tax break for my personal pet peeve, private primary-school tuition.

Posted by TFF | Report as abusive
 

Call it Political Polarization of Perspective. The Repubs have been rollercoaster successful over the past decade at equating unrelated soundbite platforms: democracy = torture, christianity = patriotism, capitalism = tax cut ..As long as there are enough undereducated, overgunpowdered fatalists to follow their graveyard spiral to global mediocrity, America will continue it’s slide to has been. We are better that that. Incidentally, the list of defeatist shitheads includes Bernanke, Geithner, Dimon and especially O’bama.

Posted by Woltmann | Report as abusive
 

y2k and TFF, usually I agree with you guys, but I’m going to diverge here from your stance on what constitutes a tax break.

Oil companies that invest in finding and extracting oil get an oil depletion allowance, which effectively allows them to depreciate the value of their oil field that is created by their initial investment to find and extract the oil, as it will be eventually gone.

But if I invest $1M in developing a new product, I don’t get to depreciate the value of that product over the 2 or 3 years of its lifetime – when it’s obsolete, the value of the product line is gone, and I get no tax break. Sure, I get to deduct the development expenses, but so does the oil industry. However, they get a deduction beyond their expenses, which the rest of industry that creates products do not get.

As for private jet travel, the tax break is not for the companies that pay for it, but for the executives who received the perk. They are getting a valuable benefit and paying no tax on it. If the difference between private travel and commercial fare was treated as personal income, then there would be no tax break for the executive, but it’s not.

There are lots of tax breaks for everyone, but I don’t think it’s right to minimize the breaks that some industries and individuals, who don’t need the breaks, receive.

Posted by KenG_CA | Report as abusive
 

I’m all for lowering taxes for job creators… AFTER they create the jobs. Receiving a huge income is no proof of job creation, and cutting taxes for someone who did have a large income is no guarantee they will invest that income in job creation.

I say it every chance I get: raise the tax rate on income, and provide tax credits for investment (past tense) that has created jobs. If you invest your profits, you will pay a lower effective tax rate. If you hoard or consume those profits, you will pay a higher tax rate, and the government will see to it that that share of the profits are re-used, recycled, and re-purposed. You get to choose how to invest, but if you choose not, the government does it for you.

Posted by KenG_CA | Report as abusive
 

KenG, not following your example of oil depletion allowance. This allowance seems to basically tell them how to depreciate their costs of developing the well, it’s not in addition to deducting the costs. Unless you’re referring to percentage depletion, which now seems to be restricted to small owners of oil wells?

Posted by niveditas | Report as abusive
 

“Instead, he wants lower taxes for the middle classes, which won’t help hedge fund managers at all.”

This isn’t true -if Obama has his way, the hedge fund managers will get and / or keep their Bush era tax cut for all earned income under $250,000. The fact that they may consider that “not helping at all” only further illustrates the gap between hedgies and the rest of the planet.

Posted by wah718 | Report as abusive
 

y2kurtus said:

“The difference between me and most left leaning voters is that I know I’m getting one hell of a deal and I’m greatful for it.”

Being the article is about the poor and middle class being squeezed and the very rich getting richer and not needing the tax breaks, who gives a whit? You are danged right you should be grateful!

Being you are a Banker and obviously right leaning, I expect nothing less of you… and yes you are getting a hell of a deal being you are not poor and do not NEED those breaks.

So you are happily putting money away while taking those breaks, but feel the poor should get poorer while the rich get richer, especially as you are “getting there” yourself? AH yes the greed mentality and people here cheer your statement!

If the middle class and the poor are squeezed, there is nothing left to give. Poverty breeds contempt, depression, suicide … and you lose a motivated workforce as the number of poor increases with unemployment. If the rich pay their fair share, they are still filthy rich, so your personal analogy on tax breaks is meaningless.

KenG_CA said:

“… provide tax credits for investment (past tense) that has created jobs.”

and

“There are lots of tax breaks for everyone, but I don’t think it’s right to minimize the breaks that some industries and individuals, who don’t need the breaks, receive.”

Exactly right, Ken.

Posted by youniquelikeme | Report as abusive
 

niveditas, are you saying that exploring and drilling are not operating expenses, and can’t be amortized with traditional accounting rules?

Posted by KenG_CA | Report as abusive
 

There is – or used to be – a huge tax break on investment in corporate jets, that effectively eliminated the depreciated basis (capital gains exposure) on trade-in value. It was stuck into the tax code to help Gulfstream etc. sell airplanes.

Posted by midasw | Report as abusive
 

Apologies, Ken_G, I didn’t mean to be offering an opinion on that particular claim. (I don’t know much about corporate tax law.) The oil industry is definitely capital intensive, though.

I do think it would be nice to have a tax system that people could actually understand without a 12-page form.

Posted by TFF | Report as abusive
 

TFF, you weren’t really offering an opinion, but you seemed to endorse Y2K’s. The system is horribly flawed, but I don’t accept his dismissal of the flaws as basically being evenly distributed.

You are right that the oil industry is capital intensive; one more reason why we shouldn’t subsidize it via preferential tax treatment (if they weren’t consuming so much capital, it would be available for other things).

Posted by KenG_CA | Report as abusive
 

KenG, I’m still not convinced we face a shortage of investment capital. Rather, we face a shortage of INVESTED capital.

One positive aspect of the oil industry is that we have undeveloped resources that will require large amounts of variously skilled labor to develop. There are certainly other ways of investing in the future (e.g. infrastructure, education, and medical advances), but they aren’t directly in competition with each other. It could be a piece of the puzzle to getting the economy rolling again.

Posted by TFF | Report as abusive
 

TFF, you’re right, there is no shortage of capital, but if the oil industry was consuming less of it, there would be more pressure on those with capital to deploy it elsewhere.

Companies are content to hoard capital and not risk it, because the executives get rewarded anyway, so they feel no need to risk losing any of it.

I don’t see any positive aspects of the oil industry. It is obsolete technology, and deploying alternatives to oil would require more sustained labor than the oil industry.

Posted by KenG_CA | Report as abusive
 

KenG, I think the oil/gas industry is a bit like desktop computing. It may be obsolete technology, but it is still an important piece of the mix and isn’t likely to go anywhere for quite a while yet.

And what alternatives to oil? Turning food crops into very expensive liquid fuels? Plug-in electrics have promise, but petroleum-fueled vehicles still dominate the market.

Posted by TFF | Report as abusive
 

no, no, no, TFF, the desktop computer industry re-invents itself every year, if not more often. They don’t lobby for tax breaks, and they don’t stifle competing technologies. They don’t anonymously finance “studies” that falsely “prove” competing computing options are inefficient and bad for the world. Right now, the desktop industry realizes they are going to shrink, due to the surging popularity of tablets and other mobile devices, and for the most part, their response has been to try to join the party, not call the cops on them.

Biofuels would be a transitionary technology, until vehicles could be converted to electric power. The technology for biodiesel is incredibly simple, and biodiesel refineries are far less expensive (so they will consume far less capital) and about 98% (that is my rough approximation) less hazardous to the environment. Biodiesel can be produced with no impact on the food supply; the agriculture industry chooses to produce one of the least efficient feedstocks (soybeans), because they are more or less fungible with other crops they grow, and they already have subsidies and distribution systems in place for them.

The attack on ethanol was led by the oil industry, in a masterful PR campaign that would have made Karl Rove seem like he was running a campaign for high school class president. They got environmentalists to do all of their work for them, but seeding the media with false reports about eh energy efficiency of producing ethanol, and the impact it had on corn prices (while ignoring climate and speculation, which affected prices far more). Also, corn is not the best feedstock for ethanol, but that’s what the farmers want to grow, because it represents the least risk, even if it also generates lower revenue and profits.

Biofuels are not ideal, but they are still better than the current system. They impact the environment less than fossil fuels, and they don’t cause massive exports of capital.

Making a commitment to wind and solar power, like the US did to building planes, tanks, ships, weapons, and ammunition during WW2, would create the jobs boom you are always seeking. Unlike a war, though, the benefits of an all-out campaign to create a renewable energy network + grid in the U.S. would pay huge dividends for decades.

Yeah, we can’t generate solar power at night, or wind power when there’s no wind, and that’s why we would invest in utility-scale batteries. Building solar and wind farms is very labor intensive, and not labor that can be exported (the panels and turbines, yes, but they represent a shrinking portion of the cost of both systems). And then to make it really valuable to the U.S., we should modernize our electric grid, which would also consume a lot of labor, and jumpstart a new industry (modren grid technology) in the U.S.

And there are other renewable energy sources that can be tried and deployed. It might cost more up front than oil, gas, and coal development and extraction, but the government can basically borrow for free and print money with impunity (there is absolutely no accountability for printing money, so we should do it whenever it will pay a yield greater than any inflation it might cause down the road). And the yield will be better than anythign else we can invest in now.

Posted by KenG_CA | Report as abusive
 

Two things to add: please forgive all the typos (there were at least 3), and a disclosure: I am investor in renewable energy companies.

Posted by KenG_CA | Report as abusive
 

KenG, you bring up a wide array of issues.

* Agricultural and renewable fuel subsidies, competing with oil/gas development tax breaks, leaving us with a highly confused and economically inefficient system.

* Imported oil is (as you note) an export of national wealth. But investing in domestic energy production, both conventional and renewable, is a way to produce jobs at home while REDUCING the trade imbalance. Subsidies for domestic production should decrease, not increase, the amount of imported oil.

* You mention a wide array of ideas that have potential, but how many of them are “shovel-ready”? Go ahead and invest heavily in them! We’ll employ every chemical and industrial engineer that we can train for the next 20 years. But these are not the blue-collar jobs created by oil field development.

* I don’t see how biofuels can be produced “with no impact on the food supply”, unless the feedstock is material that is presently treated as waste. Whatever crop you choose to grow (and I agree that corn is a poor choice), an acre that is producing fuel is an acre that is not producing food.

* You write, “Biofuels would be a transitionary technology, until vehicles could be converted to electric power.” What proportion of the vehicle fleet do you anticipate being electrically powered? I’ll be looking at an EV for my next purchase, but am presently averaging 60 miles a day (many trips of 5-15 miles) and will need to be convinced that the range won’t limit me. Buying a second vehicle is also a possibility, but further increases the costs. Moreover, if you anticipate that biofuels will be phased out in 15 years, does it truly make economic sense to invest in the infrastructure to produce them? You would need to make a convincing argument that biofuels will remain a key component of the future energy mix.

Let me emphasize that I favor investment in renewable energy. I simply don’t see them replacing fossil fuel energy sources in my lifetime. As a transition to the future that you envision and I hope for, it makes sense (to me) to invest in domestic production of oil/gas rather than continuing to send capital and jobs overseas.

Posted by TFF | Report as abusive
 

“* Agricultural and renewable fuel subsidies, competing with oil/gas development tax breaks, leaving us with a highly confused and economically inefficient system.”

Agreed, let’s eliminate all of them.

“* Imported oil is (as you note) an export of national wealth. But investing in domestic energy production, both conventional and renewable, is a way to produce jobs at home while REDUCING the trade imbalance. Subsidies for domestic production should decrease, not increase, the amount of imported oil.”

That’s pouring good money after bad. One of the reasons the oil industry is loathe to refine biofuels (even though it is a natural for them) is their sunk cost in the oil infrastructure. However, that sunk cost compels them (and the nation) to maintain an obsolete and unsustainable energy system. We need to start the transition away from it as soon as possible.

Oil and wind farms take far less time from investment decision to construction and switching on than developing oil sources, and have nowhere near the negative side effects. Building solar and wind farms will create plenty of blue collar jobs – for site preparation, installation, and maintenance, most of the jobs are blue collar. The jobs that everyone is lamenting about losing to China in these two industries are low paying assembly jobs that account for a smaller fraction of the system cost of both technologies – in fact, a big cost component for manufacturing solar panels is the cost of capital – which American investors (and taxpayers) do not want to finance.

There are feedstocks for biodiesel that can be grown on land that is not suitable for food production. For ethanol, there is much work being done on enzymes that will allow it to use waste products. also, one of the best feedstocks for ethanol is sugar cane, but our agriculture lobby has made that too expensive to do, by obtaining large tariffs not only on imported sugar cane, but on any product made from it.

If the range of electric cars can be increased to 300 miles on a charge, I think more than half of the cars sold by 2020 will be electric. Unlike biofuels, there is no chicken and egg problem with electric cars – people can charge cars at home, but fuel distributors and retailers don’t want to invest in adding biofuels to their offering, unless there is a market for it, which won’t happen if biofuels are not readily available.

People say the cost of electric cars is too high, but none of them have been made in volumes anywhere near what is needed to get costs down. That will happen, just like it happens with every other technological advancement that achieves broad acceptance.

TFF, you’re still working, so unless you have some fatal disease or meet with misfortune, you will see the end of fossil fuel dominance. The incumbents like to spread fear, uncertainty, and doubt about new technology that competes with their entrenched business, but once the new technology is embraced, it does not take long to get assimilated into everyday life and business. Very few people used the internet in the mid-90s; within a dozen years (if not less), the business models of virtually every industry that deals with consumers (and most businesses) underwent a major transformation, or became obsoleted. And it cost hundreds of billions, if not trillions, of dollars for this to happen. Cell phones were only used by a handful of people in the early 90s, now, they are on the verge of reducing landlines to a niche market – and think how entrenched the phone companies were (and still are).

There is only one thing slowing down the transition to electric cars – the cost, and that will come down, as there is money to be made in it. the range will increase, but even before that happens, enough people will buy those cars if they are affordable enough, because they only drive 20 miles a day. I love Mark Twains’ statement: “there is nothing more powerful than an idea whose time has come”. We’re just about there.

Posted by KenG_CA | Report as abusive
 

Interesting points, as always, KenG.

Solar and wind farms are a great idea — but they really compete with natural gas for the production of electricity, not oil. Oil is primarily a transportation fuel.

“There are feedstocks for biodiesel that can be grown on land that is not suitable for food production. For ethanol, there is much work being done on enzymes that will allow it to use waste products.”

Both excellent ideas, but last I heard neither was quite ready for industrial-scale production. (Industrial engineers scaling up systems that have thus far only been proven in the laboratory. Hopefully ready soon?)

“If the range of electric cars can be increased to 300 miles on a charge…”

…then we will have cracked that problem. From what I’ve heard, we’re facing a maximum range presently around 100 miles, with a more realistic estimate closer to 80. And battery performance deteriorates with age. We’ll be replacing our car next year. Give me a solid 120 miles and our next vehicle will be plug-in electric.

Hybrid is a poor compromise — lugging around two power trains is inefficient. And for smaller vehicles, the improvement in mileage isn’t enough to justify the cost.

I’m not certain my students won’t kill me by the end of the week, but if I survive that long then I might be good for another 40 years. Would be nice to see the transition that you promise.

Posted by TFF | Report as abusive
 

Yes, solar and wind compete with gas (and coal), but if we shift cars to run on electricity, we will need new sources of it.

Biodiesel is definitely ready for industrial scale production. I looked into actually building a biodiesel refinery (on a small scale, maybe 1M gal/yr)) several years ago, and only didn’t do it because I couldn’t find people with the skills to design and construct one. What’s not proven on a large scale is the algae-based diesel, that still has to be more developed, but things like jatropha, which can be grown with very little water and poor soil, can be done now.

Sugar-based ethanol is ready for prime time, as Brazil has been doing it for years, and it might even come with the very beneficial side effect of driving up the price of sugar and corn syrup.

I have a realistic range of 165 miles on my electric car, and that is with 2008 technology. It’s also a performance car, so with tweaks to the design and driving habits, it could probably reach 200+ miles. I was part of BMW’s mini-E field trial a couple years ago, and I saw 90 mile range with it, and that car was not designed from the ground up to run on electricity – with mods to the design, it should easily get > 120 miles. In 2015, if not sooner, I think 300 miles will not be that unusual on a mid-priced car. If you can wait until late next year, I will be shocked if you can’t buy an EV with 120 range.

Yes, batteries deteriorate with age, but the chemicals in them can still be re-used. There is a lot of research being done to improve that, and there are ways to maximize the life of the battery. All solvable problems.

I’m with you on hybrid. It’s been a great driver for technology development, though. However, delivery trucks should be diesel electric hybrids, where there is a motor that drives the vehicle, and a diesel powered generator. This would be so much more efficient than a pure diesel truck that stops and starts and spends lots of time in traffic.

If you stick around another 40 years, you’re going to see a lot more change than electric cars. The amount of cumulative knowledge grows faster with each year, so just compare where we were 40 years ago with today, and double that amount of change.

Posted by KenG_CA | Report as abusive
 

Great! I do look forward to my sub-compact EV with a 120 mile range. Must surely be simpler than keeping an internal combustion engine running smoothly.

Interesting as always, KenG.

Posted by TFF | Report as abusive
 

I think you’ll be able to get something bigger than a subcompact with 120 mi range.

I love not driving to the gas station, or getting oil changes (ok, there are still some fluids in the car, but nothing like a conventional car), or dealing with the complexity of an IC engine (it’s just an electric motor, with a lot less things to go wrong). The whole thing is so much simpler, people will jump on them when they are feasible. It’s not quite like going from a horse to a car, but it’s still a big step and much more convenient.

I looked at what the topic of the post was, and our last several comments – we digressed as usual, but the original topic of the post is not a solvable problem.

Thanks for the chat.

Posted by KenG_CA | Report as abusive
 

I do try not to hijack threads until they are a couple days stale. :)

Ford Focus EV = $40k.
Ford Focus IC = $20k (or less).

Not yet price-competitive, at least not without the federal tax credit.

Posted by TFF | Report as abusive
 

Our nation has a much longer life span then any individual person. The United States of America will not retire with diminished income nor will it go bankrupted from bowering on future earnings. We have had big deficits, just like this after World War II and big surpluses as recently as 1999 during the Clinton Administration. The deficit we now have measures about 9.9% of our total GDP. (compare that to a deficit of 25% of the GDP during the post depression “New Deal”.
(Budget office February 2011 http://www.cbo.gov/ftpdocs/108xx/doc1087 1/Summary.shtml ) … these are the facts … America is not broke!! ….

All of us average Americans have some debt that we pay on: Your house, your car and perhaps a refrigerator and some furniture. Now if your frugal Uncle Buck was of the mind to never buy anything he could not outright pay for, then it would take him 20 to 30 years of living in a trailer until he could afford to by a house. Uncle Buck would have to ride a bike to work for 5 years before he could buy a car and he’d be eating “K-Rations” from a can and sleeping on the floor. Now that’s if he had a good paying job within bike riding distance. If you were Uncle Buck your family would suffer right along with you and your quality of life would resemble that of a poor 3rd world country.

The republican narrative says PAY DOWN THE DEPT !!! That’s like frugal Uncle Buck saying; “don’t borrow to invest in our crumbling highways, bridges, sewers, and depleting infrastructure”. “ Its to expansive!!” Don’t educate our children and don’t improve the health care system. Like Uncle Buck, “says; “don’t spend any more money ..even if the heater is out and the roof is leaking.”

This is not the time to be holding back on an economic stimulus with so many people suffering. Interests rates are very low, labor is available and eager and our “house” is in serious need of repair.

If Roosevelt was an Uncle Buck we would have never become the great nation we are today.. and if Republicans have their way you can be sure we will be on course to further lowering the standard of living for 99% of US citizens while we struggle to survive without regulations to protect the air we breath and the water we drink. We would find ourselves kneeling for mercy at the feet of the rich and powerful banks ………………….or we might be incline to revolt.

On the other hand we cannot sustain perpetual deficit spending. Long-term fiscal reform is a wise and important endeavor. Tax reform, improving government efficiency, making some changes in our military deployment and any effort to stabilize the monetary structure;… these are important conservative pursuits.

Its no wonder that most of us, no matter the political party we ascribe to, are truly moderate independents and perhaps more willing to compromise then some in congress.

JayFT

Posted by JayFT | Report as abusive
 

I’m pretty sure that my frugal Uncle Buck would save 100% of the value of his modest house long before the typical American would manage to accumulate a 20% downpayment on theirs.

Moreover, if it takes you “20 or 30 years” to accumulate enough savings to buy your home, then what the heck do you plan to retire on?!? You can get a nice house in most burbs for a simple $300k (and Uncle Buck would be looking for something smaller/simpler than that). Even without a mortgage, it will be tough to retire without at least twice that in savings or the equivalent value in the form of a pension or Social Security.

Ten years of savings to own your home.
Twenty years of savings to fund your retirement.
Anything beyond that is for fun.

And while I realize that macroeconomics gets messy, why wouldn’t it work to have an economy in which everybody works hard and consumes only modest material wealth? Are you afraid that we will run out of services that we can provide for each other?

Posted by TFF | Report as abusive
 

“But it’s hard for a gazillionaire to come out and say that he wants more of everybody else’s money”

It’s his money. He can say that he doesn’t everyone taking his money. It’s not zero sum or a fixed end point. You can make something he wants and he’ll pay you for it.

“What we see here is the very strong correlation between tax cuts for the rich (on the x-axis) and increased wealth for the rich (on the y-axis). ”

No, that’s not what we see. What we see is a country that is losing a lot of jobs. The income is measured pre-tax, it’s not some obvious relationship. Not too mention- the chart is so relativistic, it doesn’t actually show much of anything.

Posted by mattmc | Report as abusive
 

I think this argument is basically about the value of different groups of people to the Nation as a whole. As a group, do the millions of people in the middle classes provide more economic value through their work and spending than that provided by the managers of the companies they work for and buy from?

At the rarified upper end, the 1%, things have become so dislocated from what happens lower down that I don’t think the same principles can necessarily be applied. In economic terms, yes, the 1% do sometimes create work – but in which country? More often the jobs would be created in China, not the US. In effect, their tax breaks subsidise the Chinese economy. Their tax breaks also subsidise the politicians who are complicit in moving the jobs to China by supporting all that the 1% want, and by blocking anything of benefit to the 99%.

Is this good for the US economy? On that I am not so sure, there must be some kind of small benefit from selling the products to US consumers, but since most consumers are over-indebted and use credit to pay for consumption, is the benefit real? At some point this borrowing money from future earnings that may not actually be there will reach a crossover point where it will be impossible to repay the credit.

To use an ecological analogy, successful parasites do not kill their host, just weaken it and make it more vulnerable to external threats (competitors, predators, disease). Far better for the 1% to act as a symbiont and gain self-benefit through allowing the 99% to benefit more. After all, who benefits from the activities of the 99% more than the 1%?

Posted by FifthDecade | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •