Opinion

The Great Debate

The economic cost of climate change legislation

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The views expressed are her own. —

Chairman Henry Waxman of the House Energy and Commerce Committee announced yesterday that his American Clean Energy and Security Act of 2009 “will create millions of jobs, revive our economy, and secure our energy independence.”

The 648-page bill, co-sponsored by Waxman and fellow Democrat Edward Markey, Chairman of the House Energy and Environment Subcommittee, has been the subject of four days of committee hearings this week.  It would set new limits for greenhouse gas emissions, and prescribe radically new standards for energy production and use.

The most surprising word in the 648-page bill is one that isn’t there, not even once.  That word is “nuclear.” To discuss clean energy and security without mentioning increased development of nuclear energy, now powering 20 percent of America’s electricity with no greenhouse gas emissions, shows that Chairmen Waxman and Markey are not taking the issue seriously. They’re just trying to raise taxes on Americans and enhance the power of Congress and the agencies it oversees.

Over 100 pages in the bill are spent on measures to reduce greenhouse gases.  The bill requires greenhouse gas emissions in 2012 to be no more than 97 percent of 2005 emissions, 58 percent in 2030 and 17 percent in 2050.  This last target, four decades into the future, is incompatible with our present standard of living—and illustrates the arrogance of politicians who think that they can micro-manage the economy far beyond anyone’s capacity to foresee events.

Look to deal numbers for M&A green shoots

Alex Smith-GreatDebate

– Alexander Smith is a Reuters columnist. The opinions expressed are his own –

Volumes may be down, but there are green shoots appearing in the M&A market after the frozen winter of financial distress.

This doesn’t mean a return to the boom years of a few years ago. It could take years for deal values to reach the dizzy heights of the second quarter of 2007, given falls in asset prices. But the number of deals is recovering fast. This fell off a cliff in Q1 of 2009 and at just over 8,000 deals was the lowest global tally since Q3 2004.

An emerging opportunity in U.S. housing

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Deep breath. Ok, here goes: For the first time in a very long time U.S. housing might actually be a reasonable buy on a five-year view.

As a long-time housing bear and someone who believes there is still considerable pain to come in the U.S. economy and banking system that is quite a hard thing to say.

Is there any point to the IMF?

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

Institutions often outlive their usefulness. Since the end of the Cold War, NATO has often looked like an organization in search of a mission. Lately, the International Monetary Fund (IMF) has also seemed like one lost without a contemporary role.

The IMF is trying to reinvent itself as a global financial regulator or as a forum in which member states can hold mutual discussions about their banking, monetary and fiscal policies — a sort of World Trade Organisation (WTO) for finance.

U.K. government should resist the VC trap

Margaret DoyleThe British government is considering whether to set up a mega public-private fund to invest in early-stage ventures. This would be a mistake. While British — and European — entrepreneurs have largely failed to produce huge successes like Google and eBay, bunging taxpayers’ money at the problem is not the answer.

In a policy document published on April 20, the government said it is evaluating whether to set up a public-private fund with similar objectives to the Industrial and Commercial Finance Corporation, the precursor to 3i. That was established with 10 million pounds in 1945 as Britain struggled to recover from war. Such a move has been urged on Lord Mandelson, the business secretary, by the Confederation of British Industry (CBI), the National Endowment for Science, Technology and the Arts (NESTA) and the British Venture Capital Association (BVCA). NESTA is looking for a 1 billion pounds fund; BVCA for 1 billion pounds-plus and the CBI for a round 1.5 billion pounds. The idea is for the government would lead the fund-raising by putting up an unspecified portion of the total pot.

Venture capital bigwigs speak of a calamity if the state does not step in. Britain risks “a lost generation of innovation”, says Simon Walker, the BVCA’s boss. NESTA warns that the country could lose 44 billion pounds in annual revenues unless it invests in growth businesses. Indeed, Walker believes the government shouldn’t waste time evaluating things and should simply start writing checks. Unless it does so, hundreds of early-stage businesses that need of capital may go to the wall. The BVCA recently published figures showing that investment in British venture capital collapsed by 62 percent from its peak in 2006, to 346 million pounds last year. Whether this had anything to do with the investment decisions that venture capitalists made in this period, BVCA didn’t say.

U.S. environmental agency walks a tightrope on CO2

John Kemp Great DebateThe Environmental Protection Agency (EPA)’s proposed findings on greenhouse gas emissions were a carefully worded attempt to appease climate-change activists while containing hostility from business and energy organizations or Congress.

The “endangerment” and “contribute” findings, that greenhouse gases posed a danger to human health, were designed to provide clear signs of progress on a signature issue for the administration while preserving maximum flexibility.

The Obama administration is struggling to reconcile high hopes of ambitious action with the need to formulate a policy that can be sold to the Democratic Party’s working-class base in the industrial Midwest and coal-producing states of Appalachia.

Renewables to spark U.S. grid revolution

John Kemp Great DebateGrowing power consumption and the U.S. administration’s plan to rely more heavily on renewable generation sources will increase the demand on America’s already overloaded electricity grid and require major investment in transmission and distribution networks.

Upgrading power transmission and distribution systems is likely to cost as much as installing new generating capacity over the next 20 years.

While Congress provided an extra $4.5 billion of funding for grid improvements in the recent fiscal stimulus, federal loan guarantees and other support, far more investment will be needed if the administration’s targets for renewable generation are to be realized.

Beware Goldman’s “dutiful” TARP repayment

(Republished to clarify time period of data in fifth paragraph)

Trading specialists work on the floor of the New York Stock Exchange trading shares of Goldman Sachs, in New York, April 14, 2009. REUTERS/Chip East Patriotism, as Dr Johnson once observed, is the last refuge of a scoundrel. So when you hear words like “duty” drip from the lips of a senior executive at Goldman Sachs, you instinctively count the spoons.

You’d be right to do so too. Chief financial officer David Viniar’s observation that Goldman has a duty to repay the money it received last autumn from the U.S. government as part of the Troubled Asset Relief Program may be marginally less cynical than the apercu flung out recently by his boss, Lloyd Blankfein, that investment bankers should be paid less and shouldn’t be rewarded for failure.

But not much less.

And my, do Blankfein’s comments seem cynical in light of the bank’s first quarter results. After all, Goldman accrued 50 percent of its quarterly revenues (yes, that’s revenues) against payments it plans to make to its employees. That is broadly the same proportion that it paid out to them throughout the boom. No question, then, that Goldman’s bankers should do without to pay back the TARP money. With breathtaking cheek, Goldman has also used taxpayers’ cash to bail out Jon Winkelried, one of its wealthiest and most senior executives, after he lost too much money in its own hedge funds. And as for clawing back past rewards that turned out to be excessive — well what about that $70 million you got in 2007, Blankfein?

Obama mulls cap-and-trade by decree

John Kemp Great Debate– John Kemp is a Reuters columnist. The opinions expressed are his own –

Senior U.S. administration officials have indicated that if Congress does not pass comprehensive legislation providing for a cap-and-trade system to regulate greenhouse gas emissions they will press ahead unilaterally with proposals using the Environmental Protection Agency (EPA)’s existing authority under the Clean Air Act.

This is an attempt to gain political leverage after deep divisions within the Democratic Party appeared when 26 Democratic senators rebelled earlier this month and voted for an amendment to the budget resolution barring cap-and-trade being considered as part of the budget.

Goldman may repay government funds but not ease U.S. grip

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Goldman Sachs Group Inc may succeed in its bid to pay back U.S. taxpayer money with the help of a $5 billion common share sale, but it may still not get the freedom it wants from intense public scrutiny.

Goldman, which posted a better-than-expected first-quarter profit and announced the public offering on Monday, has navigated the global financial crisis better than many of its rivals.

Its share price has more than doubled since hitting a record low in November, and is up more than 50 percent this year.

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