Gregg Easterbrook

Last week a record-setting heat wave afflicted much of the United States — yet there were no brownouts.

Electricity shortages during heat waves long have been common. We tend to miss what doesn’t happen, and what didn’t happen last week was electric power scarcity.

Two factors are at play, one positive and one vexing.

The positive factor is gradual decline in electricity demand. From 1996 to 2007, U.S. power consumption rose 23 percent. Since then, consumption has declined 16 percent. Taking population growth into account, per capita demand decline since 2007 is even greater. Details are in this fun report — every day must be a party at the Energy Information Administration.

The recession is not the root cause — electricity consumption began to moderate before the economy cooled. Homeowners, and businesses, finally are getting religious about high-efficiency lights, programmable thermostats and other power-saving technology. If the United States could achieve, in petroleum use, the same demand-curve moderation observed with electricity, America’s dependence on Persian Gulf dictatorships would decline, along with U.S. greenhouse gas output.

Now the vexing factor. When George W. Bush took office in 2001, he declared a looming electricity crisis that would require a national crash program to build generating stations and power lines. This political wolf-cry was forgotten when 9/11 happened. Forgotten, that is, by pundits and national candidates for office. But not by the permanent bureaucracy: last week the Federal Energy Regulatory Commission published rules, years in the making, intended to trigger a major initiative to build power lines.

There are places in the country where lines, and other grid improvements, are needed. But the regulatory bureaucracy is behaving as though power transmission were the crisis Bush once proclaimed it to be — even as moderating demand reduces stress on the system. The potential is for a white elephant: lots of capital sunk into long-distance power lines even as electricity demand continues to moderate, or as localized “distributed generation” catches on.

Here’s the kicker — environmentalists, who for decades opposed power lines because they made possible large, centralized coal-fired generating stations, now are supporters of new lines.

Other things being equal, you’d expect the Obama administration would overturn the Bush administration’s initiative to invest large sums in centralized electricity infrastructure. But now that the environmental lobby perceives an interest in such infrastructure, this has caused Obama’s regulatory agencies to favor the Bush-begun push. The FERC decision makes it easier to build power lines across state borders or through the jurisdictions of grid-management firms such as PJM.

Why has the political left switched sides on power lines? Big solar power installations will be in deserts or other areas far from cities, requiring new electricity lines. Most wind farms will be in rural areas. Colorado, for example, just approved a 150-mile, $180 million line to bring wind and solar electricity generated in the alpine area of the state to Denver.

Set aside whether the economics of remote solar and wind power make sense. The 2010 book “Power Hungry” by Robert Bryce contends that remote solar and wind farms will require so much capital that greater greenhouse-gas reductions could be attained, at lower cost, via energy conservation technology at homes and businesses.

But solar and wind are politically correct. Politicians want to be photographed at groundbreaking ceremonies for high-tech green power. And there’s no way big solar and wind energy facilities will fly without a commitment to invest billions in new power lines and their attendant rights-of-way. Utility customers will face higher rates, and investors lower dividends, as new lines are built to solar and wind facilities.

Considering enviros once campaigned for small-is-beautiful solutions such as roof solar panels for schools, that environmental lobbyists now back huge investments in power lines seems one of history’s little ironies. What if it turns out the small-is-beautiful view was right all along?

Distributed generation — lots of local, low-output power plants rather than a few high-output central facilities — may be the next new thing in electricity. Distributed generation would eliminate transmission losses, which can claim as much as a third of watts in a large grid. Local generation would make the power system less susceptible to regional failures, such as the Northeast blackout of 2003. And distributed generation may not just mean local green power: it could mean lots of small natural-gas or hydrogen-fired generators. It could mean small, local-use atomic reactors running on nuclear waste.

Right now central power generation using coal is more cost-effective than distributed generation, even considering transmission losses. But the engineering action is in new ideas for local power, which not far into the future may become a more cost-effective way to generate watts, while cutting out the middleman of transmission. In 19th century Europe, district steam plants made heat for apartment buildings and offices, because the on-site furnace was neither safe nor efficient. That changed. The same change may be in store for how we obtain electricity.

In a decade or two, by the time billions of dollars have been spent and the lines built, power generation may have gone local. Then long-distance power lines may become the next Iridium, a very complex and costly infrastructure for a problem that turns out to have a local solution.

Photo: Detroit Edison’s Trenton Channel Power Plant is seen in Trenton, Michigan April 8, 2009. U.S. concerns about the potential for cyber-attacks on critical infrastructure extended to the American electrical power grid on Wednesday and experts pointed the finger anew at Chinese hackers, among others. REUTERS/Rebecca Cook

Over the past three generations, America’s leaders have faced down the Depression, won World War II, won the Cold War, created Social Security and Medicare, passed the Civil Rights Act and dramatically expanded environmental protection. The record is one of boldness and triumph.

Today, America’s leaders face the challenge of reducing giveaways to special-interest groups. That is what the national debt issue boils down to — do Congress and the White House have what it takes to say “no” to interest groups that want to be showered with borrowed money?

Anybody can agree to a giveaway. In politics, nothing is easier than handing out bags of candy while making empty promises about fiscal discipline in the future. No mettle is required endlessly to say that this year everybody gets everything they want but look out, next year we get serious.

Saying “no” is often the essence of leadership. To address the national debt, Congress and the White House must say no to tax favors for the affluent, no to Social Security benefits for people who don’t need them, no to a defense budget that lacks discipline, no to the pass-along mentality of health care, no to handouts for agriculture, for the states, for programs that feather someone’s nest but make no sense. (Such as $200 million in subsidies per year to fly mostly empty planes to towns only an hour’s drive from a large airport.) No to the countless interest groups that want fiscal restraint in other people’s programs, but view their own handouts as a super ultra-crisis.

Ponder what American leaders of the near past have overcome, and you’ll feel something close to shame that today’s leaders depict merely reducing giveaways to special-interest groups as a challenge of epic proportions.

The threat before the nation is not hostile foreign powers or racial hatred — the threat is our own political system’s lack of accountability for giveaways. The beast that must be tamed is quite timid compared to beasts of the near past. Yet the country’s leaders fear the slightest step in its direction.

Threats such as World War II and the Cold War were external in nature, and human nature often responds more readily to external concerns. The national debt threat is internal, arising from faults in ourselves — in our political system’s demand from unlimited champagne today, with the bill sent to future generations.

No sinister outsiders forced the national debt on us: we did it to ourselves, with eyes open. We borrowed and spent as if tomorrow would never come — and now it’s here. Just eight months ago, in December 2010, President Barack Obama and the leaders of Congress — including the House Republicans leaders now crying disaster about the debt ceiling — enacted $930 billion in new tax favors, giveaways and handouts. Knowing the national debt was getting worse fast, they agreed to borrow-and-spend in an irresponsible manner.

No outsider forced this on us — we did it to ourselves.

Have our leaders the courage possessed by American leaders of the near past, the courage to do what the country needs regardless of what is popular? Have our leaders the courage to ask for shared sacrifice — with the rich, the middle class, entitlement recipients and corporations all surrendering something?

Can Barack Obama, John Boehner, Harry Reid, Nancy Pelosi and Mitch McConnell show us they have so much as one-half the leadership strength of their forebears who faced down Communism and brought civil rights to the whole of the nation?

Stated in today’s dollars, one decade ago the national debt was $6.9 trillion. Today it is $14.3 trillion — meaning that adjusted for inflation, the United States has borrowed more money in the last decade than in its previous 212 years of existence. And this has been done when there is no national emergency! The country has all manner of problems, but faces nothing remotely like the emergency of World War II.

The runaway borrowing has occurred under Republicans and Democrats, beginning with George W. Bush in 2007, who launched the ruinous Iraq adventure based entirely on borrowed money, and continuing to Obama, who has backed three “stimulus” giveaways despite clear evidence that this doesn’t work. At the current pace, the national debt will hit $23 trillion in 10 years,  meaning the country will have borrowed twice as much in two decades as in its previous 212 years of existence.

Worse, the runaway borrowing has occurred before the baby boomers retire. Americans have known for decades that starting around 2015, spending for pensioners and their health care must rise. Rather than save in preparation for that day, the nation’s leaders of both parties have spent with abandon. When the young borrow to spend wildly, society calls that irresponsible. When the middle-aged borrow to spend wildly, they call themselves presidents, senators, representatives and governors.

The national debt is not only bad in and of itself — surely economic recovery is being held back by the unchecked debt. Investors perceive U.S. leadership of both parties to be self-absorbed and unconcerned with the greater good, so they ship their capital to nations with better long-term prospects.

Previous generations of American leaders saved the country from grave predicaments. The current generation is asked only to reign in giveaways. Do the people in Washington have this in them?

By Gregg Easterbrook
The views expressed are his own.

Today’s Wall Street Journal in its lead editorial declares Rupert Murdoch and News Corporation all but saints walking on Earth, claiming “politicians and competitors are using the phone-hacking years ago at a British corner of News Corporation to assail the Journal and perhaps injure press freedom.”

If patriotism is the last refuge of scoundrels, press freedom is the last refuge of tabloid gutter-dwellers. But note two corruptions in that single sentence of the Journal’s embarrassing editorial.

First, casually the Journal acknowledges the scandal’s initial charge is true, referring to “the phone-hacking years ago at a British corner of News Corp.” Just last week, Murdoch was vehemently saying in the Journal’s pages that some of the accusations were “total lies."

Second, the Journal pretends everything bad happened “years” in the past. Yet just a week ago, before Murdoch’s weekend admission that “serious wrongdoing occurred,” Murdoch and other News Corporation officials were insisting their company was unfairly accused. The hacking was the initial offense. The attempted cover-up was a second and in some ways greater offense, because there is no such thing as a “rogue” cover-up: all cover-ups start at the top.

Nevertheless the Journal pretends everything bad happened “years ago.” How painful to behold the paper’s editorial page sell its soul to engage in obvious boot-kissing for Murdoch and his front-office minions.

If we’d taken the Wall Street Journal’s word for it as recently as last week, all would have been hushed over. Compare this to the Washington Post’s brutal honesty about Janet Cooke, or the New York Times’s brutal honesty about Jayson Blair and Judith Miller. Compare them, and you have the difference between – journalism and the News Corporation.

White Anglo Saxon Protestant (WASP) men are supposed to hold the reins of power in the United States. All but two presidents have been WASP males; almost all Supreme Court justices; most leaders of the House and Senate.

Today everyone knows America has a black president for the first time. It’s also the first time in American history that neither the president nor the vice president are WASPs. Of the six apparent frontrunners for the 2012 Republican presidential nomination to oppose Barack Obama, just one is a WASP. Of the four leaders of Congress, only one is a WASP. The Supreme Court not only has no WASP, it has no Protestant.

Is this the twilight of the WASPs?

Consider the absence of WASP males at the top of public life. The president is African American, the vice president is Catholic. Current favorites to top the Republican 2012 ticket are Mitt Romney and Jon Huntsman, Mormons; Sarah Palin and Michele Bachmann, women; Newt Gingrich, a Catholic and Tim Pawlenty, a Baptist.

That makes Pawlenty the sole WASP male at the pinnacle of the current national-leadership scramble, and his claim to WASP-hood is somewhat tenuous. Pawlenty attends a Minnesota church that belongs to the hardline Baptist General Convention, which may or may not be right about faith but definitely is not a mainstream Protestant denomination, such as the American Baptist Convention.

In Congress, Speaker of the House John Boehner is Catholic, House Minority Leader Nancy Pelosi is female, while Senate Majority Leader Harry Reid is Mormon. Senate Minority Leader Mitch McConnell is the sole WASP male in top leadership. At least, he probably is. In interviews 20 years ago, McConnell described himself as a mainstream Baptist. Recently, McConnell has dropped mention of religion from his official bio.

At the Supreme Court, six justices are Catholic, three are Jewish. Four of the Court’s members — Ruth Ginsberg, Elena Kagan, Sonia Sotomayor and Clarence Thomas — are reverse twofers, neither white male nor Protestant. When Louis Brandeis (first Jewish justice) was confirmed in 1916, and Thurgood Marshall (first African American justice) joined the Court in 1967, and Sandra O’Connor (first female justice) joined in 1981, each had a shockwave impact on establishment politics. Today, if Barack Obama nominated a WASP male to the Supreme Court, that’s what would be considered shocking.

Surely the overall situation would have amazed Edward Baltzell, whose 1964 book The Protestant Establishment: Aristocracy and Caste in America popularized the term WASP. Baltzell was a consummate member of that class: born into an old-money Philadelphia family, raised in the Episcopal church, shipped off in youth to an expensive boarding school, then on to the Ivy League. He styled himself “E. Digby Baltzell” because it sounded more right-you-are-old-chap. Becoming a professor at Penn, he studied the Social Register, once the Wikipedia of American snobbery.

When John Kennedy ran for president in 1960, his Catholic faith — his failure to be a WASP — initially was a source of controversy among voters. If a member of the Church of the Latter-Day Saints is a presidential candidate in 2012, will that be controversial?

Probably not. To some, JFK embodied the centuries of Protestant-Catholic warfare in Europe — Mormonism has no equivalent backstory. The 2012 elections may cause a tedious debate about whether Mormons are Christians: since they consider themselves Christian, that’s good enough for me. Hopefully most voters will assess a Romney or Huntsman candidacy on the merits of whether either seems best for the job.

The political parallel would be not to 1960 but to 1952, when the very WASPy Adlai Stevenson faced Dwight Eisenhower, a Jehovah’s Witness. Like the Latter-Day Saints, Jehovah’s Witnesses hold some beliefs that make traditionalist Christians scratch their heads. But in 1952, voters were concerned foremost with whether Eisenhower was the best candidate, and that pattern should repeat in 2012. (After being elected, Ike became a Presbyterian, so in a sense he converted to WASP-hood.)

Why are WASP males suddenly knocked off the public pedestal? Perhaps just coincidence. Or maybe it means discrimination against non-WASPs at long last has ended. If the latter, that public debate hasn’t noticed the twilight of the WASP male should be seen as a positive sign.

What if the 2012 White House race pits an African American and a Catholic versus a woman and a Mormon? E. Digby Baltzell would roll over in his grave — but it would be a great day for America. The United States, after all, is a country where how you define yourself matters far more than how society defines you.

Postscript:

Here the Pew Forum on Religion and Public Life breaks down American faith affiliations. WASPs must belong to the “mainline” Protestant categories, though this concept can be fuzzy. For instance, Pew classes 7 percent of Americans under “historically black churches” rather than as “mainline Protestant.” Yet most historically black worship is mainline, rooted in traditional theology. Note from Pew data  that the Episcopal/Anglican cohort — wellspring of 11 presidents, most of any denomination — is down to just 1.4 percent of the population.

Wondering about me? I belong to one of the country’s sadly few joint Christian-Jewish congregations, and like Sarah Palin, describe myself as “nondenominational Christian.”

Governments in Greece, Portugal, the United States and elsewhere are borrowing, and often wasting, money at a reckless pace. Why do banks and financial markets cooperate? Because there’s something in it for them.

They keep a little slice of the public money being borrowed or wasted. Only a sliver. But the more that is borrowed, the larger the sliver becomes.

This is the Sliver Strategy, and it underlies the ways many of the Western world’s wealthy institutions relate to government.

Here’s how the Sliver Strategy works. If government spends a moderate sum and an interest group gets a large share, this will be noticed and denounced. If government spends a gigantic amount  and the interest group gets a sliver, this won’t be noticed. But a sliver of a gigantic amount may be more than a large share of a moderate sum.

Many sovereign bonds and similar securities, for instance, are accompanied by credit-default swaps, which may amount to around half a percent of the amount borrowed. That’s just a sliver. But the more borrowed, the larger the sliver.

Half a percent of the low-end estimate on default swaps for bad Greek debt is $35 million.  Half a percent on the high-end estimate of the roughly $600 billion that Greece, Ireland, Portugal, Spain and Italy are — let’s just say in arrears on —  is $6 billion. Quite a sliver!

In the case of default swap fees, these proceeds go directly to the bottom line of financial companies, boosting short-term profits and pumping up executive bonuses. The more that is borrowed — by governments directly, or by quasi-government entities such as Fannie Mae — the bigger the sliver, and the bigger the executive bonuses.

In the case of many kinds of swaps, the fees are pure profit since if the loan defaults or otherwise goes south, the swap issuer will just shrug and claim penury. This is what happened in 2008 when AIG, the world’s largest issuer of default swaps, simply refused to cover the debts it had claimed to insure, handing a $182 billion bailout tab to U.S. taxpayers. Amusingly, AIG called its products “collateralized” default swaps, though it turned out there was little or no collateral. What a sense of humor those AIG crooks had! The swaps were pure profit — AIG took rich fees for providing nothing at all, other than a blessing that securities firms could use to pretend their issuances were backstopped against default.

How many AIG-like or Lehman-like slivers are out there right now in bad European debt? Nobody really knows. If it’s any consolation, the professional organization of derivatives and similar all-but-unregulated financial instruments promises “safe, efficient markets.”

Other kinds of Sliver Strategies have corrupting impacts on finance and government.

Why did big banks underwrite the liars’ loans that caused the housing bubble? Because they took origination fees and other payments, then passed the toxic debt along to taxpayers. The greater the loan volume the larger the sliver — and most of the slivers ended up in the pockets of the banks’ top management.

Why do defense contractors and  companies that build roads, rail and bridges love cost overruns? The more bloated the final bill, the larger their sliver. If the Godzilla attack helicopter program cost $10 billion and the contractor kept a third as profit, the public would be outraged. If exactly the same program cost $50 billion and the contractor got a tenth as profit, the public will be quiet — though the former is a far more cost-effective buy than the latter.

Why does the U.S. Congress support obvious boondoggles, such as $6 billion a year in  subsidies for corn ethanol production? A reverse Sliver Strategy is at play. The more money Congress wastes on corn ethanol, the more the ethanol lobby donates to members of Congress. The donations are but a sliver of the total subsidy — meaning the total subsidy must be large for the sliver to matter.

This incentive to hand out very large sums, in order to get back small sums as donations, is a hidden factor in many congressional decisions about agriculture policy, Social Security benefits and other issues. If members of Congress simply awarded themselves a couple hundred thousand dollars each for campaign expenses, the public would be furious. But if Congress gives away hundreds of billions of dollars, in order to ensure a couple hundred thousand dollars per member comes back as donations, the Sliver Strategy goes unnoticed.

The experience of Greece and Portugal — and perhaps the United States — shows that undisciplined borrow-and-spend depresses economic performance. So you’d think institutions with a major stake in national economic success, such as banks and industrial sectors, would resist government’s impulse to borrow.

Instead they are enablers, because the Sliver Strategy puts a cut directly into their pockets. It is one of the insidious reasons many nations’ balance sheets look steadily worse.