James Pethokoukis

Politics and policy from inside Washington

Environmentalists: Climate bill won’t work

May 22, 2009 01:23 UTC

This just arrived in my inbox from Friends of the Earth. Here is why the group says it can’t support the Waxman-Markey climate bill:

1) It sets the bar too low. It would reduce pollution, but not enough to save us from catastrophic effects of global warming. 2) Instead of being forced to pay for the transition to clean energy, corporate polluters would receive hundreds of billions of dollars in handouts, and ordinary citizens like you and me would be stuck with the costs. (That’s why Shell Oil and other corporate polluters support the bill.) 3) The bill contains massive “offset” loopholes that would delay its already-too-weak pollution reductions. 4) Despite the recent financial meltdown, the bill allows Wall Street traders to game new carbon markets, creating the potential for wild swings in energy prices that damage our economy.

COMMENT

With reference to the above article, the short article below explains the scenario in the Asian Climate Change context.

“Green Energy : A Paradigm Shift in Sustainability”

Green energy is not something new since the discovery of the depletion of the ozone layer and global climate change as a direct impact of green house effect on a worldwide scale.

Various international conventions/agreements on the reduction of green house effect will remain forever on glossy papers if countries around the world are not serious in committing themselves towards real implementation within national boundary.

Political will power, or even real politics for that matter alone, is insufficient in promoting green energy as attested by the economics of reality in both developed and developing countries.

A paradigm shift is needed in forging a new instrument of international co-operation within the wider framework of Free Trade Agreements and joint conviction shared by stakeholders such as the OECD, major banking bodies(i.e. IMF, World bank, ADB) and leading industrial/corporate entities.

……………………………….
Jeong Chun-phuoc
lecturer-in-law
[an an advocate of Competitive & Strategic Environmenting]
Jeongphu@yahoo.com

Posted by JEONG CHUN PHUOC | Report as abusive

Who’s going to default?

May 21, 2009 21:14 UTC

Here are some numbers (via The Big Picture) on how investors in credit default swaps views the odds of sovereign debt default by various nations:

In response to the S&P move on the outlook for the sovereign credit rating of the UK, its 5 yr CDS has risen today to 82 bps from 72.5 bps yesterday and is at the highest level since May 6th. For comparison, Italy is at 90 bps up from 84 yesterday, Japan is at 50, unchanged, the US is at 37 bps vs 34, France is at 37 up from 31, and Germany is at 34.5 bps vs 31.

Me: Beyond the UK’s problems, I would note that the US and France are about the same. This says a lot about the rapid decline in the American fiscal position.

CBO: Unemployment headed over 10 percent

May 21, 2009 15:14 UTC

This ugly news from the Congressional Budget Office:

In the Congressional Budget Office’s (CBO’s) judgment, the economy will stop contracting and resume growing during the second half of this year, but the hardships caused by the recession will persist for some time. The growth in output later this year and next year is likely to be sufficiently weak that the unemployment rate will probably continue to rise into the second half of next year and peak above 10 percent. Economic growth over time will ultimately bring the unemployment rate back down to the neighborhood of 5 percent seen before this downturn began, but that process is likely to take several years.

COMMENT

Perhaps the one good side to the issue of unemployment is that more people will have lots of idle time, and maybe they will pay more attention to Washington. Besides, the socialists in Washington will just keep printing money and telling us the recovery is just around the corner!

Posted by Erik Gustav | Report as abusive

The meaning of the California earthquake

May 21, 2009 15:07 UTC

I’ve talked to loads of investors, pro and amateur, who think the game is up.  They think the American economy is doomed to downshift into a permanent slow-growth mode. Massive budget deficits, more regulation, more taxes.  My standard reply points out that global current, debt and equity investors would punish, sooner rather than later, any nation that follows such a course. The financial vigilantes would prevail in the end.

Oh, and the voters might have a say, too — as they did in California, giving a thumping to tax-hiking referendums.  I mean, the common wisdom here in DC is that Americans need to pay higher taxes. And for awhile, many here believed that Americans would accept this perceived reality, despite the fact that President Obama was elected as an (overall) tax cutter. Some polls showed the same thing.

But actual voters sent a different message. It’s the same message that is also cutting the knees out of the Obamacrats’ plans for a cap-and trade system. Americans, facing reduced net worth and a terrifying job market, don’t want government imposing higher costs whether through taxes or regulations. (Especially when the don’t think that government is particually well run or efficient.) And higher taxes for healthcare, too? Plus, if those Obama middle-class tax cuts aren’t extended, many folks will be getting a tax hike in 2011. There seems to be a complete disconnect here between the political class and the rest of the country.

COMMENT

As a California voter, I found it strange that the politicians voted these measures in with an overwhelming majority, while the voters rejected them with an overwhelming majority. That shows the disconnect between the voters and the politicians in the sunny golden state. To correct the problem with the measures at hand, we voted to punish the politicians for having poor performance in governance.

The essence of the election was the people saying (1) stop making up for your mistakes by raising my taxes and (2) how about acting like you know what the heck you’re doing for a change. Over the long haul, this simply reflects that we need a smaller and more efficient government with personnel that are reasonably paid, not overpaid. The politicians will not touch some of these hot buttons at the risk of losing the favor of their constituents. For example, too much funding goes to the Child Protective Services. Because of this, they take on too many cases, rather than limiting the cases to the ones that actually have a problem. I know of one family that has had their children taken away. In that family, there has not been a crime committed, neither is there any danger to the children. However, the cost to the state of California for the charade has run into the tens of thousands of dollars over absolutely nothing. Do you think for a minute that the politicians will reduce funding to CPS? Heck no. They want to raise more taxes on your back and mine. CPS, like any other government agency, knows that if they don’t use their funding this year they will possibly lose some of it next year. That is the essence of how government grows. Once it gets a little larger, it thinks the new size is set in concrete. Only during times like these will government cut back. They have no choice, because the populace is broke. Raising taxes will only extend the recession longer, thereby delaying higher tax revenues.

The meaning of the California earthquake is that all across the nation, the people will get the size of government reduced (a Republican platform) due to lack of tax revenues. We should have kept government smaller all along.

Posted by Braveheart | Report as abusive

Where the growth is going to be

May 21, 2009 13:48 UTC

Not in the US, Europe or Japan, says economic analyst Ed Yardeni:

The “Old World” economies (the US, the UK, the Eurozone, and Japan) are likely to remain challenged by the unwinding of the financial excesses of recent years. They all seem to have lost their entrepreneurial spirit. They all have large government deficits and aging populations. The emerging “New World” economies, particularly in Asia and Latin America, seem to be more dynamic. They certainly have tremendous growth potential by simply catching up to the standard of living of the Old World. Standards of living may grow more slowly than in the past for the roughly one billion people in the Old World as a result of tougher credit conditions.

Meanwhile, 2-3 billion people in the New World are aspiring and perspiring to achieve what we have in the Old World. They were counting on doing so by selling goods to consumers in the Old World. That business model may no longer work for them as well as in the past. So they are likely to do more business with each other. China just became Brazil’s biggest trading partner. For the past 30 years, it was the US. Petrobras, Brazil’s national oil company, is investing $130 billion to purchase drilling equipment to develop its huge offshore oil fields. China has agreed to lend $10 billion to Petrobras. In return, Petrobras is to supply China’s state-owned Sinopec with up to 200,000 barrels a day for the next 10 years. The deal was among a host of agreements signed during Brazilian President Luiz Inacio Lula da Silva’s state visit to China this week.

Unemployment and the 9-handle

May 21, 2009 13:33 UTC

The government’s nastier stress test scenario looked for U.S. unemployment to rise to 10.3 percent. Today’s weekly jobless claims report (631,000) is another indication that we are well on our way to that level. As the econ team at JPMorgan sees things:

Although payroll declines may be easing, continuing jobless claims
indicate that the unemployment rate is still rapidly increasing.
Continuing claims increased 75,000 in the week ending May 9 to 6.662
million, and the insured unemployment rate rose to 5.0% from 4.9%. The
insured unemployment rate has increased a tenth of a percent in every
week since the April household survey week. Given this pattern, the
normal unemployment rate will probably rise from 8.9% in April to at
least 9.2% in May.

One more reason why cap-and-trade is in trouble

May 21, 2009 17:33 UTC

Some interesting factoids from a new Pew Research poll (bold is mine):

In the new poll, 51% agree that protecting the environment should be given priority even if it causes slower economic growth and some job losses, down from 66% in 2007. At the same time, the share saying that people should be willing to pay higher prices in order to protect the environment has dropped from 60% in 2007 to 49% currently. This represents a 17-year low point on this measure. Surprisingly, declines since 2007 in support for economic sacrifices to protect the environment have been particularly large among young people and political independents.

The public remains broadly supportive of a variety of options for addressing the nation’s energy supply – 82% favor increased funding for research on wind, solar and other alternatives, while 68% say more offshore oil and gas drilling should be permitted. The idea of expanding nuclear energy continues to be more contentious (45% favor/48% oppose); 60% of college graduates favor increased use of nuclear power.

Me: When times are tough, money talks and climate models walk. Indeed, when I chat with Republicans and anti-climate regulation activists, they are almost giddy with how the climate debate is going. Dems, not so much.

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