James Pethokoukis

Politics and policy from inside Washington

Cap-and-trade update

Jun 26, 2009 20:57 UTC

From a source: “I think that because of the nature of backroom deals this has a decent chance of passing. However due to the large public outcry, is has a decent chance of failing.” Again very close …

COMMENT

Pls so sorry our email address is smnor007@yahoo.com.my phone no. +60169319561. She also threaten my self to kill me and hired the people to do it.

Cap-and-trade update

Jun 26, 2009 20:35 UTC

It is turning out to be a very, VERY close vote in the House of Representatives. Some of the moderate Rs who were going to vote for it are weakening — like Mary Bono Mack of California. Earlier, it looked like Speaker Pelosi had the votes but was trying to get a big enough margin that politically vulnerable Ds could vote fopr it …now I think the issue is finding enough votes, period. Big gamble for Pelosi might be a bridge too far …

Breaking the U.S. economy’s viscious cycle …

Jun 26, 2009 16:34 UTC

From the great David Goldman:

The negative multiplier occasioned by the retrenching of consumers (lower spending, more unemployment, lower incomes, lower spending in a vicious cycle) is stronger than the Keynesian multiplier from government spending (more government boondoggles for construction unions, more spending).

There are ways to break the vicious cycle:

1) encourage entrepreneurs to dive in and take risks

2) encourage foreign investors to put more money into the US economy

3) attract skilled and talented immigrants who bring in human capital.

The trouble is that entrepreneurs at this stage of the cycle appear as vultures, speculating in human misery, buying foreclosed houses and distressed bonds. … Alternative number two would work if the US government allowed the Chinese and others to come in as partners and buy significant parts of the US economy at discounted prices. That’s not going to happen, either, for the same stupid political reasons. … Alternative number three isn’t even on the agenda.

That means we are stuck in a vicious cycle in which the recession lasts indefinitely, equities chop sideways forever, and the Obama administration sets the stage for a potential dollar collapse some time down the road.

My spin:  If you are looking for a second “stimulus package,” one that would address these points, particularly #1 would be helpful. A pro-entrepreneur package …

What is the cap-and-trade bill?

Jun 26, 2009 14:41 UTC

This is a smart summary: “Waxman-Markey is the climate policy equivalent of Sarbanes-Oxley financial regulation, guaranteeing extensive new bureaucracy and substantial economic cost to the productive economy while achieving few of its stated objectives. And the “cap and trade” system at the heart of the bill is riddled with so many loopholes that it should be considered more of a “hairnet and giveaway.”

COMMENT

Amazing that the Gore family is baking cap-and-trade trading software and a non-existant carbon offset investment firm, isn’t it?

Posted by Hank Reardon | Report as abusive

More evidence ‘stimulus’ doesn’t work too well

Jun 26, 2009 14:25 UTC

From Action Economics (bold is mine):

Today’s U.S. reports revealed a bigger May income boost than we assumed from recent stimulus legislation, but a lower service consumption trajectory nevertheless, to leave a remarkable surge in the savings rate and a slightly weaker trajectory for aggregate demand as we approach mid-year.  We also saw a small upward bump in the Michigan sentiment index in June as the various confidence measures post gains from Q4-Q1 lows, though confidence remains remarkably lean. The soaring savings rate shows that households are still bracing for the worst despite improving market conditions, as they hoard distributed stimulus benefits and hence truncate some of the “stimulative” effects.

COMMENT

I’m squirrelling away my extra $13/week to pay for my share of the carbon tax pass throughs. That way I only need to come up with an additional 842.23 through the year for those offsets.

Can a VAT be right around the corner? Thank you Sir, may I have another?

Posted by Hank Reardon | Report as abusive

Scary fun budget facts from the CBO

Jun 26, 2009 14:23 UTC

Pay no attention! Nothing to see here! Excerpts from the Congressional Budget Office:

1) The Congressional Budget Office projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035 and to more than 17 percent by 2080 .

2) That projection means that in 2080 the federal government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

3) Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs— Medicare, Medicaid, and Social Security.

4) By CBO’s estimates, the increase in spending for Medicare and Medicaid as a share of GDP will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080.

5) The current recession has little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II.

5) As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010.

The CBO bottom line:  Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress income growth in the United States. Over time, the accumulation of debt would seriously harm the economy.

Alternatively, if spending grew as projected and taxes were raised in tandem, tax rates would have to reach
levels never seen in the United States. High tax rates would slow the growth of the economy, making the
spending burden harder to bear.

Why is clean/green energy the next big thing …

Jun 26, 2009 14:14 UTC

and not genetic engineering, nanotechnology, artificial intelligence, robotics or something else that Washington isn’t focusing on? Just asking …

COMMENT

Global Warming: It’s the Sun, Stupid

The main cause of global warming appears to be change in solar activity and change in the earth’s orbit and tilt. Recent reductions in sunspots on the solar surface suggest that we may be entering into a cooling period.

 Humans are responsible for only 2% to 5% of total carbon dioxide emissions and less than two-tenths of one percent (0.2%) of total greenhouse gases emitted into the atmosphere each year.

 Higher temperatures increase non-human emissions of carbon dioxide from plant-life and the sea.

 More than 17,000 scientists signed the Oregon Petition against the Kyoto Protocol because they saw “no compelling evidence that humans are causing discernible climate change.”

 The Kyoto Protocol would cost the U.S. economy $100 to $200 billion per year, as estimated by the Clinton Department of Energy.

 Kyoto would restrain temperature increases by less than one degree and delay global warming by only six years.

 Kyoto was rejected by the U.S. Senate 95-0.

 It is very likely that the so-called scientists on the IPCC assumed beforehand that global warming was due to CO2 and then, instead of treating it as a hypothesis, they estimated a simple, incomplete, relationship between temperature change and CO2. A bad model can always be used to provide a desired result.

It is legitimate to recognize that global warming is taking place and will cause significant problems. And few in the U.S. will deny that we should decrease our dependence on oil from the Middle East. But some persons think it is heresy to disagree with the view that human activity is the main cause of global warming rather than change in solar activity and change in the earth’s orbit and tilt. Some of them appear to be confused. They do not seem to understand that the debate is not about the fact that global warming is taking place but rather about its major cause. Some may even think, erroneously, that the debate is about whether human activity contributes to emission of greenhouse gases. Others cling to a claim based on a review of 928 studies that there is no controversy that human activity is causing global warming. They seem not to realize that only 2 percent of the 928 studies wholly endorsed that claim and that there were 11,000 studies on the subject that were not examined [see investorsinsight link below].

One should also be careful in studying findings of the United Nations Intergovernmental Panel on Climate Change (IPCC). A University of Auckland [New Zealand] paper by C.R. de Freitas says “The UN IPCC’s voice to the public, press and policy makers regarding climate science is through summaries; in particular, the brief, politically approved “Summaries for Policymakers” (SPM), which have become notorious for their bias, tendency to overstate problems and penchant for simplifying and dramatizing scientific speculation”. Nor should one be swayed by the fact that a large number of scientists contributed to the preparation of the IPCC report. In 2000, Professor S. Fred Singer testified to the U.S. Senate that more than 17,000 scientists signed the Oregon Institute of Science and Medicine Petition against the Kyoto Protocol because they saw “no compelling evidence that humans are causing discernible climate change.” Furthermore, recent reductions in sunspots on the solar surface suggest that we may be entering into a cooling period.

The exact nature of the model that the so-called scientists on IPCC used to investigate the role of CO2 is not clear. It is very likely that they assumed beforehand that global warming was due to CO2 and then, instead of treating it as a hypothesis, estimated a simple, incomplete relationship between temperature change and CO2. As experienced modellers know, one can always use a bad model to provide a desired result.

Proponents of anthropogenic global warming should reveal the specific quantitative relationship [or relationships] that displays temperature as a function of CO2, and also indicate the estimation technique and the nature and source of the data that were used to establish the relationship. Modeling the causes of global warming requires use of a comprehensive data series and a complete and logical set of explanatory variables including measures of solar activity and indicators of the earth’s orbit and tilt. Carbon dioxide concentration by itself is an inadequate explanatory variable, especially in view of the fact that higher temperatures increase non-human emissions of carbon dioxide from plant-life and the sea.

Persons who are eager to place predominant blame on mankind for global warming often specialize in personal attacks on those who have an opposing view. For example, they promulgate smears that dissenting scientists are bribed by energy producers such as “Big Oil”. People who want to know the facts should seriously study websites such as http://www.geocraft.com/WVFossils/ice_ag es.html, http://www.friendsofscience.org/ [prepared by an international group of sixty professors and scientists], http://meteo.lcd.lu/globalwarming/ [chaired by Sir Ian Byatt, a distinguished British Civil Servant], an EPA site http://www.epa.gov/climatechange/science  /stateofknowledge.html, and the 2008 report: S. Fred Singer, ed., Nature, Not Human Activity, Rules the Climate: Summary for Policymakers of the Report of the Nongovernmental International Panel on Climate Change, Chicago, IL: The Heartland Institute, 2008.

For a broad overview they should read “The politics of global warming” – an interview by Bill Steigerwald of the Canadian climatologist, Dr. Tim Ball, in the February 10, 2007 Pittsburgh, PA Tribune. They should be dismissive of attempts by entities with a political agenda to smear Dr. Ball. Persons with a background in science should read the critique of the climate change modelling process by Warren Meyer (A Skeptical Layman’s Guide to anthropogenic global warming); and examine http://www.globalwarmingheartland.org/ Persons with a background in science and economics should read the scathing analysis of the IPCC and Stern reports by a British panel of fourteen independent expert scientists and economists at http://www.fcpp.org

They should consider whether it is wise to impose huge costs on consumers by adopting the Kyoto protocols for very little gain. [Kyoto would cost the U.S. economy $100 to $200 billion per year, as estimated by the Clinton Department of Energy, and restrain temperature increases by less than one degree. That is equivalent to delaying global warming by only six years]. Kyoto was rejected by the U.S. Senate 95-0.

They should pay particular attention to the Friends of Science website which shows a close relationship between temperature anomaly and the length of sunspot cycles, but a very weak relationship between temperature anomaly and concentration of carbon dioxide. Recent reductions in sunspots on the solar surface suggest that we may be entering into a cooling period. And, in his movie, even Al Gore seems to be aware that tilt of the Northern Hemisphere towards the sun leads to global warming because of its greater land mass. The geocraft website explains the effect of cyclical eccentricities in the earth’s rotation and orbit.

Furthermore, on the basis of U.S. Department of Energy data, J. DuHamel in his paper, Climate Change in Perspective, noted “that humans are responsible for 2% to 5% of total CO2 emissions. Carbon dioxide constitutes about 3% to 4% of total greenhouse gases by volume; therefore anthropogenic CO2 represents less than two-tenths of one percent (0.2%) of total greenhouse gases emitted into the atmosphere each year”.

Some persons seem eager to place predominant blame on mankind for global warming. When they have studied issues more closely perhaps they will be outraged by the temerity of the sun to change its activity and the earth to alter it’s orbit and tilt.

Professor William McKillop
1824 Countrywood Court
Walnut Creek CA 94598
Phone: 925-938-6720

Posted by William McKillop | Report as abusive

Here is what’s wrong …

Jun 26, 2009 13:58 UTC

From IHS Global: “Reduced wealth, high debt, tight credit, and a weakening labor market are all weighing on consumers. Wages and salaries were down in May, and have fallen in four out of five months this year. And higher gasoline prices are biting into spending power.”

COMMENT

$4/gallon gas crushed disposable income starting summer ’08. That was the match which touched this firestorm. In addtion to the expansion of CRA courtesy of Barney Frank in the early 90s; OPEC deserve much of the credit these past 15 months.

I’m sure you’d agree unless you’re also convinced of the Geo Soros conspiracy to demolish the US economy to drive Bush out of office.

Posted by Hank Reardon | Report as abusive

The fate of cap-and-trade in the House

Jun 26, 2009 13:51 UTC

My guy Dan Clifton of Strategas Research hears what I am also hearing:

As of early this morning, the votes were not present for passage, but House leadership has publicly claimed progress and is confident they have the votes to pass the legislation. Should the bill pass, the vote will likely be a razor thin majority. While today’s vote will have an impact on the financial markets, we remain convinced that passage in the Senate is a very unlikely event and today could represent a head fake. Passage of the House bill should not be underestimated, but House passage is not a proxy for the Senate passage. A razor thin simple majority in the House does not translate into a required 3/5 majority in a more restrictive Senate.

Me: Time is not on the side of the cap-and-trade effort. The longer the economy stays weak, the more this legislation seems like an expensive indulgence. Plus, the consensus on the science is breaking down.

And while you are here, Mr. Bernanke

Jun 26, 2009 13:48 UTC

Andy Busch of BMO Capital Markets also noticed the money supply question slipped in toward the end of Ben Bernanke’s grilling yesterday:

During the Bernanke testimony yesterday on the BofA/Merrill deal, a curious question popped up about money supply growth.  I’m not sure what was more surprising the fact that this question came up or that a House member asked it.  Bernanke said that the massive supply of money into the system was mainly being held by banks as reserves.  Since banks are not lending much, this growth in money supply wasn’t a problem at this time.

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