Monthly Archives: September 2009

Decarbonization, Pollution And Economic Prosperity

My friend Bob Preston who manages a clean energy investment portfolio for Merrill Lynch, sent the following charts the other day from the work of Jesse H. Ausubel and Paul E. Waggoner at Rockefeller University.

They confirm  some long term beliefs of mine:

The history of technological progress is one of increasing decarbonization of primary fuels and cleaning up of waste streams – from animal energy and  wood to coal to petroleum to natural gas to electricity to renewables and hydrogen.

The solution to climate concerns, like all the environmental concerns, is not more regulatory burdens and dictates, but solutions encouraging a free prosperous market economy that allows the wealth and prosperity for the luxury of environmental protection that poor and developing countries have never invested in and only wealthy nations have ever been able to afford to pursue. As these charts show, there is a clear link between economic prosperity and decarbonization and reduced pollution.

Hopefully more in the environmental community will both accept and advocate for maintaining this critical linkage between new environmental policy and maintaining real economic prosperity.

Preston files_Page_1Preston files_Page_2Preston files_Page_3

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Filed under Best Stuff, Economic Policy, Energy Policy, Environmentalism, Fundamental Perspectives

Entrepreneurs See Economy Headed In The Wrong Direction

The summary of a new survey by the Kauffman Foundation is copied below:

(KANSAS CITY, Mo.) Sept. 22, 2009 – The Ewing Marion Kauffman Foundation today announced the results of a new survey of American entrepreneurs showing that entrepreneurs and small businesses continue to struggle despite increasing optimism on Wall Street. One week before Federal Reserve Chairman Ben Bernanke made the statement that the recession is “very likely over,” two-thirds of entrepreneurs reported that the economy is heading in the wrong direction.

In the past year, more than one-third of the entrepreneurs surveyed have shed jobs while only five percent of entrepreneurs have added employees. A majority of entrepreneurs believe that the stimulus package has hurt entrepreneurial activity, and entrepreneurs want government to pursue a fundamentally different approach to encourage entrepreneurship.

“In America, entrepreneurial activity is a leading force in the health and growth of our economy,” said Carl J. Schramm, president and CEO of the Kauffman Foundation. “These results confirm that we’ve got a long way to go before we’re in the clear.”

Later this week the Kauffman Foundation will release details of a new initiative designed to enable entrepreneurs to have more influence on decisions that impact small business growth and job creation.

Kauffman Foundation studies have shown that entrepreneurs have historically been key drivers of economic recovery in past recessionary periods. Since 1980, companies less than five years old have accounted for virtually all net new job creation in the United States.

“Pessimism and revenue loss among entrepreneurs on the front lines of the economy indicate that the fruits of economic recovery have yet to hit Main Street,” Schramm said.

Other key findings include:

  • 69 percent of entrepreneurs believe the recession will last one to two years longer
  • 75 percent think the United States cannot have a sustained economic recovery without another burst of entrepreneurial activity

Pollster Doug Schoen surveyed more than 250 entrepreneurs and 150 “would-be” entrepreneurs from Sept. 8 to Sept. 12, 2009. An entrepreneur was defined as someone who has started a business and is currently running it. A would-be entrepreneur was defined as someone who would like to start a business.

As a serial entrepreneur myself, my sense is that the key here is that those who really create a growing economy are extremely discouraged by government policy of all sorts that is destroying real economic opportunity. Misguided stimulus spending wildly distorting markets, along with government bail outs of failing corporate dinosaurs, and government undermining the rule of law and contracts which are essential for entrepreneurs to succeed, together make it nearly impossible to plan for the future and access business risks. When the fundamental rules of the economic game are in such upheaval, banks stop lending and economic success appears to now come from who you know with political power or chasing government grants, its hard to build the foundations of a real business or to be willing to take the essential risks to try.

Despite the rhetoric to the contrary, the corporate cronyism engendered by both Bush and Obama economic policies is making entrepreneurial endeavors increasingly hard to rationalize.

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The Future Of The Dollar

In this CNBC interview, Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, lays out a clear analysis of the future of the dollar. He focusses on the implications of Federal Reserve Governor Kevin Warch’s Wall Street Journal OpEd “The Fed’s Job Is Only Half Over” issued while the G-20 was meeting.

Rickards pays particular note to this excerpt from Warsh’s op ed, suggesting it is all about the value of the dollar relative to gold:

Today, even more than usual, we should maintain considerable humility about optimal policy. Financial market developments bear especially careful watching. They may impart more forward-looking signs of growth and inflation prospects than arithmetic readings of stimulus-induced gross domestic product or lagged composite readings of inflation. For example, the level of asset prices and associated risk premiums, and gauging their trend and durability, will demand careful assessment.

Rickards suggests that Warsh is signaling to the G-20 that the Fed will try to fight the impending collapse of the US dollar and instead will try to manage a steady planned decline of our nations currency, wealth and influence in the world as a means to inflate away an otherwise impossible to manage level of federal debt.

The implications of Rickards interview, regarding both the Fed’s objectives and their limited powers to reach them is both clear and eye opening.

Rickards analysis seems spot on. And my sense is that Warsh is being extremely optimistic in suggesting that the Fed’s job is half over. Despite the apparent easing of the crisis, the financial mess our nation is in has only begun to become clear. Very few in Washington or in the chattering class have been as forthright and clear as Rickards regarding the implications of the inevitably declining dollar on our nation’s future or that of its citizens.

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Jail Time For A Lack of Health Insurance

Politico reports that under the proposed health care plan:

Americans who fail to pay the penalty for not buying insurance would face legal action from the Internal Revenue Service, according to the Joint Committee on Taxation.

The remarks Thursday from the committee’s chief of staff, Thomas Barthold, seems to further weaken President Barack Obama’s contention last week that the individual mandate penalty, which could go as high as $1,900, is not a tax increase.

Under questioning from Sen. John Ensign (R-Nev.), Barthold said the IRS would “take you to court and undertake normal collection proceedings.”

Ensign pursued the line of questioning because he said a lot of Americans don’t believe the Constitution allows the government to mandate the purchase of insurance.

“We could be subjecting those very people who conscientiously, because they believe in the U.S. Constitution, we could be subjecting them to fines or the interpretation of a judge, all the way up to imprisonment,” Ensign said. “That seems to me to be a problem.”

In a follow up posting Politico reports:

Sen. John Ensign (R-Nev.) received a handwritten note Thursday from Joint Committee on Taxation Chief of Staff Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead.

Jail time for the failure to purchase health insurance. Yeah, that’s the answer. Let’s fill our prison system with people whose only crime is they can’t afford government mandated health insurance.

And the folks in Washington wonder why people are getting angry in America.

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Filed under Health Care, Politics

The Huge Mistake

Environmental Attorney’s Laurie Williams and  Allan Zabel have supplemented their written critiques of the Waxman Markey Cap and Trade bill with an excellent short video – “The Huge Mistake” .

Something about video is more compelling than more writing.

As the first comment on the YouTube link notes, it is telling that “the top-ranked U.S. Climate Scientist (James Hansen) and the top-ranked (Nobel prize winning) economist working on climate change (Joseph Stiglitz) both agree that caps are a mistake, and that a carbon tax with recycled revenue is the solution.”

I wonder what it will take to get the major environmental organizations to abandon what Williams and Zabel correctly label as “The Big Ripoff” and instead support “The Real Solution” – the answer to our fossil fuel addiction that the majority of economists and sensible folks from all political persuasions – a revenue neutral carbon tax.

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Filed under Climate Policy, Economic Policy

Shining The Light Of The Freedom Of Information Act On Waxman Markey

CBS News reports: “Obama Admin: Cap And Trade Could Cost Families $1,761 A Year” Documents made available through the Freedom of Information Act reveal that:

“The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.”

“A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration’s estimate, the cost per American household would be an extra $1,761 a year.”

That publication of an honest administration assessment of the real cost of a bill that clearly would not meet any of its purported environmental goals should hopefully bury congressional efforts to create the largest corporate welfare program in the history of the country.

One also has to wonder about all the promises regarding government transparency we heard from President Obama in the campaign just a year ago. Why weren’t these assessments made honestly and publicly when Congress was debating the Waxman Markey bill earlier in the summer? It is sad to see a presidency started on such high hopes be squandered by the arrogance of those in the administration who disregard the President’s promises in order to advance a poorly conceived policy that makes no sense at all from either an environmental or economic perspective.

Perhaps soon Congress will get serious and start considering a real solution to all the problems caused by our fossil fuel addiction – a revenue neutral carbon tax that simultaneously reduces regressive payroll taxes, providing both an economic stimulus and a sensible environmental solution, with no additional burden on tax payers or our national debt.

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Filed under Climate Policy

Creating Jobs

According to the Entrepreneurship Resource Center: “From 1980-2005, firms less than five years old accounted for all net job growth in the United States.”

As we subsidize and bail out all the failed corporate dinosaurs of the last century, is anyone in Washington paying attention to facts like this?

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Filed under Economic Policy