Comentarios al post "California: Caos democrático" en Abilene blog

Comentarios al post "California: Caos democrático" en Abilene blog
Dec 28, 2009

hola, creo que hay varias cosas que no acaban de capturar realmente la esencia de las diferencias del sistema federal y el europeo continental:

“Con este hecho se demuestran las dificultades de articular estados en los que gobiernan políticos cuyas ideologías y planes de acciones han resultado fracasadas.”

A qué ideologías se refieren? Porque las dos cámaras son, sorpresa, de mayoría demócrata, cosa que no sé si se puede deducir del artículo (aunque sí del artículo de P Krugman). Parece, de otros trozos del mismo, que se refiere a que los fracasados son los republicanos.

Me parece ver aquí una habitual confusión: en política europea el primer ministro es elegido en la cámara popular, vamos a decir, por lo que muy difícilmente piensan distinto la mayoría de la cámara y el Ejecutivo (salvo el caso italiano), mientras que en los EE UU lo normal es que haya dos cámaras iguales (puede haber una) y el Ejecutivo sea elegido al margen de las mismas. Gobiernan todos, el Legislativo y el Ejecutivo. No hay que confundir gobernador o presidente federal con mayoría en la cámara baja, que es el caso de aquí.

Acerca de esto otro:

“Los ciclos legislativos desfasados del ciclo del país provocan que mientras hay una renovación política en EEUU, aun siguen gobernando en algunos estados las anteriores corrientes de poder (recordemos que en las elecciones generales B. Obama se proclamó vencedor en California, A. Schwarzenegger es republicano).”

un par de cosas:

- Lo de “siguen gobernando en algunos estados las anteriores corrientes de poder” da la impresión de que el autor cree que, ya que en las elecciones federales ha habido mayorías demócratas en las cámaras federales y el Ejecutivo federal, por ello debería haber casi 50 de los 50 estados con mayorías demócratas en Legislativo y Ejecutivo. Esto es totalmente ajeno a cómo funciona el sistema. De hecho, más o menos la mitad de los estados son republicanos y más o menos la mitad son demócratas, simplificando. Eso es al margen de quién consiga la presidencia federal.

- Como dije antes, las dos cámaras son demócratas (lo que hace que se vea especialmente flojo el análisis sociológico de “Sólo una minoría de los californianos se molesta en votar habitualmente, los votantes tienden a ser mayores, más blancos y más ricos que la mayoría predominante de la población”, según eso y las creencias del autor debería haber mayoría republicana en ambas cámaras). Que el gobernador sea republicano (y muchos republicanos dirían que es un RINO, Republican In Name Only) es irrelevante para esta discusión. Lo que falta es una mayoría suficiente de demócratas en las cámaras, pero si la gente prefiere la parálisis (y es bastante común tener el Ejecutivo de un partido y las cámaras o al menos una de ellas con mayoría de otro partido opuesto, ejemplo parálisis en la época Clinton), es lo que se necesita en ese momento, aunque visto desde Europa parezca incomprensible.

Por último, cree de verdad el autor que P Krugman es parte desinteresada en los análisis? Cree que se le puede recomendar como lectura única, sin equilibrar con otra visión después de frases como éstas?:

. “los miembros restantes del partido [republicano] se han vuelto cada vez más radicales, cada vez menos interesados en la labor de gobernar.”

. “el creciente extremismo del partido [republicano]”

. “Dicho sin rodeos: los últimos acontecimientos indican que el Partido Republicano se ha vuelto loco al perder el poder”

. “Los pocos moderados que quedaban [entre otras cosas] han huido”

Los que votan republicano son, como los que votan demócrata, cerca de la mitad del electorado y más o menos del país. Acusar a cualquiera de las mitades de creciente extremismo, haberse vuelto locos, haber hecho huir a los moderados, o estar boicoteando la labor de gobierno revela los odios y amores del profesor, que no parece una fuente que los historiadores puedan citar en el futuro sin añadir inputs de otras fuentes.

No Place to Write Detention Policy

No Place to Write Detention Policy. By Benjamin Wittes, and Jack Goldsmith
Brookings, December 22, 2009

Since U.S. forces started taking alleged terrorists to Guantanamo Bay, Cuba, the task of crafting American detention policy has migrated decisively from the executive branch to federal judges. These judges, not experts in terrorism or national security and not politically accountable to the electorate, inherited this responsibility because of the Supreme Court's intervention in detention policy. Over time they maintained it because legislative and executive officials of both political parties refused to craft a comprehensive legislative approach to this novel set of problems that cries out for decisive lawmaking.

Many commentators have complained about this state of affairs and the contradictory and incoherent body of law it is producing and have urged the political branches to enact legislation to create a uniform and democratically legitimate detention policy.

Now a more important voice has joined the call for legislative reform.

Judge Thomas F. Hogan of the U.S. District Court in Washington is one of the most respected federal district judges on the bench. And he has a particularly informed view of the disarray of modern detention policy. Not only is he one of the judges hearing detainee habeas appeals, but he was asked by most of his judicial colleagues to consolidate and manage common issues in their cases. He is, in short, one of the people to whom Congress has effectively delegated the task of writing these rules -- a person with as holistic and in-the-weeds an understanding of the issues as is possible.

Last week, in ruling on the merits of a detainee's case, he issued a scathing indictment of the current litigation and an urgent plea for congressional participation in cases that "go to the heart of our judicial system."

"It is unfortunate," he said in an oral opinion from the bench, "that the Legislative Branch of our government and the Executive Branch have not moved more strongly to provide uniform, clear rules and laws for handling these cases." While allowing that the various judges were "working very hard and in good faith," he lamented that "we have different rules and procedures being used by the judges," as well as "different rules of evidence" and "a difference in substantive law." For Judge Hogan, it all "highlights the need for a national legislative solution with the assistance of the Executive so that these matters are handled promptly and uniformly and fairly for all concerned."

Congress has avoided these issues for a number of reasons. Initially, it was a combination of the Bush administration's failure to seek congressional help and lawmakers' natural inclination to avoid taking responsibility for hard decisions for which they might later be held accountable. More recently, the Obama administration has been loath to spend any more political capital than necessary in cleaning up what it views as its predecessor's messes. Instead of dealing with detention policy proactively, it has largely adopted the Bush approach of grinding out detention policy in the courts. Ironically, the president's political base seems to prefer his adoption of the Bush approach -- an approach liberals previously decried -- to any effort to write detention rules and limitations into statutory law.

As Judge Hogan made clear, this is a bad way to craft policy. It generates uncertainty about the lawful parameters of detentions, ensures longer adjudication times and lessens accountability for difficult decisions.

The Guantanamo closure process and the appropriations process for the new terrorist detention facility in Illinois offer a perfect opportunity to correct this long-festering problem. The administration will have to work with Congress, if only to permit Obama to move detainees to the new site. Yet if legislation stops there, the political branches can congratulate themselves only on moving the location of terrorist detention and not on strengthening and clarifying detention policy.

By contrast, if Congress and the administration were inclined to perform their constitutional duties, they could draw on eight years of judicial decisions, legal briefs and scholarship to craft clear, stable rules. There are myriad issues for a responsible Congress to address, but at a minimum it should offer a clear definition of who can be detained, a coherent set of evidentiary and procedural rules to determine who fits the definition of an enemy, and guidance concerning the scope of the government's obligation to disclose evidence to detainees' lawyers.

The goal, simply put, should be to replace what Judge Hogan called "procedures drawn up by the court, and principally [by] myself . . . in a new venue that has been untested" with one that carries the legislature's stamp and the president's signature, and that answers some of the hard policy questions our political institutions have punted to the courts. The courts' job, in such a world, would be to adjudicate detainee cases, rather than to write conflicting rules that they then have to apply.

'He Just Does What He Thinks Is Right'

'He Just Does What He Thinks Is Right'. By Peggy Noonan
WSJ, Dec 26, 2009

Cannon to the left of him, cannon to the right of him, cannon in front of him volley and thunder. That's our president's position on the political battlefield now, taking it from all sides. And the odd thing, the unique thing in terms of modern political history, is that no one really defends him, no one holds high his flag. When was the last time you put on the radio or TV and heard someone say "Open line Friday—we're talking about what it is we like best about Barack Obama!" When did you last see a cable talking head say, "The greatness of this man is as obvious as it is unnoticed"?

Is the left out there on the Internet and the airwaves talking about him? Oh, yes. They're calling him a disappointment, a sellout, a DINO—Democratic in name only. He sold out on single-payer health insurance, and then the public option. He'll sell you out on your issue too.

The pundits and columnists, dreadful people that they are, call him cold, weak, aloof, arrogant, entitled.

So let's denounce him again.

Wait—it's Christmas. Let's not. There are people who deeply admire the president, who work with him and believe he's doing right. This week, this column is their forum. They speak not for attribution to avoid the charge of suckupism.
***

We start with a note from an accomplished young man who worked with Mr. Obama on the campaign and in the White House. He reminded me this week of a conversation we'd had shortly before the president's inauguration. "I remember you asked me back in January if I loved my guy. And in light of all that's happened in this first year, I still do. Even more so. And I also have a strong sense—based not just on polls but on a lot of folks I've talked to who don't always pay attention to politics—that he DOES have that base of people who still love him too.

"It's hard to detect, because the part of the 'base' that's represented on cable and on blogs is so vocal (and by vocal I mean shrill), but it's there. I also read it in the letters he gets. Some of them are amazingly poignant and appreciative of what he's done and what he's doing. Some of them are tough—very tough—but still respectful and hopeful that he's doing the right thing. Even if they're unsure right now, they want him to succeed. . ."

He sees them as a kind of quiet majority, or at least quiet-but-large-group-within-the-electorate.

"[T]hey're not going to run out and defend him on the blogs or start screaming back at his detractors, because they know its fruitless and they're sick of all that Washington nonsense anyway." They want him to cut through the mess and "get things done for them. And they're willing to give him that chance. Still."

The president, he suggested, tends toward the long view and the broad view. "Here's what I know about him. He still has this amazing ability to tune out the noise from Washington, read the letters from the people, listen to their concerns, listen to his advisors, hear both sides, absorb all the information, and make the decision that he honestly feels is right for the country."

He does this "without worrying too much about the polls, without worrying too much about being a one-term president. He just does what he thinks is right. And that consumes a lot of his time. Most of it, in fact."

He is aware that Obama is "perceived as alternately too weak and too Chicago, too left and too right, too willing to compromise and too beholden to his majority, too detached and too much meddling in too many things." The administration needs "to do better in resetting the story and telling it the way we want it told." But "the fractured, petty, biased-towards-the-sensational media today makes that more difficult than ever before."

He knows now, he said, "how the Bushes and the Clintons must have felt," and wonders "if that just happens to all White Houses. I don't know. But I do know that we have some very big, very unique problems right now. And we live in a very cynical . . . time where it's difficult to maintain the benefit of the doubt as you're navigating through the storm." They're giving it their best. "Lots of good people are trying. We won't fix it all, but I think we'll succeed (and think that in some cases, we already have!) at fixing a good deal."
***

Another staffer spoke warmly of President Obama's warmth. "He's interested in who you are, and it's not manufactured." He sometimes finds himself briefing the president before events. "I know he's just come out of a meeting on Afghanistan" and maybe the next meeting isn't as important, but he wants to know who they are and where they're from and has a gift for "making them feel important."

"He's a young president, young in terms of youthful." Sometimes people come in to meet him and find "they came for a photo and he gives them a game" of pick-up basketball on the White House court. "Those are the things from a human perspective that make him so accessible. Accessible is the right word. He's emotionally available."

He is appreciative of his staff's efforts. "When you're working hard for your country and you know [he cares] it is huge." How does he show his thanks? "It's a little like a basketball game—'Thanks for that, I know what you did.' It's not a note or a pat or a call, it's a guy-to-guy thank you, 'That's cool, that's good.' You think, 'My coach got that I worked my ass off.'"

"As a person he is just an incredible human being who you can't help but love."

A third Obama staffer spoke of last week's senior staff dinner, at which the president went around the table and told each one individually "what they meant to him, and thanked the spouses for putting up with what they have to put up with." He marks birthdays by marching in with cakes. He'll walk around the White House, pop into offices and tease people for putting their feet on the desk. "Sometimes he puts his feet on the desk." He's concerned about much, but largely unruffled. "He's not taken aback by the challenges he has. He seems more focused than he's ever been. He's like Michael Jordan in that at the big moments everything slows down for him." He's good in the crunch.
***

I end with a story told to me by an old Reagan hand who, with another former Reagan administration official, was being given a private tour of the White House by Michelle Obama. This was last summer. Mrs. Obama led the two through the halls, and then they stopped by the Lincoln bedroom. They stood in the doorway, and then took a step inside, but went no deeper. Everything looked the same, but something was different. "We don't allow guests to stay in this room anymore," Mrs. Obama explained. She spoke of it as a place of reverence. They keep it apart, it's not for overnights.

Unspoken, but clearly understood by the Reagan hands, was: This is where he signed the Emancipation Proclamation. A true copy of it is here, on the desk. He signed it: "Abraham Lincoln." The Reagan hands were impressed and moved. It is fitting and right that the Lincoln bedroom be held apart. It always should have been. Good, they thought. Good.

The credit raters lose their oligopoly

One Cheer for Barney Frank. WSJ Editorial
The credit raters lose their oligopoly.
WSJ, Dec 23, 2009

The House-passed rewrite of financial regulation is a disappointment for investors and taxpayers. But one portion of the bill represents significant reform—and a vast improvement from an early draft we described in October.

Congressmen Barney Frank and Paul Kanjorski (D., Pa.) have produced legislation that would likely end the credit-ratings racket enjoyed by Standard & Poor's, Moody's and Fitch. During the housing bubble, these government-anointed judges of credit risk slapped their triple-A ratings on billions of dollars of mortgage-backed securities. The consequences for investors were catastrophic.

The Frank-Kanjorski provision that recently passed the House not only eliminates all laws that require the use of these "Nationally Recognized Statistical Ratings Organizations." The bill also instructs all the major financial regulators to remove such requirements from their rules. This is a subtle but enormously important change from the October draft, because most of the federal edicts that guaranteed profits for S&P and the gang were contained in agency rules, not laws.

The House-passed bill also repeals an exemption that credit-raters have enjoyed from the Securities and Exchange Commission's Regulation Fair Disclosure. No longer will they have access to corporate information that is denied to average investors.

Also removed from the bill was a bizarre "joint liability" scheme in which all the credit raters would be responsible for each other's work, so that a bad report by Fitch could be grounds for a lawsuit against Moody's. Unable to restrain themselves entirely from bestowing gifts upon trial lawyers, House Democrats have instead increased liability for the raters on their own work.

The Senate should avoid such public display of affection toward the plaintiffs bar but embrace the House language that strikes at the heart of the ratings cartel. Obliterating investor requirements to use credit-ratings agencies would amount to major reform all by itself. Perhaps the House and Senate should simply agree on that, pass a bill now, and then start over with a new mission for regulatory reform: break up the too big to fail racket.

Jackson Toby's "The Lowering of Higher Education in America"

On Campus, Unprepared. By BEN WILDAVSKY
Colleges are filled with unserious students learning too little. What should be done?
WSJ, Dec 23, 2009

When President Barack Obama announced earlier this year that the U.S. should aim to have the world's highest proportion of college graduates by 2020, he was staking out an ambitious but hardly a maverick goal. It is widely recognized, by Republicans and Democrats alike, that the gap between the earnings of high-school graduates and college graduates has become a chasm in recent decades. More college graduates would mean more prosperity for individuals—and for the nation, too. Bowing to this logic, governments around the world—from China and India to the Middle East—are trying to boost college attendance for their knowledge-hungry populations.

As Mr. Obama's goal suggests, there is plenty of room for improvement in the U.S. While nearly seven in 10 high-school graduates go on directly to two- or four-year colleges (up from 49% in 1972), many students are poorly prepared for college and end up taking remedial courses. And huge numbers fail to graduate. Reformers believe, not without reason, that such problems can be solved in part by improved high-school preparation and better college instruction. But is it possible that aiming to increase the number of American college graduates is actually a fool's errand?

A few skeptics think so. Most prominent among them is Charles Murray, who in "Real Education" (2008) argued that most young people are just not smart enough to go to college and should be encouraged to take other paths instead, especially vocational training. Now comes Jackson Toby with "The Lowering of Higher Education in America," a provocative variation on Mr. Murray's theme.

Mr. Toby draws on social-science data as well as personal experience—he taught sociology at Rutgers University for 50 years before retiring a few years ago—to decry the intellectual conditions that prevail on the American campus. Sidestepping the matter of students' innate abilities, he blames low academic standards mostly on the easy availability of financial aid to undergraduates who are unqualified for college-level coursework.

Early on, Mr. Toby concedes that education has become the country's "main economic escalator." But he is alarmed at how few students are prepared to meet even the minimal demands of a real college education. He faults lax college-admission standards that give high schools little incentive to push their students harder. Too many undergrads can't write with minimal competence or understand basic cultural references. Students often take silly, politicized courses. And they feel entitled to inflated grades: Mr. Toby reports that one of his students spewed obscenities at him for ending the young man's straight-A record.

Perhaps this kind of experience accounts for Mr. Toby's seeming bitterness toward unserious students, whom he calls "unprepared, half-asleep catatonics who drift in late and leave early." Most undergrads, Mr. Toby suggests, enjoy a steady diet of extracurricular hedonism while skating through their coursework (though it's unclear how this claim jibes with his complaints about low graduation rates).

Worst of all, he says, students have been misled about the value of their degrees. Yes, a bachelor of arts degree commands a wage premium, but less because of a graduate's acquired knowledge than because of the signal that his degree sends to employers about the abilities that got him into college and about a variety of soft skills, such as reliability and problem-solving capacity. Graduates in undemanding majors—in the humanities, for example, or most of the social sciences—are unlikely to earn what their more studious counterparts in, say, engineering can. They are thus disproportionately likely to be saddled with debt and prone to default, Mr. Toby argues. He claims that this pattern amounts to the kind of unsound lending that led to our recent credit crisis—one that he darkly suggests may soon be repeated in higher education. He believes that today's "promiscuous" system of college grants and loans—which, at the federal level, is based largely on financial need—ought to be retooled to focus on academic merit.

But his platform is less radical than his book's subtitle promises ("Why Financial Aid Should Be Based on Student Performance"). He acknowledges that quite a few states already have merit-based aid. And in a concession to political reality he would continue the federal Pell Grant program, which focuses on need alone. Mr. Toby's main proposal, then, is to require good grades and test scores from those seeking federal student loans. This requirement, he believes, would improve incentives for academic performance and mitigate the inevitable trade-off between widening access to college and maintaining educational standards.

Strangely, Mr. Toby does not address the biggest objection to merit aid, which is that it usually subsidizes middle- and upper-income students who would go to college anyway. By contrast, need-based aid often provides make-or-break help to low-income applicants: Without grants and student loans, they would probably not go to college at all.

Mr. Toby sees reduced college opportunities as the price of keeping under-prepared students off campus. But that is one trade-off we should not make, especially when a college degree carries so much value in the marketplace. Our vast and varied college system, to its credit, enrolls all sorts of students. Mr. Toby delineates the system's manifold shortcomings, which badly need to be remedied. And to be sure, academic merit deserves a place in our financial aid system. But the indisputable benefits of college ought to be spread more widely, not less.

Mr. Wildavsky, a senior fellow at the Kauffman Foundation and a guest scholar at the Brookings Institution, is the author of "The Great Brain Race: How Global Universities Are Reshaping the World," to be published next spring.

Sometimes the good guys do commit 'war crimes'

The Real Rules of War. By WARREN KOZAK
Sometimes the good guys do commit 'war crimes.'
WSJ, Dec 23, 2009

Five years ago, a particularly gruesome image made its way to our television screens from the war in Iraq. Four U.S. civilian contractors working in Fallujah were ambushed and killed by al Qaeda. Their bodies were burned, then dragged through the streets. Two of the charred bodies were hung from the Euphrates Bridge and left dangling.

This barbaric act left an impression that our military did not forget: In a special operation earlier this year, Navy SEALs captured the mastermind of that attack, Ahmed Hashim Abed. But after he was taken into custody in September, Abed claimed he was punched by his captors. He showed a fat lip to prove it. Three of the SEALS are now awaiting a courts-martial on charges ranging from assault to dereliction of duty and making false statements.

This incident and its twisted irony takes me back to an oddly serene setting many years ago. When I was in college, I joined my parents on a trip to retrace my father's wartime experience in Europe. We drove from France, through Holland and Belgium and on to Germany—the same route he had taken with the U.S. Army in 1944-45. At a field outside the Belgian town of Malmedy, we got out of our rented car where my father described something I had never heard before.

During the Battle of the Bulge, in the bleak December of 1944, the Germans had quickly overrun the American lines. They took thousands of prisoners as they pushed through in a last chance gamble to turn the war around. One unit, part of the First SS Panzer Division, had captured over a hundred GIs. They were moving fast, and they didn't care to be burdened by prisoners. So the SS troops put the American soldiers in that field and mowed them down with machine guns.

Around 90 Americans were killed in that barrage. The Germans then walked through the tangle of bodies, shooting those who were still alive in the back of the head. The few that survived were brought to where my father was located in the nearby town of Liege where word of the massacre quickly spread.

My father was never a talker. And in spite of the fact that we were on a trip to look at his past, he didn't open up much, or couldn't. When I asked him what the reaction was among the U.S. troops, he answered without emotion: "We didn't take prisoners for two weeks." I immediately understood what he meant, and had the sense not to press the issue any further. I just looked out at the field, now green and peaceful on a beautiful summer day, and realized he was looking at the same field and seeing something quite different.

In the weeks following the Malmedy massacre, U.S. troops clearly broke the rules of the Geneva Conventions. Justified or not, they were technically guilty of war crimes.

My guess is that the American correspondents imbedded with those troops knew all about this and chose not to report it. So did their officers. They understood the gravity of the war, as well as the absolute importance of its outcome. And they understood that disclosing this information might ultimately help the enemy. In other words, they used common sense. Was the U.S. a lesser country because these GIs weren't arrested? Was the Constitution jeopardized? Somehow it survived.

You don't have to dig too deep to understand that war brings out behavior in people that they would never demonstrate in normal life. In Paul Fussell's moving memoir, "The Boys' Crusade," the former infantryman relates a story about the liberation of Dachau. There were about 120 SS guards who had been captured by the Americans. Even though the Germans were being held at gunpoint, they still had the arrogance—or epic stupidity—to continue to heap verbal abuse and threats on the inmates. Their American guards, thoroughly disgusted by what they had already witnessed in the camp, had seen enough and opened fire on the SS. Some of the remaining SS guards were handed over to the inmates who tore them limb from limb. Another war crime? No doubt. Justified? It depends on your point of view. But before you weigh in, realize that you didn't walk through the camp. You didn't smell it. You didn't witness the obscene horror of the Nazis.

Rules of war are important. They are something to strive for as they separate us from our distant ancestors. But when only one side follows these rules, they no longer elevate us. They create a very unlevel field and more than a little frustration. It is equally bizarre for any of us to judge someone's behavior in war by the rules we follow in our very peaceful universe. We sit in homes that are air-conditioned in the summer and warmed in the winter. We have more than enough food in our bellies and we get enough sleep. The stress in our lives won't ever match the stress of battle. Can we honestly begin to decide if a soldier acted in compliance with rules that work perfectly well on Main Street but not, say, in Malmedy or Fallujah?

In his book, Mr. Fussell probably sums up the feelings of many soldiers when he quotes a British captain, John Tonkin, who experienced a great deal of the war. "I have always felt," Capt. Tonkin said, "that the Geneva Convention is a dangerous piece of stupidity, because it leads people to believe that war can be civilized. It can't."

Mr. Kozak is the author of "LeMay: The Life and Wars of General Curtis LeMay" (Regnery, 2009).

Time for a Climate Change Plan B

Time for a Climate Change Plan B. By NIGEL LAWSON

The world's political leaders, not least President Barack Obama and Prime Minister Gordon Brown, are in a state of severe, almost clinical, denial. While acknowledging that the outcome of the United Nations climate-change conference in Copenhagen fell short of their demand for a legally binding, enforceable and verifiable global agreement on emissions reductions by developed and developing countries alike, they insist that what has been achieved is a breakthrough and a decisive step forward.

Just one more heave, just one more venue for the great climate-change traveling circus—Mexico City next year—and the job will be done.

Or so we are told. It is, of course, the purest nonsense. The only breakthrough was the political coup for China and India in concluding the anodyne communiqué with the United States behind closed doors, with Brazil and South Africa allowed in the room and Europe left to languish in the cold outside.

Far from achieving a major step forward, Copenhagen—predictably—achieved precisely nothing. The nearest thing to a commitment was the promise by the developed world to pay the developing world $30 billion of "climate aid" over the next three years, rising to $100 billion a year from 2020. Not only is that (perhaps fortunately) not legally binding, but there is no agreement whatsoever about which countries it will go to, in which amounts, and on what conditions.

The reasons for the complete and utter failure of Copenhagen are both fundamental and irresolvable. The first is that the economic cost of decarbonizing the world's economies is massive, and of at least the same order of magnitude as any benefits it may conceivably bring in terms of a cooler world in the next century.

The reason we use carbon-based energy is not the political power of the oil lobby or the coal industry. It is because it is far and away the cheapest source of energy at the present time and is likely to remain so, not forever, but for the foreseeable future.

Switching to much more expensive energy may be acceptable to us in the developed world (although I see no present evidence of this). But in the developing world, including the rapidly developing nations such as China and India, there are still tens if not hundreds of millions of people suffering from acute poverty, and from the consequences of such poverty, in the shape of malnutrition, preventable disease and premature death.

The overriding priority for the developing world has to be the fastest feasible rate of economic development, which means, inter alia, using the cheapest available source of energy: carbon energy.

Moreover, the argument that they should make this economic and human sacrifice to benefit future generations 100 years and more hence is all the less compelling, given that these future generations will, despite any problems caused by warming, be many times better off than the people of the developing world are today.

Or, at least, that is the assumption on which the climate scientists' warming projections are based. It is projected economic growth that determines projected carbon emissions, and projected carbon emissions that (according to the somewhat conjectural computer models on which they rely) determine projected warming (according to the same models).

All this overlaps with the second of the two fundamental reasons why Copenhagen failed, and why Mexico City (if our leaders insist on continuing this futile charade) will fail, too. That is the problem of burden-sharing, and in particular how much of the economic cost of decarbonization should be borne by the developed world, which accounts for the bulk of past emissions, and how much by the faster-growing developing world, which will account for the bulk of future emissions.

The 2006 Stern Review, quite the shoddiest pseudo-scientific and pseudo-economic document any British Government has ever produced, claims the overall burden is very small. If that were so, the problem of how to share the burden would be readily overcome—as indeed occurred with the phasing out of chorofluorocarbons (CFCs) under the 1987 Montreal Protocol. But the true cost of decarbonization is massive, and the distribution of the burden an insoluble problem.

Moreover, any assessment of the impact of any future warming that may occur is inevitably highly conjectural, depending as it does not only on the uncertainties of climate science but also on the uncertainties of future technological development. So what we are talking about is risk.

Not that the risk is all one way. The risk of a 1930s-style outbreak of protectionism—if the developed world were to abjure cheap energy and faced enhanced competition from China and other rapidly industrializing countries that declined to do so—is probably greater than any risk from warming.

But even without that, there is not even a theoretical (let alone a practical) basis for a global agreement on burden-sharing, since, so far as the risk of global warming is concerned (and probably in other areas too) risk aversion is not uniform throughout the world. Not only do different cultures embody very different degrees of risk aversion, but in general the richer countries will tend to be more risk-averse than the poorer countries, if only because we have more to lose.

The time has come to abandon the Kyoto-style folly that reached its apotheosis in Copenhagen last week, and move to plan B.

And the outlines of a credible plan B are clear. First and foremost, we must do what mankind has always done, and adapt to whatever changes in temperature may in the future arise.

This enables us to pocket the benefits of any warming (and there are many) while reducing the costs. None of the projected costs are new phenomena, but the possible exacerbation of problems our climate already throws at us. Addressing these problems directly is many times more cost-effective than anything discussed at Copenhagen. And adaptation does not require a global agreement, although we may well need to help the very poorest countries (not China) to adapt.

Beyond adaptation, plan B should involve a relatively modest, increased government investment in technological research and development—in energy, in adaptation and in geoengineering.

Despite the overwhelming evidence of the Copenhagen debacle, it is not going to be easy to get our leaders to move to plan B. There is no doubt that calling a halt to the high-profile climate-change traveling circus risks causing a severe conference-deprivation trauma among the participants. If there has to be a small public investment in counseling, it would be money well spent.

Lord Lawson was U.K. chancellor of the exchequer in the Thatcher government from 1983 to 1989. He is the author of "An Appeal to Reason: A Cool Look at Global Warming" (Overlook Duckworth, paperback 2009), and is chairman of the recently formed Global Warming Policy Foundation (www.thegwpf.org).

The risk of relying on reputational capital: a case study of the 2007 failure of New Century Financial

The risk of relying on reputational capital: a case study of the 2007 failure of New Century Financial, by Allen B Frankel

BIS Working Papers No 294, December 2009

Abstract:

The quality of newly originated subprime mortgages had been visibly deteriorating for some time before the window for such loans was shut in 2007. Nevertheless, a bankruptcy court's directed ex post examination of New Century Financial, one of the largest originators of subprime mortgages, discovered no change, over time, in how that firm went about its business. This paper employs the court examiner's findings in a critical review of the procedures used by various agents involved in the origination and securitisation of subprime mortgages. A contribution of this paper is its elaboration of the choices and incentives faced by the various types of institutions involved in those linked processes of origination and securitisation. It highlights the limited roles played by the originators of subprime loans in screening borrowers and in bearing losses on defective loans that had been sold to securitisers of pooled loan packages (ie, mortgage-backed securities). It also illustrates the willingness of the management of those institutions that became key players in that market to put their reputations with fixed-income investor clients in jeopardy. What is perplexing is that such risk exposures were accepted by investing firms that had the wherewithal and knowledge to appreciate the overall paucity of due diligence in the loan origination processes. This observation, in turn, points to the conclusion that the subprime episode is a case in which reputational capital, a presumptively effective motivator of market discipline, was not an effective incentive device.

JEL Classification Numbers: G10, G20, G30

Keywords: mortgage originators, reputational capital, securitisation

Industry views: Five Troubling Aspects of the Copenhagen Accord

Five Troubling Aspects of the Copenhagen Accord

IER, December 21, 2009

Even though the climate change PR machines are spinning away in the aftermath of Copenhagen’s COP 15, a few of the Copenhagen Accord’s more troubling consequences are not getting the attention they deserve.

Senator McCain called “the agreement to take note of the accord” reached by the United States and a handful of developed nations a “nothing burger.” Senator Kerry, on the other hand, believes the accord is important and called China’s participation “the most critical thing” to ensuring Senate passage of the national energy tax, even though few observers believe China will actually do anything to curtail their growing use of carbon-based energy. Meanwhile, the question of whether the outcome in Denmark was enough to advance international efforts to control emissions can best be summarized by Henry Derwent, president of the Geneva-based International Emissions Trading Association, who noted that the climate talks were a “step backward” in terms of a signal that will support carbon prices.

While the Copenhagen Accord does not represent a major change from the status quo, there are a few troubling aspects of the U.S. effort in Copenhagen worth noting.

First, U.S. negotiators opposed efforts from China and India to ban the use of border tariffs on energy-intensive exports. That means the U.S. actively fought to leave the prospect of Smoot-Hawley-type trade wars on the table for Senate cap-and-trade negotiators. The United States has benefited greatly from free trade; now the U.S. government is opposing free trade.

Second, unlike China and other developing countries, the U.S. will allow “international consultations and analysis” of our greenhouse gas emissions. It is not clear how intrusive these international consultations will be, but with millions of sources of greenhouse gas emissions, it’s hard to believe that they won’t in some way encroach on U.S. sovereignty.

Third, the U.S.’s commitment to hand over billions of dollars a year in taxpayer money was a premature gesture that will only serve as the new floor for developing nations in the next round of international talks. Why would nations in the third world operate under this agreement if they can now see that the starting point for COP 16’s bargaining talks is $30 billion?

Fourth, we must consider the sheer size of the U.S. delegation; press accounts reveal that in addition to the President, five cabinet officials, four other high ranking officials, one czar, over thirty Members of Congress and a host of staff attended all or part of the conference. The United States spent millions to send a small army to Copenhagen to forge a non-binding “accord” that very few Americans view as a priority.

Finally, contrary to Senator Kerry’s hopes, China’s willingness to sit at a non-binding negotiating table will not ease the pain a national energy rationing cap-and-trade tax will cause for American families and is certainly not a sufficient gesture to justify its passage.

Ultimately, Copenhagen will have no impact on the outcome of the cap-and-trade legislation moving through Congress. As we have just seen in the health care debate, Senate passage of this increasingly unpopular measure will depend on how much taxpayer money Majority Leader Reid is willing to give away to his fence-sitting colleagues to reach the 60 votes necessary to move this bill forward.

Rove: The President Is No B+ - In fact, he's got the worst ratings of any president at the end of his first year

The President Is No B+. By Karl Rove
In fact, he's got the worst ratings of any president at the end of his first year.
WSJ, Dec 17, 2009

Barack Obama has won a place in history with the worst ratings of any president at the end of his first year: 49% approve and 46% disapprove of his job performance in the latest USA Today/Gallup Poll.

There are many factors that explain it, including weakness abroad, an unprecedented spending binge at home, and making a perfectly awful health-care plan his signature domestic initiative. But something else is happening.

Mr. Obama has not governed as the centrist, deficit-fighting, bipartisan consensus builder he promised to be. And his promise to embody a new kind of politics—free of finger-pointing, pettiness and spin—was a mirage. He has cheapened his office with needless attacks on his predecessor.

Consider Mr. Obama's comment in his interview this past Sunday on CBS's "60 Minutes" that the Bush administration made a mistake in speaking in "a triumphant sense about war."

This was a slap at every president who rallied the nation in dark moments, including Franklin D. Roosevelt ("With confidence in our armed forces, with the unbounding determination of our people, we will gain the inevitable triumph"); Woodrow Wilson ("Right is more precious than peace and we shall fight for the things which we have always carried nearest our hearts"); and John F. Kennedy ("Any hostile move anywhere in the world against the safety and freedom of peoples to whom we are committed . . . will be met by whatever action is needed").

This kind of attack gives Mr. Obama's words a slippery quality. For example, he voted for the bank rescue plan in September 2008 and praised it during the campaign. Yet on Dec. 8 at the Brookings Institution, Mr. Obama called it "flawed" and blamed "the last administration" for launching it "hastily."

Really? Bush Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke and New York Fed President Timothy Geithner designed it. If it was "flawed," why did Mr. Obama later nominate Mr. Bernanke to a second term as Fed chairman and make Mr. Geithner his Treasury secretary?

Mr. Obama also claimed at Brookings that he prevented "a second Great Depression" by confronting the financial crisis "largely without the help" of Republicans. Yet his own Treasury secretary suggests otherwise. In a Dec. 9 letter, Mr. Geithner admitted that since taking office, the Obama administration had "committed about $7 billion to banks, much of which went to small institutions." That compares to $240 billion the Bush administration lent banks. Does Mr. Obama really believe his additional $7 billion forestalled "the potential collapse of our financial system"?

Mr. Obama continued distorting the record in his "60 Minutes" interview Sunday when he blamed bankers for the financial crisis. They "caused the problem," he insisted before complaining, "I haven't seen a lot of shame on their part" and pledging to put "a regulatory system in place that prevents them from putting us in this kind of pickle again."

But as a freshman senator, Mr. Obama supported a threatened 2005 filibuster of a bill regulating Fannie Mae and Freddie Mac. He doesn't show "a lot of shame" that he and other Fannie and Freddie defenders blocked "a regulatory system" that might have kept America from getting in such a bad pickle in the first place.

The president's rhetorical tricks don't end there. Mr. Obama also claimed his $787 billion stimulus package "helped us [stem] the panic and get the economy growing again." But 1.5 million more people are unemployed than he said there would be if nothing were done.

And as of yesterday, only $244 billion of the stimulus had been spent. Why was $787 billion needed when less than a third of that figure supposedly got the job done?

Mr. Obama also alleged on "60 Minutes" that health-care reform "will actually bring down the deficit" (which people clearly know it will not). He said his reform reduces "costs and premiums for American families and businesses" (though they will be higher than they would otherwise be). And he claimed 30 million more people will get coverage through "an exchange that allows individuals and small businesses" to purchase insurance (though 15 million of them are covered by being dumped into Medicaid and don't get private insurance).

Mr. Obama may actually believe it when he says, "I think that's a pretty darned good outcome" and congratulates himself that he could succeed where "seven presidents have tried . . . [and] seven presidents have failed."

But voters seem to have a different definition of success. And they are tiring of the president's blame shifting and distortions.

Mr. Obama may believe, as he told Oprah Winfrey in a recent interview, that he deserves a "solid B+" for his first year in office, but the American people beg to differ. A presidency that started with so much promise is receiving unprecedentedly low grades from the country that elected him. He's earned them.

Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of the forthcoming book "Courage and Consequence" (Threshold Editions).

2009: Health Year in Review

2009: Health Year in Review
Innovation.org, December 16, 2009

In the midst of the high-profile health care reform debate, 2009 quietly marked another year of important advances against serious diseases and conditions.

There have been advances across diseases and life expectancy reached an all time high of 77.9 years.^[i] Findings like this demonstrate the progress we are making as a result of prevention, early detection and better treatments. Likewise, we’ve seen positive trends in many disease areas this year. Here are just a few examples:

HIV/AIDS: The Centers for Disease Control and Prevention reported this year that between 2006 and 2007 the HIV/AIDS death rate fell 10%, which was the largest single-year decline since 1998.^[ii] Antiretroviral drugs have been instrumental in bringing death rates down and the disease has become a chronic condition for many, rather than an acute fatal illness. Since the mid-1990s, when researchers developed this new wave of medicines to treat HIV/AIDS, the U.S. death rate from AIDS dropped by more than 70 percent.^[iii]

Cancer: The American Association for Cancer Research published a study in August 2009 showing that for people in their 40s, cancer mortality rates have been falling by 26% per decade.^[iv] Although most age-adjusted mortality figures show that cancer deaths were rising until the mid-1990s, this study emphasized the fact that among younger age groups death rates have been falling since perhaps the mid-1950s and continues today. The authors attribute the trend to improvements in cancer detection, treatment and prevention.

Cardiovascular disease: The number of hospitalized patients with coronary artery disease (CAD) declined by 31% in the last decade, knocking CAD from the top cause of hospitalization to third place, according to new data from the Agency for Healthcare Research and Quality. In an interview with HealthLeaders Media, AHRQ analyst Anne Elixhauser said, "A lot of people think it's because we have better control of risk factors…. We've decreased smoking, we have better control of cholesterol, and blood pressure," which she said is credited to better lifestyle awareness and the use of drugs like statins.^[v]

Other cardiovascular diseases showed great progress in the AHRQ report as well. For example, hospitalizations for stroke and heart attacks are down 14% and 15%, respectively, compared with ten years ago.

These examples demonstrate some of the improvements that are happening in the health of Americans as a result of improvements in lifestyle, prevention, detection and treatments. There are, however, many challenges on the horizon as the nation ages, obesity becomes more prevalent and chronic diseases affect more people. New treatments will be an important part of combating these worrisome trends. Today, in the US, there are over 2,900 medicines in clinical trials or awaiting FDA approval.^[vi] Researchers are using new strategies to attack disease. They are working on dozens of different approaches to treating Alzheimer’s disease, they are searching for an HIV vaccine, they are studying promising drugs to treat Lou Gehrig’s disease and lupus, and they are using genetics to better target treatments for many diseases. Although the challenges are many, progress promises to continue in the coming years.

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^[i] HHS, Center for Disease Control and Prevention, National Center for Health Statistics, National Vital Statistics System, J. Xu, et al. “Deaths: Preliminary Data for 2007,” National Vital Statistics Reports, 58, no. 1, p. 1, (19 August 2009) http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_01.pdf (Accessed 4 December 2009).

^[ii] HHS, Center for Disease Control and Prevention, National Center for Health Statistics, National Vital Statistics System, J. Xu, et al. “Deaths: Preliminary Data for 2007,” National Vital Statistics Reports, 58, no. 1, p. 5, (19 August 2009) http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_01.pdf (Accessed 4 December 2009).

^[iii] Centers for Disease Control and Prevention, National Center for Health Statistics, Health United States, 2008, (Hyattsville, MD: HHS, 2008).

^[iv] Kort et al, “The Decline in U.S. Cancer Mortality in People Born after 1925,” Cancer Research, 69: 16 (2009): 6500-6505.

^[v] C. Clark, “Heart Disease is No Longer Leading Reason for Patient Admission,” HealthLeaders Media, 24 September 2009, http://www.healthleadersmedia.com/content/239484/topic/WS_HLM2_QUA/Heart-Disease-is-no-Longer-Leading-Reason-for-Patient-Admission.html (Accessed 4 December 2009).

^[vi] Adis R&D Insight Database, 4 December 2009.

The Backdating Molehill Revisited

The Backdating Molehill Revisited. By Holman W Jenkins, Jr
Why are the prosecutions going so badly? Maybe because there was no crime.
WSJ, Dec 16, 2009

It pains us, naturally, to see our forecasts and premonitions borne out in such exacting detail in the government's backdating prosecutions—why didn't we take our moment of searing foresight to the dog track instead?

Yesterday a judge threw out, with resort to unceremonious language, criminal charges against Broadcom co-founder Henry Nicholas III.

Mr. Nicholas, a physically large man, with an erratic personality, and accused of patronizing drug dealers and prostitutes, must have seemed a prosecutors' dream, since he gave them so much to talk about besides the details of backdating, which when examined closely invariably lead careful reasoners to wonder: Where's the crime here?

Mr. Nicholas did not benefit from any backdated stock options. He was Broadcom's largest shareholder, thus had no natural or unnatural interest in overpaying employees with backdated stock options. The company's outside auditor also appears to have blessed the essential no-no here, which amounts to reading into accounting rules a logic and coherence that didn't exist at the time.

The goal of backdating, it becomes clearer than ever, was to motivate employees at the lowest possible cost to shareholders. This was done by granting stock options that, at the date of issue, were "in the money"—because, it appears, Broadcom and hundreds of other Silicon Valley companies discovered in practice what a Nobel Prize in economics had discovered in theory: That people overvalue a seeming bird in the hand.

As far as we know, no court has gotten to the essential nullity of the backdating "wrong," but U.S. District Judge Cormac J. Carney seems to have gotten close. Less than a week earlier, he had thrown out the conviction of Broadcom co-founder Henry Samueli—who had pleaded guilty—saying he did not believe Mr. Samueli had committed a crime.

Yesterday he dismissed the remaining criminal charges against Mr. Nicholas and the company's former chief financial officer William J. Ruehle, saying the government's behavior had been "shameful," that it had made a "mockery" of a defendant's constitutional rights, and that prosecutors had "intimidated and improperly influenced" three crucial witnesses, including threatening one with prosecution if he repeated testimony already given to the SEC in a civil proceeding.

Now, call us cynical, but aren't threats often used against employees to turn them into friendly witnesses for the government? The judge complained that prosecutors had improperly leaked details of the investigation to the press—also unattractive behavior by government servants, but not exactly unusual.

Indeed, it's hard to escape the sense that such behavior was judged especially beyond the pale in this case because it was in the service of a prosecution that fundamentally never deserved to be brought.
OpinionJournal Related Articles:

To be sure, because of the incoherence of the applicable accounting rules, Broadcom had to take the biggest charge of any company to rectify its accounting for employee stock options: $2.2 billion. Investors would have understood, though, that this was not real cash, that indeed under then-regnant accounting rules Broadcom could have tried to give away the entire market cap of the company to employees without taking an accounting charge, had it simply issued "at the money" options instead of "in the money" options.

As we say, most backdating cases amount to companies trying to behave rationally amid irrational accounting rules, rather than the media's standard trope of businessmen a-lyin' and a-stealin'. Deep, rich and disappointing, then, is the irony of a recent decision by federal prosecutors to have a second go at another former Silicon Valley CEO, Gregory Reyes, of Brocade Communications

All that distinguished the Brocade case from hundreds of other instances of backdating was a prosecutor's allegation that, in order to effect backdating, Mr. Reyes had misled the company's own finance department.

This was laughable, since the SEC was simultaneously charging two former heads of Brocade's finance department with participating in and profiting from backdating. The prosecution's sole witness on the vital point recanted almost as soon as she got off the stand, and a federal appeals court eventually overturned Mr. Reyes's conviction on grounds of prosecutorial misconduct.

Why a U.S. attorney in San Francisco would want to try Mr. Reyes again is a mystery to us, but maybe it's time for an investigation of backdating investigations.

We can't close without mentioning the exemplary diligence and enterprise with which, way back when, certain reporters and editors uncovered the backdating phenomenon, and then the intellectual sluggishness with which they analyzed it.

They found an interesting story (one that fit well under the current interest in behavioral economics) and then got it fundamentally wrong by insisting on shoving it into a procrustean off-the-shelf narrative of executive "greed."

Indeed, for want of a single paragraph explaining why backdating could be (in the words of a recent academic paper) a case of optimum contracting between companies and employees, we might have avoided the waste and injustice of these misguided backdating prosecutions.

Endangering the Economy in an Attempt to Pass Cap-and-Trade

IER, December 15, 2009

For years Congress has struggled to pass legislation to regulate carbon dioxide emissions because Americans know that the regulation of carbon dioxide emission is a tax on energy. Today, the Obama Administration is pushing a new scheme that would create regulations so burdensome that Congress is forced to pass a cap-and-trade bill to reduce the economic pain caused by the regulations. The Administration admits their plan will harm the economy, but they are using it as a threat in order to urge Congress to pass their proposal to tax and regulate energy use.

The Administration’s Plan to Coerce Congress to Pass Cap-and-Trade—Force Congress to Rescue the Economy from the Administration’s Heavy-Handed, Command-and-Control Regulations

During the Presidential campaign Obama’s advisors promised to have the Environmental Protection Agency (EPA) regulate carbon dioxide. Today, the President made good on that promise and EPA published a rule in the Federal Register regulating carbon dioxide and greenhouse gases by declaring that these gases “endanger public health or welfare.” (This is why it is called the “endangerment finding” because EPA is finding that greenhouse gases “endanger public health and welfare.”) This announcement was timed to coincide with the opening of the United Nations Climate Change Conference in Copenhagen.

Last week, a top White House economic official explained the Administration’s cynical strategy to reporters:

“If you don’t pass this legislation, then … the EPA is going to have to regulate in this area,” the official said. ”And it is not going to be able to regulate in a market-based way, so it’s going to have to regulate in a command-and-control way, which will probably generate even more uncertainty.”

In other words, the Administration realizes that these regulations will harm the economy, but is trying to push Congress to pass a law they say will reduce the harm. Amazingly, a week and a half after holding a summit to discuss how to create jobs, the Administration is promoting a policy that it admits will harm job prospects. As one news report stated, a White House “official warned that the kind of ‘uncertainty’ generated by unilateral EPA action would be a huge ‘deterrent to investment,’ in an economy already desperate for jobs.” The Administration was acting, in the words of another newspaper writer, like Tony Soprano saying essentially, “Nice economy you got there, Congress. Now either youze guys pass da capntrade deal or my associate here, Ms. Jackson, breaks its legs.”

EPA Was Not Forced to Regulate Greenhouse Gases

The endangerment finding is a response to the Supreme Court’s decision in Massachusetts v. EPA. That decision required EPA to make a finding, but it did not require EPA to find that greenhouse gases endanger human health and welfare. As the Supreme Court explained, “We need not and do not reach the question whether on remand EPA must make an endangerment finding, or whether policy concerns can inform EPA’s actions in the event that it makes such a finding. We hold only that EPA must ground its reasons for action or inaction in the statute.”[1]

What’s really disingenuous about the Administration’s ploy is that even if the Senate had already passed the Kerry-Boxer cap and tax bill, the Supreme Court decision would still stand, meaning the EPA would still have to determine whether CO2 endangers public health and welfare

Thus the entire premise of the Administration’s claim that Congress must pass a bill because if they don’t “EPA is going to have to regulate in this area” is bogus. Whether or not Congress passed a cap-and-trade bill, the Supreme Court ruling required EPA to either reject or issue an endangerment finding.

Command-and-Control versus “Market-Based” Approach

EPA’s threat is misleading in yet another way. By contrasting a top-down regulatory approach with the ostensibly market-based approach of cap-and-trade, one is led to the assumption that the Waxman-Markey and Kerry-Boxer bills simply augment the market price of carbon to reflect the alleged “social cost of carbon” and then let the magic of the market take control.

This is nonsense. In the first place, IER has already demonstrated the tremendous thicket of command-and-control regulations in Waxman-Markey besides its cap-and-trade program. To contrast EPA’s admittedly top-down, command-and-control-style approach with the climate bills in Congress is a false dichotomy. They are both command-and-control.

Second, even the cap-and-trade programs in Waxman-Markey and Kerry-Boxer are not what environmental economists would have recommended to correct the “externality” of possible future climate damages. Many (perhaps most) economists who actually publish academic articles on the issue think that if the government is going to take “market-based” action, it should set a straightforward carbon tax and use the proceeds to reduce other taxes. Failing that, they would argue that the government should implement a cap-and-trade program with full auctioning of permits, and then use the receipts to reduce other taxes. No academic economist endorses the hodge-podge of allowance handouts, “offsets,” and subsidies to various “green” recipients contained in the two pending bills. The only way to justify them is to say “that’s how politics works.”

Follow the Money

So, if the Obama Administration wasn’t legally required to issue regulations but did so—knowing full well they would be harmful to jobs and the economy—why did they do it? The answer is simple—to force Congress to enact the policies the White House really wants: cap-and-trade—and the money that goes along with it. Regulation by EPA only gives the Administration regulatory authority over 85 percent of our energy use (energy from coal, oil, and natural gas) but there is no real revenue increase for the federal government. Cap-and-trade provides huge revenue increases to the federal government. The Administration’s proposed budget called for raising $646 billion in new fees from cap-and-trade between 2012 and 2019. A senior aide later admitted the number could be 2 to 3 times that much, or $1.3 to $1.9 trillion. That makes it the largest tax increase in world history. And this tax will only go up over time as emissions prices go up.

Legislative proposals such as the Waxman-Markey bill and the Kerry-Boxer bill do not raise as much revenue for the federal government as Obama’s budget proposal, but instead the bills redistribute trillions of dollars to preferred interest groups. Under EPA regulation, the government cannot collect taxes or sell credits for carbon dioxide. Under the cap-and-trade plan, it makes out like a bandit and gets to choose economic winners and losers. Government power and money would increase, paid for with the people’s economic liberties.

Conclusion

The Supreme Court did not require EPA to find that greenhouse gases endanger public health and welfare. The Obama Administration chose to make that finding, even though it understands that EPA regulations would be very harmful to a struggling economy. Now the Administration is trying to leverage the harm they have created to force Congress to pass the largest tax increase in the history. We should reject this cynical strategy. Instead of passing legislation to regulate greenhouse gases, Congress could restore the original intent of the Clean Air Act by removing EPA’s ability to regulate greenhouse gases under the Clean Air Act. Those actions would protect the American people from the Administration’s economically harmful regulations.

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[1] 549 U.S. 497, 533–34 (2007).

Banker Baiting 101 - Obama's latest populist turn won't help the recovery

Banker Baiting 101. WSJ Editorial
Obama's latest populist turn won't help the recovery.
The Wall Street Journal, Dec 15, 2009, page A20

The Obama Administration desperately wants a strong economic recovery, or so it says, but does it have any idea how to encourage one?

It says it wants job growth, but its policies keep raising the cost of creating new jobs. It says it wants small business to take risks, but it keeps reducing the rewards if those risks succeed. And it says it wants banks to lend more money, even as it keeps threatening to punish bankers if they make too many bad loans or make too much money.
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The last contradiction is again on display as President Obama rolls out his latest populist blame-the-bankers campaign. This is becoming a White House financial staple. Recall how the President joined the Congressional posse amid this year's earlier AIG bonus uproar, until it threatened to run out of control. Later Mr. Obama targeted Chrysler's bond holders who weren't eager to accept the government's meager dictated terms. The bond holders rolled over, but everyone in financial markets got a message about what this Administration thinks about the sanctity of contracts.

Now, amid Democratic panic over 10% unemployment heading into an election year, the President is attempting a double populist play: Blame the bankers for causing the financial crisis and recession by lending too much, and blame them again for causing high joblessness now by lending too little.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Mr. Obama said in an interview on CBS's "60 Minutes" on Sunday. "They're still puzzled why it is that people are mad at the banks. Well, let's see," he said. "You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in—in decades, and you guys caused the problem. And we've got 10% unemployment."

He followed up that warm encouragement yesterday by hauling the bankers in to the White House to receive the command that "we expect an extraordinary commitment from them to help rebuild the economy."

This blame-the-bankers rhetoric is worse than a distraction as the recovery tries to gain solid footing and become a durable expansion. It risks obscuring two critical and related problems: Federal policy is discouraging both lending and borrowing.

If there is a lack of lending by banks to small businesses, the President might consider cutting out the CEO middlemen and speaking directly to the regulators who work for him, as well as to the Federal Reserve Chairman he recently nominated for a second term.

Forcing banks to write down the value of small-business loans that are still performing has become the specialty of bank regulators who are now trying to make up for the bubble years. Whenever a commercial building serves as collateral, no matter the quality of the borrower, the loan becomes suspect.

The result is a reduction in bank capital, a disincentive to make the next loan and perhaps even a calling of the loan, forcing a sale of the property. Operating with perfect pro-cyclical precision, regulators who were asleep during the housing boom and its epidemic of liar loans now target current loans to companies with steady cash-flow. This does not encourage new lending.

Meanwhile, Fed Chairman Ben Bernanke's near-zero-rate interest policy encourages banks to borrow cheaply and then invest in safe long-end Treasurys instead of riskier commercial loans. The Obama Treasury has explicitly supported this Fed policy as a way for banks to play the yield curve to rebuild their balance sheets.

But if Mr. Obama wants the banks to lend more, he should tell the Fed to start to rein in its excessively easy credit now that the financial crisis is over and the economic recovery gains steam. The longer the Fed keeps rates artificially low, the longer banks will get used to this implicit subsidy and the rougher their adjustment when it inevitably ends. Meanwhile, weren't higher bank profits to raise capital a major goal of the bailout?

Regarding small business, not everyone agrees that lack of credit is the main economic problem. William Dennis of the National Federation of Independent Business says that for most small companies the problem is a lack of customers, not credit. "There aren't a lot of folks who want to borrow. Our challenge is getting people in the front door," he says.

A recent NFIB survey of small-business owners found only 10% reporting problems obtaining financing. The government's own data tell a similar story. The Federal Reserve reports that business loan demand remains at depressed levels, while data from the Federal Deposit Insurance Corporation show $6 trillion of unused lending commitments at FDIC-insured institutions.

Mr. Dennis reports that small-business owners are much more concerned about other Washington issues, namely the uncertainty created by the Obama policy agenda: When will the taxes arrive to pay for Washington's spending binge? How much will health-care reform cost? What will be the impact of cap-and-trade legislation to address climate change?
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Mr. Obama summed up his White House meeting with the bank CEOs by once again blaming them for the financial crisis and suggesting that they have an obligation to support new regulation being written by Barney Frank (D., Mass.) and Senator Chris Dodd (D., Conn.).

You have to smile at that irony. No two Members of Congress did more to encourage the financial crisis, by preventing reform of the government-sponsored housing behemoths Fannie Mae and Freddie Mac. By ignoring Washington's role in creating the credit mania, Mr. Obama is hardly offering confidence that his financial reform efforts will prevent a repeat.

Yet none of this seems to count for much at a White House that is reading the polls and sees a political opening because bankers aren't popular. Someone in that power palace ought to consider that you don't encourage capitalism by beating up capitalists, and you aren't likely to encourage more lending by whipsawing lenders.

China Secures Oil and Gas Resources; U.S. Prefers to Wait for Green Energy

China Secures Oil and Gas Resources; U.S. Prefers to Wait for Green Energy
IER, December 14, 2009

Around the world, China is investing in oil and gas resources to fuel its booming manufacturing industries and transportation sector to continue its sky-rocketing economic growth. China is not endowed with very much oil and gas resources of its own. Thus, it needs to partner with countries around the world to ensure availability of future supplies of oil and natural gas that it will need to keep up its current pace of economic growth. The U.S., which does have oil and gas resources, is not following China’s lead in investing in these resources. Instead, the U.S. is looking toward wind and solar technologies to fuel its economy. However, wind and solar power are generating technologies and will not help where oil is needed in the transportation and industrial sectors. Further, wind and solar power have capacity factors that cannot compete with those of fossil fuel generating technologies, and they can create instability issues with the electrical grid. They are also more expensive technologies and must have government support through tax credits to compete at all with fossil-fuel generating technologies.

China’s Investment in Oil and Gas

China has seized on the global recession to gain access to oil and gas resources and supplies. The atmosphere is ripe for Chinese firms to invest in these resources because:[i]

• Acquisitions are now more favorable than they were in early 2008, due to lower oil prices and, hence, lower asset prices.
• China is less constrained than many of its international counterparts in terms of where they can invest (e.g. Iran).
• Financing is not a problem, because Chinese banks are willing and able to provide needed funds.
• Competition for these assets in some areas has lessened.

Not only is China investing in places like Iran, Iraq, Kazakhstan, Nigeria, Venezuela, and Argentina, but it is in the U.S.’s backyard, looking towards usurping the U.S. supply of Canadian oil sands. China is a good customer for Canada, as Canada fears that the U.S. may introduce a low carbon fuel standard[ii] or other legislation that would restrict our purchases of oil sands from Canada[iii]. China is also looking at a possible purchase of leases in the Gulf of Mexico where Devon Energy is looking to sell its U.S. leases.[iv] The sale of these offshore leases requires the approval of the Mineral Management Service in the U.S. Department of Interior. China is willing and able to be at the forefront of any misstep other countries make to gain a foothold and secure oil and gas supplies, and the U.S. seems to be giving it elbow room.

China is also investing in oil and natural gas pipelines to ensure access to its investments and to divert some of its oil imports from the Middle East away from the Straits of Malacca. Oil pipelines are being built from Russia, Kazakhstan, and the coast of Myanmar. [v] A natural gas pipeline from Turkmenistan should be operating in the near future, and several liquefied natural gas terminals are either operating or are expected to be operating shortly.[vi]

While the total amount of “investment” loans made by China to oil and gas producing countries for guaranteed future supplies of oil and gas are unknown, China has clearly invested billions of dollars in their ‘loans for energy’ program. [vii] The main provider of the loans is the China Development Bank, and thus they are essentially Government loans. Just on Tuesday, December 8^th, for example, Nigeria’s presidential advisor for energy announced that Chinese companies have proposed investing $50 billion to buy 6 billion barrels of oil reserves in Nigeria.[viii]

China’s Oil and Gas Reserves

China is not endowed with many reserves of oil and natural gas.[ix] According to the Oil and Gas Journal, as of January 1, 2009, China had 16 billion barrels of oil reserves, 1.2 percent of the world total,[x] and its natural gas reserves totaled 80 trillion cubic feet, 1.3 percent of the world total.[xi] China gets 70 percent of its energy from coal, the hydrocarbon with the highest level of greenhouse gas emissions, and 20 percent from oil, the hydrocarbon with the second highest level of greenhouse gas emissions.[xii] China is third in rank to the U.S. and Russia in recoverable reserves of coal, with 13.6 percent of the world total.[xiii] Because of its massive use of hydrocarbons and its growing economy, China surpassed the U.S. in carbon dioxide emissions, the largest component of greenhouse gas emissions, in 2006.[xiv]

The U.S. Oil and Gas Strategy

While the Bush Administration initiated steps to bring on new leases of oil and gas, both offshore in the Gulf of Mexico and on public lands that are endowed with billions of barrels of shale oil, the Obama Administration has slowed the progress by extending the comment periods and providing other obstacles. Examples include:

• On February 4^th, shortly after his Senate confirmation, Interior Secretary Salazar rescinded 77 oil and gas leases in Utah that could cost American taxpayers millions in lost lease bids, production royalties, new jobs, and the energy needed to offset rising imports of oil and gas.[xv]
• On February 10th, Secretary Salazar delayed for 6 months the development of the new 5-year leasing program for offshore drilling that would have set the framework for accessing newly available areas.[xvi]
• On February 25^th, Secretary Salazar canceled a new round of commercial-scale oil shale research, demonstration, and development leases in Colorado, Wyoming and Utah.[xvii]
• On February 26^th, President Obama introduced a budget that contains page after page of taxes on oil and gas totaling more than $31 billion that will reduce our domestic energy production.[xviii]
• On March 30^th, President Obama signed the Omnibus Public Lands Management Act into law, prohibiting energy production on over 3 million acres of federal land.[xix]
• On October 8^th, after rescinding 77 Utah oil and gas leases in February, Salazar announces he will lease 17 of them.[xx]
• On October 20^th, after canceling a new round of commercial-scale oil shale research, demonstration, and development leases last February, Salazar issued a new oil shale leasing program that decreases lease acreage by 87 percent, demands unrealistic timelines for investment into cutting edge research, and leaves royalty rates at the whim of the Secretary or in new regulations. [xxi]

Issues with the U.S. Renewable Strategy

The Obama Administration prefers that priority be given to offshore wind farms and wind and solar installations onshore.[xxii] They tout that these sources of “green energy” will provide needed jobs in the U.S. However, studies[xxiii] have shown that highly-subsidized renewable energy cost consumers and taxpayers more than the alternative fossil technologies[xxiv], that their component parts are largely made in foreign countries, that the jobs are mainly for the actual site construction and thus are temporary, and that the economy would be spurred more by investments made elsewhere.

Further, most green technologies are dependent on the wind blowing or the sun shining, and thus provide a lower amount of usable energy than their fossil or nuclear counterparts. Hence, many more wind farms or solar installations will be needed to provide the same amount of energy as their fossil and nuclear counterparts. And, they will also require more land area.[xxv]

What China Knows and the U.S. Doesn’t Know

All sources are needed to ensure energy will be available for future economic growth and to reduce dependence on foreign imports. Trading foreign imports of oil for component parts of wind and solar technologies does not reach any goals to which the U.S. is aspiring. To reach reductions of greenhouse gas emissions required by H.R. 2454, or other similar legislation, either nuclear power or biomass generating technologies will be needed[xxvi], which provide greater amounts of energy than wind or solar power. That’s precisely the reason that China is investing in oil and gas resources abroad and in building power plants from hydrocarbon, nuclear, and renewable sources of energy without legal and government delays.[xxvii]

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[i] Centre for Global Energy Studies, China’s Search for Energy Security, December 3, 2009, www.cges.co.uk

[ii] A Low Carbon Fuel Standard reduces the carbon intensity of transportation fuels by requiring that the mix of fuels sold reaches pre-specified targets of carbon reduction. Since oil sands yield heavier crude, more energy is required for producing and refining it, thus giving that crude a higher carbon intensity than conventional crude.

[iii] China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/

[iv] David Pierson, “China’s push for oil in the Gulf of Mexico puts U.S. in awkward spot,” Los Angeles Times, http://www.latimes.com/business/la-fi-china-oil22-2009oct22,0,2776603.story?track=rss.

[v] Centre for Global Energy Studies, China’s Search for Energy Security, December 3, 2009, www.cges.co.uk

[vi] Energy Information Administration, International Energy Outlook 2009, www.eia.doe/oiaf/ieo/index.html

[vii] China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/

[viii] The Wall Street Journal, Chinese Firms Propose $50 Billion Oil Buy in Nigeria, http://online.wsj.com/article/SB10001424052748703558004574583901047538032.html

[ix] Proved reserves of crude oil are the estimated quantities that geological and engineering data indicate can be recovered from known reservoirs with existing technology and current economic and operating conditions.

[x] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 23-24.

[xi] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 22-23.

[xii]Energy Information Administration, Country Analysis Brief on China, www.eia.doe.gov/emeu/cabs/China/Background.html

[xiii] Energy Information Administration, International Energy Outlook 2009, Table 9, page 59, www.eia.doe/oiaf/ieo/index.html

[xiv] Energy Information Administration, Annual Energy Review 2008, Table 11.19, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_39.pdf

[xv] E&E News, Oil and Gas: Salazar scraps contested Utah leases, February 4, 2009, http://www.eenews.net/eenewspm/2009/02/04/archive/1?terms=Salazar

[xvi] The Washington Times, Obama Blocks Offshore Drilling, February 11, 2009, http://www.washingtontimes.com/news/2009/feb/11/drilling-ban-revisited/

[xvii] Climate Wire, Interior: Research needed before “headlong” oil shale rush, February 26, 2009, http://www.eenews.net/climatewire/2009/02/26/archive/6?terms=Salazar

[xviii] The Hill, Oil, Gas Industry Aims to Nip Tax Hikes In the Bud, March 23, 2009, http://thehill.com/business-a-lobbying/3976-oil-gas-industry-aims-to-nip-tax-hikes-in-the-bud and Obama’s Budget: Almost $1 Trillion in New Taxes Over Next 10 yrs, Starting 2011, http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html

[xix] E&E News, Public Lands: Obama signs natural resources omnibus into law, March 30, 2009, http://www.eenews.net/eenewspm/2009/03/30/archive/2?terms=Salazar

[xx] The Wall Street Journal, 2^nd UPDATE: US Govt Proposes Delay On Controversial Utah Leases, October 8, 2009, http://online.wsj.com/article/BT-CO-20091008-715463.html

[xxi] U.S. Department of Interior News Release, Salazar Reforms U.S. Oil Shale Program, October 20, 2009, http://www.doi.gov/news/09_News_Releases/102009.html

[xxii] http://www.instituteforenergyresearch.org/2009/08/06/interior-secretary-limits-domestic-energy-production-but-fast-tracks-solar-development/

[xxiii] Wind Energy: The Case of Denmark, http://www.cepos.dk/fileadmin/user_upload/Arkiv/PDF/Wind_energy_-_the_case_of_Denmark.pdf ,and Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf, and Economic impacts from the promotion of renewable energies: The German experience, www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf

[xxiv] Germans miss out on cheaper electricity, www.reuters.com/article/idUSTRE5B02YS20091201/

[xxv] www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/ and www.instituteforenergyresearch.org/2008/09/26/facts-on-energy-wind/

[xxvi] Energy information Administration, Energy Market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009, www.eia.doe.gov/oiaf/servicerpt/hr2454/index.html

[xxvii] www.instituteforenergyresearch.org/2009/11/20/what-president-obama-should-have-learned-about-energy-policy-during-his-visit-to-china/