Thursday, February 12, 2009

Paul Weinstein Jr., former adviser to Clinton and Gore, fellow at the Progressive Policy Institute: Next, cut spending

Next, cut spending. By Paul Weinstein, Jr
Or debt will doom our future
NY Post, February 10, 2009

DESPITE the need to stimulate the economy now, the long-term health of the nation depends on a return to the fundamentals - namely, getting our fiscal house in order. So the Obama administration should lay out a plan now that would restrain spending, curb entitlement growth, eliminate tax breaks for special interests and make government more efficient.

Any effort to cut the deficit must wait until the current crisis abates and the economy gets back on its feet, but there is no reason not to enact legislation now that would put into place triggers that will kick-start a series of budget reforms later, when the time is right.

In fact, acting now would do much to allay the concerns of our economic partners, who are fearful that US borrowing will crowd them out of the credit markets. It would also help to keep down the cost of credit and capital for the private sector - and ensure the eventual recovery doesn't stall down the road.

What would such a reform plan look like?

First, it would restore pay-as-you-go budgeting and caps on discretionary spending that we had in the 1990s. These laws helped hold down the rate of spending and were a key reason that the nation experienced surpluses by the end of the decade.

Second, it would create a bipartisan commission (like the one that long handled military-base closings) that would be charged with identifying which expenditures, tax subsidies and government inefficiencies can be curbed, eliminated or streamlined. Congress would then have an up-or-down vote on the commission's recommendations, without amendment.

Third, it would give the president the authority to send pork projects and special-interest tax breaks back to Congress for reconsideration, creating a constitutional alternative to the line-item veto.

Finally, it would, as suggested by the bipartisan "Fiscal Seminar" group, put into place targets for entitlement spending and tax expenditures that would be budgeted for the long run - say, 30 years. When unexpected events pushed spending or tax expenditures above targets, automatic triggers would be used to slow spending growth, increase revenues or some combination of the two.
Such a system would force policymakers to address the greatest threat to our nation's long-term fiscal well-being: burgeoning retirement and health-care costs.

If we don't, and insist on maintaining the tax burden where it has been over the last 50 years (about 18 percent of GDP), the Fiscal Seminar group estimates public debt will most likely exceed 100 percent of GDP within 25 years.

At the end of World War II, America's debt exceeded its entire gross domestic product. Yet rather than throwing up their hands, our parents and grandparents whittled down their deficits. By the Kennedy administration, the ratio of debt to GDP was back down to prewar levels.
What lesson can we learn from the "greatest generation"? Simply this: Opportunity, not debt, is the legacy we owe to future Americans. We cannot afford to let budget basics get lost in our efforts to right the economy.

Paul Weinstein Jr., a former policy adviser to Bill Clinton and Al Gore, is a fellow at the Progressive Policy Institute and Johns Hopkins University.

Strengthening American Competitiveness: Regaining Our Competitive Edge - Four Priorities and 20 New Ideas

Strengthening American Competitiveness: Regaining Our Competitive Edge - Four Priorities and 20 New Ideas. By Jason Bordoff, Lael Brainard, Carola McGiffert & Isaac Sorkin
The Brookings Institution, February 13, 2009

The United States is in the midst of the most serious economic downturn since the Great Depression. Policymakers are understandably preoccupied with applying the right mix of fiscal and monetary policy responses to stanch and eventually reverse the decline. At the same time, policymakers need to build a foundation for sustainable, long-term prosperity that can drive our economy once we move beyond the present crisis. Going forward, the economy will no longer have the technology boom of the 1990s or the housing bubble of the 2000s to sustain its growth. And it is unlikely that debt-driven consumer spending or Wall Street will provide the same boost as in the past. If we are going to provide opportunities for all Americans going forward, we need to make the right investments today to rebuild American competitiveness by investing in our people, infrastructure, ideas, and green transformation.

This paper addresses this central challenge for the United States. We begin by discussing the economic downturn and financial turmoil facing the country and how policymakers should respond to both boost our economy in the short-run and also build the foundations for long-term competitiveness. Second, the competitiveness agenda is motivated by, and must therefore be responsive to, at least three changes in the fabric of the global economy: the increase in global integration; the attendant shift in economic power to rising powers such as Brazil, China and India; and the realization of the existential threat that climate change poses. Finally, we lay out the fundamentals of a competitiveness agenda through descriptions of specific policy proposals by leading experts on how to invest more robustly in infrastructure, people, ideas and green transformation.

The whole document is here.

State Sec remarks on the 50th Anniversary of Martin Luther King, Jr.'s Trip to India and Black History Month

The 50th Anniversary of Martin Luther King, Jr.'s Trip to India and Black History Month. Remarks by Hillary Rodham Clinton, Secretary of State
Treaty Room, Washington, DC, Thu, 12 Feb 2009 15:50:23 -0600

Remarks With Mr. Martin Luther King III, Congressman John Lewis, Congressman Spencer Bachus and Mr. Herbie Hancock

SECRETARY CLINTON: Good afternoon. Good afternoon. Well, we are so delighted to have you – please be seated – here in the Treaty Room at the State Department for what is an historic occasion, something that means a great deal to this Department and to our country. I am pleased that His Excellency, Ambassador Sen of India is with us today, and I’m also very honored to be joined by a remarkable group of Americans.

We have standing before you some of the heroes of the Civil Rights Movement and of our recent history. Certainly, Congressman Lewis needs no introduction. We have with us also Congressman Bachus. They will be leading a congressional delegation to India to retrace the steps of Dr. King and Mrs. King. And of course, the person who – for whom this is a personal journey as well as a historic one, Martin Luther King III.

Now Herbie Hancock is going along as well. (Laughter.) And I think there’ll be a lot of people who recognize him. And he just told me he’s going to be recording, including some Indian artists. And maybe he’ll say a word more about that in a minute. Also joining the CODEL will be a number of other distinguished members of Congress, as well as Ambassador Andy Young and former Senator Harris Wofford. This is the real American dream team. And I don’t think we could find better ambassadors for our country to send to help mark the 50th anniversary of Dr. Martin Luther King, Jr.’s historic trip to India.

As we celebrate Black History Month here at home, the 50th Anniversary of Dr. King’s trip to India is a reminder that the struggle for civil rights and justice has always been and continues to be a global mission; it knows no borders. As Dr. King told us, “Injustice anywhere is a threat to justice everywhere.”

Now Dr. King was just 30 years old when he traveled to India in 1959, but he had already led the Montgomery bus boycott, and understood the wisdom and power of the nonviolent protest movement pioneered by the great Mahatma Gandhi. Dr. King toured the country for a month, studying Gandhi’s philosophy, meeting with Prime Minister Nehru. He met with other Indian leaders in politics and government, in academia and the professions in business and across the society. And he talked with citizens and young people at every opportunity. He brought the lessons he learned there back to the United States, and renewed his own faith in the unmatched moral force of nonviolent resistance and its ability to achieve meaningful social change.

It’s been my great privilege to have heard Dr. King speak when I was a young girl. It was a few years after he had returned from India. It was a cold January night in Chicago, but I was deeply moved then, as I continue to be, by his timeless call to all of us, his dream for a world that is really worthy of our children. I remain inspired by his undying hope for a better tomorrow.

So I am pleased to honor Dr. King’s historic journey which really represents the journey that our country has been on. And in many ways, as we have celebrated the inauguration of President Obama, a journey that has brought great faith to people who follow the tenets of nonviolence and Dr. King’s philosophy and preaching and who have worked to make the changes here at home that continue to reverberate around the world, it’s fitting that this mission then be undertaken during Black History Month, and just weeks after our President’s historic inauguration. And on behalf of President Obama, I want to express his gratitude for you doing this and for your service as well.

You know, Dr. King’s trip to India stands as a landmark of the Civil Rights Movement and a real testament, ambassador, to the bonds of affection and shared history between our two nations. I want to thank the Government of India for welcoming and supporting our delegation, a reflection that India also understands that the deep and broad partnership our countries are forging is one based on common history and values. And it is because of that that it is destined to grow even stronger in the future. So I wish you Godspeed and a great deal of – oh, shall I say, jealousy that (laughter) – that you are retracing these footsteps.

And now I’d like to introduce some of my friends and those who will be making this journey, starting with Martin Luther King III, followed by Congressman Lewis and Congressman Bachus, if you would also like to say a few words, and ending up with Herbie Hancock.

MR. KING: Thank you so much, Madame Secretary, and thank you, Congressman Lewis, Congressman Bachus, and of course, the great Mr. Herbie Hancock. I must also thank the Government of India and Ambassador Sen, for this is a very special journey for me personally, my wife and I, to retrace the steps that my parents engaged in 50 years ago. On behalf of everyone at Realizing the Dream, an organization I started, I am honored to be making this journey on this 50th anniversary of that incredible visit.

In 1959, at the invitation of the Gandhi National Memorial Foundation, my parents, Dr. Martin Luther King, Jr. and Coretta Scott King, traveled to India to immerse themselves in Gandhi’s nonviolence movement, and to identify with and give support to the people of India who were struggling to overcome the evils of poverty and discrimination.

By working to foster peace through nonviolence, I hope this pilgrimage will inspire others to end the dependence on violence for nominal change, and instead look to reconciliatory power of nonviolence to create sustainable progress and diplomacy.

The impact that Gandhi’s life had on my father was quite profound. And it is in that spirit that I set out on this journey in just a few days. Thank you. (Applause.)

MR. LEWIS: Madame Secretary and His Excellency Mr. Ambassador Sen, I would like to thank you, the United States Department of State, and the Government of India for all that you have done to support this delegation. It is with great pleasure and delight that I embark on this journey with Representative Bachus, my friend and my brother and my colleague from Alabama, co-leader of the delegation; other colleagues in the House; Martin Luther King III; Herbie Hancock and their delegation to pay tribute to the abiding link between Gandhi and Martin Luther King, Jr.

The two men were not politicians or lawmakers. They were not presidents or popes. But they were inspired human beings who believed deeply in the power of nonviolent resistance to injustice as a tool for social change. Because of their courage, commitment, and vision, this nation has witnessed a nonviolent revolution under the rule of law, a revolution of values and ideas that have changed America forever. We are all a beneficiary of this powerful legacy.

It is a great honor to retrace the steps of Gandhi and Martin Luther King, Jr. in India. Madame Secretary, I don’t where I would be if it had not been for the teaching of Gandhi and Martin Luther King, Jr. We are looking forward to fulfilling an inspiring journey. Thank you, Madame Secretary, for all your help in making this possible. Thank you.

SECRETARY CLINTON: Thank you so much. (Applause.)

MR. BACHUS: I walked into my office this morning and there was music playing, and my staff was just ecstatic that Herbie Hancock – (laughter) – was – I would be traveling with Herbie Hancock, and they knew about Martin Luther King. And I first want to say that thank you for your father. I’m the congressman from Birmingham, Alabama. And Birmingham is a better place today than it was, because of Martin Luther King. As Congressman Lewis, when he called me and asked me to head this delegation, I was overwhelmed, because we in Birmingham, probably more than anywhere else, know about the ills of discrimination and racism.

I buried my father two years ago, and I’m proudest of him for crossing that color line and being the first contractor in Birmingham to hire subcontractors. He had vandalism of worksites, but he had the vast support of the people in Birmingham when he did that. And I want you to know that Birmingham is a better place. And I’m not sure there’s any place more committed to equality than a place which suffered from inequality. And for that, I thank you and I thank your father. Thank you. (Applause.)

MR. HANCOCK: Madame Secretary, members of Congress, Mr. Ambassador, members of the Diplomatic Corps, Martin Luther King, Jr. – Martin Luther King III – and honored invited guests, it is a privilege for me to be here today among such esteemed company.

As chairman of the Thelonious Monk Institute of Jazz, I am honored to be traveling to India with my fellow musicians, singers Chaka Khan, Dee Dee Bridgewater, pianist George Duke, and young students who are studying with the Thelonious Monk Institute of Jazz performers in New Orleans. We are honored to be partnering with the State Department and to be taking this journey with Martin Luther King III, Congressman John Lewis, and other members of Congress. And we look forward to bringing music and jazz education to the people of India through this historic tour that celebrates the philosophies of Dr. King and Mahatma Gandhi, two very inspirational political and spiritual leaders whose teachings have really encouraged me to lead a life of peace, honesty, and filled with love for my fellow man.

And of great importance to me and my fellow artists, their philosophies of cooperation, communication, and harmony are also essential elements of every jazz band. (Laughter.) The Thelonious Monk Institute of Jazz has partnered with the State Department now for over 15 years, and this is our third trip to India. On the first trip I was humbled meeting Mother Teresa, as I have told you, Madame Secretary, and then filled with joy having several opportunities to contribute to the cultural fabric of the Indian people through performance and jazz education workshops.

We look forward to being a part of the Living Dream concerts in Mumbai and Delhi, and then working with the students who attend the Ravi Shankar Institute of the Performing Arts, where our students are going to be able to exchange valuable lessons with the young Indian musicians and prove again that the language of jazz knows no boundaries.

On behalf of the institute, all the musicians on the tour, and myself, I’d like to say a very, very warm and heartfelt thank you to our good friend and Secretary of State Hillary Clinton, and to the U.S. Department of State for continuing your support of culture, jazz, and music education throughout the world, and for giving us the opportunity to represent the United States and to be a part of this historic tour. Thank you. (Applause.)

SECRETARY CLINTON: Well, as you can tell, it’s going to be quite a journey and all of us wish you well. I think it’s important to really underscore the significance of this kind of cultural and historical diplomacy. It’s exactly what the State Department should be doing even more of, reaching out and learning from as well as sharing with people around the world.

And it is also a reminder that nonviolence works. And if more people were able to understand that and remember the teachings of Gandhi and Dr. King, not only would the world, I think, be a more peaceful place, but I honestly believe that the injustice that persists would be far more likely to be remedied.

So it’s a real pleasure during this Black History Month. I want to thank John Robinson and the Office of Civil Rights for what they do during this month, and this is part of that commemoration and celebration. And to all of you, it’s a great reminder from the incomparable Herbie Hancock that jazz is not just about music. I think jazz is a pretty good guide to most things in life, and I can tell you, as Secretary of State, I’m improvising every single day. (Laughter.) Thank you all very much. (Applause.)

Those of you who would like to --

QUESTION: Madame Secretary --

SECRETARY CLINTON: Just a second. Those of you who would like to meet our guests, please come up, and before they have to leave, I know they’d like to say hello to some of our guests. So, please, come up.

QUESTION: Madame Secretary, do you believe that --


QUESTION: -- Dr. King’s dream has come full circle now with President Obama’s election, and also, if the change began with Mahatma Gandhi and Martin Luther King?

SECRETARY CLINTON: Well, I think President Obama would tell you that it is not about him. His election, his victory, is a victory for the American people as well as for his philosophy of change and his deep commitment to American values. There’s still a lot of work to be done. I mean, the work of justice never ends. But we’re very proud in the United States that our President represents, in great measure, the dream of Dr. King. And certainly, we all have to now continue that work, and I know that the President feels that responsibility acutely.

But it’s not just the work of a president or not just the work of diplomats or members of Congress. It is the work of everyone, and that’s why it’s so important to have people like Martin and his nonprofit organization continuing that work, artists like Herbie and others of great talent continuing that work. So if anything, the philosophy and the examples of Gandhi and Dr. King should spur each and every one of us to even do more.

Thank you all very much. (Applause.)

PRN: 2009/125

US Gov't Help: Gaza Humanitarian Relief

Gaza Humanitarian Relief
Robert Wood, Acting Spokesman, Office of the Spokesman
Public Affairs, Washington, DC, February 12, 2009

Question Taken at the Daily Press Briefing on February 10, 2009

Question: Have we provided or do we have plans to provide additional humanitarian aid to Gaza (in addition to the 20 million)?

Answer: At this time, the United States government has contributed almost $60 million for the provision of food, potable water, medicine, and plastic sheeting for emergency shelter needs.
In addition, the State Department has contributed money to support the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) and the International Committee of the Red Cross. For example, since the beginning of the most recent conflict, it has dedicated nearly $55 million to these two organizations for food, shelter and other emergency relief in West Bank and Gaza.

Moreover, USAID has provided almost $6 million for emergency assistance to Gaza. Food, milk powder, blankets, plastic sheeting, and other nonfood items have been distributed to beneficiaries, and the distributions are continuing. This assistance is distributed to beneficiaries through USAID’s implementing partners under several recently awarded grants, including grants to Mercy Corps, American Near East Refugee Aid (ANERA), CHF International, Relief International, Catholic Relief Services, and CARE International. Food distributions are done through USAID’s grant to the World Food Program (WFP).

The needs of Gaza’s Palestinians remain acute. The U.S. government will continue to monitor the situation to judge what additional contributions would be the most helpful.

PRN: 121

The Seoul Solution to the Banking Crisis: no need to sell off toxic assets immediately

The Seoul Solution to the Banking Crisis, by Weijian Shan
Geithner doesn't need to sell off toxic assets immediately.
WSJ, Feb 12, 2009

Let's face it: the American financial system is basically insolvent. To date, the U.S. government has committed, on behalf of taxpayers, more than $7 trillion of capital injections and guarantees to financial institutions. Treasury Secretary Timothy Geithner said Tuesday the government will pour up to $1 trillion more into a "Public-Private Investment Fund," which will be tasked to buy up banks' bad assets -- the real blockage in the credit pipeline. The trouble isn't, however, that banks don't want to sell loans. They just don't know what a fair price is in a now-illiquid loan market because there are no buyers.

How should the government price toxic assets? If the government overpays, current shareholders will be unjustly enriched at the expense of taxpayers. Rewarding reckless behavior would only encourage more of it. If the government underpays for assets, it will amount to an expropriation of private properties without just compensation, and make the banks' capital positions even weaker than they are now. There's another complicating factor, too: Since most bank deposits are government-guaranteed, the government has the ultimate responsibility to save failing banks. That means Washington must take over the failed bank before selling it off. The government will own the assets and sell them when private capital is brought in to recapitalize the bank.

How should the government price these assets? Mr. Geithner's plan suggests that the determination of the prices will be left to private investors. But what if the government is the seller? How does the government get it right? How do private investors get it right? It seems to be an impossible task, because currently there is simply no market for toxic assets, and if there is, the market will deeply discount them, either bankrupting the bank or costing taxpayers dearly. It is a major dilemma which needs to be resolved. But there is a proven way to solve the problem, and it should be used again.

During the latter part of 1998, the financial system of South Korea -- at that time, the 10th largest economy in the world -- was basically insolvent. Many banks failed as bad loans mounted. Capital flight reduced Korea's foreign exchange reserves so much that the country teetered on the verge of sovereign debt default. Korea had to request emergency funding from the International Monetary Fund, which, working closely with the U.S. Federal Reserve, eventually provided the country with a $58 billion rescue package.

The package came with strings attached, one of which was for the Korean government to sell off to foreign investors a clutch of failed and nationalized big banks including Korea First Bank. The Fund reasoned that the failure of Korea's banking system was due to a total lack of a "credit culture," as lending had typically been done on the basis of either government policies or collateral without much regard to the creditworthiness of the borrowers. Seoul thought foreign investors could help inculcate this culture into the banking system.

U.S.-based private equity firm Newbridge Capital was one of the only two bidders -- among more than 40 invited -- to attend the government-mandated auctions. I represented Newbridge at these meetings. After weeks of negotiations, we reached a preliminary agreement with the Korean government to give us the exclusive right to acquire Korea First Bank. The key part of the deal was that all the assets be priced at fair market value. The memorandum of understanding specifically called for all assets to be "marked to market" on a loan-by-loan basis, after which Newbridge and the government would jointly invest into the bank to recapitalize it.

"Mark to market" accounting, however, turned out to be completely inoperative in a financial crisis because then, as now, there was no market for bad loans. Sellers thought that assets would be worth more when the economy eventually recovered. Buyers worried they might be worth less if the economy continued to deteriorate. Both were right because there was a significant probability for either to happen, but their divergent expectations made it impossible for them to agree to the right price.

Then the parties discovered a simple methodology that resolved the dilemma -- and could resolve America's dilemma, too.

Since the market was illiquid, we realized that it was impossible to determine the "fair value" in the near term. We thus agreed to a so-called future "buy or sell" arrangement. Over the following three years, on the anniversary of our agreement, the bank would name the price for any existing loan on its books, and the government would have the option to "buy" or "sell" that loan at that price.

The goal was for the government to minimize the amount of money it would have to inject to make up the difference between the market and face values of bad loans, and for us not to have to bear the losses from the bad loans we had inherited when we bought the failed bank from the government. This arrangement gave us the time to work out or to improve the value of these loans, and perhaps for the loan value to recover over time. If it didn't fully recover, and on one of the anniversaries we valued a problem loan at 70 cents on the dollar and the government agreed, we would receive an injection of 30 cents to make us whole. But if the government thought we were lowballing it, the government could buy the loan from us at full face value -- $1 -- and sell it to other investors at a higher price, say 80 cents. This would leave taxpayers with a loss of only 20 cents, as opposed to 30.

The beauty of this methodology is severalfold. First, the government did not have to sell bank assets to private investors at deeply distressed value in the depth of a financial crisis -- a move which would have incurred huge losses for taxpayers. Over time, as the economy recovers, the loan value is likely to improve.

Second, the bank was no longer crippled by the burden of bad assets because it knew they were ultimately protected by the government. The new investors could concentrate on fixing the operations of the bank and making new loans.

Third, the plan removed any incentive for the privatized bank to cheat the government. To a bank, an interest-yielding asset is more valuable than cash. Therefore a bank would want to hold on to an asset, and more importantly to a customer, as long as the loan is safe. In our buy-sell arrangement, if the bank mistakenly underpriced a loan or tried to lowball its value, the government would buy it with cash and the bank would lose the loan and the customer. If the bank overpriced the asset, the bank would risk losses as it would get stuck with a loan for less than its book value. Therefore, the bank was incentivized to work out the loan to the best of its abilities and to price it as accurately as possible.

This methodology worked so well for the Korean government that, three years later, after the program ended, the government had spent a fraction of its original budget to rescue the bank. Under the new owners, many of the nonperforming loans were worked out and recovered, along with the recovery of the Korean economy.

In retrospect, the methodology was the best deal for taxpayers. It did not give investors as much gain as government-assisted bank deals elsewhere at that time, which allowed new investors to buy assets at substantially marked down values and capture significant windfall gains when the market and asset value recovered. We earned our upside from revitalizing and building up the bank, not from gains on legacy assets at taxpayer expense. Both the Korean government and Newbridge eventually realized many times their investments when the banks recovered and were sold off five years later.

Like Korea a decade ago, the U.S. government is left with little choice but to nationalize insolvent banks. Mr. Geithner now needs to flesh out the methodology through which he's going to relieve these banks of their bad loans. There is no lack of capital in America today, or in the world beyond it. Mr. Geithner can make it flow again, if he only looks to Seoul's example for how to do it.

Mr. Shan is a partner at TPG Capital. The views expressed in this article are strictly his own.

Will You Have Enough to Retire On?

Will You Have Enough to Retire On? By Andrew G. Biggs
The Retirement Security "Crisis"
AEI, Wednesday, February 11, 2009

Excerpts w/no references:

Americans are concerned about the state of preparedness for retirement, and many believe that retirement security is nearing a crisis. As life expectancies increase, traditional defined-benefit pensions decline, and Social Security faces significant reforms, many argue that a significant share of Americans will be at risk of an inadequate income in retirement. But despite these anxieties, most older Americans seem well prepared for retirement. Controlling for household composition, the Social Security replacement rate for typical workers born in 1940 was 63 percent of average preretirement earnings, and the median total pension replacement rate was 92 percent of prior earnings--well over financial planners' recommended rate of around 75 percent. Even among the younger 1960 birth cohort, for whom the projected median Social Security replacement rate declines to 54 percent, the median total pension replacement rate remains at 82 percent. While policymakers should work to strengthen Social Security and private pension savings, talk of a crisis in retirement income preparedness appears premature.

Policymakers and the general public are increasingly concerned that a significant share of Americans are at risk of having insufficient retirement income. A common rule of thumb for financial advisers is that retirees should have enough income to replace roughly three-quarters of their preretirement earnings. A survey of financial planners and educators recommended mean and median replacement rates of 74 and 75 percent, respectively.[1] This Retirement Policy Outlook will accept these recommendations as at least approximately correct.

In this Outlook, I use a microsimulation model of Social Security and private pension benefits to analyze the level and distribution of combined pension benefits for retirees in the 1940 and 1960 birth cohorts as of age seventy. I use two integrated microsimulation models--GEMINI, which simulates Social Security taxes and benefits, and PENSIM, which simulates defined-contribution and defined-benefit pension benefits--to calculate replacement rates for retiree households in the 1940 and 1960 birth cohorts. I then adjust replacement rates for differences in household composition. Replacement rates have come under criticism for being a relatively crude tool for retirement planning,[2] but they can be refined by adjusting them for the presence of children and for economies of scale in household size.[3]

The life-cycle model of consumption implies that individuals will use borrowing and saving to smooth consumption over time, seeking to consume roughly the same amount in working years as in retirement. However, without accounting for the costs incurred in raising children and efficiencies achieved in household size, traditional replacement rates may give misleading readings of preparedness for retirement. Children can consume a significant portion of a household's income, leaving less to be consumed by their parents. Although children are often an economic burden during their parents' working years, the lower preretirement consumption by parents implies that a lower level of retirement income is needed to match that preretirement consumption. As John Karl Scholz and Ananth Seshadri of the University of Wisconsin- Madison argue, "financial planning rules of thumb, and specifically replacement rates, ignore the role that children play in optimal life-cycle wealth decisions."[4] Adjusting for the presence of children will generally increase replacement rates for households with children, although it can reduce replacement rates for individuals who continue to support children while in retirement.

Economies of scale in household size imply that households with more than one member have lower relative costs of living than single-member households. Spouses (and children) sharing housing, food, transportation, and other costs can reap significant savings versus individuals living alone. Economies of scale in household size exist during working years as well as in retirement, so the net effect on measured replacement rates of adjusting for economies of scale depends upon individual circumstances.

Shared Earnings and Retirement Income

Following standard practice in Social Security analysis, income during working years and retirement is calculated on a "shared basis." Shared income is designed to account for two factors: first, that spouses tend to share income and costs equally, and second, that household composition changes over time due to marriage, divorce, birth, death, and so on.

The shared approach divides income equally between spouses in any year in which a spouse was present. Consider a household in which the husband earns $50,000 per year while the wife earns $20,000. Under the shared approach, their total household earnings of $70,000 would be divided by two, giving each spouse a "shared" income of $35,000 for that year. Likewise, a couple's Social Security benefits and pension income are deemed to be shared between them.

Replacement rates are calculated by dividing an individual's shared Social Security benefit or combined Social Security and pension benefit as of age seventy by average preretirement earnings.[5] Age seventy is chosen because, by this time, almost all individuals have claimed Social Security benefits and most have exited the paid workforce.

Some have argued that replacement rates should be adjusted for increases in Medicare premiums (which are automatically deducted from Social Security benefits) and for out-of-pocket health care costs.[6] Doing so would reduce measured replacement rates. However, this concern seems misplaced. If health care provides a value at the margin equal to its cost, such that individuals would rather spend their income on health care than on other goods or services, then there seems little reason to treat health care provision differently from other items in a household budget.[7]

Accounting for Household Size and Composition

The method used here extends the shared earnings approach described above by adjusting earnings and pension income for the presence of children and for economies of scale in household size. In doing so, it constitutes an improvement over previous analyses using other models that do not include the presence of children.[8]

In most previous analyses of retirement income, children would be effectively ignored. Total household income would simply be divided by the number of adults living in the household to calculate each individual adult's share. Yet, we know that children consume resources during an individual's working years, and we also know that a household consisting of multiple adults will have lower costs of living than had those adults lived separately. I use a formula devised in a National Academy of Sciences (NAS) project to measure poverty.[9] This formula calculates the number of "adult equivalents" living in a household. In my approach, shared income is adjusted for the presence of children and economies of scale in household size by dividing total household income by the household's number of adult equivalents.

The first issue to consider is how the presence of children affects their parents' need to save for retirement. Dartmouth economist Jonathan S. Skinner describes the effect of children on retirement income needs in simple terms:

Parents are already used to getting by on peanut butter, given that a large fraction of their pre-retirement budget has been devoted to supporting children, so it's not difficult to set aside enough money to keep them in peanut butter through retirement. By contrast, childless households with the same income accustomed to caviar and fine wine must set aside more assets to maintain themselves in the style to which they have become accustomed.[10]

That is to say, the costs of raising children imply that the consumption of goods and services by the parents will be significantly lower than in a childless household with similar income. While parents have lower standards of living than nonparents at similar earnings levels during their working lives, this also sets a lower bar that their retirement savings must meet. Replacement rate measures should account for these differences.

The second issue I consider is how economies of scale in household composition during working years and in retirement affect the income level required in retirement. Two can generally live more cheaply than one; a couple has a lower cost of living than two singles. Moreover, a child generally consumes less than an adult, so adding a child to a household does not necessarily imply a proportionate increase in costs of living.[11]

Household equivalence scales are designed to account for how differences in the size and composition of households affect a household's true cost of living. The adult equivalence scale from the NAS has been widely used.[12] It takes the form

Adult equivalents = (A + PK)F

where A is the number of adults in the family, K is the number of children, P is the cost of a child relative to an adult, and F is a factor reflecting economies of scale in household size. Lower values of P will result in relatively lower costs of living for a child versus an adult household member, while lower values of F will result in larger economies of scale as household size increases.

The NAS recommends a value for P of 0.7 and a value for F of between 0.65 and 0.75; I will use a value of 0.7 for both variables. A P value of 0.7 implies that a child costs 70 per-cent as much to support as an adult. The F value's interpretation is less intuitive, but it implies that as additional household members are added, the incremental cost of supporting each new additional household member declines.[13]

I adjust for household size by dividing the household's total earnings by the number of adult equivalents in the household. Assuming an economy of scale factor (F) value of 0.7, a household consisting of two adults would have only 1.6 adult equivalents. To illustrate, if total household earnings were $70,000, dividing by 1.6 would produce a shared earnings value for each spouse of $43,750. This value implies that their standard of living would be equivalent to that of a single individual earning $43,750. If the couple had two children, the adult equivalent factor would then be 2.4, and each adult's attributed share of total earnings would be $29,167. This value would reflect both that larger households use resources more efficiently and that a share of the household's total earnings flows to the children rather than the adults.

In each year, the number of adult equivalents in the household is calculated, and household income is divided by this figure to produce the shared income for that particular year. This adjusted shared income is used both for calculating pre-retirement earnings and Social Security and total pension income as of age seventy. Dividing the adjusted Social Security or total pension income by adjusted preretirement earnings produces a replacement rate adjusted for household composition.

Replacement Rates for the 1940 Cohort

In this section, I report projected replacement rates for members of the 1940 birth cohort as of age seventy. It is worth noting that these projections are not adjusted for recent economic conditions, which doubtless have affected the assets and incomes of many retirees. Retirees are in many ways less exposed to an economic downturn than working age individuals, as many have left the workforce and derive income from Social Security and defined-benefit pensions, meaning that higher unemployment and lower financial asset prices may have less effect. However, retirees also are far more dependent on asset income than working age individuals and have less time to allow asset values to recover. For these reasons, figures shown here should be taken to be generally representative of the retirement income adequacy of current new retirees, based on broad trends in Social Security and pension income.

Results of the simulation are first shown to illustrate the effects of the adult equivalent adjustment factor on replacement rates. [...]


In fact, one could argue that many current retirees have oversaved. While of lesser concern than undersaving, there are large numbers of retirees with replacement rates significantly exceeding their preretirement earnings; 44 percent of individuals in the 1940 birth cohort have retirement incomes exceeding 100 percent of preretirement earnings, and 16 percent have replacement rates exceeding 150 percent. Although it is impossible to know how each individual would optimally choose to allot consumption between working years and retirement, these individuals may have inadvertently sacrificed consumption earlier in life to amass a retirement income significantly out of proportion to their needs or their ability to spend it enjoyably. These retirees may have been better served to save less during their working years, although surely many would not regret preparing for retirement as effectively as they did.

Replacement Rates for Future Retirees

While a strong majority of the 1940 birth cohort appears to have adequate retirement income to replace their preretirement earnings, many are concerned about how future retirees will fare. Social Security benefits will be lower, and private pensions will shift from defined-benefit schemes--which are perceived to be more generous--to defined-contribution plans.[18] To examine these questions, I analyze projected replacement rates for members of the 1960 birth cohort, who will retire in the 2020s.



Accounting for differences in household composition can have a significant effect on judgments about the adequacy of retirement income. Adjusting for household size and the presence of children increases the typical replacement rate for the 1940 birth cohort by approximately fifteen percentage points, although measured replacement rates decline for roughly one in ten retirees.

For the 1940 birth cohort, overall retirement preparedness appears to be strong. The typical Social Security replacement rate adjusted for household composition is 63 percent of preretirement earnings, while the median total pension income replacement rate is 92 percent. This latter figure significantly exceeds financial advisers' recommended replacement rate of around 75 percent.

Projected replacement rates for the 1960 cohort are lower, with a median adjusted total pension replacement rate of 84 percent. But even this reduced level is adequate on average, and if individuals were to choose to remain in the workforce for just one more year, the median replacement rate would rise to around 89 percent.

The most significant gray area surrounding these projections is when and how the Social Security program will be reformed to improve its financial soundness. While the program is projected to be solvent until the 2040s--meaning that scheduled benefits should be payable as of the 2020s, when the 1960 cohort will retire--changes to taxes and benefits are likely to occur in the near future. These changes are likely to reduce average replacement rates, although they will probably shield low earners from the greatest changes. While it is important to reduce the growth of Social Security benefits to ease pressure on the federal budget, Social Security reform should also include provisions to increase individual retirement savings outside of Social Security so as to help maintain income replacement rates at retirement.

While policymakers should not ignore policies to help individuals build sufficient income for retirement, such as reforming Social Security and automatically enrolling employees in pension plans, neither should they panic or assume a crisis is at hand. Most Americans, both current retirees and future ones, appear to be reasonably well prepared to support themselves in retirement.

Andrew G. Biggs is a resident scholar at AEI.

AEI research assistant Adam Paul worked with Mr. Biggs to produce this Retirement Policy Outlook.

Taxing fuels, vehicles, and passengers: EEA’s vision of ’sustainable’ transport

Taxing fuels, vehicles, and passengers: EEA’s vision of ’sustainable’ transport. By Marlo Lewis
Master Resource, Feb 10, 2009

Europe taxes gasoline at $3-4 a gallon, imposes the world’s most stringent fuel economy standards, and mandates the blending of biofuels into the region’s motor fuel supply. Yet European Union (EU) transport-sector greenhouse gas (GHG) emissions increased by 26 percent from 1990 to 2006, according to “Beyond Transport Policy,” a recent European Environment Agency (EEA) report. Why have these policies failed to reduce GHG transport-sector emissions?

The EEA report spotlights the unheard-of fact that the “key drivers” of demand for transport services are “external” to the transport sector. So despite what you’ve been told, people don’t drive around just for the heck of it, buy airplane tickets for the sheer thrill of flying, ship products or order deliveries just to make work for truckers, sailors, and airmen. No, most people use transport vehicles to shop, work, educate their children, vacation, or supply products to customers. And—horrors—they do these things “without considering the consequences on transport demand and greenhouse gas emissions”!

What this implies, of course, is that we cannot have what the EEA calls a “sustainable transport system” until politicians and bureaucrats control those pesky “external drivers”—the other economic sectors that generate the demand for transport services.

The EEA report provides detailed case studies on how three external drivers—food production and consumption, short-haul air travel for business and leisure travel, and education—increase emissions by increasing the demand for transport. Each study reveals what every sober adult should already know. Work causes emissions. Play causes emissions. Wealth causes emissions. Trade causes emissions.

In short, life causes emissions, especially where people are prosperous and free to work and play.

Let’s begin with food. Do grapes cause global warming? According to the EEA, importing a kilogram of grapes from Chile to Austria emits 7,410.8 grams of carbon dioxide (CO2), compared to only 8.8 grams for grapes grown closer to home. So if you’re an Austrian and you eat Chilean grapes, your carbon foot print is 842 times bigger than if you eat locally-grown grapes. But Europeans like fresh produce, and they can afford to import it year-round. How decadent! Why can’t they live like their noble ancestors and eat canned fruit in the winter, or simply abstain?

To counter the fresh produce peril, the EEA calls for a labeling program alerting consumers to the transport-based carbon-intensity of the food they eat. However, that would hardly be enough to instill in Austrians, for example, an aversion to Chilean grapes, South African apples, Spanish strawberries, Dutch tomatoes, or Israeli peppers. The logical next step—which the EEA recommends—is to impose carbon taxes “to internalize the external costs of transport.” Such tariffs would also keep lots of developing country produce out of European markets. The EEA proposal is protectionism by another name.

The EEA also bemoans the vicious circle created by prosperity and air travel. As Europe becomes wealthier, more economically integrated, and more connected to the global economy, more Europeans want to fly for both business and pleasure. This has led to an expansion of aviation facilities and infrastructure, with airports functioning not only as transport hubs but also as retail centers, conference and meeting venues, and accommodation facilities. By making flying more convenient and useful, these developments further increase demand for air travel. When will the flying end!

To mitigate this dastardly trend (never mind that accelerating the movement of goods, persons, and ideas enhances wealth creation—the foundation of all environmental improvement), the EEA recommends new carbon-based aviation fuel taxes, passenger duties, and landing fees. Well, what else did you expect?

Education is the third and last “external driver” examined in the report. Here’s the gist. Millions of parents would rather drive their kids to safe, high-quality schools across town than make the children walk or bicycle to underperforming, bully-infested schools nearby. The EEA report offers several antidotes to this malady, including cycle lanes, car pooling, “walking buses,” car-free action days (or weeks), consumer information, and improvements in public transport. Well, I don’t know about you, but if my son can get beat up and have his lunch money stolen at a school with a “walking bus” program, then I’m definitely going to enroll him there rather than drive him to a good school a few miles further from home.

Although the report doesn’t specifically mention taxes in this context, it states that “revenues from a carbon-based tax can be used to cover costs of cycling and walking infrastructure,” and opines that “people may be more favorable if they are given adequate information about what would happen without the tax increase.” Sure they will! ‘Monsieur Blanc, please fork over an additional €1,000 in motor fuel taxes or the Greenland Ice Sheet will collapse.” That doesn’t sound like a winning sales pitch.

Here’s the bottom line the EEA doesn’t want to face. Until somebody mass produces electric vehicles or alternative fuels that outcompete combustion engines or petroleum-based fuels, transport-sector CO2 emissions will continue to increase along with demand for transport services.

Although transport demand comes from “external drivers” on which transport policies have had little impact, the EEA report tries but fails to go “beyond transport policy.” The EEA’s default solution to the alleged problem of too many people driving, flying, shipping, and importing is the most boringly familiar transport policy of all–increase taxes on fuels, goods, passengers, and vehicles.

Comment on post " transparencia genera confianza"

Comment on post " transparencia genera confianza". By Jorge Mata, Feb 10, 2009

hola, quisiera hacer una matización, dada la redacción empleada en y en estos posts. no es un esfuerzo sin precedentes por reducir ineficiencia, despilfarro, etc. Apena ver la tendencia que todos tenemos a no estudiar lo que ya han hecho nuestros antecesores.

Todo esto ya empezó en el primer mandato Clinton (junto con el Congreso, por supuesto). En esa época, el presidente y el Congreso federales acordaron estas leyes (cronológico inverso):

. Government Paperwork Elimination Act of 1998 (GPEA) . Clinger-Cohen Act of 1996. Federal Acquisition Streamlining Act of 1994, Title V (FASA V). Government Performance Results Act of 1993 (GPRA)

Estos esfuerzos se ampliaron ya desde el primer mandato Bush 43 + el Congreso, incluyendo cosas tan imprescindibles hoy como la adopción de RSS y videos de las press conferences & daily press briefings tanto en como en (del que salió, además de la creación de portales como (luego renombrado a, etc. Menciono esto de los videos porque todavía no están los vídeos de los press briefings en, y las transcripciones ha costado mucho ponerlas completas (y sigue costando), y un sinnúmero de fallos (inexcusables si se presume de estar muy al día, permítanme decir ahora que no nos ve nadie).

De hecho, no es la primera vez que se crea algo en un mandato con la intención de ser novedoso y resulta, siento decirlo, no serlo y además duplica esfuerzo. El Congreso federal tiene una biblioteca de merecida fama que asiste, sobre todo, a los legisladores. Allí hay una dirección,, que da paso a toda la información legislativa imaginable. Pues bien, a alguien se le ocurrió en la última campaña presumir de apertura republicando los proyectos de ley en curso en las cámaras en, que es el site del Ejecutivo. So much for separation of powers.

Y no digamos eso de que las cámaras hayan aprobado un proyecto y el Ejecutivo esté de acuerdo pero que, aún así, se quedará cinco días en espera para recibir comentarios públicos. So much for respect for Congress, which already receives much more calls than anybody else of groups and individuals. Por no mencionar que a veces no se podrá cumplir lo de los cinco días porque eso puede convertir en vetadas las leyes en ciertas circunstancias, nada raras.

Bueno, a lo que iba: la Federal Funding Accountability and Transparency Act of 2006 (FFATA) hace que the Office of Management and Budget (OMB) organice un web site que permita el acceso centralizado en una sola DB de todos los gastos federales, incluidos los contratos, los préstamos, las becas, etc.:

Aquí se puede ver:

- The name of the entity receiving the award.The name of the entity receiving the award.
- Information on the award including transaction type, funding agency.
- The location of the entity receiving the award.A unique identifier of the entity receiving the award.

En una de las queries posiblemente más usadas, Top 100 Recipients of Federal Contract Awards for FY 2009 1Q (, verán una lista ejemplo. Elijan cualquier gasto y verán qué cantidad hay sin explicar, qué distritos (y diputado) han recibido el gasto, qué departamentos lo han gastado, qué tendencia de gasto ha tenido ese contrato en los años anteriores con ese contratista, etc.

Sin duda que el Congreso federal (que les recuerdo lleva en manos demócratas dos años) seguirá profundizando en las mejoras que pueden hacerse a estas medidas. Todo trabajo humano es perfectible.

Gracias por esta oportunidad de matizar los esfuerzos del Congreso y presidente federales por cumplir con sus obligaciones con el pueblo.

Best Regards,
Jorge Mata
Press OfficeBipartisan Alliance,
a Society for the Study and Defense of the US Constitution

Wednesday, February 11, 2009

Michelle Obama at Howard University

Growing up
White House blog, Wednesday, February 11th, 2009 at 3:30 pm

First Lady Michelle Obama visited Howard University today, where she assured a crowd of college students that hey, it's ok if you're not sure exactly what you want to do with your life.

"The question that I hate most that we ask of young people is, 'What are you going to be when you grow up?' And the truth is, I still don't know, and I'm 45 years old," she said. "All I know is that it's important for you to be true to yourselves, not to worry too much about what other people are going to think or make of your choices, because everyone will question what you do and tell you you should've done it the other way."

Read the full remarks here.

Ford hybrid production down 50%, pickup trucks line add a third shift

Didn’t Get the Memo, by Henry Payne
Planet Gore/NRO, Wednesday, February 11, 2009

Ford this week announced that it is adding a third shift to produce Ford F-150 pickups at its Dearborn Truck Plant. The addition of the third shift will boost total employment at the plant by about 1,000 to 3,470.

While the truck market remain depressed (Ford’s F-Series sales dropped 25 percent in December), other markets such as hybrid sales are in free fall with the Ford Escape Hybrid down 50 percent.

Ford says the shift changes are a reaction to market demand. Since the company launched its redesigned F-150 in October, full-size pickup sales have increased market share by 5 percent to 35 percent of the market.

“Despite the economic situation here, we are gaining share, and the dealer demand and the customer demand” remain strong, says F-150 marketing manager Mark Grueber. “They are asking for more trucks from us.”

Clearly, someone didn’t get the memo from Washington central planning that Americans only want small hybrids.

Libertarians on stimulus bill and reduction on education spending

No Cut-astrophe, by Neal McCluskey
Cato at Liberty, Feb 11, 2009

The Obama administration is shaping up to be little more than the Office of Doomsayer in Chief, at least in the early going, and it is being obediently assisted by the media. In education, USA Today gave the office a nice boost this morning by reporting on a Center for Reinventing Public Education projection that without a stimulus, states might have to cut their education spending by 18.5 percent over the next three years. And CRPE did not include a projection for local cuts, which researcher Marguerite Roza said were impossible to make.

U.S. Secretary of Education Arne Duncan seized the moment, stating in the article that the analysis “obviously confirms what we have feared: that there is so much at stake now and we’re really trying to stave off catastrophe.”

Here we go again…

For one thing, predicting budget shortfalls is hardly an exact science. Moreover, unreported by USA Today, the CRPE analysis is based on the assumption that states will cut spending in all areas equally in response to revenue shortfalls. But in few states does anyone wield the kind of political power that the education establishment brings to bear.

Suppose, though, that total per-pupil expenditures – consisting of local, state, and federal dough – were to decrease by 18.5 percent. (Obviously, the feds aren’t going to cut funding, but let’s pretend that some sense somehow wafted into Washington and caught the pols by surprise.) Where would that put us? On par with Depression era funding? Modern day Sri Lanka or Zimbabwe?

Try again.

Unfortunately, the latest per-pupil funding data the federal government has is from the 2004-05 school year, which is likely lower than what was spent this year. But let’s use it anyway, if for no other reason than to give the Chicken Littles every benefit of the doubt. In 2004-05, the average per-pupil expenditure in the United States was $11,470. Reduce that by 18.5 percent, and you’re spending $9,348.

At what year does that put us? Adjusted for inflation, right about at 1996-97 — hardly major time travel! And compared to other industrialized nations? Still in the top six, nearly tied with Denmark, and that is comparing our average for elementary and secondary schooling with just secondary schooling –- the more expensive level — for everyone else.

Considering all of this along with the evidence that I have laid out previously showing the almost complete disconnect between spending and performance, as well as the massive bloat in the system, and such a cut shouldn’t be called a “catastrophe.” It should be called “why the hell didn’t we make such a cut years ago?”

Unexpected side effects of environmental policies, fire control & Australia

Environmental Policies Kill - Again!, by Iain Murray
Openmarket, February 11, 2009 @ 11:31 am

One of the main themes of my book, The Really Inconvenient Truths, is that misguided environmental policies often lead to humanitarian and environmental disaster. We’ve just seen another example in Australia, where fires have claimed many lives. Distraught survivors are certain they know at least part of the reason why the fires were able to do so:

During question time at a packed community meeting in Arthurs Creek on Melbourne’s northern fringe, Warwick Spooner — whose mother Marilyn and brother Damien perished along with their home in the Strathewen blaze — criticised the Nillumbik council for the limitations it placed on residents wanting the council’s help or permission to clean up around their properties in preparation for the bushfire season. “We’ve lost two people in my family because you dickheads won’t cut trees down,” he said.

It’s called bushfire season for a reason: the bush catches fire. If you want to reduce the effects, you cut back the bush. Policies that stop this are criminally dangerous.

It’s a similar story here in the US. Every year wildfires cause more damage than they should because landowners are restricted from clearing land because of a variety of environmental policies. See here for the disturbing details of one such case from the 1990s. Here’s how I summarize the American approach to wildfires in my book:

When Californian farmers adjacent to the national forests found the kangaroo rat, which graces the Endangered Species List, on their property in the 1990s, they soon found that the rat had destroyed their livelihoods. They were unable to develop their properties in any way without paying a fine for every acre of land they owned, even if they only wished to develop a small portion of it and even if the rat habitat would be unaffected. So they sold their land to property developers, who were easily able to afford the fees. As a result, homes stood next to national forests where previously there had been a buffer zone of farmland.

Meanwhile, the forest service was unable to carry out controlled burns in those forests adjacent to the homes because the underbrush they wished to clear was also home to, you guessed it, the kangaroo rat. Even building a firebreak could get landowners into trouble under the Endangered Species Act. This problem was already apparent. After similar fires in 2003, California’s Blue Ribbon Fire Commission, created by then governor Gray Davis and whose members included Democratic senator Dianne Feinstein as well as state legislators of both parties, concluded that “habitat preservation and environmental protection have often conflicted with sound fire safety planning.”

Liberal environmentalist dogma, however, prevented any action being taken to ensure that sound fire safety planning was enabled, far less that logging companies be allowed to do their bit to protect landowners and the environment. Instead, the contradiction was allowed to stand and when the fires swept through California, the environmental “protections” of the Endangered Species Act led directly to the destruction of the very habitats and animals they were meant to save.

Congressmen should know about these problems and the best available solution. In September 2000, the late and much lamented Congresswoman Helen Chenoweth-Hage of Idaho, chair of the Forests and Forest Health Subcommittee of the House Resources Committee, held hearings on private conservationand the lessons the nation could learn from exemplary private landowners.

Skeet Burris, a South Carolina tree farmer and the American Tree Farm System’s “National Tree Farmer of the Year,” was asked if he practiced controlled burns on his private forestland. He replied that he did because it was necessary to protect the health of his pines and that fire was an integral part of the ecosystem of the southern pine forests. He said he burned about one third of his forest annually.

Chenoweth-Hage asked if, before he began his burns, he waited until there was a huge fuel build-up, a long drought, and an especially hot spell with low humidity and high winds. To some laughter, Burris responded that such a policy would be insane. When he was told that such conditions were characteristic of prescribed burns on the national forests, he explained that he couldn’t afford to take such risks.

His forests and home were all that he owned and that his children and grandchildren would inherit. Furthermore he couldn’t risk his controlled burn destroying his neighbors’ forests and homes because he would personally be held liable. There would be no taxpayers to foot the bill, no transfer to another forest, no early retirement on a taxpayer pension, no other golden parachutes. As the landowner he would personally bear the costs— and that drove his behavior.

As R.J. Smith says: “As long as man is part of nature, we can only have a sound and healthy environment by the exercise of caring stewardship and management. For guidance in that we must now look to the nation’s successful private conservationists.” Liberal environmentalism, on the other hand, has set theforests ablaze.

Instead of repealing or reforming these regulations, the stimulus bill included $500 million for “wildland fire management.”

Libertarians on Audubon’s report "Birds and Climate Change"

Audubon’s Bird-brained Conclusion: More Global Warming Misdirection. By Chip Knappenberger
Master Resource, February 11, 2009

On Tuesday, the National Audubon Society released a report “Birds and Climate Change,” which interpreted an average northern shift of the over-wintering range of a large collection of North American bird species over the course of the past 40 years or so. Audubon decided that this range shift was due, in part, to “global warming.” Therefore, it was bad and action must be taken to avert it:

It is the complete picture of widespread movement and the failure of some species to move at all that illustrate the impacts of climate change on birds. They are sending us a powerful signal that we need to 1) take policy action to curb climate change and its impacts, and 2) help wildlife and ecosystems adapt to unavoidable habitat changes, even as we work to curb climate change itself.

What the Audubon Society failed to mention was that contained within the data from its own report was that the numbers of bird species with increasing populations topped those with population declines by a margin of more than 2-to-1. In other words, “global warming” has been a net benefit for the Audubon’s collection of North American bird species. Which leaves you wondering, why would we want to take action that could result in a countering of that trend?

The Audubon Society’s report describes the analysis of 40 years worth of data collecting under their Christmas Bird Count (CBC) program. For three weeks of each year around Christmas time, volunteers from around the country conduct bird counts within their designated observing area. The methodology of the CBC program is designed such that the data collected can be used in subsequent historical analyses aimed at tracking the patterns of bird species (and their numbers) both spatially and temporally.

The latest analysis of this CBC dataset was geared towards assessing the patterns of the winter range of 305 North American bird species and whether or not they were related to temperature conditions. It turns out, that over the past 40 years (from the early 1960s to the early 2000s) the average winter range of the collection of bird species has moved northward by about 40 miles. Since the early 1960s were a cool period and the early 2000s were warm one, the temperature rise during this period seems a likely culprit. Audubon highlighted the 20 fastest moving species as well as the trace of January average temperature across the United States in the figure copied below.

[see figure in original post]

Which is all well and good—North America’s bird species are adapting their behavior to a changing climate. So what’s the problem?

Actually, Audubon was largely at a loss to find one, instead, trying to convince us that evidence of climate change is reason enough to try to stop it—apparently Audubon knows what the “best” climate is for birds.

Well, perhaps they don’t.

Hidden in the recesses of their “Birds and Climate Change” report (their Appendix 1) is a table of various statistics that were calculated for each of the 305 bird species analyzed. Included in the large table among the statistics for things such as how far each species has moved northward and how far they had moved inland, was the value (and statistical significance) of the overall population trend for each species. Funny how in a report about how “global warming” is impacting bird species, that Audubon didn’t highlight the ultimate test of bird species health—the overall population trends.

They reason why becomes clear when you start looking over the numbers.

Of the 20 species highlighted in their figure (Figure 1 above), 9 of them showed statistically significant population increases, 9 of them had no statistically significant change in population, and only 2 of the species showed population declines.

Of the overall 305 species analyzed, 120 (39%) showed statistically significant population increases, 128 (42%) showed no change, and 57 (19%) showed a statistically significant declines.

This is strong indication that, in net, North American bird species have seemed to improve their overall condition during the past 40 years—a time of winter warming.

One potential reason why, is that most of these bird species tend to spend their summers further north than they do their winters—migrating between their preferred winter and summer ranges in the spring and fall. Birds don’t migrate for the fun of it, but to find the resources to meet their needs—food, nesting grounds, competition avoidance, etc. As migration is a particularly taxing time on the birds, the less time/distance they have to migrate the better. That they don’t have to travel as far south in the winter is a good thing. And since over the past 40 years, summer temperatures across North America have warmed much less than winter temperatures, it is quite likely that the total average distance that North America’s bird species have to migrate each year has declined (and the populations have grown).

Audubon wants you to sign their petition pushing for action on climate change based upon the findings of their bird report—not because of findings of harm, but simply of affect:

Our recently-released Birds and Climate report clearly shows that climate change is affecting birds – and our world – now. For the past 40 years, as our climate has warmed, birds have shifted their winter ranges further and further north. This ecological disruption is yet another wake up call that we must act quickly to solve the climate crisis. The birds’ northward movement is another signal that climate change is here and action is needed now.

We need global warming legislation that will help birds and wildlife survive what is coming by protecting their habitats and will reduce global warming pollution 80 percent by 2050 to avoid the worst impacts of a rapidly changing climate. Tell your lawmakers where you stand on global warming by signing our petition.

Don’t you think it would be decent of the National Audubon Society to highlight to their potential petition signors that they would be lending their support for legislation which is aimed to combat an effect that is leading to an overall improvement in the general health of North America’s bird species?

[update: Audubon has now included a FAQ about their analysis on their website which includes a discussion of the population increases--predictably, they find no good news in those numbers!]

Q: Didn’t some species fare really well over the past 40 years (even showing population increases)?

A-Yes, many of the species that moved north and inland increased in population at the same time. But it would be short-sighted to focus on what may appear to be short-term gains. Where food or habitat is available, species may do well in the short term, but ultimately the need to adjust to changing climate conditions can put species in peril in a variety of ways. Some will move into areas where an unusually harsh winter will still bring conditions they cannot survive. Others may be unable to find food or suitable habitat (especially if the healthy habitats they need, like grasslands) are already being decimated by overuse, pollution, and other threats. Even species that fare well amid the changes are likely to force out other, less adaptable birds, taking a long-term toll on ecological health and all it supports.

US Provides Malaria Assistance to Zimbabwe

USAID Provides Malaria Assistance to Zimbabwe
USAID, February 11, 2009

WASHINGTON, D.C. - The collapse of the health system has left the people of Zimbabwe at great risk of contracting illnesses such as cholera, which claimed more than 3,400 lives, and increased the threat of a malaria epidemic.

To help mitigate a malaria outbreak, the U.S. Agency for International Development (USAID) is supporting emergency indoor residual spraying to fill gaps in the country's traditionally strong malaria control program.

Timing is critical; in most years spraying should be completed by December. But Zimbabwe's national malaria program lacks the financial resources to achieve three quarters of its scheduled spraying, which would target 20 high-risk districts and protect more than 400,000 households.

To respond to the critical gap and avoid another catastrophic epidemic caused by the near collapse of Zimbabwe's health sector, USAID provided $200,000 in emergency funding, matched with £200,000 from the UK's Department for International Development (DFID). This accelerated program will apply the insecticide in February and March before the usual peak in cases in April and May. USAID and DFID coordinated the program with the World Health Organization and implementing partners John Snow International, Crown Agents, and PLAN International, which organized the operation's logistics, personnel, equipment, and management needs.

Indoor residual spraying applies a WHO-approved insecticide to the indoor walls, ceilings, and eaves of houses to kill or shorten the lifetime of mosquitoes that carry the malaria parasite. Decades of experience have shown that timely and properly conducted spraying can have an immediate and dramatic impact on malaria transmission. Combined with the increased deployment of long-lasting insecticide-treated bednets, diagnostics, and drugs, indoor residual spraying will play a major role in reducing the risk of a malaria epidemic in Zimbabwe-and yet another burden in an already severe humanitarian crisis.

For more information about USAID's malaria programs visit: and

Industry Views On Offshore Energy Exploration: Myth vs. Fact

Offshore Energy Exploration: Myth vs. Fact
IER, Feb 11, 2009

Myth: There’s not enough energy in the outer continental shelf (OCS) to make exploration worthwhile.

Fact: The Minerals Management Service (MMS) estimates that the OCS contains 86 billion barrels of oil and 420 trillion cubic feet of natural gas. These estimates are likely very conservative, as bans on offshore leasing have made it illegal to explore and determine how much more energy is available. In other words, this is just the tip of the iceberg­—history has proven that when people are allowed to look for energy, they generally find it. The best way to stop them from finding it is to stop them from looking for it.

Myth: Offshore energy development would do nothing to lower prices because it would take too long for the energy resources to make it into the market.

Fact: Economists have long disputed the notion that offshore energy development would not affect consumer prices. Both economic theory and now empirical evidence demonstrate that government policies promising future oil production lead to immediate price relief. IER economist Robert Murphy made this point on a TV interview on June 26, 2008,[1] while Martin Feldstein made the point in a Wall Street Journal op-ed on July 1, 2008.

Further, while there may be areas along the Atlantic coast without the significant build-out of infrastructure needed to facilitate quick energy production, other currently unexplored areas do have that infrastructure in place, such as the eastern Gulf of Mexico. No serious observer has ever suggested that it would take anywhere close to ten years to access those energy resources and deliver them to American consumers. Furthermore, in places like California, where an infrastructure is already in place and the local community supports offshore exploration, those resources could be available in a significantly shorter period of time.

Myth: Offshore energy production is dangerous and harmful to the environment.

Fact: Offshore energy production is safe and environmentally sound. In the last 50 years, the oil and gas industry has developed innovative technologies and exploration methods that are efficient, pose little threat to the environment, and keep workers safe. The industry has taken additional precautions to prepare for any type of unwanted incident.

Some of those technologies include:
  • Advanced 3-D seismic and 4-D time imaging technologies: enable offshore operators to locate oil and gas resources far more accurately to necessitate less drilling and allow greater resource recovery.[2]
  • Storm chokes: placed on all offshore wells to detect damage to surface valves and shut down production during an emergency.[3]
  • Blowout preventers: continuously monitor the subsurface and subsea-bed conditions to prepare for unexpected changes in well pressure.[4]
  • Waste product reuse technology: transforms drill cuttings, a waste product of rock pieces and drilling fluids produced when drilling a well, into raw material for bricks, roads, and even rebuilding Louisiana’s wetlands.[5]

These technologies and practices are yielding results:

  • According to the U.S. Department of Interior data, offshore operators produced 7 billion barrels of oil from 1985 to 2001 with a spill rate of only .001 percent.[6]
  • In 2005, Hurricanes Katrina and Rita destroyed 115 Gulf of Mexico oil and gas platforms and damaged 535 pipeline segments, but there were no major oil spills attributed to either storm.[7]

Myth: Offshore oil and gas production is the number one contributor to oil in our oceans.

Fact: Less than 1 percent of all oil found in the North American marine environment comes from offshore oil and gas development.[8] According to the National Academy of Sciences, the majority—60 percent—is the result of natural seeps through the ocean floor.[9] In many places it is higher. For example, all of the tar on the beaches of Santa Barbara is from natural seeps.[10] Moreover, these seeps are reduced when the oil is produced and transported to shore, where it can be put to use as energy for America.[11]

Oil seeps—underwater cracks in the Earth’s crust—release more than 60 percent of the petroleum entering North American waters and over 45 percent of the petroleum in waters around the globe.[12] Natural seepage of crude oil from geologic formations below the seafloor is estimated to exceed 47,000,000 gallons in North American waters and 180,000,000 gallons globally every year.[13]

Myth: Oil companies are sitting on 68 million acres of untapped leases and don’t need access to new areas.

Fact: Lease agreements already contain federal requirements that require oil companies to use leased land in a timely manner. The 1992 Comprehensive Energy Policy Act requires energy companies to comply with lease provisions and explore expeditiously or risk forfeiture of the lease. Energy companies cannot “stockpile” leases (even those found to contain no oil or gas) to drive prices up. What’s more, historical data show only one discovery results from every 60 leases granted to energy companies.

Companies are not “sitting” on the leases they now have. Technology has allowed companies to increase their production on leased acreage.

The Hard Facts:

97 percent of Federal offshore areas are not leased.
94 percent of Federal onshore areas are not leased.


[1] See also Robert Murphy, Lifting the Offshore Ban Gave Immediate Price Relief, Institute for Energy Research,
[2] U.S. Department of Energy, Office of Fossil Energy, Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology, October 1999, p. 28. [3] Id. at 41.
[4] Id.
[5] See id. at 54.
[6] SAFE Commends Movement Toward Lifting Ban on Offshore Oil and Natural Gas Production,, June 18, 2008.
[7] Id.
[8] See National Research Council, Oil in the Sea III: Inputs, Fates, and Effects: Report in Brief,
[9] National Research Council, Oil in the Sea III: Inputs, Fates, and Effects, p. 2 (2003).
[10] See Kolpack 77 and Harman 198 R. L. Kolpack, Relationship of migratin of natural seep material to oceanography of Santa Barbara Channel, California Offshore Gas, Oil, and Tar Seeps, Staff Report, California State Lands Commission p. 226-55 (1977); B. Hartman & D. Hammond, The use of carbon and sulfurisotopes as correlation parameters tor the source identilication of beach tar in the southern California borderland, 45 Geochimica et Cosmochimica Acta 309 (1981).
[11] Stop Oil Seeps California,
[12] Id. at 2.
[13] Id.

DOE Partners Initiate CO2 Injection Study in Virginia

DOE Regional Partner Initiates CO2 Injection Study in Virginia
Project to Examine Carbon Storage in Unmineable Coal Seams, Enhanced Coalbed Methane Recovery
Energy Dept, February 11, 2009

Washington, D.C. — A U.S. Department of Energy (DOE) team of regional partners has begun injecting carbon dioxide (CO2) into coal seams in the Central Appalachian Basin to determine the feasibility of CO2 storage in unmineable coal seams and the potential for enhanced coalbed methane recovery. The results of the study will be vital in assessing the potential of carbon storage in coal seams as a safe and permanent method to mitigate greenhouse gas emissions while enhancing production of natural gas.

DOE's Southeast Regional Carbon Sequestration Partnership (SECARB) began injecting CO2 at the test site in Russell County, Virginia, in mid January. Earlier, an existing coalbed methane well had been converted for CO2 injection, and two wells has been drilled to monitor reservoir pressure, gas composition, and the CO2 plume. The targeted coal seams are in the Pocahontas and Lee formations and range from 1,400 to 2,200 feet in depth and from 0.7 to 3.0 feet in thickness. One thousand tons of CO2 will be injected over a 45-day period.

The site was selected because it is representative of the Central Appalachian Basin, an area of about 10,000 square miles located in southern West Virginia and southwestern Virginia. This area has been assessed by researchers to have the capacity to store 1.3 billion tons of CO2 in the coal seams while increasing natural gas production up to 2.5 trillion cubic feet.

The Central Appalachian Basin CO2 Storage Project will explore the concept of multiple use of subsurface storage volume. Injecting CO2 into coal seams boosts coalbed methane recovery, which provides an immediate commercial benefit and offsets infrastructure development costs, while providing long-term storage of CO2 in the formation—a win-win situation.

The project is being coordinated by the Virginia Center for Coal and Energy Research. The center's director, Dr. Michael Karmis, has praised the gas operator, CNX Gas, the mineral owner, Buckhorn Coal, and the supply vendors, including Praxair and Denbury Resources, for their "tremendous cooperation and support" of the project. "In addition," he said, "I would like to thank the NETL team that has worked with Virginia Tech and Marshall Miller and Associates researchers to establish baseline measurements and develop a comprehensive monitoring program."

Initiated in 2003, DOE's Regional Carbon Sequestration Partnership Program now includes seven partnering regions that were established to determine the best approaches for capturing and permanently storing CO2, a greenhouse gas that contributes to global climate change. The partnerships are made up of state agencies, universities, private companies, and nonprofit organizations that form the core of a nationwide network helping to establish the most suitable technologies, regulations, and infrastructure needs for large scale carbon capture and storage. The partnerships include more than 350 organizations, spanning 42 states, three Indian nations, and four Canadian provinces. NETL manages the partnership program for DOE’s Office of Fossil Energy.

SECARB is led by the Southern States Energy Board and represents more than 100 partners and stakeholders in 13 southeastern states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia, and West Virginia. The Central Appalachian Basin CO2 Storage Project is one of four pilot tests that the partnership is sponsoring for the validation phase of the project. In this phase, multiple sequestration sites and technologies are being validated in preparation for large-scale injection that will occur in the development phase.

CO2 emissions and renewable energies

Costs With No Benefits . . . Sounds Like a Plan. By Drew Thornley
Planet Gore/NRO, Wednesday, February 11, 2009

Der Spiegel Online has an interesting exposé on Europe’s fight to reduce CO2 emissions via renewable energies like wind and solar, a story highlighted at the top of this morning’s Daily Peiser.

Despite Europe's boom in solar and wind energy, CO2 emissions haven't been reduced by even a single gram. Now, even the Green Party is taking a new look at the issue — as shown in e-mails obtained by SPIEGEL ONLINE.

Germany's renewable energy companies are a tremendous success story. Roughly 15 percent of the country's electricity comes from solar, wind or biomass facilities, almost 250,000 jobs have been created and the net worth of the business is €35 billion per year.

But there's a catch: The climate hasn't in fact profited from these developments. As astonishing as it may sound, the new wind turbines and solar cells haven't prohibited the emission of even a single gram of CO2.

Experts have known about this situation for some time, but it still isn't widely known to the public. Even Germany's government officials mention it only under their breath. No one wants to discuss the political ramifications.

It's a sensitive subject: Germany is recognized worldwide as a leader in all things related to renewable energy. The environmental energy sector doesn't want this image to be tarnished. Under no circumstances does Berlin want the Renewable Energy Law (EEG) — which mandates the prices at which energy companies have to buy green power — to fall into disrepute.

In truth, however, even the Green Party has recognized the problem, as evidenced by an e-mail exchange last year between party energy experts and obtained by SPIEGEL ONLINE. One wrote the following message to a colleague: "Dear Daniel, sorry, but the EEG won't do anything for the climate anyway." Ever since the introduction of the emissions trading system, the Renewable Energy Law had become "an instrument of structural change, but not an instrument to combat climate change."

Indeed, when it comes to climage change, investments in wind and solar energy are not very efficient. Preventing one ton of CO2 emissions requires a relatively large amount of money. Other measures, especially building renovations, cost much less — and have the same effect.
The e-mail exchange ends with a conciliatory "What do you think?" But it is quickly followed by a bitter PS: "Do the Greens think that this problem (of climate change) will solve itself if we just screw solar panels onto our rooftops?"

The article doesn’t mention it, but energy and electricity prices in Europe are considerably higher than those in the United States. So, Europe agrees to the Kyoto Protocol, mandates that large amounts of their energy supplies come from renewables, and the result is higher prices for producers and consumers and no benefit to the climate. Unfortunately, this is exactly where the U.S. is headed, if the Obama administration’s energy plans are realized. If we turn our backs on coal power, refuse to ramp up nuclear power, and mandate “green” energies before they are proven, commercially viable technolgies, the days of relatively affordable (and reliable) energy and electricity are numbered.