Thursday, February 12, 2009

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.

[...]

Conclusion

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
http://masterresource.org/?p=817

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 "Recovery.gov: transparencia genera confianza"

Comment on post "Recovery.gov: transparencia genera confianza". By Jorge Mata
nuestracausa.wordpress.com, Feb 10, 2009

hola, quisiera hacer una matización, dada la redacción empleada en recovery.gov y en estos posts. Recovery.gov 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 whitehouse.gov como en state.gov (del que salió america.gov), además de la creación de portales como firstgov.gov (luego renombrado a usa.gov), etc. Menciono esto de los videos porque todavía no están los vídeos de los press briefings en whitehouse.gov, 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, thomas.loc.gov, 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 whitehouse.gov, 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.: http://www.usaspending.gov/

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 (http://www.usaspending.gov/fpds/tables.php?tabtype=t2&subtype=t&year=2009), 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
http://bipartisanalliance.blogspot.com/

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:
http://www.usaid.gov/our_work/global_health/id/malaria/index.html and http://pmi.gov/.

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.


References:

[1] See also Robert Murphy, Lifting the Offshore Ban Gave Immediate Price Relief, Institute for Energy Research, http://www.instituteforenergyresearch.org/2008/10/02/lifting-the-offshore-ban-gave-immediate-price-relief/.
[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. http://www.fossil.energy.gov/programs/oilgas/publications/environ_benefits/env_benefits.pdf [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, http://www.reuters.com/article/pressRelease/idUS223711+18-Jun-2008+PRN20080618, June 18, 2008.
[7] Id.
[8] See National Research Council, Oil in the Sea III: Inputs, Fates, and Effects: Report in Brief, http://dels.nas.edu/dels/rpt_briefs/oil_in_the_sea_final.pdf.
[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, http://www.soscalifornia.org/presentation-bbsw/ze.html.
[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.

In ForeignPolicy.com: Obama's Press Conference on the Stimulus

Obama's Press Conference on the Stimulus Was Not Reassuring. By Philip I. Levy
ForeignPolicy.com, Wednesday, February 11, 2009

The most interesting aspect of President Obama's prime time press conference yesterday was not the substance but the style. Without introducing any new plans, the president was making the case for the stimulus bill as best he could. I was disturbed by some of the rhetorical approaches he has adopted.

1. The Straw Man

"[T]he one concern I've got on the stimulus package, in terms of the debate and listening to some of what's been said in Congress is that there seems to be a set of folks who--I don't doubt their sincerity--who just believe that we should do nothing."

It's hard to rule out the possibility that there are such folks, but they are well-hidden. As far as I can see, there's pretty broad agreement that we have a crisis. There's pretty broad agreement that we should at least run a record-setting deficit of over $1.2 trillion this year (before any stimulus package). Then there are arguments over how we should spend trillions on some combination of spending programs, tax cuts, fiscal resuscitation, or housing market revival. Yet at least since his George Mason speech of early January, President Obama has made the argument that those who oppose his version of the stimulus favor inaction.

2. Fear

The President has argued repeatedly that if his plan is not adopted, disaster will ensue. This led to the first question last night, from Jennifer Loven of the Associated Press:

Earlier today in Indiana you said something striking. You said that this nation could end up in a crisis, without action, that we would be unable to reverse. Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?

Obama backed off a little, but not much. This is a particularly dangerous game. Some of the time, the administration pretends that they are responding to the crisis with scientific precision ("$800 billion... wasn't just some random number that I plucked out of a hat"). Other times, there's a recognition that public sentiment is playing a major role. $800 billion over several years is fairly small relative to the size of the economy; the goal is to lift public spirits. But the cries of impending doom can have the opposite effect. John Taylor argues that such cries from then-Secretary Hank Paulson and Fed Chairman Ben Bernanke, coupled with an inadequate response, helped bring on the worst of the crisis last fall.

The president's message seems to be that we should be so scared that we should not stop and subject the proposal to scrutiny. This was the sort of approach the president's supporters roundly denounced when it emerged in national security debates during the Bush administration.

3. Taxes and the election

Arguing against alternative proposals that rely heavily on tax cuts, the president said:

"What I won't do is return to the failed theories of the last eight years that got us into this fix in the first place, because those theories have been tested and they have failed. And that's part of what the election in November was all about."

My recollection of the November election was somewhat different. I recall promises of a tax cut for 95 percent of the public. I recall large posters on street corners in Northern Virginia that read "Obama-Biden: Lower Taxes." Neither then nor afterward do I recall the argument about how lower taxes brought on the current crisis. One might make that argument with respect to the deductibility of mortgage interest--a large subsidy to housing--but I don't believe the president has done so.

4. Earmarks and waste

"But when [critics] start characterizing this as pork without acknowledging that there are no earmarks in this package--something, again, that was pretty rare over the last eight years--then you get a feeling that maybe we're playing politics instead of actually trying to solve problems for the American people."

Here the president either misunderstands the concerns about wasteful spending or has succumbed to the peculiarities of Capitol Hill thinking in his short time there. He is correct that one can define an earmark as a spending suggestion tucked into a bill by a single lawmaker and not subjected to broad scrutiny. That's a more technical definition. A broader description, one more likely to drive public concern, is wasteful spending. Greg Mankiw cites an example from Milwaukee, which was to receive $88.6 million for new school construction in the stimulus package, even though it had vacant schools and declining enrollment.

That example is small relative to the overall package, but the lack of hearings and planning raise legitimate concerns that bigger ticket items, like approaches to renewable energy, could be equally misguided. The president is sidestepping the substance of the concern by focusing on the procedure: whether it is wasteful or not, it will receive a full Congressional vote and will be monitored to make sure the funds are spent as intended. That's not so reassuring.

5. Four million jobs

The key selling point, to which the president kept returning, was the jobs impact of the stimulus package. As he said ast night: "So my bottom line when it comes to the recovery package is send me a bill that creates or saves 4 million jobs...."

The implication is that White House economists can turn the dials and adjust the levers so as to achieve a particular level of employment in the economy. They cannot. He is basing the jobs estimate on an analysis by Christina Romer and Jared Bernstein. Romer is a highly respected economist and the numbers they provide are a reasonable guess. But they're just that--a guess amidst enormous uncertainty. A little history shows why it is misleading to think we can call up 4 million help wanted ads with a calibrated stimulus plan.

As Ben Bernanke noted in a 2004 speech, the economy in an average year creates 17 million jobs and loses 15 million, for a net gain of 2 million jobs. The President says he wants to "create or save" 4 million jobs, and this will be the key measure of his package's success. Given both normal and extraordinary labor market turmoil, such a change would be very difficult to measure. If the economy revives, 4 million gross jobs will seem small. If the economy does not, one can always argue that it could have been worse.

Last year the economy suffered a net loss of 3.6 million jobs. One of the striking features of that job-loss was that it occurred at a time when the economy was growing by 1.3 percent. This divergence between jobs and growth led to the breakdown of the old rule of thumb: a recession occurs when there are two consecutive quarters of negative growth. Yet it is exactly that broken-down relationship between spending and jobs that underlies the analysis promising the new jobs. The numbers are far more tenuous than the president lets on.

6. Bipartisanship

Throughout the press conference, the president was repeatedly asked about his pledges of bipartisanship. He noted that he had gone to visit Republicans on Capitol Hill and invited them to the White House. Perhaps a better measure of bipartisanship is the willingness to treat an opponent's arguments with respect.

How will Obama's liberalism shape America?

How will Obama's liberalism shape America? By Charles R. Kesler
The answer lies in understanding the three waves of liberalism in America's past.
The Christian Science Monitor, February 11, 2009 edition

Claremont, Calif. - Despite all his efforts to transcend partisanship, President Barack Obama is demonstrably a liberal. But what kind of liberal is he? And what does his brand of liberalism augur for America?

Even in the Democratic primaries, he shunned the "liberal" label. (Hillary Clinton did, too, preferring to be called a progressive.) Mr. Obama's favorite tack was to assail the whole argument between left and right as cynical and outdated. In its place he offered a pragmatic, hopeful, allegedly nonideological way forward.

On Election Day, his "working majority for change" turned out for him and the Democratic Party. Since then, Obama has tried to live up to his inaugural pledge to put an end to "the petty grievances and false promises, the recriminations and worn-out dogmas that for too long have strangled our politics." He has emphasized national unity and invoked the Founding Fathers. He met with congressional Republicans, and dined with conservative commentators at George Will's home.

Yet how nonideological can a politician be who was recognized by the National Journal as the most liberal-voting senator in 2007? Almost his first act as president was to issue executive orders repealing the policies of his Republican predecessor. Obama's healthcare and foreign-policy ideas are standard liberal issue.

His stimulus bill, meanwhile, did not get a single Republican vote in the House, and won't get many in the Senate. The problem is that the bill stimulates Democratic constituency groups – government employees, unions, community organizers – more obviously than it does the economy.

Obama's "new politics for a new time" looks increasingly familiar – "pork still, with but a little change of sauce," to quote Alexander Hamilton at the Constitutional Convention. But that doesn't mean that this president's liberalism will not be interesting. Indeed, he has endeavored to do no less than complete and perfect the grand liberal project begun a century ago.

Three waves of liberalism

Modern liberalism came to America in three waves, and it's useful to think of Obama in this light.
The progressives of the early 20th century were the original liberals, developing the essential tenets of liberalism as a political doctrine. Woodrow Wilson and others argued that the Constitution was an 18th-century document, based on 18th-century notions of rights. While suited to its day, they said, it was now painfully inadequate unless interpreted in a vital new spirit.

This spirit was Darwinian and evolutionary, turning Hamilton's "limited Constitution" into a "living Constitution" that must be able to adapt its structure and function to meet the latest social and economic challenges. To guide this evolution, to organize society's march into the future, presidents had to cease being merely constitutional officers and become dynamic leaders of popular opinion.

Obama accepts all the major elements of this evolutionary approach to the Constitution and American government. As he wrote in "The Audacity of Hope," the Constitution "is not a static but rather a living document, and must be read in the context of an ever-changing world."

Likewise, in his inaugural address he declared, "The question we ask today is not whether our government is too big or too small, but whether it works…."

This emphasis on what "works" is his nod to pragmatism, which he implies is almost the opposite of ideological liberalism. In fact, however, such pragmatism is part of liberalism.

What "works," after all, depends on what you think government's purpose is supposed to be. Pragmatism tries to distract us from those ultimate questions, while assuming liberal answers to them. Thus Franklin D. Roosevelt's New Deal promised "bold, persistent experimentation." Obama's domestic agenda betrays the same eagerness.

Liberalism's second stage was economic. In the New Deal, the Great Society, and its sequels, liberals turned to the wholesale minting of new kinds of rights. Citizens were thus entitled to socioeconomic benefits through programs such as Social Security, Medicare, and Medicaid. Besides these entitlements, the federal government also extended its regulatory authority to areas previously private or under state and local jurisdiction.

But this wave crested unexpectedly, and for a while, contemporary liberals seemingly lost their enthusiasm for such top-down regulation and the work of transforming privileges into rights.
With the fall of the Soviet Union and the discrediting of socialist economies around the globe, liberals such as Bill Clinton took a second look at the free market. He populated his Treasury department with highfliers from Goldman Sachs and other Wall Street firms. In left-leaning think tanks and even in the academy, capitalism commanded strange new respect. This rehabilitation of the market, though never more than partial, was the greatest change in American liberalism in the past 40 years. Obama absorbed it, as did many members of his new administration.

But the financial crisis and market meltdown have changed things.

It looks like 1932 again, a time for reinvigorated government activism. "Without a watchful eye, the market can spin out of control," Obama said in his inaugural. But does the market merely need watching – or some weightier form of "control"?

The final wave of liberalism crashed over America in the 1960s and '70s. Cultural liberalism erupted in the universities but the counterculture quickly went mainstream, bringing sex, drugs, and rock 'n 'roll, not to mention women's liberation, gay liberation, and abortion, to the masses.

So far, the most innovative aspect of Obama's liberalism is how he has tried to transcend its cultural excesses.

Whereas Bill Clinton sometimes embodied the immaturity and self-indulgence of the '60s, Obama's demeanor and family life – even his suits – bespeak a mature, serious liberalism that sees self-control and adulthood as cool.

Still, Obama's political dealings with cultural liberalism are bound to be complicated. He tries to defuse issues such as abortion and gay marriage by not talking about them, except in front of the relevant audience. But as president, his remarks anywhere will be noticed. Though he claims to believe that gun ownership is an individual right protected by the Second Amendment, his support for sweeping gun-control measures suggests a different perspective.

His landmark speech on race managed to divorce him from the worst of the Rev. Jeremiah Wright's fulminations, without quite repudiating the most pernicious of Mr. Wright's assumptions, namely, that the Declaration of Independence and the Constitution were, at least originally, racist documents.

Obama's religious rhetoric

On such issues Obama's best defense is a good offense, and he will doubtless continue therefore to celebrate the importance of religion in his life and in the country's, and to praise America's founders and heroes.

On Jan. 20, from the Capitol's west steps he proclaimed, "We are a nation of Christians and Muslims, Jews and Hindus – and nonbelievers." But he also invoked God five times and Scripture once. The multicultural reflex cannot be banished, but Obama clearly intends to speak in the name of religion. He does not want to leave a naked public square into which only conservative faiths and believers may stroll.

This determination will make for awkward moments: Are all those faiths equally constitutive of American mores? Whose scripture is being consulted here? (His inaugural cited First Corinthians 13:11.) Nonetheless, he is keen for liberalism to become a firm ally of American religiosity, especially insofar as churches are willing to preach a new social gospel devoted to improving the lives of people in this world and around the globe.

The patriotic theme, so prominent in his inaugural, is Obama's reply to the anti-Americanism of the cultural and academic left, those last redoubts of the radical '60s. If he is persuasive, over time he may well heal the worst of the Democratic Party's self-inflicted wounds and prepare it to be the defender of "our better history," as he put it.

A lasting Democratic majority

His ambitions are clear: The speech was a pastiche of themes adapted from FDR and Ronald Reagan, the last two presidents to pull off major electoral realignments (less enduring in Reagan's case). What Obama hopes for is a similar breakthrough for the forces of liberalism in this generation.

An enduring Democratic majority is not out of the question. The wild scramble to stop the economic and financial downturn may well leave America with a politically controlled economy that would corrupt the relationship between citizens and the federal government – sapping entrepreneurship and encouraging new forms of dependence on the state, as in much of Europe. That would be consistent with the more socialized democracy that liberalism has been striving for ever since the Progressive Era.

Obama likes to emphasize that America is more like the world than we realize, and must become still more like it if the US is to remain the world's leader. Despite his summoning oratory, his sense of American exceptionalism thus is far less lofty, far more constrained, than Reagan's or FDR's. The greatest stumbling block to Obama's ambition is likely to be the inability of this exceptional president to persuade Americans to follow him into so unexceptional a future.

Charles R. Kesler is a senior fellow at The Claremont Institute, editor of the Claremont Review of Books, and a professor of government at Claremont McKenna College.

Why isn't there more consensus among economists?

Why isn't there more consensus among economists? Tyler Cowen
Marginal Revolution, February 10, 2009 at 09:57 AM

Clive Crook asks that question about the fiscal stimulus (by the way, Paul Krugman responds to the part of the column about him). I do think there is more of a consensus than the current debates in the media, and the blogosphere, might imply. I take the general consensus of macroeconomics to be not too far from the position articulated by Alice Rivlin. That means accelerate the truly stimulative parts of the proposal and ponder the rest at greater length, plus emphasize aid to state and local governments. I'm not suggesting that you have to bow down and yield to that view, only that the view makes sense to a large number of macroeconomists.

In part the appearance of so much disagreement is driven by the fact that both MSM and the blogosphere select for opinions which deviate from the mainstream. Many segments of MSM are willing to represent the mainstream opinion, but there is then a sense that some new point of view must be offered, if only to hold the interest of the reader or viewer. And some parts of MSM are openly partisan and thus they skew toward extreme points of view. In the blogosphere libertarians are overrepresented, relative to their numbers in the profession. On the Democratic side, Paul Krugman is the most influential figure, and I would place him to the left of most Democratic economists. Progressives, like libertarians, are overrepresented on the web, relative to their numbers in the economics profession or elsewhere.

It is good that so many different points of view are being reflected, but we need to keep the biases of our filters in mind. Repeating a moderate view, again and again and again, isn't always the best way to attract or keep an audience.

President Prescreens Reporters at Press Conference?

Obama's Press List. WSJ Editorial
Membership shall have its privileges

About half-way through President Obama's press conference Monday night, he had an unscripted question of his own. "All, Chuck Todd," the President said, referring to NBC's White House correspondent. "Where's Chuck?" He had the same strange question about Fox News's Major Garrett: "Where's Major?"

The problem wasn't the lighting in the East Room. The President was running down a list of reporters preselected to ask questions. The White House had decided in advance who would be allowed to question the President and who was left out.

Presidents are free to conduct press conferences however they like, but the decision to preselect questioners is an odd one, especially for a White House famously pledged to openness. We doubt that President Bush, who was notorious for being parsimonious with follow-ups, would have gotten away with prescreening his interlocutors. Mr. Obama can more than handle his own, so our guess is that this is an attempt to discipline reporters who aren't White House favorites.

Few accounts of Monday night's event even mentioned the curious fact that the White House had picked its speakers in advance. We hope that omission wasn't out of fear of being left off the list the next time.

Conservative views: The U.S. and U.K. Must Oppose French Plans to Weaken NATO

The U.S. and U.K. Must Oppose French Plans to Weaken NATO. By Nile Gardiner, Ph.D., and Sally McNamara
Heritage, Feb 10, 2009

Full article w/references here.

The Obama Administration has announced it will back the full reintegration of France into the NATO command structure, with French officers reportedly in line to take two senior Alliance command positions: Allied Command Transformation (one of NATO's two supreme commands, based in Norfolk, Virginia) and Joint Command Lisbon (one of NATO's three main operations headquarters, which also commands the NATO Rapid Reaction Force).[1]

This is a highly significant development that would put France at the heart of NATO military planning and reform proposals and represents an ill-thought-out and risky concession by Washington to the Sarkozy administration.

In a major speech at the Munich Security Conference on February 7,[2] Vice President Joe Biden welcomed France's decision "to fully participate in NATO structures" and also made it clear that the United States will "support the further strengthening of European defense, an increased role for the European Union in preserving peace and security, [and] a fundamentally stronger NATO-EU partnership." Biden's remarks echoed the views of British Defence Secretary John Hutton, who recklessly backed French plans for a European Union army last October.[3]

Both the United States and Great Britain must take a step back and launch a fundamental, wide-ranging review of the long-term implications of French demands for the future of NATO. The U.S. Congress should hold hearings to assess the new Administration's strategy with regard to French reintegration in order to highlight any dangers posed to U.S. interests.
It would be a huge strategic error of judgment by the new U.S. Administration and the British government to continue supporting French ambitions for restructuring Europe's security architecture. Such acquiescence would hand Paris an extraordinary degree of power and influence within NATO--power and influence well out of proportion to France's actual military role in Alliance operations.

Providing France with such influence would also ultimately weaken the Anglo-American Special Relationship, shifting power away from Washington and London and toward continental Europe while paving the way for the development of a separate European Union defense identity--all of which will undermine NATO.

French Reintegration into NATO

When President Sarkozy first floated the idea of French reintegration into NATO's military command in June 2007, he outlined two preconditions: guaranteed senior command posts for French officers within the Alliance, and American endorsement of an increased EU defense identity (the latter of which he emphasized as the more important of the two).[4] To formally establish the principle of reintegration, Sarkozy commissioned an influential "White Paper on Defense and National Security," which was published in March 2008.

Designed to promote an independent European defense identity, the French White Paper on Defense and National Security clearly states:

The European ambition stands as a priority. Making the European Union a major player in crisis management and international security is one of the central tenets of our security policy. France wants Europe to be equipped with the corresponding military and civilian capability.[5]

The paper endorses several key principles:


  • Redefinition of responsibility-sharing between America and Europe;
  • An explicit rejection of the idea that the EU act as a civilian complement to NATO; and
  • A strong preference for buying European defense technologies.


In June 2008, President Sarkozy circulated an additional document outlining Paris's policy initiatives for European military integration. It presents the major elements of what an EU defense identity will entail, including:

  • A permanent operation headquarters in Brussels;
  • Common EU funding for military operations; and
  • European exchange programs for military personnel.[6]


America Has Little to Gain--and a Lot to Lose

It is likely that the Obama Administration will regard France's reintegration into NATO as a diplomatic masterstroke. The Administration will claim that it has rebuilt the Franco-American relationship in a mutually beneficial way, and Sarkozy will in turn claim that it tangibly demonstrates France's commitment to standing alongside America.

However, the Administration must ask itself what the U.S. actually gains from such a quid pro quo. Such reintegration may extract a few hundred additional French troops for eastern Afghanistan and generate stronger French public support for the Afghan mission. But President Obama will find that he has rescued the furniture only to give away the house. Not only is France already able to commit as many troops as it wishes to NATO missions (as it proved last year when 700 additional French troops were sent to Afghanistan), but 10 years of EU security initiatives have actually seen a decrease in European defense spending.

Washington continues to argue that supporting the European Security and Defense Policy is a means toward improving European defense spending and military capabilities. But after 10 years, such improvement has yet to occur and is not reflected in the projected defense budgets of any major European power. Since the EU and NATO operate in the same areas both militarily and geographically, the competition for resources will become fiercer, and Washington is likely to see its requests for military help increasingly rebuffed as France demands European commitments to EU missions.[7] Once the United States gives its blessing to the creation of a separate European defense structure, it will have no grounds to compel Europe to choose NATO over EU requests in the future.

A Parisian Power Play

Rather than genuinely attempting to increase Europe's contribution to defense on the international stage, France is seeking to expand both Paris's and the EU's power base. Sarkozy's proposal is largely political, not military. In practice, France is already involved with almost all of NATO's structures and operations, including all political bodies and the NATO Response Force. It also partakes in joint training exercises.

French reintegration into NATO command structures offers little additional value to Washington but gives immense momentum to French ambitions for an autonomous EU foreign and defense policy. When French presidents talk about European foreign policy, they more often than not mean French foreign policy. Equally, when Sarkozy talks about increasing European security capabilities, he means decreasing American involvement in Europe.

For instance, in January 2007 the EU established a military operations center in Brussels, which later that year conducted "a nine-day exercise involving the virtual deployment of 2,000 European soldiers to deal with a crisis in the fictional country of Alisia."[8] The operational center is without doubt a fledgling EU military headquarters that duplicates and will eventually compete with the NATO command.

The French proposal for an independent European defense structure will build upon the foundations laid by this new EU military headquarters. If the United States agrees to the French plan, it will represent yet another reversal of the Berlin Plus arrangements and a further erosion of the supremacy of NATO in Europe.

No Quid Pro Quo with France

If the Obama Administration agrees to support an independent EU defense structure as part of the French plan for rejoining NATO's command, such backing would represent a major transformation in U.S. strategic thinking that would have a dramatic, negative impact on the future of the alliance. It would shift the political balance of power within NATO away from Washington and London toward the main centers of power within the European Union: Paris, Berlin, and Brussels. Far from encouraging European countries to spend more on defense, it would foster an even greater dependency culture within continental Europe upon NATO resources. Such a shift would also lead to a duplication of the NATO command structure without a doubling of manpower or materiel.

It is vital that both the U.S. and U.K. reject any French proposal predicated on American and British support for an independent European defense organization. Paris should be welcomed back into NATO's leadership club only on terms that are acceptable to all NATO members, and without the doling out of powerful command positions to a country that is at best a half-hearted member of the alliance.

Simply Unacceptable

It is difficult to see how a greater EU defense capability will actually strengthen the NATO mission or the broader transatlantic alliance. Indeed, encouraging a bigger military role for the EU can only make NATO's task more complicated.

NATO has been the most successful post-war multilateral organization precisely because it is a truly transatlantic defense and security alliance of independent nation-states with a single command. The French proposal to build up a separate EU defense structure--i.e., a competitor to NATO sucking up valuable NATO resources--is simply unacceptable and should be firmly rejected.

Nile Gardiner Ph.D. is the Director of, and Sally McNamara is Senior Policy Analyst in European Affairs in, the Margaret Thatcher Center for Freedom at the Heritage Foundation. Erica Munkwitz assisted with research for this paper.