Saturday, July 26, 2008
Politicians understand instinctively how to appeal to mass opinion to gain votes. They don't understand (or care about) a very fundamental axiom of economics. The axiom is that no one will willingly start or engage in a business enterprise that is certain to lose money. American oil companies don't need government permission to drill for oil off-shore. They have leases on large tracts that have proven oil reserves. They can start drilling for oil in their existing oil leases whenever the price of crude oil is greater than the cost of getting the oil out of the ground.
It's the cost of "new" oil that is driving the world market price of petroleum. We are gradually running out of "old" oil, oil that has been exploited for years and is still inexpensive to extract. The price of "old" oil is limited; supply and demand is forcing the price. The "new" oil will not be available until the world market price reaches the extraction cost.
No amount of posturing, demagoguing, talking about off-shore drilling, punishing speculators, or opening the nation's strategic oil reserve can change the world market price of petroleum. The price of petroleum is set by the cost of pumping oil from least efficient oil well in the world.
Thursday, July 24, 2008
California's Budget Problem
Why? The budget mess is an unexpected consequence of the decision by the voters several years ago to require 2/3 votes for passing budgets and raising taxes. Local governments can't raise taxes except by a 2/3 vote of the public. The supermajority requirement was intended to make sure that the politicians didn't spend money recklessly and to prevent too rapid a growth of government at all levels. So, now we have unpaid health care providers for the most vulnerable segment of the population; now we have local governments strapped for cash because they depend on the State for some of their income. It's a classic example of people getting the kind of government they deserve, not the kind they want.
In all this mess, our charismatic Governor, Herr Schwarzenegger, has been deliberately uninvolved. He's the leading Republican in the State; he's popular and knows how to raise tons of money. You'd think he'd be trying to use his charm and his ability to raise money to influence a few of the stubborn Republicans in the legislature who refuse to approve any budget that does not make drastic cuts in many essential services. They have taken the "no new taxes" pledge. People on Medicare can do without health care for the time being. The educational system can do without a lot of things for the time being. Perhaps next year the economy will improve and the existing tax rates will bring in more money. Until then, people can just wait. Fires can burn. Policemen and other public servants can make do with less money.
Herr Schwarzenegger had his chance when he first took office after the recall election to support a change to the State constitution that would have relaxed the 2/3 vote required to a 55 percent vote in each house of the legislature. He didn't support the measure and it didn't pass. Now he has a legislature in which a stubborn minority is able to hold up the works until it gets its way. He was unwilling to support relaxing the 2/3 requirement several years ago. Today he is unwilling to use his influence on members of his party (did I forget to note that he is a Republican?) to get a reasonable budget enacted.
I can remember a time when most Republicans were reasonable, even though somewhat conservative. Before term limits were enacted, there were a few Republicans in the legislature who used their influence on other legislators of both parties to achieve reasonable compromises on legislation. These reasonable Republicans have all been termed out. Their successors are ideologues, disciples of the late Howard Jarvis and the living Grover Norquist. These intellectual giants proclaimed and still proclaim the virtues of small government and low taxes. Small government entails eliminating such services as public libraries, public hospitals, free highways, free higher education, and well-staffed police departments. Does Governor Schwarzenegger subscribe to this concept of what government ought to be?
Maybe it's time for another recall election.
Saturday, July 19, 2008
Santa Susana Test Facility Clean-up
The troble is, the place is polluted with radioactive debris from the nuclear reactor experiments and with various poisonous hydrocarbon solvents and fuels from the rocket engine testing. It's not safe to live there. Some questions are, who's going to clean it up and to what standards? The nuclear reactor work was funded by the Department of Energy, formerly the Atomic Energy Commission. The rocket engine work was funded by the Air Force or Department of Defense. Another agency of interest is the Environmental Protection Agency. The State of California also has an interest in the clean-up. The State has standards of pollution levels suitable for residences and suitable for parks and wilderness area. Local residents are concerned that the pollution doesn't stay put, but migrates slowly away from the site and into their yards and, in the case of residents of the Simi Valley, into the wells that supply their drinking water.
I have attended several meetings in which neighborhood residents meet and question representatives of various federal agencies and of the Boeing Company. The representatives of the government agencies and the Boeing Company submit gamely to the haranguing and abuse from certain vocal residents or their spokespersons. They talk about plans for surveying the site for pollutants. They talk about what is or can be done to slow down the migration of some pollutants. They have not yet talked specifically about actual clean-up of the site. There is a lot of talk and almost no action. Different government agencies are debating which agency is to do the surveys and which agency's budget will be the source of funding for the surveys. Since there are at least three agencies involves, it's going to take some time for them to agree on who provides the money and who does the work. Boeing, naturally, would like to be free of the problem and has agreed to give (or sell) a large portion of the site to the State of California.
This is a problem that gives delight to those conservatives who argue that government never does anything well or efficiently and might as well be shrunk as much as the public will allow. It would give delight to a satirist. I can imagine Mark Twain or Carl Hiaasen writing a satirical novel about the Great Santa Susana Clean-up.
Power and Global Warming
Our current President, Mr. Bush, has tried to build a strong coalition in support of the war in Iraq. He hasn't been very successful. The anti-war coalition is stronger and will probably help defeat his successor, Senator McCain.
My libertarian friend R and I have a dispute about tactics and strategies in achieving two different goals. One is to modify our power generation infrastructure so that we will not depend on imported fuel, particularly petroleum. The other objective is to reduce the emissions of CO-2 and other greenhouse gases into the atmosphere and thereby slow (or even stop) the rate of global warming. I am personally happy to combine these two goals. However, R, being more logical than I, keeps them separate. We both want to reduce the dependance on imported petroleum. We have different ideas about global warming and how much should we try to limit the greenhouse gas emissions.
These differences lead to some rather pointed criticism of various things that politicians do, or don't do, to try to achieve one or both of these goals. Consider the problem of the high cost of imported petroleum. One solution, advocated by R and many conservatives, is to extract more petroleum from beneath our own lands. Oil companies should be permitted to drill for oil in places where it would be economically worth while to extract the oil and sell it. Examples are areas off-shore from California and Florida and the ANWR area in Alaska. Another solution is to build power plants that use wind, light from the sun, heat from the earth, and the fission of uranium atoms to generate electricity.
The second solution addresses both the imported oil problem and global warming in that the proposed power plants do not use the combustion of carbon or hydrocarbon compounds to produce energy. R makes the argument that the program to build the new power plants will necessarily take a long time - perhaps 20 years or more - and we must do something to address the immediate problem posed by the continual and inevitable increase in the cost of imported petroleum. He also makes the argument that it isn't necessary for the government to do anything to bring about the needed changes. Market forces will make it profitable to convert shale from Alberta into fuel that can be used in existing plants and transportation vehicles. It will take time, of course. We can also use a process of making gasoline or other liquid hydrocarbon fuels from coal. We have plenty of coal.
I make the argument that we need a President who can generate a coalition to support a program for rapid change-over from a petroleum fueled power system to one based on renewable and non-polluting energy sources. We need another John Kennedy or another Franklin Roosevelt.
Tuesday, July 15, 2008
Mr. Bush started this when he inherited an economy and a tax structure from his predecessor that provided government surpluses for years to come. He had Congress enact tax reductions that did away with the surplus and created a deficit. The theory was that by relieving wealthy taxpayers of some of their tax obligations they would have more money to invest in new businesses, create new jobs, and spur the economy to new activities so the treasury's tax revenue would increase. Etc., etc., etc. Trickle down economics. Supply side economics.
The chickens are coming home to roost.
Sunday, July 13, 2008
Some Good News for John McCain
Other news is that Richard Viguerie is trying very hard to convince hard-core conservatives that the Republican Party has lost its way and John McCain is no conservative. On balance, I'm not sure whether that is good news or bad news for the McCain campaign. If Viguerie can convince the public that McCain is not a true Republican, those independent voters who have soured on Republicans will tend to vote for McCain. On the other hand, Viguerie may convince several million hard-core conservatives to opt out of the 2008 election, and that would sink McCain's chances of election.
Saturday, July 05, 2008
Here are some of the attitudes:
- Government, and society in general, should be sympathetic to the problems of the owners and managers of businesses. Business enterprises provide the main source of employment and income to the people. What is good for business is good for the whole society.
- Business owners and managers should be as free as possible from restraints imposed by government and society. These restraints include taxes and regulations.
- American business enterprises compete with similar enterprises in other countries. We are in a global economy and our business enterprises should be able to compete without being hobbled by unique environmental and workplace safety regulations.
- Free trade promotes enterprises that produce goods and services for export as well as for import. This world-wide competition assures that American consumers are able to buy good products at low prices.
- Since the economy is global, a business enterprise must be free to move its facilities to any part of the world where these facilities can be operated the most efficiently and profitably.
- Business enterprises must be free from the costly requirements of labor unions as well as costly government regulations. Labor is a commodity to be bought and sold just like any other. Requirements for job security, recognition of seniority, subsidized fringe benefits, retirement pensions, and the like amount to restraint of trade.
- The proper function of government is to facilitate business. Government should provide a stable currency, a stable financial system, a system of property records, protection of patents and other kinds of intellectual property, a combination of military and police forces to protect property from damage, and such infrastructure as highways, waterways, and other facilities for the transport of goods and services. To minimize the tax burden on business, government should be as small and efficient as possible.
The foregoing set of attitudes can not be called simply "conservative." Some of them are quite radical, contrary to many beliefs that we Americans have held since the colonial days. Many of the people who hold these views also hold views that can correctly be called "conservative."
Here's my challenge: tell me what word I should use to describe this set of attitudes. Perhaps a word already exists in the dictionary. On the other hand, perhaps a new word is needed. Be inventive. I need help.
Tuesday, July 01, 2008
CRIME AND PUNISHMENT
Punishment by agencies of government, including the capture and trial of the suspect, has its origin in a tradition of vengeance. Before there were strong governments, members of a family, clan, or tribe would avenge an injury on one of their members by members of another family, clan, or tribe. The vengeance would be roughly proportional to the injury. If you kill a member of my family, a member of my family is obligated to kill you or a member of your family. Feuds of this sort could last for centuries, long after the injury that started the feud was completely forgotten.
Strong governments are able to put an end to these feuds. Trials and jails are substituted for family vengeance. The punishment of the person convicted has to be severe enough to be a satisfactory substitute for the vengeance the family would exact.
Social workers and others understand that there is an economic advantage in replacing or supplementing punishment with training and education. The convict is punished by spending time in jail or prison. While there, he or she is educated to be able to earn his or her living after leaving prison, and to refrain from committing more criminal acts.
Moralists understand that severe punishments can act as deterrence to crime. The convict who has to serve the sentence serves as an example or object lesson to other potential criminals. They will refrain from committing a similar crime because they don’t wish to suffer the punishment.
Legislators, who have the responsibility to enact taxes needed to operate the system of justice, understand that taxes are very unpopular. They resist paying for the education and retraining of convicts. Taxpayers resent seeing their taxes used to provide education and training of prisoners. They think and hope that severe penalties will prevent other persons from committing crimes and that convicts will, upon release from prison, mend their evil ways to avoid being convicted again and sent back to prison. That is to say, the public and public officials understand and sympathize with the moralistic view of punishment. They don’t understand or sympathize with the view of the social workers.
I’ve tried to write this essay without taking sides. However, it is probably evident to you that my sympathies are with the social workers rather than the moralists. I think that long prison terms are expensive and don’t achieve their goal of serving as an example. A short term followed by probation would serve just as well. The important thing to remember is that the typical criminal doesn’t expect to be caught. If he’s not caught, the severity of the punishment makes no difference to him or to any other potential criminal. It makes sense to me that our society should spend more money on policing, so that a greater fraction of crimes are detected and the criminals apprehended, and less money on the prisons needed for the long prison terms. Probation is much less expensive than incarceration.
Advocating this change in our approach to crime and punishment makes me a radical. Perhaps some of you may think of me as a dangerous radical. I like the term, but I must confess that at my stage of life I no longer have the ability to be dangerous. I’m just a radical.