Obama’s Opportunity to Kill Three Birds with One Stone

December 19, 2008

The inextricably linked issues of global warming and energy (eliminating our dependence on oil from the Middle East and Venezuela) have been elevated to national security issues by the Obama administration.  So, while consumers have welcomed the plunge in gas prices, they couldn’t have come at a worse time for this administration, for there is nothing that drives down the consumption of fossil fuels (the burning of which contributes directly to global warming) like high prices.  Without high prices, there is no profit potential to provide the motivation for a switch to more expensive alternative energy sources. 

So what is the Obama administration to do?  I see a unique opportunity for Obama to actually kill three birds with one stone here.  “Wait,” you’re thinking.  “You’ve only identified two birds – global warming and energy.”  Stick with me.  We’ll get to the third. 

The key is to drive fuel prices higher, restoring the impetus for improving energy efficiency and for converting to alternative energy sources, without hurting the consumer.  Here’s how that can be done.  It begins with imposing a large federal tax on fuels – oil, natural gas and coal.  Now I can just see your eyes rolling already, so hear me out.  Every penny of this tax should then be rebated to consumers in the form of a tax reduction of some kind – either a reduction in the tax rates or through a tax deduction or tax credit.  This tax reduction should be applied evenly to all individual taxpayers, but not to businesses.  (More on that later.) 

For example, let’s suppose that this tax drives the cost of gasoline back to $4 or $5 per gallon, and that a total of $600 billion is collected from this tax.  And let’s say that there are 150 million taxpayers.  Doing the math, each taxpayer would get back $4,000 at the end of the year.  If, on average, each taxpayer burns 2,000 gallons during  the year, and the tax added $2 per gallon to the price of gas, then that taxpayer comes out even. 

So how does this accomplish anything?  The tax rebate isn’t based upon how much you consume.  It’s based on total consumption by the American public.  So, if you do a better job than average of cutting your consumption, you’re going to come out ahead.  If you cut your consumption to 1,000 gallons for the year while the average remains 2,000 gallons, you’re going to come out ahead by $2,000 at tax time.  In other words, you have an incentive to slash your spending on gas.  At $4 per gallon, we’ve already seen how quickly people begin to use it more efficiently.  The tax rebate at the end of the year is just gravy.  Everyone is going to be highly motivated to cut their spending on gas, just as they were this past summer.  And now the profit potential is still there to motivate a switch to alternative energy sources. 

Why not extend the tax rebate to businesses?  Because, unlike consumers, businesses use vastly different quantities of fuel, depending on the nature of the business.  It’d be an accounting nightmare to try to keep them “whole” in terms of fuel cost vs. tax rebate.  Besides, their products are all consumed by individual taxpayers, so if the fuel tax collected from businesses is also rebated to individual taxpayers, then the latter are kept “whole” in terms of the tax rebate off-setting the higher cost of products.  In addition, with higher fuel costs and no tax rebate, businesses will be super-motivated to improve their energy efficiency. 

But, since businesses will have to add this fuel tax to the cost of their products, won’t this make American-made products uncompetitive with imports?  Ah, this is where the “third bird” comes in!  Imports would also be taxed at a rate that would eliminate this cost discrepancy.  But isn’t that a tariff that violates WTO (World Trade Organization) rules?  Yup!  And this is where it gets really good!  The global community, led by the UN, has been beating us over the head to come up with a plan to address global warming.  So, UN, here’s the plan.  Do you have a better one?  If not, then the global community, led by the UN, needs to sit down with the WTO and demand changes to trade rules that accommodate nations’ efforts to address global warming.  After all, everyone acknowledges that one of the keys to cutting fuel consumption and CO2 emissions is to produce more products locally.  And no one can argue that trade policy takes precedent over the need to fight global warming. 

In fact, that brings up another issue.  Billions of gallons of fuel are burned every year in ships delivering products all over the world.  That’s a lot of oil consumption and a lot of CO2 emissions.  It has to be factored into the equation by someone, in some way, because the cost of dealing with global warming is going to be astonomical.  A good way to account for this is to require each nation to include in its emissions the fuel burned by ships delivering imports, beginning with their point of origin.  What I’m saying is that imports should be taxed based upon the fuel that was burned to deliver them. 

For example, let’s suppose that a ship delivering cars from Japan burns about five million gallons of fuel and delivers 5,000 cars (fairly typical figures).  That fuel should be taxed at the same rate as fuel burned in the U.S.  Again, assuming that the tax adds $2 per gallon to the cost of fuel, then that delivery of cars should be assessed a tax of $10 million.  That would add $2,000 to the cost of each imported vehicle.  In fact, even the delivery of oil in tankers should be taxed in the same way, to mitigate the cost of dealing with the emissions from the oil burned in the ship’s engines.   

This means that imports would have to be taxed twice, or in two ways:  one tax to offset the higher cost of domestically produced products (unless the exporting nation has implemented a similar system of fuel taxes, making the imports equal in cost to domestic products), and a second to offset the cost of mitigating the carbon emissions that came from the ship delivering them.  Of course, all of these taxes or tariffs, whatever you choose to call them, would also be rebated to American taxpayers.  The goal is not to collect revenue, although some additional revenue could go a long way toward balancing the federal budget, but that’s a whole can of worms I won’t open here.  Rather, the goal is to provide incentive for cutting the use of fossil fuels and switching to alternative energy sources. 

The beauty of this is that the higher cost of imports would also go a long way toward restoring a balance of trade, an issue that many experts now agree is at the heart of the global economic melt-down. 

So, with one stone – a tax on fuels – the Obama administration could kill three birds:  reduce oil consumption and greenhouse gas emissions, and even restore a balance of trade, all with minimal impact on American consumers.  He can use the climate change issue to drive a wedge between the UN and the WTO and effect a badly-needed overhaul in WTO rules that would restore some balance to global trade.

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UN Climate Conference Notes Role of Population Growth

December 17, 2008

http://www.google.com/hostednews/ap/article/ALeqM5jRgRMGKjgcFxzBGdgvXbKKBul8TgD9515EV01

This linked article offers one more glimmer of hope that the subject of overpopulation is getting more attention.  Although the article reports that the UN is unwilling to take on the issue of population growth as it grapples with global warming, experts in attendance at the UN climate conference in Poland recognize the role of population growth in worsening the problem and see a need to address it on a national level.

“Population is the unmentioned elephant in the living room when it comes to climate change,” said Bill Ryerson, president and founder of the Vermont-based Population Media Center.

“A lot of people say population pressure is a major driving force behind the increase in emissions, and that’s absolutely true,” the U.N.’s top climate official Yvo de Boer said.

“If we don’t address the population issue and population continues to grow the way it is, … we will fail to solve the climate crisis,” Ryerson said.

Brian O’Neill, a population expert with the National Center for Atmospheric Research, said there is substantial evidence showing a strong correlation between a country’s economic growth and its emissions.

Even if it doesn’t come up in Poznan, the Worldwatch Institute’s Robert Engelman said policies to slow population growth will eventually find their way into the climate toolbox for many countries.

“Population doesn’t need to be part (of) international negotiations on mitigation. You don’t have (to) say country X will cap its emissions and population,” he said.

“But countries will begin to see that a more rapidly rising population will make it hard for them to curb emissions,” said Engelman, the author of “More: Population, Nature and What Women Want.”

With the heavy emphasis that Obama has placed upon the issue of climate change, elevating it to a national security issue, how could it possibly escape his attention that it is exacerbated by population growth?  To hope for some kind of national policy aimed at stabilizing our population may be a stretch but, at the very least, one would hope that it will make Obama reluctant to liberalize immigration policy.


Is Toyota Guilty of “Dumping?”

December 13, 2008

http://www.reuters.com/article/ousiv/idUSTRE4BC0FS20081213

The linked article reports that Toyota is likely to report a loss in their 2nd half (the October 2008 – March 2009 time frame).  This begs the question:  if Toyota is selling cars at a loss, isn’t it guilty of “dumping,” the practice defined by the World Trade Organization as selling products below cost?  Shouldn’t the U.S. immediately file a complaint with the WTO?  Shouldn’t the WTO immediately either force Toyota to raise their prices or authorize the U.S. to impose tariffs on Toyota vehicles? 

Some may protest that the domestic automakers are also operating at a loss.  True, but that doesn’t violate any international trade agreements.  No other nation can take a case against the Big Three to the WTO because no one imports American-made cars, for all intents and purposes. 

But none of this will happen.  WTO rules are for the U.S. to follow and no one else.  We’ll simply give Japan time to dump yen and buy dollars, manipulating the dollar-yen exchange rate back to where they can easily make a profit.


Household Net Worth Plummets in 3rd Quarter

December 12, 2008

http://www.cnbc.com/id/28178572

The Federal Reserve reports that household net worth declined 4.7% in the 3rd quarter of this year, the fourth consecutive quarterly decline.  Also, household debt declined for the first time in history, not because people are cutting back on borrowing, but because foreclosures are erasing mortgages from the household debt column. 

The real story is that this represents an acceleration of a three-decades-long decline.  Median household net worth is now lower than it was in 1976 which, not coincidentally, was the first year in a 33-year long string of consecutive trade deficits. 

And, in 1976, the per capita share of the national debt was only about one third of each person’s net worth.  Today it far exceeds it! 

Others, who are satisfied with superficial analysis and explanations, will tell you that this is all due to the credit crisis which, once fixed by the government bail-outs, will put us back on a path to prosperity.  Bull!  This is clear evidence of the consequences of the economic collision I’ve warned of in Five Short Blasts – the rising unemployment and poverty caused by the collision between falling per capita consumption (exacerbated by free trade with grossly overpopulated nations) and rising productivity. 

There will be no end to our decades-long economic decline until we stop treating symptoms and get to the root cause – the effects of worsening overpopulation, both imported and home-grown.


Boycott Alabama Now!

December 12, 2008

http://www.boycottalabamanow.com/

Readers, here’s a link to a new web site by a retired auto worker.  He put up this site in response to Senator Richard Shelby, senator from Alabama and ranking Republican on the Senate Banking Committee, who with the support of a few other southern senators, killed the assistance plan for the auto industry.  Unless President Bush intervenes by freeing up TARP funds to help the automakers, Senator Shelby may very well have played the role of “Doctor Kevorkian” in assisting the suicide of the American economy. 

Once you get to the site, click on the “take action” tab.  There you will find instructions for contacting Senator Shelby and the Alabama Chamber of Commerce.  I’ve already done so, informing them of my disappointment with Senator Shelby and my support for the boycott. 

It’s time to start exercising our economic clout to punish those who champion the destruction of American jobs and wages.  Please join me in supporting this cause and forward links to your friends and relatives.  Encourage them to support it as well. 

Thanks.


Weekly Jobless Claims Soar Again

December 11, 2008

http://www.reuters.com/article/newsOne/idUSTRE4BA3EZ20081211

Weekly jobless claims have soared again to 573,000.  That’s an annual rate of almost 30 million workers, or 22% of the labor force, losing their jobs every year!  The pace of these layoffs is breathtaking and accelerating at the very time of year when job gains are usually their strongest. 

It’s worth noting that, at the peak of the Great Depression in 1933, unemployment reached 25%.  While our official unemployment rate is currently only 6.7%, the way that figure is calculated has been revised many times since  1933, making the data appear better than it is.  Many economists point out that, if we include everyone who is looking for work, has given up looking, or has taken part-time jobs for lack of anything better, unemployment is actually more like 12-13%.  And it’s climbing fast.

This data is a very bad sign that the economy is deteriorating rapidly and that the unthinkable – a depression – is becoming a stronger possibility with each passing day.


Defying Economists’ Forecasts, Trade Deficit Rises Again!

December 11, 2008

The Census Bureau moments ago released the international trade results for October and, in spite of economists expectations for a significant decline from $56.6 billion to $53.5 billion, the deficit actually rose to $57.2 billion!  This raises the cumulative trade deficit since 1975 (the year of our last trade surplus) to $9.2 trillion. 

How can this be?  The dollar is falling.  Consumption is down.  Even oil prices have declined dramatically.  All of these were factored into economists’ thinking that it would begin to yield some good news on the trade deficit. 

None of this is any surprise to me.  I have been saying over and over and over that the trade deficit has nothing to do with currency exchange rates or over-consumption or America’s competitiveness.  It has everything to do with the gross disparity in population density between the U.S. and so many of our trading partners like China, Japan, Korea, Germany and others.  Granting these nations free access to our market in return for access to markets stunted by over-crowding and low per capita consumption guarantees a trade deficit.  It’s tantamount to economic suicide.  The only way to stop this is with tariffs. 

America has been the village idiot of globalization, played for suckers by parasitic economies who prey upon the American market to sustain their bloated labor forces.  It’s the direct cause of our economic melt-down.  New thinking on trade policy is long overdue.