Tag Archives: jack heidel

The Six Issues That Could Cause a Government Shutdown

Posted on by
Reply

 

It is now just ten days until the new government fiscal year begins on October 1 and Congress has not yet passed a budget for the new fiscal year. Although a temporary funding bill could be brought up and passed at any time, the Washington Post thinks that there are six big impediments to adopting a new budget.
CaptureThey are:

  • Planned Parenthood. 31 House Republicans insist that they will support no spending bill which has funding for Planned Parenthood. Short term funding should not be in danger because the Democrats will step in if necessary to keep the government open.
  • The Sequester. This is a much tougher issue because the Democrats want to break the 10 year Sequester spending limits. It’s the Republicans strongest leverage and they should insist on dollar for dollar spending cuts elsewhere in order to relax the Sequester cuts.
  • A Challenge to Boehner. The anti-Planned Parenthood caucus is threatening to try to oust John Boehner as Speaker if they don’t get their way. Hopefully the Democrats would help to keep Boehner because any replacement would be more conservative and less accommodating to them. I personally think that John Boehner is a miracle worker given the hyper-partisanship in Washington at the present time.
  • The Iran Nuclear Deal. Republican desire to express opposition to the Nuclear Deal could surface as a bargaining chip in budget negotiations. As bad as the Nuclear Deal is, this is a bad budget strategy.
  • The Export-Import Bank. The Ex-Im Bank expired in June. Its supporters might try to refund it as part of a budget deal for next year. It should be allowed to die unless it undergoes reform to remove subsidies for big businesses such as Boeing and GE.
  • The Highway Trust Fund. The problem is that the 18 cent/gallon federal gasoline tax is insufficient to fund our infrastructure needs. The most sensible approach is to raise the gas tax by a few cents per gallon. Attempts to provide funding from other sources should be resisted.

 

Bottom Line: Republicans should be flexible except on overall spending limits. It is absolutely essential to the future wellbeing of our country to strongly focus on eliminating budget deficits.

The Second Republican Presidential Debate

Posted on by
Reply

 

Although I am a registered Independent, I lean strongly conservative on fiscal and economic issues. I hope the Republican Party ends up with a nominee who can make a compelling case for fundamental reform.
CaptureHere is my take on last night’s debate and the current state of the race.

  • Rand Paul. He stands up strongly for the Tenth Amendment (State’s Rights) but he is much too isolationist to take over after eight years of Obama.
  • Mike Huckabee. His social conservatism appeals to evangelicals but he has a weak grasp of economic and fiscal issues.
  • Marco Rubio. He is certainly a gifted political communicator. He is able to talk tough while also appearing moderate and reasonable at the same time. But some of his policy ideas are gimmicky.
  • Ted Cruz. He claims to be a true conservative because he won’t compromise on his basic principles, even if they lead to government shutdown. As such he is much too radical for my taste.
  • Ben Carson. I don’t see what his attraction is outside of a compelling personal story. His grasp of issues is quite weak.
  • Donald Trump. Leading in the polls, he is the wild card for the 2016 election cycle. As much as he disgusts me, his performance is improving. He has pledged to support the eventual party nominee, and not run as an independent. He also hurled fewer insults in the second debate than in the first.
  • Jeb Bush. Policy-wise, with his detailed tax plan and generally moderate views, he is outstanding. But it’s not clear that he can overcome the populist, anti-elite mood of the electorate.
  • Scott Walker. His outstanding record in Wisconsin gave him an early boost. But he hasn’t made the transition to national policy issues very well.
  • Carly Fiorina. She expresses herself in a crisp manner and has a good, general grasp of the issues. She’s rising in this campaign but still has a long way to go.
  • John Kasich. He has a superb background as a former Congressman and now as a very successful two term governor of Ohio. He expresses compassion for ordinary people. He deserves to climb in the polls but will he?
  • Chris Christie. He’s tough talking but his record in New Jersey isn’t that great. His obesity and reputation as a bully are turnoffs for me.

In short, I don’t want Trump to be the Republican nominee but who is going to emerge from the pack to defeat him? It isn’t clear if anyone will be able to do this.

Jeb Bush’s Tax Plan: Both Good and Bad

Posted on by
Reply

 

Republican presidential candidate Jeb Bush has just released his tax reform proposal, “My Tax Overhaul to Unleash 4% Growth.” It has many good features such as:

  • Lowering and consolidating seven current tax brackets into three: 10%, 25% and 28%.
  • Essentially doubling the standard deduction for most filers, thereby achieving huge simplification for millions of average income filers.
  • Eliminating the state and local income tax deductions and capping all others, except for charitable deductions, at 2% of Adjusted Gross Income.
  • Doubling the Earned Income Tax Credit for childless filers, thus encouraging more low income people to work.
  • Exempting taxpayers over the age of 67 from the employee-side payroll tax, encouraging them to stay in the workforce longer.
  • Cutting the corporate tax rate from 35% to 20%.
  • Allowing 100% immediate expensing for all capital investments, including inventories.
  • Creating a territorial tax system so that multinationals are not taxed on foreign earnings, and therefore incentivized to bring their foreign profits home.
  • Eliminating the deductibility of interest expenses.

The lower individual and corporate tax rates, together with the separate investment and work incentives, will create a significant economic stimulus estimated to raise GDP by at least .5% per year or higher, depending you who ask.
According to the Tax Foundation, however, the plan would reduce federal revenue on a static basis by $3.66 trillion over ten years, and even by $1.6 trillion on a dynamic basis, taking into account the new tax revenue generated by the plan.
CaptureThis is, of course, a huge problem. We badly need to speed up economic growth but we also need to lower, not increase, our annual deficit spending in order to put our debt on a downward path as a percentage of GDP.
The resolution of this quandary is to tighten up on those deductions, such as for mortgage interest, remaining in the code and also lessening the amount of the tax cuts if necessary in order to achieve overall revenue neutrality for the plan.

Needed: A New U.S. Foreign Policy

Posted on by
2

 

Wall Street Journal columnist Bret Stephens had a prescient article last November, “Yes, America Should Be the World’s Policeman” in which he said, “No great power can safely ignore chaos and disorder in key regions of the world. It is time for the U.S. to take a new approach – enforcing rules and standards but not trying to remake failed societies.”
CaptureAs illustrated in the photo just above from a recent soccer game, Germany is stepping forward and welcoming the masses of refugees now sweeping across Europe from the Middle East. But Germany’s generosity will just encourage yet many more refugees to attempt to escape from their failed societies.
The Hudson Institute’s Walter Russell Mead discusses “The Roots of the Migration Crisis” in yesterday’s WSJ. “The humanitarian question of refugees and asylum seekers cannot be separated from the bankruptcy of Western security policy in Syria and Libya, and the bankruptcy of Western security policy cannot be separated from the longstanding difficulties that many European states have in taking a responsible attitude toward questions of military security.”
“The utter failure of Western policy in both Libya and Syria has to be seen for what it is: not just a political blunder but a humanitarian crime.”
“It is impossible to have a humane and sustainable asylum policy without an active and engaged foreign policy that from time to time involves military action.”
“The dream of a liberal humanitarian peace that both the Obama administration and the EU share … certainly cannot be achieved with the kind of policies now in favor in capitals on both sides of the Atlantic.”
Or as Mr. Stephens said a year ago, “If the world’s leading liberal-democratic nation doesn’t assume its role as world policeman, the world’s rogues will try to fill the breach, often in league with one another.”
In other words, it is not just our own peaceful and prosperous way of life which is threatened by chaos in the Middle East, but our liberal-democratic values as well which are the foundation of progress for all of humanity.

The Evidence for Rapid Climate Change

Posted on by
Reply

 

My last post, “Why We Badly Need a Revenue Neutral Carbon Tax” makes the case for combatting global warming with a sensible free market mechanism such as a carbon tax rather than a hodge-podge of arbitrary national and state regulatory actions. Since many of the Facebook responders to this post deny the reality of global warming in the first place, I have decided to present the overwhelming evidence for its existence.
When ninety-seven percent of climate scientists worldwide agree that climate change is real and they have assembled a massive amount of measurement data to back up this claim, I think we have to take them seriously. For example:

  • The Global Surface Temperature is Rising. Global average temperature has risen 1.4 F since the early 20th century as shown in the chart just below which also shows the close correlation with carbon-dioxide concentration.
    Capture2
  • The Sea Level is Rising. It has risen at an average rate of 1.7 mm/year over the last 100 years and at the rate of 3.5 mm/year since 1993 which is equivalent to one inch every seven years.
  • Global Upper Ocean Heat Content is Rising. The top 700 meters have warmed by .3F since 1969. Thermal expansion of the ocean water as it warms contributes to the sea level rise.
  • Glacier Volume is Shrinking Worldwide. Just Greenland and Antartica alone have lost at 150 cubic kilometers of ice annually in recent years.
  • Declining Artic Sea Ice. Both the extent and thickness of artic sea ice has declined rapidly over the last several decades (see chart below).
    Capture1I accept the reality of the scientific evidence for global warming but I am certainly no “alarmist” in terms of what our response should be towards addressing it. It will be many, many years before renewable energy sources like wind and solar are able to make a substantial dent in worldwide energy needs.
    The best thing to do in the meantime is to attempt to decrease carbon dioxide emissions from fossil fuels through carbon capture and storage. A carbon tax would create a huge economic incentive for the coal and oil industry to solve this problem. If and when they figure it out, it is likely that the technology involved would rapidly spread around the world.
    This would represent a real solution to a very serious problem.

Why We Badly Need a Revenue Neutral Carbon Tax

Posted on by
Reply

 

A large and steadily growing majority of Americans believe that global warming, caused by the burning of fossil fuels, is a serious problem which must be addressed. What remains is to figure out how to do this with the least possible amount of economic damage to ourselves and others.
Capture1Consider that:

  • Energy consumption will increase 56% worldwide by 2040, overwhelmingly with the use of fossil fuels. Biofuels are a very inefficient source of energy and wind energy isn’t much better. Solar energy is dropping in price but is still much more expensive than natural gas.
  • The Environmental Protection Agency has just issued its Final Rule for a Clean Power Plan to reduce carbon emission levels in 2030 by 32% below 2005 levels.
  • California is now considering drastic legislation requiring a 50% reduction in petroleum use by 2030 which is likely to do much damage to the California economy.
  • In 2008 the Canadian province British Columbia introduced a revenue neutral carbon tax which has succeeded in reducing carbon emissions without damaging the BC economy.
  • The advocacy group, Washington Carbon, is trying to put a carbon tax on the Washington State 2016 ballot. Initiative Measure 732 would institute a tax on fossil fuels of $25 per ton of carbon dioxide. According to the Seattle Times many environmentalists are opposed to this initiative because it would be revenue neutral!

Conclusion: humanity is faced with the very serious problem of global warming and the response so far is chaotic and totally inadequate. The developing world is rapidly increasing its use of fossil fuels while the EPA is trying to put the brakes on our own use. Meanwhile states (and Canadian provinces) are establishing their own individual energy policies.
Isn’t it clear that what is needed is a conceptually simple unified approach to create incentives for all of us to cut back on carbon dioxide emissions? Isn’t it also clear that the best way to do this is with a national carbon tax?
It is up to the U.S. and other developed countries to take the lead in doing this. Once we are clearly doing what is needed, then and only then can we begin to lean on less developed countries to follow our example.

 

 

Climate Change Requires N2N

Posted on by
1

 

I have been reporting for several days on a fascinating new book, “Smaller Faster Lighter Denser Cheaper” by Robert Bryce and, in particular, what it means for climate change.
CaptureHere are some key points:

As Mr. Bryce says, “It’s time to focus our inquiry on the key question: if we agree that too much carbon dioxide is bad for the Earth’s atmosphere – what are we going to do? What’s the best “no regrets” climate policy as we move forward?” Here’s how to proceed:

  • We will need much more energy in the decades ahead in order to raise the living standards of the more than two billion people who are still living in energy poverty.
  • Hydrocarbons now provide 87% of the world’s total energy needs. There are still no affordable, scalable substitutes for the vast quantity of hydrocarbons that we use today.
  • People in the industrialized countries cannot and should not hinder the efforts of the world’s poor to gain access to cheap, reliable sources of energy.
  • We must give a very high priority to adapting and hardening our cities, networks and structures so they can better survive severe weather events.
  • N2N (natural gas to nuclear) provides the best no-regrets energy policy because those fuels can provide significant environmental benefits with relatively low economic costs.
  • The combination of natural gas and nuclear energy has reduced America’s carbon footprint by 54 billion tons over the last six decades. By comparison, wind, solar and geothermal sources reduced emissions by just 1.5 billion tons over the same period.

In other words, we need to be practical about the new sources of energy which will be needed to meet growing world demand. Renewable energy sources cannot nearly provide what is needed. Exploiting the current abundance of natural gas while further developing nuclear energy is the best way to proceed.

Smaller Faster Lighter Denser Cheaper

Posted on by
Reply

 

I look at a lot of books and every once in a while I find one that I really like. Such is the case for “Smaller Faster Lighter Denser Cheaper”  by Robert Bryce, a scholar at the Manhattan Institute.
The book starts out: “We are besieged by bad news. Climate change, pollution, famine, water shortages, war and terrorism, the mess at Fukushima, political gridlock, and the ongoing debt problems and economic malaise in Europe and the United States are dominating the headlines.” This leads some people to embrace “collapse anxiety,” the feeling that our problems are so great that our prosperous Western lifestyle cannot be sustained and soon may crash.
Capture“This pessimistic worldview ignores an undeniable truth: more people are living longer, healthier, more peaceful, lives than at any time in human history. Amid all of the hand wringing over climate change, etc. the plain reality is that things are getting better, a lot better, for tens of millions of people around the world.”
“Dozens of factors can be cited for the improving conditions of humankind. But the simplest explanation is that innovation is allowing us to do more with less. We are continually making things Smaller Faster Lighter Denser Cheaper.” Computers are becoming smaller and faster. Nearly everything we use is getting lighter. Our engines and farms are getting denser. Innovators are driving down costs and making goods and services cheaper.
For example, how does the SFLDC perspective apply to energy use?

  • In July 2012 blackouts hit northern India leaving 600 million people without electricity, even though India’s coal use doubled between 2002 and 2012. India relies on coal for 2/3 of its electricity production and has enough coal reserves to last a century. In India and worldwide, coal use will almost surely continue to increase.
  • Consider the following power densities (footprints) of various forms of energy:
    i) biofuels: .3 watts per square meter
    ii) wind energy: 1 watt per square meter
    iii) solar photovoltaic panels: 6 watts per square meter
    iv) oil well: 27 watts per square meter
    v) natural gas: 28 watts per square meter iv) nuclear plant: 50 watts per square meter

Conclusion: From a power density point of view biofuels are a very inefficient source of energy and wind energy isn’t a whole lot better.
What is the best energy policy going forward? Stay tuned!

Biofuels are “A Crime Against Humanity”

Posted on by
Reply

 

Such has been called the burning of food crops to produce biofuels.
CaptureA recent research report by Capt. T.A. Kiefer, “Twenty-First Century Snake Oil: Why the United States Should Reject Biofuels as Part of a Rational National Security Energy Strategy” states that:

“Imagine if the US military developed a weapon that could threaten millions around the world with hunger, accelerate global warming, incite widespread instability and revolution, provide our competitors and enemies with cheaper energy, and reduce America’s economy to a permanent state of recession. What would be the sense and morality of employing such a weapon? We are already building that weapon – it is our biofuels program.”

Here are a few of the reasons for such a severe indictment of biofuels:

  • Liquid hydrocarbons are unmatched as transportation fuel. Using hydrocarbons to process biomass into transportation fuel is detrimental to civilization’s energy balance and must be avoided.
  • Not even today’s best liquid biofuels have any prospect of simultaneously attaining the 6:1 EROI (Energy Return on Investment) necessary to support a healthy modern civilization while also achieving the massive yields per acre necessary to supplant any significant fraction of the national energy supply.
  • Petroleum and natural gas are true primary energy sources and fuel modern agriculture. The use of petroleum to accelerate energy crop growth is ludicrous on its face, as the result is less overall efficiency of energy and greater net consumption of petroleum.
  • The best use of agricultural land and water is to produce sufficient food for the United States and a surplus for the rest of the world.
  • The only sensible use of biomass as fuel is to harvest unfertilized biomass from unmanaged land and consume it as is (e.g. firewood) without wasteful attempts to transform it into liquid fuel.
  • Mandating the use of higher-EROI fossil fuels to make lower-EROI biofuels requires the overall consumption of more energy to deliver the same power output. Current U.S. biofuels policy is accelerating rather than decreasing the use of fossil fuels.

“We must understand that a national energy strategy is nothing less than a national survival strategy.” Is it not obvious that all subsidies and mandates for biofuels, including ethanol, should be ended as quickly and expeditiously as possible?

The Slow Growth Economy We’re Stuck In

Posted on by
Reply

 

We have very high debt and Paul Krugman says in “Debt Is Good” that we need more! The Congressional Budget Office’s latest report this week, “An Update to the Budget and Economic Outlook: 2015 – 2025” predicts slow economic growth for the next ten years, averaging 2.1% per year (see chart below).
CaptureUnfortunately, high debt and slow growth are a deadly, self-reinforcing, combination. Today’s Wall Street Journal has a chart (pictured below) showing clearly how budget deficits are likely to increase over the next ten years. The public debt (on which we pay interest) is predicted to grow from 74% of GDP today to 77% of GDP in 2025, increasing by a total of $7 trillion over this time period.
Capture1Here is another connection between slow growth and high debt:

  • Slow Growth means higher than necessary unemployment and under-employment as well as minimal raises for employed workers. The resulting economic slack leads to
  • Low Inflation. But low inflation means that the Federal Reserve can maintain
  • Low Interest Rates to try to encourage more borrowing to stimulate the economy. This means, in turn, that Congress can run up huge deficits without having to pay much interest on this almost “free” money. This eventually leads to:
  • Massive Debt. But what happens when inflation does take off, which has happened before and is likely to happen again? Then the Federal Reserve is forced to raise interest rates quickly and we are stuck with huge interest payments on our accumulated debt. And meanwhile entitlement spending on Social Security, Medicare and Medicaid is also growing rapidly. At this point debt increases very rapidly which leads to a severe
  • Fiscal Crisis.

Of course things don’t have to happen like this. Congress might become more responsible and either cut spending and/or raise taxes and start shrinking our huge deficits. Or perhaps slow growth really is the new normal and interest rates will remain low indefinitely. But slow growth is not pain free; there are many millions of unemployed and under-employed Americans who want to work and whose lives are stunted otherwise.
Slow growth is a very destructive path to be following. We badly need to adopt policies to speed it up!