Never-Never Land

You can’t turn around today without someone talking about how great the economy is.  Low unemployment and low inflation.  What could be better?

In fact you don’t have to look far to know something’s wrong.  For once this is less a matter of lies than of myopia.   We’re living in an artificially-created bubble, and while we don’t know exactly when it will end, this is never-never land.   We’ll go through it step-by-step:

– The bubble

We incurred $985 B of deficit this fiscal year as short-term stimulus to an economy already at full employment.  That’s a monumental $300 B over last year—in good times. As in every other such case, the tax cuts are NOT paying for themselves.  During the year we had a small reduction in unemployment from 4. 1% to 3.7%, but at no faster rate than last year and with no increase in inflation-adjusted wages (one-time bonuses from the tax cuts were negligible in the statistics).  You might ask why we would do such a thing—$1 T is a lot of money—but one thing the deficit certainly delivers is that much more economic activity in an election year.  The same people who starved recovery from the 2008 crisis to sow discontent for the 2016 election gave themselves a big boost for this one.

You might also ask how long we can continue doing it, and the following budget chart makes that unmistakably clear:

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We’re running up unimaginable deficits in good times, with consequences we’ll talk about in a minute.  And the chart actually understates the situation.  The underlying figures come from a CBO report written in April, when their estimate of the 2018 deficit was $805 B. With a final 2018 deficit of $985 B, the situation now looks considerably worse. The CBO report said that we would reach deficit = $1T by 2020 and then reach the sinister milestone of debt = total GDP by 2028.  With the current deficit, we have reached the $1 T value in 1/3 the time, so we can also expect the second milestone looms sooner too.

The stock market is a similar case.  The corporate tax cuts went directly to company bottom lines, raising price/earning ratios and stock values. What’s more corporations turned around and used all that money for stock buybacks, increasing demand for stocks and further enhancing stock prices.  None of this is sustainable.

– The deficit

Much discussion of deficits seems theoretical, but the consequences of our current deficits are real.  Republicans are already talking about cuts to Medicare and Social Security as counterpart to last year’s tax cuts.  Just imagine now we’ve reached a downturn in the economy—not even necessarily as bad as 2008.  We’ll have the massive deficit-induced debts shown in the prior chart, and now—on top of that—tax receipts that have just collapsed with the economy.  In that case we’re not talking about changes around the edges of Medicare and Social Security, we’re talking about no money for it and “taking the hard choices we just have to do.”   That means dramatic change in what it means to be living in this country.

Further (as noted in the CBO report) the deficit is a time bomb.  As interest rates rise in good times, the yearly cost of financing the deficit rises accordingly.  We’re already talking about deficit finance costs higher than the defense budget.  And it will just continue up, eating into available money for healthcare, education, opioid crisis even before a downturn.  There are good reasons not to incur deficits in good times!

– Our economy

With all Trump’s talk about the private sector and relief from regulation you might think that the country has been liberated from misguided government meddling with private enterprise.  But you’d be wrong.  The current executive-imposed tariffs and trade wars constitute the most extreme government intervention in the economy within memory.

The steel tariffs hit anyone building anything out of steel—basically forcing export-directed activities off shore.   The new USMCA regulations have already caused layoffs at Ford (and the touted benefits to labor are so far from clear that the unions can only wait and see).  The trade war with China disrupts values chains of any corporations not sufficiently well-connected to get exemptions.  The government is choosing winners and losers in the economy based on impulse (coal and steel sound good) or lobbying (the Apple watch).  And established companies have been winning out over newer, innovative ones (net neutrality) any time the issue comes up.

All of that, together with xenophobia and lack of support for education, augurs poorly for the state of our economy going forward.  And we’re even waging economic war with the largest, most rapidly growing economy in the world—in the name of protectionism!

– Our population

Since the subject is the economy, we’re talking here about the related topics of personal and national economic success.  It is of course a truism that the world economy is changing.  Good jobs, and the jobs that maintain our national standard of living, are changing.  Very many of them require more and different training.  (One list of the top ten growing job categories is given here.)  Economists going back to Adam Smith have recognized the responsibility of government to educate the population.

However with the tax cuts we took a very different tack, essentially trusting private sector prosperity to raise all boats.  There is no evidence that works.  The tax cuts went primarily to stock buybacks (see the mind-boggling level of buybacks below), leaving issues such as education (including the student loans crisis), infrastructure, and healthcare up for grabs.  For now, protectionism is the solution to job retraining, and consequences of automation are unaddressed.  Given the current level of inequality, low unemployment without wage increases just makes people with good jobs feel safe.

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We are not preparing the population for today’s world, because we’re too busy trying to get back to the “great” old days of the 1950’s and 60’s.

– Climate Change

Climate change belongs on this list, because if we continue to ignore it the economic effects could well rival the defense budget.  Climate change may have morphed into a partisan issue, but nature isn’t fooled.

Consequences will be in many forms—severe weather, changes of temperature and rainfall, sea-level rise.   Turning around today’s carbon-based economies takes time, so if we don’t start acting now, we’re talking many trillions of dollars of expenses for repair and to forestall truly disastrous consequences.  The recent IPCC report found more serious effects than previously recognized by 2040.   As the following chart shows, the US currently generates twice the per-capita CO2 of any other major player, so we have a long way to go.

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For now we are doing worse than nothing.  Climate change is an issue where international unity of purpose is extremely important, because cheaters—with cheap coal—can prosper.   We have not only endorsed coal for ourselves but actively encouraged cheating.  Further our departure from the Paris Agreement process—and in particular our disavowal of the whole idea of rich countries helping poorer ones act in our common interest—leads directly to dangers such as Brazil abandoning protection for the Amazon.

Ignoring climate change means more damaging effects of warming, and more drastic (and expensive) action in the end.   Furthermore, as a purely economic issue, by denying the issue we are sidelining our own companies’ participation in this necessary multi-trillion-dollar enterprise.  The day will soon come (we’re now talking just 20 years to get off coal, oil, and gas) when this moves to page 1 of the news, and stays there.

 

Our never-never land economy is good only so long as we keep our eyes closed.  But if we don’t open them soon, we won’t recognize what we’ll find later.

If Not Now When?

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We are ten years into the current business cycle.  We have not repealed the law of gravity.  The cycle will end, and history says sooner than we would like to think.

It’s important to recognize what that means.  Very simply we have to be realistic about what we’ve put off for tomorrow.  If we’re not serious about something today, there is a fair chance that tomorrow isn’t going to come any time soon.

Let’s make a short list of what we’re not serious about:

Education:  Funding for education has never recovered from the 2008 crash.  This affects all aspects (building, salaries, equipment) and all levels.  It directly contributed to the student loan crisis.  It affects the well-being of young people and our competitiveness as a nation.

Infrastructure:  Both candidates raised the issue in the election, but nothing serious has been done.

Opioid crisis:  This is a monumental problem that has thus far received only lip service.

Wages:  Businesses got a huge tax break with the Trump tax plan, but nothing has shown up in wages.  We can’t even talk about raising the minimum wage from its historic (inflation-adjusted) lows.

Medical coverage:  ACA has been deliberately crippled with nothing coherent to replace it.

Climate change:  We can pay now or pay more later, but we won’t be able to run away from it.  Thus far we’ve just closed our eyes, but the changes will be non-trivial.  Carbon capture—the least drastic path in the most optimistic estimates—would be at least 5-10 Trillion dollars a year worldwide.

 

In these good times we’ve chosen not to address any of those issues.   Tax cuts for businesses (now turned into stock buybacks) took precedence.

Unless something changes soon we should recognize that we have chosen to live with all of those problems—for as long as anyone can see.

Tesla and Ice

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This is a short note on a couple of issues related only in that they say something relevant about the future we should be planning for.

The first relates to Tesla and its production difficulties with the new, lower-priced model 3.  The highly-automated production of the model 3 is well-behind schedule, to the point where it is a big hit to the cash flow of the company.  We mention it here, though, because the delay is an indication that mass production of electric cars is something fundamentally new.

An electric car is a much simpler machine than an ordinary, gas-powered vehicle.  In principle the construction should be both cheaper and easier to automate.  Current production of Teslas is intrinsically a low-volume operation.  The model 3 will be the first indication of what newly-imagined electric car production is like.

I don’t know if we’re in for a shock or not (this is after all a first go at it), but this could be another big change to conventional middle-class employment.  And there will be follow-on effects for gas stations, and especially maintenance and repair.  This is another of many indications that broad, technology-based disruption of jobs is going to happen.

 

The other story is about the commissioning of a new class of Russian icebreaker—targeted at clearing northern ship lanes freed up by the retreat of polar ice with global warming.  The phenomenon is already clear, although the amount of traffic is still small.  The Russians are preparing for the opportunity with multiple classes of new machines planned for release up to 2025.  The Chinese have announced cooperation with the objective of reducing shipping times to Europe by a third.

The US is of course uninterested in consequences of climate change.  The only Coast Guard ice breaker is 40 years old, and they have a hard time getting authorization to get a new one.  The Bering strait, however, could be a shipping lane.

This is a very small example, but climate change affects many things, and as a country we’re trying to avoid finding out about them.

 

The current federal budget is put together for a world where the private sector will take care of everything.  That has always been a fantasy—the efficiency of the private sector comes in large part from its ability to ignore everything not relevant to immediate financial success.  It is particularly false for a world undergoing fundamental change.  We either recognize it and help people through it, or we fall behind and revert to the nightmares of the nineteenth century.

Update on Climate Change

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This note is an update to the climate change article from last year.  The story hasn’t gotten any better, but there is enough that’s new to warrant a revisit.

The most fundamental piece of bad news is the opening figure, which comes from the Global Carbon Project.  After three years of seeming stability, the world production of carbon dioxide increased significantly in 2017.  (The figure says “projection” just to indicate that the final computations are in process.)  Without too much evidence we might as well call that the Trump bump.  As we noted last time, worldwide unanimity on climate change is important precisely because the advantages of cheating are so obvious.  We—with probably the most to gain from the Paris Agreement process—are the cheaters in chief.  So it’s not surprising others will have fewer second thoughts as well.

We have to put this change into perspective.  Even a stable value of CO2 emission means things are getting worse, because it is the total amount of CO2 in the atmosphere that drives temperature change, and it all adds up.  The stable value was attractive, because it seemed to indicate that CO2 had finally peaked and might start to decline.  And the decline might mean the total CO2 could be bounded.  We’re now back to worrying about the peak, with no idea how bad things will get.

Two more new slides from the Global Carbon Project show what we stand to gain from Paris Agreement unanimity.  The first shows the current per capita production of carbon dioxide.

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As has been true for many years US per capita usage sits way above everyone else, more than twice both Europe and China.  That is a direct expression of our carbon-powered standard of living.

The second slide shows who is going to have to make changes to protect that US standard of living from the effects of climate change.

s11_Projections

This shows that the major growth in carbon dioxide production is not from the biggest economies (note that even China has stabilized), it’s from the have-nots trying to achieve some fraction of our standard of living.   We are asking them to ignore not only our past exploitation of fossil fuel resources but even our current high per capita use and to delay their own immediate hopes for a better life in order to make the world a safer place for everyone.  So much for the question of who benefits from the Paris Agreement process!

That introduces the next topic—public attitudes to climate change.  There were enough strange weather events in the past year to give people pause, so we’re getting close to—but still not over—the hump.  The latest poll numbers have both good news and bad.  First the good news:

Overall, 45 percent of those surveyed said global warming would pose a serious threat in their lifetimes, the highest overall percentage recorded since Gallup first asked the question in 1997. Despite partisan divisions, majorities of Americans as a whole continue to believe by wide margins that most scientists think global warming is taking place, that it is caused by human activities and that its effects have begun.

Then the bad—the improvement is only partisan:

Gallup asked whether people agreed that most scientists believe global warming is occurring, and 42 percent of Republicans said yes, down from 53 percent a year earlier and back to a level last seen in 2014. Just 35 percent of Republicans said that they believe global warming is caused by human activities, down from 40 percent.

This seems like another proof of a much-discussed feature of human nature—when people are confronted with proof that their beliefs are wrong, they double down on defending those beliefs.   Unfortunately those are the people running the show.

How can that turn around?  A recent Steven Pinker book made an interesting point.  Much of the rhetoric around climate change focuses on conservation and a new world view of collective responsibility.  But conservation actually isn’t the main point—since we’re not repealing the industrial revolution, the main point has to be new energy sources.  We’re not creating a new world where no one drives Chevy Suburbans anymore, we’re just changing the power source.  Conservation, however important, is about buying time until we can get there.  Perhaps that’s one way to get climate change out of the culture wars (as it should be).

In any case the focus has to be on the reality of climate change, and everything else is tactics. With tactics it’s easier to be bipartisan.   One indication is that Congress, over Trump’s objection, passed a bill continuing tax breaks for solar, nuclear, geothermal, and carbon-capture projects.  This effort united left-wing and right-wing approaches to climate change largely under the radar.  However, it must be recognized that even with such efforts the US is now lagging far behind in support for the technology of climate change.

Carbon capture (separating out CO2 and storing it underground or elsewhere) deserves some special mention, because it has become a bigger topic in the past year.  On one hand this is an idea that has been around for decades without going very far, and what’s more the coal industry supports it as a lifeline.  On the other hand the technology seems to be improving, the Obama administration supported it as a transitional technology, and even the IPCC climate studies assume some form of it will be used.  It currently exists as an expensive add-on for power plants, and some still-speculative variants have been proposed to pull carbon dioxide straight out of the air.  Both the power plant and out-of-the-air applications have a common need for CO2 storage technology, of which there are many variants.

The biggest issue with carbon capture is that it can be (and is being) used to delay doing anything about climate change—why worry about carbon getting into the atmosphere if we’ll pull it all out later.  The problem is that the technology still has such big questions about cost and scaling, that “later” could be very late or never (and some effects, such as melting glaciers, are irreversible).  Even the cheapest estimates say it will cost continuing trillions.  What you have to say is that the technology investment is necessary and at worst it at least gets the climate dialog past the hoax stage.  And if we could just get the Kochs interested in that business (which is largely oil industry technology), it would settle the Republican perception of climate change once and for all!

Returning to reality, we have to conclude the past year seems like a pause for progress.  After Trump took the US out of the Paris Agreement, many wanted to talk about all that could be done to maintain momentum nonetheless.  The chart at the beginning shows the limits of that point of view.  There are other indicators as well:

– The auto industry’s step back from future fuel efficiency standards

Exxon’s declaration that climate change is no risk to their profits

– Business as usual in the International Energy Agency’s World Energy Outlook:

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– Even the new preoccupation with carbon capture has to be viewed as a vote of no-confidence in the progress of conservation.   If prevention isn’t going to happen, then repair is all we’ve got.

What’s more than there has even been a preoccupation with a more drastic step, so-called geo-engineering.  This means injecting chemicals or particles into the atmosphere so as to dim the sun and cool the earth despite the increasing CO2 concentration.  There are many risks:  continuing ocean acidification, reduced photosynthesis and food supply, and weaponization of the technology.  Since CO2 would continue to accumulate, any loss of protection would have disastrous effects.  These are desperate measures.

As to what we should be doing, the picture is not too different from last year, but we can be perhaps more explicit.

  1. Because burning carbon is now recognized to have definite costs (i.e. whatever is necessary to counteract the CO2 increase), we need some kind of carbon tax so that the free market economy can react correctly. Since that cost is not currently captured, our economy is incurring a significant distortion that needs to be fixed.
  2. We need to get back into the Paris Agreement process to return focus to the goal. To repeat the obvious, the Paris process was always intended to be iterative—with countries readjusting their goals to eventually reach the target. We’re only at step one, so we had better help the world get back on-track.
  3. We have to recognize that at this stage we’re in no position to judge winners and losers among contributing technologies. So the solution has to be all of the above: nuclear, solar, wind, geothermal, batteries, carbon capture, even substituting gas for coal as a temporary measure.  The IPCC gave us what they called a carbon dioxide budget—the amount of CO2 we can add and still stay below a global temperature rise of 2 ⁰ C.  In 2014 (the year of the report) it was 800 giga-tons.  It is now below 700.
  4. People have to recognize that despite confusing news reports, we are all in this together. Some people will be hit by sea-level rise, some by drought, some by sheer temperature, some by storms, some by an effect we haven’t seen yet. Some may even be a little later.  But ultimately there’s nowhere to hide, and even “later” comes fast.
  5. There is no excuse for not funding research in all the contributing technologies and also research to understand the climate effects we are going to live with for however many years it takes to get past fossil fuels.
  6. Ideally all elements of society should be involved in planning such major changes. The carbon tax will help make that happen, but it’s not the whole story. We can’t keep fighting about this.

This administration likes to talk about itself as bringing business practices to government.   The evidence for climate change is such that any reasonable business would be doing its best to quantify the risk, so as to take appropriate action.   Businesses that choose to ignore disruptive new technologies or entrants are the ones that disappear—along with their disparaging comments on how the new stuff will never amount to anything.

Unless we choose to wake up—that’s us.  We’ll act now or pay far more dearly later.

 

The State of Our Future

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After the many other commentaries on Trump’s State of the Union speech, there are two reasons for this one:

  1. Trump seems to have gotten away with more than he should have.
  2. We seem to understate the magnitude of the danger.

On the first point it seems that Trump has pulled a truly remarkable sleight of hand.  The whole first part of the speech was about economic success.  He cited record low unemployment numbers as proof that his program was working and that the tax cuts would bring success.  To some extent this was the kind of distortion of reality we’ve come to expect, since Trump’s own job creation numbers were actually below all of Obama’s last five years.  What’s really shocking though is that he seems to have succeeded in using the ongoing mainstream world-wide recovery as a validation for the radically different and dangerous economics embodied in his tax plan!

Presidents generally can’t do much to change the economic situation in a first year, just because the ship is too big to turn around.   The numbers in the following job creation chart show just that for Trump.

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You can give the Republicans points for creative packaging of the results, but nothing more. (Today’s January statistics show more of the same.) That’s not surprising, since on economic policy Trump’s fights with Congress left him unable to enact much of anything before the tax cuts.  And the stock market had its own reasons for upswing—it has been overhanging the tax cuts all year, and that money will be going straight into profits.

By contrast, one cannot overstate the dangers posed by Trump’s economic plan.   We are doing a massive, deficit-funded stimulation of an economy at essentially full employment while eliminating all oversight of speculation and other bad behavior.  Economists expect that cannot end well.  It is at the least inflationary and likely worse.  The giddiness is beyond the level that gave us the 2008 crash, and this time there’s no guarantee that the people managing the crisis will remember the lessons of the 1930’s.  This is not a natural disaster or other unforeseeable event.  We are choosing to do this.

One revealing point: in his speech Trump boasted of the current strength of the American economy and talked about the urgent need to cut business taxes in order to make American companies competitive.  Say what you will, that doesn’t add up.  There’s a good reason why American companies are doing ok—in the aggregate they aren’t paying those high tax rates because of all the loopholes and other special provisions engineered by decades of lobbyists.  Real tax reform would have eliminated the loopholes, made the tax code more equitable, and paid for much of the rate reduction.   We didn’t do that; instead we just delivered a gift to companies and investors.  And we’re so excited about the gift that we can’t be bothered to look at consequences.

At this point in the business cycle we should be using our resources to make the country stronger.  Trump himself mentioned some of the problem areas that need focus:  the opioid crisis, infrastructure, job training (his first acknowledgement that business profits won’t help everyone).  All of those take money, and Trump’s speech said very little about that part.  The current Trump opioid plan is an unfunded joke.

This country and the rest of the world have come back from the 2008 crash to the point where we now have money to invest in infrastructure and people—including Trump supporters—and instead we’re giving it away and borrowing more to solve a problem that we don’t currently have.  That stimulus would have been handy five years ago; now it is a lost opportunity as well as an invitation to inflation (which certainly costs jobs) and another crash.

 

The economy, however, is only one of the danger areas mentioned at the beginning.  In an earlier note on policy risks we listed four areas of concern:  the economy, war, Russia, and climate change.  Trump’s State of the Union speech was worrisome in the other three areas as well.

War:  Trump spent a considerable portion of the last half-hour talking about North Korea.  This included two different sets of invited guests (the parents of murdered Otto Warmbier and the injured Christian defector Ji Seong-ho) to underscore his message of evil.  He blamed his predecessors for the North Korean problem, but presented nothing at all to show what he intended to do about it.  That omission made the episode eerie, particularly when we learned just before the speech that the administration ended the nomination process of a proposed ambassador to South Korea when the person expressed uneasiness about plans for “bloody nose” limited military actions.  Some commentators worried about preparation for war.

Russia:  Here the problem was not what was said but what wasn’t.   Russia was simply absent as a major concern.   In all the repeated military chest-beating there was no acknowledgement of past Russian behavior as a current threat.  The Russian regime has demonstrated its ability and willingness to penetrate public and private data networks including the NSA.  And Russians (inside and outside the state) are a major source of viruses as a kind of private cyberwarfare.  As a threat Russian cyberwarfare ranks with North Korea, but somehow it gets a pass.  (This recent article finally shows some concern in the press.)

Climate change:  Trump’s speech was a frontal attack on the whole idea of climate change.  He began with a list of natural disasters the country had overcome—including hurricane Harvey and the wildfires in California.  All his examples were cases that had been linked to climate change, and his mentioning them without comment showed how politically confident he felt in his climate denial.  He then went on to gloat about his (questionable) successes in pushing the energy sector and “clean coal” in particular.   For climate change there are many valiant efforts to work around Trump, but we should not believe that US behavior doesn’t matter.  International unanimity on climate change is crucial to stop cheating, and we—with probably the most to gain from the process—are the cheaters in chief.

 

Many people, including TV commentators, tend to discount State of the Union speeches as political hullabaloo without real consequences.   This one was more than that.   Not because Trump announced anything really new, but because it confirmed the crazy and dangerous path where he the “genius” is taking us.

As we’ve said before—people easily forget what happened with the last set of geniuses under George W. Bush.   We barely avoided catastrophe that time.   This time we have ample evidence that it will be worse.

As a country we have had many years of stability, so we tend to think somehow things will just work out.  In practice that means we try to normalize the craziness around us.  But we are abandoning peace and prosperity to follow lies and fantasy.  And once again, unless we change course, there will be hell to pay.

Shock and Awe

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It’s odd how people seem surprised at the level of corruption and outright incompetence coming from the Republican party.  We need to remember a bit.

The arrival of George W. Bush was not as traumatic as Trump’s, but then as now we got a new troupe of players (remember the neocons?) who were convinced they were geniuses, and that every other idea represented the stupid old world they were here to transcend.   That affected both the economy (government regulation does nothing good) and international relations (let’s remake the world for freedom and democracy).

It took a little while, but they were a catastrophe on all fronts.  The deregulation movement’s hands-off treatment of the economy produced a new, unregulated banking system—mortgage-backed securities—that ultimately crashed, producing the worst downturn since the great Depression.   $6T of “safe as banking” securities were wiped out.  Only the Democrats’ support of the bank bailouts kept us out of a real depression.

And of course we fought a $3T war that was justified by lies, produced no benefits to the US, and undermined US interests everywhere in the Middle East.  (ISIS was one consequence.)  Even today it’s hard to know what was really behind that war, but it is a fact that the only place in the world where people think it was anything but oil is here!

There are two other important but largely unstated points to be made about that war:

– That fact that it was unbudgeted contributed mightily to the difficulty of recovering from the crash.  In general terms governments need to act countercyclically, i.e. they should save in good times, because they need to spend in bad.   This is not rocket science, but we did exactly the opposite and in a big, untransparent way.   So recovery from the crash had to be all deficit, which made it easier for the Republican balanced-budget hypocrisy to prolong the pain.

– The result of the war was not just what was done, but also what couldn’t get done.  That affected the Middle East, where the greatest opportunity for change was for US money to grease the peace process.   That opportunity was lost forever.  ($3T would have created a true land of milk and honey!)  But that wasn’t the end of it.  That lost opportunities were here too.   Post 2008 we have found we have money for nothing, not even education.  Part of that problem has been Republican party priorities, but the fact remains we are not the first country to impoverish ourselves with a stupid war.

 

Fast forward to the present.   We’ve got a new bunch of geniuses who have no need for either information or expertise.  They’re smart!

We are now at a stage like the “shock and awe” of the Iraq war.  Reality has not yet had time to intrude on the fantasies.  But we need to remember, it can be that bad!

Where will we go from here?   The picture has a lot in common with the story just told:

– The economy

We seem to have learned nothing from 2008.  With the tax plan we are stimulating the economy at the wrong stage of the business cycle and running a deficit to do it.  Further we are removing Dodd-Frank and everything else enacted to control bad behavior.   There’s also little evidence that these people will do what it takes in case of a crash.

– War

This administration seems even more cavalier about war than Bush people.  We’ve had continuing belligerence with North Korea and Iran and a budget with an untargeted military buildup.  There’s real risk of a crazy war on impulse—with as little planning or understanding of consequences as last time.   We have to hope it won’t be nuclear.

– Russia

Russian is a constant adversary, and our buddy-buddy relationship with Putin is problematical.  Russians are proven experts in cyberwarfare, and the demonstrated impact of viruses points out the threat.  There is even a possible Russia-North Korea connection.  We stop watching them at our peril.

– Climate change

The evidence behind climate change is more than considerable.  As a risk, it is well past the point where any serious business would start paying attention to it.   We have instead decided we’re too smart to have to think.   We are risking our own future, and handcuffing our businesses that would be part of the solution.  The Chinese have taken our place and are running with it, while for us even planning is out of the question.  This is a double whammy—more heat, storms, and drought combined with loss of industrial preeminence.

Those items are not just speculation.   We’re all set to pass the economics into law.  The war rhetoric is if anything more pronounced than with the Bush administration.   For climate change this is stated and active policy.    The Russian case is a little different, but it underlines the seriousness of the dangers.  We just barely escaped with Bush; this time it looks worse.

Again we’re powerless in dealing with geniuses who can’t be bothered with facts, expertise, public opinion or anything else that gets in the way of their greatness.  We can have no confidence, for example, that Trump either understands or takes seriously the fact that a nuclear attack on North Korea will have consequences for the US even without retaliation.  Trump’s statement on deregulating Wall Street, just like his statement on leaving the Paris Accords, acknowledged no risks.

It’s all too easy to forget the past, but we’ve learned that such “genius” has consequences.  The end of this story will not be pretty.

No segment of the population—Republican or Democratic—should believe anything else.

Finding Reality

pew-studyThis item grows out of a recent study noting that in the US today few people have friends on the other side of the ideological fence.

It’s easy to imagine how that happens—there are just too many subjects to avoid!   That raises the question of why all those topics are taboo.   There are many reasons, but we deal here with one specific problem:  distinguishing real issues from pretexts.

The problem is that while there are plenty of real policy issues where debate should be possible, they tend to be mixed-in with taboo topics where the policy positions are actually donor’s self-interested pretexts (“climate change is a discredited hoax”).  Public debates can be (and often are) staged to discuss issues in the taboo category, but they never get very far.  There’s not much to be discussed when the stated policy is not the point.

It’s not necessarily easy to figure out what’s real, and undoubtedly many people will disagree with the examples here.   However the idea is to focus on a few issue areas where we as a country ought to be able to make progress if we can keep track of what is real and what isn’t.

We put issues in two categories:  non-issues and real issues.  Non-issues are issues only if donors (or other political considerations) force them to be.    We owe it to the country to get past them.  Real issues are the significant questions we need to solve.

 

  1. Climate change

As just noted, climate change is a poster child for pretexts.  There is of course one primary reason this whole subject is partisan, and his name is Charles Koch.  In addition to the false hoax claim, there is a continually-morphing litany of other misrepresentations.  It used to be easier to be a skeptic.  By now more than enough is known, so that ordinary risk analysis says the time has come to get serious.

Non-issues

Climate change is real.

Burning of fossil fuels is causing it.

The people working on it are not political hacks, but dedicated scientists faced with a hard problem.

Real issues

Risk assessment and what needs to happen now.  Steps and timing.

Roles of government and the private sector, e.g. supporting the power companies.

How research, particularly energy research, can best support the private sector.

What infrastructure changes will be needed and when?  Where will the jobs go?

Coordinating the whole effort.

It is worth pointing out that there are plenty of good, multi-year working-class jobs involved in dealing with climate change.

 

  1. Environmental policy and the EPA

What is frustrating about this topic is the extent to which the whole discussion of environmental regulation has gone on without specifics.   Is it really possible to believe that all environmental regulation is bad?  Even after the Flint disaster?  It is not viable to have environmental regulation whipsawed back and forth between administrations.

Non-issues

Not all environmental regulation is bad.

Not all environmental regulation is bad for business.

Real issues

Agreed-upon standards for regulation.  Work from the current list of Trump administration actions and responses.   Criteria to avoid overreach by all sides.

What is an appropriate process to assure that both the public interest and businesses have a say?

Should there be compensation for consequences of new rules?

 

  1. Healthcare

Now that all the repeal and replace nightmares are out of our system, we really ought to be able to do something good about healthcare.   This isn’t rocket science.   Every other prosperous country has come up with something that works.

Non-issues

Obamacare works well enough to be a starting point.  Sabotaging it helps no one.

The country needs a nationwide solution.  Uniform treatment for all people is good.

Single-payer systems are used by most of the world and may have a role to play.

Real issues

Availability of plans

Cost of plans

Assuring participation and coverage

Addressing needs of businesses

Getting religion out of the debate

Controlling costs of the program

 

  1. Jobs

Thus far the whole treatment of jobs has been based on campaign slogans.  The current tax cut plan is a case in point.   The millions of affected people deserve better.

Non-issues

Decline of good, low-skill working class jobs.

Decline in workforce participation.

Decline of upward mobility in the US.

No silver bullet.

Real issues

What is and isn’t cured by growth.

Workable options for tariffs, subsidies, or other government actions on trade.

Long-standing issues with wage growth and inequality.

Role of education.

Role of government as an employer (e.g. infrastructure, climate projects).

Budget impact and tax plans.

Geographic coverage.

Protecting the next generation.

 

It would be nice to believe that the country is now ready to get down to work.   On real issues some level of bipartisan cooperation could even be the norm.

Hurricane Harvey and the Burden of Proof

 

Hurricane Harvey was an extraordinary event.   The rainfall totals and flooding were without precedent even in the hurricane-prone Texas Gulf region.  The New York Times pointed out that fully 40% of the flooded buildings were in areas classified as “of minimal flood hazard.”

Scientists have been very circumspect about what part of this to attribute to climate change.   Michael Mann gave a careful summary of contributing factors, principally sea-level rise and water temperature.  The message is that climate change didn’t cause the hurricane, but did make it worse.  No one can quantify just how much worse, and certainly out-of-control development in Houston contributed to the destructive effects.

However, the fact remains this was an unimaginable storm.   It was out of the range of what anyone thought to see from weather, even from hurricanes.  That is the threat of climate change.  Weather isn’t limited to what we know and understand.  Once we perturb the system, the power of the elements can surpass anything we are used to—that is what’s at stake.  We can’t even guarantee the changes will be gradual.

The evidence behind climate change is considerable and increasing.  A previous post here discussed one particular way of looking at it.  Any reasonable business, faced with a risk of this magnitude, would be doing its best to quantify that risk, so as to take appropriate action.   Businesses that choose to ignore disruptive new technologies or entrants are the ones that disappear—along with their disparaging comments on how the new stuff will never amount to anything.

That’s us.   Coal and oil interests (Koch brothers and their cohorts) are horrified that anyone would even think about keeping their assets in the ground.   With this administration anything that any business doesn’t like is bad–and for climate change we actually have Koch representatives (Scott Pruitt, Mike Pence) running the show.  So climate change doesn’t exist.  Can’t even talk about it.   Come back to me when things are so bad I can’t laugh at you.

What is the burden of proof here?  We are long past the stage of serious concern.   We haven’t reached the stage where people with something to lose are ready to give in, but that’s not going to be until their businesses blow up in a storm.   With climate change you have to act early if you want to prevent a future of weather run amok.   Carbon dioxide in the atmosphere just adds up.  If you wait for things to get bad, they will go from bad to continually worse through all the years it takes to get off coal, oil, and gas—and then stay that way for many decades more.

We are at the stage where the appropriate response to risk is action.  Research and the Paris Agreement process are imperatives.  CEO’s of failed companies can always go on to the next one, but with climate change there’s nowhere to go.