The Top 10 Technology Trends of 2009: I Pick them!

10) Mobile. It’s the future. Mobile cars, mobile cigarettes, mobile gummy bears. Mobile is the buzz word out there and it’s here to stay. If it’s mobile, invest in it. In 2009 your i-phone will become the j-phone, it will become not just a restaurant locator, credit card and way to ignore other people in awkward social circumstances and seem busy, but also become truly mobile based, leveraging mobility, perhaps even becoming a vehicle, much like the segway.

9) Breakthrough in the toilet industry. This is an often overlooked piece of technology, literally! But can you imagine the market size here, I estimated it at over $19 million annually, in toilets alone! I actually predict a facebook app that will predict when you have to use the restroom, and then just go for you! I’m thinking it will work via some kind of anal catheter maybe directly connected to your i-phone that will be RSS based with your profile. Can you imagine that shit?

8) Green. Again, just one of those buzz words people keep talking about, just over and over again, everywhere, just constantly yapping about it non-stop. So it must be good. It’s right up there with mobile for slick little web 2.0 mini-segments on the Today show and faddish editorials in the WSJ. I think the biggest green technology in ’09 will almost assuredly be tote bags. Think purses, but bigger. People will not want to use things or purchase things anymore, waste not want not! So they will have to carry everything that they could possibly have to use during the day with them at all times. Car oil, knives, cat nip, Kleenex, Styrofoam, all in the new green tote bag. It’ll get heavy, so I’m thinking the deluxe models could be on wheels with smallish gasoline engines to propel them. BIG $.

7) 2012 Presidential election. We just got through one of the quietest political seasons ever, with very limited citizen involvement, and people will look to finally get back off the sidelines and there could be real excitement for the upcoming 2012 election in ’09. To tell you the details I would need you to sign a non-disclosure, but I am heavily invested in a new web-based news platform that will basically focus exclusively on politics, providing a sort of insiders look at the campaigns and key players and general political intrigue. Huge untapped market with absolutely no competition here. I’m still looking for that breakthrough once in a generation candidate, but ’09 could be the year we finally get one.

6) Robotics. Ever since most of us were kids we knew this was just going to be a money factory some day. It has already been 8 long frustrating years since Stanley Kubrick set our expectations so high with his masterful space drama 2001 a Space Odyssey. It’s bound to happen in ’09 baby, I mean it is two-thousand –and-nine. Come on already Honda! Figure it out!

5) Professional sports franchises. If you find yourself in a position to become the owner of a major league sports team in ‘09 I highly recommend pulling the trigger. You will not regret it. I am currently exploring turning my fantasy NFL, NBA, NHL and MLS teams into actual franchises. It’s legally complicated, but I think the courts have left some wiggle room here. If I pull it off I will pretty much be living in one of those sweet luxury boxes full-time! And with several owners out there clearly senile, I’m talking to you Al Davies and Steinbrener, it is a wide open competitive landscape.

4) Anti-counting movement. Counting will really lose momentum after being the mainstay of societal organization for over 15,000 years (15,000 is now so whatever!) The world is all 0s and 1s anyway. So yeah, 10 is way bigger than I thought so I’m skipping to number 1.

1) Credit default swaps. I am up to my eyeballs in these things. I swap agreements on e-trade on an hourly basis, betting on everything from daily rainfall totals in the Amazon basin to municipal tobacco ordinances to John Mayer’s relationship status to pooled toxic-ass mortgages and I just keep going in deeper and deeper. I am clinically addicted to credit default swaps. Anything that sounds as pro as “credit motherfuckin’ default swaps” has got to be just sick. In 2009 AIG will emerge from this little bumpy patch unscathed, and look for Lehman Brothers to rebrand with a sexier Lehman Sisters and as Kanye says, watch the money pile up.

A Housecall for Incoming Health and Human Services Secretary Daschle

HHS Secretary-designate Daschle will have a lot on his plate. He will oversee the largest federal agency, administering everything from Medicare to the FDA to global health initiatives, at a time when his boss has promised massive reforms in healthcare. It’s going to be a tough job. To kick things off, Daschle has said he plans to embark on a discussion of healthcare reform with households all across America, a sort of big-tent experiment in brainstorming. This is a genuine and admirable goal, if not hard to understand coming from a man who has spent the last 30 years visiting people as a professional politician. Both Obama and Daschle have literally been on the road for years, and they are not short on (often very personal) stories about healthcare in America. But how could a couple more months of it hurt? I think Secretary Daschle should focus on three key areas if he hopes to simultaneously improve the quality of care Americans receive, and the number who receive it.

One, he needs to contain costs. Healthcare expenses are growing far faster than the revenue base is expanding and at the current trajectory, non-discretionary spending will eat up the entire federal budget in about 25 years. A good model of controlling prices can be found in Japan, where they have half the per capita healthcare costs and twice the per capita utilization rates as Americans. That sounds good. In Japan the government has sole purchasing power of pharmaceuticals and healthcare procedures. They use their massive negotiating power to exert downward price pressure on everything from the cost of antibiotics to the cost of an EKG. Private insurance providers can still design their own policies and set their own prices, but the basic inputs that go into those plans are purchased in bulk by the entire government. The same concept is already pervasive in the private sector, where a few key buyers negotiate entire supply chains. Secretary Daschle’s HHS would be a great place to house the Office of Negotiation, where they set up 5-year forward purchase agreements on the largest and most common drugs and procedures.

Second, just like decoupling in the electric utilities sector, there needs to be decoupling in the medical sector. Utilities over the last decade or so have realized that electric providers in a normal market have no incentive to be efficient; in fact they have an incentive for their customers to use as much energy as possible because it translates into larger profits. This results in excess energy usage and general inefficiency. This has been more or less solved via utilities taking a percent or two out of monthly electric bills and redistributing it based on a formulaic measure of a company’s energy efficiency. Suddenly energy efficiency is monetized and energy providers start paying attention. The same basic idea should be established in the medical industry, where doctors, particularly specialists, have an incentive to carry out, and charge for, expensive procedures. Daschle’s HHS should charge a small fee to existing healthcare providers (maybe .5%) and reward medical providers who are particularly efficient in their utilization. This does not mean doctors will be rewarded for not doing expensive procedures for sick patients who need them; it means they will have an incentive not to do procedures just because they are profitable (which is perfectly rationale). HHS could measure certain key and widely available statistics, like referral and utilization rates and costs per treatment at the institutional level, and then reward those institutions accordingly, decoupling profit from wasteful overutilization.

And three, if Obama and Daschle really want universal coverage they will have to subsidize about the lowest quintile of American households. This is a decision Americans will ultimately have to make, but controlling prices and rewarding efficiency will still not be enough to provide universal coverage. Obama proposes instituting a healthcare tax on employers who do not contribute to their employees’ coverage as a means to fund subsidy programs. This seems like a good idea, as it preserves price parity across the market, as every firm will have to meet the same basic operating costs (chipping in to provide basic healthcare and not free-riding on firms that already do). Revenues here could be distributed by Daschle’s HHS based on a family’s combined income level to provide basic coverage for the uninsured.

I don’t think Secretary Daschle will be knocking on my door anytime soon, but I hope that once he hears from all these households that he starts getting specific soon. Generic goals or hollow bromides have gotten us nowhere with healthcare reform in the past, and today’s no different. Healthcare reform will be a long difficult debate, and policymakers should start working on the nuts and bolts now. None of these ideas is easy or particularly desirable, but neither are higher taxes in the future for worse benefits.

A special recipe for the holidays and one of my personal faves, just prepare and enjoy!

"You take some chocolate ... and you take two pieces of bread ... and you put the candy in the middle and you make a sandwich of it. And that would be a cake." -Andy Warhol

Oh, and he left out the oven part, be sure to put it in one of those

MLS to Portland and Some Econ

After Adrian Hanauer’s brilliant orchestration of bringing MLS to Seattle (in ’09 baby!) I think it’s Portland’s turn. Check it out - http://www.mlstoportland.com/ With an estimated cost to the city of $85m and annual benefit of $30m it would be a big win all around. Bring MLS to Ptown baby!!

And here are 10 macroeconomic prescriptions that might be good now that everyone’s talking about economic policy in DC.

10) Independent World Class Regulators for all Large Financial Firms – Independent Meaning they set their budget and world class meaning they follow GAAP, this wasn’t the case for GSEs or I-banks – this includes 10% reserve ratios, not 2.5% say like Fannie and Freddie, e.g. better leveraging

9) Housing PITI – Principal Interest Taxes Insurance – Documented and verified. This only became a rule in July 2008 when Bernanke pushed it though at a Fed meeting! (And it won't take effect until Feb '09) Why did it take so long to require borrowers to check a box at the end of their mortgage docs releasing their tax records? Then Standard and Poor's or Moody's would have had actual data to base their bond ratings on. The FDIC has been restructuring loans at or below a 30% debt/income ratio to much success (but it can only do it to assets it has acquired, which is basically IndyMac) - this would be a good threshold for lenders to loosely base restructuring (after all they will take a bit of an interest rate hit, but it's better than losing the whole loan). There's also a new study which estimates a million mortgage defaults could be prevented via utilizing $10b of TARP to increase the fees HUD provides private mortgage securitizors (source of over 50% of current defaults) get for restructuring a loan. Right now there is little incentive for them to make the effort to restructure versus just write off or auction off.

8) Global Exchange Harmony – If you trade in a market you are subject to its rules, for instance European/London traders in NYMEX are often exempt as they are considered to be regulated from abroad, not good, e.g. close loopholes. If a satellite trading shop for a European firm opens in Atlanta it should be fully regulated by the U.S.

7) Fix Entitlements – Non-discretionary spending is 65% of federal spending today and will continue to spur deficit spending and eat up the budget, which crowds out private investments – either a Greenspan style fix by say indexing benefits to the CPI rather than wage and bumping up the retirement age, or more innovative (and promising) approaches like volunteer personal savings accounts (the market has never had less than 7% returns over a decade, ever)

6) Infrastructure stimulus – Largely in the form of revolving loans to states and localities, including national direct current electricity grid (particularly applied in so called 'solar parks' which establish all the prerequisites for solar permitting and transmission in government land leased by private firms, removing the uncertainty that currently inhibits at scale development along with #5) and water infrastructure

5) Embrace the clean economy – less taxes on labor and income and more on pollution. The marginal social cost of carbon according to the Stern Report, the International Academy of Sciences and the U.N. is about $30/ton CO2, conveniently about the exact amount needed to make renewables and sequestration cheaper than coal, tar sands, oil shale etc. The IRS could oversee this program with existing authorities at the point carbon enters the economy, either the ground or port, and then recycle all revenues back via tax cuts.

4) 50% margin call (collateral) for paper (non-deliverable) hedging and speculating, today it’s often 2-5% which encourages speculating and thus bubbles

3) Warranty on bond ratings – If collateral backed bonds get a rating from one of the big agencies that proves grossly inaccurate they should take big haircuts in their contracts

2) Successful WTO Doha round – Trade needs to be opened up, and this means new negotiations with more flexibility on easing subsidies and accepting developing economy safeguards (this was the big sticking point)

1) Relax – Expectations and anxiety are self-fulfilling, losses are only realized if you sell, most of the big banks had balance sheets that were OK, it was the market cap losses that did them in. Citigroup for instance has lost $2b each of the last couple quarters, on a balance sheet of nearly $2 trillion and with tons of cash on hand (and $25b more thanks to TARP). And yet they have a current market cap of $21b, grossly undervalued in my opinion, traders would benefit from some perspective - any company, even very strong ones, can be undone by 90%+ market cap losses (which all that have gone under have sufferred). If bovine mass hysteria dictates market positions, any company can be victim - and valuation models are powerless in the face of this. If Wall Street focuses on creating wealth rather than manufacturing it (creating wealth includes products, services, consulting, insurance, liquidity/risk management, and manufacturing it includes things like arbitraging bond rates with SIVs (structured investment vehicles) or backing capital raises with deteriorating underwriting standards, like subprime backed collateralized debt obligations or massive paper speculation/derivative bets). Wealth production beyond wealth creation is the root of bubbles, and they will always burst.

Also, I think the Big Three should get their additional $25b, which is far far less than it would cost the economy if they failed. But they need to realize this is a bridge loan in two senses: 1) getting on a sustainable cash flow trajectory and 2) finally innovating. The top reason they are in this position is not because of events of the last few months but because they have been making the same vehicle since Carter was in the White House, and actually have gone backwards in fuel efficiency. As a result they've had their shirt handed to them by Japan and German automakers. Maybe with the Chevy Volt the Big Three can finally be out front on the innovation curve instead of three decades behind.

Channeling Norman Mailer

The Calzaghe-Jones fight is tomorrow night. I’ve always deeply respected boxing, and ever since getting HBO it’s become a new little hobby, a slight step up from my main collegiate hobby of gluing beer bottle caps to the ceiling, or testing which detergents actually make for the freshest smelling laundry. But anything requiring a hot glue gun or sniffing your sweatpants like crack either belongs on closed-circuit television or in a halfway house, definitely not fraternities. Yet for a pale weak washed up distance runner, such as myself, the badass tattooed prize-fighter seems to exhibit a strong allure. Ever seen that nanosecond glance between a fighter right after a knockout and his girlfriend sitting ringside in a cocktail dress? It’s the human equivalent of a lion killing a gazelle and then roaring to the whole pack that the feast is ready, pretty hot. I guess we’re most drawn to that which best conforms to our own self delusions. Ha. Ha. Both fighters are future Hall of Famers and looking to finish their careers with a big win. They’re also both superlative businessmen, their promotional outfits co-produced this whole thing from start to finish, an extreme rarity. They are simultaneously partners and adversaries. This makes for an entertaining pre-fight build-up, as two people who clearly like each other have to exhibit faux-hate to make for a more compelling narrative. Their incentive is to advance their business interest by pretending to hate the one person for whom their business interest actually depends. This split-personality incentive actually makes for a fuzzier, more intelligent sport (and also more enduring because they are masters of their own destinies). And as far as picks, from the guy who thought the Seahawks would be incredible this year no less (on a related note: dammit), Calzaghe is the very real deal. He can shift between straight power punches and super-smooth combos at will, and is flat out awesome in the later rounds, where so far no one has been able to keep up, even a little. He does seem undersized relative to Roy Jones Jr, the first man in over a century to carry both the light heavyweight and heavyweight titles, and size can overcome even significant ability gaps. Otherwise he seems hard to beat – except maybe by a close friend.

MDGs, GSEs and BTUs

Sixty four percent of income in least-developed nations comes from agricultural output and only 4% of international development assistance in these economies goes to agriculture. The typical yield per hectacre (about 4 acres) in developed economies is a little over 4 tons. In these subsistence agricultural communities the average output is only 1 ton. This combination of low productivity because of an inability to supply basic farm inputs like nitrogen fertilizer and high yield seeds, combined with essentially no targeted aid in these areas creates the ideal environment for poverty traps. Here the inability to afford basic inputs limits output, which reduces savings, which further precludes necessary productivity enhancing investments. This is where official development assistance can provide not just relief or temporary aid, but over several years be a catalyst to pull economies out of the poverty trap and develop a domestic savings pool deep enough to afford the productive inputs they need to raise income, make more investments and over time diversify their productive sectors. The world (via the UN) has pledged for over 30 years to provide .70% gross national product towards such assistance, most recently via the UN Millennium Development Goals. The United States currently provides .17% GNP towards ODA, and the EU roughly twice that. As interim targets towards the two to four fold increases required to reach these goals the EU pledged in ’06 to get aid up to .5 % GNP by 2015. A report was just released monitoring progress of these pledges to get closer to meeting the initial pledges. They show that ODA fell over 4% in ’06 and over 8% in ’07 and of the $25 billion of pledged assistance to Africa, only $4 billion was actually allocated. The world community needs to meet its commitments, and not simply as a philanthropic endeavor, but because there is no more comprehensive way to engender sustainable and inclusive national security, economic development, trade and productivity growth and environmental sustainability than through targeted development aid that in essence doesn’t just “give a fish” but “teaches how to fish.” The crutch of the problem that has beleaguered the international community and led to many failures in reaching these commitments is the structure of the United Nations. There is no legal accountability or international mechanism that is not simply an aggregation of sovereign entities, which then ultimately have final authority. Countries and member states should make pledges with legally enforceable contracts or not at all.

The government sponsored enterprises Fannie and Freddie are intrinsically sound. Their profit and losses and capitalization are adequate. They have over $5 trillion in assets and have sustained very manageable losses of only about $30 billion this year. Their independent regulators have observed this many times in the last few months. Their 80%+ market cap drops since last year are unwarranted. However, because their price depreciation so negatively affects market expectations, hinders new investments, and creates “real” losses in savings and jobs via the secondary effects of financial investment losses, the recent takeover is warranted. One can only wonder if the Fed had enacted their new common sense mortgage lending standards 5 years ago if we would even be in a downturn. It is mind-blowing to think that it took all this time to get official regulations requiring income verification of borrowers, or the inclusion of insurance or tax payments in estimates, or removing punishments for early payments. There is a huge moral hazard here and we have seen the results. I don’t know why the Fed under Greenspan did not act on these years ago. The lax lending standard only acted as an accelerant for lending practices that essentially discounted the future completely to earn commissions in the very short term. This sort of principal-agent dillemma could have been prevented with common sense rules.

There will be a huge new market in clean technology exports in the next decade. Right now Germany and Japan control about 90% of the solar market because they have the pricing less wrong than the rest of the world with a cap and trade system, significant public outlays in basic research and repurchase agreements for clean energy producers or feed-in tariffs. The surest and most sustainable way the U.S. will restore fiscal and trade balance in the next decade or two would be to learn a thing or two from Japan and Germany and price carbon. This could be achieved most efficiently with a revenue neutral carbon/BTU tax, offset with reduced income and payroll taxes. There are literally tens of thousands of people in my generation that could get filthy rich in this industry if the U.S. would simply level the playing field by removing the existing artificial carbon subsidy that makes it more difficult for our clean technology companies to build sustainable revenue models. Price carbon and we will have a domestic investment driven boom and export our technological advantage to the world. The private sector is the engine, but the government has to turn the key.

i'm ready for my closeup, bitches

blogs are a funny medium. why do we write them? there's no grades for them. no money or career. no glory. no forum where you can see people's reactions and feel their responses in person. no platform, power or authority comes from being a great blogger. there is a global tournament for beer pong and bird calling but no world champion of blogging. no pulitzer prize or fields medal. i guess most people write them as a hybrid journal/portfolio. it's simultaneously a way to remember and unpack different experiences and events, and also show our skills to the world. i think most people half expect that there's secretly a simon cawell (sp.?) of bloggers out there searching for the next big star. blogs are people's response to that ultimate frustration of having so many good ideas but never actually codifying them in a written piece. blogs are the common dude's response to the ultimate injustice of unnoticed talent. i think it could be a painful realization though when someone cites "blogspot" as one of their references. any medium where the norm is not to use caps just doesn't fly in interviews. my whole perspective on the existential nature of blogging changed though the other night when at a bar someone (you know who you are, hello, are you there?) actually told me, unsolicited too, that they read my blog! it was one of the finest moments of my life. all of a sudden i felt a little light. the back of my wrists pulsed a little harder thann usual and my stomach dropped from the adrenaline rush. wow, someone had actually read my blog. i looked around the room with starry eyes and everything seemed so perfect. i remember signing a few autographs and beating back the paparrazzi. now that i was a read blogger i would have to get used to it. in a world with no centralization, no authority or formal rules or professional standards, being read was like being a published author, like getting signed as an artist, like getting a standing ovation. 'cause i have learned one of the endearing truths of business, that it doesn't matter if its crap, so long as it sells. and my crap is selling. so it's time for a little flossin'.

My Homage to New York City (or, Goodbye)

If America were one big park, New York City would be the oversized masonic statue at the gated front entrance. Like a General eternally perched atop a bucking horse, ready to gallop into battle, New York City is the physical embodiment of what America thinks of itself at its finest, climactic hour. New York is beautiful and chic and inspiring, and smelly and crowded and infuriating. I’ve never been as close to hitting someone as when riding the MTA subways. Imagine the DMV on wheels, rolling through an oil spill. In fact, commuting constitutes such a large part of life in this largest of American cities that E.B. White famously concluded that there are three types of New Yorkers: the elitist natives who take it all utterly for granted, the transplants who give it passion and steroidal ambition, and the commuters who give it a tidal-like swell of restlessness, what celebrities often refer to as a vibe. To that I would add a fourth – 300 million Americans. NYC is the aerial backdrop for the opening credits of every Disney movie we remember growing up, people laboring off to forgettable meetings in the foreground, their blinding new designer tote bags hoisted conspicuously over their shoulders. It is the urban carrot of a million test-takers, paper writers and understudies, harboring their precious fantasies to be appreciated. It is the destination for a billion skittish dreamers and schemers, the SuperDome of IPOs and short sales. It is assuredly a place where sex never had to be brought back; sex can’t leave a city with its own line of condoms, aptly branded with the cartoonish insignias of subway stops. It is a place where people buy tickets in droves to ride on top of wretchedly emasculating double-decker buses to see rusted bridges from the Roaring Twenties, endless brownstone walk-ups and sidewalks gushing with people from below ground like a slit artery, no one looking or talking to anyone else. It is the life we envision for ourselves every single day in that hazy mid distant future, when we’ve accomplished just a little more, made just a little more, become a little better looking. NYC is a 300 block long corpus just about to wake up, perennially at the climax of the American dream – creating the new and changing it just because it’s old. And I literally cannot imagine anything else.

The Next Industrial Boom

Carbon Tax Shift Reflects Broad Consensus

Jamie Dimon, Chairman and CEO JPMorgan Chase & Co. “We don’t have an energy policy, we don’t have an environmental policy, we don’t have an education policy, we don’t have an infrastructure policy. And folks, these are not partisan, ok? These are more long term. We may have, I’m going to call it institutional sclerosis. You’ve seen it happen with huge institutions, with the British Empire. We are unable to make some tough decisions, for example, it would be a shame to let gas go below $3.50 or $3.25 a gallon – we should add the taxes to BTU, charge energy. We’ll all learn to be a lot more efficient, it’s not that big a deal…And then you also have alternative energy, people aren’t gonna put $100 billion into alternative energy if oil can go back to $50. And it’s a commodity, there will be a surplus one day and it will go down. But that fortitude, someone’s gotta say the truth and help us get it done. And you the citizens of this country, I think we’re gonna have to give it back to lower paid people. You know, so they’re losing $2000 a year now on oil and on food, so it’s gotta come out of payroll taxes or low income, and we shouldn’t be selfish about it. We need a real policy, and once you have a real policy, a serious policy of the United States of America, oil future prices will start to come down…I think if we don’t get our hands around this energy issue we could severely damage the future health of the United States.”

Vinod Khosla: “From an investment perspective, the current climate finds businesses in a holding pattern, unwilling to fully commit resources because of what may happen next – carbon pricing and a fuller appreciation of the externalities of our current energy sources has the potential to blow the old investment models out of the water. What sane CEO would bet that no climate change legislation will be enacted in the next fifty years, the typical life of their investments? We must remove this unnecessary risk for our businesses. The devil we know is better than the one we don’t when it comes to climate change legislation.”


They don't come much smarter than Mr. Dimon and Mr. Khosla. And they are dead right that the way to solve climate change, improve our national security, and usher in a real, sustained economic boom for the next couple of decades is to tax income or labor less, and CO2 more. More incentives on good things and you get more of them. Less incentives on bad things, you get less. Just some of the wonders that follow from competitive, fungible markets with efficient price signals (and big externalities like climate change are not efficient!) A green (referring to both dollars and the environment) is by definition more efficient, or Pareto optimal. So let's get into the the details about one proposal that would do exactly what these gentlmen are proposing, the Carbon Tax Center's policy, which advocates a REVENUE NEUTRAL carbon tax - meaning it is not a tax hike! Rather it shifts the burden from income and productivity to dangerous greenhouse gases. CO2 should be taxed as upstream as possible, either at the well-head if it's domestic or the port if it's foreign. A good price signal would be $25/ton CO2. At this rate you could slice some $50 billion a year off income taxes, or the payroll tax, or just mail every American a check for a couple hundred dollars. And at this price, clean coal with carbon capture (IGCC + CCS) is cheaper than current coal, because of the tax savings from not emitting the CO2. Coal currently costs about 2.5 cents/kWh, clean coal about 10 cents/kWh. Prototyped concentrated solar power (CSP, like solar thermal, which is way better than photovoltaic and already has baseload reliability) today costs about 7 cents/kWh. Get it? At this price point solar beats coal! And this means lots of new investments and jobs and growth. And these technologies will not just create more economic opportunities, but better ones. It is estimated for instance that each gigawatt of solar thermal energy will require 3,400 construction jobs and 250 permanent employees, twice the rate as a typical coal or gas plant. (Krupp, 65) So now more digging....

The CTC’s proposed $37 per ton revenue-neutral carbon tax, ratcheted up the same amount each year over the next decade, is consistent with the recommended range of both the U.N. Intergovernmental Panel on Climate Change, and the influential Stern Review on the Economics of Climate Change. A $37/ton carbon tax is equivalent to about a $10 per ton tax on carbon dioxide. CO2 would then have a price of about $100/ton at the end of 10 years under the CTC’s plan, or about $80/ton CO2 when adjusted for inflation.

This price point is consistent with the range of recommended prices provided by the IPCC and Stern review, and close to the conclusions of the Inter-Academy Council of Sciences. It is the consensus of these reports that such a level would provide the long-term price signal necessary for renewable technologies, from solar-thermal to carbon capture and storage, to be deployed at scale. It is also the consensus that it would stabilize CO2 concentrations at the threshold level of 550 ppm by century’s end. Absent such a price signal, CO2 levels under “business as usual” scenarios are projected to triple from pre-industrial levels to around 840 ppm. The last time CO2 levels were that high was about 40 million years ago when crocodiles roamed the North Pole.

The Intergovernmental Panel on Climate Change cites a range of $20-80 per ton of CO2 equivalent by 2030 as the necessary level to stabilize emissions at 550 ppm. (IPCC Working Group III Report Summary for Policymakers, 19) The Stern Review cites a review of 103 separate estimates of the social cost of carbon gathered from 28 published papers. It determines the mean abatement cost from these estimates to be $29 per ton CO2 equivalent. (Stern, 287) However, the Review goes on to develop an economic model that more accurately incorporates the market valuation of risk from potential catastrophic climate change, concluding, “We would therefore point to numbers for the ‘business as usual’ social cost of carbon well above (perhaps a factor of three times) the Tol mean of $29/tCO2.” (Stern, 287) The report recommends a real CO2 price of $85/ton CO2 equivalent. The $80/ton real price of CO2 advocated by the Carbon Tax Center is then consistent with both the IPCC and Stern Review estimates.

The $80/ton CO2 price signal is also generally consistent with the conclusions of the Inter-Academy Council of Arts and Sciences. As the Inter-Academy emphasizes, it is far more critical that such a price signal be certain and long-term than it is to mandate emission cuts year by year, as a cap would do. As they write in their recent report, Lighting the Way: Toward A Sustainable Energy Future, “establishing in every market that there eventually will be an emissions price – in the range of US$ 27-41 per ton of carbon dioxide equivalent – is more important than establishing exactly the number of years in which such a transition will occur.” (Chapter 4, 131) The Carbon Tax Center’s policy would put the price of CO2 in this range over a period of three or four years. It would then continue to ratchet up the price of CO2 as the transition costs to clean energies decreased alongside the renewed incentive for the development and deployment of such technologies. These reduced transition costs would act to mute the economic costs of further CO2 price increases.

It is notable that all three reports, reflecting the consensus of the scientific community, determine that there is a clear threshold price level necessary to induce widespread clean technology development. Such a price level is far from guaranteed under a cap and trade system, where prices can exhibit significant volatility. Under the Chicago Climate Exchange for example, the largest traded market in the world for greenhouse gas emissions allowances, the price per ton of CO2 has fluctuated between $1-7 over the past five years since its founding. This falls $13 below the lowest recommended level mentioned in the Stern Report, IPCC or the Inter-Academy. Such a low price level per ton does not make clean energies cost-competitive, nor does it provide the necessary incentive to prevent harmful anthropogenic climate change. A carbon tax shift guarantees price-competitiveness for renewable energies.

It is estimated that in the long-term carbon dioxide will need a price per ton of at least $30 to make the vitally important technology of carbon capture and sequestration (CCS) cost-competitive. This is no small matter. As Stern notes, without CCS the world will need a “dramatic shift away from existing fossil fuel technologies” (Stern, 368). With atmospheric concentrations of CO2 already at 380 ppm, and almost certainly to reach at least 450 ppm in the coming decades, some scientists say we cannot reduce concentrations below 550 ppm without carbon capture and storage. Given the pervasiveness and entrenched interests of coal producers in both the United States and emerging economies like China, it is unlikely any mitigation legislation could move forward without meaningfully incenting CCS technology.

Dr. Klaus Lackner, Professor of Geophysics and Director of the Lenfest Center for Sustainable Energy at Columbia University, estimates the long-term cost of capturing and storing CO2 to be at or below $30 ton. He has pioneered a technology that can suck CO2 out of the air and store it safely underground in an inert solid form. As he comments, “With off-the-shelf items we have right now, I can drive the cost of CO2 capture from air below $100 per ton of CO2. And I feel that, if you pursue this longer, the ultimate end game will be below $30 per ton of CO2.” (http://www.pbs.org/newshour/bb/environment/jan-june06/globalwarming_06-08.html) If his forecast proves correct, a real price of about $80/ton CO2 makes widespread deployment of CCS a no-brainer. If CCS cost reductions prove harder to come by, $80/ton CO2 makes carbon capture technologies essentially cost-competitive at current prices. The Carbon Tax Center’s plan provides the necessary incentive for the deployment of CCS under either scenario.

The bottom line is that an $80/ton long-term real price on CO2 reflects a broad scientific consensus. It is the level needed to incent the critically important long-term deployment of carbon capture and sequestration technology. Without CCS, hundreds of new coal plants in developing countries will pour tens of billions of tons of CO2 into the atmosphere in the coming decades. Without CCS you will be ignoring 55% of current CO2 emissions in the United States. CCS is a game changer. With a cap system there is no guarantee, to firms or developers or society, that CCS is an investment that will pay off. At an average price of some $4/ton CO2, like we see in the Chicago Climate Exchange or the European Union, it would be much cheaper for energy providers just to purchase allowances (or not comply) than retrofit plants with carbon capture technologies.

A tax shift is not just better for the climate and emerging clean technologies than cap and trade, it also offers the greatest potential for political compromise. These political strengths were on full display during the recent U.S. Senate debate of the Liebermann-Warner Climate Security Act. Critics of the Act correctly pointed out that the cap and trade system represents an over $4 trillion tax increase, as about 50% of the revenues raised over the next 40 years via auctioned permits are kept by the Treasury.

Add on a “safety-valve” provision (which would put a price ceiling of about $12-22 per ton CO2 via the government releasing (worthless) permits as necessary to maintain the ceiling) there is no clear price signal for carbon capture and sequestration deployment, or solar for that matter. Additionally, with a safety-valve market participants would be forced to purchase and trade permits that don’t even maintain the stated emissions reduction goals, as they are above the cap. Throw in the potential for massive volatility, and it is unclear what the adjustment and abatement costs for regulated firms will ultimately be under a cap system. And this uncertainty will only keep more clean energy capital waiting on the sidelines. As the Wall Street Journal points out, The Climate Security Act would represent the largest income redistribution since the advent of the income tax. With a tax shift from income or labor onto carbon this potent and effective argument against tackling global climate change disappears overnight.

Additionally, by returning the revenues of a carbon tax to the private sector, foreign companies that do not yet have to similarly comply will not gain a competitive advantage as domestic tax levels will remain unchanged. Such concerns could also probably be offset with WTO compliant (particularly GATT Articles 3, 11 and 20 - paper I wrote on this) cross border adjustments (tariffs) for countries that have less stringent standards than the U.S. This however would lead to long and unpleasant arbitration and probably result in retaliation by large U.S. trading partners for years to come. The fact is that with a meaningful price on carbon the United States will see huge new economic investment and growth. Jobs and capital will flow to areas like direct current transmission lines, so called “smart grids” that allow consumers to sell clean energy back to utilities via feed-in tariffs, carbon capture retrofitting, and proven renewable energy sources, among many others. Once it is apparent that a revenue neutral price on carbon is a win for the economy, the environment and national security, other countries will not be able to jump on the bandwagon fast enough. With SO2, ozone and particulate pollution it was either the EU or U.S. who first led and lesser developed countries, like China and India, who soon followed. The same would happen if the U.S. led by putting a real price on carbon. The opportunities stare the United States in the face.

The CTC’s plan has the science right. It is consistent with every major international consensus report on the economics of climate change. It is consistent with the incentive needed for critically important carbon capture and renewable energy technologies. It is revenue-neutral, unlike the fatally-flawed Climate Security Act. And with the potential for commensurate tax offsets, ranging from corporate to personal income taxes, to the FICA payroll tax, to straight dividends returned to every household – it offers a tremendous opportunity for both increased economic efficiency and political compromise. Oh yeah, and it could save the planet too.

casinos and Buffet "vouchers"

I love how casinos like to all rush up to you when you're gambling with those "free buffet vouchers." Something tells me this isn't all that it appears to be, which is unadorned pure beautiful niceness. I tell you what tho after I've lost absolutely everything in craps making a two foot sno cone next to a giant waterfall in the basement really cheers me up. There has to be something in it for them right? Like why would casinos wanna cheer me up? What's in it for them anyway? How can they possibly afford this, and why has no one looked into this more? I mean free, all-you-can-eat buffets are freakin' expensive. I know from when I treated myself to Izzy's after graduation. Goodness, I mean like most buffets it was the only meal I had that day and it still busted my budget. I'm not sure exactly what's going on here, or even generally. But in the meantime I'll keep thinking about it over my mountains of ribs and sweet delicious spring rolls.

how bad i suck at writing: a case study

Dingledoodies

“New record to northwest!” Guy shouted at the bottom of the off-ramp. “Nine minutes!” he yelled over his straining two-door Mercedes as he weaved through traffic, barely missing oncoming vehicles and flying by cars at sixty on a downtown street. He merged back on after picking up Chris and took the bridge at over a hundred, screaming up the interstate and passing a dozen cars at one intersection. He’d gotten pulled over last week, but that might as well have been ancient history. With the bass rattling and his two-door floating past entire city blocks in a blur of head bobbing and grinding clutch, it felt like a real modern day adventure. Like he and Chris were a pair of fearless pirates patrolling the sterile commercial lanes, flashing their silver teeth and sharp swords to whoever dare look. They hit a jam merging north and a jeep was free riding past the gridlock on the shoulder. This was exactly what they were looking for.
“Huh, who the fuck does this guy think he is?” Guy mumbled and darted out, riding hard up the jeep’s bumper, gunning the engine until he thought he might smash into it, slamming on the brakes at the last possible moment. Taunting. Daring him. Like a matador obsessively swooping his red cape, he set up the kill. The middle-aged man wore a cowboy hat and sang off-key to top one hundred country. They paused just long enough to look him dead in the eyes, grind their teeth and yell, “nice hat fuckface!” It was so invigorating to see such a genuine response in another human being. You can’t fake fear, you can’t hide fear, it is the base emotion, it equalized everyone- a middle-aged cowboy, two college punks, a financial planner - fear was a language they were all conversant in. Chris and Guy laughed riotously and flew through five lanes to clear the gridlock. They were indomitable, reckless, daring – in a world bursting with abstraction, status and subtlety, it was the truest thing they knew.
They sailed into the park in minutes, cursing their way through the rocky, beer bottle-laden path towards the waterfall, feeling gaunt and strong, their skin caked in salt from earlier exertions. Guy glanced at Chris like he always did, like a piece of trash, but one he would nonetheless indulge, if only for a few weeks as his latest kick. He shoveled a big stack of chips onto his tongue and bent his head to the side in a big grin, “Umm, barbeque or sour cream? I don’t know. Barbeque’s so good, classic, but sour cream goes down, so smooth. It is filling!” It was a toss-up, a true intellectual quagmire. “Hey!” was always how he launched into his next manic musing, “you wanna get Mad Dogs tonight, put jollies on the bottom, Mad Dog it up tonight?”
Chris smirked as they saw the falls gushing onto the boulders ahead, a scene that had probably been just like that, undisturbed and pristine, for the last ten thousand years, “are you fucking serious? It’s OE times tonight at Glouchester.”
“Right, right,” Guy sputtered as he tossed the chips and his shirt onto the bank and straddled the rope tied to the tree roots above and swung out over the water, releasing just when it looked like he might smash into the opposite rock wall and down to his death. They joined the crew of locals – teenagers chain smoking on the side, sliding dangerously down the slippery rocks on their Vans or finding a new incline to gator off. Always pushing the limits, feeding off the inevitable energy that builds in groups. Total freedom is scary. Guy gave a guttural scream and sat in the air for seconds, his sinewy body screaming towards the chopping waves below, his eyes nearly popping out of his head.
All the hours of grinding work, bombing through the woods of Northwest, humping the hills of the park in the scorching sunlight, plastering a smile on for hours at a register, it all built up in their bodies like a chemical dependency. The best parties are spontaneous but inevitable - the momentum of work and routine slamming violently against the hard contours of debauchery and indulgence. Guy leaned against the kitchen sink in his torn jeans, sideways generic tractor hat, already slurring his words. In the other room a sedate group played menace to sobriety to its film counterpart, while Chris and Guy just tried not to fall over onto the filthy linoleum kitchen floor.
“So, where do you work?” Guy could be textbook charming when he wanted.
“Abercrombie,” the girl practically whispered, looking off at the suddenly engrossing sliding glass door off the porch.
“That’s cool, cool,” Guy smiled and threw a ping-pong ball into a red cup to the sound of muffled cheers.
“I also do the theater here,” she added.
“Ah, no way, that’s crazy, I gotta buddy who’s gonna be filthy rich in that stuff man, he’s got this screenplay all lined up,” he kept his tunnel vision on her for a second and laughed at how ridiculous it all was.
“Rad, my grandfather is in film, he’s on a first name basis with Spielberg,” she paused to watch her friend in apparent slow motion grab Chris by the throat and push him against the wall, wailing, “I’m not retarded! Take it back!”
Guy burst into laughter as Chris reflexively karate chopped her arm down in genuine astonishment, already forgetting what it was he had said.
“Hey, let’s go, alright,” his new friend said to her enraged companion.
Guy was sad to see the interesting brunette go, I mean she practically knew Steven Spielberg and he still had a few minorly charming things to say.
“Hey, nice meeting you,” she said while wrestling her belligerent girlfriend out of the kitchen.
“Yeah, yeah, you too,” he sputtered and gave an epic, reconciliatory smile to the ceiling fan twirling above.
After getting a pseudo-tour of the house, equipped with all things classically college male - including an impressive full-size Marilyn Monroe doll, stripper’s poll and a bar that would make most restaurants envious - Guy concluded it was best to get out of the house as quickly as possible and sit in a ball on the curb with his head in his hands, shivering in the breezy summer night.
The bass line bounced back and forth between his temples, “Cause I’m Mike Jones. Who? Mike Jones, the one and only, you can’t clone me. Got a lot a haters and a lot of homies some friends and some phony.” He mumbled it over and over in his broken spinning head, and when the officer showed up, he asked him if he knew the rest of the lyrics. Unfortunately, he said he didn’t.
“How you doing there pal,” the policeman stated, shining a flashlight over him and pulling out a notepad.
Apparently he didn’t appreciate the lyrical genius of Mike Jones altogether.
“Super, real good,” and he got up to stumble over to the ditch and fill it with his vomit.
When he got back, Chris was already there, laughing at the stern, card-board figures of the officers as they probed for IDs and let the entire party in the house flee through the back porch.
Guy looked up into the officers’ eyes and saw any manner of authority figure gazing back. His father. His coach. His adviser. He could see the officer thinking, perhaps replaying the days long ago when it was him shivering on the curb, crying in laughter. Chris pleaded to walk the line, “please officer, really, I’m a champ, please!”
“Have a good night guys. And get back inside, it’s cold out here,” the cop said, falling into the warm patrol car to the sounds of dispatch.
Guy and Chris watched the car speed down the black, desolate tree-lined neighborhood onto the next call, and stood up, and then instantly sat back down, laughing huge riotous laughs, shattering the quiet summer night with their shrieks.


* “Dingledoodies” is attributed to Jack Kerouac and Mike Jones reserves all rights to his lyrics

"Hey, Check Out my Site!" Says everyone, but seriously, check out my site at ZipBird.com

ZipBird.com is a free site where you can create interactive communications pages for your groups and events. Other people can then sign up for these pages to get automatic email, text message or voice message updates when you have events near their zip code. It will also let you send out updates to your fan base on these platforms whenever you want. Each page lets you control what mediums and timeframes you prefer for that group. So basically, information you like will come to you - automatically! We're working on adding much much bigger features, but there are a few i$$ue$ in the way at the moment if you know what I mean.

I'd love to get a text message automatically when the latest indie band I love is in town or an author I like is having an event.... There, you heard my plug. Happy?

Let's Do Something About Climate Change - But Let's Get it Right

10 Reasons Why a Tax Shift is Better than Cap and Trade

By Wyatt Boyd, The Earth Institute at Columbia University

1) Command and Control versus Market Forces. A cap dictates emissions levels and creates price uncertainty. With a safety valve provision (the government will release as many permits as it takes to get below a price ceiling) it completely loses the so-called “guarantee” of emissions reductions. Then it’s just like a tax, except more expensive because of the administrative and regulatory costs. A carbon tax gives price certainty and allows the market to do what it does best – allocate resources given complete price information. In the SO2 market, permits reached prices excess of $1,000 - do you think a cap and trade system will be accepted without a safety valve? Yet with it you can imagine a scenario where firms and states are paying for permits with absolutely no real value (they're above the cap) which is also unacceptable, and expensive.

2) A cap and trade system is a tax hike, while a carbon tax, ironically, is not. With a revenue-neutral carbon tax, money could be returned to taxpayers in two basic ways. Either a check could be cut and mailed to every taxpayer, similar to the petroleum fund in Alaska, or the amount raised in carbon could be offset in payroll and income tax rates. Either way the money will go back to the people and the overall tax burden will not increase. Does Liebermann-Warner have a provision to return money to the taxpayers? No. It will create scarcity in the carbon market, thus price increases that all Americans will have to face – with absolutely no relief.

3) Windfall Profits. Initially in Liebermann-Warner, over 70% of the carbon credits are handed out, for free, to applicable firms. Assigning private property rights to a current public good and then handing them out has a name – windfall profits. A cap and trade system will essentially give the largest and most polluting firms billions of dollars in new assets and value on their balance sheets. This creates distortions in the market and perverse incentives for companies to support a cap and trade system. And then when they do auction off the allowances, the Treasury keeps about $5 trillion of the $6.7 trilloin generated over the lifetime of the Act. It should be revenue neutral, like a tax shift would be.

4) Traders Bonanza. A cap and trade system would mean a huge new overnight business for traders and brokerages all over the world. As the traders say, volatility is valuable. It allows arbitrage and profits. A huge push for Liebermann-Warner has nothing to do with the environment, national security, or the economy – but solely the ability for traders to make a healthy percentage profit on each and every carbon credit trade. If that sounds expensive it’s because it is. As Mayor Bloomberg (who knows something about Wall Street as he only built its backbone, or terminal) said about the costs of cap and trade versus taxes, “if anything, they will be higher under cap-and-trade, because middlemen will be making money off the trades.”

Additionally, oil executives have recently testified that the “true”, supply-demand determined, price of oil today is about $60 per barrel. This makes sense considering Saudi Arabia alone has 1.8 million barrels a day in spare capacity and U.S. refineries are only operating at 85% capacity. There are over 2,000 federally approved drilling permits in the U.S. representing over 30 milion acres of land that are currently undeveloped. It is not because of scarcity that prices today are in uncharted territory. A full half or more of current prices result rather from speculation and irrational exuberance. When one long position pays off, it can create a stampede of similar positions and upward price spirals that further incent a long (call) position – a bubble. Do we want such speculation to extend to all carbon-based sources via a cap and trade system? Ironically, rising gas prices make a revenue neutral carbon tax less popular, when in fact it is the system most likely to control price surges that occur on the futures market and provide greater ultimate price containment.


5) Price Threshold. Carbon has a real (currently external) cost, and there is a critical cost needed to provide incentives for large-scale deployment of technologies like solar or carbon capture and storage. According to Sir Nicholas Stern, the IPCC and the International Foundation for Science, it’s around $30/ton of CO2. Setting a cap and having price volatility provides great uncertainty as to whether this price point will be reached. For instance, the Chicago Climate Exchange, the biggest cap system today in the world, prices carbon now at about $4/ton – not even close to providing the necessary level of incentives to combat climate change. There is a “tipping point” for renewables and new technologies to be deployed at scale and it demands the price certainty only a tax shift can give.

6) Efficiency. A tax shift from income and labor onto carbon produces a more efficient outcome via reducing climate change emissions and increasing productivity. Providing more incentives for good things (like income) and less for bad things (like greenhouse gases) results in more of the good and less of the bad, which is better for everyone. Mayor Bloomberg summarized it well in a recent carbon tax endorsement speech that can be found at http://cityroom.blogs.nytimes.com/2007/11/02/bloomberg-calls-for-tax-on-carbon-emissions/



7) Non-Partisan Congressional Budget Office Findings. The CBO’s recent report “Policy Options for Reducing CO2 Emissions” (http://www.cbo.gov/ftpdocs/89xx/doc8934/toc.htm) concludes a carbon tax is up to 5 times as efficient as a fixed cap system, writing: “A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement.” This is largely because a tax lets firms smooth out their investments in clean technologies over time, rather than being legally forced to do it in mandated timeframes courtesy of a cap system.

8) Politically Possible. British Columbia is going to implement a tax shift from business and personal income to carbon starting in July. French President Sarkozy has endorsed a revenue neutral tax, saying "We need to profoundly revise all of our taxes...to tax pollution more, including fossil fuels, and to tax labour less." This is politically doable. (http://afp.google.com/article/ALeqM5gx9Wyuo7XJiydxsqseJmVdX3-MoQ)

9) Regulation and Litigation Nightmare. If Liebermann-Warner is passed it will take years for the EPA to draft regulation and settle an avalanche of suits from firms seeking exemption. Given the EPA’s current denial of California’s emissions waver under the Clean Air Act, I don’t have to tell you how arduous it can be to get any agency to enforce the law – even if it’s clearly in their purview. A shift in the tax code would be a very simple and unambiguous piece of legislation and could be implemented years before a cap and trade program even cleared the courts. Where does the government have more competency than in tax policy?

10) The Dean of Climate Change has spoken. In the words of Former vice-President Al Gore in his Nobel speech: “And most important of all, we need to put a price on carbon – with a CO2 tax that is then rebated back to the people, progressively, according to the laws of each nation, in ways that shift the burden of taxation from employment to pollution. This is by far the most effective and simplest way to accelerate solutions to this crisis.”