Just pokin' around

Facebook just announced their new messaging system, which is impressive. It integrates SMPT, SMS and IM into the regular Fbook message system to create the first ever "social inbox". Facebook develops truly elegant, robust features and boasts the most widely used API on the face of the planet, both for commercial endeavors, as well as those of the less ambitious kind. I think this will become very popular and only increase their market share in the socially targeted ad space. It also allows them to test approaches to find traction in the undeveloped market of SMS commercial content, something that has absolutely huge upside, but remains an essentially open market. However, it's success will not be due to any significant new tech or product innovation on their part. It will be because of Facebook's user scale and penetration into the mid to late adopters market. My Gmail account can already email, chat, text (you have been able to do this since the advent of the email gateway) and recently, even call people. So technically speaking, Google is on the leading edge here, and with their VoIP, still ahead. But Facebook, by maintaining a minimalistic design conducive to developing brand trust and maximum accesibility, has by far the more consumer friendly iteration. And they certainly play the PR more effectively. This should be no surprise, it's in their DNA. It's not as though Facebook invented the social network, or even the Facebook, a staple of universities across the country up until a few years ago. Their strength is a team with a gift for building simple, clean, engaging UIs that make all others' seem unnecessarily complex and cheesy by comparison. Myspace feels like the used car salesman of social networks, assualting the user with pop-ups and pushy promos; Facebook is the new Volkswagen dealer, it's just good, effective engineering (and to complete the analogy, LinkedIn is clearly the Beamer dealer of the bunch, eschewing 'friends' for 'connections'.) The bottom line is that no other potential provider of integrated messaging has the scale or brand of Facebook, because of their UI. Fbook messaging should be a solid double, broadening their revenue channel significantly while challenging the established market, but it lacks the true innovation to be a home run.

What % of businesses fail because of an inability to generate a worthy idea and execute it, versus tax rates? Would be good study.

The Age of Anxiety

People are losing less and less appreciation for the everyday, for the moments that make up their very lives, constantly aware of the supposed opportunity cost of their present circumstance courtesy of the constant array of social and emotional signals from an ever proliferating cast of the usual digital suspects. You can see the boredom, the sense of embarressment for their own common banal lives, right in their eyes. The sad part is that the lived life is the one thing that can never be replicated, reviewed, rebroadcast, rendered- that all the video and media in the world can't begin to replace the real moment, with people, things, emotions, attention and care. This makes me hesitate for a moment as to whether I would temporally prefer the Wild West or the Wide Web.

Haha, as an addendum, apparently Microsoft agrees with me. At least somewhat. I'm not sure I get the argument that because phones have become so intrusive, you should buy another phone, but I get the point.

Ingredients for round two of economic growth policies:

1) Increase the H-1B visa-limit ten to twenty fold. These are non-immigrant visas that allow employers to essentially cherry pick the best and brightest from across the world, especially in engineering. The limit is currently a ridiculously low 6,500 per year. These highly skilled positons are critical to developing private sector employment and growth.

2) Repurpose $5B from unspent TARP funds and start a revolving government venture fund to seed startup investments. The government could invest anywhere from $10K to $1M in promising businesses and take a flat 25% equity stake. 10 experienced fund managers could be recruited as SES (Senior Executive Service; the highest level of career government employees, who are eligible for bonuses for good performance) to serve on a board to approve applications and provide oversight. Future cash flow from those that succeed would pay down the deficit. The fact of the matter is we live in an information and service-based economy. Unemployment insurance, State aid and new highway spending help with cyclical unemployment, but structural employment is best created with new, sustainable, innovative companies.

3) Enact a larger follow-on investment in next generation transportation. The stimulus bill had a measly $10B for high speed rail. Follow-on with another $50B to buy a lot more cars, build more tracks, and connect major population centers. Through the multiplier effect and contracting a lot of this out, these funds' employment effects could be amplified and drive permanent private sector employment. The U.S. is falling behind in the efficiency with which it can move goods and people, prerequisites for sustainable growth in a global economy. (*Postscript: the White House just announced a $50B transportation package to stimulate the economy.)

4) Revamp, rebrand, and rerelease the Public-Private Investment Program rolled out last year. This program is designed to increase the market for banks' bad mortgage backed securities, as well as mortgage related loans. (More details here - http://www.financialstability.gov/roadtostability/
publicprivatefund.html). Unfortunately, a specific design has stalled and the program has been delayed. The terms and capital levels should be reevaluated in order to make them sweeter for private partners, and then fund managers hired to scale this up and start the auctions.

5) Tax credits/rebates based on purchases. The idea here is to combined tax cuts with smart purchases that will increase aggregate demand. I.e., invest in clean energy or buy an electric hybrid and get cash back, or hire people who are unemployed and get a payroll tax holiday. This would create a strong incentive for both immediate spending, and immediate hiring, while developing new markets. This would essentially build off the phenomenally succesful Cash for Clunkers model. That was one of the most impressive government-private policy team-ups in recent memory and I'm surprised how quickly it has faded from policymakers' collective memory.

6) Reform the Payroll/FICA Tax to increase aggregate demand. Lower income individuals have a higher marginal propensity to consume than the wealthy. Poorer people also pay a larger share of their income in payroll taxes than the rich. In fact, some 75% of Americans pay more in payroll taxes than in income. FICA should be exempted for the first $20,000 of income (thus increasing spending the most) and the current cap on FICA should be raised from $106K to more like $250K. Warren Buffet has had a wager going for years for any executive who can prove they pay more in payroll taxes than their secretary. So far, no takers.

Reverse Time Inconsistency

Recently approval ratings of Barack Obama (whether President or Candidate) have dipped into the negative terrain for the first time since polling has been conducted. Much has been made about this in policy circles and the media, and as usual I think there is way too much trying to be read into the tea leaves. Sometimes a storm comes through and the wind tussles the leaves. Then everything carries on as usual. The tree still stands, the storm comes and goes. As the President said, however less metaphorically, "I have my own pollsters. It's not like I don't have pollsters." In other words, he has been perfectly aware at every decision point, at every sensitive political juncture, of the polling costs and benefits. And the President's pollsters practice the calculus of surveying with a degree of art and complexity without compare. They could provide a range of estimates for what decision ABC will do for the voting proclivities of 80 year olds with a mild head cold this week who live in Duluth and prefer to watch Cold Case instead of Law and Order. The issue just may be that weekly, or quarterly, or even annual polling may not be the correct timeframe (or tool) to measure the President’s accomplishments, or weigh his likelihood for reelection in two years. This comes from the economic principle of time inconsistency.

Wikipedia (I have always wanted to start a sentence this way) defines time inconsistency as:

In economics, dynamic inconsistency, or time inconsistency, describes a situation where a decision-maker's preferences change over time in such a way that what is preferred at one point in time is inconsistent with what is preferred at another point in time...One common way in which selves may differ in their preferences is they may be modeled as all holding the view that now has especially high value compared to any future time. As a result the present self will care too much about herself and not enough about her future selves.

And this concept applies to essentially all of the President's accomplishments. Except in reverse. Rather than the President offering us tax cuts for a year that may benefit him in the short term, but create still more debt in the long term, he has done the complete reverse- sacrificed his short term political approval rating for long term policy investments that will likely yield approval rating dividends over the years to come. Rather than giving us candy now that will make us like him for the immediate future (but perhaps resent him later when we get a stomach ache) he has made us take our medicine. The benefits won't accrue for some time, but when they do, we will realize what foresight he had.

It will take years for financial regulatory reform to go through the rulemaking process. For specific capital reserves to be decided and set aside. For derivatives to see the light of day. Economic crises happen every 10 years or so historically, so preventing or mitigating future ones is on a time scale wholly irrelevant to the election cycle. Public exchanges from the recently enacted health reform law (of private plans mind you) will not even be launched until 2014. Then it will inevitably experience some growing pains. Millions of people may not see the benefit for several years. The deficit effects won't really come on strong until 2020. EPA's efforts to begin regulating greenhouse gas emissions in 2011 will likely take years to refine and get through legal challenges. Vehicle corporate average fuel economy improvements (which haven't been increased since Jimmy Carter) will require us to buy cars with a $1000 greater sticker price. But they'll save us $3,000in gas, and untold environmental costs, over the next 5 years. All of the costs (in money and time and anxiety and burden) occur now. The benefits are in the future, a future which people, even rationally acting ones, heavily discount. So it is no wonder the President's approval ratings are dropping. But rather than be a signal of distress, I think it might just be a measure of what real political fortitude looks like.

The public may doubt Barack Obama now. But if the President achieves no more major policy victories (say in Energy/Climate, Immigration or Social Security) I think he will still be one of the most popular former Presidents in American history. Yes, up there with the likes of his political hero Lincoln. I mean, we've already run this experiment. Social security and Medicare are two of the most beloved and untouchable programs in government. But in their day too they were subject to the short term vagaries and tremors of confidence that polls are so astute at capturing. If politicians had only listened to the polls in the 1960s we probably wouldn't even have them. Sometimes, leadership means making people do what is best for them, even if it hurts in the present.

I met the incomparable Elly Jackson. What a fuckin' baller. We talked about her favorite word (cunt) and I gave her an Orangina label from a juice bottle. Nice hug too. What a badass.

So Predictable

This last Thursday the latest big climate bill predictably failed in the Senate. Not just failed, like didn’t get enough votes, or even couldn’t break a filibuster. No, it got pulled from the legislative calendar. There wasn’t even a single minute of debate before it came to a rather pathetic end, without so much as a self-satisfied “well, at least we tried” whimper. It’s rather funny though, if not delusional, how many pundits and green lobbyists talked incessantly about how this was going to be the time. And yet this is the fourth such failure, after the three previous failures in ’03, ’05, and ’08.

I mentioned that this bill had no chance to every green intellectual I know and the most common reaction was one typical of our era defined by non-stop Hope branding. They laughed me off as irrelevant, or at the very least unimportant. They talked about how the cap could be simplified to just the utility sector. They trusted blindly in the power of Harry Reid. All the while, the bill lost it’s only Republican co-sponsor months ago and didn’t have anything close to the votes. And the biggest giveaway of all that it had zero chance? There’s 2 BLEEPIN’ weeks left on the legislative calendar and they haven’t even voted on the Supreme Court nominee, the BP spill response, or any budgets. And it’s, rather ironically, hotter than hell in DC and everyone just wants to get mandatory votes out of the way and flee to their summer vacations. Even with a strong coalition and Presidential support, both completely lacking in this half-assed effort, the calendar itself doomed this initiative. Trying to tackle the largest environmental legislation in history one week after passing a two year financial reform effort, and two weeks before vacation is either a) greenwash- political campaigning or b) delusional and impossible.

I’ll use that very dangerous word again- hope. I sincerely hope that this town will think rationally for a moment. And rather than letting every staffer, lobbyist and interest group on the Hill insert their page into the next aspiring climate bill, that we use a little Econ 101. We won’t have declining emissions until we replace dirty energy with clean energy. And we won’t ever have clean energy unless it is cheaper than dirty. And seeing as dirty energy can literally be scooped or dug out of the ground, and all amount of disaster and environmental catastrophe will never quell our appetite, and all the well-intentioned retrofitting and Prius rebates in the world will not reduce emissions so long as the world is growing, China and India are modernizing, and coal is abundant, the only way to achieve this is through altering the price of dirty energy. The equilibrium of supply and demand is determined by the price. Price is the only mechanism. And we wouldn’t even have to do anything- just put this gem of a bill on the calendar! 19 pages, no buy-offs, a clear price signal, how refreshing! http://www.govtrack.us/congress/bill.xpd?bill=h111-1337

To me it is obvious that those who have so strongly pushed for cap and trade meant well. Emissions targets, done the right way without too many offsets or free allowances, will reduce emissions. But it is just too complicated for most Americans or businesses to accept. And it tries to buy off so many groups that some will inevitably perceive themselves to be the losers and pose strong opposition, or throw some elbows at the trough to try and get theirs. A price is very simple. And it is equitable. Above all, cap and trade is a cynical structure. It seeks to hide the price increase of GHGs with a new name. “Cap and trade” is still a vague and confused topic to most Americans. The Greens know this, and they mistakenly think it will make it more appealing politically. How many failures must we endure before we realize this isn’t true? Will number four be enough? White House pollsters and media consultants explicitly told staff not to mention the climate change or price part, just green jobs. They've been saying fluffy, lazy stuff like this for a long time, and guess what, the White House wasn't any better served by it. Shit still didn't sell. If you're going to go out, why not do it at least authentically, discussing the issues directly. Their branding didn't help at all. Maybe a few of these slick 3 Blackberry toting, $5,000 suit NYC media types actually, gasp, don't know what the fuck they're talking about. Maybe they're overpaid losers, not the winners we always assume them to be. What the fuck do they know about policy, about climate change? And why would we purposefully play the American people. No. We should be as direct as possible.

We should just level with the American people. Do not underestimate them or try to hide the ball. Tell them we need to make clean energy more affordable and investment-worthy by making people pay for their pollution. And then tell them that this won’t cost them anything more, because we’ll rebate all the taxes right back into their bank account. This seems so obvious, but what any political pollster will tell you is that you can’t mention taxes. But what if we did? What if we had a straightforward debate on this? If the President laid out all the options for solving climate change- e.g. cap and trade, renewable portfolios, regulations, carbon tax or feed-in tariffs/subsidies. And then explained how a carbon tax is the best method. Why not? Because it makes too much sense.

Until then, R.I.P. cap and trade:

http://thebreakthrough.org/blog/2010/07/time_to_bury_cap_and_trade_and.shtml

Bloodless Revolution

I had a great Fourth of July. It's one of my favorite holidays. But it seems to be a holiday, really like all the others, where the real meaning and symbolism of the day is getting all but lost, the gulf between reality and those who celebrate it ever-widening. The Fourth seems to consist of tens of millions of drunk, or at least cheesily exhuberant revelers, apparently celebrating the spirit of violent uprising, independence, and bloody revolution with PBR, American Eagle and pre-made charcoal, and tens of thousands of gun-wielding young men and women squatting in the heat of the Middle East, gun in their hands, risking their lives for us, carrying on the original tradition in the most authentic way possible some three centuries later. But there is little in between.

DC on the Fourth is overtaken by the kind of people that proudly sport Americana striped shorts, bald eagle insignied button-up shirts, red, white and blue flashing sunglasses, and kids desperately looking for a party. Some like the kids I walked by on the way home, so desperate for a good time that they shoot fireworks at passerbyers. And we should celebrate. But I wish there was a little more substance to this tradition. Something that actually spoke to the principles America aspires to, and inteprets what the Declaration of Independence is supposed to mean twenty generations on.

Would it be too much to ask the Smithsonian to host a debate, or some intellectually relevant forum of any kind, every year in conjunction with their three day rock festival and nod to the fads of the year? It could be entertaining, not an academic lecture of theorists, but two popular thinkers in the public realm passionately arguing out something unqiquely American. Christopher Hitchens v. Malcolm Gladwell, Jeff Sachs v. Bill Easterly, Lou Dobbs v. Bill Maher, Tony Bourdain v. Alan Richman, Bill O'Reilly v. Rachel Maddow, Al Gore v. Jim Inhoffe, come to mind. To debate what it is we think freedom is, what America is today, why America is the greatest. What it means to be independent in a 21st century increasingly defined by anything but the nation-state, like online networks, international crises and global corporate financial meltdowns. To try to instill a sense, if only orally, of depth, substance, resistance to this day. To at least get the blood pumping a little more and not just the blood alcohol content. The fireworks would look that much more splendid if there was some tiny morsel of intellectual foundation for the day. They could just have it right on the main stage there, for like an hour. It would be fun, and meaningful. A little genuine appreciation and consideration to go with those nine hours of continuous drinking and grilling. Miller's ad of Ben Franklin, Thomas Jefferson and others break dancing with a bunch of bonnet wearing ass-shaking hoes while shooting canons is the perfect allegory. We may not even celebrate the spirit of this day, more force the day to conform to our current norms and compulsions.

I crossed paths with countless star-spangled drunk-ass revelers shouting "God bless America!" on the Fourth. That's great. But I didn't hear a single person articulate where America finds itself in this new ever-changing, less predictable, more competitive world. Precisely how America is so independent, and from what. I didn't see anyone in other words show that they love America and the countless who died for it any more than they love NASCAR or David Archelleto, in fact maybe that's exactly what they do love about America. I'm beginning to think it's because more and more of us have no clue. Revolutionaries, it seems, are becoming a species at risk of extinction, replaced by those who use their likeness to make a buck, or worship them, ironically in light of our forefathers' violent resistance to the very idea of a class of the earthly divine, e.g. the Crown, as a sort of God. I wonder what these revolutionaries would think of celebrating our independence with splendid demonstrations of submission.

See you in 2011 June, can't wait

"...now that the White House is open to alternatives to pricing carbon. "

Perhaps there's a shift in the way we're thinking about pricing carbon-

http://www.politico.com/news/stories/0610/38599.html

Maybe they saw the polls showing Americans prefer incentives to caps-

http://www.slideshare.net/Revkin/six-americas-study-of-climate-views

Research Note

News just came out that April was the largest U.S. trade deficit in almost a year and a half, putting the U.S. on pace for another $500 billion deficit like 2009. The current account deficit was larger still in 2008 at some $700 billion. There is nothing inherently wrong with deficits, so long as they can be financed with GDP growth. However, if they continue to increase, it could undermine international confidence as doubts linger about the seriousness of long-term U.S. fiscal and trade policy, or drive uncertainty around whether there is high currency risk via the U.S. monetizing the debt by printing money, reducing creditor's purchasing power. Add to the fact that as China grows in prominence over the coming decades, U.S. denominated assets and debt obligations may become less in demand. China will in all likelihood surpass Japan in 2010 as the second largest national economy and is on pace to surpass the United States by mid-century. The U.S. dollar may become the secondary currency for international trade in the long-term. In the short term though, correcting this imbalance could be achieved through the double prong strategies of reducing the fiscal deficit and promoting U.S. exports, thus creating jobs and reducing the need for foreign savings.

The current account deficit is a rough measure of U.S. economic competitiveness relative to the global economy. It is the difference between national saving and national investment, or the net of foreign reserves entering the U.S. economy and U.S. dollars going out. The U.S. buys more (dollars out) than it sells abroad (reserves in), financed mainly by foreign purchases of our debt. The biggest factor in this imbalance is the mutual dependence between the U.S. and China. China depends on U.S. demand for export growth, the largest driver of their GDP growth, while the U.S. depends on China to buy and roll over our debt, used in large part to buy their exports. Each needs the other, and so it is both an unsustainable, and self-perpetuating, cycle. Here are three things the U.S. should do to lower this balance and increase foreign demand:

1) Biggest long term priority should be innovating new products and exporting this trade advantage to the world. This would lead to some dollar appreciation, but the increased demand would create sustainable jobs and generate reserves. The biggest market here, both in terms of marginal return on investment and depth of demand globally, is clean energy technology and services. A domestic price signal on carbon would catalyze the U.S. economy to leap ahead in this area and close the trade imbalance as we export smart energy applications, concentrated solar, consulting services, wind turbines and other carbon neutral or carbon negative technologies abroad. The U.S. could get ahead of the curve by adopting this price signal before other countries.

2) In the shorter term, bring the fiscal deficit down.

3) Continue to make progress with the U.S.-China Strategic Dialogues, nudging China to stop suppressing their currency to promote U.S. demand, and to create a stronger domestic credit environment and social safety net to prevent cash hording and exorbitant savings. Freeing up Chinese savings for consumption would help decrease the net trade imbalance between the two economies.

Dear Mr. President

1600 Pennsylvania Ave. NW
Washington, DC 20500

Dear Mr. President,

Thank you for acknowledging the need for a new, comprehensive national energy and climate change plan. It’s refreshing. This was a pillar of your campaign and a main reason we supported you. As the Senate prepares to consider the American Power Act we urge you however to think bigger about the energy sources that can power this nation, and job growth, while not imperiling future generations. We urge you to support a fee-and-dividend framework in lieu of the flawed cap and trade.

Political sweeteners for specific industries, such as coal, natural gas, ethanol, utilities, and old nuclear, are not examples of such big thinking. Yet the American Power Act is chalk full of them. It is also full of emissions goals. The fact is you can set all the GHG abatement goals you want, but so long as you keep permitting OCS drilling, new coal plants, or tar sand pipelines and oil shale mines with Canada that will burn and emit for decades, if not centuries, with no proven capture technology, there is no realistic pathway for such reductions.

The American Power Act also provides billions of tons of unverifiable GHG offsets/exemptions some 40% above the total cap. In addition to significantly diluting any potential GHG reductions, such offsets create all manner of perverse incentives. Some examples include encouraging the creation of pollution just to sell the rights to destroy it, or enabling someone else to buy energy inefficient goods because one entity emitted below the cap, or giving an economic incentive for accountants, companies, and governments to inflate future emissions projections to claim higher current offsets, or encouraging dictators to over report their populations or suppress their economy to generate surplus credits to sell to the rich world. These perverse incentives just further increase the likelihood that U.S. goals will fail like those of the U.N. set under the Framework Convention. Japan for instance made the goal of a modest 5% baseline reduction under Kyoto, and even with significant investment, honest effort and a stagnant economy, actually increased emissions 10% over that period.

Goals are at best guiding principles, not self-executing mechanisms. Goals are also endless excuses for haggling and bickering among nations over who gets the rights to emit GHGs and under what inexact assumptions (basing it on past emissions benefits the developed world, basing it on current emissions benefits emerging economies, basing it on future emissions benefits poor economies; there are many such abstract issues of equity in originating and distributing emissions rights). A primary reason the world still lacks a climate treaty 20 years after the United Nations Framework Convention on Climate Change was ratified in 1990 is because a top-down "all at once" global regime requires asset distribution that inevitably hurt certain countries ex ante. Climate change also represents a tragedy of the commons, where no one stands to lose in the status quo, but there are potential private gains from assigning property rights to these public goods, and so a strong incentive for hording, gaming and free-riding. The most effective way to lead in such a case is not by decree or simultaneously negotiating with dozens of countries. As the UNFCCC shows, and theory supports, there is not necessarily a rationale to expect such an approach to ever work. The best way to lead is by demonstrating the gains to be made from clean energy investment at a domestic level. Once you show the gains to be made by a more efficient tax system (by shifting taxes from socially beneficial things like income to costly things like GHGs) there is a strong incentive for similar regional and global reform, and increasing demand for U.S. GHG technology exports.

Goals are nice but meaningless without incentives, such as a fee-and-dividend approach. EPA has estimated the marginal utility value of CO2 at $21/ton. Other organizations have estimated it to be more in the $30-40 range. If you introduced a carbon tax below this rate that gradually increased above it, offering predictability for industry and business, and returned 100% of the revenue to households, via for instance quarterly checks, you would have a real incentive and economic mechanism for emissions reductions and clean energy investment and demand- much more so than any top-down “goals”. You would also have a majority of lower and middle income families that emit below average, who really love getting more money back from the government than they pay in energy taxes. Not to mention huge demand for new labor to renovate the nation’s aging energy infrastructure. Fee-and-dividend would be a strong, tangible signal for global cooperation on the grounds of self-interest, while maximizing employment effects by neither increasing the tax burden nor assigning property rights imperfectly.

We know you know all this. And we recognize fee-and-dividend is not currently as politically tenable as the opaque and ill understood cap and trade, a tax which provides widespread exemptions, escape valves, and a huge new secondary market for Wall Street to game, inflate, and ultimately distort. Do we really need to go through this again with GHGs like MBS? Do you have that much confidence in the SEC and CFTC who let a simple pyramid scheme go unchecked for years to parse what are real and fake emissions, or prevent a speculative bubble in a brand new market they have little experience with? Mr. President- scrap the cap, see the fee.

As the legislative process proceeds, hold off on new OCS and Arctic permitting. They contain a small amount of reserves compared to either U.S. demand or global reserves, yet spews billions more tons of CO2 into the atmosphere for the next 150 years for your children and the countless unborn to reckon with. The paleoclimate record already suggests we are near committed to a 2 degree centigrade global mean increase, overwhelming natural temperature forcing nearly ten-fold.

Three policy recommendations:

1) Enact a revenue neutral carbon tax, i.e. fee-and-dividend. Carbon equivalents could initially be taxed at a low level to provide an early signal for the market to begin transitioning to a carbon constrained world. The tax could begin in 2012 at $10/ton (about 10 cents per gallon of gasoline) and increase over time as a multiple of inflation. All revenues must be 100% returned to the taxpayers, a central element for both economic efficiency and fairness. Each legal adult resident should get an equal share via electronic transfer to bank accounts or debit cards, with half a share for children up to two children per family. Opposition will attack you no matter what you do. Framing this as a multi-hundred billion dollar tax cut to stop global climate change and drive innovation and job creation is a potent (and true) counter-argument, one that cannot be made with cap and trade. WTO compliant cross-border tariffs could be applied at the port of entry on imports that do not meet this requirement in order to prevent free-riding and emissions leakage. Allowing each nation to keep the revenues from its carbon tax will align the individual interest of sovereign governments with the common interests of the global community. China for instance seemed open to strong incentives for clean energy at Copenhagen. Instead they were presented a cap on future emissions based on the past emissions of Europe and the U.S. They not surprisingly rejected it. The world will listen to incentives that create and drive new markets.

2) Invest in and build a demonstration fast-breeder (4th generation nuclear or FBR) nuclear facility as a prototype for industry to study and scale up. These reactors can reduce nuclear waste nearly 100 fold compared to current commercial models, and can burn a much wider portfolio of fissile materials, including waste from current generation reactors (which we have centuries worth). Fast-breeder reactors also reduce the depletion timeframe of waste production from tens of thousands of years to hundreds of years, making storage vastly more feasible. DOE had a demonstration plant in the 1990s called the Integral Fast Reactor that was close to completion, but it was mistakenly cancelled/defunded in 1994 because of unwarranted environmental alarmism. Nuclear should realistically be 10-20% of the energy supply to provide reliable baseload energy. Great work being done here by Bill Gates and others: http://intellectualventures.com/Libraries/TerraPower/IV_Introducing_TWR_February_2010.sflb.ashx

3) Lease federal land parcels in the Southwest U.S. for the development and expedited permitting of concentrated solar plants (CSP). There’s ample solar forcing, cheap unused land, and green jobs would help the whole economy. The parcels could generate revenue via auction; these parcels and CSP would be quite valuable because of the fee-and-dividend. CSP is vastly more efficient than traditional photovoltaic systems and can provide up to 80% baseload reliability- more than enough to meet normal household needs. It would be cheaper to produce and buy with a gradually increasing carbon tax. Today CSP costs about $.10/kWh compared to coal at $.05kWh, which would imply a real tax of about $50/ton. Additionally, tax credits and land for the construction of next generation transmission lines are necessary.

Stop throwing money at every technology and leaky window in the country while not reducing the deficit in the process. Instead, set up clear rules of the road with a fee-and-dividend framework that would put many more people to work than fast expiring, temporary job-creating appropriations and let the market scale up clean energy. This will take some audacity.

Sincerely,
Wyatt Boyd

cc:
Rahm Emanuel
Lawrence Summers
Christina Romer
Peter Orszag
Steven Chu
Melody Barnes
Lisa P. Jackson
Nancy Sutley
Carol Browner
Timothy Geithner
Neal Wolin
Mona Sutphen
James Jones
Xav Briggs
Phil Schirilo
David Axelrod
Valerie Jarrett

Happy Friday

Just a few reasons why things are looking up for the U.S. Fiscal position (the largest single component of the American economy):

1) The economy is growing, jobs are being created, and tax receipts are growing as a result. Nearly 300,000 non-farm jobs were created in April. No one is saying employment levels are where they need to be, but they're trending in an encouraging direction. (http://www.bls.gov/news.release/empsit.nr0.htm)

2) Since February the federal government has been operating under Statutory Paygo, meaning any additional spending must be accompanied by an equal offset- it's the law. This combined with #1 will reduce the deficit. The President has also frozen all non-security discretionary spending for the next 3 years. This freeze is expected to reduce federal expenditures $1.1 trillion over the next 10 years. (http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf - Table 2 ; http://budget.house.gov/laws/CRS-stat-paygo.pdf)

3) Expiration of the Bush Tax Cuts. For individuals earning more than $200,000/year, rates will return to pre-cut rates- accounting for an estimated $678 billion over 10 years and further reducing the deficit gap. 39% of these cuts went to the 99th percentile of income earners, while the middle 20% of income earners recieved 8.5% (and under Obama will continue to). These cuts have caused the lowest level of federal tax collections as a share of GDP since 1950. When these temporary cuts are allowed to expire tax levels will not exceed those of the Reagan Administration. (http://www.cbpp.org/cms/index.cfm?fa=view&id=1811)

4) Healthcare reform. Officially this will reduce the deficit around $100 billion over the next decade of outyears and one $1 trillion the following decade (http://www.cbo.gov/ftpdocs/113xx/doc11355/hr4872.pdf). This is likely a very conservative scoring as it only accounts for direct cuts, not savings or efficiency gains, for example through the dozens of pilots it establishes to learn about cost control.

5) National Commission on Fiscal Responsibility and Reform (http://www.whitehouse.gov/the-press-office/executive-order-national-commission-fiscal-responsibility-and-reform). The President's Budget lays out a plan to cut the deficit in half by 2015, from 10% of GDP to 5%. The (very) long-term sustainable rate of deficit spending is equivalent to the economic growth rate, e.g. the ability to finance current borrowing with future growth in a non-zero sum fashion. The 50% reduction in the size of the deficit is an enormous accomplishment; the President's FY 2011 Budget released in February represented the largest reduction in the deficit in over 10 years. The previous Administration never proposed a budget that reduced the deficit, not one penny. Obama's budget reduces it over $2 trillion in the outyears, before throwing in the commission and likely the largest domestic policy reform in 50 years- healthcare.

Four papers i wanna write if I'm ever patient

Local Organizing in a Global World: The Marginalization of Bright-eyed Idealists
(Post-industrialization has largely worked itself through the developed world, this means more and more problems are driven by external forces fundamentally outside the control of communities or would be activists. An organizer in the Rust Belt today might do better to work in New Delhi. But what does this mean for the identity or prospects of the individual who wants to affect positive change?)

The Evolution of Real versus Derived Profits on Wall Street from 1970-2010
(This information is so proprietary- but I imagine the shift from primary to derived assets would be interesting. There is no normative judgment that derived or synthetic profits are bad, but it's a macro analysis I don't know that's been done. Additionally, a larger real asset base only potentially provides a broader base for structured income products. At some point though, productivity necessitates actually making something in the first place.)

Prisoners Just Want Community: Lessons in the Green Prisons Movement
(This idea of hardened criminals wanting to cut the pesticides out of the prison yard, or compost their food or install solar cells is very interesting. What motivates this? Boredom? Manipulation? Atonement? I assert that if prisoners had access to these programs in the first place they might never have committed crimes, as the green movement connects people profoundly not just with a broader purpose, but an entire community. Parole programs could incorporate these services into their programs as both service and therapy.)

Speed of Thought as Speed Bumps for Information Transmital
As the vectors of information delivery expand and accelerate now on a seemingly annual basis, the rate limiting step of our ability to celebrate or appreciate, yet alone digest, information may increasingly be our innate capacity to process such exposure. In 2005, the email checking and AOL searching of 2000 seemed pedestrian, and in 2010, the blogging and i-tuning of 2005 seems pedestrian compared to our tweeting and i-padding, and there's little to suggest it won't be the same in 2015- my guess would be in the direction of integrated devices reaching out to us, rather than passively responding to our requests, based on the many known preferences it has compiled from our routine requests, a sort of Amazon suggested purchases feature for all media across all platforms. Yet I find myself sometimes simply unable to make sense of everything I see before me, the children's book Where the Wild Things Are turned into a major motion picture turned into a digital dowload turned into an instant App on my i-pad, to watch on the side as I work an excel sheet and check my blog-feed. There is more that I want to watch and do, and am now capable of, than I could ever complete. In these moments the brain almost freezes akin to a hardrive. Which one to open? Which to prioritize? In other words, there may be a limit to how useful such devices may be, the rate limiting step being our thoughts patterns themselves.

P.s. - As Goldman Sachs testifies today, I have a hard time understanding the allegations and think the SEC's case is going to have a hard time (it was only voted out by 3-2). Goldman was selling income streams from insurance on mortgage debt (synthetic CDOs) to two global institutions that engaged in this all the time. Any transaction necessitates a buyer and a seller, the idea that these funds would go long by buying in assumes there is a counterparty that would go short. It's immaterial what Goldman thought of the deal, they are the market maker. The funds requested assets of a certain type to buy, Goldman obliged, and in the process consulted with individuals of varying perspectives. For someone to make money on long positions, there has to be another party willing to cover the positive spread if they are proven wrong, which would be the shorts. Our regulatory system is about 30 years behind the curve and needs to be upgraded, but this vilification of the bankers society collectively depends on for basic finance as well as investment finance can at times look like a modern day witch hunt, or the populist version of McCarthyism. I am no deep sympathizer with speculators, particularly in the non-deliverable commodities sector, but last time I checked people are innocent until proven guilty. Also, derivatives need to be regulated, but this can be done through registries, clearinghouses, or exchanges, or some type of self reporting. Why the fixation on exchanges? Most of these contracts don't even involve public entities, they should just report their balance sheet to the SEC/CFTC and be done with it, John Q. Public doesn't need to be able to Google their proprietary deals so we can hear a bunch of mindless quipping and potentially damaging adjustments to market confidence.)

Sit back and enjoy the show

There seemed to be at least two over-riding criticisms of the newly passed healthcare reform law:

1) It would not, contrary to official estimates, reduce the deficit, but rather add to it.

2) It would represent something more or less "un-American"- a significant expansion of government at the cost of free market choice and competition and a general ideological move towards socialism.

What I am perhaps most pleased about with this bill is that over the coming years, certainly the next 5-10 years, we can evaluate these claims with real world results and see who is right. We can test these claims, comparing Congressional estimates of cost with those of the Administration and the Wall Street Journal and Rush Limbaugh and the American Enterprise Institute and Brookings- and we can see who was most correct. Afterall, prejudging outcomes and assuming away complexity in favor of one sized fits all answers and ideology is anathema to science. So let's sit back and see the results of this experiment. These arguments will not linger abstractly out in the ether of public debate and controversy forever, with two sides eternally duking it out over fundamentally unproveable philosophical or moral questions (I'm sure more than a few come to mind). We will get hard data about how many more people get healthcare, on the rate of price growth, on the cost of these new mandatory government spending programs on the budget and tax rates, on the success and replicability of the 27 cost control and quality care pilots this bill establishes, on whether we remain a country of elections and predominantly privately produced and procured goods and services, or whether we become the new Venezuela. All of this, and much, much more, time will reveal.

For instance, the intent of these new pilots is to look for best practices, cost control measures, and general innovation in healthcare delivery. The point is to test new things for proof of concept, cutting funds for what doesn't work, and scaling up what does. Evidence based, pragmatic cost control measures are good ideas whether in corporate America or government. Many (potentially) good, cost-saving ideas are in this bill, and the potential savings weren't even priced into the budget estimates. Stuff like bundling payments across hospitals and outpatient services to reduce administrative costs and create greater negotiating leverage, paying hospitals with higher infection and readmission rates less, sending out undercover inspectors to look for waste and abuse, working on payment systems that reward quality of outcome and care over sheer volume (as is currently the case for the fee for service model) and clearly conveying the state of peer reviewed medical literature to practitioners in the field, so there is no ambiguity about the state of scientific knowledge on what works, and what is a waste, both of treatment and money. After all these assertions and claims that have been discussed the last 14 months during the genesis of this law, we will get to concretely see what savings and best practices come out of these 27 seperate case studies. For economists or researchers looking for good data sets and means to test null hypotheses, it's almost overwhelming to think of all the good analysis that could be done. Yet one thing is for sure, we know what healthcare costs today, we know how much waste there is, we know how many errors there are, we know how many people are covered- and now we are about to discover which way this law pushes all these indicators.

One could spend a great portion of her life reading criticisms and attacks of every aspect of this law (and even criticisms of things not in it!) from countless think tanks, research institutes, lobbies, and yes, gasbag bloggers such as myself. But what is so exciting about this historic piece of legislation, in addition to the potential to provide care for millions and root out inhumane abuses in the insurance industry and expand competition and choice- is that we will get to test these assertions very clearly. I just hope we keep score, and in 2020 if everyone takes for granted that kids can't be denied health coverage, or domestic abuse can't be classified as a preexisting condition, or a consumer isn't forced to buy into an oligopoly because the government now forces companies to post their plans side by side online to drive choice and innovation, or that healthcare costs are growing slightly above inflation rather than 250% of it- that we don't shrug this off as just the natural progression of things, as some inevitable outcome or industry innovation. No, like any good science experiment, we have been operating a good control scenario for about the last 50 years, and now we can compare it to the future. If these changes come about, we can make clear scientific arguments of attribution. Whichever side has it right, it will be a triumphant essay they pen in the National Review or Cato blog- an epic example of "told you so!" In other words, after 40 years of debate, it's finally down to the 4th quarter of a close contest, and we're getting closer to seeing who the winner is.

As a caveat, on the first two criticisms- deficit control and socialism- I would point out that this bill cuts $550 billion from Medicare in the next 10 years by eliminating 15 cents on the dollar of Medicare Part D (because it's 15% more expensive than public run plans and gets no better results). CEOs and turnaround private equity guys gets plaudits for this constantly, ruthelessly cutting waste and ineffeciency to force better results and make hard decisions. Oh, and in this case, it will also fulfill a promise the previous administration made to seniors about prescription drug coverage but didn't actually fund. But cutting medicare funding hardly seems like adding to the deficit to me, and curtailing the size of government payouts hardly seems like expanding government. Also, creating competitive transparent online exchanges, for customers to review and scrutinize plans, none of which will be government programs by the way, hardly seems like something that would be expected to increase prices, and hardly something that is socialist, in fact it seems like the essence of market based capitalism.

And from a behavioral economics standpoint, I've decided to take this new system for a spin, test out all my new government benefits by being a little clumsier here and there. JK

In Remembrance: Rachel Corrie (1979-2003)

Seven years ago today Rachel, from Olympia, died in the name of freedom. This isn't about politics or one side versus another, it's about a brave soul giving her life for a cause, and remembering. Looking at ongoing developments in the Middle East today, more reflection and remembering is needed.

Saving the World one Popsicle Stick at a Time

I truly believe we are going to solve global climate change by switching over the Federal vehicle fleet to Priuses and squeezing some more caulk between our door shims and window panes and recycling the deep fried remnants of our Whoppers to power the farm combines endlessly plowing our Corn Pops. And that ought to employ tens of millions of people in real good-paying jobs for many years to come, at a minimum. I mean, fuck incentives- let’s mandate the world to behave itself with a Bible of regulations.

There is a reason why two installments of the Cash for Clunkers tax credit program sold out in a matter of weeks and put tens of thousands of cleaner cars on the road, and a year later the stimulus program’s $5B grant based weatherization program has retrofitted less than two percent of intended houses. Not surprisingly, people rushed to save themselves money, and not surprisingly, an army of state bureaucrats couldn’t give a fuck if your house is weatherized. Generally, it’s difficult to argue that incentive and choice do not trump rules and enforcement when it comes to social policy. This is not an argument against government, but a plea for government to use a stronger set of tools.

I mean we spend 25 years of our careers trying, usually in vain, to add 1.4 years to our lives. We subtract more years trying to add more years than we statistically predict could be added. The stress level involved in decades long regulation and litigation and political triangulation aimed at reducing environmental stress seems to cause more stress than the old bastard windbag we call “the climate” could ever muster. Apparently there are legions of people waiting just a few more years for some environmental and culinary rapture, where everything is flawlessly clean and carries no risk. They’ll finally cast a line in their favorite river when the Mercury concentration drops just a few more parts per billion, or tongue that bucket of spicy KFC hot wings when the hormone levels at the chicken mills they monitor from their i-phone app dips a tosh. I for one have always just cast the line and eatin’ the fuckin’ fish. I am not so confident as to think I have much say as to when environmental Jesus will decide to make on Earth as it is in the great organic farm in the sky.

There couldn’t be a better example of this self-celebratory environmental small think than in our Nation’s capital, where they decided to Save the River and Be Green, (“Keep the River Green”?), by making you pay 5 cents for a grocery bag. For starters, if you don’t buy a grocery bag, a disposable bag to store the things you just purchased (for likely many hundreds of cents), because it costs a nickel, you have far greater things to worry about than climate change slowly whittling away at your children’s health over the next millennium, should you not starve to death before they reach adulthood, or your trash bags blowing into the pristine waters of the Anacostia- than ignoring a few inconvenient truths. Namely, the state of your personal finances and next meal.

And I wonder if the City Council that passed this even knows anything about global climate change. Do they know that a majority of greenhouse gas emissions come from coal plants, and nearly all the rest from cars, planes, trains and forest fires? Or that plastic bag curtailment could save the greenhouse gas equivalent of 14 nanoseconds of China’s economic growth? Policy like this, that lacks all perspective of magnitude or context, and yet is pitched like the Great Leap Forward at every bus station and financial transaction, forcing many an awkward conversation at cash registers across the District about whether you want a plastic bag for your tampons or 17 cans of cat food, is the codification of denial- the timeless political calculus that feigning productivity and progress while claiming credit beats the appearance of doing nothing.

I empathize deeply for the bureaucratically enmeshed career environmental regulator who has to attempt to solve global problems via a thousand little regional solutions, when obviously a couple big ones are what’s required. They usually look like they haven’t seen the light of day in four weeks, having to fill out three forms to get their three different bosses to let them write a report to seek interagency clearance, to then languish in Committee on the Hill while be slowly mutated by lobbyists beyond anything that abnormal levels of hormones could achieve. By the time they reach this point a good portion of their career, and will, has passed, and they would not last two days in the wilderness they so seek to protect- slowly adopting the same ghostly hue of the countless memoranda and email chains that pile around their cubicle sized windowless office.

No wonder so many of my generation have adopted “unorthodox lives”. No wonder so many of us hate polluters, and the fucking politicians they pay off- because we see the answer and the impediments all too clearly. In fact, it’s pretty obvious. My generation (read the surveys) says something like, “Jesus! You want to fix climate change- macro econ 101 says put a fuckin’ price on carbon, offset taxes elsewhere, and watch the clean economy build around you, employing millions of modern day Rosy the riveters and decent lower middle class jobs- the jobs that gives this country stability in the first place! But so long as coal is cheap as dirt, your plastic bag policies are a pipe dream.” After all, the primary function of government is to create middle class jobs- that soothing ointment for the many wounds of life that makes all the tedium and drudgery usually tolerable.

The more people lobby to stop global, fucking global, climate change by opting to pay a Citibank credit card bill online in lieu of getting a piece of paper mailed once a month, or inflating their fucking tires 3.2 more PSI, or turning down the thermostat two degrees, the more America loses- the whole point, a whole generation and a peerless opportunity. If irony is when something’s actual meaning is totally opposite the literal- then nothing could be more ironic than modern populist environmentalism.

News

I started MyLastLecture.org - check it out, or don't. Hope it catches on like wild fire, not wildfire, like a fire, that is wild.

Also, regarding the current situation of healthcare reform legislation. Dammit. The votes aren't there in the Senate, so this means the House has to pass it, or as much of it as possible can be passed with a simple majority through the budget reconciliation process. This is the best method, because otherwise it will get pared down to a shell of itself. However, the Parlimentarian hasn't ruled yet on just how much of the bill could be passed this way. It only applies to spending or taxing, and many of the core programs (exchanges, eliminating heinous insurance company practices, setting up cost control pilots, Medicare Advisory Board) are not on budget. As is often the case in this life, the most important things are always both a blessing and a curse. These measures will likely save the most money (trillions, not to mention many lives), but because it doesn't dirctly spend money, it can't be considered through reconciliation. And all because of Kennedy's seat. The cruel cruel irony. Here's to good news out of the Parlimentarian's office.

Also, today J.D. Salinger died. From Catcher-

When I was all set to go, when I had my bags and all, I stood for a while next to the stairs and took a last look down that goddam corridor. I was sort of crying. I don't know why. I put my red hunting hat on, and turned the peak around to the back, the way I liked it, and then I yelled at the top of my goddam voice, "Sleep tight, ya morons!" I'll bet I woke up every bastard on the whole floor. Then I got the hell out. Some stupid guy had thrown peanut shells all over the stairs, and I damn near broke my crazy neck.

Anyway, I'm sort of glad they've got the atomic bomb invented. If there's ever another war, I'm going to sit right the hell on top of it. I'll volunteer for it, I swear to God I will.

Boy, when you're dead, they really fix you up. I hope to hell when I do die somebody has sense enough to just dump me in the river or something. Anything except sticking me in a goddam cemetery. People coming and putting a bunch of flowers on your stomach on Sunday, and all that crap. Who wants flowers when you're dead? Nobody.

Don't ever tell anybody anything. If you do, you start missing everybody

Enforced Mediocrity

I feel like a prisoner to mediocrity many mornings and evenings, shuttling back and forth to work on DC Metro (and perhaps for other reasons ha). DC Metro. That name has a good ring to it. The Nation’s Capital. The seat of power of the most powerful nation the world has ever known. Perhaps to introduce a (very) healthy dash of humility, introductory training for Freshman lawmakers (and perhaps the not so fresh as well) should include a requirement to have to commute via Metro for a couple months. Maybe the drive for government reform would be just that much stronger and more urgent as a result of what these aspiring legislators experienced. It would illustrate so many “fascinating” aspects of government management. And it’s a shame- that the most well worn experiences most people have with government often have to make those who fight for higher government performance and accountability and management look so pathetic. (As a disclaimer I am not proclaiming to be in this group, but I have seen them, they exist.)

If the keyword in our collective game of Family Feud was “government” I imagine the top five would be something like- taxes, DMV, seatbelts, waste, and- public transportation. If nothing else this is guilt by association. It often appears as if there is no leadership in Metro- which in and of itself is an impressive feat- to give the appearance of an utter lack of anything, a complete vacuum of management or direction or leadership. In this respect, deep space and the DC Metro are very alike. That, and they both cryogenically deep freeze the souls of any human beings who are exposed to them for more than a few minutes. Train time arrivals are like a game of dominos, the times change and cascade in different orders without warning- from perhaps, 2 to 12 minutes, with the swift authoritative and utterly random shift of an LED light. Hundreds of people fill the entire platform, sometimes up to 12 deep, awaiting a train that always arrives short two cars- needlessly leaving 25% of the platform unused. Passengers not uncommonly faint or get sick from the manual, jerky stop. My last ride from Adams Morgan to Dupont involved nine separate accelerations and brakings- to cover maybe seven blocks. There must be traffic ahead, or bumps in the tracks, or maybe a deer ran out in front. Trains arrive heading opposite downtown in an approximate three-to-one ratio to inbound trains in the mornings- and the reverse in the evening. Maybe the metro managers think rush hour works in reverse in DC. Escalators prove impossible to maintain for even a few consecutive days, with plywood cases often blocking them for weeks at a time.

Riding metro feels like stepping into the Great Depression. The energy level of grimaces, snipes, grunts, glances- mimic the feel of mass, shared suffering that defined that era. People throw their courtesies out the window- yesterday I got cut in front of by both a portly cheery-faced woman and a man with a Costco sized stroller. I don’t mind, it doesn’t bother me, I’d in fact gladly wait for the next train so they can board- which I did. But something tells me this isn’t these peoples’ normal personas. That maybe Metro naturally brings out the worst in people. That maybe that dad who girgles at his baby for two hours every night, also forearm shimmies people in the morning to slip down the escalator to catch the arriving train, and maybe he wonders what the hell he was doing at night, feels guilty, suppresses and channels that anger, and becomes a slightly more bitter, unhappy person. Perhaps this makes him a marginally worse father, worse husband, emotionally less available or feeling of his child. Perhaps Metro's service- our shared couple hours a week- tears slightly, but meaningfully at the fabric of our communities, our homes, our belief systems, our families- ourselves. Metro is a microcosm of the inert and faceless forces of modern life that simultaneously know nothing about us, but dictate the very minutia of our lives, that trusts a smaller and smaller bit of us everyday.

And before you write this off as a misanthropic diatribe (nothing about that is inherently unacceptable to me however) or observations divorced from the responsibility of constructive criticism end efforts at self-improvement- consider that Metro will get $150 million in Federal Funds this year to….very auspiciously- improve their service. Consider that every person I’ve talked to would pay more to have a better Metro, and none has ever complained about their $3.20 daily fare so they can save hundreds a year not driving. In June, nine people were tragically killed on Metro in a horrific accident. This is all the more reason to aspire to more, to a more efficient, safer train system- it is not a pretense to eliminate two cars off a train. I wish you could transfer Moscowans from 1920s Stalinist Russia to Washington, D.C.’s Metro in 2010 and explain that we have not figured out a way to safely operate an eight car train. It would utterly perplex them, as it should. Metro riders include some of the most hardworking, brilliant, beautiful, promising, driven, and often, powerful and influential, people in the country. This makes our shared enforced mediocrity all the more tragic.