Category Archives: Economics

Taxes – The Price We Pay For Civilization

“Taxes are the price we pay for civilization.” – Oliver Wendell Holmes.

Neil Armstrong on the surface of the moon

Your Tax Dollars At Work, Courtesy NASA

Tweet Taxes fund Medicare and Medicaid so the poor and the elderly can see a physician and get treatment when they are sick. Taxes fund education for our children and our neighbors children so they can grow up to be doctors, lawyers, engineers, architects, accountants, teachers, plumbers, electricians, carpenters, builders, actors, etc., so we can buy things that work properly, travel safely, enjoy life, so we can, in a word, thrive. Taxes fund police, fire-fighting, defense, judicial and other services so we can be secure in our homes and our persons, so the innocent do not go to prison, so the guilty pay their debts to society, and so we, when we do foolish things, can compensate those we accidentally harm. Continue reading →

The Crash of 2011

Tweet I thought the market would crash in the wake of the Earthquake / Tsunami / Nuclear Meltdowns at Fukushima. It didn’t. However, something much less serious may be bringing the market – and the economy – to it’s knees. Politics. The Voice of America reported here that Standard & Poors downgraded US debt from AAA to AA+. Click here for the S&P’s Special Report and here for the full report.

S&P’s analysts wrote:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

John Boehner It is clear that the emphasis on cutting government spending, eliminating government jobs, eliminating benefits to unemployed citizens, rather than raising revenues and developing infrastructure is not in the long term or short term interests of the United States. As the 512 point drop in the Dow Jones Average, and the downgrade of US debt indicate, Republicans and the Tea Party should be careful for what they wish for – they just might get it.

In the discussions over the debt ceiling, John Boehner said something to the effect that if a family or a business is borrowing too much it simply must tighten it’s belt. Continue reading →

Exxon Profits: $10,700,000,000 for the Quarter

The Associated Press via the Sacramento Bee reported that “Exxon Mobil Corp. earned $10.7 billion … its highest quarterly profit since the third quarter of 2008…. However, Exxon officials noted that sluggish business investment, lower consumer spending and high debt would continue to weigh on the economy.”

Let’s do some math – Exxon earned $10.7 Billion this past quarter. Yet Exxon and other big oil companies receives $2 Billion to $3 Billion per year in tax subsidies. If divided equally, then Exxon would get $400 to $600 million per year, $100 to $150 Million per quarter. The subsidies amount to 0.93% to 1.4% of Exxon’s profits of $10.7 Billion this quarter, and 0.108% to 0.16$ of Exxon’s annual revenues of $370 Billion for the year ended 12/31/10 (Google Finance). This is equivalent to giving someone earning $50,000 per year a gift of $54 to $81.

A lot of people need help: American college students need help paying tuition, Americans on Medicare and Medicaid need help paying their medical bills, and Americans on Unemployment need help paying for food, people trying to design and build a renewable sustainable energy infrastructure. But we are helping oil companies.Why?

Let’s look again at the numbers. For the year ending Dec. 31, 2010, Exxon’s Gross Revenues were $383 Billion. Gross Profits were $107 Billion, and Income Before Taxes were $53 Billion. Profit was 27.9% of Gross Revenues. Income before Taxes was 13.8% of Gross Revenues.

Exxon	12/31/10
Total Revenues	$383	B
Gross Profit	$107	B
Income before Taxes	$53	B

Gross Profit / Revenues	27.94%
Income BT / Revenues	13.84%

Period	Income	Nominal Tax
Year ending 12/31/2010	$53 Billion	$18.55 B
Quarter ending 6/30/2011	10.7 Billion	$3.745 B

And according to Valeri Vasquez, at the Center for American Progress, here, Exxon’s tax rate is 17.6%. The nominal corporate rate is 35%. With profits of $53 Billion last year, rather than receiving subsidies. Exxon should have paid $18.55 Billion in taxes last years. With profits of $10.7 Billion last quarter, Exxon should have paid $3.745 Billion.

Continue reading →

Debt, Catastrophe, and Foreign Entanglements

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The battle raging today between Democrats and Republicans will not solve the nation’s debt problems, nor avert a financial catastrophe in the future. The politicians do not appear to have a handle on a comprehensive solution to our financial woes. I’m not certain that I do, either, but I feel an obligation as a citizen and a stakeholder in our nation’s present and future to present my ideas and add to the debate.

The issues, as I see them, revolve around the debt ceiling, government obligations, the economy, consumer debt and what George Washington might consider foreign entanglements of the kind he warned us against in his farewell address. The solutions must benefit the American taxpayers today and in the future. Here are the issues and some ideas toward resolution. Continue reading →

Roughing It

Tweet A s they struggle to pay their bills, forced to work, the wealthy cope as only they can. By sending their children to summer camp in private jets. In “To Reach Simple Life of Summer Camp, Lining Up for Private Jets” Christine Haughney, in the New York Times, July 24, 2011, wrote:

“A turboprop Pilatus PC-12 carrying Melissa T., her daughter, her daughter’s friend and a pile of lacrosse equipment took off for their home in Connecticut, following the girls’ three-week stay at Camp All-Star in nearby Kents Hill, Me. Shortly after, a Cessna Citation Excel arrived, and a mother, a father and their 13-year-old daughter emerged carrying a pink sleeping bag and two large duffel bags, all headed to Camp Vega in Fayette. … as the economy limps along, more of the nation’s wealthier families are cutting out the car ride and chartering planes to fly to summer camps. One private jet broker, Todd Rome of Blue Star Jets, BlueStarJets.com, said his summer-camp business had jumped 30 percent over the last year.”

A quick check on the Camp All Star web site’s “Dates & Rates” page suggests that 3 weeks will cost about $4500. Trips, horseback riding and hockey are extra. Getting there on a private jet, would add $6,318 to $15,240 per party, $2,106 to $5,080 per camper for a camper, his or her mom, and a friend. As I tell people, it’s the trip, not only the destination.

Tell me again, Mr. Boehner, why the wealthy can’t afford to pay taxes?

I did some checking. Went to Blue Star‘s website, priced a charter for three (3) from Allaire Airport in Monmouth County, New Jersey to Augsta State in Maine. I was surprised at how affordable it is. Blue Star offered 5 alternatives, all turboprops:

A Ratheon Super King BE 350, a 9-passenger aircraft, $6,318, which is $2,106 per passenger,
The BE-C90, a 6 passenger turboprop, $11,270, or $3,757 per passenger,
The BE-100, an 8 passenger turboprop: $12,151 for the trip, $4,050 per passenger.
The BE 200, in a 9-passenger configuration, for $13,043, $4,348 per passenger, and
The BE-200 in an 8-passenger configuration: $15,240, $5,080 per passenger.

These data are summarized in the table below.

Plane	Trip	Per Passenger, 3 passengers	Per Passenger If Full
Ratheon Super King BE 3509 Passenger Turboprop	$6,318	$2,106 per person.	$702 per person for 9.
BE-C90, 6 passenger Turboprop	$11,270	$3,757 per person.	$1,878 per person for 6.
BE-100, 8 passenger Turboprop	$12,151	$4,050 per person.	$1,519 per person for 8.
BE-200 9 Passenger Turboprop	$13,043	$4,348 per person.	$1,630 per person for 9.
BE-200 8 Passenger Turboprop	$15,240	$5,080 per person.	$1,905 per person for 8.

I don’t know if the airline serves food, drinks, or offers in-flight movies. But caviar is only $115 per oz (Russian Sevruga, Caviar Express, Glendale, CA).

Clean Energy, Good Jobs, and a Vibrant Economy … But

courtesy NASA (our tax dollars at work)

Tweet It sounds too good to be true:

*   100 gigawatts of offshore wind, $300 Billion,
*   100 gw of landbased wind, $200 Billion,
*   75 gw of solar, $300 Billion,
*   75 gw of geothermal, $200 Billion.
*   200 gigawatt equivalents of efficiency – $200 Billion.
*   100 & Clean, Renewable, Sustaianble Energy: 1.2 Trillion.
*   2.7 Million New Jobs and a Healthy Economy: Priceless!

This is happening, slowly, inexorably, by the “invisible hand of the market.” But it will happen faster if the “invisible mind of the community” acts. This means the government!

Continue reading →

Do you Really Want a Balanced Budget Amendment?

The rainbow in the grey skies is magical and alluring. But take a look at history before suggesting that the USA should operate under the limitations of a balanced budget. A good place to start is by searching on milestone wars that made or saved this country. Try a search such as “US Revolutionary War debt,” “US Civil War debt,” or “US WW2 debt.”

Then try to decide if the US Constitution had such an amendment from day one would we:

Be a British colony?
Have slaves?
Speak German?

Would we have climbed out of the Great Depression without Roosevelt applying Keynes’ ideas on government projects?

The idea of sending America’s youth into battle without proper equipment and financial support is powerful motivator for me. I was in the Air Force during a budget battle and we literally could not fly our fighters because Congress did not approve enough money for fuel while they argued about the overdue budget! Thankfully that was peace time.

Let’s take a look at the financial meltdowns this country has encountered and the effects that a Balanced Budget amendment would have had. Take a look at just two, the Great Depression and the 2008 meltdown. The government did not do all the right things to prevent or solve these problems. The solutions (i.e. the recovery) required combination of forces including government spending, Wall Street and Main Street.

Search on “US Depression debt” and read current events to see the impact of such economic events on the deficit. Thank you Uncle Sam for pitching in to take away the pain and suffering that literally millions of Americans faced during these crashes. I am glad you had a credit card to use to save us!

The metaphorical Atlas – is he the government or the taxpayers? Ours is an experiment in government of the people, by the people, for the people.” Is there a difference?

I probably should stop here but …
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Ask Obama – Internet Town Hall

What would I #AskObama (on Twitter or in person)?

1: #AskObama Economists think in terms of resources. How do we change the conversation to think in terms of processes, systems, interactions?

2: #AskObama Neoclassical Economics: Resources & Wastes. Ecological Economics: Systems: Stocks, Flows, Processes. Burn Coal: Fuel ergo Waste. Solar: No fuel ergo no waste.

3: #AskObama Ecological Economics: “Like neoclassical but a better understanding of time and costs.” Marlboro MBA Managing for Sustainability.

At 2pm EDT, July 6, 2011, President Obama will participate in the first Twitter town hall at the White House to discuss the economy and jobs with Americans across the country. The entire event will be streamed live at WhiteHouse.gov. Right now, thousands of people are talking about the event and asking questions on Twitter, using the #AskObama hashtag. Take a moment to join the conversation and ask your own question.

Fort Calhoun Nuclear Plant – Update

in the Missouri River

Tweet The flooded Fort Calhoun nuclear power plant is not exactly like the nuclear plants at Fukushima Daichi and Fukushima Diana. There are three main differences: First of all, there’s one plant, not 12. The difference of scale is tremendous. Secondly, it was offline – shut down for refueling – when flooded. Meaning, we got lucky, really lucky. Finally, it was hit by the gradually increasing pressures of rising floodwaters, not by an earthquake, a tsunami, and aftershocks. This is huge!

Steve Everly, at the Kansas City Star, reported that David Lochbaum of the Union of Concerned Scientists was “Reassured.” (here). I spoke to Mr. Lochbaum about the flooded plant on June, 29, 2011.

Most of the releases of radioactive material, generally tritium and tritiated water, occur when plants are online. Because the plant was offline, very little radioactive material has been released into the biosphere as a result of the flooding. While it is easy to filter heavy metals, it is very expensive to isolate tritiated water from water.

The damages due to the flooding are likely to be in the ballpark of $1,000,000 per day in lost revenue – $23 Million since June 6 – because the plant produces power worth about $1,000,000 per day. The buildings that have been damaged are collateral buildings, not the reactor itself. Those buildings would be less expensive to repair than the reactor.

At 35 years old, the plant is near the end of its design life. While we can engineer plants that are as safe as the NRC requires, new wind, solar, geothermal, hydro, and efficiency cost less than new nuclear or coal with carbon sequestration. Safety, security, and waste management are not the challenges with sustainable technologies that they present with nuclear and coal. Therefore, it seems logical to consider that once it is decommissioned, the plant will be replaced with wind, solar, geothermal, hydro, and efficiency.

Continue reading →

GDP or GPI? – My metric is better than yours.

As any freshman economics student should know, the Gross Domestic Product, GDP, is a measure of spending, derived from the Gross National Product, GNP, defined by Simon Kuznets during the Depression (click here for econlib). GDP is, at best, an indirect measure of wealth. The Genuine Progress Indicator, GPI, defined by Think Progress in 1995, measures genuine progress.

Consider the case of Joeseph Q. Bloggs, MBA, J.D., Esq., an investment banker. Bloggs has a J.D. from Harvard or Yale, an undergrad degree from Princeton, Dartmouth, Cornell, or another ivy league school, and a high school diploma from the Citadel or an acclaimed private school. As with his colleagues on Wall Street, he is self-proclaimed “Master of the Universe.” He leaves work one night after negotiating a highly leveraged hostile takeover, buys a Lamborghini, and rents the time of an expensive “friend.” He buys her an expensive outfit, and takes her to dinner at an the Four Seasons, or a similar expensive restaurant. He has a few drinks before dinner, a bottle of wine with dinner, and a glass or two of port after dinner. On the way to the Hamptons, he crashes his Lamborghini into a Ferrari driven by another lawyer / banker / actor / “Master of the Universe.”

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Brookings, SAP, NRG, and the City of New York on our Energy Future

NRG Energy

Tweet Will moving to the new energy future – deploying Solar, Wind and other sustainable alternatives create 2.7 Million New Jobs?

At “How Cities and Companies Can Work Together to Operate in the New Energy-Constrained Economy” a panel discussion (press release), Bruce Katz, Vice President and Director of the Metropolitan Policy Program, Brookings Institution, said “2.7 million new jobs” will be created in moving to the clean energy / low carbon economy.

Mr. Katz also noted that two out of three Americans – 200 million people – live in the 100 biggest metropolitan areas, and those 200 million people are responsible for 75% of our GDP. High carbon energy is no longer cheap. The people in those metropolitan areas, and elsewhere, therefore, must act. Continue reading →

Indian Point 1 – A Zombie Nuclear Power Plant

Bucolic? Pastoral? Looks that way, but looks can be deceiving. First of all, there’s Indian Point 1. Then there’s the water issue. Other issues are waste and national security.

Indian Point 1

Brought online in August, 1962.
Shutdown in October, 1974.
Spent fuel is stored on site.
Scheduled to be closed in 2026.
Operated 13 years.
“Zombie” 52 years.

Talk about externalities! “Zombie” since ’74 and scheduled as such for another 25 years, total of 52 years. NRC. What does it cost to maintain and manage as a “zombie?” And who pays? The owners or the taxpayers? And did the plant produce so much power in the 12 years of operation that it will make a profit after 52 years of being managed and serviced?

Indian Point 2

Rated Thermal Power: 3216 MW
Net Electrical Rating: 1032 MW
Water Requirements: 840,000 gallons per minute

Indian Point 3

Rated Thermal Power: 3188 MW
Net Electrical Rating: 1051MW
Water Requirements: 840,000 gallons per minute

(source: Entergy / Indian Point website)

Summary – Indian Point is a 2.083 GW complex. Replacing it with new nuclear would cost about $12 to $18 billion, plus the cost of fuel, security, and the costs of interest during the 8 to 10 years of construction. Replacing it with solar would require about 2 million PV solar panels, at a cost of $8 to $12 billion, or 570 wind turbines at a cost of $4 to $6 billion. 2.0 gw of wind and solar do not require 1,680,000 gallons per minute of cooling water, or even 1.0 gallons per minute. Solar and wind do not require fuel and do not produce waste. Nor do they present national security challenges.

Energy Alternatives

2 Gigawatts
Modality Nuclear Solar Wind
Cost (billions) $12 to $18 $8 to $12 $4 to $6
Fuel Yes No No
Waste Yes No No
Security Hole Huge No No

Keynes, Reluctance to hire, & 21ST Century Energy

in black and white, because some ideas are.

Tweet During the Great Depression the Classical Economists said “Unemployment is voluntary. Business owners will not voluntarily keep the means of production idle.” While he had been a student of classical economics, John Maynard Keynes observed that the data didn’t fit the theory. And, he reasoned, if the observable data don’t fit the theory, the theory must be flawed. “Business owners are risk averse,” he saw. “A employee needs to be productive, needs to make widgets. But if no one is buying widgets, then contrary to classical theory, factory owners will fire workers and keep capital idle rather than hire workers to create excess inventory. That’s just common sense.”

We see this today.

When unemployment was low, for example in the United States during the tech boom of the 1990’s, people acted on the premise that “There is so much work that we could hire and good people and train them.” Today hiring managers seem to be acting on the premise that “There are so many people looking for work that they can wait for the perfect candidate.” Perfection being unattainable, jobs go unfilled. This is ok, in this context, because

“Budgets are tight.”
“The future is uncertain.”
“Money not spent on a new hire can be saved or used to pay down debt.”

Keynes also observed that the government is an employer that does not need to worry about going out of business. Building infrastructure is government employment that is investment for the future. These observations are as valid today as they were 80 years ago.

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NegaWatts Save MegaBucks

The Newark Star Ledger reported (here and here) that Public Service Electric and Gas, PSE&G, a subsidiary of Public Service Enterprise Group, PSEG, is installing a 2,700-ton chiller the University of Medicine and Dentristy of New Jersey, UMDNJ. This an $11.4 million investment in negawatts. The Star Ledger reported that UMDNJ will save $1.3 million per year on energy costs.What’s the payback? An $11.4 million investment will save $1.3 million per year. That means the system will pay for itself within 9 years, assuming the price of energy remains constant. I think it’s a much more reasonable to assume that the price of energy will go up, so the payback will be higher and the system will pay for itself sooner.

The system will work long after it is paid for. It will save $13 Million over the next 10 years and $26 Million over the next 20 years – assuming electricity costs are constant. Assuming electricity costs increase an average of 5% per year, this will save $16.35 Million over the next 10 years, and $42.99 over the next 20 years.

Projected Savings of $11.4 Million investment.
After 1 Year: $1.3 Million, a return on investment of 11.4% in one year.
After 5 Years: Save $7.18 Million, for a total ROI of 63%, assuming a 5% annual increases in cost of energy.
After 10 Years: Save $16.35 M; total ROI of 143.4%).
After 15 Years: Save $28.05 M; total ROI of (246%)
After 20 Years: Save $42.99 M; total ROI of 377%).

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We have Governor Corzine to thank. as well as Governors Whitman, McGreevey, Codey, and Christie.

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Earth Day, 2011, Where Are We?

Earth from Space, courtesy of the American taxpayer. Reto Stöckli, Nazmi El Saleous, and Marit Jentoft-Nilsen, NASA GSFC

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Earth Day, 2010, I looked to the future on Popular Logistics. In 2009, I wrote about water pollution and agricultural waste in the Chesapeake. Today I am looking at the present and recent past. While a comprehensive look at where we are can be found on the web pages of the World Watch Institute, the New York Times, and the World Factbook of the Central Intelligence Agency, I want to make a few points.

Our energy policy is “when you flip a switch, the juice gotta flow.” It ain’t magic. It’s engineering and classical physics, with an understanding of radioactive fission and decay and a profound lack of long term thinking. It ain’t magic, but it might as well be. But we really need to base our energy policy on an understanding of ecological economics and sustainability.

We’ve had a few problems with nuclear power and fossil fuel in the last few years. Yet, there’s some light on the horizon.

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