advice from a fake consultant

out-of-the-box thinking about economics, politics, and more... 

Tuesday, May 24, 2011

On Hole Cards, Or, "Drill, Baby, Drill"? Why? Is Canada Out Of Sand?

In America, today, there are three kinds of drivers: those who look at the other gas pumps down at the ol’ gas station and think: “Oh my God, I can’t believe how much that guy’s spending on gas”, those who look at their own pump down at the ol’ gas station and think: “Oh my God, I can’t believe how much I’m spending on gas” – and those who are doing both at the same time.

Naturally, this has brought the Sarah Palins of the world back out in public, and once again the mantra of “Drill, Baby, Drill” can be heard all the way from the Florida coast to the Arctic National Wildlife Refuge.

But what if those folks have it exactly backwards?

What if, in a world of depleting oil resources, the last thing you want to do is use yours up?

To put it another way: why isn’t all our oil part of the Strategic Petroleum Reserve?

Consider the inexorable logic of the Big Lie. If a man has a consuming love for cats and dedicates himself to the protection of cats, you have only to accuse him of killing and mistreating cats. Your lie will have the unmistakable ring of truth, whereas his outraged denials will reek of falsehood and evasion.

--From the book Ghost of Chance, by William S. Burroughs

So here’s the thing: we produce a surprising amount of our own oil right here in the USA (in fact, we’re the world’s third-largest oil producer), but we don’t produce enough to cover our current use, and that’s why we import about half of the roughly 19 million barrels of oil we use daily. The vast majority of that is used in vehicles or for heating; almost none is used to generate electricity.

Our largest suppliers of oil, despite what you might think, are not all from the Middle East: instead, it’s Canada, Saudi Arabia, Mexico, Nigeria, and Venezuela, in that order.

(Perhaps you’re thinking: “Canada? Oil?” Yes. Canada and Oil. They provide us with more than twice as much as Saudi Arabia from huge “oil sand” resources, primarily in Alberta; the exploitation of those resources has created a huge environmental controversy.)

Now if you ask me, an ideal situation would be one where we decided to get out of the business of using oil altogether – and to help make my point, we have some helpful numbers from a guy that you pay every day to figure this stuff out: Mark Doms; he’s the Chief Economist for the US Department of Commerce, and, to paraphrase Little Feat, he’s always handy with a chart.

According to Doms, 60% of our 2010 trade deficit (about $265 billion) represents the cost of imported petroleum products, and if things continue through December as they did the first three months of this year, in 2011 every American, man, woman, and child, will pay a “tax” of about $1000 to import all that petroleum.

Do you know what we, individually, spend on gas? In March of this year, the average household spent just over $300 on that month’s gasoline; 5 months ago that number was $56 lower. The way it works out, every time gas goes up 10¢ a gallon, it costs the average household another $7 a month.

And that’s not all: less than half of the total cost of imported oil is paid at the pump: about 44% of imported oil is used by businesses; another 15% is used by governments across the USA, and that means almost 60% of the cost of imported petroleum is “folded into” the price of everything else.

(A quick author’s note: you’ve seen the words “oil” and “petroleum” used liberally in this story; the exact literal reality is that in each instance we should really be referring to “petroleum products”, and that’s because we import and export not just crude oil, but a variety of other petroleum products. I get tired of using the phrase “petroleum products” over and over, and I’m probably using “oil” and “petroleum” more interchangeably than I should.)

So get this: if we were out of the importing oil business, we’d save about $300 billion a year – and as it turns out, over a 10-year period we could actually convert the entire US auto fleet to electric cars powered by windmills by providing $15,000 cash “buy-outs” for today’s 135,000,000 gasoline cars and building the wind generation and “smart grid” we’d need to support the effort…and doing all that would cost…wait for it…about $250 billion a year.

If I get the math right, 20 years after we first started building windmills and subsidizing cars, everything would be paid off; and every year after that the US economy would generate a $300 billion “profit” on our investment – unless the price of a barrel of oil goes up. If it does, the amount of money coming back to our wallets every single year from then on, obviously, also goes up.

And if we were out of the “using oil for driving” business, once everything was paid off we could put almost $4000 a year (in today’s dollars) right back in the pocketbooks of every family in this country – which, if you ask me, represents a pretty good “tax cut”.

Let’s also keep in mind that any new oil drilled on our public lands might not necessarily end up in the US; that’s because even if oil companies were 100% free to “Drill, Baby, Drill” in our waters to their hearts’ content…they’d also be perfectly free to sell as much of that same oil, anywhere in the world, to whatever entity might end up being the highest bidder – and today, our friends in places like India and China are desperate to be that high bidder.

Put all of this together, and you get back to the question I posed at the top of the story: why in the world would we be in a hurry to “Drill, Baby, Drill”, when we could, instead, put all our efforts into getting out of oil, which would save us so much money that the conversion pays for itself?

Then, when oil’s running $400 a barrel or so, let’s use our oil to pay China back the trillion dollars we owe ‘em…which, at current production rates, would only take about 400 days, assuming it were possible to divert all our production for that purpose.

To state it a bit more ironically, it may be that the smartest thing we can do right now is to conserve every possible drop of oil we have…until we don’t need it any more, and it becomes a sort of Strategic Cash Reserve that can help strengthen the dollar and reduce the national debt in the years to come, both at the same time.

Or to put it another way, the next time someone tells you they want to “Drill, Baby, Drill” can step right up, look them square in the eye, and ask: “Why do you hate America?”

And won’t that be fun?

Tuesday, May 17, 2011

On Sunday Drinking, Or, Has Satan Been Rendered Irrelevant?

I know better than to go drinking on Sundays, but it’s just been one of those weeks, and I figured I’d grab a few beers, no big deal, and then head hone and get some real work done.

Of course, the reason I don’t drink on Sundays is because that’s when Satan likes to go hang out at my favorite bar – and to be real honest with you, lately Satan’s getting to be a real drag to hang out with once he gets drinking.

I mean, it’s depressing: he’s always talking about how he gets blamed for the economy, even though he claims he has no control over Wall Street, and atheism is a bit of a sore subject – and he’s forever complaining about how all his best customers have been outsourcing more and more work to Varsavarti.

But if you think all that’s a drag to have to deal with…you should hear him complain about Republican Presidential Politics.

They say that heaven is,
10 zillion light years away;
But if there is a God,
we need him now;
Where is your God?

That’s what my friends ask me;
and I say it’s takin’ Him so long,
‘cause we’ve got so far to come.

--From the song Heaven is 10 Zillion Light Years Away, by Stevie Wonder

I had no idea what a Tardis was until recently, except that it’s one of the things you have to hit a bunch of times to get to the really good multiballs in the “Doctor Who” pinball game, and it was Satan who told me all about this “Doctor Who” stuff over a few games in the back of the bar (and he would know: he tells me almost every BBC producer, one time or another, has availed themselves of the intercession of the Devil just to get another 12 episodes out of that network); in fact, the way I really got to know Satan was over a whole bunch of games of pinball.

He plays fair, by the way: he gives himself free replays by making the machine “match” his score at the end, but he doesn’t manipulate the gameplay just to rack up results; because of that we have some pretty competitive games, especially after he has a beer or two and really loosens up.

But once he found out I’m a blogger…oh, man, it’s Republicans this and Republicans that – and the thing that really has him upset with this crowd lately is that it’s all sort of gone out of his control.

“There was a time,” (it’s always “there was a time” with Satan) “when a guy who was in favor of private businesses being allowed to be ‘Whites Only’ who also wanted to run for Senate, much less President…well, they wouldn’t have a chance in Hell unless they made a deal with me – and now you got two of ‘em in the same family who went and ran for Congress, and won, without me getting’ a single soul out of the deal, and now Ron Paul’s running for President, and it’s just killin’ me.

And look who else you got over there: you can’t do a deal with Trump, because he’ll try to bankrupt his way out of any agreement you make, and Santorum actually believes he can win without a deal. Me and Dan Savage, though, we fixed him good: Google ‘Santorum’ sometime, and see what you get.

I made a deal with Bachmann…but I did it when I thought she’d only make it to Congress…so I’m gonna get short-changed on that one. I don’t know if Pawlenti wants it bad enough to make a deal, and if he doesn’t run I’ll lose that soul. Romney hasn’t done a deal yet, and I’ve told him three times already that he can’t win without me.

Gingrich was the one I was sure I would get eventually, but he has no shame, so he’s running without my help even though I showed him how bad he looks to the rest of the world…and he’s been trying for years to undercut me by going to the Catholics to get his marriages annulled – and for cash, instead of a soul. The guy’s just pathetic, he really is.

I am negotiating with Daniels, though, so it’s not all bad – and on that deal, I might even get a ‘two-fer’: him and the wife.”

By now I’d been just nailing Daleks and I was in the middle of the three-ball multiball, and collecting Davros jackpots big-time, but even in the middle of all that I had the presence of mind to ask if Satan had any campaign tricks up his sleeve for this bunch?

“Tell me what you think about this: I’m working something up where Christine O’Donnell gets caught up in an affair with one of the candidates – but I can’t figure out who makes a better scandal: linking her romantically to Newt Gingrich…or to Michelle Bachmann?”

And I told him the truth: I was happy indeed that I hadn’t been drinking a beer when he asked, because I would have done a “spit take” for sure.

But, honestly, I’m not sure who would make the better scandal, so I’m going to do what I promised Satan I would: I’m going to throw it open to you, the readers, and we’ll see who y’all think would be the best person for Christine O’Donnell to be, shall we say, “seeing”.

Anyway, by that time I figured I better go, especially before he got all caught up in another big speech about how “Citizens United” screwed him over, or how that guy from the IMF is gonna be calling any time now, so I finished up my pint, and I headed on home to bring you this story of how the Republicans have screwed things up so badly that, for perhaps the first time in history, discord, anarchy, insanity, and ugliness aren’t business opportunities for The Horned One…and, of course, I wanted to get you the “heads up” on the Christine O’Donnell scandal that hasn’t even happened yet – which, if my friend Satan has anything to do with it, soon will.

Thursday, May 12, 2011

On Redistribution, Or, “Afghanistan Peace Dividend Stimulus Lotto? OK!”

They tell us we’re dropping about $10 billion a month in Afghanistan so we can catch that Bin Laden guy...but eventually, we’re gonna catch him, and as soon as we do you can imagine that folks will be wondering why we’re still over there – and I gotta tell ya, I’m one of those people.

I mean, we’re over here talking about how we're so broke that we have no choice but to cut a couple of billion from heat assistance for the poor, and a billion-and-a-half from the Social Security operations budget, and money from food stamps and childcare assistance and tornado forecasting in Alabama…but every single month, just as regular as clockwork, we seem to be able to find another $10 billion to spend in Afghanistan, even as we have an economy that could badly use another round of truly productive stimulus.

And I don’t think y’all even realize just how much money $10 billion really is – but today we’re gonna see if we can’t fix that with a bit of a thought exercise.

Imagine if we set up a program that took that Afghanistan money and spent it right here at home for a year or two – and it was spent in the form of a lottery, where we stimulate the larger economy, help fix the mortgage crisis, and create a more energy-independent nation, all at the same time.

I got all we need except a catchy name; with that in mind let’s move on to the description of how the Happy Super Fun Day Peace Lotto Stimulus Thingy works.

...In this world, the two cities – the earthly and the heavenly – are commingled; but hereafter the predestinate and the reprobate will be separated. In this life we cannot know who, even among our seeming enemies, are to be found ultimately among the elect...

--Bertrand Russell, explaining St. Augustine, in the book A History of Western Philosophy

So it couldn’t be any simpler: what I have in mind, to illustrate our point, is a giant national lottery, and it wouldn’t cost a dime to enter.

First prize would be directed toward cleaning up the mortgage crisis by either getting folks out from “under water”, lowering their current monthly payments, or converting them from renters into homeowners: if you’re one of the 10,000 first place winners, you get $250,000 to spend on either paying down your mortgage or to buy a house of your choice if you don’t have one now.

Second prize involves “greening” America’s homes; the idea being that if we cut America’s heating, air conditioning, and hot water bills, we free up billions of newly productive dollars to create long-term self-sustaining consumer demand – and that means you can take some of that power bill money and go out and have a nice dinner with the kids again.

10,000 winners would each get $50,000, and with that you could easily replace a whole lot of windows with better-insulated ones…or you could get some solar panels, or put up that rooftop wind generator you’ve been thinking about, and you could pay for the electrical connections to get you in the business of selling power back to your utility. Don’t own your house? That’s OK, we’ll “green” it up anyway, with the owner’s permission – and if that can’t be arranged, then maybe we’ll have to just award you third prize instead.

The idea behind our third prize is to lower the amount of money we spend every year on imported oil; to that end we would give 50,000 third place winners $40,000 to spend on a vehicle that gets 40 MPG or better – and because we don’t want to “disincentive” inexpensive green cars, if you can arrange to buy two cars for $40,000, we’ll do that, too. (And hey, just to be fair: if you were “bumped down” from second place, let’s make your “car credit” $50,000.)

That’s 70,000 winners, folks, who could end up with a new house, or a new car, or a newly energy-efficient home – and that doesn’t give a complete picture of just how much we’re really spending right now blowing up Afghanistan.

You see, we’re spending so much right now that we could give away all this stuff every single month of the year with all the money we’re dumping “Over There” instead – and even that doesn’t tell the whole story, because all that stuff...all the houses and all the cars and all the energy improvements...represents only 50% of what we’re spending every month Over There.

And all that money doesn’t even include what we’re spending on our other wars, overt and covert, in Iraq, Pakistan, Libya, Somalia, the Philippines, Yemen, Iran, Mexico, Columbia, Venezuela, and, of course, the one we fight right here in the good ol’ USA: The War On Drugs.

So whaddaya think, America?

Should we continue the endless war and keep on looking for those last 100 or so Al Qaeda fighters in Afghanistan, to the tune of $100 million a month for each guy, for the next decade or so…or would you rather do a giant lottery for a couple of years, for half the cost of what we’re spending every month over there now, that creates lots and lots of jobs and permanently lowers our national energy bill?

I think I know which one you want – and that’s just too bad, because we aren’t gonna get it anytime soon, now are we?

Tuesday, May 10, 2011

On Killing Medicare, Or, You Stand Up, They Run Scared

Oh, my, has there been a lot of news since we spoke last about the Potential Impending Death Of Medicare: obviously we’re going to have to talk about the implications of Osama Bin Laden’s death (but we’ll do that another day), President Obama very publicly congratulated Donald Trump for having the leadership skills to know that Gary Busey was the one who needed to be fired after the way he ran the men’s cooking team on “The Apprentice”, and, of course, there was that “extreme ironing incident” on the M1 near London’s Mill Hill.

But what you may not have noticed is that in the past two weeks the Grim Weeper himself, Speaker of the House John Boehner, has gone from saying “I fully support Paul Ryan’s budget, including on Medicare” to saying that the Paul Ryan “Let’s Kill Medicare” plan is “an idea … worthy of consideration”—and when that happens that quickly you know somebody applied what we might politely describe as being at least “an equal and opposite force”.

And what I’m here to suggest today is that the opposite force in question…is you.

When I left for college, I was determined never to be a victim again. I would take my lead from the Hollywood tough guys I had always looked up to: Charles Bronson, Clint Eastwood, Ned Beatty. So on Day One of my freshman year at Dartmouth, I walked into class and punched the first person I saw—my Ethics professor, Dr. Buneta.

--From the book I Am America (And So Can You!), by Stephen Colbert

So as we said, it just a couple of weeks ago that we were talking about the then-underway Congressional Recess and killing Medicare and how you could go make yourself well understood by your local member of Congress; people did exactly that, and all of a sudden the backpedaling was under way.

As we mentioned, back then it was full speed ahead for the Ryan budget plan—but two weeks of facing the voters later, Michelle Bachmann, the Chair of Congress’ Tea Party Caucus and the Woman Who Would Usurp Sarah Palin, says that:

I supported that budget blueprint, though I’ve expressed caution about how we approach the issue of Medicare. We must keep our promises to those who receive Medicare benefits, and those who are nearing the age of Medicare eligibility. Our challenge is to reduce the soaring amounts that government spends on health care, without burdening those who are most vulnerable.

And it’s not just her: virtually no legislation moves through the House unless it first clears the Ways and Means Committee, and Chairman Dave Camp says this about the Ryan plan…

“I am not interested in laying down more markers. I am interested in solutions.”

…and that is his way of saying Ryan’s proposal is toast.

Beyond that, it looks like the Republicans’ most immediate “tactical” effort, tying big cuts in the program to an expansion of the Federal Government’s “debt ceiling”, is also coming apart at the seams; to that end we have the Republican House leadership now suggesting that they understand the urgency of passing the debt ceiling even if the Medicare “reforms” are not in that agreement.

(There is, however, an element of uncertainty still extant: Speaker Weeper spoke to the Economic Club of New York Monday; he told them he’s going to attach lots of conditions to that debt ceiling extension, after which he went off to a private spa to be dipped in whatever orange liquid they use to obtain his peculiar hue.)

Republican Representative Joe Walsh, of Illinois’ 8th, says that he would like to see the Party continue to push the Ryan plan as an issue in the ’12 campaign. That might work well in certain Congressional races, but it would seem to be a problem for any Republican Presidential candidate—and we should note that Walsh himself was elected in ’10 with a very narrow margin of victory.

So that’s all good news, but it’s probably not the end of the story…and if you ask me, the next battle is going to look more like no battle at all.

Here’s what I mean:

A great way to negotiate a deal is to start out with a crazy demand, and then, when that idea falls off the table, come back with something slightly less crazy that looks good enough to the other side to be acceptable.

Another variation on this theme is to start out with an extreme demand, and then you “meet somewhere in the middle”, which ends up moving the entire negotiation farther in your direction than you might have ever achieved by “normal means”.

You would think Democrats would be smart enough to not go along with such a strategy—but with Osama dead, and the “Democrats are soft on defense” argument getting tougher to make all the time, there is going to be a ton of effort going into the ’12 campaign to show that Democrats are “soft on the deficit”, and there is a real possibility that this Administration and certain Democrats in Congress will be susceptible to some of that pressure.

This will begin to play itself out, I suspect, as the effort to reconcile the budget visions offered from the House, Senate, and Administration continues through the summer—and if you want to get a sense of how that battle might look, check out today’s hearing (Perspectives on Deficit Reduction: Social Security) before the Senate Finance Committee.

Senate Finance is Max Baucus’ Committee (Orrin Hatch is Ranking Member), so this is a Blue Dog Chairman; he’s also one of those who might be happy to make compromises to “lower the deficit” that we won’t like—including supporting cuts to Social Security or raiding the Social Security Trust Funds.

One way that could be done…very quietly…would be to put a cap on all Federal spending, and then lower that cap by some amount each year, ignoring the fact that Social Security has its own funding source and is in no way connected to the deficit—and they tell me that’s what Nancy Altman, the co-chair of Strengthen Social Security, is going to be saying to the assembled Senators today:

“Social Security lacks the legal authority to deficit-spend, and so, cannot run a deficit. Because it cannot run a deficit, it cannot add to the federal deficit…

Some policymakers are proposing a so-called universal cap as a mechanism to control federal spending. It is important to understand that unlike the general fund, Social Security already has an automatic spending cap. If Social Security were ever to lack sufficient revenue to cover the cost of scheduled benefits, the law provides that those benefits be reduced automatically

To include Social Security in deficit legislation, even with the explanation that the inclusion has nothing to do with deficit reduction, risks reinforcing the widespread belief that Congress is raiding the trust fund…”

(Full Disclosure: I’m associated with the Campaign for America’s Future, and they’re part of Strengthen Social Security.)

It’s a short story this time, so let’s wrap it up here: we’ve had great success this past couple of weeks convincing pretty much every politician in the United States of America that Social Security and Medicare/Medicaid matter to us, and that getting crazy with these programs really is political suicide—but these programs have been under assault since the very day they were born by people with their own agendas and more or less all the money in the world to fund an endless series of fights…and you can kill a popular program in subtle ways that most voters might not even notice until it’s too late; with all that in mind, this one very big victory is not a war finally won.

The shape of the next fight is going to be made more visible today, and I would encourage you to swing by C-SPAN to see how it went

Even more importantly, I want y’all to think about what this past couple of weeks really meant: we went out in force, and we scared the hell out of the politicians who thought they would slam through some major changes that we’d just somehow…accept.

Democrats and Republicans alike need a bit of direction as this electoral season gets underway, and the messages we send out there obviously have the power to turn an entire discussion, so look at what you did, let it give you a bit of confidence that you can have an impact…even in this seemingly impossible year…and then let’s get ready for the next fight, which is going to be just as rough, and just as high-stakes—but this time much of the action will be subtle and deliberately “obfuscated”, and we’ll have to be even more alert if we want to see the scam before it gets set into stone.

And of course, we’ve got to keep showing up for those “Town Halls”, eh?

FULL DISCLOSURE: This post was written with the support of the CAF State Blogger's Network Project.