Obama’s Energy bill: A recipe for economic destruction
By raising energy prices a large number of streams and tributaries will be eliminated while others will be redirected into less productive lines. The more energy prices rise the greater will be the damage. Instead of accumulating capital America would be accumulating malinvestments thanks to Obama’s capital destroying legacy. Let us, for example, assume that the US is reduced to a pathetic one per cent annual growth in GDP. By 2050 GDP would have increased to $21 trillion dollars, $9 trillion of which is consumed by energy taxes. This would come to 43 per cent of GDP.
To top it off, Americans will be facing an avalanche of tax increases in 2010 to 2011, courtesy of a Democratic ruled Congress. Obama has made it clear that the aim of increased taxation is income equality (except for his super rich pals whose vast wealth will remained untaxed) which will increase the level of consumption*. This means less investment, which in turn will hit living standards.eb
Lots of comments in this one………..
Excuse me, but isn’t this the same old "Chicago School" argument, i.e. lower the taxes of the very rich so that they will then invest and therefore produce jobs and a better standard of living for the working class? "Trickle down economics." "A rising tide floats all boats."
Well, I thought we just got through proving this didn’t work. What happened was that enormous wealth got transferred from lower classes to the very rich. And when the working class does not have enough money to consume as they are taught, then they overspend, charge up their credit cards, refinance their mortgages and spend that, and in general go broke from their enormous debt. Not totally unlike what our country is doing right now……too much overspending, too much debt….and guess what? We’re bankrupt, as individuals and as a country, by any fair analysis.
The argument about an "avalanche of tax increases" is really just a resistance to tax increases on the most wealthy.
As far as those whose wealth remains untaxed, it seems to me that we see this regardless of who the puppet president is.
We need to get over what the Repubs do vs. what the Dems do. Haven’t we figured out yet that we really only have one party in this country – the party of the greedy/rich/elite/corporate/financial/government/military complex? Folks, we’re going in the toilet, at faster and faster rates.
Just watch what this so-called "turn around" does, come another six month! And then some years after that.
The U.S., in terms of energy, particularly, has developed the economic dynamics of a slumlord in a tight real estate market. Take the electrical grid, for example. You have high demand, no regional competition, generally speaking. If the infrastructure degrades, will the owners put their funds into building new infrastructure, or will they milk it like a cash cow, problems or not, because there is no real choice for the consumer? They will raise prices to the price point they can get away with, too. The only difference between slumlords and energy producers, is energy producers are in an even stronger position than slumlords. The Friedman model has to be read with Marx doctrine before you can appreciate what actually goes on. Neither one of them are completely off base, but Marx is probably more correct in his perspective than Friedman in a capitalist society that has matured to the rotting stage. I’m not a Communist, but can see some of the obvious and inevitable problems with capitalism, particularly with regards to infrastructure. There has to be some kind of mediating or ameliorating force.
Somehow, people come here, presumably after digesting the CC, who still don’t get the second "E."
So exactly how does this cap and trade bill help the second E? It doesn’t. While certainly would support tax credits or other incentives to develop alternative energy, I don’t support punishing those who use the current infrastructure. And there are a lot of provisions in this bill that are merely designed to allow the government to take over more and more aspects of daily life. That’s why it was rammed though in a hurry, with 350 pages added at 3 am on the morning of the vote. There was only one copy available in House chambers when everyone showed up to debate before the final vote. Those who complained were told they could access it online, but internet access isn’t available in house chambers – anyone who wanted to read it would have to leave the debate to do so.
One of the sneaky provisions that is in the bill will require homeowners to undergo an inspection prior to selling their house. If the house does not meet specific energy conservation standards, the homeowner will be required to bring the house up to those standards, at their expense, before the sale will be approved by the federal government!
It is NOT OK for the government to be meddling in private transactions like this. Big Brother is watching and extending his reach.
IMHO the "game" is over if this goes thru….it will be just how long it takes.
Right Doc. I sometimes think the gov’t stays up all night, trying to figure out new ways to make us subservient to them, and to get more taxes out of us. For example, here in WA state (I don’t know where else) when you sell your home, after paying all the required taxes on it for as long as you’ve owned it, you are charged an "excise" tax on the sales price (not on the profit) so even if you lost money on the deal, you still owe the excise tax on the selling price, even before the realtors fee is deducted. They labeled it an excise tax so we can’t claim it as a tax on our income tax return.
One other thing. I have two friends who are pretty big developers, and they both tell me that when they begin a development, they automatically add 35% to the cost of it, just to get through all the damn red tape, inspections, etc. at all the agencies. I have to wonder if all those inspections really help people, or just add to the payroll at city hall.
First, I think it’s important to recognize that this isn’t about saving energy, it’s just another scam.
Goldman Sachs has created a rigged futures market to trade the credits. Think about that for a minute, the penalties will profit big banks instead of going to a fund that might be used to reduce energy costs.
The insanity is that another, over 2,000 page bill written by lobbyists, was rushed through the House before anyone could read it. The bill is a nightmare from the parts that I read.
Our governbank is blowing another bubble…read the following…Cap & Trade – Goldman Sachs creates another ponzi scheme
So exactly how does this cap and trade bill help the second E?
I’m not particularly defending cap&trade. I think that’s a misguided attempt to insert market mechanisms into a problem that really requires a regulatory solution. What I was responding to was the OP:
By raising energy prices a large number of streams and tributaries will be eliminated while others will be redirected into less productive lines. The more energy prices rise the greater will be the damage…. etc.
I think a lot of people here are so blinded by their knee-jerk allegiance to radical free-market economics that they can’t comprehend the underlying realities of energy. Those "streams and tributaries" are the problem, not something that needs to be kept on life support. While I would certainly love to see a "hands off" approach to the problems of the banks, auto manutacturers, and financial firms, the energy sector is not as simple as that. There is a huge momentum in the energy sector that’s not going to respond to some simple tax breaks. Those have been tried with varying degrees of seriousness since the Carter admin. Though it’s a help, especially if substantive, it doesn’t change the fact that fossil fuel resources here somewhere near the peak in production is an absurdly good deal. If there are ever going to be an effetive market signal given to get us away from fossil fuels, it’s going to have to involve a big price increase, something closer to what the Europeans pay, and probably eventually more than that.
Again, I don’t like ths approach put forward by the admin, but it sounds to me like any approach that involves raising prices to an amount that truly accounts for the costs of fossil fuels interms of their environmental and geo-economic impacts would be opposed by you true believers.
IMHO the "game" is over if this goes thru….it will be just how long it takes.
I’m not so optimistic.
I’m going to be one more voice of dissent and play the Devil’s advocate. Green_achers made many good points. I’m going to be more blunt – free market economics has utterly failed us and only through government meddling are we going to "motivate" power companies, auto manufacturers, etc. to head in a direction that we NEED them to.
For decades, we heard car manufacturers tell us that higher fuel efficiency standards would kill them. All the while, in countries where energy cost what it should, cars got smaller and much more efficient. Plus, they got better and before long, the American autos were uncompetitive. Unfortunately, the politicians from the auto states had enough power to prevent us from heading in the right direction. Now we use millions more gallons of fuel than we need to, our auto industry is bankrupt, and our conspicuous consumption has helped make peak-oil come sooner than needed.
What about all the subsidized dirty fuels? While we could have been plowing full speed ahead into high efficiency autos, homes, appliances, and alternative energy, we CHOSE to squander the time and resources. Every effort to pursue efficiency and renewable solutions was squashed. Fossil fuels received unfair advantages, making it the drug of choice for the American public.
Was it all bad? No. Cheap fuel allowed the US to prosper obscenely for the last couple decades. These riches pushed us to further build big and wasteful, building millions of "field mansions". Then, to help things along, we dropped interest rates to near zero and seduced our populace into living way beyond their needs.
Cap and trade motivates investment in alternative "clean" energy. Germany’s build-out in solar happened very quickly. While one can argue that it didn’t reduce CO2 emissions, the economic advantages of developing renewables caused the type of disruptive change in the market that we need. We need decisive, forced investment in this direction in order to reduce the impact of peak-oil. If it cost $147 more for energy in 2020, I consider it a bargain. Even if it’s $1,000 more, it’s still a bargain if it softens the hard landing that we’re headed for from peak oil. Plus, it’s not just higher energy costs, it’s numerous skilled labor jobs created. Yes, people will also lose their jobs. Obsolete jobs that would get lost anyway. Replaced by better jobs in industries with a future. Change is painful.
Regarding the comment about forcing energy efficient housing and keeping the gov’t out of our private transactions – I strenuously disagree. I am in the energy efficiency business and can tell you that we NEED to force the testing and improvement of homes. (and not because it will get me more jobs – it won’t, I’m not involved in that specific testing). People are spending tens of thousands of dollars on granite countertops, master suites the size of homes, separate bathrooms for every bedroom and other extravagances, and yet they go "low bid" on the HVAC, get the lowest efficiency equipment and insulation, and take an already horrendously inefficient home and make it worse. It’s not a private transaction, it’s a decision that affects our entire society. It’s this type of selfishness that caused the mes that we’re in now. Each of us is NOT an island. Our decisions are multiplied millions of times, by others in the population who share our views. 20 million people saying "I’m going build this 8000 SF house that uses ten times the amount of energy as a typical house because I CAN" is unconscionable. I’m not making this up. A friend of mine is an insulator, and one wealthy client was using $6000/month of heating oil.My friend suggested that his attic was uninsulated and most of the heat was going out the roof. The client said, in essence "so what? I can afford it".
Ok, this has been a long rant, and I’m new to these discussions so I don’t want to wear out my welcome too fast 🙂 I just want to show that this is not a black and white issue. The energy bill should not just be seen as a misguided white elephant. There is tremendous long term good that is likely to come out of it. And while it is unfortunate that it is adding to our already huge deficit, I don’t see any option. The so-called "free market" has failed us.