2010 - %3, April

We're Still at War: Photo of the Day for April 23, 2010

Fri Apr. 23, 2010 8:05 AM EDT

Pfc. Alejandro Munoz, a military policeman with Headquarters Company, 4th Stryker Brigade Combat Team, 2nd Infantry Division, stands underneath a once-useful footbridge, ensuring that the traffic through the area is clear during a meeting with local contractors, on April 6. Photo via the US Army.

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MoJo Wins National Magazine Award

| Thu Apr. 22, 2010 11:10 PM EDT

ellie_NMA.jpg You see that shiny elephant sculpture to the right? That's the National Magazine Award we won for General Excellence tonight (100,000 to 250,000 circulation). These pointy beauties, otherwise known as Ellies, are awarded annually in New York by the American Society of Magazine Editors. They're basically the Oscars of the magazine world. Winning General Excellence? That's like winning Best Picture.

(Check out this year's National Magazine Award-winning issues here, here, and here.)

Congratulations to all the nominees in our category: Foreign Policy, Paste, Garden & Gun, and Martha Stewart Weddings

View the full list of ASME winners and nominees here.

UPDATE: This, of course, just proves that reader-supported journalism really works. We hope you enjoy your Ellie!

Conservatives and Financial Reform

| Thu Apr. 22, 2010 8:16 PM EDT

Jonathan Chait remarks on the "intellectual disarray" in right wing circles concerning financial reform:

Conservatives do not know what to say or think about this. A few of them are calling for breaking up the big banks. A few more are following the Frank Luntz line that regulation is a big favor to Wall Street. But mostly they're saying... nothing. It's almost a non-issue at the National Review and Weekly Standard blogs.

This is something that's been nagging at me lately too. Most of the blogs that spend a lot of time on regulatory reform are liberal or leftish blogs. Most of the books on the subject that aren't pure journalistic efforts generally come at it from a lefty point of view too. Conservative bloggers, columnists, and talking heads just don't seem to have an awful lot to say on the issue.

Why? They had plenty to say about healthcare reform, a similarly policy-heavy debate. And regulatory issues have long been a staple of the right. So why don't conservatives have more to say about it? Jon proposes an answer:

You can see why the issue would pose problems for the right. First, it threatens the self-image they've developed over the last year as opponents of the government-business nexus. Second, it's difficult to work out a free market response. If you let Wall Street invest however it likes, it will eventually precipitate a financial crisis, with massive government intervention being the only option to save the economy. Or else you can break up the big banks, or limit their ability to take on systemic risk. Either way, government has to get involved at some step in the process. It almost seems like conservatives can't choose which form of government intervention to accept, so many of them just aren't choosing.

Maybe. I don't have a better answer, anyway. But it's not really very compelling. In the past conservatives have always been able to marry their middle class NASCAR wing and their big business wing without much difficulty, and they've always been able to construct a free market response of some kind no matter what the issue is. It's hard to believe that banking reform is really all that big a challenge for them.

One possibility, I suppose, is that this took them by surprise. On most subjects — healthcare, climate change, taxes, etc. — the right has a well honed arsenal of proposals. They may or may not make sense, but they've got 'em. Financial reform, conversely, is something they've never even thought about. For the past 30 years their only mantra has been to tear down regulation, and that's pretty obviously a nonstarter right now. So they've got nothing.

Kerry: Three Big Oil Companies Likely to Back Climate Bill

| Thu Apr. 22, 2010 7:43 PM EDT

When Sens. John Kerry, Lindsey Graham and Joe Lieberman release their climate bill on Monday, they expect to have the backing of three of the five major oil companies, Mother Jones has learned. In a conference call with a coalition of progressive business leaders on Thursday evening, Kerry said he believes those companies will "actively participate in supporting this bill." He hopes the other big oil companies will at least hold their fire on the bill, and added that he believes the American Petroleum Institute (API), the oil industry's major trade group, will call off its ad campaign attacking the legislation.

Kerry also said that the Edison Electric Institute—the main trade group representing utilities—will support their measure. "We are bringing to the table a significant group of players who were never there for the Waxman-Markey bill," Kerry said. (While Edison supported Waxman-Markey, it was opposed by several big oil companies and API).

In the teleconference, organized by the We Can Lead coalition, Kerry outlined specific details from the bill that have not previously been publicly available. Here's a rundown:

  • The bill would remove the Environmental Protection Agency's authority to regulate carbon dioxide under the Clean Air Act, and the states' authority to set tougher emissions standards than the federal government.
  • There will be no fee—or "gas tax"—on transportation fuels. Instead, oil companies would also be required to obtain pollution permits but will not trade them on the market like other polluters. How this would work is not yet clear.
  • Agriculture would be entirely exempt from the cap on carbon emissions.
  • Manufacturers would not be included under a cap on greenhouse gases until 2016.
  • The bill would provide government-backed loan guarantees for the construction of 12 new nuclear power plants.
  • It will contain at least $10 billion to develop technologies to capture and store emissions from coal-fired power plants.
  • There will be new financial incentives for natural gas.
  • The bill would place an upper and lower limit on the price of pollution permits, known as a hard price collar. Businesses like this idea because it ensures a stable price on carbon. Environmental advocates don't like the idea because if the ceiling is set too low, industry will have no financial incentive to move to cleaner forms of energy.
  • The energy bill passed by the Energy and Natural Resources Committee last year will be adopted in full. This measure has sparked concerns among environmentalists for its handouts to nuclear and fossil fuel interests.

Some elements of the legislation remain in flux, Kerry said. The senators still haven't figured out how to deal with the contentious question of offshore drilling. He added that they are still trying to secure the support of the Chamber of Commerce, another prime foe of the House measure, but remain hopeful that the powerful business lobby might endorse the bill.

UPDATE: Post Carbon reports that the three oil companies expected to endorse the bill are Shell, BP and ConocoPhillips.

Who's Afraid of Finance Industry Profits?

| Thu Apr. 22, 2010 5:38 PM EDT

Matt Yglesias wants to know why so many progressives are obsessed by the insane profitability of the financial sector:

Consider two problems:

— Financial institution failures that cost taxpayers billions.
— Run-amok income inequality.

The policy response to the first is “regulation modernizing the powers of regulators.” And the policy response to the second is higher taxes to finance more and better public services. Is there really some third problem that trying to make Wall Street less profitable addresses? At the end of the day, insofar as people want to entrust their money to greedy risk-taking bankers, I would rather have those bankers be located in New York and paying taxes to the IRS that finance great schools and shiny new mass transit systems than have the bankers be located in Zurich and financing their schools and transit systems.

Speaking only for myself, I'd say this misconstrues the issue. Finance sector profitability isn't a problem per se, it's the symptom of a problem. Put another way, you might say that industry profits are a useful metric for assessing how bad the financialization of the U.S. economy has become. Historically, the financialization of a country's economy is a huge blinking red light, and we'd do well to avoid it.

More prosaically, industry profits are also a good way of measuring whether our regulations are working. A safe, efficient banking system just shouldn't be enormously profitable. So if our regulations are working, you'll see profits decline. Conversely, if they stay high, there's something wrong. Finance sector profitability may not be the only (or even the best) way to measure if Wall Street is working well, but it makes a pretty decent canary in the coal mine.

Remember: at its core, finance is supposed to be a way of allocating capital to the real economy. The way it does this might be simple or it might be complex, but its fundamental purpose is to provide a service to the business community. When, as Martin Wolf put it yesterday, it instead becomes a "machine to transfer income and wealth from outsiders to insiders," the real economy suffers as capital is increasingly misallocated. That's the problem we need to address, and the best way to address it is to make pure finance less profitable. It's better to refocus Wall Street into caring primarily about the moderately profitable business of providing efficient funding to the rest of the world than it is to let them do whatever they want and then try to tax the excess away.

(FWIW, I've never been sold on the idea of taxation as the best policy response to income inequality anyway. But that's a subject for another post.)

UPDATE: There's also a political economy problem with outsized finance industry profits, which Ezra Klein gets at here. Taxation can mitigate this, though even here I don't think it's an ideal solution.

Another thing to keep in mind: taxing the industry doesn't really motivate Wall Street to engage in less risky, more socially useful activities. To do that, you have to tax riskier activities differently from less risky activities. To say the least, that's pretty tricky.

Is Your iPad Making Toilet Paper Scratchier?

| Thu Apr. 22, 2010 4:55 PM EDT

Last year, the New York Times reported on the staggering environmental impact of making super-soft toilet paper from virgin forests. But now, according to this week's cover story in Chemical & Engineering News, it's getting harder to make soft TP out of recycled paper: As consumers ditch magazines, newspapers, and paper bills in favor of the electronic versions, companies that produce recycled paper products are facing a shortage of raw materials.

One major problem is offices are using less white paper—which is coveted by producers of recycled toilet paper because its long fibers make for a softer product. That means manufacturers are now using lower-quality recycled paper, so the fibers are shorter and produce a rougher product—and the more times paper gets recycled, the shorter those fibers become. The challenge, then, is for companies to figure out how to do more with less:

Chemical companies that supply papermakers with bleaching and processing aids are introducing new products to make those fibers go further. The best of them also reduce costs by helping paper mills recycle water and save energy.

The pulp and paper industry is one of the largest consumers of chemicals in North America, according to the market research firm Frost & Sullivan. Every ton of paper and paperboard produced requires 600 lb of basic and specialty chemicals. Most paper chemicals firms offer a wide range of products, from commodities such as hydrogen peroxide to process chemicals including enzymes, biocides, and defoamers to functional aids such as sizing chemicals, coatings, and binders.

So either you destroy virgin forests to make a really soft non-recycled TP, or you pump a ton of chemicals into recycled paper to make the short-fibered stuff easier on our backsides. All of which has me wondering: Could we learn to live with a little scratchiness?

Via fellow MoJo staffer and sometimes Blue Marble contributor Stephanie Volkoff Green.

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Cutting Costs the WellPoint Way

| Thu Apr. 22, 2010 3:03 PM EDT

Cancer survivor Murray Waas files a dispatch for Reuters about WellPoint's treatment of women who contracted breast cancer:

The women all paid their premiums on time. Before they fell ill, none had any problems with their insurance. Initially, they believed their policies had been canceled by mistake.

They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.

Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information.

The whole story is here.

Senate Climate Bill: Five Hot Spots

| Thu Apr. 22, 2010 2:35 PM EDT

After months of closed-door huddles with lawmakers and lobbyists, Sens. John Kerry (D-Mass.), Lindsey Graham (R-SC), and Joe Lieberman (I-Conn.) are expected to finally unveil their long-awaited climate and energy bill on April 26.

The bill is expected to stick to the broad goals of the Waxman-Markey cap-and-trade bill passed by the House last June: a 17 percent emissions cut by 2020 and a reduction of roughly 80 percent by 2050. But while the bill will likely contain a cap-and-trade component, it will probably mix and match a variety of methods to reduce planet-warming gases. For instance, it's expected to introduce a cap on carbon emissions produced by utilities in 2012, and later include emissions from other major sources like steel, glass, and cement manufacturers in 2016. The system for trading pollution permits will likely be more limited than previous iterations of the plan. The bill is also expected to include financial incentives for, among other things, nuclear power, offshore oil and gas drilling, and technologies to capture and store emissions from coal-fired power plants.

But there's a lot more we don't know about the bill, and plenty of points of contention. Here are the five biggest sticking points:

Drill, maybe, drill?: President Barack Obama's big announcement last month that he would open vast new areas of the outer continental shelf to offshore oil and gas drilling made oil-state Democrats and many Republicans happy. Sen.Mary Landrieu (D-La) cheered the announcement, as did Sen. Lisa Murkowski (R-Alaska)—both of whom are seen as possible "yes" votes for a climate bill. On the other hand, ten coastal state progressives are threatening to oppose any bill that expands offshore drilling.

There are two contentious issues here: the drilling itself, and how the revenues from the sale of leases for drilling sites would be distributed. Some senators favor distributing part of the revenues to the states that consent to drilling, arguing that they should be compensated for their resources. But enviros oppose this proposal, arguing that it creates a perverse incentive for states to expand drilling. And some senators—like Jeff Bingaman (D-N.M.), Byron Dorgan (D-N.D.) and Jay Rockefeller (D-W.Va.)—say revenue sharing would take away hundreds of billions of dollars in much-needed income for the federal government. Murkowski summed up the dilemma nicely for the Wall Street Journal: "Drilling is just one piece of controversy in a bill that is obviously very difficult to build. Some would suggest that as you try to bring certain members on to an initiative, for every one you get on, you have two that leap out of the wheelbarrow."

What happens to existing environmental regs?: One big question hanging over the climate bill is what happens to certain existing environmental laws, both federal legislation like the Clean Air Act and state-level efforts to cut carbon emissions. The House bill, for instance, explicitly states that its cap-and-trade system will replace regulations that the Environmental Protection Agency is crafting under the authority of the Clean Air Act. But a number of climate activists warned that this would mean that while new coal-fired power plants would be cleaner, a number of old, dirty coal plants would remain unregulated. The EPA's Clean Air Act authority was restored in the bill that Kerry and Barbara Boxer (D-Calif.) introduced last fall, but likely didn't survive the chopping block in the new bill. This is sure to rile up 13 Democratic senators who wrote to Majority Leader Harry Reid last month asking that a final bill protect the EPA's authority. And it's also a key issue for environmental advocates. "If the Clean Air Act is weakened, we're going to go to the mat for that," Sierra Club executive director Michael Brune told Mother Jones.

A number of moderate Democrats and Republicans want to eliminate not just the EPA authority, but also the rights of states to set climate targets that are tougher than federal rules. On Wednesday, George Voinovich (R-Ohio), another one possible Republican vote, said the bill would have to preempt both the EPA and state regulations to win his vote. And 10 industrial state Dems included this in a list of demands sent to the bill's authors last week. But progressive states like California have pledged to fight any attempts to undermine their ability to set more ambitious goals.

Step on the gas (tax): A few weeks ago, it looked like the bill would leave the oil industry out of a cap-and-trade system and instead establish a separate fee on transportation fuels (ie. gasoline and diesel), to be paid at the pump by consumers. Oil companies like this idea (mostly because they came up with it). But now Kerry is pretending the concept was never under consideration, and Graham says that they've dropped the fee idea. How will the bill deal with oil? Who the heck knows.

What's in the trade winds?: At least 10 Dems from industrial states are worried about what the bill does (or doesn't do) to protect industries—like, say, steel—that are big users of energy and very vulnerable to offshore competition. Those senators want to delay regulations on manufacturers until 2016, limit the price on emissions, and create a "regionally equitable distribution of allowances." (This is senator-speak for financial handouts to industries that will be hit hard by limits on greenhouse gases.) The senators have also called for a border adjustment, which is a fee on imports from countries that don't have a cap on pollution. Last year, President Obama dismissed this idea as overly "protectionist." But his energy and climate adviser Carol Browner said this week that the administration has warmed to the notion. "I think it's fair to say a final bill will be very mindful of the needs of these particular sectors of the economy," Browner said Tuesday.

Show me the money: In the House debate last year, one of the biggest foodfights was over the distribution of tens of billions of dollars worth of carbon pollution permits. (The permits are the currency of the cap-and-trade system: companies that exceed the "cap" on their emissions must buy more permits to cover the extra carbon.) The House members devised a system that handed out the majority of permits to polluters, auctioned off others, and distributed revenues to a variety of industries and interests. That included $60 billion to develop "clean coal" technologies, free permits for heavy emitters like manufacturers, oil refiners, and merchant coal generators, and a rebate program for low-income energy consumers. Now Kerry, Graham, and Lieberman get to do this all over again. Kerry has promised that the bill will include "huge assistance" to the coal industry, as well as rebates to consumers. If you think the deal-cutting that went on in health care was bad, you ain't seen nothing yet.

Fiore Cartoon: Born to Lose

Thu Apr. 22, 2010 2:24 PM EDT

Wall Street barons have made a fortune off an unconventional strategy: blowing it. In the cartoon below, watch satirist Mark Fiore tell the inspirational American tale of winning...by losing.

Obligatory Earth Day Post

| Thu Apr. 22, 2010 2:21 PM EDT

Perhaps I should mention that today is Earth Day. It's the 40th anniversary of the holiday in fact. Now, whether this day matters any more is a subject of much debate (see green bloggers, including me, weigh in over at Treehugger). I think Earth Day is a good reminder of just how much environmental advocates and allies achieved in the early years: the Clean Air Act, the Clean Water Act, and the Occupational Safety and Health Act, just to name a few. But this year, it should serve as a reminder that much, much more needs to be done on today's biggest environmental problem: climate change.

Where are we on that? Well, the lead Republican working on climate and energy legislation last week rejected the plan to roll out the bill on Earth Day, downplaying the idea that the legislation has anything to do with the environment. Meanwhile, it's not even clear what exactly that bill looks like, as the authors struggle to build some manner of franken-climate-bill that can attract 60 votes. And from recent reports it looks likely that the bill will move further down the list of legislative priorities this year, behind financial reform and then immigration.

John Kerry, the lead Democrat working on legislation, tried to strike a hopeful, if somewhat plaintive, call to action on Thursday. This year, he said in a statement, is "our last and best shot" to get a bill passed. Thus, Earth Day, "must be a reflection point that helps make this the year the Senate passes comprehensive climate and energy legislation." (He said pretty much the same thing in an op-ed in Politico today too.)

With all the not-very-hope-inspiring-news of late, I'm really hoping that this is neither the "last" nor "best" shot at getting the policy right. But Kerry is certainly right that Earth Day should be treated as the impetus for action.