How to Screw Your Constituents

Matt Yglesias watches the sausage grinder at work on the Waxman-Markey climate bill and is especially outraged at so-called moderates who insist that a large fraction of carbon emission permits should be given away, rather than auctioned off:

The moderate bloc [...] has portrayed itself as concerned with the climate crisis but worried about the tradeoffs with short-term economic growth. But the concession they’ve forced here doesn’t do anything to boost short-term growth. Instead, whereas auctioning the permits would have made rich people bear most of the cost of reducing emissions, by giving the permits away you make poor people bear most of the cost.

The environmental impact of the two methods is similar, and the overall costs are similar. But the moderates acted swiftly and decisively to reallocate a portion of the costs onto the backs of the poor. And they’ve done so specifically under guise of looking out for the interests of the working class. They ought to be ashamed of themselves.

In a way, this is even worse than Matt makes it out to be.  As I understand the politics of the situation, the problem is basically regional: a lot of moderates come from the midwest and the south, where they rely on coal-fired plants for the bulk of their electricity.  These plants emit more carbon than even other fossil-fueled plants, and way more carbon than hydro or solar plants.  And to make it even worse, most of these states have done very little to become more energy efficient over the years.  Put all this together and the bottom line is that carbon pricing hits them much harder than it hits, say, California.

This means that any bill that raises the price of carbon is disproportionately painful for the midwest and the south.  So they want relief.  Now, you can argue that global warming is such serious stuff that they shouldn't be given any, but let's face it: this kind of regional politics is pretty standard stuff.  It's hard to get too bent out of shape about it.

Except for one thing: it won't work.  The theory here is that giving away permits to coal-fired plants means they don't have to raise prices.  After all, the permits are free.  And this means that voters in the midwest and the south won't start hauling out their pitchforks and throwing out incumbents because their electric bills have gone up.

But guess what?  The electric utilities are going to raise their prices anyway.  Kevin Drum explains:

The economic theory involved is a little hairy, but those permits have a value on the open market, and that means that in many cases marginal producers can make more money selling their permits than by producing power. They'll only be willing to produce power if they can raise prices enough to make the power-producing business more profitable than the permit-selling business, and eventually everyone will jack up prices to follow suit.

This may sound abstract—even a bit fantastical—but it's absolutely real. In fact, when permits in phase one of Europe's ETS system were handed out for free, electricity prices rose and power companies pocketed a windfall profit (which Britain's Department of Trade and Industry estimated at about $1.1 billion a year in the UK alone). Dale Bryk, an attorney with the Natural Resources Defense Council (NRDC), puts it bluntly: "If you ask them point-blank if they'll charge customers for free permits, they won't tell you. But they know they will."

If moderates were demanding free permits because they wanted to keep electric prices in their states low for a few years while they work on converting to new power sources, that would be one thing.  We could argue about whether it's a good idea, but at least it's normal, understandable stuff.  But that's not what they're doing.  Prices are going to go up regardless, and the free permits do nothing except provide windfall profits to operators of coal plants.  The moderates pushing this "compromise" either don't understand basic economics, in which they case they need to learn some, or else they understand it perfectly well and like the idea of screwing their constituents in order to provide a bonanza for coal plant operators.  In either case, yes, they ought to be ashamed of themselves.

Last week, Mother Jones reported that Philip Zelikow, the Counselor to the State Department in the Bush administration, suspects that Dick Cheney was behind an order to "collect and destroy" all copies of an anti-torture memo he wrote. Zelikow also told Mother Jones about the existence of other memos arguing against torture. Two of those memos were released at a Senate Judiciary subcommittee hearing this morning, where Zelikow testified about the existence of a small group of dissidents—himself, state department legal adviser John Bellinger, and Gordon England, the deputy secretary of defense, among others—who tried to get the administration to change its detainee treatment policies in 2005 and 2006. You can read about the memos and Zelikow's testimony here.

Retail Sales

The economy continues to suck:

Retail sales decreased by 0.4% compared to the prior month, the Commerce Department said Wednesday. Economists expected an increase of 0.1%.

Sales in March were revised down, decreasing 1.3% instead of 1.2% as previously reported. Sales rose in January and February, after sliding six straight months.

So how long is this going to last? My rough guess is this: one way or another, the U.S. savings rate has to increase enough that we not only get rid of our trade deficit, but start to reverse it.  That's going to require a drop in domestic consumption on the order of 10% or so over the medium term. This can be masked somewhat by tax cuts and government stimulus and fluctuations in the exchange rate, but eventually consumption has to come down.

And it has!  The chart on the right, from Calculated Risk, tells the story: retail sales have dropped something like 12% in the past year or so.  That doesn't mean our trade deficit has reversed or anything — that's not likely to happen for quite a while — but it does mean that personal consumption might be getting close to sustainable levels now.  Maybe.  I wouldn't bet the ranch on it, but if you're looking for some slightly less grim news than usual, this is it.

The Anti-Cap-and-Trade Lobbying Blitz

Cap-and-trade legislation may clear Henry Waxman's Energy and Commerce Committee as early as next week. But are its supporters ready for it? The bill faces a hostile blizzard of ads and PR from big carbon emitters, whose spending has vastly outstripped that of environmental groups.

So far this year, opponents of climate change legislation have spent $76 million on ads while supporters have spent just $29 million, according to data from the Campaign Media Analysis Group obtained by the Guardian.  The oil, coal and gas industry also boosted its lobbying budget by 50 percent, spending $44 million in the first quarter of the year. In comparison, Grist reports, clean energy interests and environmental groups have managed to cough up less than half that sum.

The End of Universal Default?

I forgot to blog about this earlier, but here's the latest news on Chris Dodd's bill to bring a little common sense to the credit card industry:

Dodd's original bill had sought to ban all interest rate increases on existing balances.

Under the compromise measure, agreed to over the weekend by Dodd and Sen. Richard C. Shelby (R-Ala.), card issuers would be allowed to retroactively bump up rates for any borrower at least 60 days behind on payments. However, if the borrower subsequently paid on time for six months, the card issuer would have to restore the original rate.

The bill also would prohibit card issuers from increasing rates during the first year a credit card account was opened and would require them to get a customer's permission to process transactions that would push the account balance over the credit limit. Another provision would require card issuers to post credit card agreements online.

It's good to see that the credit card industry still has a friend in Richard Shelby.  We certainly wouldn't want to pass a law that completely prevents a company from retroactively raising the interest rate on a loan it's already made, would we?

Eh.  At least it's something.  Presumably this means that credit card companies can no longer retroactively increase your rates just because you were a few days late paying your water bill, either.  Though I think I'd want to read the fine print before I was sure of that.

In any case, now it's time to see if any Republicans will vote for this bill.  They might!  Constituents are pissed at credit card companies, after all.  In the past Republicans could prevent bills like this from even coming to a vote, but now that they're going to be forced to take a public position they just might decide that discretion is the better part of valor.  Cozying up to your finance industry pals is one thing, but losing your seat over it is quite another.

Liberty City 6 Convicted

After two mistrials because of hung juries, US attorneys succeeded today in convicting five Florida men of intending to blow up the Sears Tower... with explosives and a plan provided by an undercover FBI agent. The defendants, one of whom was acquitted, were called the Liberty City 6 and they now face possible sentences of up to 70 years in prison.

The trial has been hotly debated due to lack of physical evidence, and the nascency of the terrorist plot. The defendants, who lived in a poor neighborhood and some of whom were struggling fiscally, had no means to blow up the Sears Tower: no explosives, no guns, not even a video camera to take surveillance. In fact, the plot to blow up the Tower, plus vans for travel and a camera to survey the area, came from a FBI informant who had been arrested for domestic assault. The main pieces of evidence from the prosecution seemed to be an oath to Osama bin Laden some of the defendants made, and a list of desired materials (which did not include explosives) they gave to the informant.

You can read more about the case, and other examples of pre-emptive prosecution, in our 2008 article, "The Department of Pre-Crime."

Rove on Torture

On Fox News last night, Karl Rove suggested that President Obama's decision to treat captives decently will become an incentive for terrorists to join al-Qaeda:

It has served, frankly, I think, as a recruiting tool. They can now take these memoranda and go to prospective, you know, recruits and say, This is the worst that the enemy, the United States, would ever do to you....It’s given them a tool to make it more attractive to recruit people, and you know, this kind of thing is harmful to us over the long haul.

Even by the normal standards of torture apologetics, this is batshit crazy.  "The Americans are so civilized they treat their prisoners decently!  We must destroy these infidels!"

That's quite a sales pitch, isn't it? Once again, Rove is demonstrating the tin ear for human nature that led him to destroy the fortunes of the Republican Party in a mere eight years.

The Tragedy of the Cod

Guess what?  Cap-and trade isn't just for limiting carbon emissions.  Here's Jonathan Adler on the destruction of our fisheries:

Protecting fishery resources requires keeping fish catches to sustainable levels. The most effective way to do this is through so-called "catch-share" policies, a property-based conservation regime often called "IFQs" or (as some now say) "cap-and-trade for fish," which allocate tradeable shares of the catch among fishery participants.

....Greenwire reports that the Administration's budget request for NOAA includes a dramatic increase in funding for catch-share management. According to Greenwire, the request "indicates a major push from the administration" to push the adoption of catch-share systems in the nation's fisheries. If so, this will be very good news for fish, and a significant step toward sustainable management of marine resources.

But remember the lesson of Iceland!  Bored, rich fishermen can eventually become a problem:

[In the early 70s] the Icelandic government took radical action: they privatized the fish. Each fisherman was assigned a quota, based roughly on his historical catches. If you were a big-time Icelandic fisherman you got this piece of paper that entitled you to, say, 1 percent of the total catch allowed to be pulled from Iceland’s waters that season.....Your percentage of the annual haul was fixed, and this piece of paper entitled you to it in perpetuity.

....It was horribly unfair: a public resource — all the fish in the Icelandic sea — was simply turned over to a handful of lucky Icelanders. Overnight, Iceland had its first billionaires, and they were all fishermen. But as social policy it was ingenious: in a single stroke the fish became a source of real, sustainable wealth rather than shaky sustenance....Since its fishing policy transformed Iceland, the place has become, in effect, a machine for turning cod into Ph.D.’s.

But this, of course, creates a new problem: people with Ph.D.’s don’t want to fish for a living. They need something else to do.

Unfortunately for Iceland, "something else" turned out to include lots of insane investment schemes.  Perhaps periodic auctions of long-term leases would be a better idea than outright privatization.

Spring has come to recession-era America, which means that all across the nation, millions of old people are emerging from hibernation and hobbling out to their mailboxes in search of their long-awaited Social Security stimulus checks. The first round of payments provided by the American Recovery and Reinvestment Act has just been mailed out. So while the big banks may be raking in their trillions, U.S. elders--along with recipients of SSI and veterans’ benefits--will soon have a whopping $250 to protect them from the ravages of the economic meltdown. 

 And it looks like we’d better make it last, since it’s the only increase we’re likely to see for a long, long time. For the first time in more than 30 years, according to forecasts by the Congressional Budget Office, there will be no cost-of-living adjustment (COLA) to Social Security next year. In fact, because of low inflation, there probably won't be a COLA before 2013.

And it might not stop there, since the straw man of Social Security “reform” is yet again raising his scruffy head. The phony crusade to “save” Social Security from bankrupting the country and destroying the lives of our grandchildren has gained new traction during the recession. This manufactured crisis is already being used by conservatives (apparently with some cooperation from the Democrats) in a quest to cut old age entitlements--in effect taking money away from elders to pay for the Wall Street bailout.

A report released by the Trustees for Social Security and Medicare will surely add fuel to this manmade fire. The report projects that the Social Security system will remain solvent for "only" 28 years--downgraded from 32 years in the previous report--due to a reduction in payments into the system's trust fund as a result of the recession’s job losses.

This means that in terms of solvency, the giant government program is still running 28 years ahead of Citibank, Bank of America, and the other behemoth private financial institutions run by the high-paid geniuses of Wall Street (and much longer, if you count the years when the bubble was expanding). In addition, the Social Security trust fund is still in better shape than it was a decade ago, according to the Center for Budget and Policy Priorities

None of this, of course, will stop proponents of entitlement cuts from brandishing the new trustees' report as a weapon. Within hours of the report’s release, a new post on the Cato Institute’s blog was warning that it “shows that the program’s financial crisis is growing worse while Congress has continued to duck the issue.” As for the proposed solution--even the financial meltdown that has decimated all of our 401(k)s is not enough to avert Cato from its true agenda:

Driving While Texting

From Slate, an argument for outlawing driving with even a powered up cell phone. Sound draconian to you? Then I guess you haven't yet had the privilege of a near death experience at the hands of some moron texting at 65 miles per hour. I have.

First there was last year's train crash near Los Angeles, with 25 dead and 130 injured. In three hours of work before the crash, the engineer received 28 text messages and sent 29 more. He sent his last message 22 seconds before impact, just after passing a signal that would have alerted him to the disaster ahead.
Now comes the Boston crash, in which one trolley went through a red light and rear-ended another...Officials say the operator of the second trolley "was text-messaging his girlfriend" and "was looking down at his phone and could not apply the brakes quickly enough when he looked up and saw the trolley in front of him."
If texting can cause crashes on train tracks, which prevent lateral drift, think how much more dangerous it is to text while driving a car.

Duh.

I'd go so far as to argue that the police check the text and call logs of every cell phone at every accident site and charge accordingly.