Kevin Drum - August 2011

Streamlining Small Hydro

| Fri Aug. 12, 2011 9:47 AM PDT

Here's yet another tea party wingnut blathering on about how regulations are strangling American business:

Due to regulatory morass, the U.S. is not a good place for small hydro companies to do business. In order to build even the smallest facilities, a developer must go through the Federal Energy Regulatory Commission, U.S. Fish and Wildlife Service, Army Corps of Engineers, State Environmental Departments, State Historic Preservation Departments, and many more. Each of these agencies is just doing their job — but the cumulative impact weighs down small hydro and makes projects prohibitively expensive.

“The regulatory environment is not friendly at all. It’s incredibly difficult and expensive to build these facilities,” explains Lori Barg, CEO of Community Hydro, a developer based in Vermont. “It’s absurd, really.” Barg says that federal and state permitting can add up to $2,000 per kilowatt for projects under 1 MW. To put that in perspective: solar PV projects around 1 MW are being built today for about $3,000 a kW, including permitting, labor and equipment.

Oh wait. Sorry. That's not a tea partier who wrote that, it's Stephen Lacey over at ClimateProgress. He says that we have the potential to generate 30,000 megawatts of clean, renewable power via small hydro installations that are either run-of-river (i.e., require no damming) or could be built using existing dams. But they can only be built if the existing regulatory structure is substantially streamlined.

Republicans have made such an insane spectacle of themselves pretending that Barack Obama is some kind of regulatory madman that it's easy to just dismiss them wholesale. Regulatory uncertainty is very plainly not what's holding the economy back right now, no matter how many times conservatives repeat this canned talking point in front of the Fox News cameras. What's holding us back is economic uncertainty: businesses don't think there will be enough customers next year to justify expanding their operations this year, so they're not expanding. Address that problem and businesses will start adding capacity, jobs will open up, and the economy will grow again.

Still, regulations do matter, and regulatory underbrush needs to be cleared away periodically. Nor is there any reason for liberals to fight this: after all, we favor regulations that serve a clear purpose, not regulations for their own sake. The value of clean energy is pretty high, and it might very well outweigh whatever benefits we're getting from the current regulatory thicket. A pair of Republicans have introduced bills that take modest steps to streamline regulations for small hydro projects, and they're probably worth a hard look.

I'd also be pretty willing to take a look at emergency streamlining of other regulations that get in the way of quickly building new infrastructure projects if Republicans were willing to actually fund new infrastructure projects as a stimulus measure. But I don't think I'll hold my breath waiting for that to happen.

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Why Big Rigs Need Higher Fuel Standards

| Fri Aug. 12, 2011 8:54 AM PDT

Yesterday I wrote about new fuel economy standards for big rig trucks. But Megan McArdle asked a good question: why do we even need them? For ordinary cars, you can argue that consumers aren't especially rational and don't properly consider the long-term cost of operation, so they need to be nudged into saving themselves money. But big rigs are commercial vehicles purchased by steely-eyed operators who look carefully at long-term cost of ownership and are keenly aware of how fuel costs play into this. So if truck manufacturers can make more efficient vehicles, the market should have forced them to do it long ago.

So what's the deal? A reader with experience in the field sets me straight:

You don't understand the market for big rigs. A tractor typically has three types of owners in its life:

  • The original buyer: Either a manufacturer with a private fleet that it uses to get its products to market (e.g., Sherwin-Williams), or one of the very rare firms with enough cash to afford new units. They run it for 1-2 years (or 150,000 miles), when the components go off-warranty and are at risk for breakdowns — and then trade it in.
  • The quality aftermarket: The second or third owners, who can't afford new units. Most big fleets are in this group. They get the best used models and run them until the math stops working for them. (How long this takes depends on the type of trip and cargo hauled. Long-haul is easier than city driving, but a nasty breakdown in Montana can take you off-road for two days. Also, perishable cargo or just-in-time components have to keep moving.)
  • The beaters: The third, fourth or fifth owners, who either can't afford quality yet, don't care, or find it cheaper to fix them.

There's no incentive for a manufacturer to put money into fuel efficiency. Groups two and three care about fuel cost, but they're never buying new trucks. Group one probably doesn't own the unit long enough to recoup even 30% efficiency. Because even the best stuff gets beaten to crap, everyone buys on price. If your first high-efficiency models cost a lot more, sales would drop.

I was assigned to Bendix truck brakes for about a year, and it was a master class in planned obsolescence. Bendix made parts that lasted 3-4 years — best on the market — but nobody wanted them, because they didn't own the models long enough to get a return on the value.

Still, even with that said, wouldn't a carbon tax or increased fuel taxes accomplish the same thing as stricter CAFE standards but more efficiently? Probably. But I'll let Mark Kleiman speak for me on that: "As soon as the Tea Party has been ground into the dust and the GOP transformed into a party capable of seeing reason, we can talk about it. In the meantime, kudos to the President for using his executive powers to do the right thing. And recall that none of his Republican opponents would have done the same."

Quote of the Day: Tax Cuts Uber Alles

| Fri Aug. 12, 2011 8:06 AM PDT

From Bret Baier of Fox News, following up on Byron York's question at last night's debate about supporting any tax increase at all in order to reduce the deficit. "Is there any ratio of cuts to taxes that you would accept? Three to one? Four to one? Or even 10 to one?"

I'm going to ask a question to everyone here on the stage. Say you had a deal, a real spending cuts deal, 10-to-1, as Byron said, spending cuts to tax increases....Who on this stage would walk away from that deal? Can you raise your hand if you feel so strongly about not raising taxes, you'd walk away on the 10-to-1 deal?

All eight candidates raised their hands immediately. This is now unshakeable dogma within the Republican Party regardless of circumstances and regardless of how it's accomplished. And yet, when the congressional super committee fails to reach agreement on a deficit reduction package later this year? It'll be a failure of "Washington," of course. Some things never change.

The Moon's $100+ Billion Price Tag

| Thu Aug. 11, 2011 9:43 PM PDT

Here's the latest on our return to the moon:

The rocket and capsule that NASA is proposing to return astronauts to the moon would fly just twice in the next 10 years and cost as much as $38 billion, according to internal NASA documents obtained by the Orlando Sentinel....That timeline and price tag could pose serious problems for supporters of the new spacecraft, which is being built from recycled parts of the shuttle and the now-defunct Constellation moon program. It effectively means that it will take the U.S. manned-space program more than 50 years — if ever — to duplicate its 1969 landing on the moon.

That is certain to infuriate NASA supporters in Congress....blah blah blah.

Well, hell, is this really a shocker? There are reasons to think that a moon program today should cost less than the original: we know a lot more about building rockets, we have better design technology, we have far better computers and access to lighter-weight components, and so forth. Still, that only provides a modest benefit, and in the end you still have to put together a massive program to build a brand new space vehicle pretty much from scratch. CBO estimated years ago that the Apollo program cost $100 billion in current dollars just for the R&D and management alone, and another $70 billion to build the dozen or so launchers and lunar modules. Given that, why should anyone be surprised that $38 billion is a shoestring budget that will barely fund two flyby missions?

The truth is that a new moon program will probably cost something on the order of $100 billion or more. Personally, I don't think it's a good use of money, but your mileage may vary on that score. Whatever you happen to think of it, though, that's how much you need to count on spending if you want a real program. There's no point in continually being shocked when it turns out that NASA can't really do much of anything for less than half of what it actually needs.

Debating Among the Cornfields

| Thu Aug. 11, 2011 8:39 PM PDT

I thought tonight's debate was much closer than the last one. I didn't really see any clear winners or losers. Just in general, though:

Michele Bachmann struck me as more mechanical than last time. She was just too focused on being a fighter and not much else. But by overstressing that, she also highlighted the fact that she's been fighting fighting fighting and losing losing losing. That's not so good in a presidential candidate. If you're presidential timber, you're supposed to fight and win.

Romney was fine, I guess. No mistakes, but also nothing that really helped him. Still the front-runner until someone knocks him off his perch. Something tells me I'm going to be saying that a lot.

Pawlenty continued to be a little soporific, though he didn't make any big mistakes this time around. So in that sense it was an improvement over last time. But he still doesn't know how to credibly sound tough. And that joke about mowing Mitt Romney's lawn? Please. Frank Luntz apparently loved it, but I thought it seemed way too obviously prepped and staged. For that kind of thing to work, it has to sound spontaneous, and Pawlenty just doesn't seem to have the ability to sound spontaneous.

Santorum was way too whiny. Quit complaining about how much camera time you get!

Jon Huntsman didn't really distinguish himself, but also didn't pander as much as the rest of the field. I still maintain that he's running for 2016, not 1012.

Gingrich proved once again that he knows how to turn a phrase, but that's about it. He reeled off some good applause lines, including his faux outrage over gotcha questions, but honestly, he still doesn't look like he's treating the whole thing seriously. At the very least he could try standing up straight instead of slouching rakishly over the lectern.

Ron Paul, Herman Cain: give it up guys.

Standard caveat: I'm obviously not the target audience for these folks, so it hardly matters what I thought about them. Still, what's so striking about this group is that aside from Ron Paul there's hardly any real daylight between them. The questioners tried mightily to provoke some arguments, and they did manage to get a few small ones going over relative minutiae, but for the most part they're still just trying to out-tea party each other.

Nonstandard caveat: I had to go out to pick up a pizza partway through, so I didn't see the whole thing. I might have missed the best zingers and most substantive discussions of the night, for all I know.

Next: Rick Perry shakes things up! And when he does, I guess I'm going to have to explain further why I'm so sure that he can't win next year. Either that or I'll have to change my mind. I'll bet you can't wait to see which way I go.

California's HSR Boondoggle Now Even More Boondoggly

| Thu Aug. 11, 2011 3:13 PM PDT

So how is California's fabulous high-speed rail project between LA and San Francisco going? You know, the one approved by California's fabulous voters as part of California's fabulous initiative process. Well, a new estimate for the nice, easy part between Merced and Bakersfield puts the cost at $10-$14 billion, up from earlier estimates of $6.8 billion made a mere three years ago:

If the cost of the entire project balloons at the same pace as the Central Valley section, the San Francisco-to-Anaheim railroad would cost from $63 billion to $87 billion, similar to what independent analysts have been predicting. And those figures do not include inflation, which could push the final cost toward a staggering $100 billion. When California voters approved the project in 2008, the state said it would cost $33 billion, but it soared to $43 billion a year later.

I'm no engineer, but I'm willing to risk a few C-notes that this project ends up at $100 billion or more in 2011 dollars. Any takers? This is a very long-term bet, of course, since the line isn't scheduled to be finished until 2020—and I'm willing to put up a few more C-notes that it'll be more like 2025 or 2030. Or never.

Look, I'm sorry, HSR lovers. I love me some HSR, too, but this project is just a fantastic boondoggle. It didn't even make sense with the original cost estimates, and it's now plain that it's going to cost three or four times more than that. What's more, the ridership estimates are still fantasies, and it won't be able to compete with air travel without large, permanent subsidies. This is just too much money to spend on something this dumb. It's the kind of thing that could set back HSR for decades. Sacramento needs to pull the plug on this, and they need to pull it now. We have way better uses for this dough.

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Michael Lewis's Lazy Take on Germany

| Thu Aug. 11, 2011 12:15 PM PDT

Last year Michael Lewis wrote a much-lauded piece about Greece, and because it's Michael Lewis it was indeed a great piece. Michael Lewis could probably make a grocery list sound fascinating.

Unfortunately, buried within its 10,000 words or so was....nothing. Greece's finances are in terrible shape, he said, because Greeks don't pay their taxes. That's it. I think I'm summarizing the piece pretty fairly when I say there was virtually nothing else to it aside from scenery.

This month in Vanity Fair Lewis takes on Germany. And again, it's a great read. But also again, there's practically nothing there. The piece is built around an extremely strained extended metaphor about the German fascination with shit and excretion — because, you see, all those toxic assets in the Wall Street securities they bought were shit, which makes it no wonder they ended up with so much of it. Get it? Now, this produces a few funny riffs, but it's also completely ridiculous. This is not why German bankers bought lots of CDOs stuffed with crappy subprime loans. (Hah! Crappy loans. He's got me doing it too!) How did VF's editors let him get away with this nonsense?

The rest of the essay, aside from a few paragraphs explaining some technicalities about how the ECB works, tells us nothing. Germans, apparently, are prudent, rule-bound, gullible, guilt-ridden, and punctual. Prudent explains why their economy is still in good shape. Rule-bound explains why they were willing to buy so many AAA-rated securities without looking very carefully at what they contained. Gullible explains how Wall Street's sales force was able to pull the wool over their eyes for so long. Guilt-ridden explains how they got suckered into adopting the euro. And punctual is just there to add some color.

For what it's worth, I have to say that gullible isn't really one of those stereotypical German traits that you find on postcards. The rest are, though, and if this bit of armchair cultural psychoanalysis satisfies you, then I guess you're just easily satisfied. In my case, though, I want to know what's happened to the real Michael Lewis, the one who actually digs into complex financial issues and explains them with flair and wit and telling detail? I don't care how many people call his latest piece brilliant, the truth is that it's just lazy. He's now done this schtick for Iceland, Ireland, Greece, and Germany, and he's getting worse with each country. I suppose Italy must be next, but I can't say I'm looking forward to it.

More Batteries, Less Oil

| Thu Aug. 11, 2011 11:09 AM PDT

Time's Michael Grunwald says that although the 2009 stimulus might have been too small, it sure has made a big difference to the American battery industry:

Before 2009, the U.S. was supplying less than 2% of a tiny global market in advanced batteries. When the stimulus-funded factories are all complete, they’ll have the capacity to supply 40% of a rapidly growing global market, about 500,000 batteries a year. The stimulus will also boost our supply of electric-vehicle charging stations by more than 3,000%. And the Obama administration has provided loans to help Tesla, Fisker and Nissan build electric-car factories in the U.S., all part of Obama’s pledge to put 1 million plug-ins on the road by 2015. That is what change looks like, even if the President doesn’t beat his chest and call for mass beheadings on Wall Street while it happens.

Point taken, though I wouldn't mind at least a few targeted beheadings on Wall Street as well. Plus there's this about newly announced fuel economy regs for big rigs:

The regulations call for reductions on fuel consumption and greenhouse gas emissions by 2018 of 9 to 23 percent, depending on the type of vehicle. Trucks and other heavy vehicles make up only 4 percent of the domestic vehicle fleet, but given the distance they travel, the time they spend idling and their low fuel efficiency, they end up consuming about 20% of all vehicle fuel, according to the Union of Concerned Scientists. Experts say that a 20 percent reduction in heavy vehicle emissions would boost fuel efficiency to an average of 8 miles per gallon from 6 miles now.

The announcement comes less than two weeks after Obama and the country’s automakers unveiled new fuel economy rules for passenger vehicles that would boost fleet-wide average gas mileage to 54.5 miles per gallon by 2025, from about 27.8 miles per gallon now.

Let's do some arithmetic. Trucks use 20% of all vehicle fuel, and the new standards will increase their efficiency from 6 mpg to 8 mpg. That's 25% less fuel in a fleet that accounts for 20% of all fuel use, or 5% less total fuel used. It's not going to solve global warming all on its own, but it's probably more than you would have guessed. Add that to the new regs for cars and light trucks, and American gasoline use is going to go down pretty considerably by 2025. It just goes to show what vigorous executive action, combined with an implicit threat from us radical lefties in California,1 can accomplish.

1Just in case I'm being too opaque, here's what this means. California has long had an exemption that allows it to set its own standards for auto emissions, which in the case of CO2 is basically the same thing as setting standards for fuel economy. Automakers really, really don't want to have separate standards for California and everywhere else, so the threat that we communists in the Golden State will unilaterally ratchet up our own standards gives them an incentive to agree to nationwide standards that are tougher than they'd otherwise agree to. You can thank us later.

UPDATE: I'll grant, though, that this is a good question: Why are big rigs are so inefficient in the first place, given that they're commercial vehicles and their owners are pretty obsessive about fuel costs? My guess is that just like commercial building owners, truck owners simply don't always focus on long-term things like energy efficiency. It's human nature.

The Rich Drink Differently From You and Me

| Thu Aug. 11, 2011 9:34 AM PDT

Matt Yglesias, apparently as bored during the August recess as I am, posts a chart today showing that highly educated people spend a lot more on alcohol than poorly educated people. Why is this? James Joyner, who has a PhD to hone his analytical skills and (presumably) also likes to drink, takes a whack at this:

Increasing levels of education correlates with increased income and, presumably, more disposable income. As people attain more education and income, they’re likely to switch from cheap beer (Miller Lite) and cheap booze (Seagrams gin, Jim Beam bourbon) to better and more expensive beer (say, Dogfish 160) and booze (Bombay Sapphire gin, Macallan 12 Scotch). Also, they’ll drink wine that comes in bottles not boxes. Additionally, they’ll be more likely to drink at bars and pricey restaurants, thinking nothing of paying $6 for a pint of beer, $9 for a glass of wine, or $12 for a cocktail.

James's PhD and alcohol swilling ways have served him well. As this chart from a 2000 paper produced by the BLS shows, weekly alcohol expenditures increase strongly with income. Here's how it breaks down:

  • Expenditures on beer double between the lowest and highest income quintiles.
  • Expenditures on wine quintuple.
  • Expenditures on "other" (mostly mixed drinks, I assume) also quintuple.
  • Expenditures on alcohol consumed at home go up 170% while expenditures on alcohol consumed elsewhere go up 600%.

So yeah: wealthier people might drink more alcohol than poor people, but probably not by much. Mostly they just buy more expensive stuff at home as well as more pricey drinks in bars and restaurants. Now you know.

California Joins National Popular Vote Movement

| Thu Aug. 11, 2011 8:19 AM PDT

I missed this when it happened Monday, but here's some interesting news from my home state:

A national movement aimed at sidelining the Electoral College in presidential elections got a big boost Monday when Gov. Jerry Brown signed legislation adding California to the list of states supporting the drive. Brown's signature makes California the ninth state to sign on to the effort, which would hand the electoral votes of all participating states to the presidential candidate who wins the most votes nationwide. Currently, California's 55 electoral votes go to the person who wins the most votes in the state.

The idea here is to round up states with at least 270 electoral votes who will agree to cast all their votes for whatever candidate wins the national popular vote. California's support is crucial, since it brings the number of committed electoral votes to 132. It wouldn't be impossible for this deal to work without California's 55 electoral votes, but it would be pretty hard. So this is good news.

There are some weird objections to this, the most common of which is that it will turn the whole country into a gigantic Florida circa 2000. And anything is possible, of course. But it's vanishingly unlikely: it's unusual enough for a single state to have a result so close that it inspires the kind of massive court challenges we saw in Bush v. Gore, but it's close to impossible for it to happen on a national level. Even in 2000, the national vote for the two candidates differed by more than 500,000. It would only be worth challenging an election if this number were so small that there was a legitimate chance of overturning the result, and what are the odds of the entire national vote being within, say, 20,000 votes? Nada. And anything further apart than that isn't worth going to court for.

This won't fix our dysfunctional Congress, which is currently a more pressing problem than the Electoral College, but it's still a good thing. Only 138 electoral votes to go!