Mortgage Meltdown Recovery: Economics, Waste, Imbalance, and Unbalanced Economists

Posted on May 24, 2008 by Neil Garfield

ECONOMICS: How Economists downplay substitution on the supply side, and discount American Innovation, American Ingenuity and American Temerity. Bad policy from flawed measurements. Flawed Measurements from biased, agenda-based ideology.

“The central problem confronting the new President is not the political issues of conflicting ideology nor the “choices” presented by well-intentioned economists; the real issue is leadership in seeing what economists call “waste” and imbalance” as opportunity.”

Empty steel and auto-making plants have an unequalled opportunity of leveraging an existing infrastructure to manufacture wind generators, new concept products and most importantly cars that are far ahead of the curve and exactly what consumers want.

Phoenix Motors Cars and other new entrants into the race for longer range high speed all-electric vehicles that can be recharged in minutes on the road, or with a few solar panels during the day at home have taken the ultimate risk and ultimate plunge and are doing very well in their development stage vehicles.

Too much wheat? Create incentives to find other uses. Of course we can help feed the world, but there are hundreds of other uses to produce energy, manufacture goods, create new products for building materials and dozens of possibilities that are probably lingering in the heads of some farmers right now. Those expensive subsidies could be turning a profit for government and farmers and provide an opportunity for small farmers to make money no matter how much surplus wheat is grown.

Subsidies: Whether it is for individuals going through rough times, businesses going through rough times, businesses being incentivized, there is an important element of risk that is being reduced for the recipients. This reduction of risk is worth a great deal of “value” to the recipients. What are they paying for it? If it is individual there are all kinds of community service that can be worked into almost anyone’s schedule. If it is a business, this value can be passed on to consumers in reduced prices or greater benefits. The point here is not to prescribe specific methods of payments but only to say that ANYONE who gets a benefit from the government should be paying for it through taxes, giving back to the community or providing financial or non-financial benefits to the marketplace and society. 

That corn is being diverted to production of ethanol is a political pandering of the worst sort. What politicians and economists have both missed completely is not just that there are much better energy efficient alternative products from which to refine ethanol (cane sugar, cellulose, wheat etc) but that since we are able to produce so much corn, we can lower its price, keep the farmers happy and substitute uses such that farmers are making a good rate of return on VOLUME.  This brings down food costs which increase the opportunities for consumers to pay their bills, save money and thus provide the capital that is currently being “borrowed” from other countries by issuance of increasingly worthless American paper, once called money.

Economists fail to recognize on the supply side that certain substitutions will routinely provide segments or tranches of demand for products wherein the exchange value might be low but the use value may be high. Taken collectively, this represents opportunity for even the smallest farmers and manufacturers.

Corn is a bastardized example of this process and a poor model, mostly because business schools, media and modern economists are not teaching substitution as a general application. They teach substitution only on the demand side where the inventiveness of the American consumer to adapt to changing quality and prices is assumed but the ingenuity and inventiveness of the American producer is dismissed.

Too much interest expense? This curse dating back to the early 1970’s has robbed the country and its citizens of much needed capital for savings, investment and consumption of goods and services that drive our economy. Government’s complicity in making legal (usurious rates and fees) what was always illegal and even criminal needs reversal.

Current plans to reduce mortgage payments and mortgage interest to the teaser rates that were forced down the throats of unsuspecting borrowers using the money from unsuspecting investors, reducing credit card interest and fees, banning payday loans that roll over into 450% loans etc.,. are all steps in the right direction of redirecting capital to where it needs to go without robbing the capitalists from receiving a fair return.

Reasonable minds may differ but they can come to agreement on a fair rate of return which maintains financial market liqudiidty without windfall profits to credit card issuers, payday lenders, oil companies, health-care, health insurance and drug companies.

These are the things that central bankers and investors around the world are watching and waiting for and it is only through aggressive innovation, which requires aggressive, innovative education techniques, that good old American ingenuity will once again save the day and the dollar.

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Democracy Inaction: Bill Moyers Speaks the Truth

Posted on May 18, 2008 by Neil Garfield

EXPLAINING MORTGAGE MELTDOWN, IRAQ AND INEQUALITY OF WEALTH AND OPPORTUNITY

The truth we don’t want to hear is the same truth we shout down as unpatriotic. It is the essence of patriotism and good journalism to speak the truth and to back it up with solid facts that are congruent with the reality we experience in our daily lives. This piece by Moyers is the one of his best, and worth reading and re-reading.

Moyers: ‘Democracy in America Is a Series of Narrow Escapes, and We May Be Running Out of Luck’

By Bill Moyers, Doubleday
Posted on May 17, 2008, Printed on May 18, 2008
http://www.alternet.org/story/85521/

The following is an excerpt from Bill Moyers’ new book, “Moyers on Democracy” (Doubleday, 2008).

Democracy in America is a series of narrow escapes, and we may be running out of luck. The reigning presumption about the American experience, as the historian Lawrence Goodwyn has written, is grounded in the idea of progress, the conviction that the present is “better” than the past and the future will bring even more improvement. For all of its shortcomings, we keep telling ourselves, “The system works.”

Now all bets are off. We have fallen under the spell of money, faction, and fear, and the great American experience in creating a different future together has been subjugated to individual cunning in the pursuit of wealth and power -and to the claims of empire, with its ravenous demands and stuporous distractions. A sense of political impotence pervades the country — a mass resignation defined by Goodwyn as “believing the dogma of ‘democracy’ on a superficial public level but not believing it privately.” We hold elections, knowing they are unlikely to bring the corporate state under popular control. There is considerable vigor at local levels, but it has not been translated into new vistas of social possibility or the political will to address our most intractable challenges. Hope no longer seems the operative dynamic of America, and without hope we lose the talent and drive to cooperate in the shaping of our destiny.

The earth we share as our common gift, to be passed on in good condition to our children’s children, is being despoiled. Private wealth is growing as public needs increase apace. Our Constitution is perilously close to being consigned to the valley of the shadow of death, betrayed by a powerful cabal of secrecy-obsessed authoritarians. Terms like “liberty” and “individual freedom” invoked by generations of Americans who battled to widen the 1787 promise to “promote the general welfare” have been perverted to create a government primarily dedicated to the welfare of the state and the political class that runs it. Yes, Virginia, there is a class war and ordinary people are losing it. It isn’t necessary to be a Jeremiah crying aloud to a sinful Jerusalem that the Lord is about to afflict them for their sins of idolatry, or Cassandra, making a nuisance of herself as she wanders around King Priam’s palace grounds wailing “The Greeks are coming.” Or Socrates, the gadfly, stinging the rump of power with jabs of truth. Or even Paul Revere, if horses were still in fashion. You need only be a reporter with your eyes open to see what’s happening to our democracy. I have been lucky enough to spend my adult life as a journalist, acquiring a priceless education in the ways of the world, actually getting paid to practice one of my craft’s essential imperatives: connect the dots.

The conclusion that we are in trouble is unavoidable. I report the assault on nature evidenced in coal mining that tears the tops off mountains and dumps them into rivers, sacrificing the health and lives of those in the river valleys to short-term profit, and I see a link between that process and the stock-market frenzy which scorns long-term investments — genuine savings — in favor of quick turnovers and speculative bubbles whose inevitable bursting leaves insiders with stuffed pockets and millions of small stockholders, pensioners, and employees out of work, out of luck, and out of hope.

And then I see a connection between those disasters and the repeal of sixty-year-old banking and securities regulations designed during the Great Depression to prevent exactly that kind of human and economic damage. Who pushed for the removal of that firewall? An administration and Congress who are the political marionettes of the speculators, and who are well rewarded for their efforts with indispensable campaign contributions. Even honorable opponents of the practice get trapped in the web of an electoral system that effectively limits competition to those who can afford to spend millions in their run for office. Like it or not, candidates know that the largesse on which their political futures depend will last only as long as their votes are satisfactory to the sleek “bundlers” who turn the spigots of cash on and off.

The property qualifications for federal office that the framers of the Constitution expressly chose to exclude for demonstrating an unseemly “veneration for wealth” are now de facto in force and higher than the Founding Fathers could have imagined. “Money rules Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us and the political speakers mislead us.” Those words were spoken by Populist orator Mary Elizabeth Lease during the prairie revolt that swept the Great Plains slightly more than 120 years after the Constitution was signed. They are true today, and that too, spells trouble.

Then I draw a line to the statistics that show real wages lagging behind prices, the compensation of corporate barons soaring to heights unequaled anywhere among industrialized democracies, the relentless cheeseparing of federal funds devoted to public schools, to retraining for workers whose jobs have been exported, and to programs of food assistance and health care for poor children, all of which snatch away the ladder by which Americans with scant means but willing hands and hearts could work and save their way upward to middle-class independence. And I connect those numbers to our triumphant reactionaries’ campaigns against labor unions and higher minimum wages, and to their success in reframing the tax codes so as to strip them of their progressive character, laying the burdens of Atlas on a shrinking middle class awash in credit card debt as wage earners struggle to keep up with rising costs for health care, for college tuitions, for affordable housing — while huge inheritances go untouched, tax shelters abroad are legalized, rates on capital gains are slashed, and the rich get richer and with each increase in their wealth are able to buy themselves more influence over those who make and those who carry out the laws.

Edward R. Murrow told his generation of journalists: “No one can eliminate prejudices — just recognize them.” Here is my bias: extremes of wealth and poverty cannot be reconciled with a genuinely democratic politics. When the state becomes the guardian of power and privilege to the neglect of justice for the people as a whole, it mocks the very concept of government as proclaimed in the preamble to our Constitution; mocks Lincoln’s sacred belief in “government of the people, by the people, and for the people”; mocks the democratic notion of government as “a voluntary union for the common good” embodied in the great wave of reform that produced the Progressive Era and the two Roosevelts. In contrast, the philosophy popularized in the last quarter century that “freedom” simply means freedom to choose among competing brands of consumer goods, that taxes are an unfair theft from the pockets of the successful to reward the incompetent, and that the market will meet all human needs while government itself becomes the enabler of privilege — the philosophy of an earlier social Darwinism and laissez-faire capitalism dressed in new togs — is as subversive as Benedict Arnold’s betrayal of the Revolution he had once served. Again, Mary Lease: “The great evils which are cursing American society and undermining the foundations of the republic flow not from the legitimate operation of the great human government which our fathers gave us, but they come from tramping its plain provisions underfoot.”

Our democracy has prospered most when it was firmly anchored in the idea that “We the People” — not just a favored few — would identify and remedy common distempers and dilemmas and win the gamble our forebears undertook when they espoused the radical idea that people could govern themselves wisely. Whatever and whoever tries to supplant that with notions of a wholly privatized society of competitive consumers undermines a country that, as Gordon S. Wood puts it in his landmark book The Radicalism of the American Revolution, discovered its greatness “by creating a prosperous free society belonging to obscure people with their workaday concerns and their pecuniary pursuits of happiness” — a democracy that changed the lives of “hitherto neglected and despised masses of common laboring people.”

I wish I could say that journalists in general are showing the same interest in uncovering the dangerous linkages thwarting this democracy. It is not for lack of honest and courageous individuals who would risk their careers to speak truth to power — a modest risk compared to those of some journalists in authoritarian countries who have been jailed or murdered for the identical “crime.” But our journalists are not in control of the instruments they play. As conglomerates swallow up newspapers, magazines, publishing houses, and networks, and profit rather than product becomes the focus of corporate effort, news organizations — particularly in television — are folded into entertainment divisions. The “news hole” in the print media shrinks to make room for advertisements, and stories needed by informed citizens working together are pulled in favor of the latest celebrity scandals because the media moguls have decided that uncovering the inner workings of public and private power is boring and will drive viewers and readers away to greener pastures of pabulum. Good reporters and editors confront walls of resistance in trying to place serious and informative reports over which they have long labored. Media owners who should be sounding the trumpets of alarm on the battlements of democracy instead blow popular ditties through tin horns, undercutting the basis for their existence and their First Amendment rights.

Bill Moyers is the author of “Moyers on Democracy” (Doubleday, 2008) and the host of the PBS show, Bill Moyers Journal.

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COAL ECONOMICS AND POLITICS: REALITY CHECK — OBAMANOMICS

Posted on May 10, 2008 by Neil Garfield

 

It is Obama who will ironically do the most to preserve the way of life in West Virginia, Kentucky and other states — even though they vote overwhelmingly against him out of fear, prejudice and disinformation

The reality is that coal is going to be with us for a while and perhaps permanently. Regardless of who is President, despite all the concerns about the noxious fumes and heat emanating from mining and firing coal, it will be many years before demand for coal decreases. Technology, innovation, and alternative energy sources will play an increasing role in providing the power to run our homes, offices, hospitals and factories. But the process will take many years and perhaps many decades before the time comes that demand for coal decreases.

Thus the people of West Virginia, Kentucky and other coal producing states are not in jeopardy — but their children or grandchildren might be doing something other than mining. This is the reality.

Politics being what it is, results in pandering to the worst fears of voters and getting them to believe that the candidate speaking is the only one who will not let coal mining decline and will fight to keep them in business. It is a lie.

No candidate can stop this progression and no candidate is going to fight in favor of coal, which is perceived now as a major source of emissions and heat. It is political suicide for a candidate to say what Clinton is saying anywhere outside of West Virginia. She doesn’t care because she has no chance of elected but she wants to make a big finish.

The problem with that is once again people are being mislead and are being coerced into voting against themselves. Coal’s survival depends not on running against global warming but running with it. Someone who promises to fight for you against the environmentalists is telling you a whopper.

But someone who promises innovation and technology dividends might just be the person who can save you in spite of yourselves. And supporting that person will hasten the resurgence of coal and your economic security as well as the economic security of your country, your children and your grandchildren. 

Recapture of the heat from coal fired plants, some of which spew 650 degree or more superheated air into the atmosphere could turn any coal fired plant making steel, concrete or even electric power into augmented power.

Every coal fired plant could be a clean source of additional energy if we recapture the energy being wasted.  Every emission being discarded randomly into the environment could be captured as well and buried where it will do no harm.

Paradoxically it is the resistance of the mining lobby and mining interests, who are ill-informed about Obama and ill-advised in their direction, who could derail what would otherwise be a perfect outcome for West Virginia and Kentucky.

The abundance of coal reserves in the U.S. could thus paradoxically become one of the major green initiatives of the next administration and congress. Who would lead this?

Fortunately, whether you vote for him or not, Obama is very likely to be our next President. It is fortunate because he is the first person in politics to break the logjam, break the hold of special interest lobby groups and actually use innovation, technology and creative -in depth thinking and action to create an army of 750,000 active volunteers, 1,300,000 donors who have freed him from having to respond to any BIG DOG, and who will use the same techniques to overwhelm the opposition.

Obama is unstoppable precisely because he alone understands the significance of community organizing and he is unique in being the only one who has a successful track record in doing it, even under the most despondent circumstances. In this case, the community to organize is more daunting than the South Side of Chicago — it is now the country and eventually the world. But the dynamics of despair, fear, hopelessness versus empowerment, hope and relevance are the same. 

For him, American innovation and problem solving from the bottom up is his first priority. For every other candidate in recent years it has been through regulation and selling out to groups who already had too much power. With the support of the American people and indeed the world behind him, Obama is the one who can make this happen for coal and hundreds of other industries, large and small. 

It is therefore Obama who will ironically do the most to preserve the way of life in West Virginia, Kentucky and other states — even though they vote overwhelmingly against him out of fear, prejudice and disinformation

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American Meltdown: 3AM or 8PM—Emergency vs Urgency

Posted on May 5, 2008 by Neil Garfield

Thomas Friedman, in Michael Moore -like frankness, doesn’t make a case, create a sound bite, or try to get elected. Here he simply tells the facts. 

If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

People want to do nation-building. They really do. But they want to do nation-building in America.

Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

The emergency is that the fiscal fiasco of the last 7 years is frightening larger than any public figure has stated. Who will tell the people? The reason why you hear scattered comments about this period being comparable to the great depression is that we have dug a real hole for ourselves, so big, so deep, that we can’t see the bottom anymore.

  • Buffett and others are admitting it — economists are slyly predicting it without being accused of starting riots and panic. There is general agreement that the housing market could have another 20% correction from current levels.
  • 20-30 million American homes will have greater mortgage indebtedness than they are worth within 12-14 months.  The same people are mired in credit card debt carrying interest and fees that assures( or at least threatens) the virtual permanent enslavement of a significant portion the American people. Americans spend more money on debt service (interest payments and principal) than many countries do on EVERYTHING. 
  • We have locked ourselves into an energy policy that allows both domestic and foreign enemies of freedom almost unfettered control over our property, our food, our lives and our civil liberties. We have done this while having the technology and knowledge to reduce our oil and gas consumption to a negligible amount, forever abandoning foreign policy based upon foreign fuel supplies. 
  • Inflation is already five times higher than the manipulative government statistics reported and it is increasing. 
  • Joblessness is five time higher as well. 
  • The Iraq war will take at least 7 years — our longest war.
  • Our healthcare system is in the death grip of a few people who have turned our vulnerability into an excuse to rob the public treasury and the private finance of every individual.
  • 1929? — we already there and headed downward, burdened in more debt than any country or its people have acquired in the world history.
  • And in world opinion our stock of confidence has never been lower and is clearly declining every other day, as the dollar goes lower and lower and the world’s central bankers look for alternatives for their currency reserves — anything other than the plummeting dollar. They know we caused, allowed and promoted the worst outbreak of financial fraud in history and that the measurement of the scope of the fraud keeps growing every day by trillions of dollars.

So there is the emergency. The urgency is that there is hope.

The Mortgage Meltdown was the trigger, the wake-up call that the fundamentals of our policy, our society and our economy were all wrong. The people know it, with 4 out of people asserting we are headed in the wrong direction.

We emerged from the Great Depression and we can emerge from this too, perhaps a little battered and wiser but still standing tall. The way we can do that is through ruthless truth, a tolerance for ambiguity, transcending our fears, acceptance of failure, determination to succeed, and persistent pursuit of the core values expressed, although unevenly lived, in our Declaration of Independence and our U.S. Constitution. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

May 4, 2008
OP-ED COLUMNIST

Who Will Tell the People?

By THOMAS L. FRIEDMAN

Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America.

They are not only tired of nation-building in Iraq and in Afghanistan, with so little to show for it. They sense something deeper — that we’re just not that strong anymore. We’re borrowing money to shore up our banks from city-states called Dubai and Singapore. Our generals regularly tell us that Iran is subverting our efforts in Iraq, but they do nothing about it because we have no leverage — as long as our forces are pinned down in Baghdad and our economy is pinned to Middle East oil.

Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.

We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.”

That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have.

A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit. Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons. If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans.

And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore … have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.”

Much nonsense has been written about how Hillary Clinton is “toughening up” Barack Obama so he’ll be tough enough to withstand Republican attacks. Sorry, we don’t need a president who is tough enough to withstand the lies of his opponents. We need a president who is tough enough to tell the truth to the American people. Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

Who will tell the people? We are not who we think we are. We are living on borrowed time and borrowed dimes. We still have all the potential for greatness, but only if we get back to work on our country.

I don’t know if Barack Obama can lead that, but the notion that the idealism he has inspired in so many young people doesn’t matter is dead wrong. “Of course, hope alone is not enough,” says Tim Shriver, chairman of Special Olympics, “but it’s not trivial. It’s not trivial to inspire people to want to get up and do something with someone else.”

It is especially not trivial now, because millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. They want it to be about building wealth and dignity — big profits and big purposes. When we just do one, we are less than the sum of our parts. When we do both, said Shriver, “no one can touch us.”

Filed under: alternative medicine, bubble, Bush, CDO, Chelation, community banks, CORRUPTION, credit unions, currency, education, energy, Eviction, foreclosure, foreign relations, GTC | Honor, healthcare, inflation, interest rates, Investor, McCain, Mortgage, Obama, oil, politics, securities fraud | Tagged: , , , , , , , | Leave a comment »

Bill Clinton Economics vs Hillary Clinton Economics

Posted on May 4, 2008 by Neil Garfield

For all the talk about how similar they are, the differences have largely been overlooked. The main difference I see is that Obama has a broader understanding of macroeconomics — which means that he understands that if you push here then something else pops up there. He understands nuance and complexity in a highly ambiguous world.

Once you get past sound bites and continuous loop feeds of irrelevant chatter, and then do some research you find two things: Bill Clinton’s policy advisors agree with Obama, not Hillary. And virtually 100% of all economic advisers score Obama’s proposals as having economic merit vs. Hillary’s proposals which contain solely political appeal. 

The inescapable irony is that if you want the “good ole days” of Clinton economics and prosperity, vote for Obama. If you want narrow carefully orchestrated proposals that will fail for lack of support (like healthcare in 1993), then go ahead and vote for Hillary. 

 

May 4, 2008

For Democrats, Instincts Differ on Economics

By DAVID LEONHARDT

As they traveled across Indiana and North Carolina over the last few days, trading charges and countercharges about the wisdom of suspending the federal gas tax for the summer, Senators Hillary Rodham Clinton and Barack Obama were really having a larger fight.

They were arguing over who had better economic instincts.

For all the similarities between the two Democrats, there is also a core thematic difference between them. Mrs. Clinton tends to favor narrowly focused programs, like the gas-tax holiday, that speak to specific voter concerns. By suspending the tax and replacing it with a new tax on oil companies, Mrs. Clinton told a rally in Hendersonville, N.C., on Friday, she was standing with “hard-pressed Americans who are trying to pay their gas bills.”

Mr. Obama, on the other hand, leans toward broader programs meant to help nearly all middle- and low-income families. At a steel factory in Northwest Indiana on Friday, Mr. Obama called the tax holiday a “gimmick” and said he instead favored a cut in the payroll tax, which finances Social Security, of up to $1,000 for middle-class households “to offset the costs not only of gas, but also of food.”

The dueling instincts do not explain all the differences between the two Democrats. They also disagree about a health-insurance mandate (Mrs. Clinton favors one) and the capital-gains tax (Mr. Obama has indicated he would raise it more than Mrs. Clinton would). Mr. Obama is open to increasing the amount of income subject to the Social Security payroll tax; Mrs. Clinton has been critical of that idea.

But their contrasting approaches do extend to a range of issues, including the current economic slowdown, the mortgage crisis and retirement savings. The contrast has been present since before the primaries began — when Mr. Obama announced his middle-class tax cut, for example, and when Mrs. Clinton took out a whimsical television advertisement in which she was labeling Christmas gifts as if each were a specific policy proposal.

“Where did I put universal pre-K,” Mrs. Clinton asks herself, looking around. “Ah, there it is!”

The contrast between their approaches also highlights what many economists consider to be the biggest weakness of each candidate’s plan.

As the economy has slowed, Mrs. Clinton has released a series of proposals — to stimulate growth, stem home foreclosures and, most recently, reduce energy costs — that have helped burnish her image as the candidate most in touch with the specific concerns of working families. Yet policy experts say these proposals have generally made for better politics than economics.

“I was appalled by Hillary going with the gas tax,” said Alice M. Rivlin, a budget director under former President Bill Clinton who supports Mrs. Clinton for the nomination. It “looked like pandering,” Mrs. Rivlin said.

An open letter signed recently by more than 100 economists said the proposed tax holiday would do little to reduce gas prices. In part, that is because a fall in prices would lead to more demand, which would cause prices to return to their earlier level. The result would be that overseas oil-producing governments would get money now flowing to the United States government in gas taxes.

Along similar lines, Mrs. Clinton’s proposed stimulus plan was widely considered to be more complex and less effective than Mr. Obama’s suggestion of quick tax cuts, which was the same approach Congress and the White House ultimately took.

But Mr. Obama gets lower marks from budget experts for fiscal discipline. His package of tax cuts and new spending would cost roughly $300 billion a year, while Mrs. Clinton’s would cost less than $250 billion. Economists said they were skeptical he could pay for his program without increasing the deficit.

“Obama has a shorter list of tax breaks,” said Leonard E. Burman, director of the Tax Policy Center in Washington, “but has some really big items on it.”

Policy analysts specifically criticize Mr. Obama’s proposal to eliminate income taxes for senior citizens with up to $50,000 in income. Thanks to Social Security and Medicare, the federal government already spends a large amount of resources on older citizens.

“The tax system already does a pretty good job of protecting poor and near-poor seniors,” said Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities in Washington.

Both campaigns defend their proposals. Mr. Obama’s advisers say he would pay for his plans by, among other things, raising the capital-gains tax more than Mrs. Clinton would and doing more to crack down on corporate-tax evasion. His broad cut in the payroll tax is an aggressive response to middle-class income stagnation, they say, and, because most senior citizens do not pay payroll taxes, they need additional help.

“I’m the only candidate who’s proposed a genuine middle-class tax cut,” Mr. Obama said Saturday in Indianapolis, “that’s paid for in part by closing corporate loopholes and shutting down tax havens.” He also talked about his support for a tax credit to help homeowners who do not itemize their taxes and thus do not benefit from the mortgage deduction.

Clinton advisers say that her remedies to the economic slowdown have been more focused than Mr. Obama’s and that, early on, she correctly identified the housing market as needing specific help. Her economic plans would provide short-term relief to families in the months and years before her longer-term plans — on energy conservation, for instance — would have an effect, the aides say.

Mrs. Clinton often talks about other countries, like Germany, that have created jobs and cut their reliance on imported oil by investing in alternative energy.

“We lost 20,000 jobs last month, and people are saying, ‘Well, that’s better than we thought,’ ” she said at a John Deere sales center in North Carolina on Friday. “I don’t accept that at all.”

The Clinton and Obama approaches still have many more similarities than differences. Whether through focused tax breaks or sweeping ones, both candidates would reduce taxes on middle-class households and raise taxes on those making more than $250,000 a year.

Senator John McCain, the presumptive Republican nominee, by contrast, would make permanent nearly all of the Bush tax cuts, including those on high earners. McCain advisers say allowing taxes on high earners to return to their pre-Bush levels would damage the economy when it is already vulnerable.

Both Democratic candidates have also promised to regulate corporate America more closely than President Bush has and to spend more than $100 billion a year on an overhaul of the health-care system.

The one major difference between their health plans has received more attention than it deserves, economists say. Although opinion is divided, they generally favor the Clinton policy, which would require all Americans to have insurance, potentially making the health-care system more efficient. But health analysts say the Clinton campaign has falsely suggested the Obama plan would exclude people who wanted to sign up for insurance.

Despite the individual criticisms of the two agendas, policy experts praise both candidates for an unusually substantive primary campaign, each having come forward with detailed plans to address climate change, the middle-class squeeze and the decline of company-provided health insurance.

Mrs. Clinton and Mr. Obama have also been more forthcoming than Mr. McCain about how they would pay for their plans. Mr. McCain has proposed almost $300 billion a year in new tax cuts, on top of President Bush’s cuts, but has offered little detail about how he would pay for them.

Douglas Holtz-Eakin, the McCain campaign’s top economic adviser, has said Mr. McCain would later offer more details and that the tax cuts would spur economic growth, reducing their cost.

Perhaps the most important question, policy analysts say, is how Mrs. Clinton’s and Mr. Obama’s different approaches would affect their governing style.

On many budget matters, Mrs. Clinton’s instincts seem similar to her husband’s. Both favor carefully crafted tax credits that can help people who most need it, that come with relatively modest price tags and that seem likely to survive a divided Congress.

Mr. Obama sometimes talks of his vision of an “iPod government,” with simple programs that people can understand. He also talks of persuading voters and members of Congress, including Republicans, to support his plans.

Either way, the debate may not last much longer. No matter which Democrat is nominated, the disagreements with Mr. McCain are likely to be far larger.

Patrick Healy and Jeff Zeleny contributed reporting.

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Thomas Friedman Calls Out Clinton and McCain on Gas Tax Proposal

Posted on May 2, 2008 by Neil Garfield

The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: “Maximize demand, minimize supply and buy the rest from the people who hate us the most.”

Good for Barack Obama for resisting this shameful pandering.

 

April 30, 2008
OP-ED COLUMNIST

Dumb as We Wanna Be

By THOMAS L. FRIEDMAN

It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

No, no, no, we’ll just get the money by taxing Big Oil, says Mrs. Clinton. Even if you could do that, what a terrible way to spend precious tax dollars — burning it up on the way to the beach rather than on innovation?

The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: “Maximize demand, minimize supply and buy the rest from the people who hate us the most.”

Good for Barack Obama for resisting this shameful pandering.

But here’s what’s scary: our problem is so much worse than you think. We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage — gasoline consumption and gas-guzzling cars — and you want to lower taxes on the things you want to encourage — new, renewable energy technologies. We are doing just the opposite.

Are you sitting down?

Few Americans know it, but for almost a year now, Congress has been bickering over whether and how to renew the investment tax credit to stimulate investment in solar energy and the production tax credit to encourage investment in wind energy. The bickering has been so poisonous that when Congress passed the 2007 energy bill last December, it failed to extend any stimulus for wind and solar energy production. Oil and gas kept all their credits, but those for wind and solar have been left to expire this December. I am not making this up. At a time when we should be throwing everything into clean power innovation, we are squabbling over pennies.

These credits are critical because they ensure that if oil prices slip back down again — which often happens — investments in wind and solar would still be profitable. That’s how you launch a new energy technology and help it achieve scale, so it can compete without subsidies.

The Democrats wanted the wind and solar credits to be paid for by taking away tax credits from the oil industry. President Bush said he would veto that. Neither side would back down, and Mr. Bush — showing not one iota of leadership — refused to get all the adults together in a room and work out a compromise. Stalemate. Meanwhile, Germany has a 20-year solar incentive program; Japan 12 years. Ours, at best, run two years.

“It’s a disaster,” says Michael Polsky, founder of Invenergy, one of the biggest wind-power developers in America. “Wind is a very capital-intensive industry, and financial institutions are not ready to take ‘Congressional risk.’ They say if you don’t get the [production tax credit] we will not lend you the money to buy more turbines and build projects.”

It is also alarming, says Rhone Resch, the president of the Solar Energy Industries Association, that the U.S. has reached a point “where the priorities of Congress could become so distorted by politics” that it would turn its back on the next great global industry — clean power — “but that’s exactly what is happening.” If the wind and solar credits expire, said Resch, the impact in just 2009 would be more than 100,000 jobs either lost or not created in these industries, and $20 billion worth of investments that won’t be made.

While all the presidential candidates were railing about lost manufacturing jobs in Ohio, no one noticed that America’s premier solar company, First Solar, from Toledo, Ohio, was opening its newest factory in the former East Germany — 540 high-paying engineering jobs — because Germany has created a booming solar market and America has not.

In 1997, said Resch, America was the leader in solar energy technology, with 40 percent of global solar production. “Last year, we were less than 8 percent, and even most of that was manufacturing for overseas markets.”

The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious — the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout.

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Energy Policy and Return on Investment

Posted on May 2, 2008 by Neil Garfield

 

While we love our contentious politics and passionately favor our pretty candidates, we lose sight of the fact that there is actually some work to do and that the policies that will get that work done are complex, filled with nuance, trapdoors and obstacles.

Politics is well-suited to sound bites, but governance is far more complex than that. We favor Obama’s candidacy not because he knows everything about energy policy or economics — he doesn’t and neither do any of the other candidates. We favor him because he understands that any policy that is actually effective must engage the voters and decision-makers in the private and public sectors and his approach is more likely to achieve that plan of engagement. He is betting that people will accept some ambiguity and mistakes in the pursuit of good governance.

The business case discussed below must present the voter or decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he/she will receive, the fact that there will be government incentives, and the fact that his/her competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

As the following article points out, the largest problem confronting us in changing the energy paradigm is the bean counter. Return on investment (ROI) is a term that is widely used and presumed to mean something. Unfortunately it  doesn’t mean anything except to the speaker. We all mean different things when we talk about whether a project is “worth” doing. That’s where government comes in as the referee.

Good government policy defines the scope of a project, the benefits and the costs in a way that educates people and has them speaking about it in the same way, using terms that are understood by everyone the same way. It is from the higher government point of view that decision-makers in the private sectors can gain a perceptual advantage as they see their place in their industry and their place in the economy as a whole.

Good government policy provides incentives and reliable information for decision-makers to make good decisions not only indiivudally for their own companies, but collectively so that each industry and each company, along with the economy as a wholoe has an opportunity to achieve a stable growth pattern, secure in the knowledge that we remain ahead of teh curve.

Energy policy is part of the larger government role of national security. We can all agree that we want to pursue policies that will increase the likelihood of peace and prosperity, where tax rates are low, tax revenues are high (because of high growth economic activity and productivity) and reducing entangling alliances and policies that might increase the the prospect of an expensive war or distract us from maintaining the value of our currency, while keeping the pressures of inflation checked.

Thus we all know that good national and state economic policy includes effective administration of an energy policy. However in a democratically driven republic with capitalist economic underpinnings nothing works without “consent of the governed.” Cooperation of voters and private sector decision-makers is not merely helpful, it is required. Consent cannot be effectively coerced without most of the rest of the voters or decision-makers subscribing to the policy (peer pressure and reducing the perception of risk because others are doing it). 

Thus the mission of the next administration will be to communicate effectively with the private sector and with voters to change the paradigm of energy production and consumption.

 

  • For example, plug-in hybrids that will provide a range of perhaps 40-50 miles on battery power alone, requires somewhere to plug them in. 
  • If they are plugged in overnight when usage is lowest, then the utility companies get increased revenues and profits, and government should reward the utility companies with credits for participating in the reduction of the carbon footprint of transportation. 
  • But if the cars are plugged in during peak hours, it could be a financial disaster for the utility companies unless they are able to secure cheap energy to absorb the already overloaded hours.
  • This opens the door for wind turbine and solar capture farms in areas that are presently unused, and which would be environmentally unaffected by installation of renewable energy sources. 
  • It opens the door for entrepreneurs to convert existing hybrids to plug in versions and for car manufacturers to offer new vehicles with the hybrid capability to  run on battery alone, run on gasoline, run on diesel and even to run on alternative bio diesel.
  • It opens the door for entrepreneurs to offer home conversion for solar (PV) electricity for powering up those hybrids, golf carts etc. during PEAK times.
  • This in turn opens the door for companies that deliver products and services to businesses and residences to convert to such vehicles, including government society services like police, fire, public transportation etc.
  • The result if properly administrated and orchestrated, is a direct cost savings to all the participants, direct increase in profit for the private sector, direct decrease in major costs for government services, and indirect benefits that are more important at higher levels of government than a particular locale or even state.
  • ALL of this requires an effective leader who gives voice, vision and direction motivated by a desire to produce a benefit to society (everyone) rather than part of a society with merely leads to abuses that are always traced to schemes that are merely masked agendas for transfer of wealth, accumulation of power and the enslavement of the citizenry. 

 

Thus the business case discussed below must present the decision-maker not only with some proposal that is based upon his direct benefits, but all the indirect benefits he will receive, the fact that there will be government incentives, and the fact that his competitors are getting the benefit of having already subscribed to the new policy. If the decision-maker is not sold on all these factors, he/she won’t do it. His/her job is on the line. Everyone wants to be a hero but nobody wants to risk cutting their employment throat. 

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Sales & Marketing: Why ROI Calculators are a Formula for Failure

Financial justification tools face three major challenges: Prospects don’t believe their output; facilities managers are not financially trained; and sales reps are not trusted to explain the numbers.

Denis Du Bois
May 02, 2008
Rebates, ITCs, projected energy costs, NPV… Finance is not a shallow subject, but most people barely get their toes wet before they drown. Just ask three CFOs to explain “return on investment.” You’ll soon be gasping for air, even if you thought you knew what it meant.

When it comes to sustainability, for-profit corporations still do more talking than buying. Without a business case, few projects end up getting past the “nice idea” stage.

This is as true for chiller plant controls as it is for a utility-class wind farm. Capex approvers need convincing that sustainability goes beyond saving polar bears, and isfiscally the right thing to do for their company.

Take energy efficiency as an example, performance contracts aside. Unless a sales rep can get C-level executives to think about energy as a manageable P&L line item, instead of as a fixed expense, the rep will be going out the way they came in — empty-handed. No business case, no deal.

Point of failure

Who prepares the business cases for your proposals? Unless you can find a way to keep your finance department out of doing it, this is a bottleneck in the sales process. Thus the popularity of ROI calculators.

Does your company use an ROI calculator?
Post a comment and share your experience.

Sales reps who open up an ROI calculator are likely to experience a vague sense of dread. The facilities manager doesn’t really understand or believe the result — accounting isn’t their profession, after all — but they provide the numbers and nod politely.An attempt to explain the results is likely to embarrass the sales rep — accounting isn’t their profession, either — but they try. The prospect does more nodding, and grows more skeptical.

So, companies say they have tools to calculate payback, reps say they use them, and prospects say they understand the results. The marketing department, who spent plenty to have the ROI tool developed, hears neutral feedback or nothing at all. They don’t know the tool is ineffective and has fallen into disuse.

Soon, though, the tool is out of date. The state grant expires, the latest energy bill changed the depreciation rules again, or energy costs have outpaced the projections. Even a spreadsheet that is still valid is not trusted beyond a few months after it was created.

What’s the formula?

In companies where I’ve seen ROI tools succeed, there have been common traits. First, these typically are larger companies with multiple products, so they have more than one ROI tool. One or two people with financial backgrounds are assigned to researching, building, and maintaining the tools. They take pride in their product.Second, each tool is designed to allow the prospect and sales rep to produce a believable business case. That means believable for the customer even if it’s not as favorable to the vendor. When it’s readable and believable, it has a chance of showing up in the C-level decision maker’s e-mail. All assumptions and constants are footnoted with credible sources, and none of them are locked. If the prospect wants to reduce the power factor or increase the number of cloudy days, let them. It’s their ROI.

Finally, train sales reps and give them a support line. Try as you may to make the user interface simple, it’s still Excel and it’s still complex. Webinars are effective at teaching sales reps how to use these tools, especially in a third-party sales channel — and the recording of the webinar stays around for reference. Reps then need to know who to call for help whenever they get stumped in front of a prospect.

To close a business-to-business sale, you need to demonstrate the cause-and-effect relationship between investing in your product and achieving a business goal. In the C-suite, there’s nothing as powerful as a good ROI tool in the hands of someone who is comfortable using it.

 

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