In macro terms its really fairly simple. We have always come out of busts with booms. Wondering what the next boom is going to be and how to help it launch itself is where government should be looking and trying to act – not at deficit funding government make work projects and future energy schemes still some decades from reality.
For instance – a little look into the not to distant future and a scenario that would help us in both the balance of trade and employment, arenas (the latter almost immediately).
But also, we will help to satisfy burgeoning demand for petroleum in Asia, South America and Africa. Yes, the US is an oil importer. But if we import less, that will help to satisfy world demand just as much as if a new exporter appeared on the market. If we import a billion barrels a year (2.74 million barrels a day) less, at current prices that works out to $100 billion off of our huge trade deficit. This could also be a huge engine of job growth. We now have about 2,000 rigs drilling, and more are being added all the time. For each rig there are the roughnecks, the service companies, the drilling pipe and casing producers, the local service providers, etc. It is big business, and growing fast.
Fortunately, we have lots of places to drill, in various shale formations around the country. (It’s not “shale oil” in the classic sense, better to call it, “shale associated oil”). For those who think that Yankee ingenuity is a thing of the past, just look at our oil and gas industry. It serves as a powerful testament to the power of the free enterprise system that a great many people chipping away at the same problem can come up with creative new ways of extracting oil from the earth that a centralized government program of oil production would never (and has never) originated. You don’t see these new drilling techniques coming from Russia, which is still sadly statist in its efforts to exploit natural resources.
We have the resources, we could be exploiting them now (relatively speaking) and have them benefit our economy while we do the pie-in-the-sky energy research the Democrats think is the panacea to all our problems. I’ve never understood their insistence on ‘either/or’ in that regard. Why can’t we do both simultaneously – which seems both logical and would help do exactly what they claim they want – employ Americans.
Timothy Siegel’s point about innovation is well taken as well. One of the reasons we’re moving past the peak oil predictions of the past is because of innovation from private oil companies that is allowing them to extract harder to reach and exploit oil and gas at a reasonable price. We, as a nation, should be encouraging that instead of doing everything in our power to cripple such innovation.
Instead we get solutions like those below from the left. Government should spend money when one of the greatest engines for economic revival is left sitting at idle while the administration figures out how to get more sugar in its gas tank.
It’s freakin’ nuts.
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Ron Klain, former Chief of Staff for Joe Biden (and a Bloomberg View columnist) gives you a peek at the plan. Klain has a piece in Bloomberg where he puts the outline of what the administration needs to do to spin the car bailout properly if it hopes to make it a campaign positive. Klain’s suggestions are offered to form the basis of a narrative which will be polished and become a center-piece of the record of Barack Obama. The reason for beginning now is obviously an attempt to condition the public, which was very much against the bailout (and mostly remain so), to the supposed positive aspects of the takeover by government.
Of all the policy challenges I saw Obama tackle in my two years in the White House, none was more complex than turning around the U.S. auto industry. When the president took office, the industry was in free fall. Sales of cars and trucks, which had topped 17 million in 2006, fell to 10.6 million in 2009. Two of America’s three major automakers were insolvent, kept alive by weekly inflows of federal cash. U.S. automakers had an unsustainable cost structure, were badly trailing their foreign competitors in the production of fuel-efficient and electric vehicles, and seemed unable to make the hard choices needed to arrest their downward spiral.
The course the president chose was unexpected and risky. Most Americans remember that the administration decided to "bail out" the car companies — and indeed, the president did extend more loans and support to the industry. But he attached to the aid a series of controversial and painful conditions that ended business as usual in Detroit.
Call it “gutsy call II” if you will, but in reality, it is far from the picture that Klain ends up painting. Both the car companies were headed toward bankruptcy – a financial condition they had earned by their poor practices and sellouts to unions. Obama’s bailouts certainly ended “business as usual” for those two companies but not in a positive way.
One of the consistent memes is that had Obama not acted, GM and Chrysler would have gotten the equivalent of a death sentence by having to go into bankruptcy. By death sentence I mean the administration and its bailout supporters imply millions would have been thrown out of work and those two companies would have forever disappeared.
Uh, no. As Jim Manzi at NRO explains:
First, in the event of a bankruptcy, you don’t burn down the factories, erase all the source code on all the hard disks, make it illegal to use the brand name Chevrolet, and execute all of the employees. Others take ownership of the assets, and the employees go on with their lives. Some of these assets will be put to use generating revenues, profits, and taxes, and some of these former employees will get jobs or start businesses, and generate revenues, profits, and taxes. In order to measure the effect of the bailout over, say, five or ten years, you have to compare the actual taxes collected to what would happened over this same period in the counterfactual case where the bankruptcy was allowed to proceed. What owners would have bought the factories and IP assets, and what would they have done with them? What businesses would the former employees have started? Who would have moved to Arizona and retired? What new industry clusters will evolve in Arizona because of this transfer of people?
And what would have come out of the bankruptcy? Leaner companies better equipped to address the market and turn a profit. What wouldn’t have come out of the bankruptcy are the level of union pensions and benefits the administration preserved. Obama, through his bailout and modified bankruptcy made sure those were weren’t destroyed. Consequently you have pretty much the same conditions that existed prior to the bailout still in existence today with the added twist of more union control.
GM, for instance, just before it announced it had “paid off” its government loans, lost 3.4 billion dollars. Hans Bader, of the Competitive Enterprise Institute destroys the myth of GM’s loan payback with an extensive investigation into the real story. It is a story of known falsehoods being tacitly approved by the White House and the Treasury Department because the administration was desperate for some good news at the time. The Chrysler loan payback, as I noted recently, is of the same stripe. More smoke and mirrors from the “transparent” administration.
But back to the bailouts and the reasons. The defense offered for the bailout is this:
The White House report said the money invested in GM and Chrysler ultimately saved the government tens of billions of dollars in direct and indirect costs, including the cost of unemployment insurance and lost tax receipts that the government would have incurred had the big Detroit auto makers collapsed.
Again, that assumes nothing comes out of any bankruptcy proceedings. Nothing. And, as Jim Manzi of NRO explains above, that’s simply not how it works. It is an assumption without any real world foundation. We’re talking a zero sum assumption by the administration where no assets are bought, no one goes back to work, everyone is unemployed and no one can find a job. That’s just not the way bankruptcies (or the real world) work.
Second, some of the profit GM makes today would have been made by other companies that picked up some of the slack if the company lost market share after a bankruptcy. They would pay taxes on these profits, and as far as government receipts are concerned, money is money. How would auto industry structure evolve over time given whatever changes happened to the assets currently owned by the legal entity GM, or the employees currently paid by it?
Anybody who tells you they can answer all of these questions reliably is full of it.
Indeed. Again, the White House and its cronies must push the black and white version of this to make it saleable. If they can’t make you believe in their “either/or” scenario, then they can’t sell the lie. They’re banking on a large degree of economic ignorance to sell this. But they know that if they rely on the fact and figures they’re going to end up on the wrong side of the argument. So Klain says, break out the smoke and mirrors once again – sell it on emotion:
First, tell the story with fewer numbers and more emotion; less prose and more poetry. Rescuing the auto industry isn’t just a matter of saving jobs and factories — it means preserving a uniquely American manufacturing tradition. Cars are more American than apple pie or hot dogs (which, unlike the automobile, were both invented in Europe). We couldn’t have won World War II without this "arsenal of democracy"; as Walter Reuther famously said, "England’s battles were won on the playing fields of Eton, but America’s were won on the assembly lines of Detroit." The president needs to jujitsu Republican critics who accuse him of failing to understand American exceptionalism by pointing out his success in saving this exceptionally American industry.
You have to love the fact that even Klain doesn’t believe his own nonsense, but has no problem advising the president to use it. Note too that Klain seems not to remember that one of the reasons that GM and Chrysler were on the ropes had to do with the American public choosing competitive foreign cars over the American cars from those two companies (and with the VOLT, we see GM again in the same condition. But he feels if he wraps it all in emotions and not facts (a variation on “hope an change” that worked so well in 2008), they can fool enough voters into accepting the narrative or at least, not caring about it.
Second, equally emphasize the pain that was imposed as a condition of support, and the hard and unpopular choices the president made. It was a plan of “shared sacrifice,” in which executives were fired, workers lost jobs, benefits and pay were cut, and dealers were shut down. The story of the tough choices the president made along the way must be told to convince the public that this wasn’t a handout.
Of course, this plays into the part of the narrative in which you must believe their “either/or” scenario – that is had the government not acted, millions of jobs would have just vaporized. Of course, what Klain describes above would most likely have been the result of normal bankruptcy proceedings minus the $50 plus billion government money injected into GM. They don’t what that known though. And, naturally, they don’t want any speculation about what would have emerged, how many jobs would that would have entailed, etc.
If you start down that road and use the history of bankruptcies and the emergence of companies from that situation as a basis, you’ll have a very difficult time swallowing the administration’s story. So avoid those facts at all costs and concentrate on “emotion” and “pain”.
Finally – Klain advises the White House to crank up the propaganda:
Third, let the people of the auto communities tell their own stories — encouraging homegrown viral videos and other uses of social and new media. This is a lesson I learned the hard way during the 18 months I was part of the White House team that struggled to explain the benefits of the Recovery Act. We used visits by the president and vice president, videos posted on WhiteHouse.gov, as well as endless statistics and charts and maps and graphics on Recovery.gov — and yet nothing got the job done. Finally, two ice-cream shop owners made an iPhone video that told the story better than we ever had, by showing how a single small business loan rippled across their area to create jobs in countless other businesses.
The White House needs a similar personal narrative to tell the auto rescue story, or it will risk being denied a return to Victory Lane in 2012.
So there is the plan – “emotion, pain and propaganda” – that Klain claims the administration should use to sell something that is about as un-American as the internment of Japanese/American civilians during WWII. The most interesting part, of course, is Klain understands that if they get into the specifics of this “deal” and the facts come out, it ends up looking like a very poor decision. And Klain knows that the opposition, once it finally settles on a candidate and its own narrative, is going to seize on this subject as a part of their attack on the Obama record.
He instinctively knows that any chance of blunting that, or making it a non-issue, requires that the administration’s narrative be out there actively being pushed now and that it has to be spun properly for it to work.
How do you counter this? With facts. And the facts are aplenty. There is no shortage of factual information that can gut these arguments and show them for what they are – emotion and propaganda. The opposition also has to use “American exceptionalism” in its proper way and point to the fact that the administration misusing “exceptionalism” in its version.
And that doesn’t even start to get to the really long-run considerations of what effects this has on rule of law and moral hazard (or if you want to make the case for the bailout, social solidarity and degradation of the working class).
One of the things America prides itself on is “rule of law”. That is a large part of our exceptionalism. We also founded a country that attempts to avoid the moral hazards that abound in this sort of a situation. We are and for the most part always have been a meritocracy. You get what you earn. We don’t buy into exceptions because they’re “too big to fail”. We understand that freedom means the freedom to fail and we don’t bail out –selectively- failures. We don’t throw good money after bad, and we certainly don’t expect our government to interfere in that process.
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I’m sure they’re “unexpected”:
Private-sector employment growth decelerated sharply in May, according to Automatic Data Processing Inc.’s employment report released Wednesday, in another possible sign of a sputtering U.S. recovery.
Employment in the nonfarm private business sector rose a seasonally adjusted 38,000 in May, well below the 175,000 increase expected by economists. In April, private payrolls showed an increase of 177,000, ADP said.
“This is exceptionally weak,” said Eric Green, chief market economist at TD Securities Inc. in New York.
“This was a dismal report, indicating a significant slowdown in job creation after six months of solid gains,” said Nicholas Tenev, economist at Barclays Capital Research.
“Sold gains?” Yeah, not so much. We’ve yet to hit the threshold of job creation – about 300,000 or so – necessary to tread water, much less be adding jobs. The gains we’ve seen in the past six months have been “positive” in that there were net jobs created, but 38,000 is about 10% of what we need per month to begin to chip away at unemployment.
The government will report its version of the numbers on Friday (the above is the ADP report):
On Friday, the government will report on U.S. nonfarm payrolls for May, data that also include government workers.
Economists polled by MarketWatch are looking for a gain of 175,000 in payrolls and for the nation’s unemployment rate to tick lower to 8.9% from 9.0% in April.
That would mark a slowdown from the healthy 244,000 jobs added in April.
It would also tell us that there is no real slowdown in hiring government workers, wouldn’t it – you know, despite “budget woes”, etc. And note too that we again, despite “a dismal report”, see economists saying the unemployment rate will “tick lower” to 8.9%? Yup, the Ministry of Truth is available to feed you whatever data you want to believe (which may explain why “improvements” in the unemployment rate don’t seem to boost consumer confidence at all). Again, not being at the “tread water” level with job creation, you have to wonder how the calculations are figured and what is being considered and not considered to anticipate the unemployment rate coming down in the face of “a dismal report”.
Dale has covered the real numbers for quite some time – well into double digits. But there is indeed a larger question out there – is the workforce actually shrinking and the old norms no longer the standard by which we should measure unemployment. I.e. are older workers looking at the job market and saying, “to heck with it, I can retire and I’m going too”?
Don’t know for sure, but regardless, the numbers from ADP remain “dismal” for May.
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The one-trick pony that is Paul Krugman, constantly pushes massive government spending as the panacea for all recessionary ills. It is supposed to be the way one “manages the economy” from a central government position – as collectivist a thought as one can imagine.
In fact, one of Krugman’s criticisms – despite the fact that his estimate of the amount needed to stimulate the economy was $200 billion less than what was passed in the stimulus package – is that the government hasn’t borrowed and spent enough. And he certainly is no fan of austerity, claiming that the “pain caucus” has been in charge (what almost a year trying to address decades of borrowing and spending?), with no significant results and oh, by the way, look at the UK.
“In Europe,” he wrote last week, “the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer … [But] Europe’s troubled debtor nations are … suffering further economic decline thanks to those austerity programs.”
Yes, friends, “sound money and balanced budgets” are, apparently, things to be avoided.
But curiously Krugman never says, “oh, by the way, look at Switzerland” because if he did, he’d have to explain their positive outcome based on austerity:
The Swiss have run a prudent fiscal policy throughout the economic crisis. They have had a structural surplus in each of the past five years. Their net debt is actually lower today than it was in 2005. And guess what? In 2009 their economy suffered the smallest contraction in Europe, with unemployment today below 4 percent. As for sound money, the Swiss franc is up 95 percent against the dollar since 2000.
The key point is the Swiss never let their economy get in the shape that is now plaguing the rest of Europe and the US. It has never spent and taken on debt like the UK, much less Portugal and Greece. It has been a program of economic austerity for years. Consequently, the debt level is miniscule compared to other Western economies and recovery was quick with minimal intrusion (if any) from government. We, on the other hand, were borrowing in good times and borrowing heavily to spend on things our government has no business involving itself in much less borrowing money to do so. And it points out that even if you buy into the Krugman theory that we ought to be borrowing and spending in “bad times” ala Keynes, the other borrowing that has taken place limits those options considerably:
The real lessons for the United States are clear. Those who run up debt in good times can borrow only so much more when a recession strikes. And heavily indebted governments postpone fiscal stabilization at their peril. If you wait to reform until the bond market calls time, you are—to use a technical term from economics—screwed.
And we’re headed toward that “technical term” more quickly than we can imagine, and yet the Krugman’s of the world still counsel more spending of borrowed money leading to more accumulation of debt.
At a certain point, the amount of debt begins to shave percentage points off the GDP as the debt is serviced. That, at least in my opinion, is where we are now and one of the reasons we’re seeing such a slow recovery. GDP growth, last quarter for instance, is not at all robust:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.8 percent in the first quarter of 2011…
Economically we have to understand, at the highest levels, that despite the siren songs of Keynesians like Krugman, that the bill has come due – in fact it is past due- and must be addressed and paid. We can’t afford to ignore it anymore, nor pretend that spending borrowed money will do more good than harm. We and the can are at the end of the road. It can’t be kicked anymore without dire consequences. Unfortunately, while it seems we’ve at least recognized that fact – for the most part – what we can’t seem to make ourselves do is that which is necessary – cut spending deeply. We continue to hear from the false economic prophets that we can fix all this if we’ll just borrow and spend.
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As China’s middle class expands and as its business and manufacturing sector continue to grow, it is driving the price of commodities higher because of increased aggregate demand for relatively scarce commodities:
While China’s GDP is only 9.4% of the global economy, and its population is 19% of the world population…
- Cement demand represents 53.2% of global demand
- Iron ore = 47.7%
- Coal = 46.9%
- Pigs = 46.4%
- Steel = 45.4%
- Lead = 44.6%
- Zinc = 41.3%
- Aluminum = 40.6%
- Copper = 38.9%
- Eggs = 37.2%
- Nickel = 36.3%
Some of that demand is relatively stable, like food consumption. The world’s largest country has a middle class that can afford meat for the first time…..
Obviously this means that competition for these commodities will push prices higher and higher. It is these sorts of numbers that cause me to doubt seriously those who claim inflation is not a threat. Certainly the price for commodities is going to go up based on nothing more than China’s demand. And if it costs more for those commodities, that means costs for products based on them are going to rise as well – everywhere. Add in the money supply woes (i.e. literally dumping trillions in dollars into the economy to no real effect) and debt problems and you have a mix of reasons why, while it may not be evident just yet, inflation seems to be a certainty in our near future.
UPDATE: More on food commodities. Interesting article. Much that is produced in China in terms of grain is going toward feeding livestock. So that puts even more pressure on costs for grain, etc.
China was until recently self-sufficient in soybeans, for example. But now they are producing the same amount as they always have (15 million metric tons) but importing 3 times that to keep up. Corn, wheat and rice are headed in the same direction:
Xiaoping said that most of the land in China that can be farmed profitably is already under cultivation and that available land is actually shrinking in the face of development. In addition, yields are beginning to plateau, he said, with little expectation of major gains.
He said he expects China to increasingly import corn to keep up with demand resulting in part from dietary changes and its use in producing biofuels.
That means upward pressure on prices for everyone.
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President Obama promised a new sort of presidency. And he’s delivered – Chicago politics in DC:
If Obamacare is so great, why do so many people want to get out from under it?
More specifically, why are more than half of those 3,095,593 in plans run by labor unions, which were among Obamacare’s biggest political supporters? Union members are only 12 percent of all employees but have gotten 50.3 percent of Obamacare waivers.
Emphasis mine. 12% get 50% of the waivers. Got a “gold plated health benefit package” but don’t belong to a union? Tough.
Pure and simple, this reflects who makes up the Democrats real constituency. The NLRB reflects it as well – see the Boeing stupidity and the attack on right-to-work states and the attempt to deny non-union workers their jobs.
But back to the waiver point. One of the things I constantly harp on is the fact that we supposedly are a nation that abides by the rule of law, not the rule of men. And that means something:
One basic principle of the rule of law is that laws apply to everybody. If the sign says "No Parking," you’re not supposed to park there even if you’re a pal of the alderman.
The special dispensation granted through 50% of the waivers to this point to a favored constituency seems to clearly point out that the law is at best being selectively applied (and the reason seems pretty obvious).
As for the NLRB":
Another principle of the rule of law is that government can’t make up new rules to help its cronies and hurt its adversaries except through due process, such as getting a legislature to pass a new law.
Chicago cronyism on a national level. And, you can be sure the unions will spend their members money to re-elect the politicians who favor them.
Yes friends, “hope and change” have taken on a new distinctly Chicago machine sort of air, haven’t they?
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That according to Gallup:
The bump President Obama received after the killing of Osama bin Laden more than two weeks ago in Pakistan has vanished completely, according to the latest Gallup Tracking poll released Monday.
Obama’s approval rating is now at 46 percent, equal to his approval rating in the last tracking poll conducted before Obama addressed Americans late on May 1 and informed them of bin Laden’s death. Forty-four percent of Americans now disapprove of the job Obama is doing as president.
According to the Gallup poll, Obama’s approval rating crested at 52 percent after the bin Laden killing. His disapproval rating never fell lower than 40 percent.
Obama’s bounce is smaller in magnitude and shorter in duration than the bumps enjoyed by other presidents over the past 70 years, according to a study by Republican polling firm Public Opinion Strategies. For example, George W. Bush received a 15-point bump after the capture of Saddam Hussein in 2003 — a bounce that lasted seven weeks.
“It’s the economy, stupid”:
The poll also comes the same day as Gallup announced that three in four Americans "name some type of economic issue as the ‘most important problem’ facing the country today — the highest net mentions of the economy in two years. Those numbers, combined with Obama’s fleeting boost, suggest the economy remains — by far — the dominant issue of the 2012 presidential campaign.
“Yea, we got Osama. But I still don’t have a job, the economy sucks, we’re in debt up to our ears and you’re trying to find more and more ways to take more and more money from me because of your profligacy. What are you going to do about that?”
I think that’s a fair statement of what the 2012 election will turn on. And I also believe Obama is beatable. But not with the current declared crop of candidates on the GOP side.
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In a townhall meeting, President Obama was confronted with a situation by a former federal worker. I won’t say she was confronting him per se, but she was laying out a less than happy result, for her and her family, of the economic downturn and asking, rhetorically what the President would advise her to do:
Karin Gallo, who jokingly described her job at the National Zoo as "non-essential employee number seven," said she had taken a job in government "thinking it was a secure job" – but that now, she feared for her family’s future.
"I am seven months pregnant in a high-risk pregnancy, my first pregnancy," Gallo told Mr. Obama. "My husband and I are in the middle of building a house. We’re not sure if we’re gonna be completely approved. I’m not exactly in a position to waltz right in and do great on interviews, based on my timing with the birth."
"And so, I’m stressed, I’m worried," she continued. "I’m scared about what my future holds. I definitely need a job. And, I just wonder what would you do, if you were me?"
Obama essentially ignored the personal “what should I do” part of the question to spin an answer that Jim Geraghty at NRO calls “epically wrong”.
The reason for the spin is obvious – it’s a way to throw a scare into the voting population by pretending two things that haven’t happened are happening. And here is the “epically wrong” quote:
"The reason the unemployment rate is still as high as it is, in part, is because there have been huge layoffs of government workers at the federal level, at the state level, at the local level," he said. "Teachers, police officers, firefighters, social workers– they have really taken it in the chin over the last several months. And so, what we’re trying to do is to see if we can stabilize the budget."
"I do want to make a larger point to people, though, that folks like Karin provide vital services," Mr. Obama continued. "And so, when we have discussions about how to cut our debt and our deficit in an intelligent way, we have to make sure that we understand this is not just a matter of numbers – these are people."
Well of course they’re people. So are the 6+ million or so not working in the private sector right now. But let’s get to the numbers shall we? Geraghty provides them:
First, let’s look at the numbers for private-sector employment. All figures come from the U.S. Department of Labor’s Bureau of Labor Statistics:
Recent peak of private-sector employment, June 2007: 116,603,000.
Total private-sector employment in the month Obama became president, January 2009: 109,084,000.
Recent low of private-sector employment, January 2010: 104,933,000.
Total private-sector employment, April 2011: 108,494,000 (Seasonally adjusted: 108,862,000).
So note, we are about 8 million away from the most recent peak in private-sector employment.
Now, let’s look at total government employment (at all levels) for those four months:
June 2007: 22,176,000.
January 2009: 22,471,000.
January 2010: 22,376,000.
April 2011: 22,594,000 (preliminary).
As you can see, in terms of total number of Americans employed in government, there has been no real discernible recession. In fact, the number has increased slightly.
Now let’s look at the number of people employed in state government during these months:
June 2007: 4,918,000.
January 2009: 5,116,000.
January 2010: 5,053,000.
April 2011: 5,253,000 (preliminary).
Again, not only pretty stable, but slowly climbing.
Now let’s look at employment in local government:
June 2007: 14,514,000.
January 2009: 14,583,000.
January 2010: 14,478,000.
April 2011: 14,492,000 (preliminary).
Geraghty updates his numbers when a commenter points out he used seasonally adjusted numbers in one place but not another. It still doesn’t really change the picture or the point that Obama’s just wrong about this:
In the comments, Reno Dave notes that in one case I used seasonally-adjusted numbers instead of non-seasonally adjusted numbers. I have added the non-seasonally-adjusted number for consistency. He notes that using the seasonally adjusted numbers, the total government workforce has varied slightly differently in the selected months:
June 2007: 22,218,000.
January 2009: 22,582,000.
January 2010: 22,488,000.
April 2011: 22,166,000 (preliminary).
You end up with 300,000 or so fewer government workers in the past 16 months. (Notice that the Census hiring effects these numbers a bit; the number of Census employees went from 24,000 in January 2010 to 564,000 in May 2010 all the way down to 1,000 in October 2010. More details here.)
The fact is there has been no significant drop in government employment at all in the past 5 years – none. And of course, who did Obama cite as being the first out the door of these mythical “huge” layoffs? Why "teachers, police officers, firefighters, social workers", of course.
Where did Karin Gallo work?
"My main message to you is that the work you’ve done at the National Zoo’s important," he said. "Every child that you see who comes by and is amazed by those animals, you know, they’re benefiting from your work."
Really? So does that make her a “teacher”? This is the “vital work” Obama was trying to tout earlier?
No offense to Ms. Gallo, and my sympathies to her and her family about her loss of employment – honestly. (Remember that almost $900 billion “stimulus” the prez said would keep unemployment under 8%, Ms. Gallo?) But you know, I went through the same thing last October. I survived and am beginning to thrive. I didn’t even apply to unemployment, although I was eligible.
What Mr. Obama should have said was, “this is a great land and I’m sure you have many talents. Why not look around, assess your strengths and weaknesses and then consider starting a business of your own?”
Instead he tries to sell big government as a huge necessity in which government employed zoo workers do “vital work”.
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David Evans is a scientist. He also has worked in the heart of the AGW machine and consulted full-time for the Australian Greenhouse Office (now the Department of Climate Change) from 1999 to 2005, and part-time 2008 to 2010, modeling Australia’s carbon in plants, debris, mulch, soils, and forestry and agricultural products. He has six university degrees, including a PhD in Electrical Engineering from Stanford University. The other day he said:
The debate about global warming has reached ridiculous proportions and is full of micro-thin half-truths and misunderstandings. I am a scientist who was on the carbon gravy train, understands the evidence, was once an alarmist, but am now a skeptic.
And with that he begins a demolition of the theories and methods by which the AGW scare has been foisted on the public. The politics:
The whole idea that carbon dioxide is the main cause of the recent global warming is based on a guess that was proved false by empirical evidence during the 1990s. But the gravy train was too big, with too many jobs, industries, trading profits, political careers, and the possibility of world government and total control riding on the outcome. So rather than admit they were wrong, the governments, and their tame climate scientists, now outrageously maintain the fiction that carbon dioxide is a dangerous pollutant.
He makes clear he understands that CO2 is indeed a "greenhouse gas", and makes the point that if all else was equal then yes, more CO2 in the air should and would mean a warmer planet. But that’s where the current "science" goes off the tracks.
But the issue is not whether carbon dioxide warms the planet, but how much.
Most scientists, on both sides, also agree on how much a given increase in the level of carbon dioxide raises the planet’s temperature, if just the extra carbon dioxide is considered. These calculations come from laboratory experiments; the basic physics have been well known for a century.
The disagreement comes about what happens next.
The planet reacts to that extra carbon dioxide, which changes everything. Most critically, the extra warmth causes more water to evaporate from the oceans. But does the water hang around and increase the height of moist air in the atmosphere, or does it simply create more clouds and rain? Back in 1980, when the carbon dioxide theory started, no one knew. The alarmists guessed that it would increase the height of moist air around the planet, which would warm the planet even further, because the moist air is also a greenhouse gas. [emphasis mine]
But it didn’t increase the height of the moist air around the planet as subsequent studies have shown since that time. However, that theory or premise became the heart of the modeling that was done by the alarmist crowd:
This is the core idea of every official climate model: For each bit of warming due to carbon dioxide, they claim it ends up causing three bits of warming due to the extra moist air. The climate models amplify the carbon dioxide warming by a factor of three — so two-thirds of their projected warming is due to extra moist air (and other factors); only one-third is due to extra carbon dioxide.
That’s the core of the issue. All the disagreements and misunderstandings spring from this. The alarmist case is based on this guess about moisture in the atmosphere, and there is simply no evidence for the amplification that is at the core of their alarmism.
What did they find when they tried to prove this theory?
Weather balloons had been measuring the atmosphere since the 1960s, many thousands of them every year. The climate models all predict that as the planet warms, a hot spot of moist air will develop over the tropics about 10 kilometres up, as the layer of moist air expands upwards into the cool dry air above. During the warming of the late 1970s, ’80s and ’90s, the weather balloons found no hot spot. None at all. Not even a small one. This evidence proves that the climate models are fundamentally flawed, that they greatly overestimate the temperature increases due to carbon dioxide.
This evidence first became clear around the mid-1990s.
Evans is not the first to come to these conclusions. Earlier this year, in a post I highlighted, Richard Lindzen said the very same thing.
For warming since 1979, there is a further problem. The dominant role of cumulus convection in the tropics requires that temperature approximately follow what is called a moist adiabatic profile. This requires that warming in the tropical upper troposphere be 2-3 times greater than at the surface. Indeed, all models do show this, but the data doesn’t and this means that something is wrong with the data. It is well known that above about 2 km altitude, the tropical temperatures are pretty homogeneous in the horizontal so that sampling is not a problem. Below two km (roughly the height of what is referred to as the trade wind inversion), there is much more horizontal variability, and, therefore, there is a profound sampling problem. Under the circumstances, it is reasonable to conclude that the problem resides in the surface data, and that the actual trend at the surface is about 60% too large. Even the claimed trend is larger than what models would have projected but for the inclusion of an arbitrary fudge factor due to aerosol cooling. The discrepancy was reported by Lindzen (2007) and by Douglass et al (2007). Inevitably in climate science, when data conflicts with models, a small coterie of scientists can be counted upon to modify the data.
Evans reaches the natural conclusion – the same conclusion Lindzen reached:
At this point, official “climate science” stopped being a science. In science, empirical evidence always trumps theory, no matter how much you are in love with the theory. If theory and evidence disagree, real scientists scrap the theory. But official climate science ignored the crucial weather balloon evidence, and other subsequent evidence that backs it up, and instead clung to their carbon dioxide theory — that just happens to keep them in well-paying jobs with lavish research grants, and gives great political power to their government masters.
And why will it continue? Again, follow the money:
We are now at an extraordinary juncture. Official climate science, which is funded and directed entirely by government, promotes a theory that is based on a guess about moist air that is now a known falsehood. Governments gleefully accept their advice, because the only ways to curb emissions are to impose taxes and extend government control over all energy use. And to curb emissions on a world scale might even lead to world government — how exciting for the political class!
Indeed. How extraordinarily unexciting for the proletariat who will be the ones stuck with the bill if these governments ever succeed in finding a way to pass the taxes they hope to impose and extend even more government’s control over energy.
While you’re listening to the CEOs of American oil companies being grilled by Congress today, remember all of this. They’re going to try to punish an industry that is vital to our economy and national security, and much of the desire to do that is based on this false “science” that has been ginned up by government itself as an excuse to control more of our energy sector and to pick winners and losers. All based on something which is now demonstrably false.
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The other day I was on a conference call with representatives of ExxonMobil as they tried to explain why the upcoming attempt to remove certain tax breaks was a bad idea. I was struck by a statement one of the representatives made:
The thing that tends to get lost is we’re the home team here. And you have two – if the government is looking, U.S. government is looking to raise revenue and they’re looking at our industry, they really have – it’s coming down to two choices, it appears. They’re looking at, right now, singularly focused on increasing tax, our taxes, as a way to increase revenue coming into the government. But study after study show that if you increase access, increase business opportunity for our industry, give us access to more resources to go explore and develop, give equal treatment to downstream investments, that by increasing access, you will increase revenue.
And by – and you will increase revenue by magnitudes more than by focusing just on raising taxes. And by giving us – the industry more opportunity to explore, develop, refine, what have you, that increases jobs. And jobs increases overall social welfare. [emphasis mine]
ExxonMobil employs about 84,000 people directly world wide (the oil industry in the US, both directly and indirectly is responsible for over 9 million jobs). In the US, that part of the total is 35,000. Now imagine if, instead of doing everything in their power to stand in ExxonMobil’s way, the government actually did what the ExxonMobil representative lays out? The result would be as he concludes – more jobs, more revenue for government, and more opportunities in the works for both in the near future. Right here.
Instead of that, however, we see government doing everything in its power to hurt the “home team”. I asked, given the situation here and the fact that ExxonMobil derives much of its income from outside the US (~75%), whether the sort of shenanigans now being attempted by Congress and the administration would have an effect on corporate planning:
Well, we approach our investments on a global basis, and obviously it’s – the money that we’re investing is our – it’s money – it’s not our money; it’s our shareholders’ money. And we’re looking to make investments that are safe; they are going to make consistent returns over a long period of time, given the nature of our business; and obviously, government policy and the consistency of government policy is an important criteria for us as we look at projects that are competing for our investment dollars around the world.
So to the extent that United States policy makes an investment, for example, in a U.S.refinery less attractive than an investment in a similar operation outside the United States, is that something we will consider? The answer’s yes, of course we’ll consider it.
You can’t ask for a clearer answer. What is it the Democrats in Congress are doing? Well they’re playing politics with American jobs. In essence they’re trying to repeal tax breaks , but only for the oil industry. Specifically (thanks Neo):
Intangible Drilling Costs – Companies which engage purely in energy exploration and discovery can recover their costs related to exploration at tax time at a rate of 100%. This lessens the burden on energy providers for the number of “dry holes” which may be found in the process. Integrated companies (i.e. “big oil”) can recover these exploration costs at 70%.
Domestic Manufacturer’s Deduction (Section 199) – A deduction (not a credit) equal to 9% of income earned from manufacturing, producing, growing or extracting in the United States, is available to every single taxpayer who qualifies in the U.S. The oil and gas industry, and only the oil and gas industry, is limited to a 6% deduction.
Percentage Depletion – The percentage depletion deduction is a cost recovery method that allows taxpayers to recover their lease investment in a mineral interest through a percentage of gross income from a well. This depletion method is not available to companies that produce oil as well as refine and market it (i.e. “Big Oil”.) This is available to all extractive industries (gold, iron, clay, etc) in the US and is in no way unique to the oil and gas industry.
Note that none of these are “subsidies”, nor (other than intangible drilling costs) are they unique only to the oil industry (although the oil industry is the only industry that is limited in the Section 199 deductions). We hear Democrats whine constantly about the loss of manufacturing jobs, yet here they are pushing for tax changes that will likely kill good high paying manufacturing jobs in a critical industry. Not only that, but as API’s chief economist, John Felmy points out they will also hurt our economy in other areas and possibly lessen our energy security by driving future jobs off shore:
[T]he more we invest here, the more we produce, the more we have improved energy security and, really importantly, it reduces he trade deficit. And for every reduction in the trade deficit means that’s dollars that aren’t lowing abroad and can be spent here, and adds further to the U.S. economy that we desperately need.
Those are extremely important points, points that are being virtually ignored by the Democrats and the administration in this headlong rush to “punish” big oil for “excess profits” and more importantly, as a means of taking the political heat off themselves and their absurd and self-defeating economic policies. Somehow, one assumes, they believe that if they tax the oil industry more, then gas will cost less – go figure.
Read the transcript of the call I’ve linked above. Check the numbers out. It is eye-opening.
And the oil business isn’t the only target of such nonsense. Jim McNerney, CEO of Boeing, covers the NLRB/Boeing debacle in today’s WSJ – something I pointed out a week or so ago. The National Labor Relations Board (NLRB) has gone to war against another home team – Boeing. Here’s a company doing precisely what you’d expect the administration would applaud if they at all believed their rhetoric about “jobs, jobs, jobs”:
Deep into the recent recession, Boeing decided to invest more than $1 billion in a new factory in South Carolina. Surging global demand for our innovative, new 787 Dreamliner exceeded what we could build on one production line and we needed to open another.
This was good news for Boeing and for the economy. The new jetliner assembly plant would be the first one built in the U.S. in 40 years. It would create new American jobs at a time when most employers are hunkered down. It would expand the domestic footprint of the nation’s leading exporter and make it more competitive against emerging plane makers from China, Russia and elsewhere. And it would bring hope to a state burdened by double-digit unemployment—with the construction phase alone estimated to create more than 9,000 total jobs.
Eighteen months later, a North Charleston swamp has been transformed into a state-of-the-art, green-energy powered, 1.2 million square-foot airplane assembly plant. One thousand new workers are hired and being trained to start building planes in July.
It is an American industrial success story by every measure. With 9% unemployment nationwide, we need more of them—and soon.
Pretty hard not to agree with that, right? And, the administration and Democrats have told the America people repeatedly that their focus is on jobs. But in the example above about the oil industry and this example about Boeing, the rhetoric does not come close to supporting reality In reality, they’re at war with the job creators:
Yet the National Labor Relations Board (NLRB) believes it was a mistake and that our actions were unlawful. It claims we improperly transferred existing work, and that our decision reflected "animus" and constituted "retaliation" against union-represented employees in Washington state. Its remedy: Reverse course, Boeing, and build the assembly line where we tell you to build it.
And, as with ExxonMobil, the government’s actions have consequences that it either doesn’t understand or doesn’t care about. McNerney lays them out for you in the cold light of economic reality and, as you’ll note, it’s not much different than ExxonMobil’s answer:
The world the NLRB wants to create with its complaint would effectively prevent all companies from placing new plants in right-to-work states if they have existing plants in unionized states. But as an unintended consequence, forward-thinking CEOs also would be reluctant to place new plants in unionized states—lest they be forever restricted from placing future plants elsewhere across the country.
U.S. tax and regulatory policies already make it more attractive for many companies to build new manufacturing capacity overseas. That’s something the administration has said it wants to change and is taking steps to address. It appears that message hasn’t made it to the front offices of the NLRB.
We are in some dire economic times right now, and we have an activist government that is saying one thing but doing another. It is telling us how critical jobs are to our economy on the one hand while, in two very important examples, doing everything in their power to discourage large American companies from creating them.
This is nothing more than political payback and cronyism. At risk are the lives and livelihoods of thousands of Americans, put at risk to satisfy a political agenda. The oil industry is not a favored industry of the left, so the administration and Democrats are doing their level best to drive it off, just when untold amounts of new fossil energy has been discovered (shale). Boeing, on the other hand, isn’t serving a favored constituency as the administration and Democrats would prefer. So they have attacked that company as well.
Both are extraordinarily bad precedents and symptomatic of a toxic political atmosphere in which the administration and Democrats are engaged in trying to pick winners and losers. They are also engaged in serving favored constituencies rather than doing all that is necessary to encourage and invite domestic American industries (the home team) to create jobs. Their actions border on the criminal and are inexcusable – especially in these tough economic times when Americans are suffering from the economic downturn.
These are actions that by government that must be stopped and stopped now. And Democrats need to be put on notice that their ploy to punish the oil industry is transparent partisan politics and wholly unacceptable to the American people.
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