Tonight, I was with family. Before gifts were opened, my daughter was playing. And I had this interesting exchange with my mother and my brother’s wife. They were talking about how the normal heating system in a house can leave one part of the house hot and another cold.
My mother mentioned that, if they build a house, they want to convection-heat the floors.
My sister-in-law pointed out how her parents were cooling their home with a geothermal system: the house was kept cool by the constant temperature of the earth. It costs them very little to cool their house.
We went on to jump from that to the lack of consistent tax policy (to encourage innovation and customer demand); how Holland, and now China, had big companies to supply that demand (because of policy); how in Europe, a lot of people had installed solar panels (because of their tax policy and the fact that they could sell the electricity back to the Utility company).
Strangely enough, this was a discussion about Energy Policy that bridged the traditional split between left and right. One of the three people in the discussion is a traditional Republican who is at best “not convinced” about climate change.
She does realize that clean energy is doable. And she also put together that innovation is the key: with the right policies (for investors to place long-term bets), people will start coming up with solutions to the technical problems. That changes the dynamic for clean energy completely.
Once, there were portable phones. The first I saw filled half a briefcase. Then there were mobile phones. And those became cell phone. And now, there are devices small enough to easily loose that do far more than handle calls and cost almost nothing.
If the problems with clean energy are technical, development will follow the same curve and we will eventually arrive at a situation where clean energy is cheaper than traditional energy sources.
The benefits of clean energy (both in being ultimately cheaper and in being something in which American companies can win) were clear enough that it didn’t matter that we didn’t even agree on whether climate change was an issue.
Earlier in the evening we had talked about the car company Tesla. Tesla is a California-based company that manufacturers electric cars. Their first car, the Tesla Roadster is (while outrageously expensive) also able to accelerate faster than almost every car on the road. Their second car (a 2011 model) will be a sedan that while still expensive is priced more like a BMW than a Lamborghini. Their next car is rumored to be a family sedan and priced for the mass market.
Besides producing electric cars that people want to buy, Tesla in unique in another way. Tesla Motors is the first new American car company (as opposed to a new Brand) since Delorean in the eighties. They are succeeding because the regulatory market for cars is stable, they’ve created a product that customers want and they have strong funding.
The fact that an electric car company is innovating so fast is incredible. The fact that the cars are cheaper to operate and create engineering and manufacturing jobs in the United States is something that most people get. Even if they don’t believe in global warming.
Tags: Add new tag, Climate Change, Electric Cars
The debate on Health Care has clearly been hated. My previous post on the topic develops an idea I had discussed with my Dad. Generally his views are on the Conservative end of the spectrum and (suprisingly to me), he thought it was a great idea at the time. Even more interestingly is that (at least as I read the tea leaves of Obama’s recent speech before Congress and the discussions afterwards), it looks like a variant of my idea will be part of the final bill. Tis interesting…
Tags: Health Care
A hypothetical campaign exchange:
“There goes my liberal opponent again—demanding yet another tax. He’s never seen a tax he didn’t like. Now he wants to raise your gasoline taxes… The American people have been taxed quite enough, thank you!”
“The American people certainly have been taxed quite enough. I totally agree. Right now they are being taxed by Saudi Arabia, taxed by Venezuela, taxed by Russia, taxed by Iran, and, if we stay on this track, they’ll soon be taxed by Mother Nature… So let’s get one thing straight: My opponent and I are both for a tax. I just have this quaint, old-fashioned view that my taxes should go to the U.S. Treasury, not the Saudi Treasury, not the Iranian Treasury and not the Russian Treasury. It’s just a little tic I have. I like my tax dollars to go to build my own country.”
That hypothetical campaign exchange comes (via some modifications of my own) from Thomas Friedman’s Hot, Flat and Crowded. It’s an exchange that does a nice job of summarizing some basics.
There are a laundry list of examples that demonstrate that climate change is very real. The opening of the Northwest passage for the first time in recorded history is one such indicator. The extraordinary efforts the Chinese went through to have clear (if not clean) air for the Beijing Olypics is another indicator. Al Gore’s movie and (until the economic meltdown) the nightly news were filled with more. As California Governor Schwarzenegger (you have to love being able to quote the Terminator in a policy article) put it to Friedman “If ninety-eight doctors say my son is ill and needs medication and two say ‘No, he doesn’t, he is fine,’ I will go the nighty-eight. It’s common sense—the same with global warming. We go with the majority, the large majority.
And, of course, there are people who still disagree with that position. But, many of those people understand the other explicit argument in the exchange above. We’re in a situation where the oil we purchase from abroad is, to a significant degree, funding agendas most people don’t want to fund; for instance, the Iranian nuclear program and Russia’s recent invasion of a southern neighbor. Go ahead and think of more while I wait. Good. Go ahead, think of a few more. Want more? Google and your local bookstore can provide all the fodder you need. We are paying to prop up what George W. Bush in his dudding way would call Bad Guys. And we are paying them to be major threats to our national security.
The impatient are already sending me emails. “Gas prices have gone back down and the Bad Guys have gotten quieter.” Very true. When we cut the bottom out from under gas prices, Putin and company have to cut their budgets some where. But, we are in the middle of the worst economic crisis since (depending on how you count) either the ’70s or the Great Depression. Chinese factories are literally closing (liquidation is a growth industry in China at the moment). The U.S. economy shrank at an annual rate of over 6% in the 4th Quarter of 2008. Other economies have shrunk much faster. And gas prices are still high by historical standards. How long will a barrel of oil stay cheap once the world economy starts to grow again?
Next… a short history of energy revolutions.
Tags: Climate Change, Energy Security, Taxes
I’ve been meaning to flesh this post out some more… since October. Instead of holding it up any longer, I’m going to release the draft version (right down to references to Presidential Candidates)…
Both Candidates for President have health care proposals (Obama and McCain). But, the genesis for this blog was an idea for a way to provide health insurance for everyone. We have a fairly straight forward program called the Earned Income Tax Credit that helps workers at the bottom of the income scale. The same concept can be applied to health care. At it’s core, the Federal Government would provide assistance to pay for health insurance based on income. The less people make, the larger the assistance.
Beyond providing assistance, the Federal Government’s would carry out several functions. First, the Government would set minimum guidelines for coverage. Second, the Government would monitor the insurance provider to prevent abuses. Third, the Government would require participating companies to write policies on all comers regardless of pre-existing conditions. More on that last point in a moment.
Fourth, the Government would provide a website that would allow the public to locate insurers, compare prices, post comments about insurers and file complaints. In many ways (besides the fact the Government would not be making money off of it), it would resemble an Amazon.com for the health insurance market.
The Government would not dictate absolute prices on policies. If the program is structured properly, the market should manage prices quite nicely.
It would probably make sense for insurers to have a second category of policy for high-risk individuals. If that were allowed there would have to be standard rules on what qualified as a high-risk individual, the amount provided to the individual by the federal government would be adjusted upward and, most importantly, the price of high-risk policies would have to be within a certain multiplier of the price of a standard policy. In essence, insurers would be incentivized to take on high-risk individuals because they would both receive higher payments and have access to a large pool of customers that they would otherwise not be able to access.
Of course, the plan would have to be structured so that employers would be encouraged to continue to provide health insurance. Existing tax benefits to employers should be maintained. Employers that choose to not provide insurance could possibly be taxed in proportion to worker’s salaries. Thus, an employer with mostly low wage workers (and presumably a very low profit margin) wouldn’t be penalized for the business they’re in. Conversely, companies with primarily high salary employees for which health insurance is (relative to salaries) a small cost would have an incentive to continue to provide health insurance for their workers.
Tags: Health Care
This American Life is an award-winning radio program. Each episode focuses on a theme and usually covers it with stories about ordinary people. But every once in a while the stories are about something else. In May, they covered the Housing Crisis and this weekend, Collateralized Debt Securities, the financial items which almost caused a meltdown in our credit markets. Most of the coverage of the crisis has amounted to either a repetition of some summary (since most journalism isn’t focused on understanding) or people twisting themselves into contortions to prove their political viewpoint.
As the second program points out, the CDS market has been completely unregulated. This state of affairs was fixed in 1998 by agreement of the Clinton Administration and a vast majority of the members of both parties in Congress. The belief was that those buying and selling CDS instruments were sophisticated investors (aka really smart big boys) who didn’t need oversight. Clearly, they were wrong.
I suspect that over the next few years we will see new regulations designed to address a series of problems, including bringing transparency and sanity to the CDS market.
The more interesting point in that program, for my purposes, was a comparison of the core solution in the plan Congress passed and the President signed with one that most Economists the program talked to favored.
In the official plan, money will be used to buy something that is very difficult to properly price: toxic assets. In a very real way, the Banks in question will not pay the price for their bad decisions. In economic terms, they escape the moral hazard of their choices.
The contrasting plan is termed stock injection. In essence, we would buy stakes in the Banks in what amounts (in many cases) to a Government takeover. Upper management would pay for bad decisions by loosing their jobs. The Stockholders, who are culpable because they typically approve the hiring of management and the broad direction that management takes a company, would pay by seeing most of the value of their stock disappear. Like anyone else coming to the rescue of a company, we would get to call the shots and we would expect to be rewarded for keeping the company alive.
This is actually the model that was applied to AIG. The value of the existing stockholder’s stock disappeared and upper management lost their jobs. But, the company was saved and the feared economic meltdown was avoided. At the same time, the return for the money we invested (at least according to what I’ve read) looks like it will actually be quite good.
Economic Conservatives often have a philisophical problem with government ownership of a company. And, to be honest, in general I do, too. But, the ownership is not intended to be long term. The company will leave government hands in a reasonable period of time. In essence, the government is acting as temporary caretaker until new, presumably more responsable, owners can take over the company (that the previous owners ran into the ground).
I would propose that, going forward, that this become the standard model that is followed for a government rescue of a company. A company’s stockholders and management will be very motivated to not put themselves in the position to be rescued. If they need to be rescued, they’ll be very motivated to find another solution to their problems. And, if government involvement becomes necessary, the people paying for it (us), have a good chance of getting a good return on the investment we make.
Tags: CDS, Financial Crisis, Moral Hazard, Rescue Plans
I’ll be focusing on policy questions. At Policythunk, I’m interested in discussing ways to solve our problems. Posts will narrowly focus on a specific topic. Since this is all about policy (as opposed to personalities and politics), I won’t generally be discussing people, political parties, who stuck what rider into which bill and why a certain pork provision is evil.
My posts will be informed by a fusion of ideas draw from progressive thought, libertarianism, a strong belief in civil liberties and a long list of thinkers of all stripes. The world in general and the U.S. in particular, face a list of critical immediate problems. Each of this problems is immense and, in some cases, may be unprecedented in human experience.
When I find links to background material that is reasonably complete, clear and concise, I will include that, too. I won’t quite say that the background material is required reading before posting comments. But, please be up to speed and stay on topic. I’m open to views by people that are up to speed and on topic. I’m very impatient with people (even those I agree with) who clearly arn’t up to speed or can’t stay focused.