And you are correct: Conservation and drilling in ANWR aren’t mutually exclusive. In fact drilling elsewhere in less environmentally sensitive regions is not prevented by conservation either, and there are more such places available than rigs to drill them.

The oil companies want to drill ANWR “by and by,” not now. They’re just lobbying for permission to drill because Bush is a pushover.

The alternatives I suggested produce none of the environmental damage drilling in ANWR or less sensitive alternatives would produce, they actually reduce our dependence on imports, and don’t threaten to produce more C02.

The big question: Since we cannot do all things at once — even drilling everywhere at once — which should we do first? And which should we subsidize?

How about pursuing the alternatives that produce the best long-term outcome for the public rather than the best short-term profit for the oil companies?

Just a suggestion…

And I don’t disagree that higher gas prices are better than lots of government programs and regulations. That’s why I’m suggesting that the government get out of the business of subsidizing petroleum, so the price can rise to reflect the real costs. I’ve seen everywhere from $5 to $15 a gallon suggested as the real cost of gas at the pump. The truth is that even if the cost of conservation is high, petroleum costs are kept artificially low by subsidy. Better to face the music now than after we’ve pumped all the cheap oil and produced earth temperatures comparable to venus…8^).

Unfortunately, this “subsidy” conversation is not the entire story. The real insanity in the accounting for oil is that it’s classified as “income” when oil production is more accurately described as a withdrawl of natural capital.

To appreciate the distinction, imagine applying for a loan, trying to convince the loan officer that the money in your savings account was your “income.” You would be ejected from the bank as a crazy person. But that is how we account for oil production now by calling it “income.”

Note that if oil were classified as a kind of capital, a prudent company (or society) would be constructing the replacement for the capital that was depreciating with the proceeds of that capital’s income production. Most factories replace their machinery with a set-aside from the income from the machinery’s production in just this way.

We are not setting aside much from current petroleum production to pay for alternatives, conservation, or anything else — certainly not much compared to Europe and Japan (or even China!). American public policy is arranged to maximize consumption, not set aside income for that alternative.

An alternative to the petroleum-centric infrastructure we now enjoy is possible, profitable, and preferred by the market. Buyers pay premiums to live in pedestrian- and transit-friendly neighborhoods.

Of course the subsidies are all on the side of sprawl — the opposite of such infrastructure. I’ll outline these subsidies if you like, but take my word, they’re enormous.

Now you are acting as if *I* was the one who presented choices as mutually exclusive, when in fact for your laundry list to make sense as an argument we would have to pretend that somehow your options c) thru e) are somehow incompatible with also drilling in ANWR.

This is not at all controversial.

I’m not sure what you mean, but if you are saying that your options c) thru e) are widely accepted as cheap solutions to our energy problems I would have to say that the devil is in the details. Individual conservation measures, or for that matter CAFE, may well be controversial.
In any case, conservation is already happening. That’s the genius of high prices – they’re a more efficient force to promote conservation than any law or regulation.

It’s not even controversial to believe that other, better places to drill exist, for which oil companies don’t have to get permission (but the Bush administration is such a pushover, they feel compelled to try while they have the chance).

This I could certainly believe: that oil companies have plenty of reserves that they are developing, but that they’re using the political climate of the moment to also push aside obstacles to the development of other reserves that they might not even want to use at the moment.

For example, simply increasing the CAFE (auto fuel efficiency) standards a couple of mpgs would deliver more energy sooner than ANWR

And the costs would be hidden and spread out so that it would be harder for people to complain. Really, people already have a major incentive (in the form of high gas prices) to buy fuel-efficient cars. The fact that they do so only to a limited degree suggests that the costs of fuel efficiency are high, and that forcing higher fuel efficiency is not optimal. This is Econ 101. If you want to make an argument for why the regular rules of supply, demand, and time preference don’t apply, feel free – but from where I sit, the net effect of CAFE is that it functions as a progressive tax. Carmakers are forced to charge more for their less fuel-efficient vehicles.

bbartlog says: “I don’t have a strong opinion on how *much* of a difference [drilling in ANWR] would make – but arguing that we shouldn’t drill there because it *won’t help enough* is idiotic. If you’re in a hole, the first thing to do is to stop digging. Drilling in ANWR will only help a little bit? OK, cool, that’s better than nothing at all.”

If the options you have are a) “Drill ANWR,” and b) “Do nothing,” then you are absolutely correct. But other alternatives exist, like c) “conservation,” d) “building pedestrian- and transit- friendly cities,” and e) “increasing fuel efficiency in autos” — all of which would be cheaper and more effective at providing available energy than drilling in ANWR. This is not at all controversial. It’s not even controversial to believe that other, better places to drill exist, for which oil companies don’t have to get permission (but the Bush administration is such a pushover, they feel compelled to try while they have the chance).

For example, simply increasing the CAFE (auto fuel efficiency) standards a couple of mpgs would deliver more energy sooner than ANWR — and unlike ANWR it would never run out. You can quote barrels and dollar amounts available in ANWR until you’re blue in the face, but where is the vaunted “conservative” rationality here?.. or do y’all get some kind of prize for parroting the oil companies’ line?

The scope of the problem is vast, too. I know it’s hard to conceive of 10 billion barrels of oil (the most optimistic projection of ANWR’s capacity), but that’s a drop in the bucket, and the other solutions are far cheaper and more effective. And if we implement them, and ANWR runs out, we won’t be beholden to some nut-job in the Middle East for the oil to fill the ANWR void.

Mesa Econoguy: (ME)

ME doubts I [Yoshidad] know what happened in the S&L bailout, saying “No extant regulation or person [could have] prevented it, not even Eliot Spitzer. What makes you think that the next regulation, or the next 50 regulations, will prevent things like this from happening again? What piece of evidence, anywhere, supports this way of thinking? None.”

Yoshidad replies: As a person who was either selling homes (yes, a Realtor) or writing mortgages during this period (yes, a loan officer — both mortgages and SBA loans), I think I bring more direct knowledge of the facts on the ground to the table than even someone who “knows a little bit about the financial industry.”

The origin of the S&L bailout was not regulations, but the loosening of S&L loan underwriting and accounting standards so that any previously well-known standards simply evaporated. S&Ls were making loans so far afield from their expertise because they were “de-regulated” in a completely foolish way.

Because of disintermediation (CDs and money market funds), the S&Ls were failing as early as the late Carter administration. The trouble began when Reagan insisted they could “grow” their way out of trouble, so following the laissez-faire mantra, his administration loosened the accounting rules and underwriting standards so that S&Ls could make really bad loans, and carry them as though they were assets even though they were bad loans. As you might imagine such bad loans fester and grow worse if they are “rolled over” and more money is advanced to pay the accrued interest. The amount of festering was $150 – $500 billion, depending on how you count the interest, the largest political / financial scandal in U.S. history.

You’ll be gratified to hear that Enron / Worldcom / Adelphia totted up $600 billion in losses, though, and the Telcos lost $6.5 billion in market valuation since they were “deregulated” … so private can still outdo public, even when it comes to scandals.

Reagan / Bush 41 deregulated the S&Ls without removing FDIC (and at the time FSLIC) guarantees, or even charging larger insurance premiums for the added risk. This is not sound business practice, or good regulation, either one. It was wishful thinking, or if you like, denial, pure and simple. This fact answers the “moral hazard” objections.

The other cause of the awfulness of the S&L bailout was the 1986 tax “simplification” in which the Reagan administration removed (retroactively!) all of the passive loss provisions from the income taxes. This meant investors owning properties could no longer write off the depreciation unless they were “at risk,” — i.e., liable for losses as a member of a partnership, not as a limited partnership or corporation, which were the bulk of real estate investment vehicles at the time.

The meaning of this last paragraph is that virtually all real estate limited partnerships and REITs that made sense with a depreciation write-off were no longer viable. The lucky ones gave their properties back to their banks. Banks that got so many give-backs and foreclosures began suffering, and ultimately failed.

This is exactly the same kind of thing that has happened with the sub-prime mortgage crisis too, BTW. The underwriting standards controlled by the quasi-governmental FNMA and FHLMC were loosened to permit lending to people who had no business getting loans.

So the banks have been saying “Sure, we’ll give you a loan with no money down, interest only, and no payment for a while, and BTW, we won’t be verifying your income, either!” Making a loan like that is simply asking for trouble. And the foreclosures are reaching record levels because of this kind of lax underwriting.

Q: Why would anyone do something so foolish? A: So the Bush administration could take credit for some miraculous economic revival spurred by the proceeds of these loans.

Q: Why not rely on the mighty economy to provide jobs and better wages? A: Because the job creation during the Bush years has been less-than-spectacular, and because of the pressing burden of tax increases in recent years.

Yes, the top brackets have come down on income taxes, but regressive FICA quadrupled in the wake of the Reagan / Bush progressive tax reductions, and states local jurisdictions have had to raise taxes to cover the shortfall from previous federal revenue sharing…

So Reagan / Bush 41 tax increases left real wages flat, and the real, remaining purchasing power has been in the hands of people with real estate equity. Because wages have been flat, credit = consumer demand.

Keeping consumer demand strong this way, and creating a real estate bubble as a consequence, is roughly like increasing worker productivity by giving everyone crystal meth. Now the morning after is upon us, and it will be very bad, my brothers. But hey, that’s what 30 years of “conservative” economics gets ya!

“Many solvent S&Ls were driven out of business as a result of the solution and subsequent overregulation.”

Sorry, the opposite is true. They got in trouble because of bad loans. If the FDIC is insuring their depositors, they have to have some standards about when the bank or S&L is viable, or should be closed, but no regulations got these lenders in the spot they were in. The truth is that Reagan waited far too long to close a lot of defunct S&Ls, hoping that the delusional practice of “growing out of the slump” would work. This is not controversial.

Instead of practicing your insults, read Martin Mayer’s book, or any of the others about the S&L bailout. These confirm what I’ve said, no matter what your assertions.

Incidentally, the Clinton administration’s repeal of Glass-Steagall’s separation of investment banks from mortgage lending is also partly responsible for the current sub-prime crisis. But once again, that’s de-regulation, not over-regulation.

“Regulation and government guarantee create the ultimate moral hazard problem, which no regulation can ever prevent. So insisting more regulation will cause fewer problems is an absurd argument on it’s face.”

The lenders’ moral hazard was sidestepped because no additional charges for FDIC insurance were levied, even though the S&L’s (and currently mortgage lenders) were taking on more risk as they lowered underwriting standards. It was half-assed from the start, destined to fail. Sort of like the California electricity “deregulation.”

But I’m not insisting on more or less regulation. Either way, I see that “de-regulation” has been done by the delusional, and the results have been half-assed and very bad.

For banks, intelligent regulation is actually required. Or do you believe that lenders should have no standards for loans? And if the government is the lender of last resort, as they are with the FDIC (and FNMA/FHLMC, in another way), should they provide no guidance? Or do you just believe no FDIC is really necessary?

“Oh, and Paul Krugman is not a credible economist.”

So let me get this straight, Jude Wanniski is a journalist, who doesn’t submit his conclusions to peer-reviewed journals, and he’s credible in his economic pronouncements. And Reagan’s budget director, David Stockman (recently photographed as he was led away to face indictment for securities fraud) famously confessed that Wanniski’s “Supply-Side” economics was baloney, just adopted as a pretext for the Reagan administration to lower the top progressive tax rates….

…but the Clarke-medal-winning Krugman (that’s the equivalent to the Fields medal in mathematics, for example) is not credible. I see. On what do you base this assertion?

And what color is the sky in your world?…8^)

Finally, demonstrating he is again listening to the voices in his head rather than what I say, Mesa Econoguy says: “Yoshidiot’s line of thinking also says “restricting speculation in oil futures will curtail oil price increases, and limit volatility.””

First of all, let me express my sympathy for your willingness to resort to invective and insult. Sad, really.

Second of all, I have no line of thinking — that would make me an ideologue instead of someone who pays attention to reality — I said, and continue to say no such thing. You are arguing with people not present.

Mark writes:

“Regulation and government guarantee create the ultimate moral hazard problem, which no regulation can ever prevent. …Probably the most critical example of this statements are the current problems of Fannie Mae and Freddie Mac. …And, as much as the liberals want to pretend that the only component to the current mortgage/housing crisis is greed, what they conveniently forget is their own culpability to the problem. Not too long ago, their outlook was that housing is a “right” and that mortgage and other financial institutions were “redlining” minorities and not extending enough mortgage loans to poor people so they could also live out the American dream. …The fact that “redlining” was fictitious (the proof was that minority default rates were much higher than white default rates indicating that the exact opposite problem was happening) was meaningless to these airheads.”

I certainly can’t speak for liberals, attempting to avoid ideology as I do, but I’ve got to wonder what you believe was the source of the sub-prime lending scandal currently in force. What was it really? Over-regulation? The legacy of some misguided racial integration? I’ve demonstrated that the contrary was true in my reply to Mesa Econoguy above — and believe I have credentials superior to either of yours or Mesa Econoguy’s to know what I’m talking about.

Mark continues:
“I would wager that in the vast majority of home sales that the buyers utilized a real estate agent who was supposed to act in the best interests of their clients. Often, it is the real estate agent who steers the buyer to a favored lender. ….And, why aren’t the being castigated in the press??? “

Clearly you don’t know the business. The Realtor may have a favored mortgage guy, but he doesn’t set the underwriting standards. Loan officers are not (with very few exceptions) the people deciding who gets a loan. It would be a conflict of interest to have the guy getting paid a commission from the mortgage decide who gets it (“Everyone I meet, that’s who!” says such a loan officer)

A different person — the underwriter — is the one who assembles the appraisal, the verifications of income and credit, and decides whether the applicant gets the loan. She typically gets these standards from the secondary market (GNMA, FNMA, FHLMC, etc.). The government started the secondary market in the wake of a depression, and continues to be involved.

The reason that lots of foreclosures are happening now is that someone in the Bush administration said “Loosen those underwriting standards” — so people were getting loans without having their income verified, without having to pay a down payment, without a credit check, etc. The banks making these loans were relying on property values increasing indefinitely to keep the security for their investment safe.

Making the source of the real estate bubble the Realtor’s referred lender, the property buyers, or some supposed liberal need to lend to negros is beyond laughable. It just ain’t true. Don’t believe me, ask your favorite loan officer if he’d make a loan just to please his referring Realtor. In the vast majority of cases, borrowers follow the banks lead, they don’t know whether a loan is viable or not.

Incidentally, I don’t know of anyone who says owning a home is a right rather than a privilege. I do know many people who believe homelessness is shameful, and a legacy of Reagan’s 1986 tax law change above that created many, many more homeless than preceded it (it made rental property much more expensive, you see). Again, bad regulation rather than “deregulation” — the banner under which it was sold.

Finally Solar Lad weighs in: “At current market prices, drilling offshore and in ANWR would produce $ 7 TRILLION worth of oil….To call that “a very slight difference” is at best retarded.”

Notice the invective again. Really and truly fellows, I am really and truly sorry that your parents called you (or worse, treated you as) idiots and retarded. You are valuable people who are misguided enough to think that if you worship hard enough at the shrine of free markets and deregulation, life will turn out great — and believe it’s OK call anyone who interrupts our daydream an idiot. Idolatry is a sin, but I don’t expect you to buy that “conservatism” is idolatry. It is, though. Just as liberalism can be.

Anyway, people thinking the idolatrous way crucified Jesus too. They put Galileo under house arrest. The truth always takes a beating from such thinking. Taking your insults is the least I can do to bring a little light into the dim region in which you live. I forgive you, for reals.

Oh yes, and Solar Lad is a big dummy because of what I said earlier about drilling in ANWR being more expensive and less effective than conservation…

…8^)

This is what makes it so hard for me to believe that oil prices will fall soon. For that to happen, this government has got to get control of the currency and quit inflating it willy nilly. And so far I do not see any sign of that happening.

You’re right! It makes the slightest difference — but very slight.

At current market prices, drilling offshore and in ANWR would produce $ 7 TRILLION worth of oil.

To call that “a very slight difference” is at best retarded.

Probably the most critical example of this statements are the current problems of Fannie Mae and Freddie Mac.

And, as much as the liberals want to pretend that the only component to the current mortgage/housing crisis is greed, what they conveniently forget is their own culpability to the problem. Not too long ago, their outlook was that housing is a “right” and that mortgage and other financial institutions were “redlining” minorities and not extending enough mortgage loans to poor people so they could also live out the American dream.

The fact that “redlining” was fictitious (the proof was that minority default rates were much higher than white default rates indicating that the exact opposite problem was happening) was meaningless to these airheads. THey had a cause “seared” into their little minds and they were sticking to it. Liberals are very famous for this, as they shift their positions as the wind blows despite the fact that their statements were recorded. THey understand that their simpleton followers will not even care. My favorite is John Kerry favoring the elimination of taxes on dividends but when George Bush supported such a policy, elimintating the “double taxation” on dividends suddenly was very sinister.

And, lastly, I want to make a point that is not being stated. In the search for bogeymen in the mortgage default saga, how come the real estate agents are not being held accountable? THe real estate game is one of America’s last bastion of monopoly power and work the game with dubious integrity.

I would wager that in the vast majority of home sales that the buyers utilized a real estate agent who was supposed to act in the best interests of their clients. Often, it is the real estate agent who steers the buyer to a favored lender. When these buyers purchased a property that they “could not afford” and received mortgages that were poorly explained, too complicated, and had unfavorable aspects, why didn’t the direct representative of these buyers step in and prevent such poor decisions? Usually the real estate commissions are split between buyer and sellers agents, so these selling agents made significant sums of money in making these transactions.

And, why aren’t the being castigated in the press???

Probably the most critical example of this statements are the current problems of Fannie Mae and Freddie Mac.

And, as much as the liberals want to pretend that the only component to the current mortgage/housing crisis is greed, what they conveniently forget is their own culpability to the problem. Not too long ago, their outlook was that housing is a “right” and that mortgage and other financial institutions were “redlining” minorities and not extending enough mortgage loans to poor people so they could also live out the American dream.

The fact that “redlining” was fictitious (the proof was that minority default rates were much higher than white default rates indicating that the exact opposite problem was happening) was meaningless to these airheads. THey had a cause “seared” into their little minds and they were sticking to it. Liberals are very famous for this, as they shift their positions as the wind blows despite the fact that their statements were recorded. THey understand that their simpleton followers will not even care. My favorite is John Kerry favoring the elimination of taxes on dividends but when George Bush supported such a policy, elimintating the “double taxation” on dividends suddenly was very sinister.

And, lastly, I want to make a point that is not being stated. In the search for bogeymen in the mortgage default saga, how come the real estate agents are not being held accountable? THe real estate game is one of America’s last bastion of monopoly power and work the game with dubious integrity.

I would wager that in the vast majority of home sales that the buyers utilized a real estate agent who was supposed to act in the best interests of their clients. Often, it is the real estate agent who steers the buyer to a favored lender. When these buyers purchased a property that they “could not afford” and received mortgages that were poorly explained, too complicated, and had unfavorable aspects, why didn’t the direct representative of these buyers step in and prevent such poor decisions? Usually the real estate commissions are split between buyer and sellers agents, so these selling agents made significant sums of money in making these transactions.

And, why aren’t the being castigated in the press???

Actually, you see them first-hand and you still can’t believe it. And some very long-term colleagues in the business tell me it’s absolutely no different in the countries I haven’t worked. And believe me when I tell you that you have absolutely no idea what the term “office politics” really means until you’ve worked for a Middle Eastern national oil company. Oy.

Wrong.

Also see here.

Yoshalist has once again proved himself nearly completely ignorant of all economics in his above posts, but let me pick out just one point illustrative of the abject stupidity of his (and way too many others’) pseudo-thinking:

“The S&L story is desperately important not for the reasons usually given but because its development, maturity and crisis raise profound questions about American society. In the light of this bonfire, we must ask whether our great professions are still capable of self-regulation, of giving honest service, and of accepting fiduciary duties in an age when all costs and benefits are reduced to monetary measurements and all conduct that is not specifically prohibited has become permissible.

This quote is so brainless on its face it’s astounding people like this have jobs.

1) This is not what happened.

2) The financial industry (which I know a little bit about) is one of the most heavily regulated industries in the world. It is probably the most heavily regulated. Look what just happened and continues to happen – meltdown (to a certain degree). No extant regulation or person prevented it, not even Eliot Spitzer. What makes you think that the next regulation, or the next 50 regulations, will prevent things like this from happening again? What piece of evidence, anywhere, supports this way of thinking? None.

3) Much of the losses generated by the S&L debacle were caused by late regulators, mark-to-market restrictions, and impositions placed on them during and after the crisis, and the RTC “solution.” Many solvent S&Ls were driven out of business as a result of the solution and subsequent overregulation.

4) Regulation and government guarantee create the ultimate moral hazard problem, which no regulation can ever prevent. So insisting more regulation will cause fewer problems is an absurd argument on it’s face.

This does indeed raise very important questions, like “Are you paying any attention whatsoever to US economic history, idiot?” but not “Gee, when will we get more regulation, which will fix everything?” That line of thinking is flatly wrong. It is regulation which causes multiple failures, not the other way around.

It is very dangerous when clueless people start to think like this, and start posting on blogs much like this one.

Now, this applies to oil as well, and I think I’ll defer to Warren’s original post above. Much of the difficulty we are seeing arises from 1) market interference and 2) our own stupidity.

Please stop quoting sources which prove the exact opposite of what you are trying to prove, Yoshalist.

Oh, and Paul Krugman is not a credible economist.