Archive for May 2009

Jeff Flake is Freaking Brilliant

The Republicans have lost the knack for being a minority party in opposition.  Nowadays, they waste tremendous time and effort playing he-said-she-said with Nancy Pelosi or Jon Edwards, while blithely voting for more pork and trillions in new spending.  Obama, after all, wouldn't have his favorite and best tool (TARP) for building a Mussolini-style corporate state without Republican votes.

While it strikes me that a capable opposition would certainly know how to turn a knife in a political scandal, it also should be ready to introduce principled alternatives to key legislation.   The best such proposals are ones that attempt to achieve the stated goals of the majority party better and faster than the majority's own legislative efforts.

Which brings us to Jeff Flake, who is becoming a master of this.   When Nancy Pelosi and Barack Obama spouted platitudes about openness in government (without really taking any steps to achieve it) Flake came along and introduced bill after bill challenging the Democrats put their money where their mouth is on earmarks and transparency.  I have always been a big fan of Congressman Jeff Flake, who represents a district not far away from my home.  Though we don't agree on every issue, there are few, if any, politicians whose judgment I trust more.

Flake's most recent initiative is one close to my heart.  As readers know, I have good scientific reasons for believing the threat of CO2 emissions has been grossly overstated.  However, if we are going to commit to reducing CO2, we might as well do it intelligently, and Flake's proposal is very close to one I have been pushing for some time:

Conservative House members Jeff Flake (R-AZ) and Bob Inglis (R-SC), along with Rep. Dan Lipinski (D-IL), have introduced an alternative to the cap-and-trade proposal developed by House Democrats: HR 2380, the "Raise Wages, Cut Carbon" Act of 2009. Their proposal is for a carbon tax that will gradually increase over time, offset by a reduction in payroll taxes.

Of course I think this is brilliant, because it is my idea as well.  But it is also a brilliant opposition strategy.  Flake's approach is far better than the cap-and-trade mess the Democrats have gotten themselves in  -- not just because it would work better, but because it actually hits key supposedly liberal objectives better than does the Democrat's bill.  Specifically:

  • Fairness. Sure, everyone is correct that a carbon tax can be politicized, but I do not think it can be gamed nearly as much as cap-and-trade.  For evidence, I turn to California.  California has both a cap-and-trade legislation, rule-making for which has been thrown to the California Air Resources Board (CARB); and it has carbon-tax-like excise taxes, which we generally call sales taxes.  Sure, there are some special case sales tax categories aimed a politically connected groups, but in general the sales tax system in California is simple and mostly fair.  More importantly, it is a layup to administer.  Contrast that to CARB, which has been slogging away in cap-and-trade related rule-making for years, and has everybody both pissed off and panicked.  Should cow flatulence be counted?  Should National Forests be able to sell offsets?  How do you create any kind of fair offset accounting given the shenanigans in Europe?  Should we allow Californians to have black cars? (seriously)  This is a perfect A-B test, as the legislators are the same in both cases -- sales taxes are simple and fair, cap-and-trade is a mess.
  • Openness and transparency. It is clear that Obama's stated commitment to openness and transparency was all so much BS.  But why not nail him to that cross anyway?  Few if any of the general public understand cap-and-trade.  It is a tax, but it is inherently hidden from view, and passed through to consumers buried in rates in a way that offers politicians maximum deniability.  Everyone understands a sales tax, or the gas tax.  The system and its costs will be right out front (which is exactly what Democrats secretly DON'T want, which is what makes this a clever opposition tactic).
  • Progressiveness. For all their talks about the common man and being progressives, the advocates of cap-and-trade are pushing what is possibly the most regressive tax increase of all time.  Again, there is a kind of political money laundering that hides the tax, but it is a tax none-the-less, and will hit the poor the hardest when electricity and fuel prices inevitably increase.  Flake's proposal to take the proceeds of the tax and use them to reduce the payroll tax is a great one -- offset one regressive tax with another, while at the same time putting in place incentives for job creation.

Postscript: My 2007 energy plan was as follows (assuming the need to do something about CO2)

  1. large federal carbon tax, offset by reduction in income and/or payroll taxes
  2. streamlined program for licensing new nuclear reactors
  3. get out of the way

Health Care Trojan Horse

I have warned for years about government health care being a Trojan horse for government micro-management of personal behaviors.  If government is paying the health care bills, then anything individual action or choice that can conceivably be linked to health are open to regulation.  The latest episode:

Note in particular their emphasis on "health-related excise taxes." Those discussions are happening in Congress and the administration, too. It's really looking like tobacco, alcohol, and sugared sodas are likely to get a bit more expensive after health reform. Polling around these policies is proving them more popular than most wonks expected, and they have the secondary benefit of being dual-purpose: They raise money and make Americans healthier.

The fascism of good intentions is on its way.

What the Hell Where They Thinking?

I couldn't believe this when I read it:

General Motors is open to considering moving its headquarters from Detroit, selling off U.S. plants and even renegotiating parts of its restructuring plan with its major union, the new chief executive said Monday....

A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler and the sharp downturn in auto manufacturing.

GM purchased its glass-towered headquarter building known as Detroit's Renaissance Center last year for $625 million.

The article moves on to other topics, but I was struck by this:  A year ago, when bankruptcy was only months away (delayed only by injections of taxpayer money), with the real estate market teetering at its peak and just starting to fall off, with GM hemorraging cash, GM decides to ... spend $625 million on Detroit commercial real estate.

This is outrageous.  All the more so because GM's fortunes and the value of downtown Detroit real estate have a beta coefficient that is probably well above 1.  In other words, if GM decides it wants to sell the building, Detroit commercial real estate is going to tank on the news that GM is leaving Detroit, making the real estate virtually worthless.  It is very dangerous to buy an asset for which you are the only possible buyer if there is any possibility you might want to sell it some day.

I understand that companies that have losing business models often find it more profitable to invest outside of their business**, but GM seems to have found the only investment on the planet worse than their own stock.

** Postscript: I am not a huge Roger Smith fan, but this was essentially his strategy -- GM sucks as an investment, so I am going to invest outside of the auto industry.  Though he caught a lot of grief for it, most of his investments outside of GM turned out to have a substantially higher return for shareholders than his (or his successors') investments inside of GM.   Wikipedia writes:

Smith's purchases of EDS and Hughes were criticized as unwise diversions of resources at a time when GM could have invested more in its core automotive divisions.

But what if investments in your core business are even more unwise?

Symbiosis

Via Overlawyered:

How "safety" news gets shaped: a litigation consultant "at the request of trial lawyers "¦ combed through hundreds of coroner's reports and media accounts" and before long ABC had an alarming story to run.

There is a symbiosis between tort lawyers (who want to inflame a jury into giving large awards, or better yet create a mass tort), the media (who want scare stories to boost circulation) and government (populated with legislators just itching to ban or regulate something to show they "care").  Someone should write a book about that.

An Interesting Tale of Regulation

Bottom line:  Never assume the states reasons of "safety" or "consumer protection" are the actual reasons for a regulation.  Regulation is much more likely to be protection of powerful political interests:

Flashback to 1959. The airline industry is on the cusp of its fifth decade, but there is a problem facing younger pilots who want to enter it. The old-timers just won't retire, and this frustrates potential entrants with much flying experience and training, thanks to military service in World War II, Korea, and elsewhere. The result is a sort of malinvestment in human capital, with many men trained to be pilots without private-sector jobs to justify the training.

What is a young, aspiring pilot to do? Well, he and his peers could make their presence and skills known to the airlines, signaling that the labor market had changed and that it would be possible to hire new pilots at lower wages. Not only would some airlines opt for the lower-priced laborers, thus lowering the airlines' reservation price required to provide flights to consumers, some owners of capital might invest in new airlines, thus increasing consumer choice, industry output, and create a downward pressure on prices.

Such would be the market solution, coordinated by changes in relative prices, and it would be peaceful, characterized by voluntary interaction and compromise by the parties involved. Unfortunately, there was another option, requiring the pilot to join a pilots union to lobby the federal government to enact rules forcing existing pilots to retire at age 60. All the union needed was a lobbying presence and some sympathetic regulators at the FAA.

Guess which option was chosen? It seems that in 1959, the aspiring pilots found a sympathetic ear in C.R. Smith, the then-president of American Airlines who also wanted to ground his older pilots. The industry was switching to jet engines, and Smith wanted to freeload off of the tax-supported training with those engines many of the younger pilots received in the military. So Smith instructed his lobbyists in Washington to rewrite FAA rules to force retirement at 60, and in December of 1959, an FAA administrator named Elwood R. Quesada simply authorized them. In January of 1961, Quesada retired from the FAA and immediately joined the board of directors of American Airlines. The retirement age rule has been in effect for almost 50 years.

What a Horrible Law

Via Reason:

Because, unbelievably, Cartwright had previously been served with an Anti-Social Behaviour Order (ASBO)"”a civil order that is used to control the minutiae of British people's behaviour"”that forbade her from making "excessive noise during sex" anywhere in England.

This case sheds harsh light not only on the Victorian-style petty prudishness of our rulers, who seriously believe they can make sexually expressive women timid again by dragging them to court, but on the tyranny of Anti-Social Behaviour Orders themselves. Introduced by our authoritarian Labour government in 1998, anyone can apply for an ASBO to stop anyone else from doing something that they find irritating, "alarming," or "threatening."

Local magistrates' courts issue the orders, sometimes on the basis of hearsay evidence (which is permissible in "ASBO cases"). In short, the applicant for an ASBO does not have to go through the normal rigors of the criminal justice system in order to get a civil ruling preventing someone he doesn't like from doing something that he finds "alarming" or "dangerous." Once you have been branded with an ASBO, if you break its conditions"”by having noisy sex in your own home, for example"”you are potentially guilty of a crime and can be imprisoned.

The ASBO system has turned much of Britain into a curtain-twitching, neighbor-watching, noise-policing gang of spies. The relative ease with which one can apply to the authorities for an ASBO positively invites people to use the system to punish their foes or the irritants who live in their neighborhoods.

I don't really have much time to comment on this, but is there any need?  And for those smug enough to think this will never happen in the US, just look on college campuses today, where a number of universities are coming awfully close to creating a right not to be offended, and allowing students to define crime as anything that offends them.  And it almost goes without saying that such standards tend to be enforced unevenly, depending on the ideology of those who happen to be in charge.

Yet Another Reason I Have Not Joined The Chamber of Commerce

From the AZ Republic:

A local contestant on "The Biggest Loser," NBC's hit weight-loss show, will be the featured speaker at the Maricopa Chamber of Commerce's Third Annual Keynote Speaker Event on May 27.

Maricopa resident Sione Fa, 28, is expected to share his journey to a healthy, new lifestyle during the fundraising event at Harrah's Ak-Chin Casino Resort.

Really?  You mean Gary Coleman wasn'g available.  Do business owners really have time for this stuff?

Star Trek Review

If you can get over the cognitive dissonance of seeing Spock feel up Uhura, this is a very solid movie.  Much like Casino Royale did for the Bond franchise, it tore the franchise down and rebuilt it very well, creating something that is both familiar and true to the original yet less campy and more up-to-date.  My son, who has never seen any of the original series (yeah, I know, major parenting failure) really enjoyed it as well.   Interestingly, there were almost more references back to The Wrath of Khan as there were to the original series.

Awsome Video

OK, I am an engineer-geek but I think the video below, of a ship leaving the Houston Ship Channel at night, taken with time lapse photography, is really cool.  If your eyes are sharp, you can catch the San Jacinto monument on the right (which Texans went out of their way to make taller than the Washington Monument) and the refinery where I once worked on the left, just before the third bridge (the only suspension bridge).  Via Tom Kirkendall.

I had the sound off when I watched it.  I can do without the techno-jazz soundtrack, but ymmv.  I will confess parts of it look like a scene from Blade Runner.

It's Official, We're Living in France Now

From Cafe Hayek:

President Obama's modest proposal to slice $17 billion from 121 government programs quickly ran into a buzz saw of opposition on Capitol Hill yesterday, as an array of Democratic lawmakers vowed to fight White House efforts to deprive their favorite initiatives of federal funds.

Sen. Dianne Feinstein (D-Calif.) said she is "committed" to keeping a $400 million program that reimburses states for jailing illegal immigrants, a task she called "a total federal responsibility."

Rep. Mike Ross (D-Ark.) said he would oppose "any cuts" in agriculture subsidies because "farmers and farm families depend on this federal assistance."

And Rep. Maurice D. Hinchey (D-N.Y.) vowed to force the White House to accept delivery of a new presidential helicopter Obama says he doesn't need and doesn't want. The helicopter program, which cost $835 million this year, supports 800 jobs in Hinchey's district. "I do think there's a good chance we can save it," he said.

The news releases began flying as Obama unveiled the long-awaited details of his $3.4 trillion spending plan, including a list of programs he wants to trim or eliminate. Though the proposed reductions represent just one-half of 1 percent of next year's budget, the swift protest was a precursor of the battle Obama will face within his own party to control spending and rein in a budget deficit projected to exceed $1.2 trillion next year.

Eugene Lawson for the Supreme Court

From the Liberty Papers:

President Obama says that he wants to nominate a Supreme Court Justice who has "empathy" as opposed to a jurist who makes decisions based on "some abstract legal theory." Not surprisingly, I'm not the only one troubled by his selection criteria. Thomas Sowell has written an excellent 3 part series "Empathy" Versus Law" (Part 1, Part 2, Part 3).

Title reference here and here

"My objective was social progress, human brotherhood and love. Love, Ms. Taggart. That is the key to everything. If men learned to love one another, it would solve all their problems"

Friday Pictures

A couple of cool views of New York from 1931:

ny2

ny1

Full size originals here and here at Shorpy

Update on DC Vouchers

The Thugs Win

Via Zero Hedge:

A group of Chrysler creditors opposing the carmaker's reorganization is likely to disband after two more investment firms withdrew from its membership, a person briefed on the matter told DealBook on Friday.

The withdrawals of OppenheimerFunds and Stairway Capital Management will likely drop the group, calling itself the Committee of Non-TARP Lenders, below 5 percent of Chrysler's $6.9 billion in secured debt, this person said. That would almost certainly eliminate the group's standing in federal bankruptcy court.

Ever since the group made public last week, its membership has shrunken by the day as it faced public criticism from President Obama and others. That continued withdrawal of firms led Oppenheimer and Stairway to conclude that they could not succeed in opposing the Chrysler reorganization plan in court, the two firms said in separate statements.

Just another step closer to a Mussolini-style corporate state.

Update: David Skeel argues the Chrysler bankruptcy settlement is a sham sale of the sort that was outlawed in 1938.  Except, of course, when the President does it, I guess.

Arrogant Ignorance

Over the years, I have developed a term "arrogant ignorance" to describe certain people we deal with from time to time.

We often get young and inexperienced contract managers assigned to one of our relationships.   These folks will struggle, due to lack of experience and fragmentary training, to perform their duties, because they really don't know what to do in many circumstances.  We accept the fact that we often know more about our contract manager's job than she knows herself, and try to help them get up to speed.

However, occasionally these folks, despite very obviously not knowing what they are doing, get hugely arrogant and refuse to admit they don't know what they are doing.  They fire off orders and decisions that not only are wrong, but simply make no sense, and then yell at us within seconds for not complying with their bizarre requirements.   I have always scratched my head over this syndrome, and have assumed that it resulted from a combination of:

  • a young person with absolutely no education and experience in how to work in a high-performing organization.  (think about the organizations a 20-something has seen -- public schools, college faculty, maybe a non-profit over the summer, fake businesses on TV -- nothing that would give them any clue how a high-performing organization works).
  • really bad incentives.  Typically, the worst examples have non-existent formal performance management systems where the informal metrics therefore reign.  These informal metrics often default to things like "always look busy" or "always look like you know what you are doing" or "never do anything that will cause your boss to yell at you" or "never get caught making a bureaucratic process error.

Well, I was thrilled today to find that the syndrome I call "arrogant ignorance" actually has a name.  It was mentioned in this article by Simple Justice and is called the Dunning Kruger effect.   Here is the first line from Wikipedia:

The Dunning"“Kruger effect is an example of cognitive bias in which "people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it"[1]. They therefore suffer an illusory superiority, rating their own ability as above average.

This also helps to explain another phenomenon we tend to see -- that the absolute worst, most incompetant, most clueless employees tend to be the first (and often only) ones who call me and threaten me with lawsuits over false termination.  The article goes on:

  1. Incompetent individuals tend to overestimate their own level of skill.
  2. Incompetent individuals fail to recognize genuine skill in others.
  3. Incompetent individuals fail to recognize the extremity of their inadequacy.

But at least there is this ray of hope:

4.  If they can be trained to substantially improve their own skill level, these individuals can recognize and acknowledge their own previous lack of skill.

The Demagoguery Moves to GM

From a reader, via Bloomberg

GM's offer is "grossly unfair to the point of abusive," Glenn Reynolds, chief executive officer of CreditSights Inc. in New York, wrote in a report this week. "Politics remains an overriding factor in the equation and has been decidedly unfriendly to the interest of bondholders in a contest with the disproportionately outsized power of organized labor and other Washington-heavy constituencies and interest groups."...

"The attack on institutional investors by the administration in this process is a very strange approach and borders on demagoguery," CreditSights' Reynolds wrote in the report. "The bondholders are being painted into a corner and will have no chance but to stand and fight. You can call them names as long as they get treated fairly. Offer them virtually nothing and then call them names? Now that's just cold."

And here is Cliff Asness, a hedge fund manager not involved with Chrysler:

  • "Let's be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients' money to share in the "sacrifice", they are stealing."
  • "The President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along."
  • "The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power."

Cool Photo Concept

The Wages of Sports Stadium Subsidies

Well, you can't say I didn't predict this.  The Phoenix NHL hockey franchise (the Coyotes, a case of obvious before-the-fact trademark infringement on this blog) has declared bankruptcy.  The only current buyer is RIM's Jim Balsillie (a section-mate of mine at HBS) who will only buy the team if he can move it to Canada.  Gee, who would have thought that ice hockey would struggle to be successful in Phoenix?

Several years ago, Phoenix suburb Glendale paid about $180 million to build a hockey stadium for the Coyotes.  The Coyotes had already been in the Valley for several years, losing money all the while, and had shed one ownership team for another fronted by Wayne Gretzky.  It was shear madness to build them a stadium, as their chances of financial success were almost non-existant.  It was already clear at this point that hockey was not going to be a big draw in Arizona.  For this reason, Scottsdale and Phoenix both ended up passing on subsidizing the team before Glendale, out to prove it was a "real" city, stepped up to the plate with a wad of taxpayer money.   The stadium ended up being about as close to the center of mass of the metropolitan area as the Denver airport is in that city.

Do You Owe the State Your Name if You Have Not Committed A Crime?

Carlos Miller has an interesting story from New Hampshire, where a man was arrested for bringing a camera into a courtroom, and then has been detained for weeks in prison because he refuses to tell his captors his name.  By the way, filming and picture taking is explicitly allowed in courts by New Hampshire law and past state supreme court rulings.  The judge who presides over the court in question began banning cameras from court, despite having no legal right to do so, last year after he was personally embarrassed by a YouTube video of his courtroom temper tantrum.  The state has yet to point to the precise statute that requires courtroom visitors to provide their names on demand.  One would think the worst that could happen is to be told that revealing one's name is a security requirement and that those refusing to do so are barred entry.  But 22 days in jail?

Also yet to occur is any arrest or prison sentence for a judge who flaunts the very state law he is sworn to uphold.

Obama May Get His Way After All

It looks like Obama's plan to yank money normally due the secured creditors and hand it to politically more palatable parties may yet win out:

And, as in the Lehman case, the best asset of the bankrupt company is about to be stolen from under the noses of creditors, as the Judge is willing to appease the even bigger powers that be, using the threat that all hell could break loose if the deal is not consummated in T minus 0 nanoseconds. Same old song and dance. Will the last person leaving please turn off the lights on due process.

How Does He Do This With A Straight Face?

I already in a previous post deconstructed Kevin Drum and Joe Romm's critique of the carbon tax.  One reason they don't like the carbon tax is:

Well, for one, it doesn't have mandatory targets and timetables.  Thus it doesn't guarantee specific emissions results and thus doesn't guarantee specific climate benefits.  Perhaps more important, it doesn't allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures "” many of which are in Waxman-Markey "” that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

What they are basically arguing is that a carbon tax works by hundreds of millions of individuals making decisions in reaction to higher prices, and chosing their own way to reduce carbon production.  They don't trust this kind of bottom up chaos, despite the fact this is how our entire economy and society works, except for a few corners where beltway guys live and breath in their own reality.  They want a few "scientific" guys at the top picking winners and subsidizing technologies and particular approaches.

I described why I disagreed with this  (or you could spend some time with Hayek to really understand why it is wrong) but I found it staggering that the very next post from Kevin Drum in my feed reader was this one:

Via the LA Times, this is the best news I've heard all day:

The Obama administration on Tuesday proposed renewable fuel standards that could reduce the $3 billion a year in federal tax breaks given to producers of corn-based ethanol. The move sets the stage for a major battle between Midwest grain producers and environmentalists who say the gasoline additive actually worsens global warming.

....While biofuels as a whole "” including grasses and even algae "” are considered promising alternatives to petroleum, some researchers have begun challenging the use of corn for this purpose.

In particular, they point to the "indirect land-use" effects of pulling corn out of the world food supply, which could force farmers in developing nations to clear rain forests "” and release massive amounts of carbon dioxide in the process "” in order to plant corn.

Please dump the corn ethanol subsidies.  Please, please, please.  Dollar for dollar, it might well be the stupidest use of taxpayer cash in the entire federal budget.

Since ethanol is the largest example of Congress's past attempts to set "rational climate policy," what in the hell gives Drum confidence things are going to be any different in the future?  It is yet another example of technocratic planners arguing that the failure is not top-down planning, just the particular individuals doing the planning.  If only my guys did the planning, things would be different.  Right.

Besides, it was a Democratic Congress that passed the last round of ethanol subsidy increases and a Democratic Congress that is upping them again.  So it is Drum's guys doing the planning, and they are making a hash out of it, as all planners do.

For the record, I don't want my guys in DC doing the planning.  I want 300 million people making their own damn choices.  When did this ever stop being a liberal value?

A Helpful Primer on the Politics of a Carbon Tax

Kevin Drum and Joe Romm offer a helpful primer on the politics of a carbon tax.  Unfortunately, they are a little shy in coming out with exactly what they mean, so I will add in a few helpful explanations.

1. A carbon tax, particularly one capable of deep emissions reductions quickly, is a political dead end....

What they are referring to is that though both are approximately equally costly, the government imposed costs of a cap and trade are better hidden from the consumer than those of a carbon tax, thus making it a more palatable plan for politicians.  By raising costs to producers, and then having the producers inevitably raise prices to the consumer, wily politicians can blame the producers,  not themselves, for the price increases.

2. A carbon tax that could pass Congress would not be simple. Advocates of a tax argue that simplicity is one of its biggest benefits.  Again, those advocates seem bizarrely unfamiliar with the tax code in spite of the fact that they pay taxes every year....

Basically, they are arguing that Congress is incapable of producing a simple, clean law.  Politicians used to be able to do this (the US Constitution will fit on the back of a cereal box -- the new EU proposed constitution barely fits in a large 3-ring binder) but have obviously lost the knack.  Or, more likely, as public choice theory tells us, as the dollar stakes have been raised, politicians are incapable of resisting the pressure of huge sums of money at stake for targeted tweaks and overrides for politically favored groups.

By the way, the comparison he is making to the US income tax code is a false one.  The carbon tax is much more like a sales tax, and many state governments in the US (though not all) maintain very simple and easy to administer sales tax systems with single rates and little complexity.  Our sales tax return in New Mexico, for example, consists of three numbers and a signature on a form about the size of a 3x5 card.

3. A carbon tax is woefully inadequate and incomplete as a climate strategy. Why?  Well, for one, it doesn't have mandatory targets and timetables.  Thus it doesn't guarantee specific emissions results and thus doesn't guarantee specific climate benefits.  Perhaps more important, it doesn't allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures "” many of which are in Waxman-Markey "” that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

Basically, their argument here is that they don't like the fact that the success of a carbon tax relies on the unmanaged, bottom up responses to higher prices by 300 million Americans acting in their own best interests and finding their own individual solutions to carbon reduction.  The authors instead prefer a few people in Washington, heavily influenced by a number of special interest lobbyists, setting policy and picking winners.  "Complementary measures" is shorthand for government picking of winners and subsidizing of ... whatever the hell Congress chooses to subsidize.  It is a great way to wrap pork in a nifty new green wrapper.

I think most folks who are not naive understand that what the authors are advocating for here is doomed to be hopelessly politicized -- this is, after all, how we got massive ethanol subsidies that do zero for carbon emissions.  But even if one believes the politicians in charge are monks of public service making purely science-based decisions, these guys still are advocating for at most a few hundred people making the major carbon reduction priority decisions from the top rather than 300 million making them from the bottom up.

Besides, isn't this argument deeply contradictory.  In points 1 and 2, they basically argued that the legislative process is deeply politicized and it is naive to think otherwise.   But then, in point 3, they make an argument for top down planning over bottom up response to planning that can only be even marginally valid if the process is not politicized and science, and not political pull, rule decisions.

Postscript: A couple of related stories, first from the Washington Times:

House Speaker Nancy Pelosi and House Energy and Commerce Committee Chairman Henry A. Waxman, both of California, were among the Democrats -- then in the minority -- who slammed Vice President Dick Cheney for holding closed-door meetings to draft energy policy early in the Bush administration.

Republicans "invited energy lobbyists to write the energy bill that gouges consumers with big payoffs to Big Gas and Big Oil," Mrs. Pelosi said in 2005. "They have turned Washington, D.C., into an oil and gas town when it is supposed to be the city of innovation, of new, of fresh ideas about our energy policy."

But the sweeping climate bill Mr. Waxman and Rep. Edward J. Markey, Massachusetts Democrat and chairman of the panel's key environmental subcommittee, introduced at the end of March includes a provision that benefits Duke Energy Corp., a founding member of the U.S. Climate Action Partnership (USCAP), whose climate plan released in January the lawmakers have frequently called a "blueprint" for their climate legislation.

The exemption would save Duke Energy -- along with other firms now building new coal power plants -- from having to spend millions of dollars outfitting its Cliffside, N.C., power plant currently under construction with "clean coal" technology.

"The USCAP companies must be delirious over the freebies that they've received after writing the blueprint for [the House draft bill]," said Larry Neal, deputy Republican staff director for the House Energy and Commerce Committee.

The second is from the Washington Examiner via Watts Up With That

In exchange for votes to pass a controversial global warming package, Democratic leaders are offering some lawmakers generous emission "allowances" to protect their districts from the economic pain of pollution restrictions.

Rep. Gene Green, D-Texas, represents a district with several oil refineries, a huge source of greenhouse gas emissions. He also serves on the House Energy and Commerce Committee, which must approve the global warming plan backed by President Barack Obama.

Green says Rep. Henry Waxman, D-Calif., who heads the panel, is trying to entice him into voting for the bill by giving some refineries favorable treatment in the administration's "cap and trade" system, which is expected to generate hundreds of billions of dollars over the coming years. Under the plan, companies would pay for the right to emit carbon dioxide, but Green and other lawmakers are angling to get a free pass for refineries in their districts.

"We've been talking," Green said, referring to a meeting he had with Waxman on Tuesday night. "To put together a bill that passes, they have to get our votes, and I'm not going to vote for a bill without refinery allowances."

Lester Brown is at it Again

I guess it is not surprising that Lester Brown continues to scream "famine" despite being wrong about global food shortages and agricultural collapse for forty years running.  What is amazing to me is that respectable journals like Scientific American still give the guy the time of day.  But here they are this month, giving Brown plenty of print space to repeat his warmed-over apocalyptic visions and manipulated data.  Ronald Bailey has the whole story.

One of Brown's problems is that he looks at food capacity  way too narrowly.   For example, a large amount of food growing capacity are currently used for fuel.  Farmers receive billions of dollars to divert huge portions of the world's crops from the food supply to motor fuel.  Should the world ever face a real food emergency, this capacity could quickly be freed up (as it should have been already) by elimination of ethanol and other biofuel mandates and subsidies.

Further, what Brown always seems to ignore is the fact that every year, the amount of farmland dedicated to growing crops is actually shrinking around the world.   Just as he doesn't look at the capacity that is diverted to the fuel supply as an effective food inventory that can be tapped, the same is true for millions of acres of farmland that, while by definition more marginal than current acreage, could again be pressed into service should the need arise.

Craigslist "Free"

I tried listing a grill and a bunch of old patio furniture on the Craiglist "free" section the other day.  I had no experience with the site, but the amount of hassle to try to sell these items, which are incredibly bulky, was really high compared to their value.  Anyway, I simply listed them as sitting beside my driveway and that anyone who wanted was welcome to take anything they wanted.  I chose a good weather period with the anticipation that they might sit outside for several days.

My son and I left for lunch and 45 minutes later it was all gone -- every one of 20 or so pieces.  Piranhas probably take longer to fully strip a cow carcas.

Chicago-Style Politics, Chrysler, and the Rule of Law

Finem Respice has a great post on the Administration's bare-knuckle tactics in trying to enforce its will (against the dictates of bankruptcy law) on Chrysler:

It should be obvious to most observers that, recent allegations of strong-arm tactics in negotiations with Chrysler creditors notwithstanding, given the current situation the White House shouldn't need to resort to anything so openly thuggish as naked threats issued by the likes of Steven Rattner. Assuming for a moment, and for the purposes of conversation, that the allegations are substantially true (and I believe they are), the fact that a bit of Chicago-style thuggery seems to have been required- and seems to have failed- says a lot about this White House. It also says quite a bit about the wild overconfidence intrinsic in the administration and how entirely unused to being denied their will are the senior members thereof. A more deft executive need not have pushed so hard, or rattled the saber of class warfare so loudly, but then a more deft executive would not have expected so much....

There are three things that are scarier than the actual resort to common thuggery. The ease with which it comes to this administration. The ubiquitous and rank ineptitude that makes a resort to thuggery necessary in the first place- and promises it will become a common tactic in the days to come. And the forgiveness the population regularly affords the administration after one or another of these episodes is, yet again, made public.

The tantrums that follow missed targets sketch an interesting family portrait of a class of politically spoiled children, think Hillary Clinton meets Paris Hilton- totally devoid of real executive experience but somehow still used to getting their way no matter what some silly law book says. I believe I'll take my chances with the "speculators" over these alternatives any day, particularly when the spoiled children have the 82nd Airborne Division in their toy chest.

When Obama, who has no real experience with bankruptcy or really with any business enterprise, attempts to substitute for a bankruptcy judge, we have to ask ourselves why.  He certainly does not have as much experience or expertise.  He has no particular unique knowledge of the business.  The only unique "quality" Obama has that a bankruptcy judge does not is that Obama does not feel bound by bankruptcy law.   The only possible reason for his involvement is to substitute his desired outcome for the one that would result from the normal application of contract law and bankruptcy precedents.  Since this is an inherently political process, it should not be surprising that at its core, Obama's actions are meant to promote the interests of a politically important Democratic constituency at the expense of a group of bondholders he is confident he can portray to the public as unsympathetic.

Megan McArdle said it quite well:

For the record, I have no problem with whatever cramdown those debtholders--or any others--get in bankruptcy court.  If the judge thinks that the reorganization can't be done without making the UAW basically whole, fine.  I just think that the reorganization should be done under the well-established procedures of the bankruptcy court, not at the behest of an administration trying to reward its supporters.

It's all very well to say that most of the senior lenders are going along, but of course, the leading senior lenders are doing this because the administration has them over a barrel.  I think most of the people enthusing about this actually recognize that in other countries, when the government uses the banking system as a slush fund to reward its constituencies, this generally turns out badly--and makes the banking system a lot more frail.

Nor will it fly to claim that the administration's threats--and note that Perella Weinberg has most carefully not denied that they were threatened--are just standard jawboning.  Standard jawboning does not involve the White House bloody press corps.  It is true that DIP financiers often get to demand serious concessions from creditors, but those creditors are limited by what those creditors would get out of a recession, and are aimed at either maximizing enterprise value, or maximizing the likelihood that the loan will be repaid.  This deal does neither.

Perhaps it's idealistic of me, but the American bankruptcy system actually works very, very well.  I think we should be very cautious about mucking with it, particularly when there's no reason to.  The administration didn't need to beat up the creditors in order to reorganize the company--or at least, they wouldn't have needed to do so, if they weren't trying to make the creditors take less than they'd get in a liquidation.  Nor did it need to do so to keep the UAW at the table--unlike capital, the UAW isn't going anywhere.  The administration is beating up the creditors because a) it wants to give the UAW a much better deal than they'd get in liquidation and b) they'd like someone else to pay for it.

Update: More of the same coming out (as I predicted here):

Although the focus has so been on allegations that the White House threatened Perella Weinberg, sources familiar with the matter say that other firms felt they were threatened as well. None of the sources would agree to speak except on the condition of anonymity, citing fear of political repercussions.

The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking "end justifies the means" group they have ever encountered. Another characterized Obama was "the most dangerous smooth talker on the planet- and I knew Kissinger." Both were voters for Obama in the last election.

One participant in negotiations said that the administration's tactic was to present what one described as a "madman theory of the presidency" in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.

The White House has denied the allegation that it threatened Perella Weinberg.