Today in “The Free Market”

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School Bullies: Texas oil refineries want Texas school districts to pay for the pollution-control equipment the refiners are required to install. They claim they cannot afford to stop polluting the environment unless they get huge tax refunds. Win or lose, little Johnny should get an education.

The refineries want the tax breaks in exchange for buying pollution-controlling equipment. But the cost to public schools would be dear, coming only months after lawmakers slashed education spending by more than $4 billion. An intense odor of burnt chemicals hangs over the town. “There are days when we can’t go out because our children’s asthma is that bad,” she said. “And then they want money back?”

In smaller, more rural counties — where property taxes from heavy industry provide a big chunk of funding for schools and government services — the effect could be even greater. For example, in Moore County, where a Valero refinery is seeking two exemptions, a $15.8 million refund would amount to more than $720 per person.

Now, now these are tough times for these megacorps making record profits. They’re not flush with cash and power like those greedy schoolkids.

Clearly, the problem is the teacher’s union.

To look at Peak Oil Another Way….

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A writer states:

Say you’re throwing a Super Bowl party for roughly 20 people, and you’ve got a 24 pack of Coke from Costco in the fridge. Word gets out about your party, and 35 people show up. By midway through the second quarter there’s 2 cans left, but plenty of pretzels and chips to make everyone thirsty. Further complicating matters is that all the local grocery/convenience stores are out of Coke. What do you do?

1) Drive way out of town to hopefully find a store that a) is still open and b) has some Coke in stock.
2) Serve some fruit punch, iced tea, juice, and/or water in place of the Coke.
3) Do nothing, because those two cans should probably last the rest of the party.

Passenger Rail under a Drewbert Administration

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Some readers out there might know my love for rail travel and my feeling that we a grossly under served in the U.S.. Contrary to frequent accusations that I’m some sort of Marxist, I do not feel that passenger rail would best be served by a government takeover and subsidy. So here is my outline for passenger rail in the US.

Passenger Rail under a Drewbert administration:

Requirements:

1. Ability to maintain speeds above 100mph on trips over 30 miles.
2. Ability to maintain speeds above 130mph on trips over 60 miles.
3. Ability to maintain speeds above 160mph on trips over 120 miles terrain permitting.
4. All electric motive power.
5. Utilize a hub and spoke system.
6. Speed limits set at a federal level rather than local (this addresses a problem demonstrated with Amtrak’s Acela were local townships set absurdly low rail speed limits)

The basic structure would be that the railroad is operated privately, but the rail infrastructure for passenger service is federalized. New lines would be built for the Federal government by the existing rail operators. All passenger lines would be electrified.

Since the federal government would own and maintain the rails, a fuel tax would be levied to cover maintenance and expansion costs. The tax would be indexed to inflation and be structured in such a way that the tax cost per mile would be lower for electric locomotives. The exception to this would be the freight yards which would continue under existing ownership/operation/maintenance structure. Passenger stations would be owned and operated by state, county, or local governments and funded by a fee-per-use system similar to the gates at airports. Conrail would be re-introduced as the entity that owns, maintains, and runs traffic control on the lines.

Passenger trains would be owned and operated by the existing freight lines. In order to spur passenger train offerings, all passenger trains would be fuel tax exempt. As an incentive to offer the most reliable, fastest, and safest service possible, a gradually increasing standard of service would be established. Passenger trains that met that standard of service would qualify the freight operator for a fuel tax reduction on their freight operations. However, at no point can the tax reduction exceed 60% of the fuel tax paid. The credit would be structured in such a way that it the most effective way for the operator to get the largest rebate would be to operate frequent trips to minimize the impact of a single late arrival.

Since there is a need for more than just intercity travel, the tax rebate would be broken into 3 segments, each worth 20% of total fuel tax paid. The trip lengths specified in the requirements section would be the bases for each rebate bracket and could be earned independently of each other. Therefore, if a freight operator decides it is not in it’s best financial interest to offer the highest speed intercity travel (which might be the case the a company like the Union Pacific which operates in a lot of mountainous terrain) they could still qualify for the full rebate from each of the other two segments.

Amtrak would continue to operate during the transition phase, but would eventually be privatized completely or broken up and sold off to the freight railroads.

Some further points:

  • One of the arguments against privately run passenger rail is the claim that it nearly bankrupted the railroads in the 1960s. They weren’t nearly bankrupted. They were bankrupted. However, not because of passenger rail specifically, but because of price regulation generally and an inability to innovate their transportation structure specifically. Price controls weren’t removed until the late ’70s (by Jimmy Carter if I recall correctly) and by then it was far too late. The FRA didn’t allow intermodel for a long time after the concept was introduced.
  • The government takeover of the existing lines would be a government purchase, funded by the new fuel tax, and it would relieve the companies of a liability on their books. Additionally, the railroads would suddenly gain access to areas of the country where they do not operate.
  • The freight railroads of today are some of the most cost efficient companies on the planet.
  • The freight railroads of the 60’s were too fractured. Due to multiple companies servicing a particular area, there was far too much overlap capacity the led to waste. The consolidation into Conrail eventually took care of that overlap and within 10 years Conrail was turning a profit again.
  • Shippers would now be able to choose their carrier instead of only being serviced by whoever owns the “last mile” line today.

The net result would be five new multi-billion dollar companies competing for your traveling needs with little to no subsidy from the government with a heavy incentive on energy efficiency and clean energy.

Willing blindness about oil: Continued

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In response to my previous post, my verbal adversary said this in regards to the new oil reserve estimates:

Alternative sources are nowhere near prime time, delaying the inevitable for as long as possible is prudent.

Basically, his theory boils down to this: We’re speeding towards a brick wall. We can see the brick wall even though there are people in the back seat telling us there is no brick wall. He proposes that we continue at current course and speed to maximize fuel efficiency and then when we reach the brick wall, if it’s there, we’ll magically wish it away and speed right on through.

We KNOW the Saudis are lying. Their own numbers PROVE it. Once Mexico’s Cantarell and the large Saudi fields deplete, we’ve lost the two largest sources oil we know of. Iraq’s recent “update” still brings their reserves to about 5/8ths of what Saudi Arabia’s max number ever was. But the current economy depends on believing these lies so we can maintain lower oil prices. The Saudis are willing to lie to us and we’re all too willing to believe it.

But if these lies are so transparent that a random I.T. guy in Pittsburgh can see it, why hasn’t the market priced oil accordingly? To be honest, I have no idea what’s going on. my only guess is that the depletion for the Saudi fields is still far enough off that it isn’t priced into the market. As long as the Saudis can maintain shipment on current orders, the alarm hasn’t been sounded yet.

But maybe, just maybe, there is some awareness of the lies recently.

The Saudis were the first to say that their reserves had gone up sometime back in August I believe, magically, it happened without any new finds.
Iraq followed a few weeks later with a 25% increase in it’s reserve estimates.
Iran, cheating off it’s neighbors, declared that it’s reserves were higher than previously thought.
And Kuwait, not to be left out, increase their reserves by 12 billion barrels.

All in the span of about 60 days.

Yet the price of crude has risen fairly steadily over that same time period. With all these increased reserves (nearly 150 billion barrel increase) in existing fields (save for Iraq), you’d think “The Market” would have started to price oil lower. Perhaps they didn’t buy the lie this time? This article really drives that last point home.

Money Quote:

“I don’t think it’s possible accurately and confidently to look at the reserves for many Middle Eastern countries with a great deal of confidence,” said Paul Harris, a natural resource analyst at Bank of Ireland, referring to numerous previous substantial revisions to reserves by OPEC members.

Some countries, including some OPEC members, are in fact reporting total oil reserves discovered instead of oil still to be extracted, several analysts have said.

And then comes the *facepalm* from my adversary:

How do you know they weren’t under-reporting before?

The problem with that theory is that OPEC’s actions have been inconsistent. Back in the 80’s and 90’s there was a race to show “proven” oil reserves in order to get lots of investment dollars from oil companies to come build up the infrastructure. So back then, if there was false reporting, it was because they were over reporting their reserves. The problem for Saudi Arabia is getting caught in the lie. They’ve been pumping 8-9 billion barrels of oil a year from the 260 billion reserve, yet their official reserve hasn’t decreased in 2 decades.

Today the problem is reversed. If they admit their reserves are a lot smaller than declared, the price of oil will skyrocket, suddenly the entire world will be on the alternative fuel bandwagon, and their influence will be greatly diminished once a solution is found. They have nothing once their oil is gone, they will shift from being an exporter of oil to being an importer of whatever the new fuel is that gets adopted. Instead of being a massively wealthy mid-east state, they will fall into poverty, and they will do anything they have to do to maintain their current position.

Willing blindness about oil

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Over on my other site CheersandGears.com, I was having a conversation about the coming oil bust and our need to push now to find an alternative to oil as our primary fuel for transportation. My jaw dropped with this response:

Free trade relies on entrepreneurs using their creativity to make a lot of money. Nothing about the idea of relying in the ingenuity and the allocation of resources through millions of voluntary transactions is based on oil. If oil were actually running out, futures prices would shoot up and there would be a large profit opportunity to invent alternative energy sources, and companies a large incentive to spend their money wisely on the best technology. The free market will save us from any impending disaster created by the free market.

Wait…. what?! First off, we don’t have a free market on oil. The vast majority of oil production is controlled by an oil cartel who has a direct interest in lying to the consumer about their supplies so as to prevent a mass switch away from their product.

Someday I fully expect to hear about an area in Saudi Arabia where they are having trouble with some wells. “Just a little snarl!” declares the Saudi oil minister (looking vaguely like the Iraqi information minister), “We’ll have production back online in a week”. That week turns into a month… and then a few more wells pop offline… still “We’re ok! We have 260 billion barrels in reserve! Keep driving your Hummers! We’ve had a couple setbacks but we’ll be back online on Wednesday”

Two weeks later, the same thing happens in Kuwait.

Mexico announces that their Cantarell oil field (the second largest oil field in the world) production has fallen so far, they are no longer able to export oil, and in fact will start importing it.

Oil shoots up to $300 a barrel which makes it about $15 a gallon of gas.

Global shipping grinds to a sudden and catastrophic halt. Suddenly and without warning, it is less costly to make goods in the U.S. than it is to make them in China and ship them half way around the world. The only problem is: No production capacity of any meaningful amount is available in the U.S. anymore. 4 billion Chinese, faced with sudden unemployment, begin rioting in the streets. There is a Tiananmen 2.0, only not as pretty.

Conspiracy theories abound.

Republican’s propose, on national TV, invading Saudi Arabia to take the oil, but with China in turmoil, there is no way to fund such an invasion.

And so the economy collapses into a depression that makes 1929 – 1941 look like a walk in the park. Multiple countries default on their sovereign debts, this collapses just about every bank on the planet. I won’t even go into what happens to the stock market… that should be fairly self evident at this point.

Eventually a few countries find something to fight over and we all go back to war.

But sure….. we’ll be saved by “The Market”

“The Market” doesn’t have foresight… and it doesn’t have the ability to tell if someone is lying…. and even when it’s blatantly obvious they are lying, “The Market” ignores it if it’s financially inconvenient (need proof? look at the blatant lying in the mortgage crisis)

Switching off oil as a fuel cannot be left up to market forces alone, because when it becomes absolutely necessary to make that switch, it will already be too late.

The upcoming elections? I’m not worried.

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A lot of Democrats are very worried about the upcoming election on November 2nd.  They should be. A good many of them stand to lose their job. I, however, am not that worried. I think this country really needs the good shellacking the Democrats are about to get. Here’s why:

The Democrats need a swift kick in the ass. They’ve squandered the 6 months or so they had a majority. (Due to various deaths of Senators, they haven’t had the full 60 votes the whole time). I like some of what they’ve done, but their big accomplishments have still only been half assed. They keep walking around in their majority, saying to the Republicans, “Please don’t hurt me!”

Meanwhile, the Republican’s have gone off the lunatic fringe!

In Delaware, we have Sarah Palin 2.0, also known as Christine O’Donnell, who once was a witch… but then not… and wanted to be a Harri Krishna, but couldn’t give up cheeseburgers. She’s also single and doesn’t believe in masturbation….. or paying taxes.

Then there is Sharron Angel, the Tea Party backed candidate for Senate running against Harry Reid in Nevada. This is a woman that has suggested, repeatedly, that if the election doesn’t go her way, people should resort to their “2nd Amendment rights” to take Harry Reid out. I don’t know if there is a specific law against calling for the assassination of Senators, but there should be.  Sharron Angel has also said she wants to end Social Security and Medicare…. except when she’s questioned about it, she says “No! I want to SAVE social security!”

Then there is Rand Paul, who was against Medicare before he was for it…. but stay tuned on this one because I’m sure it will change again.

But here is why I fully support all of the above candidates. They are so extreme and so unqualified that the electorate will finally see the Tea party and Republican party for what they really are.

Even the Republican’s “Pledge to America” is painful to read… not because of the meat of it’s content (it has very little of that), but because it’s 64 pages of the Republicans clearly not getting it. Even in House Minority Leader John Boehner’s words “American’s aren’t ready for solutions”

If the Republicans get a majority in this election, we’re going to have 2 full years of congressional investigations into whether President Obama lied to his 2nd grade teacher about needing to go number 1 or number 2 and absolutely none of the Republican agenda will be able to get done. (They aren’t able to take enough seats for a filibuster proof majority)

At the end of 2 years of Republican pettiness, they’ll proudly march into the Presidential election fielding such candidates as Mitt the Plastic, Palin the GILF, DeMint the Mean, or Huckabee the Dope to go up against an embattled but still smart President Obama.

It will be two years of dark ages, but at the end of it, the Tea party will be capsized and the Republicans will hopefully be smart enough to reform into the socially libertarian/fiscally prudent party I’d like them to be.

Mr. Teabagger here’s why you keep getting screwed.

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This post on craigslist explains it far better than I could.

Hey you. You there in the Glenn Beck T-shirt headed off to the Tea Party Patriot rally.

Stop shouting for a moment, please, I want to explain to you why you’re so very angry.

You should be angry. You’re getting screwed.

I think you know that. But you don’t seem to know that it doesn’t have to be that way. You can stop it. You can stop it easily because the system that’s screwing you over can only keep screwing you over if you keep demanding that it do so.

So stop demanding that. Stop helping the system screw you over.

Look, you can go back to yelling at me in a minute, but just read this first.

1. Get out your pay stub.

Or, if you have direct deposit — you really should get direct deposit, it saves a lot of time and money (I point this out because, honestly, I’m trying to help you here, even though you don’t make that easy Mr. Angry Screamy Guy) — then take out that little paper receipt they give you when your pay gets directly deposited.

2. Notice that your net pay is lower than your gross pay. This is because some of your wages are withheld every pay period.

3. Notice that only some of this money that was withheld went to pay taxes. (I know, I know — yeearrrgh! me hates taxes! — but just try to stick with me for just a second here.)

4. Notice that some of the money that was withheld didn’t go to taxes, but to your health insurance company.

5. Now go get a pay stub from last year around this time, from January of 2009.

6. Notice that the amount of your pay withheld for taxes in your current paycheck is less than the amount that was withheld a year ago.

That’s because of President Barack Obama’s economic stimulus plan, which included more than $200 billion in tax cuts, including the one you’re holding right there in your hand, the tax cut that’s now staring you in the face. Republicans all voted against that tax cut. And then they told you to get angry about the stimulus plan. They didn’t explain, however, why you were supposed to get angry about getting a tax cut. Why would you be? Wouldn’t it make more sense to get angry at the people who voted against that Obama tax cut?

But taxes aren’t the really important thing here. The really important thing starts with the next point.

7. Notice that the amount of your pay withheld to pay for your health insurance is more than it was last year.

8. Notice that the amount of your pay withheld to pay for your health insurance is a lot more than it was last year.

I won’t ask you to dig up old paychecks from 2008 and 2007, but this has been going on for a long time. Every year, the amount of your paycheck withheld to pay for your health insurance goes up. A lot.

9. Notice the one figure there on your two pay stubs that hasn’t changed: Your wage. The raise you didn’t get this year went to pay for that big increase in the cost of your health insurance.

10. Here’s where I need you to start doing a better job of putting two and two together. If you didn’t get a raise last year because the cost of your health insurance went up by a lot, and the cost of your health insurance is going to go up by a lot again this year, what do you think that means for any chance you might have of getting a raise this year?

11. Did you figure it out? That’s right. The increasing cost of health insurance means you won’t get a raise this year. Or next year. Or the year after that. The increasing cost of health insurance means you will never get a raise again.

That’s what I meant when I said you really should be angry. That’s what I meant when I said you’re getting screwed.

OK, we’re almost done. Just a few more points, I promise.

12. The only hope you have of ever seeing another pay raise is if Congress passes health care reform. Without health care reform, the increasing cost of your health insurance will swallow this year’s raise. And next year’s raise. And pretty soon it won’t stop with just your raise. Without health care reform, the increasing cost of your health insurance will start making your pay go down.

13. I wish I could tell you that this was just a worst-case scenario, that this was only something that might, maybe happen, but that wouldn’t be true. Without health care reform, this is what will happen. We know this because this is what is happening now. It has been happening for the past 10 years. In 2008, employers spent on average 25 percent more per employee than they did in 2001, but wages on average did not increase during those years. The price of milk went up. The price of gas went up. But wages did not. All of the money that would have gone to higher wages went to pay the higher and higher and higher cost of health insurance. And unless Congress passes health care reform, that will not change.

Well, it will change in the sense that it will keep getting worse, but it won’t get better. Unless the problem gets fixed, the problem won’t be fixed. That’s kind of what “problem” and “fixed” mean.

14. Sadly for any chance you have of ever seeing a raise again, it looks like Congress may not pass health care reform. It looks like they won’t do that because they’re scared of angry voters who are demanding that they oppose health care reform, angry voters who demand that Congress not do anything that would keep the cost of health insurance from going up and up and up. Angry voters like you.

15. Do you see the point here? You are angrily, loudly demanding that Congress make sure that you never, ever get another pay raise as long as you live. Because of you and because of your angry demands, you and your family and your kids are going to have to get by with less this year than last year. And next year you’re going to have to get by with even less. And if you keep angrily demanding that no one must ever fix this problem, then you’re going to have to figure out how to get by on less and less every year for the rest of your life.

16. So please, for your own sake, for your family’s sake and the sake of your children, stop. Stop demanding that problems not get fixed. Stop demanding that you keep getting screwed. Stay angry — you should be angry — but start directing that anger toward the system that’s screwing you over and taking money out of your pocket. Start directing that anger toward fixing problems instead of toward making sure they never get fixed. Instead of demanding that Congress oppose health care reform so that you never, ever, get another pay raise, start demanding that they pass health care reform, as soon as possible. Because until they do, you’re just going to keep on getting screwed.

And it’s going to be that much worse knowing that you brought this on yourself — that you demanded it.

Thanks for your time.

P.S. — I didn’t mention this because I’m trying here to be as patient with you as I can, but you might also want to keep in mind that in addition to screwing over yourself and screwing over your family and screwing over your own children by demanding that Congress oppose health care reform so that you will never, ever see another pay raise, by doing that you’re also demanding that I never, ever see another pay raise, which means that you’re also screwing over me, and my family, and my children. Not to mention the millions of poor and uninsured and uninsureable people I didn’t even mention above because they don’t seem to matter at all to you. And for that, let me just say the only appropriate thing that can be said to someone so determined to do direct, tangible harm to the welfare of my family: Fuck you, you fucking moron.

American Icon, rebuilt by the Chinese piece by piece.

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Who said globalism isn’t great?

The San Francisco bay bridge rebuild project was off shored to China, a country known (we need a sarcasm font) for it’s high quality building practices.

The bridge is arriving in pieces aboard specially built ships, 15 months late due to poorly translated plans, low grade steel and prison labor quality construction; and being constructed like a giant lego set in the sky.

The job was out sourced to China rather than built in the US to save roughly $6.3 billion in costs, a 100% increase…. never mind that the $6.3 billion saved would have been returned into the US… and San Fransisco economy instead of joining the rest of the flow of our wealth to China.

With any luck, we’ve financed the project with bonds sold to the Chinese so we can pay interest on the bridge as well so they eventually also get the $6.3 billion we saved.