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The Political Implications of America’s Oil & Gas Boom – James Kwak Interview

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Yves here. Most readers probably know James Kwak well from the Baseline Scenario blog and the book he co-authored with Simon Johnson, 13 Bankers. The interview covers a wide range of topics, and produces a compendium of slightly left-leaning conventional wisdom (albeit with some clever framing).

By James Stafford, editor of OilPrice. Cross posted from OilPrice

As we begin a new year we wanted to take a look at the current energy landscape and see what the future holds for the global economy, America’s oil and gas boom, whether renewables will continue to be a favourite amongst investors and whether we should be focusing more attention on conservation and energy efficiency rather than our continuous effort to increase supply.

In the interview James talks about:

• The political implications of America’s oil & gas boom
• How the shale boom will impact climate change
• Why China may be forced to change its political system
• An easy way to solve the debt crisis
• Why we should expect a comeback from coal in the future
• Why we must invest in renewable energy
• Why cheap energy isn’t vital to economic growth
• How Obama’s second term will alter the energy landscape
• Why we need to focus on conservation
• Why we shouldn’t take note of the doom and gloom predictions

Oilprice.com: What changes do you see happening to the domestic energy landscape in Obama’s second term?

James Kwak: The biggest trend is obviously the domestic boom in shale gas and oil, and hence the biggest question is what will happen to it. Frankly, I don’t see anything happening to change the current trend. Plentiful fossil fuels do have obvious short-term economic benefits that the Obama administration is not blind to. Insofar as the administration wants to reduce fossil fuel consumption—and it’s not clear that they do want to—there is enough opposition, both in Congress and in the courts, to justify a policy of doing nothing.

Oilprice.com: What are your thoughts on America’s oil and gas boom?

James Kwak: There are some obvious benefits. Lower dependence on politically unstable parts of the world is clearly good. Shifting electricity production from coal to natural gas is also good. One can also come up with a plausible scenario in which plentiful natural gas buys us the time necessary to shift toward greater usage of renewable energy sources.

On the downside, I worry about the political implications of the boom. Increased domestic production will encourage politicians to declare victory on the energy front without doing anything about the big, long-term problem: climate change. Before, fears of rising energy prices and dependence on the Middle East were encouraging political investment in renewables and conservation. Now the message from ExxonMobil and its allies will be that we don’t need to do anything because we are a (net) energy exporter and energy is cheap. That will further reduce the chances that we do anything meaningful about climate change.

Oilprice.com: What do you see happening to the US and global economies in 2013?

James Kwak: I’m modestly positive about the U.S., but that’s not because of any particular insight. It’s because I read Calculated Risk, and because the housing market is turning around.

Oilprice.com: Obama has made clear his desires to cut the $4 billion a year tax breaks given to oil companies. What affect do you believe this would have on the US economy and the US oil industry?

James Kwak: I find it hard to imagine this would have a big impact on anything. $4 billion is simply not a lot of money for the energy industry (something like a few weeks’ operating profit for ExxonMobil), and even assuming they pass it on to businesses and consumers, that’s not a lot of money for the U.S. economy. At the same time, it won’t do much to cut the deficit. But it’s still a good idea simply to get rid of economic distortions.

Oilprice.com: What is the relationship between energy and the economy? Is cheap energy vital for economic growth?

James Kwak: I don’t see why, as a logical matter, you need cheap energy to have economic growth. My background is in software, for example, and energy inputs were just not an important part of our cost structure. We sold software to insurance companies, and their ability to pay for our software was not constrained by higher energy prices, since they weren’t a big part of their cost structure, either. Cheap energy can certainly change the type of economic growth you have, and maybe it can increase growth, all other things being equal, but I don’t think it’s a prerequisite.

Oilprice.com: At this moment in time natural gas extraction is cheap – which is leading people to say coal is finished. Is it too soon to predict this – as natural gas prices can’t stay depressed forever?

James Kwak: I think it’s always too soon to make this kind of prediction. People thought wood was finished in England sometime in the eighteenth century, and now other people are talking about biomass (which hopefully won’t make a comeback, but does have its supporters). Coal may not be economically viable now, but as energy prices rise in the future it could become viable again, and maybe someone will figure out a way to use it “cleanly.”

Oilprice.com: Advances in renewable energy technology are slow and expensive. Do you see renewables making a meaningful contribution to global energy production? And if so over what time period?

James Kwak: Renewables can and must make a meaningful contribution to global energy production, or else much of our coastline will be underwater in a century. But I think we’re talking about a few decades here, not a few years. The problem is that behaviorally we find it very difficult to make choices that seem painful today and whose benefits are both uncertain in magnitude and far off in the future. Having a dysfunctional political system in the United States and not much better ones in Europe doesn’t help. (I’m not saying that China has a good political system, but as an autocracy it is more able to dictate a national energy strategy, whether or not it’s the right one.)

Oilprice.com: With cheap oil running out do you see Americans changing their driving and energy consumption habits?

James Kwak: Unfortunately, I think Americans’ energy consumption habits will shift relatively slowly in response to increases in the price of oil. There are many factors that lock us into our current driving patterns, most notably the physical layout of our cities, suburbs, and exurbs. The stickiness of people’s living and working arrangements means that we will always be slow to respond to changes in prices. In addition, there are cultural factors at work here. I imagine many people will continue driving long distances either because they take pleasure in it or because they refuse to change their habits as a matter of pride, despite the economic disincentives.

Oilprice.com: Peak oil has been finding itself in the press a great deal recently with peak oiler’s taking quite a bit of flak over the shale boom. What are your thoughts on peak oil?

James Kwak: Peak oil is inherently difficult to predict because it is an economic, not a scientific concept. The rate of oil production will always depend on at least three factors: difficulty of extracting the marginal barrel of oil, difficulty of producing the marginal unit of the alternatives, and demand for energy. The more difficult is to produce alternatives and the higher the growth of the overall world economy, the more worthwhile it is to extract the next barrel of oil. These days we should know not to bet against technological progress when there is enough of an economic incentive for it, so peak oil will depend on that incentive.

Oilprice.com: Economic growth goes hand in hand with carbon emissions. This means that China and India, whose economies are growing quickly, are also the largest polluters. In our global battle against climate change is it fair to limit the economic growth of developing countries by demanding they keep their emissions below a certain level?

James Kwak: This is a complicated question that ultimately depends on your moral philosophy. The simplest and perhaps most sensible answer is that it doesn’t make sense to deprive people in developing countries of the lifestyle that we enjoy in the United States because of our high energy consumption, and therefore emissions limits should be roughly the same, per capita, worldwide.

However, you could come up with an alternative argument on utilitarian grounds. If we were to mandate equal emissions levels for everyone, the disutility that Americans would suffer in having to radically change our lifestyles is probably far greater than the utility that people in developing countries would gain, because they would presumably be able to consume more energy than they do today.

The other thing to look at is that it is the people in developing countries who are going to suffer the most from climate change (and are suffering already), whether from coastal flooding or because their agricultural systems are the most vulnerable to climate change. Arguably they have the most to benefit from global emissions limits and therefore should be willing to accept lower limits on energy consumption than in the United States. A deal like that would be “fair” when measured against the likely alternative but “unfair” in an absolute sense.

Oilprice.com: Most publications and commentators are focused on the supply side of the energy equation. Do you think we should instead focus more attention on the demand side and conservation?

James Kwak: There should certainly be more attention on the demand side. I believe, for example, that we could reduce energy consumption significantly by improving the energy efficiency of our residential buildings, through investments with relatively short payback periods. More stringent building codes could also go a long way. There is also the benefit we could get by overhauling our car fleet with hybrid technology. There are also other obvious policies that would reduce consumption, like a higher gasoline tax (which would make sense for all sorts of reasons, including the externality costs of congestion and accidents).

That isn’t to say that this is a complete long-term solution, but it’s one of the most obvious things we could be doing today while renewable technology develops.

Oilprice.com: There have been quite a few doom and gloom articles in the press recently from hedge fund managers and commentators looking at resource depletion, population growth and climate change. What are your thoughts on these types of articles?

James Kwak: When I was growing up in the 1970s and 1980s, there was a lot of the same kind of talk. That doesn’t mean that it isn’t true today—maybe it was true then— but you have to take this kind of thing with a helping of salt. I’m no expert, but I would be skeptical of doomsday scenarios based on resource depletion or population growth. Population growth, as I understand it, is slowing down. Being more efficient about resource usage is a technological issue, and given the incentives in place I think that that type of technological development will do well.

I think climate change is more worth being gloomy for the obvious reasons. First, it’s already baked into the cake; I believe we’re hoping we can limit average global temperature rise to two degrees Celcius, or 3.6 Fahrenheit. Second, because actions today don’t have effects until decades into the future, the incentive structures necessary to solve the problem don’t work properly.

Oilprice.com: Chris Martenson has said that the economy, energy, and the environment are all coming to a head. Which do you think will give, and how will this affect the other two, and also the entire world?

James Kwak: I think the environment will be the first to give for the simple reason that it has no real political constituency. Sure, there are plenty of liberals in rich countries who care about the environment, and there are hundreds of millions of people in less rich countries whose lives will be seriously disrupted by environmental change, but in the short term, economic growth will always win over environmental protection. The politics are so one-sided that in the United States—supposedly a well educated, scientifically based society—a blocking minority of the political system denies that anthropogenic climate change is taking place.

Oilprice.com: China’s economic growth is slowing slightly, but has been expanding for several years at an alarming rate. How do you think China’s actions over the next decade or two will shape the whole world?

James Kwak: The big question about China is not its economic development, but its political development. China has obviously been a huge economic success story, but there are plenty of reasons to doubt it can continue in the long term in the current political system. Besides the Tocquevillian J-curve (political turmoil comes when people have rising expectations), there is evidence of both corruption among the political leadership and mismanagement of capital by the state-controlled financial system. I believe, along with Daron Acemoglu and James Robinson, that at some point China’s economic development will require more open political institutions, and it doesn’t appear that the country’s current leaders are interested in making this transition.

Oilprice.com: US debt levels are at their highest ever, a level that is actually impossible to pay off. Yet the US is not trying to drastically cut back its spending, so what does this tell us? Does the US effectively have a bottomless bank account? Will it eventually catch up with them, and in what way?

James Kwak: The most obvious way to deal with the debt crisis is the one that is rarely mentioned, except by people like Bruce Bartlett: If we taxed ourselves like an average OECD country, we would run large surpluses and pay down the debt relatively quickly. For decades, however, self-appointed deficit hawks have simply asserted that it is impossible to solve the debt problem through higher taxes and that therefore we have to cut entitlement spending.

That said, the higher-tax solution is politically infeasible. The fact that we are not drastically cutting back spending simply tells us that there is no political percentage in cutting Medicare, since Medicare is one of the most popular government programs in American history. The interesting question is why the debt markets don’t seem to care. This is a complicated question, but probably the biggest factor is that the aforementioned “debt markets” (which are really investors) don’t have any other safe place to put their money. In the long term, I think they will find another safe place, which might be Germany, or a reformed China, or something else. So in the long term, I think we will need to do something about the debt problem, or we will start facing rising interest rates and a downward fiscal spiral that will end in severe austerity.

Oilprice.com: The public expects economic growth anything less is treated as a recession, but is constant economic growth a realistic goal? Is it achievable?

James Kwak: Constant economic growth (meaning, say, three years out of four, given the business cycle) is realistic under normal circumstances. Long-term economic growth, the way we usually measure it, is just population growth plus productivity growth, with changes in capacity utilization (meaning not just factories, but productive assets and people more generally) causing the ups and downs. Even if you focus on per capita economic growth, that should still be positive because of productivity growth, which is based on technology. We could have severe shocks, and energy is one possible cause of such shocks, that could cause contraction for a sustained period, but growth should be the norm.

That said, there’s a question of whether we’re measuring it the right way. As some people have written on this website, all the costs of energy extraction count toward economic growth. As others have written, things like environmental remediation and lawyers’ fees for court cases also count toward economic growth. All health care spending counts toward economic growth, which means that health care inflation is contributing toward economic growth. Even without getting to the happiness question, it’s not clear that our definition of economic growth is all that accurate a measure even of people’s material well-being.

Oilprice.com: What opportunities and pitfalls do you see on the horizon?

James Kwak: The biggest issue here in the United States is our long-term national debt problem. I’m sympathetic to the view that right now we need to worry about growth and jobs, but I see that as a short-term problem, and one that will largely take care of itself as long as we don’t do anything too stupid.

The opportunity we have is to take a huge wedge out of the long-term national debt by letting the Bush tax cuts expire, by which I mean all of them. To the extent that we need economic stimulus, we should do something like a payroll tax cut, which not only is more stimulative than, say, preferential rates for capital gains, but also has exactly zero chance of being made permanent.

Unfortunately, this isn’t going to happen.

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42 comments

  1. Gerard Pierce

    James Kwak: “It’s because I read Calculated Risk, and because the housing market is turning around.”

    The problems with that statement is that Calculated Risk drank the Kool Aid and declared that the lies about the housing market were true. I noticed this about 6-8 months ago and I’ve been wondering ever since why some otherwise intelligent people would join the con game.

    If they are successful in starting to inflate a new bubble, it won’t last that long, and those who buy into it will lose shirts, pants and suspenders.

    It’s going to take another 15 or so years to raise up a new crop of “Greater Fools” ,and the housing market isn’t going to turn aroung until those in the current crop of fools wake up and take their losses.

    1. from Mexico

      I think Kwak has drank the Kool Aid on a number of fronts.

      He should have spent more time studying thermodynamics than neoclassical economics.

      1. mikkel

        While this is true of any “serious” thinker, he’s not as bad as most, his thoughts are just not integrated in any fashion.

        Observe “I don’t see why, as a logical matter, you need cheap energy to have economic growth…We sold software to insurance companies…because the housing market is turning around.”

        And “There are many factors that lock us into our current driving patterns, most notably the physical layout of our cities, suburbs, and exurbs…I’m no expert, but I would be skeptical of doomsday scenarios based on resource depletion.”

        The pieces are there, but he doesn’t connect the suburbs with the housing boom and policies that led to the FIRE sector dominance of which his software helped perpetuate. A layout that has been rightly called the greatest misuse of resources in the history of man; nor does he connect the vast majority of resource worrying in the 70s/80s to that very suburb policy.

        He doesn’t seem impervious to facts, but seems to have immense cognitive dissonance and technosaviorism because the alternative is too scary to comprehend.

      2. jake chase

        Quack, Quack, Quack, Quack. This guy just keeps on quackin’. More tepid bipartisan drivel.

    2. rjs

      one fairly widely followed report that was released last week was for new home sales for November from the census bureau…like all census reports on housing, this report incorporates a large margin of error, which you’ll never see included in Bill’s reports; to deconstruct the opening statement from the report: “Sales of new single-family houses in November 2012 were at a seasonally adjusted annual rate of 377,000, according to estimates released today…This is 4.4 percent (±16.8%)* above the revised October rate of 361,000 and is 15.3 percent (±18.7%)* above the November 2011 estimate of 327,000″. reading the explanatory note at the bottom of the first page clearly tells us that what “4.4 percent (±16.8%)*” means is that the census bureau is 90-percent confident that the change in new home sales between October and November was between an increase of 21.2% and a decrease of 12.4%, or that they’re fairly confident that the number of new homes sold in November was at a seasonally adjusted annual rate of between 316,236 and 437,532; not anything that should be reported as if it was certain…in fact, by using (±18.7%)* on the annual percentage gain, they’re indicating they cant even be sure if sales this year are higher than last year or not…

      http://www.census.gov/construction/nrs/pdf/newressales.pdf

  2. AbyNormal

    re doom/gloom “When I was growing up in the 1970s and 1980s, there was a lot of the same kind of talk. That doesn’t mean that it isn’t true today—maybe it was true then— but you have to take this kind of thing with a helping of salt.”

    was it just me or did anyone else feel the ground shake?
    had the doom/gloom gained footing during 70/80′s financial policies gone wild, NC would be clothed

  3. Max424

    How much crude oil condensate is amassed in the human body? Anybody know?

    I don’t. I’m assuming not much. But if there’s some, alive or dead, we should frack human bodies out of every last drop of it.

    Why? Because the good stuff is gone –the easy crude. We are in the bottom of the barrel phase, total production wise, with crude coming from the likes of Arctic deep sea drills (hi Shell!) and 40% water cut wells (hi Ghawar!), and the non-crudes, the chemistry altered sub-inferiors, being squeezed from Dakota rocks and Iowa/Kansas corns, and don’t forget, possibly from dirty coal too, should we ever be faced with a –who-could’ve-predicted?– contingency, far beyond the pale (hi coal liquefaction and the Third Reich!).

    So I say, frack it all, man. Frack the trees, frack rabbits. Frack the moon and the stars … once the technology is in place (it won’t be long). Frack –then crack!– everything that walks or crawls or sways in the effing breeze, as this will increase our total net energy production. Make our energy portfolio, one more robust and diversified. Possibly turn us into, even, a net energy exporter –should all our liquid/electric dreams come true.

    Note: Especially frack granny, the ingrate. You lived too long, woman. You’re using up our collective SS money. Dipping your greedy arthritic hands into our broke and busted fund.

    So put down your knitting needles –for the last time, old girl– and consider yourself fracked. Your sacrifice will be duly, if not gratefully, noted (one hopes), by your net energy independent former-dependents.

  4. Brindle

    Kwak seems like a well intentioned person who only looks at certain dynamics in the U.S. as well as the world, totally missing such basics as the massive redistribution of wealth in this country during the past 35 years, our broken education system, etc.

  5. Paul Tioxon

    Mr Kwak says:”I’m no expert, but I would be skeptical of doomsday scenarios based on resource depletion or population growth. Population growth, as I understand it, is slowing down. Being more efficient about resource usage is a technological issue, and given the incentives in place I think that that type of technological development will do well.”

    The first 3 words sum up this piece. By the way, here is an expert. Even the NYC intelligentsia can look up at the newly refurbished Empire State Building and see a titanic energy retrofit, aka conservation aka reduce load.

    The Rocky Mountain Institute worked on retrofitting the Empire State Building and is also one of the best sources on rational energy policy you will ever see.

    Built Environment: RetroFit

    “Deep energy retrofits achieve bigger energy savings and other benefits at equal or lower cost, driving much larger savings (more than 50%), than conventional, shallow retrofits

    Who would have thought retrofitting the 6,514 operable windows of the Empire State building for energy efficiency, onsite on the 5th floor, would be time- or cost-effective? But it was.

    Retrofitting existing commercial buildings for energy efficiency is one of the greatest opportunities facing the building industry. If our existing buildings in the U.S. were a nation, its energy consumption would rank third after China and the U.S. More than a trillion dollars is currently flowing out of our buildings in the form of wasted energy.

    Eighty percent of the today’s commercial square footage will be standing and operating in 2030. We estimate a conservative $1.4 trillion dollar value to be gained over the next 40 years from intervening with deep energy retrofits using whole systems design.”

    http://www.rmi.org/RetroFit

  6. AbyNormal

    ‘coal viability’
    China’s never taken its eye of this ball, breaking up the Aussies big 3 and to the degree of exporting Chinese labor.

    Cash-rich companies in China are able to snap up mining assets driven into retrenchment by slowdown in Chinese demand for coal
    http://www.guardian.co.uk/business/2012/aug/16/china-coal-mining

    http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/china-insights/Documents/case-study-china-first-coal-mine-australia.pdf

    http://blogs.wsj.com/dealjournalaustralia/2012/09/24/china-coal-pricing-to-hit-aussie-miners/
    Even though China’s economic growth has slipped to its slowest rate since 2009, coal imports in the first eight months this year are up a hefty 44% on the corresponding period of 2011. Shipments from Australia more than doubled as mines returned to full operational capacity following the heavy rains in Queensland and New South Wales states that restricted production last year.

    In a report earlier this year, consultancy Wood Mackenzie said China’s domestic coal production will lose competitiveness against imports by 2015–just as many of Australia’s big port expansions are completed.

    This shift could prompt Chinese companies, including its state-owned power generators, to invest more aggressively in overseas coal mines through M&A as well as spur strong growth in Australian coal exports to China, Woodmac said.

    this has been going on for years but for china, breaking the

    1. Max424

      “China’s domestic coal production will lose competitiveness against imports by 2015 …”

      Imports? It’s all domestic production, as far as China is concerned.

      The whole world is China’s oyst…err…coal mine.

      Especially northern Australia.

  7. Beppo

    The USA is going to get even further into this double rentier poke, and I don’t see any quick ways out. If we don’t collectively say no to fracking, we’ll soon end up like the UK after North Sea oil and Canada after the tar sands.

    That is to say, with a tiny elite somehow making billions off of the resources that supposedly belong to the country, and then completely hijacking the political process, riding it into hell.

  8. Mcmike

    I am curious how China is a success story – aside the obvious low hanging fruit of recovering from medeival maoism by being in the right place at the right time when the usa decided to commit suicide.

    1. Max424

      The suicide of the US is playing a big part, no doubt, but I think the main “success” of China, if it could be deemed such, is that it is still a country.

      You could make a very good argument (and I would and frequently do), that in this neo-liberal world, China is the only functioning country of consequence left.

      And the last nation standing wins, by my way of reckoning.

  9. Susan the other

    I agree with the tone of all these comments. Kwak gave the strangest set of answers I’ve ever heard on these subjects. He said one thing I liked: that long term growth has been measured traditionally by growth in population plus productivity and lots of people are looking for a more realistic definition of economic growth. Because, duh, productivity has become the nemesis of growth in the capitalist world; also maybe because population is slowing down dramatically. Kwak sounded kinda lobotomized about the environment and sea level rise… like it was only Bangladesh’s problem. And his comments on China were just peculiar – does he expect China to cease being a state run economy? That thought is just plain terrifying. Even to an investor.

  10. Klassy!

    One can also come up with a plausible scenario in which plentiful natural gas buys us the time necessary to shift toward greater usage of renewable energy sources.
    Sounds nice, but I cannot come up with a plausible scenario where natural gas is not just a component of an “all of the above” energy plan– if you can call it a plan.

  11. dan h

    It’d be interesting to study the interaction between surname and profession, cause boy is he nailing it…

  12. Mel

    There are some other strange things in this interview, too.

    “We sold software to insurance companies, and their ability to pay for our software was not constrained by higher energy prices, since they weren’t a big part of their cost structure, either.”

    You have to zoom back. Insurance companies had the wealth to pay more for software. Where were they getting the wealth? AIG had wealth until they didn’t. Where can you sell insurance when physical production is declining? Malpractice insurance for software developers, bloggers, and whoever else is a possibility. That does things to software developers’ costs, so they have to charge more, do bigger deals, and need more insurance. You can call that growth.

    “Peak oil is inherently difficult to predict because it is an economic, not a scientific concept. The rate of oil production will always depend on at least three factors: difficulty of extracting the marginal barrel of oil, difficulty of producing the marginal unit of the alternatives, and demand for energy. The more difficult is to produce alternatives and the higher the growth of the overall world economy, the more worthwhile it is to extract the next barrel of oil.”

    There is a scientific aspect here. Energy-return-on-investment says that if it takes (say) 1.1 equivalent oil barrels of energy to obtain that next barrel of oil, the extrancting that next barrel is madness.

    And the whole thing about taking greenhouse gases and global warming as an externality. Fracked methane that leaks past the wellhead is 25 times more potent in heat capture than carbon dioxide. Luckily it doesn’t last too long and degrades into mere carbon dioxide, if you call that luck.

    1. AbyNormal

      “Energy-return-on-investment says that if it takes (say) 1.1 equivalent oil barrels of energy to obtain that next barrel of oil, the extracting that next barrel is madness.”

      it’s that exact formula madness that gave birth to ICE
      i expect NO good to come from their future endeavors

  13. different clue

    I have been able to briefly skim the Kwak interview before I have to get to work. I notice he had precisely zero to say about long-term aquifer pollution from fracking.
    If I didn’t miss something . . . if he really did not bother to care about even mentioning that . . . then I hope in all sincerity that his water is filled with cancer frack-juice from this day forward.

  14. Aquifer

    Sorry – i can’t seem to find the “slightly left-leaning conventional wisdom” – sounds like fairly standard neo-liberal “don’t worry, be happy, techno fix will save us” stuff to me – what did i miss …?

    1. Lambert Strether

      Well, he’s not calling for new wars or the outright slaughter of old people and the undeserving poor, for example. By Overton Window standards, that makes him nearly a Communist.

      Technocratic? Yes. Neo-liberal? Yes.

  15. Jackrabbit

    It seems that Kwak has not not been paying attention.

    Firstly, Calculated Risk Risks ‘Housing Recovery’ expectations have been questions here at NC and elsewhere.

    Secondly, On climate change he says:
    “I think the environment will be the first to give for the simple reason that it has no real political constituency. I believe we’re hoping we can limit average global temperature rise to two degrees Celcius, or 3.6 Fahrenheit. Actions today don’t have effects until decades into the future, the incentive structures necessary to solve the problem don’t work properly.”

    Climate scientists announced only weeks ago that they are now expecting temperatures to rise by 4 degrees Celsius because of inaction and some scientists think this is conservative because it may not take into account ‘knock-on’ effects.

    And it will affect EVERYONE, not just poor third-worlders. And in unpredictable ways. Pandemic diseases, for example, doesn’t respect state boundaries or class differences.

    1. different clue

      The upper classes may hope that their better nutrition/medical care/ continued access to vaccinations/ ability to quarantine themselves behind gates and walls and private armies/ etc., may indeed allow them to force pandemics to respect class differences.

      In fact, the upper classes well well be counting on it and working to bring it about so that they will emerge from the Age of Pandemics as the sole survivors. So they hope.
      Is there something we can do to fling disease-ridden corpses over their walls to make very sure that they do not escape?

      1. charles sereno

        Just stumbled on your comment, reminded me of the missing Camelot version of the Walled Table. The only Knight that really shined was Sir Steve de Jobs and now he’s gone.

  16. Paul P

    “big, long-term problem of climate change”

    What’s so long-term about climate change? And, under the world’s Sarah Palin policy prescription of “Drill Baby Drill” there is no global, national, regional, and local coordinated strategy to prevent climate change. Tipping points? Just a fantasy? The oil, gas, and coal industry must be shut down, now.

  17. Pepe

    James Kwak: The biggest issue here in the United States is our long-term national debt problem.

    Ummm, no. At least he’s sympathetic for the poor, unemployed folks.

    1. different clue

      The “national debt problem” will seem like an amusing diversion once we start getting Category Six and Seven Hurricanes and F6 and 7 tornadoes. Hopefully those hurricanes and tornados will confine themselves to the geographic areas majority-inhabited by global warming deniers.

  18. commenter8

    How To Raise Taxes: Think Eisenhower!!!

    Quoting J.J. Goldberg at forward.com:  
      
    [...] Eisenhower inherited a top marginal income tax rate of 92% from his predecessor Harry Truman when he entered the White House in 1953. He quickly lowered it to 91%, where it stayed until Lyndon Johnson lowered it again to 77% in 1964 and then 70% in 1965.  
      
    During his eight years in the White House, Eisenhower managed to reduce the federal deficit by 75% — down to a quarter of the size he inherited — while building the Interstate Highway System and launching America’s space program. GDP growth averaged 3% per year. Unemployment averaged just under 5.5%.  
      
    Reagan, entering office in 1981, inherited Johnson’s 70% top marginal income tax rate and immediately lowered it to 50%, then to 38.5% and finally to 28%. His theory was that high taxes stifle economic growth, while lowering taxes unleashes growth and creates jobs. It was a great national experiment, and the result was conclusive: It didn’t work. Growth averaged 3.4% per year during Reagan’s presidency, hardly better than Eisenhower’s, while unemployment averaged a shocking 7.43%, far worse than Eisenhower’s and hardly better than the much-maligned Obama record. [...]  
      
    So the next time you listen to a presidential debate, remember that nobody up there is taking the Democratic side. The debate we’re having today is between a robust Reaganism and a faint, timid echo of Eisenhower Republicanism. In fact, when you get down to it, the Democrats can’t even bring themselves to take Eisenhower’s side with any conviction. We’re all touting variations on a flimflam theory that’s been tried and proven a colossal failure.

    ——–

    How To Cut Spending: End Corporate Welfare!!!     
        
    As Rex Nutting of Marketwatch noted in his 12/18/2012 article “Why isn’t Obama demanding corporate welfare cuts?”, “$2.6 trillion could be saved [...] It’s possible to achieve all the budget savings we need for the next 10 years simply by cutting the fat out of discretionary spending programs and tax expenditures [removing all of the corporate welfare] without raising tax rates on the wealthy or cutting the safety net at all.”     
         
    Oil and gas companies, which are raking in record profits, certainly don’t need $4 billion a year in subsidies, and even the oil company CEOs admit they don’t need it!     
         
    Why are cuts to Social Security and Medicare even being discussed while literally billions in corporate welfare are constantly spilling out of the Treasury? 
        
    White House petition to End Corporate Welfare: http://wh.gov/Qa6f

    1. different clue

      That’s what you get when one Party is Republican and the other Party is a secret-agent false-flag Republican front-operation. One wonders why legitimate Democrats like Harkin and Kaptur and Grayson put up with it. Though the only thing they could do about it would be to defect en masse from the Democratic Party and hope to take all their voters and donors and staffers with them into whatever new Party they cared to invent. It would have to be a very carefully crafted and secretively planned conspiracy on their part.

      But if they diddit, I would change my registration to whatever their legitimate political party experiment was named. It would be so great if they were to call their rebel party the Real Democrat Party . . . as an insult to the DLC Turd Way BillClintobama Shitocrat Party we have now . . . as much as anything else. And they would have to develop a huge intel-counterintel apparatus to keep Neobamacratic moles and agents out of their Real Democrat Party.

      And it would have to stand for things like:
      Free Trade isn’t fair, and Fair Trade isn’t free.
      Free Trade is the New Slavery. Protectionism is the New Abolition. Abolish Free Trade. Proven supporters of even one of the Free Trade Agreements would have to be banned and excluded from such a Party.

  19. Hugh

    I agree with Aquifer. Much of this is just recycled neoliberalism. James Kwak and Simon Johnson have worked a lot together. They have been pretty critical of the current system, but almost all their solutions remain within the neoliberal, corporatist mold. Case in point his last answer:

    “The biggest issue here in the United States is our long-term national debt problem. I’m sympathetic to the view that right now we need to worry about growth and jobs, but I see that as a short-term problem, and one that will largely take care of itself as long as we don’t do anything too stupid.”

    If anything, this is even more conservative than some of the other Establishment economists, like Krugman and DeLong, we regularly take apart here.

  20. Min

    James Kwak: “I’m sympathetic to the view that right now we need to worry about growth and jobs, but I see that as a short-term problem, and one that will largely take care of itself as long as we don’t do anything too stupid.”

    Pie in the sky thinking. Well, maybe not pie, maybe gruel in the sky. Kwak just does not get it. If unemployment were a short term problem, it would be below 6% now.

  21. different clue

    Upon slower closer reading, this Mr. Kwak seems like a nice enough person who wants good things to happen for us all. But he is trapped in some false or OBE (Overtaken By Events) belief systems which leave his thinking trapped and not able to bear facing up to the bars on his braincage.
    He keeps wanting to avoid the basic method of economic growth . . . which is turning rising amounts of energy into waste heat in order to turn rising amounts of matter into waste crap. Earth has run out of safe places to hide the waste crap which is now building up to shrink and then kill the biophysical life systems within which the growth economy takes place. Re-cheapening gas and coal will only encourage burning more faster, carbon loading the air faster, and speeding up the migration of excess aerial carbon into the ocean. That will acidify the ocean fast enough to kill all enjoyably edible life therein. Shrinking the edible fish supply to zero will shrink the catch-and-sell-fish part of economic growth to zero, for example.

    His despair over “society” doing what is necessary to punish coal/gas/oil use to shrink and change the economy away from burning fossil carbon is pre-emptive surrender to the merchants of fossil carbon who wish to sell all they own. The way to shrink coal/gas/oil use is simple, though not easy. Simply tax the burning of fossil carbon up to punitive levels, and ban trade contacts with all countries which refuse to do the same, and you will shrink the use of coal/gas/oil.

    His thoughts about whether India/China/etc. will accept a lower per capita carbon emmission level than the “rich west” will accept are useful. He seems to edge towards accepting that a per-head carbon emmission limit is the only thing that would win any worldwide consensus on coal/gas/oil suppression . . . but then he falls into a state of irrelevant concern about whether lowering American standards of living more than Chinese standards of living would be raised would be . . . “utilitarian” . . . or something. This begs the question: what is the “utility” value of survival against extinction? If “conservy living” buys long term survival, is that of less “utility” to the “seekers of utilitarianism” than buying near immediate extinction through “consumey living” in the meantime?
    A good first step towards earning long-term survival would be to accept and adopt concepts of zero growth from Herman Daly and others, and then refuse to be sacrificed to China/India/other growthseeker countries’ pursuit of growth through raising money by burning energy into waste heat in order to turn matter into waste crap for sale to consumers whose evil governments destroyed those own consumers’ collective means of making what they use with less crap and heat than in China/India/etc.

    1. different clue

      Here is an article called The Dirty Secret Of Climate Change. The article is about how the dirty secret of climate change is this: renewables cost more than coal/gas/oil and the only way to make them “cost less” by comparison is to tax coal/gas/oil so heavily that coal/gas/oil cost more than renewables. That will punish the use of coal/gas/oil and de-punish the use of renewables (and conservation). Achieving punitive taxation against burning coal/gas/oil will require a citizen movement agitproping for it the same way that achieving Civil Rights, Women’s Voting, etc. required citizen agitprop. Here is the link.
      http://www.resilience.org/stories/2013-01-02/the-dirty-secret-of-climate-change

  22. Gaylord

    The energy/economy “experts” all pretty much accept both Bush’s and Obama’s declarations that “our lifestyle is not negotiable.” In fact, not only our consumptive/wasteful ways but our exportation of that lifestyle, are the main cause of humanity’s impending destruction of its only means of existence on this fragile planet. The extreme methods of fossil energy extraction that are being used to prop up an antiquated economic model will only perpetuate the illusion of viability while hastening its self destruction.

    Any thinking person now has enough evidence to conclude that a radical reorganization of priorities is crucial to our survival, and the entrenched special interests that are doubling down on existing imperatives (greed) must be overthrown — not just in the U.S. but globally. It is too late for incremental change, and the notion of “buying time” to develop renewable energy sources is faulty, especially when resources are not being devoted to that end. Conservation measures are worthwhile but will not be nearly sufficient, either.

    I think Mr. Kwak’s mild optimism is erroneous. This is not the time for mollification; but rather the grave situation calls for alarm and decisive action. Take a firm stand to fight, or get out of the way.

    1. different clue

      “Getting out of the way” might be the best thing for those of us “in the know” to do at this point. We can only hope that the system self-destructs fast and hard enough to kill itself to fast to be able to kill life on earth on its way down. The System Lords will passionately fight those who passionately fight the System. And those who passionately fight the System will be passionately fighting the System Lords who are passionately fighting them as they passionately fight The System.

      Those who “get out of the way” will pursue Survivalism of one sort or another. And Survivalism is not Prepperism.
      Kurt Saxon the “inventor” of present-day programmatic Survivalism condemned Prepperism before it had a name. He referred to it as “space capsule Survivalism”. He wrote a condemning article of it called The Idiocy Of Space Capsule Survivalism which can be googled up with enough work. (But not from the publik liberry computer which has very few more capabilities than a TV set).

      Stuff by people like Ran Prieur, The Archdruid, Sharon Astyk, Dmitri Orlov, Kurt Saxon and many others would be good to read and assimilate. Learn it live it love it. How The Irish Saved Civilization by . . . whoever wrote it. The Coming Dark Age by Roberto Vacca.

      And of course we should all be good citizens in the meantime with 10% of our effort . . . our “citizenship tithe”. We can devote our citizenship tithe . . . our “lifted finger” to fighting the System. One obvious way to do that is to keep obstructing the BS Obama Catfood Conspirators’ efforts to steal our survival benefits. If the whole econosystem is going to crash and burn eventually, at least lets not let the Upper Class get their hands on our money to use that money against us buying up all currently public (or otherwise) collective survival assets. If we can’t have our own Social Security Money, lets make sure that NObody can have it, LEAST of all the Predasitic Rich.

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