Consulting by RPM || Free Advice Blog

Glenn Beck Whiffs

Folks, I really do like Glenn Beck, especially when he and Stu (sp?) get into an argument over something absurd and spend 20 minutes analyzing it from 18 vantage points. (“In fairness to General Zod, Glenn, Jor El did condemn him to the Phantom Zone, when Krypton wasn’t that far from extinction. That was just unnecessary cruelty. So I think we need to think about that, when we discuss waterboarding.”)

But anyway Beck was talking about the growing danger of the Fed, and how the people need to make it accountable. He said something like, “I mean, we don’t even know what’s on its books. All these Treasurys they’ve been buying from the government? For all we know, we could force them to open their drawers, and find nothing but a bunch of IOUs.”

Swing and a miss.

Fed Official: "Don’t Monetize the Debt"

So argues Dallas Fed president Richard Fisher in today’s WSJ. Apparently the Chinese have been reading my blog (though from my traffic reports, presumably only 0.00001% of them), because the WSJ reports:

[Fisher] has just returned from a trip to China, where “senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature.” He adds, “I must have been asked about that a hundred times in China.”

Although Fisher is pretty cool for a Fed official, this part cracked me up:

He surprises me by siding with the deflation hawks. “I don’t think that’s the risk right now.” Why? One factor influencing his view is the Dallas Fed’s “trim mean calculation,” which looks at price changes of more than 180 items and excludes the extremes. Dallas researchers have found that “the price increases are less and less. Ex-energy, ex-food, ex-tobacco you’ve got some mild deflation here and no inflation in the [broader] headline index.”

I love how Fed officials take out energy and food prices and then talk about what a great job they’re doing in stabilizing “the price level.”

Is the IPCC Saying What I Think It’s Saying?

(UPDATE below.)

Ever since I tackled Joe Romm’s argument (in which he is just reproducing the IPCC’s own statement) of how “cheap” it will be to stabilize greenhouse gas (GHG) emissions at safe(r) levels, I have been trying to dig up the IPCC’s estimates of future GDP losses from climate change in the absence of new government policies.

You see, the trick the IPCC used to downplay the cost of the policies, was to convert large future reductions in the level of GDP (relative to baseline) into a lower annualized growth rate. So for example, the high-end estimates are that GDP in 2050 will be up to 5.5% lower because of policies that governments put in place to curb GHG emissions. But that works out (at the time of the IPCC AR4 report) to only a 0.12% reduction in annual GDP growth, which doesn’t seem like a big deal. Who but shareholders of Big Coal would object to that?

So what I wanted to do was the same trick. Even the really scary projections of huge damages from business-as-usual don’t kick in until after 2100. So for example, let’s say that if we continue on our suicidal path, that global GDP in the year 2150 is 50% lower than it would be, if there were no such thing as the greenhouse effect. (Well, if there were no greenhouse effect we’d all freeze I think, but you get what I’m saying.)

OK now that’s pretty severe; I’m considering a scenario where literally half of the entire earth’s productive capacity is destroyed because of our destructive emissions. Now it’s true, some of the possible damages are unquantifiable; but if we’re going to go through the farce of a cost/benefit analysis, then we have to come up with a number. So to repeat, I don’t think I’m being a “denier” or a “skeptic” by discussing a case in which half of global GDP gets wiped out by 2150.

Yet using the IPCC trick, that works out to only a 0.5 percentage point reduction in growth rates. For example, if real GDP would have grown at 3% annually in the absence of climate damage from unrestrained emissions, then the “inconvenient truth” of anthropogenic global warming means real GDP will grow only at an annualized rate of 2.5% between now and 2150. Over that course of time, the gap between the two GDP series will have grown to 50%.

So even in this fairly nightmarish scenario, it means that someone who earns $10,000 per year today, would earn “only” $325,000 per year, in 2150. (Actually it’s less because of population growth, but you get the idea.) In contrast, were it not for the inconvenient truth of climate change, this representative person would be earning twice as much, i.e. $646,000 per year, in 2150. (My spreadsheet is rounding the numbers.) It is to avoid the nightmare scenario of condemning our great-great-…-great-grandchildren to earning only $325,000 per year, that we must immediately hand over the energy sector to the federal government.

But I digress. As you can see from the discussion above, it would take some pretty fantastic projections of GDP losses in the distant future, in order to make immediate action seem necessary for any cost/benefit test that isn’t completely rigged. (By completely rigged, I mean one that says, “The risks of doing nothing are essentially infinite, so any mitigation policy is justified.”)

Yet I was having real trouble finding the IPCC’s numbers. I know what Nordhaus’ DICE model says, but that’s because I’ve been studying his model thoroughly. In contrast, I hadn’t examined the Second Working Group report of the AR4; I had focused mainly on WGI’s discussion of the physical science of climate change.

But look what I just stumbled upon, from the overall Synthesis of the AR4. This comes from the 3rd last paragraph in the entire summary [.pdf]. Is this saying what I think it’s saying? Seriously, those of you who are big fans of the IPCC–or at least, who think that the “deniers” and “skeptics” are making mountains out of molehills–please explain the following paragraph.

Limited and early analytical results from integrated analyses of the costs and benefits of mitigation indicate that they are broadly comparable in magnitude, but do not as yet permit an unambiguous determination of an emissions pathway or stabilisation level where benefits exceed costs.

I think we can all see now why Joe Romm et al. are taking such pains to ridicule the very notion of applying a cost/benefit test to climate policies.

UPDATE: OK I think that the IPCC statement really is poorly worded. I just waded through Chapter 3 of the AR4 Working Group III book, and I didn’t see anything about comparing abatement costs with the benefits of avoided climate damage. (Nordhaus does this very clearly in his book discussion [.pdf] of the latest DICE model results.) What I did see was a discussion showing that the range of estimated prices for carbon emissions (under various policies like cap and trade) roughly overlapped with the estimated values of the “social cost” of carbon emissions.

I’ll post more on this stuff later in the week, but for now let me just say that this isn’t at all what the quotation above is saying. In the absence of enforcement costs and other frictions, the optimal policy would set the price of emitting a ton of carbon equal to its social cost. But even though this would equate the (marginal private) cost with the (marginal social) benefit, it’s not true to say the “costs and benefits” of this policy are the same. On the contrary, there would be large net benefits because emitters would scale back their output of GHGs to the socially optimal point.

Rereading the IPCC quotation, I am still not sure what’s going on. Surely they wouldn’t have let some non-economist write the summary, right? And yet, they are clearly saying that the policies don’t yield net benefits. Hmmmm.

The Tea Parties Weren’t Protesting Higher Spending?!

Brad DeLong links (with apparent approval) to Andrew Samwick’s criticism of the “Tea Party” protestors. Here’s Samwick:

At moments like this, we go back to Milton Friedman’s adage, “To spend is to tax.” I cannot really come up with a better word than juvenile for the tea parties — don’t protest the taxes unless you can identify the specific cuts in expenditures that you would make to bring the budget into balance. If you think taxes are bad, then you should think deficits are worse, because they raise the taxes of people who were not represented in the decisions to spend the money.

That’s the real lesson from the Revolutionary War period that should be drawn. And the danger for the Libertarians is that if they don’t put the reduction in expenditures ahead of the reduction in taxes on their agenda, they are destined for another abusive relationship down the road.

This is rich. First and foremost, the Tea Party protests were complaining about spending, not taxes. Samwick wants them to identify “the specific cuts in expenditures”? Did he read their signs–the ones that said “End the Bailouts” and “Let Wall Street Fail”? Do Samwick and DeLong not remember the inventor of the idea? It was Rick Santelli, who was protesting not marginal tax rate hikes, but bailouts for people who couldn’t make their mortgage payments!

If my only points were the above, I wouldn’t have even blinked when reading DeLong’s post, quoting Samwick. But what makes this amazing is that I recall quite vividly some very smug reporter interviewing some hickish guy at one of the Tea Parties. The reporter (I think a woman but not sure) said something like, “How can you call this a tax protest when the president is going to cut most people’s taxes?” And the guy was momentarily stumped, but then he said, “It’s the spending! Those taxes will go up to pay for all this!” (BTW I may be botching the letter of these quotes, but this was 100% the spirit of the exchange.) I think I may have seen this clip during Daily Show mocking, or perhaps Rachael Maddow / Keith Olbermann. Those are the only things I ever watch (in brief snippets over the Internet; I don’t have a mind-destroying box in my house). But the tenor was definitely, “Ha ha look at these racist idiots. When faced with the undeniable fact that their taxes are going down, they grasp at the straw of some hypothetical connection between current spending and future taxes.”

And now they are being mocked for the exact opposite reason.

Reader Contest: If anyone can find either (a) the video that I am referring to above or (b) Brad DeLong linking with approval to anyone making the same point, I will send him or her a signed copy of my new book. (I have to get rid of these things somehow.)

Freedom Fest: I’ll See You in Vegas

It is confirmed: I am speaking at this year’s Freedom Fest on Saturday July 11. Here is the tentative schedule [.pdf]; other stuff might change but Mark Skousen assures me my time slot will not.

Note that if you buy a signed copy of my book, it doesn’t have to stay in Vegas.

President Nationalizes More Companies

You thought I was talking about Obama, right? Nope, this time I was talking about Hugo Chavez. According to CNBC, such moves are to “spread socialism” when they are conducted by foreign leaders.

Now you might say, “C’mon, Chavez openly boasts of the benefits of socialism, unlike Obama who gives lip service to capitalism. So the CNBC article isn’t treating the two differently.”

Really? The article also tells us, “Chavez’s government has nationalized major steel, cement, electricity, telecommunications and oil projects since 2006 in a bid to expand the reach of the state.”

I seriously doubt Chavez told his subjects, “I am doing this to expand the reach of the state.” I bet he justifies it instead through reducing reliance on foreign imports, protecting the country from speculators, blah blah blah.

Has anyone seen a CNBC article talk about the TARP-to-common-stock flip as a “bid by Obama to expand the reach of the state”? It clearly is, just as clearly as what Chavez is doing.

But no, whether it’s torturing prisoners or nationalizing companies, things are far less sinister when done by American officials. When it comes to our own government, the absolute worst that can ever happen is that they screw up, and end up hurting the very people they were so desperately trying to help.

Elizabeth Edwards: President of United Health Care Made Almost $3 Billion a Few Years Ago

Check out the clip below of Elizabeth Edwards on the Daily Show. Start it around the 3:00 mark. She is a policy fellow at the Center for American Progress, where she works on health care reform. In the clip, she says that a few years ago, the president of United Health Care earned so much money, that it worked out to 1 out of every 700 dollars spent in the country on health care. The audience gasped.

So I turned to my trusty Google, and found that in 2005, health care expenditures in the US were “almost” $2 trillion. So if the president of United Health Care pulled down 1/7ooth of that, he earned about $2.9 billion. Really?

Presumably Mrs. Edwards can come up with some subset of health care expenditures to make her claim accurate. But you know, I’m not sure how. I tried googling “elizabeth edwards president united health care” thinking that somebody would have justified / blew up her absurd claim. This site deals with it, and says “Indeed…” and goes on to point out that some CEOs made upwards of $11 million each.

Soooo, do these writers think that total health care expenditures in any recent year were only $11 million x 700 = $7.7 billion? Off the top of my head, that sounds more like what Americans spend on over the counter medicines, not “health care” in general.

It seems like the policy fellows at Center for American Progress need a remedial course in arithmetic.

Glenn Greenwald Asks: "Is there anything the Right isn’t afraid of?"

This was an aspect of the debate over Guantanamo prisoners that I hadn’t considered:

The “debate” over all the bad and scary things that will happen if Obama closes Guantanamo and we then incarcerate those detainees in American prisons is so painfully stupid even by the standards of our political discourse that it’s hard to put into words…

And the money quote:

Rather than scoff at the inane fear-mongering or point out simple facts to reveal its idiocy, Democratic “leaders” such as Harry Reid echo the right-wing fears in order to prove how Serious and Tough they are — in our political debates, the more frightened one is, the more Serious and Tough one is — and/or because they are genuinely frightened of being called mean names by Sean Hannity (“Harry Reid isn’t as scared of this as I am, which shows that he’s weak”);

I listen to portions of Rush, Hannity, and Glenn Beck probably 4 times a week, and I don’t think I have ever heard any of them even once give even a nod to the possibility that any of the people being held at “Club Gitmo” might be innocent. It would be unfair to say, “Apparently they think that just because some Marines grabbed a guy, he therefore is a terrorist,” because their train of thought never even gets in the same ZIP code as that type of thought. It’s possible that it never even occurred to them to wonder.