Capital Idea Indeed!

Four cheers for The National Review and National Review Institute they have launched Capital Mattersto the joy of us capitalistic orphans.  For those of you that might have missed a MWG post, we refer to ourselves as capitalistic orphans because supporting capitalism is rarely a priority for politicians.  It is a first priority for us.  Capital Matters is:

a new initiative on business, finance, and economics from a National Review sensibility.

When headlines are going to Climate Change and the ironically named organization Black Lives Matter it is good to start serious discussions on serious stuff from the details of the deficit and entitlements to how to encourage capitalism.  We hope that Bjorn Lomborg has put the last nail in the Climate Change activist’s coffin with

How climate change alarmists are actually endangering the planet

But we really doubt it.  We are sure that when Bill Barr (via PowerLine) pointed out the obvious:

When a community turns on and pillories its own police, officers naturally become more risk averse and crime rates soar. Unfortunately, we are seeing that now in many of our major cities. This is a critical problem that exists apart from disagreements on other issues. The threat to black lives posed by crime on the streets is massively greater than any threat posed by police misconduct. The leading cause of death for young black males is homicide. Every year approximately 7,500 black Americans are victims of homicide, and the vast majority of them –around 90 percent – are killed by other blacks, mainly by gunfire. Each of those lives matter[s].

that it won’t yet make an iota of difference.  So there will still be plenty of silly and/or trivial issues and ideas floating around but you can go to Capital Matters for important issues and we will have more to write about.  Everybody wins.

Frazzled

Frazz is a comic strip by Jeff Mallett about the eponymous and unpleasant young man who works as a janitor at a school.  Our recollection is that he is independently wealthy.  In the comic at the link a kid says to Frazz, “I am just wondering how close I am to the last generation who knows what a battery is.”  This got us thinking.  We thought about when we used our battery powered shaver.  We thought about it when we started the car.  Our cars have batteries to start them but don’t run on batteries.  We continued to think about it as we used our battery powered lawn trimmer.  We enjoyed cutting that cord.  We decided to respond but we had to make a decision about using our battery powered phone, tablet, or laptop.  We decided to wait to see the next strip.  It continues the theme where the kid asks about alternative energy.

Some folks need to have the newest phone, tablet, or laptop.  Like many people we get a new one when the battery wears out.  If “alternative” energy sources are ever to be useful they will need to create storage.  Only having electricity when the sun shines will not be popular.  The storage will likely be in batteries.  The oblivious kid in the comic and our grandkids are the battery generation.  One of their serious environmental challenges will be building and disposing of all those batteries that allow us freedom from cords.

 

Jesper’s Descent

We just finished the Norwegian TV series thriller “Occupied” on Netflix.  There are 24 episodes of about 45 minutes each.  The episodes are divided into three years.  It is a Norwegian show so most of the dialogue and text is in Norwegian but there are subtitles and a fair amount of English.  Folks from different countries use English to communicate.  You will want to have the remote in hand so you can review the subtitles because a few subtitles don’t show up well.  Here is the Wikipedia link if you want some background.

In the near future the story starts with Jesper Berg has become the prime minister of Norway on a green platform that includes shutting down all of Norway’s oil and gas extraction.   Humn, where have we heard that? Jesper has the political skills and sexual mores of Bill Clinton with the politics of Al Gore.  The show is largely about Jesper’s descent but there is a large cast with lots of threads being unraveled.  We haven’t decided if Jesper’s descent is into insanity or Hell.

In the near future the US is energy independent and the Middle East is in turmoil so the European Union is aghast at Jesper and conspires with Russia to have them occupy Norwegian energy.  There are great thrills, intrigue, and skinny women (Ane Dahl Torp, Ingeborga Dapkūnaitė, Janne Heltberg, Selome Emnetu) as almost everybody gets put into impossible situations.  The real strength of the show is reveling how complex reality is and how difficult some decisions are.

Besides the subtitles there are some concerns.  There are some plot twists that are hard to swallow.  There are too many kidnappings.  Sidorova, the nasty Russian ambassador to Norway is suddenly identified as a lesbian with a pregnant lover fairly late in the show.  Free Norway using the video game to communicate is way, way, way over done.  If you need happy endings look elsewhere.

We recommend Occupied.  It is a great idea that is often well executed.  It will get people talking.  See if you think Jesper is crazy or the devil.

The Internet Is Forever

When we were in high school we wrote poetry with a teammate from football and track and field.  It was really bad poetry.  Although we found a way to print it some fifty plus years ago, we are pretty sure that none of it survives.  Both of us are really glad about that.

What got us thinking about our poetry career, such as it was, was this article by Bill Weir.  You really don’t have to read all of this one.  Here is part of the start of a father’s letter to his new son River:

I’m sorry that the Great Barrier Reef is no longer great, that we value Amazon™ more than the Amazon and that the waterfront neighborhood where you burble in my arms could be condemned by rising seas before you’re old enough for a mortgage.

Sure, the combination of COVID-19 and a new child is going to make emotions swing.  It is a bigger deal than poetry after losing a football game.  Especially when we were 5-31 in our high school career.  We should mention that Bill’s byline lists him as CNN Chief Climate Correspondent.  He has no excuse for being ill-informed.  River is always going to be able to find out what his dad said.  River is only one of many.  Our kids were saved from our poetry.  Generally, our generation left our foolishness behind.  The Internet is going to make lots of things weird by keeping all these records.  Perhaps River will understand.

Substitution Effects For Fossil Fuels

We were getting ready to go grocery shopping when we noticed that the lasagne was best if used by January 2118.  That led to the discussion of whether we would use the bucatini that we had or get spaghetti at the store.  And the imperfect ability for one good to replace another got us thinking about the Bloomberg quote we were considering before we went to handball:

“The fight against climate change may suffer a setback as fossil fuels become more competitive versus renewable energy.”

Sidebar: We played three games of cutthroat today.  MWG won one and finished second twice so we are reasonably pleased.  End Sidebar.

Fossil fuels are not perfect replacements.  They are not all the same in emissions either.  You don’t see many coal fired vehicles except electric vehicles might be indirectly coal fired.  The US has been the world leader in reducing CO2 emissions largely because natural gas has replaced coal:

“Coal-fired power plants faced even stronger competition from natural gas-fired generation, with benchmark gas prices an average of 45% lower than 2018 levels. As a result, gas increased its share in electricity generation to a record high of 37%.

Price almost always matters and it matters for fossil fuels.  It matters less for alternative energy because of mandates.  Here is a place to check them out.

The Bloomberg quote was about the reduction in crude oil prices. The Dow is down almost 2000 points.   Crude oil prices have declined by about a third in the last few days.  Natural gas has declined by about an eighteenth but as the quote above indicates, it had big declines since 2018.  Coal has declined by about a twelfth.  If these new price relationships for fossil fuels are maintained what will be the substitution effects?  Somebody has a fancy model to predict all of this but it looks like we will get a cleaner mix of fossil fuels because of the changes.  An equally reasonable quote would be: “The fight against climate change will be helped by the cleaner mix of fossil fuels due to the price changes.”

Again, we support a modest carbon tax to replace the gas tax and elimination of energy subsidies and mandates.

Technically True?

Oil prices are down.  Bloomberg finds an unusual cloud in this silver lining: “The fight against climate change may suffer a setback as fossil fuels become more competitive versus renewable energy.”

Sidebar: Yes, we should have a link but this came up on our phone and we are writing on our computer.  Yes we should have better technical skills and we probably could find it but we have a handball game shortly.  End Sidebar.

Saying fossil fuels, really oil and natural gas, is more competitive is liking saying Liverpool would be more competitive in the Premiership if they signed Messi.  They currently lead the Premiership by what we expect is a record 25 points.  Currently taxpayers support rich folks buying fancy electric cars.  Alternative energy is generally not competitive and often not reliable.  So what Bloomberg said might be technically true but a more honest way of saying it is that renewable energy will be even less competitive with these prices.

It would be an especially good time to implement a modest carbon tax, eliminate the gas tax, and eliminate subsidies to renewable/alternative energy.  That way instead of the government trying to guess what “alternative energy” would work we could let the market do it.

Folks Need To Read More

One of our alumni magazines came recently.  It is from the University of Wisconsin.  Although the whole system is the University of Wisconsin the campus at Madison likes to be the unmodified version.  On the cover it says, “Despite The Bleak Environmental News” and then at the start of the article the sub headline says, “It has been 50 years since the first Earth Day, but everything we read says things [in the environment] are getting worse ….”  Then it goes on to extoll the virtues of the Nelson Institute of Environmental Studies.

Since the magazine brought up 50 years, we were alive 50 years ago.  The environment in the US is much better now.  There were birds walking on one of the local rivers.  We discussed with our friends if a human could do it but nobody wanted to test the hypothesis.  We didn’t live in an urban area so we only had to deal with small numbers of vehicles but some of them were able amazing amounts of pollution.  We saw the episode of the Crown (here are some pix of The Crown and Wikipedia on the 1952 London smog) where the smog came to London while Churchill was prime minister.  We have been to London and things are much better there too.

If you want to talk about climate change, here are some graphs on CO2 emissions in the US.  There is much good news to be found.  Another dose of good news would be to look at the then global warming predictions of bad news from a decade or two ago that haven’t come true.  As the title says, you might need to read more and part of that is to find these things yourself.  Well, here are some visuals.

On the other hand, we have been to a number of Chinese cities with really serious pollution problems. We are sure the Chinese are not alone in environmental problems to solve.  Even capitalistic countries have opportunities for improvement.

As with many issues, it would be nice to have a serious discussion about environmental issues.  Instead, our experience tells us that the environment is much better than it was and when news reports hype extreme predictions our experience tells us are always false.  The headlines in the alumni magazine made us disinterested in the article itself.  To try and start a serious discussion we will again suggest a modest carbon tax that replaces the gas tax.

 

Climate And A Carbon Tax

We written less recently because all of the oxygen seems to go to discussions of impeachment that bore us to tears.  The good news is that we read more books and reviews will be coming shortly.  We needed something optimistic to start the political and economic juices flowing like the always interesting Holman W. Jenkins, jr. at the WSJ.  Of course, you should read the whole thing.  He is discussing the Australian wildfires when he says:

And yet the zeitgeist, I think, is changing (and I like to think this column played a role). “Denier” is getting a last go-round in Australia at the hands of some whose wrong-footedness is their most salient quality, but the term is increasingly recognized as a sleazy way to refer to people whose views are perfectly compatible with the lower-end estimates of the U.N.’s Intergovernmental Panel on Climate Change.

We hope Holman is right.  We are not convinced as we see the silliness of impeachment, the behavior of the folks seeking the Democrat nomination for president (especially their statements on climate change), and The Donald’s rhetoric as evidence that the zeitgeist is, at best, changing very slowly.

Later on Holman comes to agree with us on a modest carbon tax:

It may take five more years, but you probably won’t even notice the debate that eventually spawns a U.S. carbon tax. A carbon tax equivalent to 13 cents per gallon of gasoline would have let Republicans in 2017 realize their fondest tax-reform hopes.

Holman’s carbon tax of 13 cents is particularly modest as we would support a carbon tax almost 50 percent higher.  We support eliminating the federal gas tax (18.4 cents) and replacing with an equivalent tax on all carbon.   Taxing carbon should lead to a reduction in government support for non-carbon based energy sources.  That is, less crony capitalism.

Holman doesn’t explain why he picked it but his time frame of five years is interesting.  Five years would mean 2025 after The Donald has finished his second term.  We are not convinced that The Donald riding into the sunset will help change the zeitgeist but we hope Holman is right.

Carbon Tax Analysis

It depends is the most reliable answer to almost any question other than is socialism a good idea?  It is particularly true as an answer to the following: should the US have a carbon tax?  Our starting points are that first, the left wants a carbon tax so there is space to negotiate with them.  Second, a carbon tax is conceptually a good idea because there is some relationship between carbon and global warming and we would, all other things being equal, like to reduce carbon emissions.  Third, a carbon tax is a good way to do that.

Paul Mirengoff at PowerLine has a discussion of carbon tax that we would like to review. We agree with much of his analysis but not his final decision.   Paul is correct that that the cost would be borne by consumers:

First, the cost of the carbon tax would be passed on to consumers:

While oil, natural gas, and coal companies would be responsible for paying the fee, they would likely pass a significant share of the associated cost on to their customers.

Yup, no doubt.  We are willing to agree that 100% will be passed on to consumers.  The GOP should see that low income folks are not sacrificed.  There are many ways to do this but the most obvious would be to reduce FICA, the biggest tax for most low income folks.  Make the first N thousand dollars of income not subject to FICA where N is the number that eliminates the impact of the carbon tax.

Sidebar: We could make this complicated and decide that only N at the first job applies.  We don’t think so.  If somebody works several different jobs we are OK with them benefitting from reduced FICA several times.  We think it is not exactly “fair” but the costs are not worth the benefits.  End Sidebar.

Like tariffs, sales taxes, and VATs it will fall more heavily on low income individuals:

Second, a carbon tax would have a disproportionate impact on low-income households:

As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.

Yup, no doubt.  Again, this can be fixed.  FICA is part of the solution.  Another part is to eliminate the gas tax that is currently 18.4 cents per gallon.

Paul might be right that is is not popular but we think presentation might matter:

Not surprisingly, the carbon tax is unpopular with voters. Indeed, Americans for Tax Reform notes that carbon tax advocates haven’t been able to get a carbon tax passed in a single blue state.

Two items are worth mentioning here.  First, carbon taxes by state are a really bad idea.  Second, in a purple USA, we can get a carbon tax that is modest and allows us to do good things like eliminate subsidies to alternative energy.  As our tweeter-in-chief might say, it all depends on the deal.

Again, in summary, a modest carbon tax, say, $20 per ton, that eliminates the gas tax and alternative energy subsidies while reducing low income FICA is a good idea.  We don’t know if the Democrats are willing to make the deal.  It might even be good politically even if they are not willing.

 

Carbon Tax Again

There has been some discussion if the CNN Climate Change Town Hall was more boring that the Bears-Packers game that opened the 100th season of the NFL.  The game had 17 punts, 20 penalties, and one touchdown.  Holman W. Jenkins, Jr. at the WSJ watched enough of the Town Hall to weigh in.  He ties it to a Harvard professor and some science stuff that the Town Hall folks allege they worship:

It comes just days after the shocking suicide of Harvard climate economist Martin Weitzman, rightly praised in obituaries for an insight lacking in the CNN town hall: A climate disaster is far from guaranteed. It’s the low but not insignificant chance of a “fat tail” worst-case disaster that we should worry about. (Mr. Weitzman put the odds at 3% to 10%.)

We had not heard mention of it before but it appears that one of MWG favorite topics came up briefly at the Town Hall.  Holman tells us

As the New York Times also noted, “For the first time, Ms. Warren explicitly embraced a carbon tax before quickly pivoting away . . .”
What’s Ms. Warren afraid of? A carbon tax would hardly be prohibitive. Weitzman advocated $40 a ton—the equivalent of 36 cents per gallon of gasoline. Such a tax could be implemented without raising the overall tax burden; it could be used to trim taxes on work, saving and investment, improving the economy overall. It could be embraced and copied by other nations out of self-interest rather than self-abnegation (unlike the absurd Green New Deal). [Emphasis added]

A carbon tax of $40 is twice what we have suggested but it is on the upper end of modest range.

Sidebar: We are really pleased that our back-of-the-envelope computations agreed with Holman and, perhaps, Martin.  We estimated that $20 per ton would be equal to the current federal gas tax of 18.4 cents per gallon.  The part in bold shows that we had the relationship right.  Wheeee!  End Sidebar.

It also matters what else is done.  We like Holman’s suggestions.  The gas tax goes and then there would be some negotiation.  We would like to see alternative energy subsidies go too.  At $40 a ton we might be able to eliminate all tariffs but that would require a new administration.  An alternative could be a permanent reduction in FICA taxes so the tax burden for low income folks does not increase.

Why didn’t all the Democrats embrace a carbon tax?  Why weren’t they asked?  And asked to provide specifics?  The answer, as many suspect including Mario Loyola at NRO, seems to be that attacking capitalism is the real goal.  A carbon tax would be part of a capitalistic solution.  It is an idea that conservatives should seriously consider.