Sacrifice

a tdaxp Special Report by “Aaron”

aaron
Aaron is a Noted Beacon of Non-Partisan Sanity

I’ll avoid quoting cliche’ but we all know the text of President John F. Kennedy’s famous Inaugural Address. At a time when there was much uncertainty in the world, the President did not ask us to fend for ourselves but to band together and make sacrifices for the greater good of each other and the world. Later, at a speech at Rice University, he famously said “we choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard.”

In his speech on January 31, President Bush noted the following:

Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology. Since 2001, we have spent nearly $10 billion to develop cleaner, cheaper, and more reliable alternative energy sources — and we are on the threshold of incredible advances.

In this statement, the President is throwing the onus of oil consumption reduction on scientists and engineers, not on consumers and definitely not on producers. Again, no request for sacrifice from the voting public. Has patriotism gone to exclude the self-giving that Kennedy and others asked of us?


In reading this and reflecting, it occurred to me that this President Bush is very hesitant to ask anything of the American people, the Military excluded. We shy away from heavy environmental regulation because it may hamper our ability to do business efficiently. We opt out of the Kyoto Protocol, noting that other countries would not be expected to sacrifice as much as we do. We continue to decrease taxes for those who need it the least, and when I say need I mean honest, physical need. We ignore the warning signs of global warming, glacial retraction and seawater acidity, because no one has proven definitively enough for the detractors that we can stop it or that it’s our fault… Even though a simple reduction in world greenhouse emissions could show us a positive or negative change in warming acceleration in less than a decade. The President is eager to push Health Savings Accounts on the American public, asking us to spend more of our own money or go to the doctor less, all in an effort to better pad the pockets of investors and CEOs.

It seems that in every turn, the current Administration is only interested in making more, keeping more, and not in using less or making less. I understand that capitalism thrives on the efficiency of everyone being as greedy as possible, but could it not also thrive on people being as giving as possible?

Dan and I discussed at length the idea of a fuel tax. We thought that an increase in the price of gasoline might drive down demand. We discussed that this tax could be made fairer by giving rebates at tax-time for miles driven. In this system, those who drove the least would be rewarded and those that drove the most would even out. But we both know this idea would be political suicide for whoever attempted to legislate it. Again, no ask for sacrifice. Is it that unpalatable to the American public? For every person who volunteers for the military, where is the person willing to pay $5/gallon for gas? For everyone who thinks the President is infallible, where is the person trading in his tax-subsidized SUV for a hybrid, or even a higher fuel-efficiency vehicle? Again, efforts to mandate increased efficiency were retarded to spare the automobile industry the brunt of higher cost of manufacture. Some manufacturers even tweaked their models slightly so as to be larger than the government standard ‘light truck’ qualification, thereby exempting themselves from even the relaxed newer regulation. And who is crying foul? A marginalized Democratic minority?

This year, the economics of the situation got to me. I started riding my bike to work more frequently and I second-guessed a lot of short trips. I already had a fuel-efficient vehicle (32mpg) but I have paid more attention to keeping it efficient… Maintenance and more pragmatic operation. The President is pushing for more nuclear energy, which I applaud, but what’s wrong with wind, solar, and hydroelectric energy? Almost no mention of them in the speech. He mentions switchgrass farming for cellulose alcohol, a more efficient form of combustible than ethanol. But where is the mention of agricultural subsidies to the farmers growing an initially unprofitable crop?

I am interested to see where the Administration goes with this. I have great hopes for the American people. In the same speech, President Bush vowed billions for the teaching of math and science. And in the same term, argues that intelligent design ought to be taught in public schools. I think if we can only overcome the limitation of our President, we just might make it.

6 thoughts on “Sacrifice”

  1. aaron/dan –

    'energy security' or environmental security or whatever you want to call it is a tough nut to crack. voluntary measures, or even mandated fuel taxes and other government interventions, would be unlikely to result in reductions significant enough to make a strategic difference for America's energy profile – most of our energy consumption needs are inelastic in the short term, and essential to continued economic growth. government interventions would significantly slow down the economy and have their greatest negative impact on the poor, both of which could significantly affect much-needed domestic support for the war on terror/whatever you want to call it. I dunno, maybe the shared sacrifice would make Americans all band together in the face of adversity, but I don't think that that outcome is more likely than increased political infighting and domestic discontent, neither of which we can afford much more of.

    Bush is right to put the onus on the scientists and engineers – major reductions in our energy dependence and/or greenhouse gas emissions (not at all 'simple' to reduce – just ask Japan, Canada, or the numerous EU countries whose emissions are growing faster than the US's despite their struggles to meet their meaningless Kyoto targets) will only come from *radical* improvements in existing technologies. again, just look at the example of Japan/EU/etc trying their darndest to reduce consumption with existing technologies to very little effect. due to technological, economic, geographical constraints, neither hydro, solar, or wind can make much of an impact right now, and only solar really has the long-term potential to make anything more than a marginal contribution. and none of those technologies will do anything to reduce oil consumption until we get plug-in hybrids that let us use electricity to run our cars. technologically feasible, but not for another few years at least.

    sacrifice is noble, and kudos to you and anyone else setting an example, making a little difference, raising awareness, etc, but any government-mandated sacrifice society programs had better damn sure be worth it, especially at this delicate juncture in American politics.

    (this is all without mentioning the fact that 'the energy problem' and 'the global warming problem' are both global problems whose evolution will be influenced much more by China and India's trajectories over the next few decades than the US and EU's… v tough nuts!)

    best
    John.

  2. John,

    You are right on the outlines of the energy problem. A good energy plan would work around and with those elements.

    For instance, working off my rough calculations from a year ago [1]

    For instance, an additional $3/gal gas tax would raise enough to give a rebate check of $1040 to every American. Therefore, if we would do that, we should /start/ by mailing $1040 checks to every American immediately before the gas tax kicks in. This would prevent the tax (which is designed merely to limit consumption) from being an expropriation aimed against the poor. Alternatively, one could mail monthly checks of $86.67 to every American, if one was worried that lower-income Americans could not properly handle that yearly rush of cash.

    Additionally, unlike increased CAFE standards, this “geogreen” measure would not distort the market. If a rich man wanted to by a wasteful HUMVEE, let him — he will merely pay more to operate it. Likewise, the geogreen measure would encourage people to buy less fuel consuming vehicles — if a family's gas expenditure was less than $1040 per capita per annum, they would make money off of this measure.

    Tom Barnett has also said that the global problem will be driven more by China and India than America and Europe, but I think this is a simplification. America has the opportunity to be a technology pioneer. An American geogreen tax would encourage the marekt to create fuel-efficient vehicles and begin manufacturing them with economies of scale. This would make similar technologies cheaper and more accessible for China and India. In this way we would harness China's and India's growth, and not merely despair at it.

    From my perspective, the Kyoto targets are meaningless and distracting. We are attempting to remove the life support from tyrants. I don't care about the degree to which this matches Kyoto's pseudoscience.

    [1] http://www.tdaxp.com/archive/2005/04/01/a_modest_geogreen_gas_tax_proposal_5_gal_gas.html
    [2] http://www.tdaxp.com/archive/2004/12/09/removing_the_i_v_from_tyrants.html

  3. In this case, then, I see President Bush as the cruel elephant tamer. Before the crowd, he is encouraging and nurturing. He inflates the egos of our inteligentsia by calling us the most capable country in the world and offering up the challenge of Mars exploration. He lauds our science capabilities in his speeches. But at the end of the night, when the spotlight points elsewhere, the whips come out and neglect and violence begin.

    He asks that we solve our oil addiction via science, then cuts funding by millions for the Department of Renewable Energy and eliminates programs for hydropower, nuclear optimization and nuclear research from the Department of Energy.. He pushes for the introduction of faith into our school systems and cuts 55 programs from the Department of Education. He appoints heads to government organizations like the EPA and NASA that massage or simply lie about data unfavorable to Bush policies, or more frankly, unfavorable to anyone making a buck off the environment. He asks us to end our oil addiction, then gives subsidies to oil companies in the midst of record-breaking profits. He asks us to look for alternatives or reduce foreign dependence and then pushes for drilling in places that won't affect oil supply for decades.

    Bush is rewarding his base with dividend tax cuts, permanent tax cuts, making favorable judicial appointments and any number of other gifts. How about he start sweetening the deal for the people who are going to save his country? How about reviving the Perkins loan cancellation program? How about increasing the number of visas for foreign engineers and scientists? How about increasing funding for departments of science and education? How about money for the NSF, how about helping make college affordable? How do we know the next Einstein or Feynman won't be a poor black kid from New Orleans?

    I'm tired of the taxes I gladly pay subsidizing the profits of investors and security and infrastructure corporations operating in Iraq. It's time my tax dollars went somewhere that helps society. I'm mailing my next IRS check directly to Stanford University.

  4. Federally funded manned space flight, let alone the now forgotten moon base, are further reasons why Bush can grind my gears [1]

    Likewise, the insane visa restrictions on “180 IQ” asians [2], let alone highly intelligent AND beautiful asians Lady of tdaxp.

    Then again, the Democratic alternative sounds little better [3] [4]. So while I, in a deeply red state [5], can afford to vote neither Republican nor Democratic for President, the rest of the country isn't so lucky.

    From an economic perspective, your statement of “the taxes I gladly pay subsidizing the profits of investors” is dubious. Growth is more sensitive to marginal capital gains tax rates than marginal income tax rates, even ignoring the fact that in our economic system high-earns subsidize most government services for low-earners.

    [1] http://www.tdaxp.com/archive/2005/10/13/george-bush-really-grinds-my-gears.html
    [2] http://www.thomaspmbarnett.com/weblog/archives2/001277.html
    [3] http://www.acepilots.com/mt/archives/001094.html
    [4] http://www.professorbainbridge.com/2004/02/kerrys_benedict.html
    [5] http://www.usatoday.com/news/opinion/editorials/2006-02-27-oppose_x.htm

  5. dan –

    the 'geo-green' redistributive gas tax plan isn't a bad idea, but I could see it getting pretty thorny. without verrry careful/complicated implementation, it'd also effectively be a big cash transfer from suburban to urban areas, Los Angeles to New York (not that I'd mind, as a NYer), blue collar workers to white collar workers that can telecommute, etc. which isn't to say that we shouldn't discourage sprawl (or LA) or telecommuting, but where people live (from the individual's perspective – urban planning from society's) and work take even longer to change than the kinds of cars people drive.

    for these and all sorts of other less obvious reasons, I think that the system would provoke an awful lot of complaints, many of them legitimate, and would have to be continually modified as circumstances (political and otherwise) change, which would create uncertainty about the future values of the tax that will make people less likely to make the major new investments that are being asked of them.

    so as not to be a 'problems not solutions' kind of guy:
    I wish I had time to hash this out in more detail (midterm time! etc), but one potentially more dynamic way to implement this kind of program could be a 21st century, tech-enabled, market-based gas rationing system. give everyone with a driver's license a gas card that they'd have to use when filling up that would be linked to a national (or state?) market of gas credits. if you've already used all your credits for the month/year, you will automatically be charged for extra credits that would come from the pool of unused credits by the gas savers, who would then get a check at the end of the month/year based on the market price. start out by giving everyone a shitload of (or even unlimited) credits to get everyone used to it and to calibrate the system (figure out how much people drive on average in different areas, with different jobs, etc), with the understanding that the market will gradually contract by some set amount every year.

    the dynamic pricing has the advantage of not only being more efficient in 'normal' conditions, but would allow the system to be easily changed in response to emergencies (Katrina, Iran, etc) – the government could quickly tighten the band/remove credits from the market to help it adjust more rapidly to unexpected shortages. the system is also flexible enough to make carbon tax/trading a piece of cake to implement – if we ratified Kyoto tomorrow, your gas purchases could be tied into the European emission market by Friday.

    while this would obviously be more technologically complicated than a simple tax rebate, I don't think it would be prohibitively expensive, especially considering how much more effective it might be… (?) but I haven't done any serious research on it.

    for what it's worth, this was kind of inspired by an idea that my dad had after 9/11, that we should all get gas cards with a picture of the planes hitting the WTC, so that every time we filled up we'd be reminded that we're at war and what those bastards did and why we'd like to not use so much oil etc. that might be a bit over the top, but it might be a design idea worth holding on to

    (sorry for the incoherence, hope it made sense – it's late/early)

    best
    John.

  6. aaron –

    I can't really get into specifics on the policies/budgetary decisions you bring up – suffice to say that I agree with you on some (science and education), not so much on others (drilling in ANWR, funding for Iraq). but for most of them I think that it has more to do with the interaction of the complexity of demand for government resources with the irrational contours of the terrain of political feasibility than any concerted effort by Bush to be a cruel elephant tamer. each of the quasi-simple issues you bring up is determined by more variables than you mention, and the government is just not very good at making tough decisions about allocation anyway.

    this isn't to let Bush off the hook, he could and should do better in many, many areas – but I'm dubious that another president would do much better. to kind of rehash my earlier point, the energy problem is a problem of technology, and the majority of work that's going to be done solving it should be done by the private sector – the government has little useful role right now other than increasing funding for those working on promising solutions (despite the fact that we aren't even really close to figuring out which solutions these are) and even then, private R&D investment will be much more significant.

    basically: the energy problem is a hugely complex one, depending on currently-unforseeable interactions between science, technology, the economy, and the environment that we only have dim understandings of, and I don't trust Bush or anyone else in any White House very much to come up with the solution. we can and should ask the government to do better, but we shouldn't expect it to do very much

    best
    John.

  7. John,

    I do agree that the greatest work will come from the private sector. The X-Prize, etc. did a lot more for manned space travel (that we know of) than NASA has in a decade.

    But necessity is the mother of invention, and at this point, there's no need for alternative fuels. People continue to pay $3.00/gal without too much complaint. Demand certainly didn't decrease this year, if respected journals like The Economist can be believed. I fear the only time that there will be a need for economically driven alternatives will be when it's too late. I imagine the 70s gas lines over but worse. Would our economy survive the sudden slap? And I don't imagine Mad Max here, but I could see a decade long recession or perhaps even another Great Depression. No one can drive, no one can work, the economy and market crashes… Hard to say.

    So we keep throwing away money to people who have it. Dividend tax cuts are great, but even Warren Buffett argued they weren't necessary. Subsidizing Big Oil seems counterintuitive. Why do we keep lifeless corporations in business but shy away from subsidizing farmers with families? I know a country doesn't run on altruism, but I think we could do a little more wealth transfer towards what may be our economic salvation. We should be overfunding scientific research. We should make University research a lucrative career, as more professors spawn future academics than investment in private R&D firms. How many great ideas have been scrapped because there's no ROI for the private firm, or scrapped because the stock is underperforming by $.02, according to 'analysts?'

    When Bush got egg on his face and had to transfer $5m back to the Energy Research Lab, the director said they'd get the money from 'underperforming' programs. Who's to say one of those programs weren't on the verge of breakthrough?

    How much work and public money do we put into growing the economy by 7% vs 6%? Why can't we be happy with 6% and throw some cash at some crazy ideas? The solution might be one non-existent grant away.

  8. Aaron and John,

    Technology-subsidies, which would increase the supply of alternate fuels, are part of the solution. But given the mixed record of specific science projects with federal funding, a better solution would be broad-based science funding (which Aaron wants, but becomes more of a welfare-for-phds program than an innovation initiative), or increasing gas prices to the point where demand does decrease. The second would spur technology solutions on its own, so that's what I'm for.

    Tying gas prices (or tradeable gas rations) to a CO2 index would be an innovate idea if the purpose was a reduction of CO2 emmisions. As I'm intereseted in reduced natural-resource depency towards Gap states, I'll set it aside without dismissing it as such.

    Aaron,

    Economic growth compounds, so even small decrease in economic growth leads to substantial reduced social welfare long-term. It's not a question of one old-line financier's view of what's socially “necessary,” it's the facts of economic growth. It's a question of how much we want to deprive our future of in order to get now.

    One's discount rate is a matter of preferences – how much reward one chooses to defer now in exchange for a greater reward in the future — but there is a real trade-off that can't be ignored. (Though it can be discounted… heh)

    Throwing money at “crazy ideas” is, of course, crazy. Perhaps we can throw money at “cool” stuff (a political judgement), or risky stuff (which may lead to greater economic growth), but learning for the sake of learning seems dubious.

    I'm not sure what lifeless corporations the Bush administration is subsidizing. If anything, it has taken flack for allowing large businesses to go under (Enron, Arthur Anderson, Delphi, etc) in the name of creative destruction.

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