Centerfield

Marcus,

I feel your pain and agree with your premise. We often say politicians speak with their mouths but action is in the budget. Yes, we need to rethink our priorities.

That said, in the spirit of total fairness, you said:

"Oil, gas, coal, and nuclear energy all have their considerable subsidies and tax breaks that run to the tens of billions of dollars. For that, the American consumer is now being amply rewarded with high energy costs while watching record profits go to the energy companies"

Though it's easy to say that, it wouldn't exactly link those two sentences like that. It doesn't lend itself to a fair debate.

Marcus,

All good points. On a cynical note, I say this:

When nearly every Tom, Dick and Harry on Main St. USA is generally disgruntled with our energy situation, you'd think this would be a political boondoggle for any Pol with some gumption and integrity around which to push a compelling agenda. The fact that little is being done, leaves me to wonder about the insider obstacles and impediments that are preventing progress in what would seem to be a no-brainer.

On trickier note, growth of all kinds will continue. This means that as a country and earth, never mind per capita, the use of energy products like gas will only continue to climb. Any innovation that leads to less oil will mean increases in other areas which will also fuel growth and STILL trequire more energy for a more prosperous society.

There's a theory floating on the web about "zero-growth policies" that are aimed at minimizes growth to a standstill and controlling it to bring us to a stable point of sustainance. It's kinda wierd but it's worth explorin...though I'm not at all sold on its feasibility or positive net results.

John,
While rhetorically I may have been heavy-handed I feel it's a fair assessment of the return Americans are getting for their tax dollars. Think about the tens of billions of dollars ending up in a few hands, some to be invested in this country and the rest invested overseas. Whereas take those same dollars and put them in the hands of middle and lower income people and watch that money get spent locally on groceries, clothing, used Toyotas, etc. Which provides the better social utility? There's a better multiplier effect for our domestic economy when money is spent here by the average Joe than if it is spent in Saipan or Guatamala.

On the zero growth front, I refer to the technical paper by Art Rosenfeld where they felt in 1989 that they could reduce per capita use by 3.5% per year for 20 years, saving about 2 trillion dollars (in 1987 dollars) with an investment of about 300-400 billion (same 1987 dollars) This would free up a lot of capital as previous energy conservation efforts have for capital investment in other US industries. Obviously this would not mean a drastic reduction in overall use but if we kept even or did reduce a modest amount we would be in much better shape financially as a nation than if we continued to grow at an annual rate of 2-3% over 20 years. Personally I feel that the ratio is probably higher as technology pushes down the price of conservation and renewable energy while fossil energy prices continue their upward climb.

I don't think we can get to the position where the oil market collapses as it did in the 80's after the first wave of conservation efforts, changes in domestic demand and increased domestic production of oil and gas. While we can definitely increase conservation efforts, finding new domestic sources of fossil fuels will be much more difficult (and foreign ones, as we're finding, aren't worth the price in money or in lives). Furthermore, there isn't a whole lot of domestic industry left to export, at least without seriously damaging whole satate economies. So I don't think we'll see a total collapse although depressed prices are almost a certainty as we adjust to the current levels of energy costs.

Marcus,

I agree with your arguments. Keeping more money in local hands will do more for local economies. BUT, part of what allows us to consume and still produce cheaply what we do in fact still make is lower prices...not just as shoppers but also as businesses who need to keep costs low for supplies so they can still compete to some extent with foreign competition.

What do we tell up and coming recent IPO's and IPO hopefuls producing higher end, in demand technology and creating jobs about supplies? Does he get that part from a company in Saipan to improve his competitve advantage or do we make that harder to do and force him to spend more domestically so we can protect THOSE jobs but hurt jobs and growth at the other place? It's tricky.

What's better (as a simple example)? selling lots of $40 jeans at the malls and creating a lot retail jobs and expansion or cohersing companies like GAP to keep more production jobs here and selling a lot fewer $80 jeans and creating fewer retail jobs and watching more people struggle and collect unemployment and increase tension for lower paying jobs the immigrants are taking?? I know it sounds silly maybe. But it's reality.

I learned a lot about this painful struggle from Gene Sperling, economic advisor to Bill Clinton, in his book "The Pro-Growth Progressive" where he grapples with all these Catch 22's while trying to get your (and my) end-result.

So, we need to find a balance. Sure, keeping the pockets of average Joe's lined with money fuels demand and keeps local economies moving. But spending power and prices go hand in hand. And ofcourse, we need to not overtax wealth. While it's true that we need to mindful of "boondoggles for the rich" disguised as growth policies, we cannot suffocate the lungs of the private sector to empower consumers. That's like biting your nose to spite face.

Forward thinking people to create policies that produce wise investments for better jobs without hurting growth. It's a struggle. I know we can do better.

John,

As you should note, I did not say that we force the oil companies to invest domestically instead of in foreign nations but just merely pointing out that as an example, 100 billion saved domestically in energy costs means we have that money here to spend now, without the lag time that you have with investments and that it is better we have the money here in the first place. I don't think you can argue that making Americans spend that same 100 billion dollars on energy, to the exclusion of other goods and services that they need and where some of that money stays overseas rather than is spent or invested here, is better than saving 100 billion to spend and/or invest domestically on both domestic and foreign goods?

As for taxes suffocating the wealthy and investment, well that was proven wrong a long time ago when in the 50's and early 60's with significantly hire tax rates for the wealthy, this country enjoyed unprecedented economic growth. I also will point out that contrary to the naysayers in 1993, when Clinton and the Democrats had the guts to raise taxes on upper income earners, that our economy grew by leaps and bounds. And again, the advantage of conserving energy is that it does free up money domestically for investment, whether it's for here or for overseas.

To your first question, I would never argue to the contrary. The less we spend on energy, the more we spend on other things.

Dean speaks occasionally of an alternative energy stimulus plan that would create jobs here AND lower our energy costs and foreign oil dependency. I'm not sure if he's talking growing corn for ethanol or some other innovation or bot. But I like the idea. If I were in charge, I would pursue that vigorously. Along with that, I would find out what conservation technology is feasible in the next few years and work in tax incentives for car makers and others to produce cars that utilize this technology....you eluded to engine blocks that conserve energy and use less gas...that's one prime example. This would encourage car makers to take on the expense and do it knowing they will reap some rewards for the added expense of bringing new technology to mass production so quickly. I'd extend this to other energy consuming products.

For the second part, I wasn't referring to Clinton-era tax rates as suffocating. Not at all.

But at the same time, there are other ways to put more burden on business without taxing them. Enacting policies that indirectly increase costs on businesses in the name of protectionism is a vague example I mentioned earlier. The easier and cheaper to do business, the better. Less burden of all kinds encourages entrepreneuship. Ofcourse, I'm not implying to do this at the expense of labor...I'm just speaking in general

These are FEASIBLE ideas and I'm all for them.

John, every time someone says "zero growth" I can't help but notice one thing. They are inevitably living in one of the rich nations, and somehow have no intention of lowering their _personal_ standard of living to any significant degree. Which means that, even if everyone else in the world who consumes more than they personally do (a tiny fraction of the world population) was to cut down to their level, the vast majority of mankind would be condemned to keep something close to their current (very low) living standards if zero growth in total energy usage was to be achieved.

Since there is no way that the majority of the world will agree to any such thing, the "zero growth" discussion can be nothing but feel-good posturing. The only way out is a combination of more efficient technology and new energy sources (which will require technological improvements as well). Of course, I've also noticed that the "zero growth" fans frequently tend to be technophobes, so they probably aren't interested in hearing that.... ;-)

Actually vi, zero or slow growth has little to do with lowering anyone's standard of living, whether you're 1st world or 3rd world. 1st world nations can rein in consumption, even lower it considerably without adverse effects on lifestyle, and operate more efficient energy flows and economies. (If you want proof of pudding look no further to than to California, home of many zero growthers who not only use much less energy than most people do in the USA but have a pretty enviable standard of living - not bad for what is the 7th or 6th largest economy in the world ).This in turn reduces upward price pressures of the scarcer energy resources. Furthermore, 3rd world and developing countries can benefit from our mistakes, skipping whole steps and increase their standards of living with the more efficient and cheaper technologies available to 1st world nations.

It is not a stretch to imagine small scale hydropower and biodiesel plants, wind power, and solar technologies making headway into rural areas of 3rd world nations with the added benefit of insulating them from the now costlier fossil fuel based infrastructure and economy as well as the price variations thereof. They can start lighting not with incandescent bulbs but with much more efficient compact neons or LED bulbs And why not have cel phone towers, microwave transmitters, satellite dishes, WiFi or WiMax instead of stringing thousands of miles of telephone lines? It's a much quicker path to obtaining information and communication, part of the cornerstones of development. Much higher living standards can be had with much less energy than is used now by Americans and Europeans. One of the reasons why we have so much energy use in the US is our antiquated infrastructure and a lot of adherents to the old school "energy is cheap and available" way of doing things. We are partly trapped by our past, just as a fading English empire was trapped by it's antiquated and quaint industrial past a century ago. At that time the US and other nations took over the economic reins. We can climb out of it, I think, despite what some of the more pessimistic on both the left and right might say. We have the technology to rebuild and remake our country. We seemed to have been be lacking the will, or more unfortunately, the sense responsibility to our children's future.
Maybe now that will change.

Another thing. "Zero growth" means anything but zero possibilities and zero opportunities.
And if anything "zero growth" adherents tend to be geeks and first adopters, not luddites and creationists. They're the first to use ethanol, biodiesel, solar, and energy efficient technologies sometimes decades in advance of those trying it now. Heck my dad's old business partner built his own electric motorcycle in the 60's, rewiring a bus alternator and slapping a few batteries on an old triumph frame. There are solar installations in the SF Bay Area that were built 30 years ago.

Better define "zero growth" a bit more specifically there, Marcus. Does California have zero population growth? Zero resource usage growth? Zero state budget growth? Zero income growth?

Zero per capita energy growth. Everything else, including all ye snowbirds moving in and boosting the population and crowding out the few natives of us that are left, is growing.

In general it would be nice to have zero or low population growth, California is already importing water and energy to meet its needs. Thre are some pretty heavy environmental prices to pay just for that. But then with lax enforcement of our borders and labor laws there's not much I can do is there?

Marcus,

Just informationally, I live in California, and have had a solar electric system on my roof for years. But the people that I know who advocate zero growth (as opposed to energy efficiency) are almost all intent on:
a) zero growth in total world energy usage,
b) zero growth in total world consumption of resources of all kinds,
c) not changing their personal life-style at all.
And their personal life-style doesn't seem to stretch to putting solar panels on their roofs or anything else that might significantly reduce resource consumption. Although I will admit that fewer of them have SUVs than the general population -- "fewer", but not none.

Perhaps I simply know a non-representative group, being here in the San Francisco area. But like everybody else, my perceptions tend to be informed by my personal experience.

Zero per capita energy growth. Everything else, including all ye snowbirds moving in and boosting the population and crowding out the few natives of us that are left, is growing.

Hey, don't blame me for your population problems. Besides, in-country migration to California is a negative number--many more are leaving than are moving in from other states. Heck, I left Colorado to evade the hordes of Californians moving there! They said they were driven out of CA by the high taxes and increased cost of living from all the enviro regs--then immediately proceeded to start doing the same things to Colorado. (We called that "Californication." It drove a lot of native Coloradons out...now folks in Oregon and Washington are cursing those darn Coloradon interlopers...)

In any case, per capita energy usage flattened out and stabilized a quarter of a century ago, according to the link you provided. For the entire nation. If anything, it's down a hair. And energy usage per constant-$ GDP has been cut by a third in that same time frame, and continues to decline in what appears to be a constant trend. We seem to be steadily finding efficiencies.

As for taxes suffocating the wealthy and investment, well that was proven wrong a long time ago when in the 50's and early 60's with significantly hire tax rates for the wealthy, this country enjoyed unprecedented economic growth. I also will point out that contrary to the naysayers in 1993, when Clinton and the Democrats had the guts to raise taxes on upper income earners, that our economy grew by leaps and bounds.

LMAO. Nope, no other fundamental factors could have been involved in the process. You're wrong, BTW, as regards the effect of taxes in both real GDP and real GDP per capita terms for the '50s and '60s. We've had this discussion before, and I realize it's a cherished religious belief of yours, but the historical record and the empiricals don't agree with you. The effects of taxation are unambiguous, it's simply not the only factor involved in GDP growth by a very long shot. Though of course those getting tax hikes OR tax relief like to claim so.

But keep it up. It's always amusing to watch amateurs attempting economics--as long as I don't have to pay for it.

Note I did not exclude other factors, just pointed out that when taxes for the wealthy were higher we still had economic growth, whether because of or in spite of I'm sure there are opposing studies out there. I do recall that with Clinton's 1993 tax increase on upper-income earners, federal income tax receipts grew at a greater rate than the growth after Reagan's tax cut and that despite all teh very lod and somewhat vituperative doomsaying by the GOP we did end up with economic growth (and a surplus!). Just stating the apparently obvious. That's all.

I do recall that with Clinton's 1993 tax increase on upper-income earners, federal income tax receipts grew at a greater rate than the growth after Reagan's tax cut

You recall incorrectly. Average annual federal revenue growth was higher under Reagan/Bush than under Clinton, right up until Bush I hiked taxes, yet Reagan started out in a major recession, and Clinton had a booming economy when he came into office in a rising business cycle.

Not that I really credit either with specifics, just leadership--it's Congress that both originates and passes tax bills and budgets. It's all right there in the Constitution, which you really ought to read sometime. It's that 1789 document with the funny writing that explains the basic structure of the American federal government.

Where the Reagan era fell down compared to the Clinton era was in the growth of federal spending. Spending grew much faster under Reagan than under Clinton. Once again though, Clinton didn't come into office under a recession with runaway inflation. Both ended up with opposition Congresses writing the tax and spending bills. See above re: origins of tax and budget bills. Nor for that matter did they face the same situations, either politically or economically.

Note I did not exclude other factors

Just completely failed to mention them while implying that the only relevant factor was the one you mentioned, which is indeed exclusion. Pretty disingenuous, Marcus.

I get the point you wish to make--that a hike in tax rates need not shrink GDP. It's also true that a cut in taxes need not light a rocket under growth either. But the effects of either are unambiguous. An increase in tax rates results in lower growth than would otherwise have occured, and a decrease in tax rates results in higher growth than would otherwise have occured. Plain and simple.

Tully,

a few remarks on your remarks:

Clinton had a booming economy when he came into office in a rising business cycle.

While I don't deny that the economy was beginning an up cycle, I'd hardly call it "booming". The BOOM came several years in.

On a slightly separate note: More than any tax cut, I'm part of the smaller crowd that credits the victory over stagflation to Milton Friedman and his monetarist polcies concerning money supply. I had it explained to me once. It took about a half hour and I was sold.

An increase in tax rates results in lower growth than would otherwise have occured, and a decrease in tax rates results in higher growth than would otherwise have occured. Plain and simple.

Agreed but it's not so plain and simple. I once read that increases in government spending have a higher net positive effect on growth than tax cuts do. The problem there is increased inflationary pressure. I'm not condoning keynsian principles, just stating grey truths that get lost in these debates.

Ofcourse, what we saw in the late 90s kind of underines parts of these theories. Government spending growth dropped and the economy pushed forward. But any "cause and effect" doesn't happen at the same time. Spending was higher in the years preceding the boom, and falling in the years preceding the 2001 recession. Causality or correlary? I do not know.

The Clinton years did however give data for the arguments concerning the effects of the relationship between low budget deficits and low interests being more influential than small tax cuts or increases.

Just throwing some ideas around. I'm not really beholden to any one theory. But economics is rife with data to present correlary. The hard part is figuring out if the correlary is, in fact, cause/effect or simply a correlary tied to a third (or more) factor(s).

Agreed but it's not so plain and simple.

When examining the effect of a change in a single variable against baseline, it is indeed that plain and simple. That particular one's an empirical truth, well-established. I used the term "unambiguous" in the empirical sense--it's a given, not a conditional. But it only applies as changes resulting from that single variable, and changes in other variables will also affect GDP.

I once read that increases in government spending have a higher net positive effect on growth than tax cuts do. The problem there is increased inflationary pressure.

Don't believe everything you read. That one's highly situational, dependent on a number of different co-dependent variables. Simplistically, in some situations (usually severe depression and high unemployment), yes, it can be. In most other situations, no.

The usage of "net positive effect" is highly questionable when coupled with "increased inflationary pressure." You're describing a Keynesian use of monetary expansionism, using the time lag between excessive monetary growth and the resulting inflation to get some steam built up. Hopefully, the resulting growth will overshadow the inflationary effects. But it's not mechanistically predictable--you don't know exactly what the net of the competing effects will be until after you do it. Roll the dice. Short-run positive, long-run ambiguous.

An increase in government spending can be net growth-negative, positive, or nuetral to baseline, depending on the situation and the form of increase and several other things. "Ambiguous." A reduction in tax rates is always growth-positive, an increase in tax rates always growth-negative. "Unambiguous."

Greenspan (per Friedman) had it right. Hope his successor is just as steady.

Spending was higher in the years preceding the boom, and falling in the years preceding the 2001 recession.

Huh? The last time government spending fell in real dollar terms I was five years old, we were building up in Vietnam, and LBJ was still pushing "The Great Society" to a vote in Congress. Do you mean revenues?

Tully,

Sorry. Spending was SLOWING not falling.

I make that little faux pas sometimes. Some figures I've seen gave an impression that spending flatened or fell slightly when adjusted for infation.

Side note on Greenspan...some economists say he precipitated the recession by over-estimating inflationary pressures and jacking up interest rates too much too fast. There may be a thread of truth there.

Gotcha. "Falling" in terms of %GDP, not inflation-adjusted. Mostly due to the speed with which GDP was picking up, and the increasing returns-to-margin on taxes in %GDP terms in a growth economy, and spending restraint imposed by the Gingrichians. "The Good Old Days."

Greenspan didn't precipitate the recession. Not even close. The collapse of the dot.com market bubble needed no assistance in wreaking havoc. We were overdue for a cyclical contraction, and the market overvaluations guaranteed it would hurt. We got off easy, largely thanks to Greenspan.