tadfad » economics

The Richest 1%

tadfad — Sat, 08 May 2010 00:38:56 +0000

In the midst of troubling economic times, it’s easy to lose sight of the big picture. The Global Rich List helps you put it back in perspective.

Global Rich List via kwout

We hear a lot about the richest 1% in the U.S. What about in the world? Who are these fat cats?

I guess it’s me.

Two observations:

The middle class in the U.S. is very wealthy relative to our global neighbors. Let’s not forget this as we talk about how to tackle global problems like climate change and resource scarcity.
The wealthiest 1% in the U.S. are so astronomically wealthy compared to the rest of the world that it’s bordering on obscene. These are NOT the small business owners that politicians love to talk about while cutting taxes for the rich. These are the super-elite earning hundreds of millions of dollars per year. And after decades of successful political manipulation by the rich, they pay very little in taxes relative to their wealth. Does it make sense to anybody that a family earning $250,000/year and a multi-billionaire earning $250,000,000/year are in the same tax bracket? I didn’t think so.

A plea for reason

tadfad — Sat, 20 Mar 2010 18:00:27 +0000

In the U.S., the raging debate over climate change continues to devolve. Throughout the winter, skeptics repeatedly reminded us that it was cold out, disproving “global warming”. When severe snow storms battered the east coast, a Senator Inhofe (R-OK) built an igloo and labeled it “Al Gore’s new home”. The discovery that a 3000 page report contained a transposed digit (that created an order-of-magnitude error for the year in which the Himalayan glaciers would melt) drew accusations of scientific malfeasance.

Never mind that zero climate change models predict the disappearance of winter in the northern hemisphere any time soon.

Never mind that climate change models explicitly predict increased precipitation like we’ve seen all year.

Never mind that the handful of errors discovered within the thousands of published studies represent immaterial corrections to the underlying models.

We’ve completely lost the distinction between science and politics; reason and faith; logic and emotion. Given the catastrophic economic and environmental consequences predicted by climate change models, it’s terrifying that so many Americans are willing to dismiss it outright as a scam or conspiracy. We need a national plea for reason.

There are two explanations for how we got to this unfortunate position:

A) A world-wide group of nefarious characters (lead by Al Gore) have created the largest and most convincing conspiracy in world history to convince thousands of scientists and most political leaders throughout the world that climate change is real and a major problem.

B) The very powerful industry lobby for carbon-intensive companies and their representatives in congress are waging a successful disinformation campaign to create doubt and obfuscation among the American public about the validity of climate change science.

Which of these two seems more plausible?

One of these groups is backed by billions of dollars in resources, an army of lawyers, PR firms, lobbyists, and sympathetic politicians.

The other group is infamously inept at PR, has no unifying organization to speak of, and defers to the norms of scientific inquiry that errs on the side of caution when publishing results or predictions.

One of these groups has spent the better part of a century investing in technologies, infrastructure, and business models that will do not fit in the carbon-constrained world required to slow the effects of climate change.

The other group predicts a future in which we must radically change our technology, infrastructure, and human habitation models to fit a carbon-constrained world.

One of these groups appeals to the large swath of Americans who are falling behind due to a shifting global economy and see their standard of living stagnating or even decreasing.

The other group finds broad appeal internationally and strong support within the American upper-class who are educated and affluent enough to allow a graceful transition to a carbon-constrained world.

Only one explanation can survive a serious test of logic and reason; unfortunately the opponents of climate change don’t care much for either.

Credit card disclosure rules

tadfad — Sun, 28 Feb 2010 19:24:17 +0000

The new credit card disclosure rules went into effect this month with a few interesting changes to our statements. It’s a little shocking when you see the cost of carrying a balance spelled out in plain text:

It will take me 17 years to pay off my balance if I make only the minimum payment. 17 years!

Increasing the payment by a modest $20/month (by, say, skipping a fancy coffee one a week) would bring that payoff period down to 3 years and save me almost $1400 in interest charges.

Behold, the power of compound interest.

(Don’t worry, I pay off my full balance every month. They probably hate me as a customer.)

This one’s a little dark. You’ve been warned.

tadfad — Sat, 27 Feb 2010 19:23:42 +0000

I’m amazed at how little attention is paid to climate change in the U.S. Sure, we talked about the Copenhagen summit for a news cycle, and we loved chirping about the dastardly U.K. scientists and their suspicious emails. But given the potential costs of climate change, it’s alarming how little attention it gets. Future historians will be utterly bewildered as they sift through the clues we leave behind and wonder how we so willingly brought collapse upon ourselves. We have completely failed at weighing the relative costs and benefits and have likely sealed our own fate.
Climate change critics generally start by [drastically] overstating the level of disagreement within the scientific community regarding the anthropogenic causes of climate change. I won’t waste much text here, but to be clear, there is no disagreement. Climate change is happening and humans are causing a large part of it; the only debate remaining is whether our share of the blame is 95% or 96%.

Once the seed of doubt is placed, the critics then scare us with dire predictions of a possible future. Dealing with climate change would require significant changes to the way we live, it would require significant investment in new infrastructure and technologies, and would alter the institutions we’ve been familiar with for the past century. Therefore, the theory goes, we should do nothing.

For the sake of argument, let’s assume there is a legitimate debate within the scientific community (remember, there’s not). I’ll even be so generous as to assume a 50/50 split. If that were the case, how should we respond?

The costs of unmitigated climate change are immense. The path we are on leads to massive population displacement, food shortages caused by flooding and draughts, accelerated species extinction, and (eventually) economic and civilization collapse. Yes, collapse.

What about the costs of attempting to stem the tide of climate change? These, too, would be large. The standard of living for developed nations would be altered forever. Air travel would no longer be available to the public. Nor would personal automobiles. Meat would be a luxury instead of a staple. Our cities and towns would contract and the massive suburban developments would transition back to agricultural land. The number of farmers would increase 10-fold (at least). Many industries would cease to exist and those that remained would look completely different. Our national wealth would have to go into buying things like wind turbines and solar panels instead of HDTVs and fancy cars. Make no mistake, life would be very very different. But we would have a real fighting chance at staving off the total collapse of our civilization.

When presented in these terms, is there really any question of which path to take? I’m so tired of hearing about the “energy tax” and the costs of transitioning to a carbon neutral energy mix. Money won’t buy you much if the global economy fractures under the strain of climate change.

[ . . . ]

Easter Island (the place with the giant stone heads) was once covered in thick forrest. Poor resource management and fanatical obsession with erecting the giant stone heads lead to 100% deforestation of the island. At some point, some one cut down the very last tree left standing. What do you suppose that felt like?

Soon, we all will know.

What if the Bush tax cuts had never happened?

tadfad — Wed, 03 Feb 2010 00:15:13 +0000

The Wall Street Journal published some great graphs and charts detailing the Federal budget over time.

Looking at the Cash Flow graph in particular, I noticed a striking decline in Revenue from 2000 to 2004 (i.e. G.W. Bush’s first term). When Bill Clinton left office, we had a healthy budget surplus. A trillion dollars later, we were back in the red.

I wanted to try something, so I adjusted the graph to erase the Bush tax cuts (shifting the revenue line up, represented in green below). Imagine my shock and surprise when I discovered that this adjusted revenue line coincided with spending estimates in 2015.

Now, I realize there are about a hundred holes in my logic here. I can’t move lines around on a graph and pretend that it represents an alternative history. Moreover, it’s a useless argument since we are where we are and we can’t go back in time. Even so, I think it’s important for us to realize the future costs of policy choices.

Way better than State of the Union

tadfad — Tue, 02 Feb 2010 22:44:01 +0000

Minnesota takes aim at North Dakota

tadfad — Wed, 06 Jan 2010 23:48:43 +0000

Minnesota (my beloved home state) has just fired a shot across their western border towards North Dakota. From Scientific American:

To encourage the switch to clean renewable energy Minnesota plans to add a carbon fee of between $4 and $34 per ton of carbon dioxide emissions to the cost of coal-fired electricity, to begin in 2012, to discourage the use of coal power; the greatest source of greenhouse gas emissions.

To provide some context, North Dakota is a state with dwindling population and abundant cheap coal. There are a number of coal-fired power plants that export electricity across their borders to the more populated (and less coal-rich) Minnesota.

Continuing the article,

State officials in North Dakota are mounting a legal battle against Minnesota. State officials argue that this would unfairly discourage coal-powered electricity sales in favor of renewably powered electricity.

Really, North Dakota. No shit.

Fortunately for their state, North Dakota is also blessed with an abundance of wind resources. The same high voltage lines that carry dirty coal electricity could be used to export wind power instead.

There’s two ways they can play this:

1) Use the tariff as a direct financial incentive to agressively build wind farms and increase local employment

2) Spend millions of tax dollars fighting the tariff in court and continue down the dead-end of coal power plants.

I wonder which path North Dakota will take?

Zipcar : initial thoughts

tadfad — Mon, 04 Jan 2010 04:08:51 +0000

I’ve relocated to Washington D.C. which means I can take advantage of a really nice mass transit system and sell my car. The Metro can get me most places I need to go within Washington and the first-ring suburbs. For those trips when I do need a car, I joined the Zipcar car-share service.

I tried a similar car-share program when I lived in Madison, WI but found that it couldn’t meet my needs. There were too few cars spaced too far apart to be convenient.

The Zipcar scene in Washington is much, much better. With hundreds of cars to choose from, many in close proximity to a Metro station, getting to and from a car is a breeze. Reservations have been plentiful as well, with multiple cars available at any given time when I want one.

The Zipcar process is pretty slick: you pay a one-time fee to join the service (for me, $25) then rent cars by the hour. The price depends on the model you want (they have everything from a Smart Car or Prius to pickup trucks and BMWs) in the range of $6.50 – $13. The casual Zipcar user also pays an annual fee (currently $50) that is waived for more frequent users who commit to a minimum monthly spend. I know I will be using Zipcar for work travel at least a few times a month so I signed up for the $75/month plan.

Reservations are done online or using a very slick iPhone app when you’re on the go. Once you arrive at the car during your reservation time, your Zipcar card unlocks the vehicle and away you go. I’ve rented a car for three trips so far and each time it’s worked perfectly.

Most of us aren’t used to paying for a car by the hour so that fee may seem high. When you factor in all that you’re getting, however, it starts to look like a real bargain. There’s the obvious stuff like the capital cost of the car itself and all maintenance/repairs. You’re covered for insurance (with a $500 deductible if you’re at fault) and the cost of parking the Zipcar. Add in the fuel costs (each car comes with a fuel card if you need to refill) and it starts too look like a real bargain.

The secret behind Zipcar is raising the capital utilization rate for their fleet of cars. Most car owners use their car for maybe 10% of the day, while it sits idle for the other 90%. The typical car ownership costs in the U.S. are $400-600 per month. You’d have to use that car for 12 hours a day to come close to the hourly rate Zipcar charges.

Of course, the Zipcar scheme won’t work for every city or every driver. It relies on a critical mass of users and is buoyed by an available mass transit system. But for urban dwellers with infrequent car needs, it can’t be beat. I’m thrilled to be giving up car ownership and relying on the Metro, Zipcar, and my feet for my transportation needs.

And finally, the sales pitch : if you are interested in trying Zipcar, use the link below. You’ll get $25 in free driving credits and I’ll get $25 for the referral.
Join Zipcar and get $25 in free driving!

Marshalls destroyed by post-Christmas shoppers

tadfad — Wed, 30 Dec 2009 03:51:34 +0000

I walked through Marshalls today on my way back from Target. It was a wreck. Most aisles had merchandise strewn about the floor and haphazardly stacked on shelves. It was as if the stocking crew had gone home for the year.

It reminded me of a great Onion article from a year ago: Difficult To Tell If T.J. Maxx Hit Hard By Recession

This pull-quote sums it up nicely

Financial analysts, observing more than 100 locations nationwide, cited large quantities of off-brand and wildly scattered merchandise as evidence that T.J. Maxx has either been devastated by the economic downturn, or is carrying on as usual in spite of it.

God bless America’s shopping fetish.

Obama’s Big Sellout

tadfad — Wed, 16 Dec 2009 05:26:20 +0000

It’s official. Between the Democrat’s wholesale capitulation on health care reform, the rampant cronyism with Wall Street, and taxpayer-funded handouts to realtors, home builders, auto makers, and of course bankers, I’ve lost my faith in the “Change” we voted for last November. I was duped.

(Not that the McCain/Palin ticket was any more promising, but I still feel like a shill.)

Not convinced yet? Read more about Obama’s Big Sellout from Rolling Stone.