The Skeptical Optimist

Global Warming: No Match for the Coming Ice Age

According to Dr. Mark McMenamin of Mt. Holyoke College...

[G]laciers are going to move down and grind New York into the North Atlantic ocean.
   

How the Earth was Made
A brand new two-hour documentary, How the Earth was Made, is now showing on The History Channel.  Be sure to catch it if you can, because it is the best of its kind I've ever seen.  [Link is at the bottom of this article.]

Most of the program is a chronological exposition of earth's 4.5 billion year history, pieced together by generations of scientific thought about how to explain the mounting evidence in the geological record.  The first 110 minutes show, in spectacular graphic detail, how earth evolved prior to becoming today's human-friendly environment.  (In order: Hell; then Waterworld; then Iceball; then Jungle; then Today.  Most of the time, life and volcanoes play a huge role.  Don't let that summary spoil it; watch the whole thing.) 

The Coming Ice Age
In the last ten minutes of the program, after covering earth's first 4,499,990,000 years, scientists explain the most recent hundred centuries we've been enjoying. 

It’s definitely not coincidence that civilization has developed over this period of time, because the climate is so favorable to our species to develop and flourish.  The period we live in the moment, climate-wise, over the last let’s say ten thousand years is exceptionally stable, almost unbelievably stable if you look into the geological record.  It certainly will not stay forever like that.
—Dr. Joerg Shaefer, Lamont-Doherty Earth Observatory

What's in store for us in the near future?  I was expecting to hear about the human-induced runaway greenhouse effect that would boil the oceans and turn earth into a Venus-like sulphuric acid pressure cooker.  But I was in for a surprise...

[Narrator:] Our first major challenge will be the climate at the start of the 21st century.  We may worry about global warming, but most scientists recognize that we are in a gap between ice ages.  Our whole civilization has occurred in a brief warm period, ten thousand years so far.  This warmth has proved crucial...

Even if our industrial economies effect a global warming over the next couple of centuries, it can do no more than delay the inevitable.

[Dr. McMenamin:] The New York area is going to be completely changed by the next cycle of glaciation, and at some point glaciers are going to move down and grind New York into the North Atlantic ocean.

In other words, earth-induced global freezing will overwhelm any human-induced global warming.  [Come to think of it, maybe George Carlin wasn't far off the mark when he said, "The earth is gonna shake us off like a bad case of fleas."]    

I wonder if the climate models are predicting the approaching Ice Age?  If not, why not?  If so, why haven't we been hearing about it in the mainstream press?  A new Ice Age will make the sea level drop, push humans toward the equator, and severely disrupt economies and national boundaries—if not turn the entire earth into a frozen, Europa-like ice ball.  Seems to me that's newsworthy. 

Fortunately, the documentary implies we have a few hundred years to prepare for the new Ice Age.  Wouldn't it be wise to start discussing today how future generations might make an orderly-as-possible transition to the coming, much-colder world? 

--------------------------
Watch the documentary if you are at all interested in our planet's history.  It is a top quality production.  I caught it on the History Channel, but it's also available for purchase.  Here's the link:
• How the Earth was Made

FQ.07.40: Favorite Quote(s) for This Week

This week, I have three closely-related favorites.  The first two are videos; the third one gets the blue ribbon.

First (video):
Al Gore on why we should have been tougher on Iraq.

Second (video):
Dick Cheney on the inadvisability of invading Baghdad.

Third, Winston Churchill:
A politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year.  And to have the ability afterwards to explain why it didn't happen.

Where the Jobs Went: Sept 2007 vs Year-ago

Today's employment numbers illustrate why the month-to-month change in employment doesn't deserve as much attention as it usually gets.  One month ago, the stock market tanked when the August jobs number showed an unexpected decrease (-4000 jobs) for the month; now, that same number for August has been revised upwards to +89,000 jobs.  I suppose the market will jump today on that "good news."  If it does, I think I'll start analyzing short-term trading strategies to take advantage of the monthly overreaction. 

Below are the charts showing 12-month changes (Sept. '07 vs Sept. '06).  The private sector added 1.4 million jobs, and the federal government decreased by 22 thousand jobs. 

Click to enlarge:

The source data (BLS tables B-1 and B-3) can be accessed at this page.

Natural selection at work in our financial system

Now that the August liquidity crunch is several weeks in the past, everybody is jumping in with an opinion about what it meant, and how well or poorly it was handled.  Harold James, Princeton's Professor of History and International Affairs, has jumped in with one of the more intriguing analyses I've seen.  He gives us a critique of the various historical perspectives in his recent article, The Perils of Financial Historicism.

The August events caused rarely-seen tremors in the short term securities markets, and have been evoking comparisons to the panic of 1907, and to the banking collapse of 1931—but Professor James says there are better parallels than those two:

Neither of these apparent historical parallels is convincing. We are not living in 1907, when the gold standard limited the ability of central banks to supply additional liquidity. Nor, following the fastest five-year period of economic growth in human history, are collapsing prices endangering the financial system, as they did during the Great Depression...

If today’s credit crunch has historical parallels, they are closer to nineteenth-century “normal crises” like 1837, 1847, or 1857. In those panics, financial innovation caused uncertainty and nervousness, but also induced an important and beneficial learning process. The financial institutions that survived the crises went on to play a crucial role in pushing further development, and they had enhanced reputations because they withstood a crisis.

So, it appears that our financial system is just as much of an evolving, complex adaptive system as the rest of the economy—as Eric Beinhocker has convincingly described in his excellent book.  Now that I've watched economic evolution shift into high gear for several weeks, I'll have to pull Beinhocker's book down off the shelf and give myself a refresher this weekend; it's one of the best books I've read in years.

Can FDR help John Edwards?

Last Thursday in the Democrats' debate, John Edwards told us about something he doesn't understand:

I don't understand why somebody who makes fifty million a year pays social security tax on the first ninety-seven thousand and not on the rest, while somebody who makes eighty-five thousand a year pays social security tax on every dime of their income.

After I pondered his admission, I decided there are only two possible scenarios.  Either...

1. Edwards was being honest: he really doesn't understand why, and he would therefore benefit from Franklin Delano Roosevelt's explanation of the social security system; or...

2. Edwards was not being honest: he really does understand why, but instead chose to play the class warfare card for political gain. 

I'll assume Edwards was being honest, and could therefore use some help understanding why every worker pays the same amount into social security up to a predetermined level.  It's really pretty simple: FDR wanted social security to be thought of as an insurance system, not a welfare system. 

Seventy subsequent years of presidents and congresses have not altered that original justification.  In FDR's system, each worker contributes to the old-age insurance system, subsequently collecting benefits proportional to those contributions.  The benefits were meant to be a minimum, anti-poverty safety net; that's why a worker's contributions stopped after that worker had paid a predetermined amount into the system. 

That's how the system was sold to the public seventy years ago, anyway.  Here are a few excerpts from FDR's Statements on Social Security:

[Nov. 14, 1934: ]  We must not allow this type of insurance to become a dole through the mingling of insurance and relief. It is not charity. It must be financed by contributions, not taxes...

As Governor of New York, it was my pleasure to recommend passage of the Old-Age Pension Act which, I am told, is still generally regarded as the most liberal in the country. In approving the bill, I expressed my opinion that full solution of this problem is possible only on insurance principles. It takes so very much money to provide even a moderate pension for everybody, that when the funds are raised from taxation only, a "means test" must necessarily be made a condition of the grant of pensions. 

[Aug. 15, 1938:]  The amount of the pension depends upon wages received and taxes paid by both employers and employees.

FDR wanted everyone to picture each worker "contributing" to his or her own old-age insurance.  That's why each worker's FICA "contribution" (6.2%) stops at $97,500 of wages, as does the employer's contribution (6.2%) for each worker.  It's supposed to be thought of as an insurance system, not a charity or welfare system.  [If John Edwards now wants us to start thinking of social security as a welfare system, he should simply say so.]

The problem of regressive taxation
A regressive tax is one that extracts a higher percentage (average, not marginal) from lower income taxpayers than it does from those with higher incomes; the FICA tax is regressive.  [Notice the subtle change in terminology.  What we pay into the social security system is no longer called "contributions"; that wording was important to get the program sold to the public seventy years ago, but now we're calling those payments what they really are: "taxes."] 

But when we debate the effect of federal taxes on individuals, full disclosure requires us to include at least the two most significant taxes: both the payroll (FICA) tax and the income tax.  Neither side of the debate has a habit of doing that, however.  When conservatives isolate the income tax to make a point about the large share of taxes paid by a small portion of taxpayers, the regressive effect of the payroll tax is not getting full disclosure.  Likewise, when liberals talk of the FICA tax in isolation, to make a point about unfair regressivity, the progressive income tax is not getting full disclosure.  An objective debate would include both the income tax and the payroll tax—but most politicians are apparently more interested in scoring cheap points than in laying out an objective, full-disclosure argument. 

If you and I truly want a progressive, growth-friendly taxation system that does away with the tax-avoidance games enabled by the current, impossibly complex system, then we should demand a full-disclosure debate that includes both the payroll tax and the income tax.  The logic behind the regressive FICA tax has deep historical roots; proposed changes should be debated (a) with that history in mind, and (b) in the context of the total tax system—including the monstrosity of an income tax system five decades of Congresses have given us. 

Candidates who demagogue one side (or the other) of our tax system are dodging the bigger issue, and debate moderators who let them get away with it aren't doing their journalistic duty.  If enough of us voters lazily keep falling for rhetorical tricks like the class warfare tactic, we'll end up getting precisely the crummy leaders we will so richly deserve.  And we'll only have ourselves to blame. 

------------
End note:
My personal favorite alternative tax system (growth-friendly, continuously progressive, simpler, anti-game-playing) is the inappropriately-named "Dual-rate Flat Tax."  The inappropriate word is "flat"—as I explained in an article titled The Flat Tax is Progressive.  I like the proposal partly because the second, higher rate on the income tax kicks in exactly where the FICA tax stops, ensuring continual progressivity for the whole system.  Here's a graphic from a past article, showing the continual progressivity of one possible dual-rate system:

Simplicity nostalgia
I especially like the above proposal because of the simplicity the flat rates and minimal deductions bring to the system.  Tax-system simplicity eliminates opportunities for game-playing and for cheating—and, believe it or not, our system used to be simple.  It worked well until the mid-1950s—at which time, unfortunately, our politicians learned they could use the income tax system to dish out political goodies to special interests. 

The dual-rate flat tax would bring simplicity back—and that is growth-friendly.  I wonder how many in our current crop of candidates understand why growth-friendly policies are important?  Wouldn't it be more productive for our politicians to spend their time figuring out how to make poor people rich, instead of the other way around?