The Skeptical Optimist

Five ways to fight global warming, ranked worst-to-best

Although I’m still not sure whether the cause of global warming is due more to humans than to the sun, I keep an eye on the science.  (I enjoy keeping up with the science—but pure GW science is a rare find. GW news is too frequently contaminated by confirmation bias, belief preservation, and rehearsed political dogma.  I stop reading as soon as I detect any of that, which means I skip a lot of GW “news.”) 

I was glad to see Freeman Dyson’s recent review of William Nordhaus’s new book about several possible policies the world could choose for mitigating global warming, and each policy’s estimated effect after 100 years. Nordhaus’s analysis netted the worldwide cost of each policy against its worldwide benefits over 100 years—using $1 trillion as the base unit of measure.  A negative result means the policy in question would make our great-great grandkids worse off than doing nothing; a positive number means they’d be better off.  Nordhaus used a discount factor of 4%—an assumption that’s perfectly reasonable to most of us, but highly controversial to those whose pet policies end up looking ugly as a result. [What a surprise.]

For fun, see if you can match each policy to its outcome, before peeking at the answer.  Here’s the set of policies and outcomes:

Give it your best shot before you go to the rest of the article below.

 

Interest on the debt: What we get for it

I estimate that 99% of the voting public believes we get absolutely nothing for the interest we pay on the federal debt.  Okay, 99% plus-or-minus one percentage point, anyway. It's a false belief, and false fear of that false belief is played like a fiddle during campaign seasons.

Before I explain the important benefit we get from paying the interest, let's look at how we are faring on the indicator I consider the best indicator of "debt burden": the portion of tax receipts it takes to pay the net interest on the debt.  (It's more to the point than the debt/GDP ratio.)  As the chart shows, the debt burden (9.6% of tax receipts today) is still significantly lower than it was in the mid 1990s.

It's good to know our debt burden has improved, isn't it?  I wonder when The USA Today will start reporting that fact. Click to enlarge:

Some will recognize this indicator as the inverse of "times interest earned" -- commonly used as a measure of creditworthiness in the private sector. And that's a hint. Interest payments are not a waste of money; they buy something valuable (creditworthiness), and they prevent something catastrophic (default). 

Good credit enables us to employ a mix of tax and debt financing to fund both the government spending we like, and the spending we hate. We like the GI Bill, we like national security, we like the Head Start program, and we like beefed up embassies safe from terrorist bombs.  We hate government waste; if only we could isolate it, we could cut it out while simultaneously cutting taxes by the same amount. In any case, what's left is spending we like, plus waste we have no hope of cutting out, the total of which must be financed by some combination of taxes and borrowing.  Our ability to borrow is better known as our creditworthiness.  Our creditworthiness is dependent on our steady, reliable payment of interest to those who have chosen to park their money in "risk-free" US Treasury securities.

Next time someone is wondering what we bought for the interest, I wish they'd also wonder what we bought with the principal that interest is supporting.  Although it's impossible to pinpoint, I bet we have a Nimitz carrier, a few intelligence assets, several thousand more college-educated GIs, and a few more Head Start activities in the works because of the principal we were able to borrow -- all because we have been steady and reliable in paying interest on our debt.

It's not being wasted, it's buying something valuable: creditworthiness and default-avoidance.

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End note:

If you know anyone who still thinks interest payments are pure waste, suggest a fact-finding experiment involving their own budget for personal expenditures: tell them to stop paying the interest portion of their mortgage, their car loan, and their credit cards -- then observe the consequences their creditors will bring about. 

I predict they will conclude that creditworthiness and default-avoidance are valuable benefits of paying interest on the debt they had utilized to acquire desirable assets early.

FQ.08.25: Favorite Quote for This Week

[In 1952] the Los Angeles County Democratic Central Committee considered endorsing [Ronald] Reagan for an open congressional seat but declined to do so on grounds he was "too liberal" . . . Reagan's vision of America as a free society that drew its strength from the courage and bloodstock of its immigrants was then considered a liberal view.  Liberals in those days celebrated the American "melting pot" rather than the diversity of its human ingredients.  The genius of America was not that it perpetuated differences but that it obliterated them and created a new being: an American.
—Lou Cannon, Governor Reagan: His Rise to Power

Yippee! Six-dollar gasoline is in sight!

Wow, is this encouraging: Gasoline demand for motor vehicles in the USA is dropping like a stone.  Take a look at this chart I assembled using the most recent data from the Energy Information Administration:

If we can keep gasoline demand headed in that direction, it will accelerate the arrival of oil independence day—which I still hope to see in my lifetime.  How encouraging! 

I credit this good news to the rising price of gasoline.  It's $4 per gallon and climbing.  With luck, $6 gasoline is right around the corner!

I can hardly wait.  How about you?

FQ.08.24: Favorite Quote for This Week

There are distinct types of emotion: fear, anxiety, elation... It is clear why political campaigns seem always to "play to our emotions." In order to change a voter's standing (and mostly unexamined) decision, an appeal to the voter must arouse emotions. Since anxiety seems to be the factor that is causally related to reconsideration, it is natural that campaign managers would try to arouse anxiety.
—Bryan D. Jones, Politics and the Architecture of Choice

"Taxes must increase"? That would be good news, if our take-home pay grows, too.

I get the feeling it's unanimous: taxes will have to increase, whether the next president is Obama or McCain.  Obama's team thinks it's because the government is not yet transferring enough money from oil companies and "the rich" to ethanol agribusinesses and the non-rich; i.e., that oil company tax rates are not yet high enough, income tax rates are not yet progressive enough, and social security contributions should be de-linked from subsequent social security benefits.  McCain's team includes the Concord Coalition's deficit fear-peddlers, who think the only permissible deficits are the ones it takes to win wars after they start (as opposed to preventing them before they start).  Presumably, they have his ear. 

Why aren't we hearing more from the candidates about how their proposed policies would help to grow the economy, and therefore the average worker's take-home pay -- as well as the government's tax receipts?  Why doesn't Obama take the muzzle off Austin Goolsby?  Why doesn't McCain fire the Concord Coalition from his team, and get them out of Jack Kemp's way? 

These are just a few things I don't understand about the campaigns and their rhetoric machines. 

But, just in case one side or the other is listening, here's a paycheck brain teaser, showing two ways the government could "increase taxes" on us.  Study the two future scenarios, then decide which one you like better.  (Note that GM is not writing the last check; that's a hint that "growth" means "creative-destruction.") 

Then ask the candidates why they aren't giving economic growth the attention it deserves. (Wild guess: pandering to holders of today's jobs is probably a big part of the reason; identifying the holders of tomorrow's jobs is too hard.)

Domain transfer problems

FYI: I am currently trying to fix all the broken links caused by my attempt to increase this site's "security" by moving to a different domain name service.  What a mistake that was.  I am now moving to yet another service, easyDNS, to see if that will fix my problem. I will never, ever use NetworkSolutions again.

If it's not fixable, it's three years' worth of image links down the drain -- and I have zero time to go back and fix them all.  In short, that would mean the end of this blog. 

Primary reason all the links are broken: If TypePad could just issue a static ip address for the domains to point to, none of this would be a problem -- but they can't, because they use dynamic ip addressing, which is less-expensive (for TypePad) than issuing static ones. (Now I know more than I care to about TCP/IP technical issues, by the way.) 

If this doesn't fix the links, it's doubtful I'll continue this blog.  But I'll probably leave it up for a while until I figure out what's next.