Wednesday, January 31, 2007

Joe Biden, without a Script

As the News Journal reports, Joe Biden is going on The Daily Show as part of his announcement of his campaign for President. But he was hardly joking when speaking about his chief rivals in an interview with the New York Observer:
On a recent weekday afternoon, he was discussing his rivals over a bowl of tomato soup in the corner of a diner in Delaware, about a 15-minute drive from his Senate office. He wore a red cardigan and blue shirt, periodically raising his raspy voice over the sound of loudspeakers summoning customers to pick up their sandwiches. He had showed up carrying a Mead notebook filled with handwritten talking points, but once he’d gotten started, he closed the book and pushed it aside.
He may be wishing he had kept the notebook open:
The subject he prefers to talk about these days—particularly when contrasting himself with his prospective Presidential rivals—is Iraq.
Addressing Mrs. Clinton’s latest proposal to cap American troops and to threaten Iraqi leaders with cuts in funding, Mr. Biden lowered his voice and leaned in close over the table.
“From the part of Hillary’s proposal, the part that really baffles me is, ‘We’re going to teach the Iraqis a lesson.’ We’re not going to equip them? O.K. Cap our troops and withdraw support from the Iraqis? That’s a real good idea.” The result of Mrs. Clinton’s position on Iraq, Mr. Biden says, would be “nothing but disaster.”
Most early polls show Mrs. Clinton as the party’s clear front-runner. Mr. Biden, the chairman of the Senate Foreign Relations Committee, is firmly in the thick of a pack of third-tier candidates. Still, he thinks that at such a precarious point in the nation’s history, voters are seeking someone with his level of experience to take the helm.
“Are they going to turn to Hillary Clinton?” Biden asked, lowering his voice to a hush to explain why Mrs. Clinton won’t win the election.
“Everyone in the world knows her,” he said. “Her husband has used every single legitimate tool in his behalf to lock people in, shut people down. Legitimate. And she can’t break out of 30 percent for a choice for Democrats? Where do you want to be? Do you want to be in a place where 100 percent of the Democrats know you? They’ve looked at you for the last three years. And four out of 10 is the max you can get?”
Mr. Biden is equally skeptical—albeit in a slightly more backhanded way—about Mr. Obama. “I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy,” he said. “I mean, that’s a storybook, man.”
But—and the “but” was clearly inevitable—he doubts whether American voters are going to elect “a one-term, a guy who has served for four years in the Senate,” and added: “I don’t recall hearing a word from Barack about a plan or a tactic.”
(After the interview with Mr. Biden and shortly before press time, Mr. Obama proposed legislation that would require all American combat brigades to be withdrawn from Iraq by the end of March 2008.)
Mr. Biden seemed to reserve a special scorn for Mr. Edwards, who suffered from a perceived lack of depth in foreign policy in the Presidential election of 2004.
“I don’t think John Edwards knows what the heck he is talking about,” Mr. Biden said, when asked about Mr. Edwards’ advocacy of the immediate withdrawal of about 40,000 American troops from Iraq.
If you're a second tier candidate, you want to differentiate yourself from the leaders. Biden has twice the experience in the Senate as the three front-runners combined.
But it wasn't the criticism that got him in trouble, but the comment that started out as an attempt to compliment Obama that got him in trouble. Later today, in a conference call with reporters recounted by The Politico, Biden tried to minimize the reaction:
"I believe I was quoted accurately but they weren’t meant to take shots," he said, backpedalling to the position that this is "probably the most qualified field of Democrats that he Democratic party has fielded in a long, long time."
And...about Barack "Clean" Obama: He's "Probably the most exciting candidate that the Democratic or Republican Party has produced at least since I’ve been around. He’s fresh, he’s new, he’s smart, he’s insightful, and I really regret that some have taken totally out of context my use of the word 'clean.'"
He said he'd called Obama, who told him, "Joe you don’t have to explain anything to me -- I know exactly what you meant."
Joe Biden has always most capitivating when speaking without a script. But can he succeed as a candidate without what is known in the business as message discipline? And if he does stick to his talking points, will he sacrifice some of what makes him so interesting?
Update: Paul Kiel at Talking Points Memo argues that the enunciation, and hence the punctuation, of the key sentence are important to understanding Biden's meaning:
The difference in punctuation was subtle but the difference in meaning was not. Transcriptions get put together quickly. And usually a comma added or omitted doesn't make a big difference. But this wasn't one of those times. It made a big difference. Listen to the audio and see whether you agree.
I have listened and do agree; consider what the insertion of this comma does to the sentence:
“I mean, you got the first mainstream African-American[,] who is articulate and bright and clean and a nice-looking guy... I mean, that’s a storybook, man.”
Read this way, Biden isn't saying Obama is the first African American candidate who is articulate and bright and clean and a nice-looking guy, but using those words to describe Obama himself, and not in contrast to other blacks who have run for President.
Joe Biden often finds himself working his way through subordinate clauses when speaking extemporaneously; in this instance the meaning may have gotten mangled in the process. Unfortunately for Biden, you can't get to the White House by pointing out the nuances of English punctuation.

Tuesday, January 30, 2007

Is Corn the Best Biofuel?

If we grow corn for ethanol production, it's good for energy independence and the environment, right? Well, maybe. An article in Business Week with the headline, "Food vs. Fuel," points out some of the shortcomings of corn as a source of ethanol:
Corn is just the first step. It's a lousy raw material for fuel because producing 10 gallons of ethanol consumes the energy equivalent of about 7 gallons of gasoline, and greenhouse gas reductions are minuscule. That's why the key will be changing to more environmentally friendly sources, such as agricultural waste, trees, or new crops.
One of the best candidates: perennial prairie grasses. Their deep roots store carbon captured from the air, improve soils, and require little water. Companies are now trying to breed the most productive varieties.
So other crops may be more appropriate, but they need more R&D.
I don't want to downplay the promise of biofuels, but the details of how to make it all work seem to get more and more complicated as we take a closer look. Increased use of biofuels affects food supplies, water supplies, carbon emissions and carbon capture by plants. I'd say we all have some homework to do.

Sunday, January 28, 2007

Not so Fast with the Ethanol

Environmental reporter Jeff Montgomery writes in the News Journal that the benefits of ethanol are quite so clear once we start to take a closer look. For instance, ethanol production requires the buring of fossil fuels:
The current generation of ethanol refineries relies on expensive grains normally used as human or animal food. They also use too much fuel in the process of heating the grain to produce ethanol.
We need to develop a process that converts plant waste to ethanol without burning a lot of fuel, said John Reilly, associate research director of the Joint Program on Climate Change at the Massachusetts Institute of Technology.
Using the plant waste would also allow the good stuff to go for other uses, like food. As more corn is used for fuel production, food prices could go up. So if we could use the stuff that isn't eaten, that would be a good thing, right? Well, maybe not:
Even producing ethanol from plant waste could have an economic effect on farmers, [Sussex County farmer William] Vanderwende said.
"The plant matter that you don't use adds organic material back to the soil right now," Vanderwende said. "If we take the whole crop off, we're going to have to put a cover crop or replace the organic material some other way."
This business of growing fuel in the ground is getting more complicated, which is why we should think this through before we start offering subsidies for selling ethanol here in Delaware.

Friday, January 26, 2007

Cooler Heads Prevail on Yard Waste

HB 1, first up in Wayne Smith’s “Nine in Nine” strategy to get the session off to a fast start, didn’t come up for a vote this week. HB 1, which was introduced in response to complaints about the ban on yard waste going to Cherry Island Landfill, would overturn the ban and require that the DSWA accept yard waste until such time as the General Assembly decides otherwise.
Diana McWilliams, Helene Keeley and Gerald Brady deserve the credit for slowing things down enough to allow cooler heads to prevail. Instead of forcing the DSWA to accept yard waste for Cherry Island’s remaining useful life, they are seeking to sit down with the key players to find practical means for handling the single largest category of recyclable material in the waste stream.
This is exactly what Reps. McWilliams, Keeley and Brady proposed in HA 2 to HB 1, which would postpone the ban for five months while directing DNREC and the DSWA to find alternatives for handling yard waste.
You can read the original bill and the proposed amendment here. The synopsis of HA 2 reads:
This amendment maintains the ban on yard waste in the DNREC permit to DSWA that allows the expansion of Cherry Island but prohibits any enforcement of that specific permit condition until June 1, 2007. The amendment also requires DNREC and the authority to work on long-term solutions for yard waste disposal and recycling during the delay. The amendment also leaves the decision for exclusion of yard waste from any landfill in Delaware with DNREC instead of the General Assembly.
This is how the system is supposed to work. Instead of ramming through a bill that would mandate the landfilling of recyclable material, the House can choose to take some time, do some homework and find solutions that minimize the cost and inconvenience to residents and maximize the environmental benefits of diverting leaves and grass clippings from Cherry Island.

Wednesday, January 24, 2007

Yard Waste: Pile It Higher and Deeper

Legislators have been getting an earful on the yard waste ban in New Castle County, which is part of the permit for the expansion of Cherry Island Landfill in Wilmington. In response to the complaints about the cost and inconvenience of the ban, Wayne Smith and six of his colleagues have introduced HB 1, which would reverse the ban and bar DNREC from enforcing that provision of the permit.

So where will the DSWA put the grass clippings? No sweat: We'll just raise the top of Cherry Island another six feet, and declare that it won't cost anything and won't shorten the useful life of the landfill. In other words, just pile it higher and deeper.
The sponsors of HB 1 assert that there is free capacity at Cherry Island that can be used to accommodate yard waste "at no additional cost and with no change in the date at which the landfill will reach full capacity." The fallacy in this argument is that there is no such thing as free landfill capacity. A landfill is a finite resource the use of which requires trade offs.
For instance, the additional capacity could be used to extend the life of Cherry Island, postponing the capital expense of siting and building a new landfill. How expensive will that be? The capital cost of raising the height of Cherry Island by 23 feet is $86 million. Recently the DSWA estimated the cost of a new landfill to be $106 million, a number that seems rather low to me.
As I wrote last year, financial analysis can quantify the present value of postponing a large expenditure, even one years in the future.
There are other, less tangible costs to HB 1. One would be the credibility and integrity of the permitting process. The DSWA's permit that allows the expansion of Cherry Island came at the end of a long and thorough hearing process that took a variety of points of view into consideration. The sponsors of HB 1 would simply toss that aside and ignore the concerns of Wilmington residents and proponents of recycling.
Another cost of HB 1 would be reputational; the General Assembly could hardly retain any claim to environmental leadership if they declared that the largest single category of recyclable material in the waste stream is permanently off limits. I didn't think this was possible, but the sponsors of HB 1 have managed to make the DSWA look positively progressive by comparison.
Fortunately, Reps. Diana McWilliams and Helene Keeley have proposed and amendment, HA 1 to HB 1, which would postpone the ban for five months while directing DNREC and the DSWA to find alternatives for handling yard waste. It's a sound problem-solving approach that mandates practical alternatives to alleviate the concerns of homeowners. HB 1 is expected to come up for a vote in the House tomorrow.
Update: Reps. McWilliams and Keeley, joined by Rep. Gerald Brady, have introduced HA 2, which is worded differently but would seem to have the same effect as HA 1.

Monday, January 22, 2007

Energy Choices in Delaware

Jack Markell has posted an op-ed he wrote about the energy choices facing Delaware. Three proposals have been presented for electric generation: coal gasification, natural gas and wind power. Delaware's Electric Utility Retail Customer Supply Act of 2006 (EURSCA) directs four state agencies to review the proposals: the Public Service Commission (PSC), the Department of National Resources and Environmental Control (DNREC), the Controller General’s Office and the Office of Management and Budget.
The criteria for evaluating the proposals include cost, feasibility, environmental impact and price stability, which has to be considered in light of expected measures to reduce greenhouse gas emissions:
I recommend that as the PSC and the other agencies evaluate the various proposals for a new power facility in Delaware, they strongly consider the importance of price stability, new technology, and reductions in environmental impact (especially greenhouse gas emissions). They should take a long-term view of cost-effectiveness, considering not only today’s business environment but the business environment in which these facilities will operate during their entire functioning life.
In other words, we can expect the cost of coal-generated electricity to rise significantly over the life of a new power plant. Let's hope our regulators understand the implication and act accordingly.

If Bush Is Serious about Global Warming...

The News Journal reports that President Bush plans to visit a DuPont Company facility in Delaware on Wednesday to illustrate his new-found interest in alternative energy sources and climate change. Mike Castle is looking for evidence of evolution from Bush tomorrow night:
"You wonder if he's going to have a different policy, if it's going to evolve on Tuesday night, in terms of his views on some of the energy issues," Castle said.
If Bush has become serious about climate change, a good place for him to start would be to stop subsidizing the burning of hydrocarbons. Specifically, he could agree to sign H.R. 6, which would take back most of the subsidies granted to oil and gas companies over the last six years. But perhaps I am placing undue faith in his capacity to evolve.

Sunday, January 21, 2007

Subsidized Ethanol in Delaware?

The News Journal reports that legislation is pending in the General Assembly to subsidize the sale of an ethanol/gasoline blend called E85 in Delaware. (No such legislation has yet been introduced.) The story is written by Luladey B. Tadesse, who shows evidence of having done some homework. The article goes beyond the current popularity of alternate energy to consider the question of whether subsidizing the sale of ethanol in Delaware is actually a good idea:
"I would be very reluctant as either a taxpayer or investor to do anything to expand ethanol production beyond the plants that are already under construction," said Lester Brown, founder of the Earth Policy Institute in Washington. "My counsel, if I were being asked by legislatures for advice, would be to hold off for a bit and see how this situation settles out."
One of the limiting factors to consider when it comes to ethanol is the supply of corn. This is particularly true for Delaware. Ethanol plants are clustered in the Midwest, where most of the nation's corn is grown. Getting ethanol to the pumps in Delaware may not be worth the cost:
But getting the ethanol-gas blend to those stations may be difficult and expensive. The corn needed to produce ethanol is in high demand. Without a local ethanol refinery, Delaware stations would rely on a distribution network that ships in the fuel from the Midwest, adding to the cost. And with a local refinery, the high price of Delaware corn, which mostly goes to the poultry industry for feed, would likely leave E85 prices higher than those for gasoline.
But what if ethanol plants were built on the east coast?
As it is, the state doesn't produce enough corn to supply feed to the state's $844 million poultry industry, the backbone of agriculture on the Delmarva.
"We certainly support biofuels, and we don't oppose ethanol plants per se, but there is a lot of concern and we are wondering whether it makes sense to build one on the shore," said Julie DeYoung, spokeswoman for Perdue.
Each year, Perdue has to bring in 20 million bushels of corn from the Midwest by rail to meet its needs on the Eastern Shore.
If the limiting factor for the use of ethanol is the supply of corn, then a subsidy in Delaware won't make much sense.
Image: The News Journal

Friday, January 19, 2007

Climate Change in Washington

The word is that our future former president is planning to include mention of climate change next week, which puts him in line right behind scientists, religious leaders and, yes, energy executives.
As the New York Times reports,
the congressional agenda is getting crowded with bills (and press conferences) on global warming:
On Wednesday, leading scientists and evangelical pastors jointly declared their intention to fight the causes of climate change and the public confusion on the subject. Cheryl Johns, a professor at the Church of God Theological Seminary, called that problem “nature deficit disorder.”
Another news conference on Wednesday featured executives of the heavily regulated electric utility industry embracing Senators Dianne Feinstein of California and Thomas R. Carper of Delaware, both Democrats. The senators were offering separate bills to add regulations, including a cap on carbon dioxide emissions.
The Times reports that business leaders are determined to play a role in creating policy to limit carbon emissions:
Ten major companies with operations across the economy — utilities, manufacturing, petroleum, chemicals and financial services — have banded together with leading environmental groups to call for a firm nationwide limit on carbon dioxide emissions that would lead to reductions of 10 to 30 percent over the next 15 years.
One way to start to change the enormous effect energy use has on the earth's climate is to stop subsidizing the activities that create the greatest carbon emissions. Which, as the Washington Post reports, is precisely what the House voted to do yesterday:
The measure passed yesterday would repeal a tax break oil and gas firms received in 2004 that effectively lowered their corporate tax rates. It would also bar oil companies from bidding on new federal leases unless they pay a fee on or renegotiated improperly drafted leases from 1998 and 1999 that did not require royalty payments on Gulf of Mexico production. And the bill would take the estimated $13 billion to $15 billion in revenues over a five-year period and set the money aside for tax breaks and appropriations that would go to renewable energy sources.
I've never grasped the logic of subsidizing energy companies for doing what they've been doing, and very profitably, for more than a century. When asked about ending the subsidies for oil and gas companies, BushCo's policy wizards in OMB responded by saying the bill was based on a "tax and spend philosophy."
The bill passed 264 to 163, with 36 Republicans joining the Democratic majority.

Monday, January 15, 2007

"How long? Not long."

As we look in fear at the prospect of at least two more years of bloodshed in Iraq and possibly the region, we can take heart from these stirring words from the Rev. Martin Luther King, Jr. delivered at the end of the march from Selma to Montgomery on March 25, 1965. The speech (the full text is available here) was delivered on the steps of the Alabama state capitol building:
I come to say to you this afternoon, however difficult the moment, however frustrating the hour, it will not be long, because "truth crushed to earth will rise again."
How long? Not long, because "no lie can live forever."
How long? Not long, because "you shall reap what you sow."
How long? Not long:
Truth forever on the scaffold,
Wrong forever on the throne,
Yet that scaffold sways the future,
And, behind the dim unknown,
Standeth God within the shadow,
Keeping watch above his own.
How long? Not long, because the arc of the moral universe is long, but it bends toward justice.
Dr. King's confidence of eventual victory was remarkable given the events that led the marchers to Montgomery that day. The first attempt to march from Selma to Montgomery was met with force from Alabama state troopers. (John Lewis, now a member of Congress, was beaten by the troopers.) The marchers reached Montgomery only with the protection of federal troops.
Stanford has
a collection of King's most notable speeches. The definitive collection of King's speeches and writings is A Testament of Hope, published by HarperCollins. has new and used copies for sale. If you want to know what he thought, read what he had to say.

Saturday, January 13, 2007

"The swagger is gone."

So writes Chuck Durante in a short, sharp opinion piece in today's News Journal:
We've seen Presidents in no mood to smile -- Reagan humbled, Johnson weary, Nixon defiant, Clinton angry -- but never before a President whose bearing betrayed that he knew his excuses were used up.
The oratory was familiar -- invoking a "global war on terror" early, feigning respect for consensus by mentioning the Iraq Study Commission whose recommendations he ignored -- but unfortunately, so was the unfocused strategy.
Like a flummoxed CEO explaining a plummeting stock price or the doomed manager of a floundering ballclub, he showed no understanding of the disaster nor a realistic way to curb the carnage.
Chuck, a lawyer and stalwart Democratic Party activist, continues:
President Ford's inaugural comments echoed recently: "Our Constitution works ... Here the people rule."
Yet, we were lucky. The nation nearly lost its hinges; the system can be hacked.
For the likes of Dick Cheney, the lesson of Watergate is to avoid Nixon's tactical mistakes, not his tactics.
If the people really rule, Congress must show courage. It must prevent the expansion of hostilities foreshadowed against other countries.
It must issue a vote of no confidence in increasing troop commitment.
And if the President doesn't get the message, it must use the power of appropriations to curb the most insane, misguided foreign policy blunder of our time, perhaps ever.
The scary part is the rising drumbeat for a wider war in the region. Right wing heartthrob Christine O'Donnell, also in today's News Journal, adds her voice to the chorus:
We are not at war with Iraq. We are at war with Iran in Iraq.
The logic (if you call it that) is that having failed to control the chaos in Iraq, we should widen the conflict to the entire region. As the New York Times reports, Bush seems determined to continue, and perhaps even widen, an unpopular war:
A recent series of American raids against Iranians in Iraq was authorized under an order that President Bush decided to issue several months ago to undertake a broad military offensive against Iranian operatives in the country, Secretary of State Condoleezza Rice said Friday.
While we are likely to remain in Iraq for the remainder of Bush's presidency. Fortunately, as the News Journal reports, some in Congress including Joe Biden, are warning the commander-in-chief not to lead us into a regional war:
Sen. Joe Biden, chairman of the Foreign Relations Committee, warned Rice that the authorization of force against Iraq that Congress approved in 2002 did not give the president a green light to invade Iran or Syria.
"We will fight that out if the president moves," said the Delaware Democrat. "That will generate a constitutional confrontation here in the Senate."
Bush, having ignored the results of the recent election and the findings of the Iraq Study Group, may force the issue.

Thursday, January 11, 2007

Bob Nardelli Gets $210 Million for Being Fired

Last week, Home Depot fired its CEO, Robert Nardelli, and paid him $210 million in severance. Some shareholders aren't very happy about the amount he was paid for being fired, and for good reason.
The standard benchmark used by those upset with the enormous inflation of executive pay is the ratio between CEO pay and that of the typical line worker on the shop floor. We all know that that ratio has widened in the last 25 years.
But I find other ratios more enlightening. For instance, Mr. Nardelli's severance package comes to 10.3 cents for each share of stock (there are about 2 billion shares outstanding). Perhaps that is why we have seen the first of what could be many shareholder suits filed against Home Depot,
as noted in this report from Reuters:
Investors are turning up the heat on the Home Depot Inc. board of directors to make more corporate governance changes following the departure last week of Chairman and CEO Robert Nardelli, who had been under fire for his pay package.
This week, shareholders asked a Georgia state court to block Home Depot from paying Nardelli a $210 million severance package.
Nardelli's package represents 3.4 percent of the company's profits for the last year, and 0.23 percent of the company's revenue. Last week I spent $32.85 at the local Home Depot; of that modest purchase, 8 cents went to kick this guy out the door.
I searched for golden parachutes for sale on the Web, and found a company called Silver Parachutes of Hayward California (, that sells a complete kit for $1,575; and yes, gold is one of the custom color options. Throw in all of the options, like Genuine Sheepskin Backpad, Inflatable Lumbar Support and Monogram, and the price comes to just over $2,000. At that price, Mr. Nardelli could afford about 100,000 parachutes.

Sunday, January 07, 2007

Number 750

This is the 750th post on this humble blog since I opened for business in February, 2005. 750 separate doses of rational thought and clear exposition with an undertone of dry, self-effacing wit would be enough to tire even the most determined policy wonk, but I'm not done yet.
I’m starting a new job on Monday, one involving health care finance. For the foreseeable future I expect dial back the frequency (though I hope not the perspicacity) of my blogging. I will still strive to do my homework and leave the half-baked opinions and whimsical spelling to my more entertaining colleagues listed in the right hand column.
No Delaware blogger is more entertaining than Mike Matthews of Down With Absolutes, the subject of a lengthy profile in today's News Journal. How lengthy? Mike notes at DWA that the NJ editors gave reporter Victor Greto “more inches to write about me than I’ve got at my waist.” This paragraph sums up the phenomenon that is Mike Matthews:
"I had a point at first," says Matthews in a deep, FM-announcer voice, leaning back in a chair that fronts his desktop computer. "Now it's just entertainment. I play the role of curmudgeon. I'm sensational and ridiculous."
The self-deprecating tone is typical of Mike, though I wonder if he’s old enough to qualify as a curmudgeon. The NJ article contained the obligatory comment from a former editor that blogs are unfiltered -- meaning they don't have editors. Maybe we should carry warning labels.
But the lack in editorial oversight is compensated for with an informal system of peer review; we keep each other (mostly) honest. Some of my best stuff has come from the back-and-forth with those who hold different points of view. It's helped me hone my thinking and sharpen my writing. What for me began as a mostly solitary exercise, has become something approaching at times a communal experience, which may be why I keep at it. Thanks everyone. Keep coming back.

Friday, January 05, 2007

A Quiet Start for Jack Markell's Third Term

The event passed with hadly any notice; Jack Markell quietly took the oath of office for his third term as state treasurer on Tuesday. The public events were cancelled due to the death of Gerald Ford.
I found no mention of the event in the state's largest newspapers (other than a notice that the public events had been cancelled). So when Jack circulated his prepared speech (available as a PDF) via email, I thought I'd highlight a few words on his policy ideas:
So what must we do going forward to make a difference in real people’s lives?
As I said during the campaign, I am hopeful that the General Assembly will help working families across the State by supporting legislation like that sponsored by Representative Bill Oberle to make contributions to college investment plans tax deductible.
I look forward to working with my colleagues on the State Employee Benefits Committee to expand the Health Rewards Program, improving health and reducing the cost of health care.
I will work with partners throughout the State to bring high-quality financial education programs to more Delawareans so they can take control of their own financial well-being.
I will work with AARP and others to bring the benefits of our Consumer Tool Chest and Anti-Fall Ideas to Delaware’s seniors, so they can be more secure.
And I will continue to work with community partners like Nehemiah Gateway and First State Community Action Agency to expand the earned income tax credit program to reward our citizens who believe that their own labor is the pathway to a better life.
In typical Jack Markell fashion, the formal reception planned for Tuesday has been replaced by a series of pizza parties, one in each county. You can find more info at Blog for Delaware.

Wednesday, January 03, 2007

No Uptick in Situational Awareness

I just knew that before long, someone, somewhere would say something inane enough to rouse me from my holiday hibernation. As if on cue, President Sluggo stepped up to the plate with an op-ed published in today's Wall Street Journal that extinguished any lingering hopes for an uptick in situational awareness on the part of Mr. Bush. For those without a WSJ subscription, Economist's View has posted the entire debacle with some sharp, succinct commentary.
In turning to economic policy, Mr. Bush offers this reassuring nod to Adam Smith's dead hand:
The elections have not reversed the laws of economics.
Okay, hold that thought. The most startling assertion in the piece was that the federal government should be able to balance the budget by the end of the next president's first term. It's as though Nixon had announced a secret plan for his successor to end the war in Vietnam, which is in fact what happened. Even with the bar lowered to this unimpressive level, the New York Times reports that Mr. Bush (and his unlucky successor) will have a hard time meeting his objective:
Mr. Bush gave no hint in the article about whether the goal of a balanced budget by 2012 was predicated on continued rapid growth in tax revenues or deep new spending cuts in domestic programs.
But Mr. Bush’s budget plans in the past several years have consistently failed to take into account two major costs in the years ahead: the war in Iraq and the cost of restraining or repealing the Alternative Minimum Tax.
War costs are now more than $100 billion a year, and Mr. Bush is expected to ask Congress for a supplemental spending package of more than $110 billion to finance military operations in Iraq and Afghanistan over the next year.
The alternative minimum tax is a potentially more costly item. The tax, which was created to prevent rich taxpayers from making too much use of elaborate deductions, is rapidly expanding its reach into the middle class because it is not adjusted for inflation.
Fixing the AMT so that it doesn't affect more and more middle-class taxpayers each year is estimated to cost about $100 billion a year. So before we even get started cutting the deficit, we're looking at another $200 billion or so that needs to be covered. Not to worry; our leader plans to tap the power of magical thinking:
It is also a fact that our tax cuts have fueled robust economic growth and record revenues.
Bush isn't quite saying that tax cuts are the cause of the revenue increases; they just fueled them. He thus barely avoids the the canard that tax cuts lead to increased revenues, which as recent history demonstrates, isn't so:
Note the drop in revenues during the first four years of the Bush presidency. But doesn't a cut in income taxes result in increased tax revenue from expanded economic activity? Not quite, according to this study from the Congressional Budget Office:
Under various assumptions, the supply-side economic effects of the tax cut are estimated to offset between 1 percent and 22 percent of that revenue loss over the first five years.
Now George W. Bush may have slept through the Harvard Business School class session on fractions, but what I remember is that 1 - 0.22 = 0.78. In other words, the CBO's best case scenario is that, for every dollar in income tax cuts, the revenue loss would be at least 78 cents. Never mind the basic laws of economics; our president hasn't mastered the basics of arithmetic.
It's the same thinking that allows our president to assert that the way to get out of Iraq is to send more troops. Finally, as to Mr. Bush's obligatory nod to working with Congress, this comment from Economist's View sums up the odds:
It will be difficult to find common ground if policy is based upon what he wants to be true rather than what the evidence actually shows.