Wednesday, July 15, 2009

Personal Circumstance & The Economy

Yesterday, I posted a link on my facebook page to Sarah Palin's article on Cap and Trade. I received a lot of flack for posting a Sarah Palin article, and I'm not sure how much the content was actually read. It was a well-written article that I hoped would help people to understand why Cap and Trade is such a bad idea for our economy.

In addition to posting the article, it turned into a debate about which candidates should be supported. I still stand firm in that I would vote for a very smart economist who was a little right wing than a person who supported social rights in every manner that I do who had terrible economic policy.

I feel that the reasons for the argument I'm making are not clear, and it is with this posting that I hope to bring some understanding to those around me about why I make these statements.

Here is a run down of what Cap & Trade is going to do:
Cap and Trade is going to raise energy prices. We are going to be taxed for the amount of energy and carbon emissions we use, and rewarded for those we don't use. There will be a new market, similar to the stock market, for the sale and purchase of these credits. Since we are a global power, we are going to tariff anyone who does not meet our standards in attempts to better the planet.

How Cap and Trade will effect us as individuals and business owners:
With the raise of taxes, companies do not simply pay them and let revenues go down. The beauty of capitalism is that everyone is trying to succeed rather than just get by- but in this case that means passing on those taxes to the consumer. Because of this, energy prices are going to skyrocket. There is an Iowa-based energy company called Mid American energy that hasn't risen its prices in years, but under Cap and Trade prices will raise 25%, just to give you an idea how hefty this tax is.

While the job market is down; 9.5% is the most recent statistic, but this doesn't include people who now consider themselves self-employed, work one part time job just to get by, or are not receiving unemployment. If we include all of these people, unemployment would be closer to 15%.
Is Cap and Trade going to create jobs? Well, as Sarah Palin's article points out, the government knows its going to squash our energy businesses, and includes around $4,200,000,000 to cover unemployment under this new tax over eight years.

In addition to taxing the living daylights out of us all and losing jobs in the energy industry, this bill would also be yet another gut punch to our economy. The intention of Cap and Trade is to get us off oil and coal and most of the energy sources we use today. When our resident energy goes out of business, we will continue to turn to foreign countries to get the same efficiency of energy. Breaking the bank? Invest in Saudi Arabia.
So you might be wiping your brow, thinking, "Well at least we'll still be able to get the energy we need, right?" ... The bad news is these tariffs. If we tariff other countries who don't use the same energy, our energy prices will still be higher than they are now, but that's not the worst of it. Tariffing other countries will cause them to tariff us back. This is another hidden tax to be paid by all business owners who are interested in the "global economy" that our government keeps going on about.

So there you have it- not only will we as citizens be hard for a dollar, but our dollars will continue to leave the country and go to foreign countries. At the same time, our exports are gong to be seriously curtailed due to tariffing, which we will have to pass on to our customers here and abroad, which will cause sales to go down, which causes revenues to go down, and then ... more job loss. More pain in this economy. More of the same stock market crashes and rising unemployment.

Cap and Trade's only redeeming quality is that it will help to cure the national debt- one that we should take responsibility for and find the responsible way to clean up without taxing the life out of our citizens.

...

You might be curious as to why I seem to care so vehemently about the economy. Here's my story:

This year is my eighth year working at a motorcycle company. I do dealer licensing and registration as well as state licensing, on top of sending out corporate mailings to shareholders, copy editing and just boring office nonsense.
My boss (who doubles as my dad, coincidentally) was an economics major, is a conservative (both fiscal and social, I'm sad to say, but supports my stance on the drug war at least) and was owner of a brokerage firm back in the eighties when that was the hot thing to do. He understands the stock market better than anyone I know and also how the economy works. Its mostly thanks to him (and a few econ teachers I had at Iowa State) that I have the knowledge that I do.

At work, I keep tabs on how our stock is doing in regards to the rest of the market, and the market has been hit hard. I've seen some of my closest family friends hit hard times.
Three years ago, when I graduated high school, I was lucky enough that I was told not to try to get a job- school was my job, but in this economy that is no longer possible.

I know a man who had his life savings invested in Wells Fargo, only for the price of the stock to fall by 50%.

I'm seeing firsthand the effects of this depression- yes, depression- and its not pretty. The statistics don't demonstrate nearly enough what is really going on, and its not good. You probably have had something hit you hard right now, and it might not be as bad as finding out that your retirement just got cut in half (so if you live more than ten years you're kind of screwed) or losing your home like so many are.

...

In psychology, I learned about what is called Maslow's hierarchy of needs. Physiological is the first need, then safety, then love, esteem and self-actualization.
While all the needs are important- obviously safety is a big one, as well as love- while in this hard financial time, my main focus is money for rent and food. There really isn't anything more important for survival.
Continuing to curtail the economy is going to make these basic needs impossible to obtain for a significant percentage of the population. There are missionaries who go to third world countries to cure hunger: the United States is soon going to need them here if this is the way our country is continued to head, and that's the thing that no one seems to understand.

There has been talk of corporations "too big to fail." Well they've failed and the government has now taken them over in the grandest abrasion into the private sector this country has ever seen. With this, government is growing, the economy is halting, and with it, our GDP.

For these reasons, I would choose a candidate with the right mind economically than one who didn't. For the sake of the future of our country, economic stand point has to come first and foremost. I fear that without real economic recovery, this great nation will lose all the things that make it great: laissez faire, capitalism, freedom to succeed.

I hope you understand my position: the government is not immune from failure. The government is not "too big to fail," its just too big.

9 comments:

  1. "Cap and Trade's only redeeming quality is that it will help to cure the national debt- one that we should take responsibility for and find the responsible way to clean up without taxing the life out of our citizens."

    It's not my obligation, please don't include me in that monstrosity as is not my responsibility.

    Besides, there is no cure for the national debt. Because if the debt was ever "cured," the dollar would fail. The debt must grow if the dollar is to remain "healthy."

    It is designed this way. For your US monetary system to work: Money is debt. Debt is money.

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  2. I believe that it is our responsibility as citizens and as voters to hold our government in check. It is our responsibility to elect capable and good people into our government, and we haven't been doing a good job.

    We stand around and point fingers, saying Obama did this, Pelosi did that, look at what Bush did! But isn't it our fault, as voters, for not educating ourselves on who these people are and what they want to do with their power before voting?
    Isn't it our job to tell them what to do? They work for US, and WE pay THEM to do their jobs. As the people of America, we have the capability to fire them if we so choose.

    And at this point, we need all the activity we can get on the local and state levels. Nothing is ever going to change if WE don't change it.

    And there is a cure for the national debt: STOP SPENDING, let them drill oil, create jobs, revenue... Resuscitate the economy and get the government OUT of the private sector, and the government back in its place.

    Our nation was founded on restricting the government and its powers, and over the last eight years it has seriously breached those boundaries and shaken our economy to ruins.

    I'm not saying I'm not guilty myself, and I know I'm not the only one who hasn't been staying on top of things.

    The debt does not need to grow for the dollar to remain "healthy" - as the dollar is only worth what those who support our debt value it at.

    In Germany, after WW1, they took out loans from the US to pay their debt. These loans backed German currency and helped strengthen their economy... That is until we hit the Great Depression and called in those loans. When the US pulled out their support (much like China has the power to do over us, might I add) the German economy collapsed and gave way to fascist Germany.

    Sound familiar?

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  3. If it is your responsibility as a citizen, I think it is appropriate to define what a citizen is in the first place. So what is a citizen?

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  4. I would argue that pollution of a company infringes on my rights as an individual, especially if it is frivolus pollution because a corporation makes more money not upgrading. The government, in taxing the pollution, will be able to clean up the environmnt and, better yet, create jobs in the alternative (wind/solar) energy sector. If money taxed ... Read Moregoes to projects which employ people, then there is no issue.

    The economic projections take the loss of jobs into account, but probably not the gain- though I don't know, they never release projection formulas because it curtails the sensationalism. I don't trust secretly formulated projections, but that's another issue.

    If I knew more about the allocaton of funds gathered from this scheme, I too, would feel better. I 100% agree with federal auditing. I understand it is possble for large companies to hire more people with the same amount of money, but if the government handled money responsibly, it is possible they could hire more than anybody (given that they are the largest corporation).

    Do you know if any of the money gathered will be earmarked (and how)?

    In addition to an economic crisis, we have an environmental crisis. Systems were put in place of stock market crashes, and with the ice caps dissolving at a very unnatural pace, we need sanctions to support the environment. If things continue, the environment may have a direct influence on the economy. Not facing this problem could be more disastrous than a depression. It is not something we should gamble with. I feel it is good economic policy to support the environment.... Read More

    This is all coming from a person who starts work as a job developer (in North Minneapolis) for recently released felons, as of early August. The unemployment rate blows, but so does the wind. http://www.politicalbull.net/pursuing_renewable_energy_will_create_jobs_and_get_us_off_of_oil.html

    PS Never trust a statistic without a formula.

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  5. "Energy will become more efficient and cheaper over time, and taxing us while trying to make that happen is not the proper solution."

    Only if we put money into it. Unless we're talking about cold fusion, we really can't beat the combustibility of oil. Nuclear is nice, but is very (and reasonably) regulated. I would argue that taxing us is the ... Read Moreonly solution, because we need to solve this problem and there is little profit in it. People that want to make profit are in oil. These people quash alternative energy. They're the people that buy up and halt all research and production of alternatively fueled cars. It is not profitable to stray from oil. The government must intervene and take the expense if progress is desired. And this is how they will pay.

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  6. I'm sorry, but I hold probably just the opposite view. Social issues matter a whole lot more for me than economic ones, though I'm not trying to suggest these are at all mutually exclusive. To say economic and social issues are completely separate is a false dichotomy. But what I'm saying is that I definitely take precedence of one over the other. For example, I would much rather live in a country that was experiencing hyperinflation but still respected human rights than one where the economy was growing but systematically violated human rights.

    Take Pinochet's Chile as an example. As a student of Latin America history, I am absolutely appalled by the horror stories that came out of Chile under Pinochet's rule. Here is a guy, with the help of Milton Friedman the Chicago Boys, who completely reformed the Chilean economy, liberalizing, deregulating, and privatizing at an astonishing rate. If there was a laissez faire economy, it was Chile. And, you know what, some economic indicators like GDP rose. However, this came at the price of massive repression. Dissents were disappeared, tortured, murdered. Democracy did not exist. The country was ruled with an iron fist by the military and its dictator. If you dare spoke your mind, you would be brutally repressed. Ah, but the economy expanded! But does this legitimize the loss of social rights? The answer is a resounding NO.

    Pinochet's Chile is not somewhere I would like to live. I would not care in the slightest how rich everyone in that country is. It's completely irrelevant to me in the face of social rights abuses. That's my point.

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  7. Totally. Big industry pollution is an encroachment on my social rights. Freedom does not mean a laissez faire economy and a laissez faire economy does not indicate freedom. I support this like I support the current cap and trade enacted by George H.W. Bush regarding Sulfur Dioxide.

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  8. I wasn't directly speaking about pollution or cap and trade, as my reply was sort of an off shoot of another discussion relating to this one but at a different location. In any case, yes, pollution does bring about a social cost (and physical). I would not call emitting greenhouse gases a human rights abuse, but it's true that people have the right to be safe.

    Ultimately, what this really boils down to is a problem of externalities. Externalities are heavily criticizd as one of the downsides of capitalism and can result in market failure. Pollution is an externality--it is not accounted for in price. So here we are exterting a cost at a price that does not account for that cost. If it did, naturally, the price would be higher.

    I personally don't like emission trading, namely because it doesn't work. If you implement an intiative that fails what it was meant to do, then it is a bad intiative. So that's the first thing you ask; the other issues are irrelevant if the intiative will fail its objective.

    That said, it doesn't help that Sarah Palin is completely clueless about the issue (but who's surprised?). Saying cap and trade will hurt the lowest classes the most is plainly wrong. The CBO predicts it will help them. Yes, help them. They will gain money. However, high income earners will be paying more. So it's a progressive cost. That hurts her argument enormously, in addition to all the other errors she makes in her op-ed.

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  9. This makes absolutely no sense:

    "Besides, there is no cure for the national debt. Because if the debt was ever "cured," the dollar would fail. The debt must grow if the dollar is to remain "healthy.""

    Higher spending and debt is what caused the Bretton Woods pact to break down, as other currencies removed their peg to the dollar as our dollar got weaker (in terms of gold). More debt often leads to more inflation, which weakens the demand for dollars.

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