The Fallacy Snapshot and the Top 1%

There has been a great deal of press lately about the terrors and travesties of The 1%. We have been reminded repeatedly by the Occupy Wall Street (OW) movement , via the mainstream media, how our  degenerate and out–of-control capitalistic system has systematically moved large piles of cash into the coffers of the ultra rich, all at the expense of the remaining, somehow monolithic, and ultimately disenfranchised 99%. And while the OW message that our economic system has become corrupted by cronyism, is correct, their insistence that the vast swath of America is licking the boots of modern-day robber barons whilst wallowing in poverty, or at the very least, material stagnation, is an absolute falsehood, one that is perpetuated by a weak economic analysis known as the “snapshot fallacy.”

The premise of this fallacy is that it is illogical and unreliable to take a still picture of any phenomenon (any large system), and then extrapolate truths used to make policy decisions that project into the future.  This is precisely what occurred when pundits interpreted recent U.S. Census data. It was not that the data itself was erroneous. However, because census data is taken every ten years, it does not capture the movement of people through the economic system over time. Hence, interpretations of this snapshot are misleading at best, and likely deceptive.

This is because all events, whether economic or social, are dynamic, meaning they take place over time and are therefore subject to significant changes.  Much like listening to only to a single contentious conversation between a husband and a wife might lead one to believe that the entire relationship is on the rocks, taking a snapshot of the economy at one point in time and then drawing conclusions about categories can be misleading.  This is because, as the systems philosopher and author of The Rational Optimist: How Prosperity Evolves Matt Ridley points out, attempting to understand complex adaptive systems with our limited, temporal-bound perceptions distorts reality and reduces the world to zero-sum terms. 1

Then again, we are a society obsessed with categorization: we are white, black, Hispanic, Asian, blonde, brunette, fat, skinny, young, old. However, the ultimate dichotomy is classism, an ongoing conflict that cleaves Americans into rich and poor camps, into oppressors and oppressed.  

A better, more accurate, and realistic way of judging the economy (and people for that matter) is to look at data and behavior over time. This economic data is available from the U. S. Treasury Department data. By following specific individuals over time from their tax returns to the Internal Revenue Service, the data reveals that the incomes of those particular taxpayers who were in the bottom 20 percent in income rose 91 percent by 2005, while the income of those particular taxpayers who were in the top 20 percent in 1996 rose only 10 percent by 2005 -- and those in the top 5 percent and top one percent actually declined. Moreover, 86 percent of those in the lowest 20 percent of income earners in 1979 had moved to a higher income category by 1988; 66 percent reaching the middle range or above, while 15 percent ascended to the top fifth of income earners.2

In fact , according to the economists Bruce D. Meyer of  the University of Chicago and James X. Sullivan University of Notre Dame, by accounting for inflation, taxes, and

noncash benefits (welfare), something conveniently left out of U.S. Census, the median income rose by more than 50 percent over the past three decades. 3

Other data also support this overall rise in prosperity for all Americans. According to a University of Michigan longitudinal study tracking more than fifty thousand Americans from 1968-1991:4

• Only 5 percent of the families in the bottom fifth of income distribution in 1975 were still there in 1991. More than three-fourths of them had made their way up to the two highest income quintiles.
• The poorest families made the largest gains. Those who started in the bottom 20 percent in 1975 had an inflation-adjusted gain in annual income of $27,745 by 1991; those who started in the top 20 percent in 1975 also improved, but only by $4,354.
• Less than 1 percent of the sample population remained in the bottom 20 percent during the entire time period under study.
• Among the second poorest quintile in 1975, more than 70 percent had moved to a higher quintile by 1991, and one-fourth reached the top 20 percent bracket.
• With education and training the rise up the income brackets was even swifter: more than half of the families who were in the bottom 20 percent in 1975 made it to a higher bracket within four years.

This economic progress is known as income mobility. Rather than a static snapshot of where people are at a given point in time, this data paints a picture of robust economic progress over time, something that has been a constant narrative in America since the first major waves of immigration in the early 19^th century.

But you have to be willing to look beyond the here and now. Consider the following graph:

This looks as though income disparity has indeed been on the march for some time. Until that is, you look at it longitudinally, across time. When you do this, a vastly different set of data materializes:

You can see that over time, income mobility is at play, and has moved people up the economic ladder. In other words, when you compare where specific people were and how they progressed and changed, rather than using fixed snapshots and categories, a more realistic, accurate and complete picture emerges.  

Of course, this is rather dry, academic stuff. Terms like “longitudinal,” “snapshot fallacy,“ and “income mobility” pale in comparison to emotionally charged terms such as “inequality,” “oppression,” and “greed.” Such incendiary language and meteoric rhetoric, while stoking the fires of class warfare, do little to provide accurate data, much less grow our economy or propel the poor to a better place.

These divisive efforts have always failed, and always will, because this approach suffers from the same shortsightedness of other approaches based on snapshots: people are not static, statistical categories to be judged, manipulated and adjusted at the whim of supposedly benign and omnipotent central force. We’re individuals with unique ambitions, talents, and dreams. And we don’t need government, or protestors to classify us, categorize us, or move us form one data point to another via income redistribution schemes. What we need is economic freedom, something that is fading swiftly from our horizon and threatens to undermine our republic. If there is one important message we can glean form the OW crowd, it is that we have lost our perspective in regard to the role that money should play in our lives. When we prize materialism above people and then expect government to redress this wrong, we simultaneously abdicate personal responsibility and autonomy, moving us further down the road to serfdom. That will be the topic of my next blog.

Gary

1.     http://www.amazon.com/Rational-Optimist-How-Prosperity-Evolves/dp/006145205X

2.     http://www.treasury.gov/resource-center/taxpolicy/Documents/incomemobilitystudy03-08revise.pdf

3.     http://bpub.wharton.upenn.edu/PDF%20files/AE-F11-Meyer.pdf

4.     http://dallasfed.org/fed/annual/1999p/ar95.cfm

•  

Shame on America

Those of you who know me well understand who I am and my political point-of-view as an independent conservative. I have not shied away from criticizing President Obama specifically, and the Democratic party in general. I do not say these things with racist sentiments. I firmly believe that Obama is horribly misguided and that his policies are ruinous to the U.S. economy. I also find more and more evidence of, if not duplicity, at least a lack of the directness and transparency proffered by then candidate Obama in the run up to his election in 2008. Of course, a lack of honesty is hardly a new political crime, as evidenced by the numerous previous occupants of the White House, most recently President Bush.

However, when I found out recently that my friend received a phone call from her school asking if she wanted her son to "opt out" of seeing President Obama's televised speech, I was suddenly filled with a sense of shame and disgust I have never felt. The hypocrisy is overwhelming! How can we as a nation claim we have matured when we allow things like this to occur? To be sure, there has been plenty of race baiting by the Left, a shameful and repugnant behavior that has been used repeatedly to demonize opposition. But by even giving such an "opt out" alternative to parents, we have ushered in an era of incivility laced with racist undertones that threatens to tear us apart as a people and a nation. No president before has received such outrageous and indecorous treatment. Such behavior is illustrative of something dark and disturbing about the nature of certain elements of society; it is a pox upon our body politic. Let's be real after all. Are parents so insecure with the value system they have taught their children that they cannot weather a short speech? Are children of conservatives hapless drones unable to withstand a perceived rhetorical onslaught? Americans are better than that, and conservative are better than that.

Any conservative claiming integrity and intellectual honesty should robustly reject such a dynamic. Let's be clear and transparent: All presidents should be treated with the same accord. Part of teaching civics to our children is to model appropriate respect and decorum for official occasions and the officers of the occasions. Even if you vehemently and passionately disagree, even if the other side mocks, berates, and condescends, a true conservative, any person of substance for that matter, will stick to his principles and show the respect both the President and the office deserve. While it's okay to criticize policy and point out hypocrisy, it never okay to have double standards. That's a value system we should all honor when it comes to our children, one that goes beyond the partisanship and racial tensions that grip our nation. Superintendents and school board members should take a solemn oath that they will never play the race card, even when the have the winning hand. By doing so, we all lose our soul.

Gary

Monetary Madness + Governmental Goading = Financial Frankenstein + Taxpayer Trickery

In possibly the most absurd move yet, the Fed is playing political populism as they sue investment banks for their fiduciary chicanery in “duping” the mortgage giants Fannie Mae and Freddie Mac into buying their toxic assets.

While I certainly have no sympathy for investment bankers and their unbridled avarice in using out-of-control-binging of credit default swaps to line their pockets, one should not lose sight of some very basic historical facts:

1. It was the United States Federal government, under the auspices of the Community Reinvestment Act, which goaded banks into unrealistically relaxing their lending standards, using Fannie and Freddie to underwrite this dubious activity.
2. It was the Federal Reserve, first under Alan Greenspan, then under Hank Paulsen that kept interest rates artificially low and a loose and ready supply of cash for the taking, creating the liquidity that led to the misuse of these very funds.
3. It was congressman Barney Frank (D-CA) and members of the Congressional Black Caucus, the same group that pushed banks to relax their standards to begin with, that blocked multiple efforts by the Bush Administration to audit the books of Fannie and Freddie.
4. It was Fannie Mae’s CEO Franklin Raines, President Clinton’s director of the Office of Management and Budget, who collected $90 million in compensation from 1998 through 2004, and is now in legal trouble himself.
5. It was the government, first under Bush and then Obama that used fear tactics to sell its bailout of the banking industry, putting the American taxpayers on the hook.

One cannot help but choke on this entree of hypocrisy served up with a side order of demagoguery.

Moreover, from a rational and empirical perspective, one has to ask, “How precisely is this going to help the already beleaguered real estate market, much less the general economy? Answer—it won’t. As Mike Mayo, an analyst with Crédit Agricole points out: “Banks should pay for what they did wrong, but at the same time they shouldn’t be treated as a big piñata that has the effect of delaying the housing recovery. If banks have to pay for loans they made five years ago, are they going to make new ones?” 1

If this is starting to sound more than a little like the 1994 Mexican pesos crisis, the 1997 Asian bond crises, the 1998 Russian ruble crisis and debt default, the 1998 collapse of the hedge fund Long-Term Capital Management, and the dot.com bust of 2000, that’s because underlying dynamics are the same. Wild speculation, plus unfiltered access to capital via rate cuts by the Federal Reserve led to the inevitable bubble, and all bubbles must eventually burst. As Matt Welch of Reason Magazine states: “The Federal Reserve responded to the 2000 contraction by using the main mechanism at its disposal: repeatedly slashing interest rates (a move, many say, that helped inflate the next bubble).”2

If you step back and look the bigger picture, it is painfully evident our government not only sets up these bubbles, but then bails out the very entities that played fast and loose with suspect financial instruments, thereby creating a self-perpetuating moral hazard. It is akin to a drug dealer who whose clients become addicted to his product, and then is angered as they engage in inappropriate and risky behaviors as a result. In his rage he lays down new rules, while simultaneously providing them more amore access to product they crave.

All of this leads the average American to scratch his head and wonder if D.C. and Wall Street have collectively lost both their minds and their souls, along with any modicum of common sense. Or perhaps politicians have become addicted to their own drugs and need to be cut off, placed in rehab, and monitored closely for further signs of abuse. Dr. Drew where are you?



1.http://www.nytimes.com/2011/09/0 3/business/bank-suits-over-mortgages-are-filed.html

2. http://reason.com/people/matt-welch/all

Drug Legalization: A Possible Way Forward

If we are going to take a step in a new direction, we have to do it thoughtfully and carefully. The legalization of drugs is no small matter, and an evenhanded approach must try to anticipate unintended consequences, no easy task to be sure. To this end, here are some practical guidelines:

1. Start small, with the legalization of marijuana. Even amongst a fair amount of conservatives, there is recognition that marijuna is, at the very least, a moderately harmful substance. It is not associated with aggression, violence, suicide, or behaviors that lead to legal trouble, save for possession or use in itself. Certainly, in comparison to alcohol, it has a better track record. More importantly, marijuana is the lifeblood of Mexican drug cartels, financing their violence and importation of more nefarious substances. According to officials Kevin L. Perkins, Assistant Director, Criminal Investigative Division, FBI, and Anthony P. Placido, Assistant Administrator for Intelligence, DEA:

"Marijuana is the top revenue generator for Mexican DTOs(cartels)—a cash crop that finances corruption and the carnage of violence year after year. The profits derived from marijuana trafficking—an industry with minimal overhead costs, controlled entirely by the traffickers—are used not only to finance other drug enterprises by Mexico’s poly-drug cartels, but also to pay recurring “business” expenses, purchase weapons, and bribe corrupt officials." 1

So, counterintuitive as it may seem, it is obvious that a policy perspective that seeks to reduce the use of cocaine and heroine should legalize marijuana as a means of severing the finacancial base of the drug trade pyramid.

2. Allow states to be laboratories of experimentation. The best way to find out what works is to let states set their won policies with regard to how the legalize marijuana. The last thing we need is a one-size-fits-all policy set by the federal government. States can set legal amounts and age of usage, as well as policies dealing with misuse. This will provide some flexibility for adjusting of the law as time progresses, something almost impossible at the federal level. Furthermore, data collected from the states can be analyzed to see how effective particular policies are, which will help create a diverse set of approaches, from which will emerge some common principles regarding management.

3. Consider the "Alaskan" approach. Until the mid 1980s, Alaska had a very sane policy regarding the use of marijuana because it allowed its citizens to use marijuana as long as they did not buy or sell it. This meant most people grew their own marijuana, and shared it as they saw fit. While their are implications even with this approach, it seems rational place to begin, as marijuana dealers would soon find themselves out of willing buyers. Of course, there would be a "black market" that might sell to youth, but let's be real--this is already going on. The difference would be a lot less of this behavior.

4. Keep taxes to a minimum. In our cash-strapped, deficit-driven economy, it is tempting for legislators to slap an excessive tax on the selling of marijuna. But if this tax drives the price to high, it's coceivable that a true black market with more competive prices will emerge, as has happened with cigarets. Keep the taxes low to discourage this type of enterprise. The money raided from these taxes could then be used for treatment of people addicted to harder substances.

5. Monitor vigilantly. States should monitor their approaches and modify accordingly. If laws do not lead to a reduction in violence and imprisonment, they should be jettisoned or fundamentally restructured.

6. Secure the border. The absolute best way to ensure a decrease in drug usage is to decrease its supply, especially when the sup[ply is controlled by Mexican drug cartels . More importantly, we cannot sit by idly as a country and let lawlessness reign on our borders. This is not just about national security, but about sheltering our citizens and preserving our civilization from an unprecedented level of violence. According to Perkins and Placido: "... we anticipate that the gruesome violence in Mexico may get worse before it gets better. We must recognize that we are witnessing acts of true desperation: the actions of wounded, vulnerable, and dangerous criminal organizations." 2

6.Be prepared for things to get worse. I don't advocate marijuana legalization lightly. There is some growing evidence that Europe has had some mixed results, some of which are quite negative. A recent report by the U.S. Drug Enforcement Agency indicates that such liberalized drug policies in Europe have lead to not only more usage of marijuana, but also an increase in crime, violence, and usage of more dangerous substances. 3


Still, we cannot continue to abide with locking up our youth and permitting drug cartels to reign. We have to do something different, and we need to do it in an intelligent and comprehensive manner. There surely is no panacea. What we don;t know is if this is a Pandora's box. Dare we lift the lid?


Gary


1. http://fdlaction.firedoglake.com/2010/05/05/fbi-marijuana-is-the-top-revenue-generator-for-mexican-cartels/

2.http://www.fbi.gov/news/testimony/drug-trafficking-violence-in-mexico-implications-for-the-united-states

3. http://www.justice.gov/dea/demand/speakout/09so.htm

War on Drugs: A Losing Proposition?

When it comes to the debate on the war on drugs, I remain as dispassionate as possible. This is because,regardless of our opinion or point of view regarding this issue, no one knows for sure what the result of legalization will be on our society. Opposition to legalization is not without merit. Logic dictates that when you increase access and decrease legal consequences, use will skyrocket because these incentivize the targeted behavior. I don't think most parents want their children to be able to pick up a package of marijuana, cocaine, or heroine at a local dispensary. Worse yet would be a black market for underage youth that would illegally sell to this audience.

Yet, if we take a close look at what is going on in our country with regard to our policies regarding drugs, it becomes painfully apparent we need to reform the way we do business in the United States.

Part of the problem is that in our "war on drugs," the enemy is faceless, diffuse, and abstract. As pointed out in by Claire Suddath in a 2009 Time magazine article, "It's a war without a clear enemy. Anything waged against a shapeless, intangible noun can never truly be won — President Clinton's drug czar Gen. Barry McCaffrey said as much in 1996.nd yet, within the past 40 years, the U.S. government has spent over $2.5 trillion dollars fighting the War on Drugs."1 We seem to be spending a lot of money, and getting more negative than positive results. This is corroborated by a comprehensive analysis by the Cato Institute, a libertarian think tank, which reached the following conclusions:2

--legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition
--drug legalization would yield tax revenue of $46.7 billion annually, which could be used for treatment of addicts


And yet, the consequences of this war ago far beyond economics. As Suddath explains:

"Despite the ad campaigns, increased incarceration rates and a crackdown on smuggling, the number of illicit drug users in America has risen over the years and now sits at 19.9 million Americans."2

The picture among our youth is equally grim. Although illicit drug use was on a steady decline starting in 2001, according to a recent youth survey conducted by the National Institute on Drug Abuse, "Illicit drug use in the United States has risen to its highest level in 8 years."3 As Pamela S. Hyde, administrator of the Substance Abuse and Mental Health Services Administration (SAMHSA) states: "These results are a wake-up call to the Nation...(O)ur strategies of the past appear to have stalled with 'Generation Next.' Parents and caregivers, teachers, coaches, and faith and community leaders must find credible new ways to communicate with our youth about the dangers of substance abuse."4

Yet, the picture gets more complicated, however, when you try to tease out the cause versus the effect. According to Gil Kerlikowske, director of National Drug Control Policy under President Obama, the survey spotlights two possible contributing factors: the shift in state policies regarding drug use, and the widening availability of medical marijuana. But as Dr. Wilson Compton, director of NIDA's Division of Epidemiology, Services and Prevention Research asked: "Do the changes in perceived risk lead to changes in laws and regulations, or do these policy changes lead to a shift in attitudes?"5

However, drug use alone is only part of the picture. While some state have moved to relax their laws regarding marijuana use, the use of a police apparatus remains problematic. The analysis of a former Baltimore Police Department lieutenant who oversaw the Planning and Research Department sheds light on this issue. The lieutenant used data to map the occurrences of robberies and murders that occurred in the city over a period of six months. He then mapped all Baltimore city addresses for people, vehicles, and other entities identified in drug related incidents which occurred in adjacent jurisdictions over the same time frame. According to FBI statistics, "The results show a pattern where the areas in the city with an increase in murders and robberies are consistent with the areas where addresses are identified from drug related incidents occurring in the adjacent jurisdictions."6 Based on this information, the lieutenant concluded the city's crackdown on drug trafficking led users as well as dealers who resided in Baltimore to go to adjacent jurisdictions to buy and sell drugs.7

Moreover, the lieutenant surmised that the increase in drug demand in adjacent jurisdictions caused the price of drugs to increase, and as a result, users are engaged in more robberies to acquire the additional money needed to purchase drugs. Concomitant with this dynamic, Baltimore city dealers attempted to sell more of their drugs in adjacent jurisdictions where other drug dealers already operated, resulting in more drug-related murders.8

The issue gets even thornier when you inject race into it. The reality is, regardless of the cause, black youth are the the greatest casualties in the war on drugs. We are arresting and incarcerating an alarming percentage of our black youth, leaving a wake of decimated families, overcrowded prisons,and mired in poverty and despair. Although African Americans represent 12.7% of the US population and 15% of US drug users, they represent 36.8% of those arrested for a drug-related crime.9 It is not my contention that we are instituting whole-sale racist policies in order to destroy communities. I will leave that debate for another time. However, what I am getting at is a more commonsensical: if we keep arresting and incarcerating black people for crimes related to drugs, we will perpetuate the destruction of these communities and families, even if unintentionally so. Moreover, we create another problem that tears at our social fabric, the perception of a racist witch hunt as symbolized by a rapacious, aggressive police force, the foot soldiers in this on-going war.

As John H. McWhorter, contributing editor to the Manhattan Institute’s City Journal pointedly states:

"Making black America better will entail battling the senseless war on drugs. Police forces assigned to trawl black neighborhoods create thousands of young black people wary of whites -- and thus less likely to ever succeed in a world full of them. When drugs are illegal, you can make money from the markup that selling them entails, and thus, so very many young blacks step outside of legal work to do so -- especially when their schools are bad -- and end up in prison or a coffin.

"Their children grow up in communities where two-parent families are rare, are subject to the disruptive home lives that make it hard to be a good student, and often end up recapitulating the lives of their parents. Selling drugs means turf wars wielded with guns, which kill people, including little girls and grandmothers caught in crossfire.

Take away the war on drugs and all of this dissolves. With one generation of black inner-city boys who have never known cops as the enemy; who think of "slingin' on them corners" as something old-school that no one could do now; and who stay in their neighborhoods to help raise their kids, black America would turn a corner." 10

There is empirical evidence to back up MCWhorter's claims. In 2001, the country of Portugal, in an effort to deal with their own problems with drug abuse, decriminalized once-illegal drugs. Glenn Greenwald, an attorney, author and fluent Portuguese speaker, conducted research to measure the effects of this policy shift. "Judging by every metric," stated, Greenwald "decriminalization in Portugal has been a resounding success," adding that "[I]t has enabled the Portuguese government to manage and control the drug problem far better than virtually every other Western country does."11

In fact, a comprehensive report on the study conducted by the Cato institute yielded the following sets of data:12

--following decriminalization, Portugal had the lowest rate of lifetime marijuana use in people over 15 in the E.U.:
--rates of lifetime use of any illegal drug among seventh through ninth graders fell from 14.1% to 10.6%
--drug use in older teens declined, with lifetime heroin use among 16-to-18-year-olds falling from 2.5% to 1.8% (
--deaths related to heroin and similar drugs were cut by more than half
--money saved on enforcement allowed for increased funding of drug-free treatment as well.

Yet, even with these startling statistics, we should not overgeneralize. As Mark Kleiman, author of the forthcoming book "When Brute Force Fails: How to Have Less Crime and Less Punishment" and director of the drug policy analysis program at UCLA cautions, "Portugal [is not]a realistic model for the U.S., however, because of differences in size and culture between the two countries."13

This does not mean, however, that we should avoid a national conversation that embodies a different direction and tone regarding the connection between policy, drug abuse, and crime. 
As Brian Vastag, writer for Scientific American opines: "Drug decriminalization did reach its primary goal in Portugal," of reducing the health consequences of drug use, he says, "and did not lead to Lisbon becoming a drug tourist destination." 14

Still, there are many factors to consider, and a radical policy shift could unleash a torrent of drug abuse that we would regret for decades. The bottom line is that if we truly want our kids to have lives unadulterated by drugs, we seem to be loosing ground. This is precisely why I am dispassionate, because anyone who claims that they have a panacea constructed strictly around a legal framework is at best naive, and worst, myopic. As cliche as it sounds, kids need guidance and involved parents, parents who hopefully remain married and committed to the welfare of their spouses and their children. Without this moral component undergirding any policy shift, we will be treating the symptom, not the disease. Parents have to be willing to monitor their kids, and they should send a strong message that drug abuse is wrong, that there are healthy alternatives to personal and psychological fulfillment. Then they should provide these opportunities and support their kids' endeavors, always keeping the lines of communication open. In my next blog, I will suggest some national strategies to revise how we deal with this problem realistically, and hopefully, effectively.

Gary





1.http://www.time.com/time/world/article/0,8599,1887488,00.html
2. http://www.cato.org/pubs/wtpapers/DrugProhibitionWP.pdf
3.http://www.nida.nih.gov/NIDA_notes/NNvol23N3/tearoff.html
4. Ibid
5. Ibid
6. http://www.fbi.gov/about-us/cjis/n-dex/law-enforcement-scenarios/scenarios19
7. Ibid
8. Ibid
9. http://www.prisonerswithchildren.org/pubs/color.pdf
10. http://www.theroot.com/views/no-more-forums-about-black-agenda?page=0,1
11.http://www.time.com/time/health/article/0,8599,1893946,00.html
12.Ibid
13. Ibid
14. http://www.scientificamerican.com/article.cfm?id=portugal-drug-decriminalization

Energy Transformation and Security

Energy transformation and security—We are not just a nation, but a world that is starved for energy, and there is no going back. Whether we have reached peak oil may be debatable, but what is not debatable is that we need and consume vast quantities of energy, and that energy is the glue that binds us economically, militarily, and socially—it is the material lynchpin of global interdependence. As such, failing to have a comprehensive plan has ramifications that threaten all facets of civil society in a manner never seen before. In order to have energy security, we will have to transform the way we procure, produce, use and regulate a variety of energy resources. Unfortunately, like most national issues, energy security is being held hostage by rigid political ideology and partisanship rather than practicality and science.
Those on the left side of the political spectrum bemoan our “dependence” on fossil fuels, but refuse to see that this technology, with all it’s detractions, is the best system we have, and that renewable sources, while promising and deserving of investment, are neither reliable or well-developed at present to offset a sudden disuse of carbon-based fuels. Moreover, certain alternative fuels, such as ethanol, are not only poor substitutes, but wreak economic havoc on developing nations by raising the price of crops, with the consequences falling disproportionately on the world’s poor. As economists C. Ford Runge and Benjamin Senauer, point out:"Resorting to [corn based] biofuels is likely to exacerbate world hunger. “ 1
The bottom line is that we are just not in a place yet in which alternative fuels can meaningfully and realistically substitute for petro fuels en masse. As Robert Bryce, energy journalist and Author of Gusher Of Lies states: “Energy independence is hogwash. From any standpoint, economic, political, military, or environmental—energy independence makes no sense. Worse yet, the inane obsession with the idea of energy independence is preventing the U.S. from having and honest and effective discussion about the energy challenges it now faces.”2 This is because we live in a global system undergirded by international interdependence.
It is often pointed out, and rightly so, that petrodollars fill the vaults of foreign despots, including organizations that fund terrorism. This is unfortunate and undesirable, but also, to a degree, unavoidable, because oil is a fungible commodity. This means that emerging superpowers, such as India and China, will pick up the slack even if we lessen our demand. Of course it could be argued we would be at least taking the moral high ground by not purchasing oil from such sources; but in the end analysis, it would be a zero sum gain, because money would continue to flow to these organizations regardless of its source. As Mother Jones puts it: “Despite its immense appeal, energy independence is a nonstarter—a populist charade masquerading as energy strategy that's no more likely to succeed (and could be even more damaging) than it was when Nixon declared war on foreign oil in the 1970s.” 3
From this perspective, it is somehow mystifying that liberals at once champion our common humanity with catch phrases like “global village” and “a world without borders,” yet are completely myopic to the material aspect that binds us. The blood that courses through the venous collective is oil. There is no getting round this,f or at least for the near future.
But the blame does not fall entirely on progressives. Chants of “drill, baby drill” are appealing, and even commonsensical to a point, but they are short-sighted, and are not beyond rational criticism. The Green movement, despite its political and emotional excesses, makes fundamental points about carbon fuels that simply cannot be ignored. Oil may or may not be at its peak availability, but it will one day run out. Furthermore, fossil fuels as a whole are undeniably toxic to the environment, pose a variety of serious health threats, degrade and destroy natural habitats when extracted, and imperil the safety of those who are involved in the both the extraction and production of this energy source. The Exxon Valdez and the BP oil tragedies remind of these consequences. Further more, the potential for further, unexpected problems, despite technological innovation, is both real and significant. To ignore these realities crosses the line from benign neglect into ethical negligence.





Though we must rise to this mega-challenge, there is no simple answer. Rather, we must use our present system of energy production as a transition to a mixed-energy source economy. Obama and his administration interpret this in a skewed manner, looking to penalize oil companies by imposing penalties and restrictions via a cap-and trade scheme. According to economist David Kreutzer of the Heritage foundation, such an approach would not only fail to reduce carbon emissions, (as happened in Europe under the Kyoto protocol), but raise energy prices to such a level many businesses would fold, leading to a loss of over 300,000 manufacturing jobs.4 As Bjorn Lomberg, a social scientist and objective assessor of global warming states: “Just because there is a problem doesn't mean that we have to solve it, if the cure is going to be more expensive than the original ailment.” 5
Beyond the obvious grief suffered by those left unemployed I such a scenario, this dynamic would also significantly shrink our tax base, leading to less money that could be directed toward research and development. So any “investment” the government wants to make has to take into account the fragility of the present manufacturing base. Instead of hustling up tax payer dollars to be dolled out to cronies of politicians, a more measured and reasonable approach would be to free up regulations and corporate taxation in return for plowing this money into finding ways to efficiently and safely procure fossil fuels while simultaneously investing in alternative sources.
The key point is to use the expertise at our disposal in the existing energy companies to continue to find and develop a variety fuels for hungry consumers. Case in point would be the collaboration between ExxonMobil and Synthetic Genomics, Inc. to produce synthetic algae, a potential boon to alternative energy. Yet, as promising as this source is for the future of energy, it is not without complications. Beyond the costs to create and maintain a steady supply, synthetic algae requires a constant supply of carbon dioxide, beyond the elevated levels we have now. 6Yes, there is grand irony here. In fact, it begs the question of whether it is government meddling that is causing problems to begin with.
If we really want a mixed-energy future, the best bet is to free up the innovators and entrepreneurs in the free market and provide a simplified regulatory structure to provide them with the capital and freedom needed for R and D. Until then, be thankful we have been blessed, at least temporarily, with oil, regardless of where it comes from.

Those who would like a more detailed and extensive analysis regarding energy productivity are encouraged to see the report “Facing the Hard Truths About Energy,” by the National Petroleum, found at http://www.npchardtruthsreport.org/download.php.




1. http://news.mongabay.com/bioenergy/2007/04/corn-ethanol-could-hurt-poors-food.html
2. http://www.amazon.com/Gusher-Lies-Dangerous-Delusions-Independence/dp/1586483218
3. http://motherjones.com/politics/2008/05/seven-myths-energy-independence
4. http://www.heritage.org/research/testimony/the-economic-impact-of-cap-and-trade
5. http://www.newsweekly.com.au/articles/2001dec01_lomborg.html
6. http://greeneconomypost.com/algal-biodiesel-pros-and-cons-9573.htm

The Collective Angst of America: Present and Future Challenges

As we embark on a new year and decade, new challenges face our country and our world, and echo the Chinese aphorism “may you live in interesting times.” I do not believe that our challenges are any greater than our predecessors, but they are more than likely more complex, and our awareness of these issues and the concomitant saturation with divergent philosophies and their informational caches has left us either numb, overwhelmed, and dare I say, neurotic. This has impelled me to do the impossible, which is to not only define these challenges, but to recommend some potential solutions, or at the very least, some avenues that may lead us to solutions. I have listed the challenges in descending order, from the least challenging to the most challenging; in reality, however, they are all monumental, interconnected, and open to hierarchical rearrangement. I will post these as time allows. The challenges are:

10. Taxation Reformation
9. Energy transformation and independence
8. "War" on drugs
7. Democratization of information
6. Deindustrialization
5. Global fascism
4. Educational decay
3. Ideological entrenchment
2. Obsessive ethnocentrism
1. Reframing of values

Taxation reformation—Although taxation seems to be a mundane issue relative to only the rich, the reality is that it is intimately tied to economics, productivity, and quality of life. Therefore, it affects all strata of society. Nor is this only a matter of the byzantine nature of our tax code; to say that our tax code is complex and cumbersome is beyond an understatement. We have to take a deep breath in order to deal with this issue.
The deeper reality is that the way we do business now is not only sustainable, but morally reprehensible. It has in fact, served to widen the gap between the proverbial “haves and have nots,” creating a highly stratified society in which the rich get richer, the poor become ever more dependent, and the middle class bears the brunt of these two worlds. David Bessie, producer of the documentary “Generation Zero,” states it this way: “We have socialism for the poor, capitalism for the middle class, and socialism for the rich.” This has tilted the playing field towards the ultra rich, lining the pockets of investment bankers and hedge-fund managers and has resulted in a devastating economic crash. The result, beyond the painful and obvious suffering of our citizens, was that the proverbial fat cats not only avoided prison, but were actually rewarded with about a trillion dollars, which they quickly reinvested to further line their swelling pockets. As Robert C. Lieberman writes in his review of the book Why the Rich are Getting Richer: American Politics and the Second Gilded Age, by Jacob S. Hacker and Paul Pierson, “And yet a curious thing has happened in the midst of all this misery. The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer.” Of course we call this TARP, but it’s more like TARPed and feathered for the middle class, which ultimately finance this financial chicanery. And this happened under two different presidents from opposing parties, so this is not a democrat or republican issue—this was a bipartisan screwing all the way.
Hacker and Pierson then unload their derision on the taxation and economic policies of Presidents Ronald Reagan and George W. Bush, along the overall climate created by D.C. which in recent years rewarded the ultra rich with lavish stock options, staggering bonuses, and golden parachutes. To a degree, Hacker and Pierson are right on. The reality is that IRS revenue increased under Reagan and Bush, as it did under Kennedy. So where did all this money, money that could have been reinvested to help those at the margins, go? Was it the “war on terror,” social Security, Medicare, Medicaid? While this topic would require a separate treatment beyond the scope of this writing, suffice to say, the money was not just spent, but overspent, as our crushing deficit sorely reminds us.
However, the authors are only revealing half of the picture. On the other end of the spectrum are people mired in generational poverty, who have become hooked on a variety of entitlements. According to usgovernmentspending.com, we spent almost $490 billion on welfare alone, not to mention hundreds of billions more on education and pensions. To be sure, all of these areas need funding, but If you look at the condition of our schools and the mess pensions have caused a multitude of states, you see the bigger picture: we have created a two trillion dollar entitlement state that threatens to consume the entirety of our GDP, and more importantly, will ultimately undermine our ability to create and perpetuate prosperity. The ultimate irony is of course that it is this very prosperity that allows us to care for those who need our help! Yet, still we march on, lining the pockets of Goldman Sachs while simultaneously creating dependence and generational poverty amongst the populace we purportedly want to ease the suffering of. Neither of these two extremes should be tolerated, because only the ultra rich benefit, something that neither true conservatives nor liberals want.
The idea that the middle class is being squeezed is reflected with empirical evidence that wages for this SES group have moved up only incrementally in the past twenty plus years. Despite an overall rise in our standard of living as a nation, the middle class is stuck in financial stagnation, with the cost of living outstripping wage increases. Rahter, these funds are being diverted to either overseas, or to the cost of healthcare, And although President Obama should be applauded for trying to insure the less privileged, by no stretch of the imagination will the Affordable Health Care act be affordable to anyone, especially those footing the bill. This is the angst that gave rise to the Tea Party movement. Whether you agree or not with their perspective and policy points, it is clear that the working man and woman are frustrated, and they want something done to address their anxieties. The tax code is a good place to begin.
For a tax system to be effective, it has to be fair, simple, and broad. A dual flat tax rate, such as 12% and 6% on gross income with no (or few) exemptions, is one option. The other is taxation on consumption, or a national sales tax, with compensatory vouchers sent to the most vulnerable and truly needy in order to offset a portion of their burden. Either way, everyone must be stakeholder, and neither the rich, nor the poor, should be shielded. Several positive things will happen as a result of this radical change.
First, we will capture a greater share of revenue because high-priced lawyers and accountants will not be able to shield their clients from paying their fare share. Second, U.S. corporations will begin to relocate on American soil, employing more American citizens who will then pay taxes. Third, the sway of corporations will diminish because they will not be able to lobby congress for taxation entitlements. And finally, because the federal government will increase it’s revenue intake, this money can be reinvested into free-market solutions, such as Health Savings Accounts, school vouchers, loans for entrepreneurs, and economic help for college based not on race or gender, but rather on achievement, and when necessary, on finances. If President Obama and Congress can for once see beyond the partisan rhetoric and do what is right, everyone will benefit. We are waiting to exhale.