The Gas Wars

Tuesday, February 21, 2012 by Robert Reich
by Robert Reich

Nothing drives voter sentiment like the price of gas – now averaging $3.56 a gallon, up 30 cents from the start of the year. It’s already hit $4 in some places. The last time gas topped $4 was 2008.

And nothing energizes Republicans like rising energy prices. Last week House Speaker John Boehner told Republicans to take advantage of voters’ looming anger over prices at the pump. On Thursday House Republicans passed a bill to expand offshore drilling and force the White House to issue a permit for the Keystone XL pipeline. The tumult prompted the Interior Department to announce on Friday expanded oil exploration in the Arctic.

If prices at the pump continue to rise, expect more gas wars.

In fact, oil prices are rising for three reasons — none of which has to do with offshore drilling or the XL pipeline.

The first, on the supply side, is Iran’s decision to cut in oil exports to Britain and France in retaliation for sanctions put in place by the EU and United States. Iran’s threat to do this has been pushing up crude oil prices for weeks.

The second, on the demand side, is rising hopes for a global economic recovery – which would mean increased oil consumption. The American economy is showing faint signs of a recovery. Europe’s debt crisis appears to be easing. Greece’s pending bailout deal is calming financial nerves on both sides of the Atlantic, and the Bank of England and European Central Bank are keeping rates low. At the same time, China has decided to boost its money supply to spur growth there.

Neither of these would have much effect were it not for the third reason — overwhelming bets of hedge funds and other money managers that oil prices will rise on the basis of the first two reasons.

Speculators have pushed crude oil to $105.28 per barrel, up 35 percent since September. Brent crude, Europe’s benchmark, is now $120.37 a barrel – also worrisome because many East Coast refineries use imported oil.

Funny, I don’t hear Republicans rail against speculators. Could that have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

But that’s okay. The gas wars may come to a screeching halt before too long, anyway. So many bets are being placed on rising oil prices that the slightest hint the speculators are wrong – almost any sign of expanding supply or declining demand – will set off a sharp drop in oil prices similar to the record one-day fall on May 5 of last year.

Half of America in Poverty

(If you question the reason for the Occupy movement...if you think it's not worthy or worthwhile...then you aren't paying attention to the reality facing half of the citizens of the

US...--jef)

The Facts Say It's True

by PAUL BUCHHEIT

 

Recent reports suggest that almost 50% of Americans are in poverty or at a “low income” level. The claim is based on a new supplemental measure by the Census Bureau that includes health care, transportation, and other essential living expenses in the poverty calculation.

The concept of “low income” is controversial. It has been defined as earnings between 100 and 199 percent of the poverty level, a claim which, if true, would place every American family making $50,000 or less at a near-poverty level.

Conservative organizations believe the whole ‘poverty’ issue is overblown. The Cato Institute blames LBJ and Obama for reversing a declining poverty rate. Forbes blames the calculations. The Heritage Foundation argues, “The average poor person, as defined by the government, has a living standard far higher than the public imagines…In the kitchen, the household had a refrigerator, an oven and stove, and a microwave.” (pop the cork, let's celebrate our wealth in kitchen appliances!!!--jef) The case for a growing “consumption equality” is alternately defended and denied.

With emotions running high on both sides, we need to take a balanced look at the available data to determine how well the highest-earning family of the poorest 50% — a family with a $50,000 income — can survive. (The maximum individual income for the poorest 50% is about $30,000.)

Start with taxes. It is frequently noted by conservatives that the richest 1% pay most of the federal income taxes, and indeed they paid about 37 percent in 2009, more than the poorest 90% of Americans. But only the richest 5% of Americans have experienced income growth since 1980. And during that time, their tax rate has dropped from 34% to 23%. As for the 3 percent rate paid by the poorest 50%, the Tax Policy Center sums it up nicely: “The basic structure of the income tax simply exempts subsistence levels of income from tax.”

More relevant to the poverty issue is that federal income tax is only a small part of the tax expense for lower-income families. According to a study by The Institute on Taxation and Economic Policy, the poorest 50% paid about 10 percent of their incomes in state and local taxes (the richest 1% paid 5 percent). Congressional Budget Office (CBO) figures reveal that the bottom 50% pays about 9 percent of their incomes toward social security (the top 1% pays just under 2 percent). CBO also shows that the bottom 50% is paying about 2 percent of their incomes on excise taxes, a negligible expense for the people at the top.

Another year of Bush tax cuts will chop another 1-2 percent off the taxes of the very rich.
So total taxes for the poorest 50% are 24 percent of their incomes (3% + 10% + 9% + 2%), as compared to 29 percent for the richest 1% (23% + 5% + 2% – 1%).

Other significant expenses for low-income people, based on the most conservative estimates from the Bureau of Labor Statistics, the Census Bureau, the National Center for Children in Poverty, the Carsey Institute, and the Economic Policy Institute, include food (10%), housing (27%), transportation (6%), health care (5%), child care (8%), and household expenditures (5%). Expenses for insurance and savings and entertainment, although important to most households, are not being included here.

Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.

Total expenses for the richest family in the bottom half of America? – 24% taxes – 27% housing – 34% food, health care, child care, transportation, household needs – 12% energy.
That’s 97% of their income. The richest family among 70,000,000 households is left with just $1,500 for a car, appliances, a TV, a cell phone, a loan repayment, an occasional night out. It comes to $30 a week, barely enough to take the family out for a pizza.

Critics bemoan the amounts of aid being lavished on lower-income Americans, making dubious claims about $16,800 in government funds going to every poor family and families with $90,000 incomes being classified as “near poor.”

The fact is that only 4,375,000 families (out of 70,000,000 in the bottom half) received Temporary Assistance for Needy Families (TANF) in 2010, for a total expense of about $36 billion. Current federal budgets include about $350 billion for food, housing, and traditional ‘welfare’ programs for needy children, elderly care, and energy assistance. This averages out to about $400 per month per family.

Senator Bernie Sanders Introduces Bill to Lower Cost of Solar Power

(Go, Bernie!--jef)

Fri, 06/10/2011 - 12:18pm.
A press release from the office of Senator Bernie Sanders (I-Vermont):

Washington - Sen. Bernie Sanders (I-Vt.) and Sen. John Boozman (R-Ark.) introduced a bill that would lower the cost of solar power and put the United States on track to install 10 million solar systems on homes and businesses by 2020.

Sanders and Boozman are the chairman and ranking member, respectively, of the Senate Green Jobs and New Economy Subcommittee. They were joined in introducing the solar legislation by Sen. Jeff Bingaman, the chairman of the Energy and Natural Resources Committee.

"This legislation will make it more affordable for families and businesses to install solar, by helping communities reduce the costs associated with solar energy permitting," Sanderssaid. "As we lower the cost of solar energy and increase our use of solar, we can create hundreds of thousands of good-paying manufacturing and installation jobs in this country. This bill also sets strong targets for American solar energy production, to ensure we compete vigorously with China and Europe for solar energy jobs."

Boozman said the goal is to reduce unnecessary bureaucratic hurdles to American-made solar energy. "Our country benefits by using our domestic energy resources, including the expanded use of renewables, such as solar and wind energy.  A simplified permitting process will make solar energy more affordable.  I am especially pleased that our bill is fully offset and uses existing authorized spending to spur improvements in solar permitting and encourage the deployment of solar energy systems."

The 10 Million Solar Roofs Act of 2011 would establish a goal of powering 10 million homes and businesses with solar energy by 2020. The measure also would incorporate a Department of Energy initiative called SunShot to make solar more competitive with conventional energy technologies. The bill would provide grants to communities to help them make their solar energy permitting process less costly and more efficient, and would recognize and reward communities that have adopted common policies on solar permits.

A solar industry report said obstacles to acquiring local permits add up to $2,500 to the cost of a typical residential solar installation. The Department of Energy also identified local permitting costs as an obstacle to further lowering solar energy costs that declined by 60 percent since 1995.

Supporters of The Ten Million Solar Roofs bill include the Solar Energy Industries Association, the National League of Cities, and the League of Conservation Voters.

To read the bill, click here.

Obama's Missed Opportunities for Economic Change

Monday, March 21, 2011 by Huffington Post
by Robert Kuttner

As spring dawns, the economy's green shoots have been trampled once again, first by the economic fallout from Japan's tsunami, and again by rising worldwide commodity prices.

The disruption of Japan's production revealed the soft underbelly of globalization -- the reliance on vulnerable global supply chains only as strong as their weakest link. Rising food and energy prices produce a toxic stew of inflation and unemployment.

This depressing news, of course, has political as well as economic consequences. Politically, it means that the incumbent party -- Obama's -- faces even tougher going in 2012.

Economically, rising inflation makes it that much harder for the Federal Reserve to keep resorting to very low interest rates to levitate a sick economy. At some point, the Fed's natural inflation-phobia will kick in, even though higher food and energy prices have nothing to do with overheated demand (with unemployment stuck near double digits, demand is still too low, not too high.) But as in the late 1970s, stagnation could turn into stagflation.

And the Republicans in Congress are compounding the crisis of prolonged recession and joblessness by slashing everything in sight -- throwing more people out of work.

Faced with the prospect of having to defend the administration's performance in an economy of still high unemployment, you might think the White House would be doing everything possible to highlight the Republicans' responsibility for the weak economy -- the perverse budget cuts, the unpopular assault on unions, the direct attack on Social Security.

Instead, the president has doubled down on his strategy of "more-bipartisan-than-thou." As the New York Times' Michael Shear wrote in a smart and skeptical piece last week,

"As they prepare to wage political war against President Obama, the potential 2012 Republican candidates are doing everything they can to draw sharp distinctions with him.

But Mr. Obama isn't cooperating.

Rather than emphasize his differences with potential Oval Office rivals or Republican adversaries on Capitol Hill, the president is taking every opportunity he can to embrace members of the other party as co-conspirators in his efforts to confront the country's challenges.

According to Mr. Obama, the two parties have cooperated -- or are showing signs of being willing to work together -- on education reform, tax cuts, energy security, economic growth and potential changes to an entitlement system that has become a drain on the nation's budget."

This must be occurring in a parallel universe somewhere. Republican collaboration with Obama is certainly not happening on earth. The president and his political advisers are evidently gambling that as the Republican budgeters and GOP presidential contenders grow more reckless and more extreme, he will just look more reasonable and more presidential.

Doubling down on bipartisanship did not exactly work in 2010, when the Dems lost 63 House seats, their worst off-year performance in modern times. Because of the Republicans' sheer extremism, it may work to re-elect the president by a narrow margin in 2012 -- but not to rekindle the enthusiasm of the groups that elected him in 2008 as a force for believable change.

Presidential elections are won or lost state by state, and you have to wonder how this strategy will rally economically distressed voters to the Democrats in key swing states like Ohio, Pennsylvania, Michigan, Florida, or even Illinois.

At best, Obama wins narrowly next year, but the Democrats suffer huge losses in the Senate, where the numbers are stacked against them (11 Republicans up, compared to 23 Dems) and gains in the House but not enough to take back control.

There is latent support for a president to lead as the champion of hard-pressed regular people. But Obama keeps passing up the opportunities history deals him.

The Republican assault against public employees in Wisconsin, Ohio, Indiana, and elsewhere produced the largest gain in the approval ratings for unions in decades. By margins of nearly two to one, the public rejects the conclusion that public workers should take pay or benefit cuts to solve fiscal crises.

You wouldn't have expected government employees to be the poster children for broad economic distress, but the effort to blame the recession and the budget crisis on nurses, teachers, cops and firefighters backfired. Regular people saw these workers as their neighbors and fellow members of a beleaguered middle class, not as their oppressors.

You might have expected a Democratic president to seize this teachable moment to point out that the collapse of the economy and of government revenues was caused on Wall Street, not in state capitols or at union bargaining tables. But this president was too busy making amends for the hurt feelings of big business, preparing to unveil the next loophole in enforcement of the Dodd-Frank Act, and sending his fundraising associates to Wall Street with wheelbarrows to collect donations for his campaign.

Jobless claims jump, wholesale food costs surge

By Pedro Nicolaci da Costa
WASHINGTON | Thu Jan 13, 2011

WASHINGTON (Reuters) - Jobless claims jumped to their highest level since October last week while food and energy costs lifted producer prices in December, pointing to headwinds for an economy that has shown fresh vigor.

However, a surge in exports to their highest level in two years, which included record sales to China, helped narrow the U.S. trade deficit in November, an encouraging sign for fourth-quarter economic growth.

Federal Reserve Chairman Ben Bernanke said he was hopeful about the recent improvement in the outlook, saying he now expects the economy to expand between 3 percent and 4 percent this year.

"That's not going to reduce unemployment at the pace we'd like it to, but certainly it would be good to see the economy growing," Bernanke said at a conference on small business sponsored by the Federal Deposit Insurance Corp.

Back in November, the Fed's estimates for 2011 were in a range of 3 percent to 3.6 percent.

"I think deflation risk has receded considerably and so we're moving in the right direction," Bernanke added.

Still, the data on Thursday showed just how torturous the economy's path to recovery would be.

The number of Americans filing for first-time unemployment benefits rose unexpectedly to 445,000 from 410,000 in the prior week, a Labor Department report showed. It was the biggest one-week jump in about six months and confounded analyst forecasts for a small drop to 405,000.

The jobs figures weighed on U.S. stocks and boosted government bonds, which were also benefiting from concerns about Europe's debt struggles.

"The jobless number highlights the patchy recovery we've seen in the job market and reinforces that it will be a slow process bringing down the jobless rate," said Omer Esiner, market analyst at Commonwealth Foreign Exchange in Washington.

The rebound in benefit claims came in the wake of the holidays, which may have hindered new applications and created a backlog. Claims, which peaked around 650,000 in April of 2009, had been on a downward trajectory, dipping below 400,000 for the first time in two years during the week of Christmas.

The four-week moving average of new claims, which strips out short-term volatility, rose by 5,500 last week to 416,500.

A separate report from the Philadelphia Federal Reserve Bank showed factory activity in the U.S. Mid-Atlantic region accelerated less in December than originally reported.

WHOLESALE STICKER SHOCK

Though underlying inflation trends remain tame in the United States, food and energy costs were rising briskly at the wholesale level as 2010 drew to a close.

U.S. producer prices climbed 1.1 percent in December after a 0.8 percent rise in November, according to another Labor Department report. Economists had been looking for a repeat of that 0.8 percent advance in December. For the year as a whole, the PPI index was up 4 percent.

Inflation excluding food and energy, however, rose just 0.2 percent, in line with forecasts. That left the year-on-year gain in core producer prices at 1.3 percent, just below analyst estimates, helping tame inflation fears.

The rising prices producers receive ultimately could put upward pressure on retail prices, acting like a tax on consumers that could slow growth. Up to now, companies have not been able to pass increasing costs onto consumers because of weak demand, but that too has consequences.

"Eventually this means corporate profits could be squeezed," said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.

A recent spike in global food costs has raised fears of a crisis in the poorer corners of the developing world.

World food prices hit a record high last month, outstripping the levels that sparked riots in several countries in 2008, and key grains could rise further, the United Nations' food agency said recently.

TOUGH SELL

On a more positive note, the U.S. trade gap narrowed to $38.3 billion in November from $38.4 billion in October, the Commerce Department reported. Analysts had expected it to widen to $40.5 billion.

November's deficit was the slimmest since January 2010. Exports totaled $159.6 billion, the highest since August 2008 -- just weeks before the bankruptcy of Lehman Brothers touched off a trade-crushing global panic.

Exports to China in November totaled a record $9.5 billion. Still, they were swamped by rising imports that pushed the politically touchy U.S. shortfall with China to $25.63 billion.

Chinese President Hu Jintao meets with President Barack Obama in Washington next week, and trade issues -- and what the United States calls China's "substantially undervalued" exchange rate -- will be high on the agenda.

The split between weak underlying inflation and high food and energy prices makes it harder for Federal Reserve officials to argue publicly that inflation is not a threat. A fear of inflation being too low has underpinned the Fed's efforts to support the economy by purchasing government bonds.

Another key factor is the bleak jobs picture, not helped by the Labor Department data.

The number of Americans who continued to claim benefits after an initial week of aid did retreat sharply to 3.88 million from 4.13 million, offering some reason for hope.

Still, the total number of Americans on benefit rolls, including those receiving extended benefits under emergency government programs, jumped to 9.19 million from 8.77 million.