Congress passes Energy Bill – Ethanol is not about saving oil

Congress passes the Energy Bill for 2008. It defines many things. Most importantly it dedicates money to develop energy supply. This bill continues to give subsidies to American Oil producers even though oil remains at record high prices. The most important thing the bill does is that it encourages, through funding, alternative sources of energy. Ethanol an important part of the bill with a mandate to create ethanol from non food based raw materials. Many people continue to criticize the production of ethanol.

There are many discutable financial reasons why ethanol is not a good idea. First it will take a tremendous amount of corn to produce a significant amount of ethanol. If oil were abundant in the US and not in bad places it would cost less to produce gasoline than ethanol. Ethanol requires investments in infrastructures that will reduce corporate earnings.

There is one reason to develop ethanol that outweighs the financial costs of using alternative fuels. That reason is that we do not have to have an army to protect ethanol supplies. No American will die to defend “US interests”, better known as international oil reserves. We will no longer have any reason to fight with the Arabs. We will no longer fund their regimes. We will not have to worry about their nuclear intentions.

As a popular television advertisement would say: “Priceless!”

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Divided We Fall

I was reading an article about the anti-war protests in San Francisco. One of the promoters stated, “Where's the outcry? Where's the horror that almost 4,000 Americans have died in a foreign country that we invaded?" Robbins said. "I'm almost as angry at the American people as I am the president. I think Americans have become apathetic and placid about the whole thing.” These words hit me with astounding force. They did not hit me because I think we should be demonstrating against the war in Iraq or that we should hightail it out of there. No, they hit me hard because this individual strongly believes in what she is doing and is pissed off because other Americans will not support her quest. I do not get upset with other Americans because they continue to buy Chinese goods putting their children’s health at risk or because they will not push for alternative energy sources but the seeming apathy does affect my consideration of my fellow Americans.

Last night I was chatting with my cooking buddies. Among the topics of conversation were “the land of fruits and nuts”, the apparent conflict of “why someone can die in a war but not drink a beer”, the fallacy that “illegal immigration cannot be enforced for lack of manpower while we actively throw teenagers in jail for breaking local curfew laws”, and “prohibiting smoking while air born pollutants skyrocket.” I thought about “our dreams”. As college students, we talked about changing the world by eliminating poverty, making education available to all no matter what their social class, and world peace. That was a time when social movement rallies had as many student participants as football games (well maybe not as many but it was acceptable to be socially involved).

Some time ago these same cooking buddies expressed how our political machine had been so successful in dividing the nation. We can no longer act as a people because it is now thousands of specific “us and them”. The religious right believes that abortion and gay marriage are the most important questions, others believe we must “save the environment from humanity”, still others believe that we must “protect ourselves from the evil Muslims.” So here we are, the most informed and financially capable segment of American society, divided, fighting this or that symptom of the greater illness. We are not getting at the cause. We are unable to come together to fight for what made us see a better future because we are heads down, concentrated on the minutia. Our politicians have one. World order is safe. Poverty, wars, despair will be with us for many generations because we are divided and Divided We Fall.

Tags: Government Politics Recession Corporate America Finance Illegal Immigration Economy Reaganomics

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Regulating Imports and the Free Market

Free Market theory is based on producing goods in the area where the total costs associated with that product are lowest. The idea is that dislocation in resources will move production to eliminate excesses. Today many economists and Reaganomics supporters tout Free Market policies. I believe that these individuals have translated lowest cost of production to highest corporate margin. In a Free Market economy all costs, direct and indirect, are associated with each product produced.

A simple example of this concept is the production of a widget. The direct costs are raw materials, labor and infrastructure depreciation. The indirect costs are environmental costs, security, lost opportunity, quality control and any other costs that arise as a result of using this product. If a head of lettuce produced in Mexico costs $1 and a head of lettuce produced in Texas costs $1.50 one would say that the Mexican product costs less. This may or may not be true. If the head of lettuce from Mexico requires additional controls or has some bacteria. All of the costs verifying the head of lettuce and any health costs to individuals plus lost productivity while the person is in bed instead of working are all part of the costs of that head of lettuce.

Free Trade agreements strictly define how many controls may be made on an imported product. This is based on the concept of equals. Products produced in China or Mexico, under free trade agreements, are exactly the same quality. Most recently we have proof that this is not true. We have also found that the regulators responsible to control these products are not properly staffed to do their jobs. This is because these agencies are paid with tax dollars instead of charging the companies importing goods with the costs associated. We are in fact subsidizing imports.

Why should I, as a consumer and tax payer, be required to pay for an agency that controls quality of imports if I only use US made products?

More importantly why should US based production facilities be forced, not only to compete with subsidized imports, to pay the costs of those subsidized products?

I am all for Free Markets. I am also for each company paying for all costs associated with the production of those products. This means that oil companies should pay for international security in the Middle East. This means that every product imported must be inspected and the company importing that product must pay the costs associated. The companies importing products should also be required to verify that the product is made in a country where environmental costs are not superior to those in the US otherwise they should be required to pay a cost tariff to truly represent cost of goods.

The recent recall of toys with lead paint is a perfect example. It just so happens that my father drafted the legislation to remove lead from paint and spent the latest years of his career at CDC heading the Lead Poisoning Prevention program. This is a big deal. The damages from lead in paint are serious even at low levels. We can only assume that in China paint may contain lead. This means that the playing field is not equal and that every painted product entering the US from China should be tested for trace lead. The importer should pay the cost associated with these controls.

We can talk about tires from China, fruit from Mexico or South America, Oil from the Middle East. The facts are the same for all goods, imported goods receive direct and indirect subsidies. To have a true Free Market we must create an environment where the Free Market can exist.

Tags: Government Politics China Corporate America Finance Economy Reaganomics

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The World is one big happy family!

Our government has just sent a full scale high level delegation to China to discuss trade, international finance and, while not publicized, most likely China’s position as a primary holder of US debt. North Korea has come back to the forefront. Now that they are in the Nuclear club they want things from the US otherwise they will continue developing nuclear weapons. Obviously these things all translate to money, money and more money. Iran has quieted down a bit in the last week but most likely will jump back to the forefront with some nuclear threat of its own. Finally, Saudi Arabia informed the US that should the US pull out of Iraq the Saudi Government will provide support to the Sunni militants in Iraq.

These questions are discussed to nausea by the media, each taken individually as if they are different problems. The way I see the world instead says these are all symptoms of the same problem. The problem is that each country has there own interests while the US is attempting to create one big global market. The position of the US seems to be a noble objective and perhaps the first President to actually accomplish this will be remembered as a great President.

The problem is that our government seems to see the world through rose-colored glasses. Since each country will act in its own interest, they have little concern for a worldwide market. Additionally there is the perception that the US is rich and the other countries should get a piece of the American pie. This attitude is found in every aspect of international dealings. The Mexicans believe that the US should accept all of their poor and hungry. North Korea wants billions of dollars in aid and additional technology just to come to the table to talk about talking. China believes that they should be able to purchase US corporations without allowing the US to purchase China’s infrastructures. For the Chinese it is obvious. Why should they be excluded from purchasing US assets since everyone else can?

Perhaps it is time for the government to consider a change in policy. China does not see either Iran or Korea as a problem while they do see the US as a major threat to their economy feeling the necessity to threaten the US, during the most recent visit, not to do anything that they would perceive as protectionist. They also feel that the US does not understand China. Well, I agree. I do not understand China, I do not understand Iran, and I do not understand North Korea. China does understand these countries. Since our government feels that an intimate relationship with China is in our best interest how about we let China take care of these problems.

While many Americans are rich, many Americans are very poor. Many Americans are homeless even with a job and a college degree. Many Americans are scared to death to lose their health insurance and their jobs. We have serious problems here at home. We need to be concerned with the security of our borders before we think about Iraq’s borders. We do not need to be protectionist. We do need to act in our own best interest, just like everyone else in the world does.

Tags: Politics Iraq China North Korea venezuala Border Security Port Security Iran Illegal Immigration

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