Archive for April, 2008

Well said Mr. President

Posted in Activism on April 29, 2008 by poyers

President Bush addressing the press “corps” regarding Afghanistan:


Addressing the high oil prices

Posted in Oil on April 25, 2008 by poyers

Mr. McCain and Mrs. Clinton have brought up a temporary solution to high oil prices for the summer; a tax holiday from Memorial Day to Labor Day.  In essence, the 18% or so gas tax the federal government currently charges would be eliminated for four months.  It sounds nice and might have a short-term effect, but there is no real solution in this grandstanding at all.  It is just politicians assuming that we are dumb.  For the record, Obama is against the idea; although in 2000 he supported a similar plan in Illinois.  This time he is against it because the funds go to repair and expand the highway system.

What if we were to try these three measures?  Would they have any impact on the price of gas?

  • End state fuel-mixture mandates — Our refineries have to produce upwards of 30 different formulations of gasoline for different states. It makes our supply chain brittle when it should be flexible and leaves us vulnerable to sudden price hikes when refineries have problems.
  • Begin expediting the approval process for more refineries — We have not built a new refinery in the US for 30 years. We keep expanding the capacity at existing refineries instead, and that also leaves the supply chain vulnerable to disruption when a refinery has to shut down. They now have to run at full capacity constantly in order to meet demand and keep prices down. Over the last two decades, we also now have to import more and more refined gasoline instead of crude to keep up with the demand, thanks in part to a lack of refinery capacity here in the US.
  • Allow more domestic drilling — Oil, like any commodity, increases in price when demand goes up and supply doesn’t meet it. With China and India vastly increasing their demand, prices have gone up accordingly. The only way to get the prices down is to either reduce demand or increase supply. That means the US has to start using its own resources rather than living off the resources of others.
  • The crumbling of LA?

    Posted in Activism on April 23, 2008 by poyers

    This is an interesting article from the Guardian regarding the situation in LA.

    It says that LA is becoming a “third world city” thanks to its overwhelming number of immigrants who are poor and illiterate. 

    The article says that this might be the future of America as the baby boomers move along.  The shame according to them is that there will be a huge wealth gap with some elites on top and the rest lagging way behind.

    I wonder your thoughts?

    Some NAFTA perspective

    Posted in Activism on April 22, 2008 by poyers

    I have been hearing a good deal of talk against NAFTA and other free trade agreements over the past couple of weeks and I wanted to offer a different perspective:

    There is no question that the imbalance of trade within Nafta has soared since 2000. That deficit has almost doubled to nearly $140 billion in 2007, from $77 billion in 2000. But the deficit in manufactured goods did not displace U.S. factory production.

    What the antitrade advocates have been hiding from the candidates (or maybe don’t know themselves) is that almost all of the increase in our Nafta deficit since 2000 has been in increased U.S. imports of energy from Canada and Mexico. In fact, $58 billion of the $62 billion increase in our Nafta deficit has been in energy imports. That’s 95% of the total increase.

    We need that oil and gas, and we would rather get it from our friendly neighbors. Surely no one seeks to argue that America would be better off saying no to Mexican and Canadian oil and gas, advocating that we instead import that energy from less secure sources farther from our borders.

    Except for energy, though, our trade deficit within Nafta has hardly grown at all – only $3.5 billion from 2000-2007. Our agricultural and manufactured goods sales to Nafta countries have just about kept pace with our imports. That’s a lot more than one can say about the rest of our foreign trade.

    While the nonenergy deficit within Nafta has grown less than $4 billion since the job loss started, with the rest of the world it grew over $150 billion. Put another way, the increase in our nonenergy deficit within Nafta has accounted for only 2% of the increase in our global nonenergy deficit since 2000.

    Why are the candidates so focused on 2% of our trade problem rather than on the other 98%? Our nonenergy deficit with the high-wage, high-environmental-standard European Union (with whom we have no free trade agreement) grew 10 times as much as it did with Nafta. And of course, with China the deficit grew even more.

    None of this is to say that some U.S. factories haven’t closed and their production moved to Canada or Mexico. Certainly that has happened. But in the case of Nafta, that job impact has been almost exactly balanced by increased U.S. production and exports of farm and factory goods.

    Suppose our trade with the rest of the world had performed as it did within Nafta. Instead of seeing our nonenergy trade deficit grow over $155 billion, it would have grown only by $25 billion. That would have put us ahead by $130 billion, which sounds pretty good. 

    Big Oil

    Posted in Oil on April 22, 2008 by poyers

    I have been sitting on thoughts stemming from Congress’ interview of the CEO’s of big oil not too long ago but I wanted to write some things. It seems timely given the PA primary today and Mr. Obama, Mr. McCain, and Mrs. Clinton’s recent remarks on the economy and their promises and platforms to give everybody a job and make life great.

    The big oil company tax benefits that our politicians remind us of virtually every day are tax breaks enjoyed by corporations across the board. So when the politicians cite those tax breaks as an excuse to tell the oil companies what to do with their profits they’re laying the groundwork for a system in which politicians can dictate, to one or extent or another, how virtually all American businesses spend and invest their profits.  

    Listening to these politicians, many of whom have never been responsible for delivering a profit in their entire lives, telling the oil companies what they should and should not do (translate into what they can and cannot do) with the money that they earn made me ill.  Now I blame those oil company executives too. They were submissive before that congressional inquisition. These politicians work for the stockholders and employees of these oil companies … not the other way around. A little bit of spine in some of these highly-paid executives would have been a wonderful thing to watch yesterday.  The political hacks made a big deal about the huge profits these oil companies made over the past few years. All of this posturing was a sham .. and the politicians knew it. They also knew that most of the people would watch them deliver their big oil smack down on TV wouldn’t know a profit from a profit margin if their next six-pack and their big screen TVs depended on it.

    Let’s say you sell widgets. It costs you 92 cents to make a widget, and you sell the widget for a dollar. You make eight cents on the sale of that widget. Your profit is eight cents – your profit margin is 8%. Now, let’s say that your cost of business, comprised mostly of raw materials, goes up. Now it costs you $1.84 to make a widget. You respond by raising the price of your widgets by a dollar. They now cost $2.00 each. Subtract your cost of doing business ($1.84) from sales revenues for one widget ($2.00) and you have a profit of 16 cents. Wow! Your profit has doubled! But wait! What is your profit margin? How much is your company making for every widget it sells? Nothing has changed. Your profit margin is still 8%. Profits have doubled .. the profit margin has remained the same. The only reason the profits doubled is that the price of your raw materials has gone up. Has anyone looked at the price of crude oil lately?

    Last year the big five oil companies made around $123 billion in profits. Pretty strong. But what was their profit margin? Around 9%. Same as the year before and the year before that. The politicians can’t pander to the dumb masses by slamming profit margins … so they play the dishonest game of slamming the gross profits, and the media lets them skate. They start talking about “windfall” profits. Tell me … how is it a windfall profit when the profit margin is remaining effectively the same?

    Some politicians, of course, want to take this situation with gas prices and figure out a way to turn it into another government entitlement program. They point out that some low-income Americans pay as much as 10% of their incomes for fuel. So .. what to do? Let’s make some more suggestions as to how the oil companies should spend their profits. Two senators, Republican Olympia Snowe of Maine and Democrat Jack Reed of Rhode Island have asked the oil companies to voluntarily help low income consumers.  They want the oil companies to contribute to a fund to help “low income” consumers pay for this upcoming winter’s heating bills. Oh and to also pay for their transportation costs later this summer. The Senators complain that these big oil companies “need to share some of their profits with consumers who are in need.” Since when it is the government’s role to tell a private company that it needs to share its profits. It is not the government’s money. This money belongs to the teacher’s union retirement funds, the police and fire fighter pension plans and other organizations and individuals who have purchased stock in these companies. Every dollar these politicians wrestle away from the oil companies is money out of the pockets of the shareholders .. or money the oil companies aren’t going to invest in more energy production.

    We need to take ownership of our lives and tell the government to get away from us.  They do not know what is best for us as individuals and they have proven time and again from the dawn of time to be terrible at spending and budgeting money.

    Obama misrepresenting McCain’s comments part II

    Posted in Activism on April 21, 2008 by poyers

    I understand completely Mr. Obama’s misrepresenting Mr. McCain’s “100 years in Iraq” comments.  When the core of your party hates George Bush and the war so much, you say things like this just to get people fired up and nobody on either side really cares if there is truth behind it or not.  While that goes against the image that Obama wants to portray, it is political pandering and who cares.

    But to do such a thing again; comparing McCain to George Bush and this time on an issue (the economy) that you have proven so horribly inept and ignorant about is a little bit much for the candidate of hope and change.

    According to Obama: “John McCain yesterday said that we are, that, that during George Bush’s tenure, the economy actually made great progress,” Obama said. “That’s his quote.”  This is supposed to be a criticism by the way (explain to me how if the economy is so bad, I get an email everyday from the Obama campaign asking for money and he is able to raise $50M a month; sounds like the Obama supporters are doing pretty well).

    You have to love the “quote” for it is easy to find a transcript of McCain’s acutal “quote” from Bloomberg television:

    Peter Cook: Do you think that when Americans are asked, “Are you better off today than before George Bush took office over seven years ago,” what will their answer be?

    McCain: Certainly at this time we are in very challenging times. We all recognize that. Families are sitting around the kitchen table this evening and figuring out whether they’re going to be able to keep their home or not. They’re figuring out why it is that someone in their family or their neighbor has lost their job. There’s no doubt that we are in enormous difficulties. I think if you look at the overall record and millions of jobs having been created, et cetera, et cetera, you could make an argument that there’s been great progress economically over that period of time. But that’s no comfort. That’s no comfort to families now that are facing these tremendous economic challenges.

    It is not necessarily the politics and the deception and the pandering and the lies from Obama that are annoying to me; afterall he is a politician in every way shape or form.  It is the constant communication that the American public is stupid and simple-minded and therefore, this particular politician can get up there and tell us what we are feeling, how we are feeling, and how to respond to what he says.  He is always having to explain, restate, and translate his meaning because we are too stupid to understand him.  Listen to him speak off the cuff and then come out the following day or week with an explanation and criticism of the interpretation.  He does it all the time and the inference is annoying.

    My other great grievance is that the Obama supporters refuse to acknowledge that Mr. Obama is a politician just like all of the others.  He plays all of the games and says all of the things that every other weasel does.  Why is he allowed to get away with it? 

    The cost of war

    Posted in Activism on April 9, 2008 by poyers

    I thought that I might provide some information regarding the costs of the war since 2001.  It seems that we are achieving success since General Petraeus took over but I continue to hear and read displeasure in the war’s costs.  Let us take a look at some things:

    During the five years of the Iraq war the U.S. economy has performed remarkably well. Real GDP has increased by 16 percent, or 3 percent annually. The unemployment rate has hovered below a historically low 5 percent for quite some time. Nearly 10 million jobs have been created. Household net worth has increased by $20 trillion. Industrial production has expanded by 13.5 percent.  Even home prices, despite the current correction, have increased by 20 percent.

    Lest we soon forget, anti-freedom, anti-capitalism jihadists were attempting to drive a dagger through our economy. Not only did they fail miserably on that front, they also failed to stem the rising tide of free-market capitalism throughout the world. Global GDP has averaged nearly 5 percent annually. The capitalization of the world’s stock market increased 159 percent — or $35 trillion. Meanwhile, new emerging-market economies saw their stock market index collectively rise by 223 percent.

    Now, responding that the $3trillion price tag is too high; Modern economics has long understood that the notion of a one-for-one guns-versus-butter trade-off is simply wrong. A high proportion of money spent on defense goes back into the U.S. economy in the form of salaries paid to the more than 5 million Americans employed directly or indirectly by the Defense Department, and payments to the defense industry and the long and complex supply chains from which they draw their raw materials. Military spending has traditionally been a form of economic stimulus, and wars more commonly end recessions or depressions than start them. That’s not a good reason to start a war, but neither is it a good reason to lose one. The impact of the current war on the U.S. economy, finally, is far smaller than the impact of previous major conflicts. Military spending in World War II ranged from 17.8 percent of GDP to 37.5 percent; in Korea from 5.0 percent (in 1950 — 7.4 percent in 1951) to 14.2 percent; in Vietnam from 7.4 percent to 9.4 percent. Current expenditures on the Iraq and Afghanistan Wars bring total defense expenditures to something well below 5 percent of GDP. Even granting the simplistic and misleading $3 trillion figure, $3 trillion is about 5 percent of the nearly $60 trillion American GDP over the five years of the war.

    The burden of the war on the American economy has simply not been heavy enough to have caused a recession on its own. The collapse of the housing bubble, the sub-prime mortgage crisis, rising oil prices (which losing the war will not lower), and a variety of other factors have been far more important in slowing the economy than any brake the war might have put on it. Defense spending as a percentage of total federal spending is now around 20 percent. In World War II, it ranged from 73 percent to 89.5 percent; in Korea it ranged from 32.2 percent (1950 — 51.8 percent in 1951) to 69.5 percent; and in Vietnam from 42.8 percent to 46 percent. In more context: at the height of spending on this war, defense spending was only 12.3 percent of all public spending (including federal, state, and local expenditures); in World War II the high was 82.1 percent; in Korea, 52.5 percent; and in Vietnam 31.3 percent.

    While it is true that security spending (including Homeland Security and many costs not related to the Iraq war) is the largest single line-item in the 2008 Federal budget at $656 billion, mandatory programs like Social Security, Medicare, Medicaid, and S-CHIP, and other non-security discretionary programs received $610 billion, $391 billion, $211 billion, and $481 billion respectively. The $100 billion or so of direct war costs that could theoretically be recouped by withdrawing all of our forces from Iraq and Afghanistan is less than 6 percent of the $1.7 trillion spent on mandatory and discretionary domestic programs. The financial cost of the war, high though it is, is simply not a large enough part of the federal budget, to say nothing of the GDP, to have played a significant part in the American economy, particularly considering the fact that a high percentage of defense dollars go back into that economy.

    If only our schools were fully funded and the Air Force had to have bake-sales to buy bombers…. Well, the Air Force is just about at the bake-sale level thanks to consistent under-spending on defense since 1991. But if we stopped the war tomorrow, would our schools get all the money those who make this argument think they need? Of course not. The war is being funded on an emergency basis (for good or ill) and its cost has not been offset by tax increases.  In the real world, there is no way that even a Democratic Congress would spend $100 billion a year in non-offset emergency authorizations for education or health care, even if some war critics think that they would like it to do so. As for increasing domestic spending, those who believe that we should raise taxes and spend more money on domestic programs can still advocate that policy, whatever its wisdom.

    This is the war, and we’re winning it no matter how late in the game. Let’s not decide that we’d rather lose.