Posts Tagged ‘Taxes’

You may think that, from the title above, I am recommending that we can solve the problem of greenhouse gas creation by having our congressmen shut their mouths.  That may be a good idea, but that’s not where I was going with it. 

According to the EPA’s most recent study,   70% of the CO2 gas emissions in the US come from generating electricity (utilities) and transportation (cars and trucks) with the utilities being the majority.  Fine, that makes sense since the burning of fossil fuels generates CO2 gas.  Since we knew all along that burning fossil fuels were potentially harmful, why did the government make it easier to commission new gas-fired power plants and nearly impossible to commission new nuclear plants?

According to the Nuclear Energy Institute, between 1992 and 2007, the US commissioned 123x more gas-fired energy capacity as it did nuclear capacity.  Never mind the fact that nuclear energy is also 10% less expensive compared to coal-fired and over 20% less expensive than gas-fired.  Why did this occur?  Regulatory hurdles is the short answer.  The long answer will have to wait until someone else with much more knowledge writes about it or I have more time. 

What really gets my goat (yes, goats also generate greenhouse gases) is that the congress’ proposed solution to the gas emission problem is called the Waxman-Markey bill.  This bill would place a whole new level of government burden on all industry and, according to their own estimates, raise each household’s energy bill by $1,600 per year.  If that wasn’t bad enough, our elected officials want to provide ‘free credits’ to some industries in order to get this legislation through.  These credits allow those that hold them to go on producing the pollution that the bill attempts to lessen.  Who would get these free credits?  Funny you should ask.  Those that create most of the problem in the first place, the electric utilities. 

So, to make this long, painful story shorter, our federal government has potentially created a climate problem (still up for discussion, of course) by favoring one form of electricity generation over a more efficient, cleaner form.  And to correct the problem, they propose to impose heavy regulation over all except for the one industry that represents the largest source.

At least we can say that our government is consistent…

There is a nice opinion article in the Wall Street Journal concerning a potential solution to the ever growing federal government. Here is the link.

I’m not a big fan of demonstrations.  From my limited experience with them, most of the passersby didn’t care about the demonstration and hated us more because we were making their commute inconvenient.  It just turns out most people aren’t as emotional about stopping the Hooter invasion as me…

However, this coming Wednesday is April 15th and many cities across the country are having demonstrations supporting a 2009 “Tea Party”.  I plan on attending.  I have more hope in this one than past public displays of dis-satisfaction (aka PDDs).  The past presidential election was conclusive but not “mandate worthy”.  Some are celebrating as though it was.  It wasn’t.  It was definitely worth celebrating as a large hurdle was  jumped; a young black man took the office.  Doesn’t matter what your politics are, that was a truely impressive event for our country. 

Unfortunately, many on one side of the aisle have gotten carried away and think they are entitled to force their agenda on all of us.  They can’t.  They shouldn’t.  Winning the office with a slight majority doesn’t provide them the opportunity to trample over our individual rights.  This event is to remind them that they really do work for us rather than the other way around.  Yes, many of the events were organized by supporters of the other party, but that doesn’t change the fact that the current holders of government power are enacting an agenda that less than 30% approve (see recent Gallup polls). 

It’s time to let them know our mandate; protecting individual liberty.  Hope to see you there.

Politicians are not economists and that is the biggest problem.  If you have time to read one long and boring financial piece, I suggest you choose John Mauldin’s Velocity of Money note.  If you choose to have a life and not be bothered with it, let me summarize a significant point within it.  The velocity of money is one of two variables that goes into determining our GDP, or our level of economic activity. 

The formula is GDP = M * V, which is the amount of money in the system times the number of times it trades hands (that’s the velocity of money).  In the article, he has a graph that charts the velocity of money through time.  It has averaged 1.67x (meaning money trades hands 1.67 times in a year) since 1900.  In the last decade, it was in the 2x range.  Currently, it has dropped to 1.72x.  Why the move up and then move down?  The biggest swing factor is the amount of leverage placed on money (either by banks, corporations, governments, or individuals).  The 1990s and early 2000s were years of increasing amount of leverage (debt).  In the past 18 months, we have seen people and enterprises lower their debt levels, preparing for a bad economy.  This naturally lowers the velocity.

Now, why do I say that the government wants to slow us down?  It comes down to the fact that government money velocity is thought to be lower than private sector activity.  The current administration puts the number at 1.5x.  I have heard others says that that is a best case number.  Whatever the real number, when the government spends money, it has less of an impact on our economy that when the private sector does since our velocity factor is greater than 1.5x (again, that may be putting a positive spin on the actual government influence).  For the government to spend this money, they are needing to take it from some place, and that my friends, is the private sector.  So, when the government spends $1, it has the best case scenario of making $1.5 of economic activity.  When you and I spend a $1, we make $1.7 of economic activity.  It’s just basic math.