Something about Oil...

If you drive down the 405 Freeway from Los Angeles towards Orange County, you will invariably see a large American Flag draped over a industrial expanse. Among the smoke-stacks, economizers, tubing, flaring, iron and steel is a oil refinery. These refineries take in oil from Alaska and refine to use in various products that range from plastics and nitrogen-rich fertilizers to gasoline or diesel for your car. This is how the business of oil becomes the business of American (and Californian) consumers.

If the price of oil spikes, the cost for nitrogen-infused fertilizers goes up, which leads to an increase in the cost of production for farmers who use that fertilizer, which forces them to charge higher prices for their goods which leads to higher costs at the supermarket. While this may not be the main driver for an increase in food prices (salmonella outbreaks, weather, pests, etc. aside), it is still a way your average Whole Foods or Trader Joes shopper can connect the price of oil to the price of produce.

If a refinery shuts down for maintenance, and the market for the oil that comes from that refinery becomes tight, the price of oil from that refinery will go up. If a bunch of oil refineries shut down for maintenance, then the region that receives oil from those refineries will go up in cost. This will lead to higher prices at the pump, assuming a good portion of that oil is refined for gasoline and diesel.

If an oil producing country experiences social or political upheaval that paralyzes their oil production, then the global cost of oil will rise. The United States imports nearly half of the oil it consumes (in one way or another). If the global cost of oil goes up, the price at the pump will surely be affected.

Each of these situations have occurred in some capacity during the current Administration. The price of oil on the global and domestic market spiked during the Arab Spring (Libya), we are entering a phase where refineries are shutting down for maintenance and higher commodity prices have been a result of an increase in oil prices and the recession.

There are a couple factors that are leading to higher oil prices, which are translating to higher prices at the pump. But, let's look at a parallel economic universe to give you a perspective.

Coal...

Domestic coal consumption has been dropping over the last 5-10 yrs. At the same time, the price of coal has been steadily rising. Demand from Asia (China, South Korea, Japan), South America (Brazil, Colombia) and Europe (Germany) has grown. Traditional sources of coal for the international export market (Australia, Indonesia) have been hit with weather events and supply constraints. So, the US has stepped in to cover the gap. This has led to an increase in the price of coal on the international market for thermal (steam generation for electricity) and metallurgical (steel making) purposes. At the same time, coal companies have been cutting domestic production due to lower demand which has been caused (mostly) by a precipitous drop in the price of natural gas, an alternative to coal power. While the US is far from exporting more coal than it burns, many analysts from major coal companies (Arch, Peabody, Alpha Natural, Patriot, Cloud Peak, CONSOL, Arcelor Mittal, etc) are seeing a robust export market into the near future. Even though domestic consumption is low, production in places like the Powder River Basin is set to increase as more domestic and international partners buy up mine expansions.

Oil...

For the first time in decades, the US has become a net exporter of oil. Demand from developing countries for US oil exports has grown dramatically in the last couple of years. Domestic oil production has increased (instigated during the last Administration), but domestic consumption has gone down. This has been due to the recession and an increase in the average fuel efficiency of autos sold in the US. While we have enough oil to satiate our consumption, the drop in demand coupled with increased exports has led to an increase in price. Refineries are also shutting down for maintenance and moving towards higher cost blends for certain regions (see CA gas prices). And, threats from Iran on closing the Straits of Hormuz are not helping.

The Point: There is no Administration policy that could alleviate the increasing price of oil in the short term. If Obama approved the Keystone XL pipeline tomorrow, the price of oil and gas at the pump would still be high for the short term. Republicans have been criticizing the Administration for what they characterize as overreaching regulations and stalling on the exploration of new oil and gas fields. Putting aside the exploratory well will be drilled in the Arctic in the next few months, if the Administration approved a good amount of onshore and offshore wells, the price of gas would remain relatively high. As long as we are connected to the international market for oil, we will be subject to it's fluctuations. The Administration can do nothing to influence that.

So...why, with all this information in mind, are the Republican nominees blaming the Administration's policies, talking about offshore oil exploration, and promising far-flung dreams of $2.50/gallon gas?

Political gain. Pure and simple. Their assertions are nowhere near the universe where fact resides.

And a point on the Strategic Petroleum Reserves...If the Administration were to release oil from the SPR, it would send a price signal to the market that we are in a dire situation in regards to oil supply. But, we are not. We have plenty of supply. We are just exporting more and consuming less and feeling the effects of the international market.

Gingrich/Romney and the Art of Buzzwords

When the TEA Party anti-Obama, anti-tax rhetoric was making it's way from one state to another ala TV personalities like Glenn Beck and Sean Hannity, the art of the buzzword was revitalized.

A buzzword is a polarizing statement or word that is meant to radicalize or motivate a political base. During the Bush Administration, many on the left compared Bush to Hitler, which made their arguments both polarizing and illegitimate. During the current administration, talking heads like Rush Limbaugh and Glenn Beck compared Obama to Hitler, Rev Jeremiah Wright and radical William Ayers.

The problem with buzzwords is ingrained in their simplicity. The average person listening to talking heads absorbs buzzwords more readily than nuanced details. When Sean Hannity criticizes the Obama Administration by using the graphic of the "apples" of security, industry and commerce "falling" into the "basket of Socialism," viewers will make their own conclusions based on vague and often simplified concepts. Hannity's viewers will, more often than not, have a completely misguided understanding of both the Administration's policies and the tenets of modern Socialism. But, the words evoke an ideal of a bygone era where Socialism and Communism were the antithesis of American.

Prospective Republican presidential nominees Newt Gingrich and Mitt Romney have stepped up their buzzword attacks on the Administration. I am going to break down some of the buzzword attacks of recent:

"Bureaucratic socialist" (Gingrich)

These two words slyly evokes the characteristics of someone who supports an inefficient government and is anti-American. Those who rail against the government use "bureaucratic red tape" as a reason to cut funding from programs that range from Nuclear Energy to regulations covering farm dust. Socialism is something that is considered, Prima Facie, anti-American.

"Kenyan, anti-colonial behavior" (Gingrich)

This statement covertly revives the "birther" issue without explicitly supporting it. Gingrich would lose the race immediately if he overtly supported the deranged conspiracies of the Birthers. But, by adding in "Kenyan" anti-colonial, he is bringing up the idea that Obama was born in Kenya. The anti-colonial part of the statement has many implications, none of which are elaborated on by the former Speaker. It could refer to Kenyan nationalism in the colonial and post-colonial era, it could refer to the Mau-Mau Movement or it could be veiled racism.

"...takes political inspiration from Europe" (Romney), "...must choose between a European-style welfare state and a free land" (Romney), "I am for the Constitution, he is for European socialism" (Gingrich)

Calling Obama a "European" seems to be all the rage among the potential nominees. By evoking Europe, Romney and Gingrich instill fear into voters that the U.S. will end up like the faltering economies of Ireland, Portugal and Greece. What voters see in the media is that these governments have failed because of their bloated public sector. So, they make the assumption that if we cut from our public sector and elect a president who will work to shrink the government, we will not end up like Greece, Portugal or Ireland. Even mentioning the word Europe implies high government wages, high debt, socialism, anti-Americanism and economic failure.

"I am for the Declaration of Independence, he is for the writing of Saul Alinsky." (Gringrich)

Gringrich seems to be giving the average American more credit. I know many educated people who have no idea who Saul Alinsky is. This one, while not apparent to most, brings up the same effects as comparing Obama to Rev Jeremiah Wright or William Ayers. Alinsky was a community organizer who taught minority communities how to gain political power through organizing. While he was not a socialist or a communist, mentioning him brings up the Palin-made criticism of community organizing and its connection to socialism. Alinsky's "Rules for Radicals" was very confrontational. According to psychologist Drew Westen , the combination of a "Jewish-sounding" last name the idea of radicalism could appeal to the antisemitic voters.

What I despise most about buzzwords is that it polarizes voters instead of informing them. Those who support the existence of the Electoral College often point to a popular vote that assumes, to a certain extent, an informed voter. By listening to the nominees and the talking heads, an average voter would come up with the assumption that socialism will and always has been Anti-American, the government is inefficient and the European governments of Ireland, Portugal and Greece failed because they had a bloated public sector. They will also think that Obama is a Kenyan socialist who values European-style democracy over the basic tenets of the Constitution.

This kind of conspiratorial hogwash should have no place in electoral politics. And, mudslinging is ineffectual once elected. If you don't believe me, just look at the effectiveness of the Freshman TEA Party class in the House.

Prop 13 Has and Always Will Be a Problem

There is a trend among Californians these days: We love to think of progressive ideas, but rarely have the will to get them passed. Some examples:

1. We love public transit, but will never amend the constitution to make sure gas tax goes to public transit projects (currently it is required, but law, to go to maintaining roads and highways).

2. We love public transit, but we will never pass a tax to pay for it.

3. We love clean air, but our largest public utility is having trouble with divesting from coal power

4. We love that our public universities are top in the country in academics and athletics, but our legislators would rather cut hundreds of millions from them instead of pass a tax to support them.

5. We love our K-12 education, yet our legislators are unwilling to pass a tax to prevent cuts to the school year

6. We love our public services, yet complain about high taxes

7. We complain about high taxes and bad schools, but still overwhelmingly support Proposition 13

The last (and bold) point is what this blog post is about. Some controversial points about Prop 13 are:

1. Maximum value-based tax on real property shall not exceed 1% of the value of the property.

2. Decrease in property taxes by assessing the real value of a property at its 1975 price and restricting assessment of annual increases to an inflation factor not to exceed 2%. Reassessment of a new value can only happen under an ownership change or completion of construction.

3. Requires a 2/3 majority of both houses of the CA Legislature to increase tax rates or collect revenues.

4. Requires a 2/3 majority in local elections to pass an increase in special taxes

The passage of Prop 13 was a result of the "Taxpayer Revolution" headed off by anti-tax people like Howard Jarvis. But, Prop 13, which is considered to be the third rail of CA politics, has caused decreased tax revenues for localities, which have been forced to find creative ways to recapture those monies.

Here are some supportive arguments for Prop 13:

1. It creates certainty for Homeowners

True. But, it created uncertainty for localities and pegs a portion of their tax base to the rise and fall of the real estate market. This is especially bad in coastal communities, where home ownership and prices are higher. These localities must find creative ways to recapture tax money. They become dependent on state block grants and look to "use fees" and higher sales taxes. Cities have begun to decrease services and increase fees to compensate for that move.

2. The acquisition-value assessment provides property tax equity

Suspect. The scheme is good for taxpayers if you look at the prop as a whole. But, it's condition that the value be reassessed for change of ownership highly favors commercial properties. If a commercial property is owned by one company and it sells, but continues to be deeded to that company, they are exempt from the reassessment condition in Prop 13. This works well for those who own big box stores and shopping malls.

3. Decreases volatility for funding of municipalities

True. But, it also decreases that funding. It creates certainty, but in a negative way. See my answer for #1.

Some negatives:

1. Sales disincentives

Because of the condition that the house value will be reassessed upon change in ownership, there is a disincentive towards upward mobility or selling of a home. There is also a disincentive to build more homes.

2. Loss of Revenues to local government

The 2% maximum has under paced the Consumer Price Index, giving local government less money to collect against the 2% levy or when the price of a parcel is reassessed. Translation: less tax money to the coffer. Result: find ways to recover that loss money through creative means (see #1 under "Arguments for Prop 13").

3. Bubbles and Ownership/Renting volatility

When housing bubbles occur, taxes collected increase due to increase in housing values. Once the bubble bursts, downward pressure is put on collected revenues, creating a tax deficit. Trends in ownership/renting follow these bubbles creating both rigidity and friction in the housing market. This can attributed to Prop 13.

4. Price Increase for New Developments

Because there is a disincentive to move out of a home due to the reassessment condition, older homeowners are not selling and younger prospective homeowners are increasingly renting. Finding new places to build homes in a constrained market also leads to higher prices. Adding in environmental, geographical and development limitations only makes prices for development even higher.

When Gov. Schwarzenegger was elected governor in a recall, his financial adviser Warren Buffett told him that Prop 13 needed to be repealed or changed in order to cover the widening state budget deficit. The governor said it was no politically possible. Current governor Jerry Brown has openly criticized Prop 13 and it's negative affects on the power of local governments. Part of Brown's initial budget was to return power back to local governments and away from Sacramento.

With the partisan gridlock in Sacramento holding back any modification to Prop 13, these inequities, high sales/use taxes and uncertainty will only persist.

Mississippi Amendment 26: Knowing What's Right Since Jesus Rode Dinosaurs

Let me first explain the title of this blog:

Whenever I ridicule the religious right for thinking the federal government (or state government) should be a lightning rod for Christian morality, I always include a statement about the ridiculousness of creationism. Creationism, and Intelligent Design, are anathema to rationality and the scientific method. Based on observations made by paleontologists, anthropologists, planetary scientists, geophysicists, archaeologists, cosmologists, evolutionary biologists and geneticists, the earth is 4.54 billion years old, humans evolved from apes and the universe is expanding at an ever increasing rate. Saying that the earth is around 6,000 years old is as rational as saying that Jesus rode dinosaurs.

The underlying message is that the religious right, with enough support, can turn these superstitions into law. I will defend to the end of my life someone's right to be religious and to follow the doctrines supported by whatever church, synagogue, mosque or holy pillar that is the center for their beliefs. But, the law of the United States of America, and it's many states, should not include the moral inclinations of any single religion. The whole reasoning behind the 1st Amendment's religious protection clause was to make sure the country did make any law "respecting the establishment of a certain religion, or prohibiting the free exercise thereof." Jefferson's purpose behind including the freedom of religious clause was to make sure that there was a "wall of separation" between church (any religion) and state. I interpret this protection as a law that makes sure no law is established on the basis of the core beliefs of one religion.

This brings us to Mississippi, and it's Amendment 26 "Personhood" legislation. This law, if passed, would define "personhood" or "life" as starting at the time of conception. This will effectively outlaw abortion (in ALL cases), birth control, morning after pills and in vitro fertilization. Haley Barbour, governor-extraordinaire, said that he supports the law, but is hesitant because it includes ambiguous language like "life begins at fertilization, or cloning, or the functional equivalent thereof."

Here is my beef:

1. It is based on religious inclinations: Most Pro-Life (whatever that means) believe that life starts at conception because they follow the religious (Catholic mostly) idea that sex is purely for procreation. Keep that belief to yourself and out of our statehouses.

2. It casts the government as a moral crusader: It makes the Mississippi government an enforcer of anti-abortion morality. No government should make laws to enforce the moral inclinations of one group.

3. It translates unanswered ethical questions into law: It essentially settles an ongoing ethical debate, de jure. The definition of "personhood" and "where life starts" has been debated for decades, and there are good arguments on both sides. But to make a law that forces the debate to a conclusion is unbelievably premature.

4. It defines life: No one has the right to define where life starts. Not Haley Barbour, not Mississppi, not Barack Obama...no one.

5. It gives the Mississippi government too much power over the bodies of women: Women have the right to choose what they want to do with their body. Simple as that. No state has the right to legislate that choice. This is why the Federal Government has the Hyde Amendment. It makes sure that the government does not meddle with the abortion debate.

The encroachment of any government on the rights of individuals should stop when it comes to legislating abortion. This amendment goes a step further by defining life, and thereby expanding the definition of murder. This will not only have implications for women's rights, but will also impact family planning and restrict access to in-vitro fertilization for Mississippians who cannot conceive.

What disturbs me most is the quote by obstetrician Dr. Freda Bush:

"In rape and incest, the life that has created during that has done nothing to deserve death. The mother is a victim and there is no reason to make a victim a murderer."

This scary, sick and demented logic is common, unfortunately. This Amendment will only encourage this kind of view, while setting women's rights back to the age of back alleys and clothes hangers.

Herman Cain: Out of Touch with Reality and Race

The Joint Committee on Deficit Reduction has until Thanksgiving to come up with a plan to reduce the deficit by $1.5 trillion. If they don't, a series of emergency cuts will be triggered that will slash from entitlements (Democrats cry) and the Pentagon (Republicans cry).

At this point, I am not sure if a deal will be struck. Debt reduction aside, the current political situation, as it is related to condition on Main Street, is abysmal. Herman Cain is a prime example of this disconnect:

I don't enjoy using the "race card," but in this case it is completely appropriate. When he was on the Hannity Show earlier this month, Cain said that he does not "have a lot of patience for people who want to blame racism on the fact that some people don't make it America." Next he will tell us how far in the sand you have to stick your head before you get the Republican nomination. Let me make something abundantly clear to Mr. Cain: Racism exists. The legacy of racism is still prevalent today. It is embodied in the fact that a large population of African-American people are unemployed and live in low income communities. If given the same opportunities to succeed, as you have so purported with your statement Mr. Cain, then why is statistic still starkly visible?

Cain's attempt to "simplify" the tax code through his infamous "9-9-9" plan will only burden the middle class and low-income communities with more taxes, while giving a nice tax break for those who make exorbitantly large amounts of money. Tax reform is a respectable, yet gargantuan undertaking. You cannot simply extend what amounts to a "flat tax" and (with a wave of the wand) make all the tax problems disappear. First, only about half of all Americans pay taxes. Some of those people are either on some sort of government assistance, or do not make enough money. With this plan, low income communities and the elderly will see their taxes go up. Second, simplifying the tax code is a nice slogan (like 9-9-9), but it is also very unpopular if you decide to eliminate deductions that reduce the tax rate of middle income earners. It would also raise sales tax in 47 states.

Then, there is the deficit. By some estimates, this plan would cut federal tax receipts in half. Cain's plan is an extreme example on how cutting taxes and spending can lead to both higher deficits and higher unemployment (as I have said here, here and here).

Herman Cain is just one, albeit extreme, example of how Republicans vying for the nomination in 2012 and those seated in the Halls of Congress are increasingly out of touch with reality. They are calling for measures to boost employment, while pressuring the Deficit Committee to reduce the deficit in a completely unbalanced (deep cuts) and economically unsound way.

We are continuously bombarded with messages about the 99% and the tax rate of wealthy Americans. What we should be hearing from candidates and Washington is about the 16% - those who are unemployed or have given up on looking for employment. Tax rates and political grandstanding mean nothing to those in the 16%.

Lamar Alexander: Thank You

I hardly ever agree with Republicans. I can't stand their position on healthcare, abortion, environmental regulations, rights for homosexuals and the role of government. Recently, I have pushed myself farther left in reaction to the polarizing right shift that Congress and the administration has taken in the last year. Everything from rolling back public health regulations to focusing a debt debate on an imbalanced package of cuts without entitlement reform or a long term source of revenues have shown me that Congress is too dysfunctional to create progress and pass legislation to help those who are most in need.

The focus in Washington has been to create an environment where "job creators" can find enough "certainty" to start hiring workers. Well, that's what Republicans have been saying. In a recent interview with NPR, Finance Committee Chairman Paul Ryan (R-WI) said that short term incentives like payroll taxes and a "second stimulus" don't give "job creators" enough support to start hiring. He used this point to justify a rollback in regulation and a massive tax cut for the wealthiest (IE, the "job creators").

As for those who were affected the most by the recession and the state and national service cuts, he said that his policies will "widen the pie" so more people have opportunities to return to work. The problem with this approach is that it is a long term fix at a time when a short term solution is necessary. For the poor and middle class, infrastructure jobs and incentives like the payroll tax cut will allow for short term job growth while leadership in Congress can deal with long term fiscal health, like deficit reduction, regulation reform and changes to the tax code.

This blog is related to the partisan rancor that has enveloped Congress, pushing it's approaval rating to the low teens and spotlighting polarizing figures like Michelle Bachmann (R-MN), Paul Ryan (R-WI) and Jim DeMint (R-SC) while completely ignoring statesman like John Kerry (D-MA), John McCain (R-AZ) and the subject of this blog: Lamar Alexander (R-TN).

Lamar Alexander is a Republican Senator from Tennessee. The 71 year old has recently announced that he will be stepping down from his position as the 3rd most powerful Republican in the Senate to "get the best results on the issues [he] care[s] about" which means that "you have to get some people from the other party to agree with you or you don't get 60 votes."

Thank you.

No truer words have ever (well, maybe not in the last year) been spoken. Here is a Senator (a Republican, no less) who is known for bucking his own party in the face of stern opposition (and cowardly name calling). He worked across the aisle on the failed energy and climate bill, he voted for the START arms reduction treaty, he worked on the "Gang of Six" deficit panel, worked to find suitable areas for nuclear storage with Barbara Boxer (D-CA) and Lisa Murkowski (R-AK), and even mentioned that he was open to supporting "increased revenues" as a part of a deficit reduction plan.

There are many areas I disagree with Alexander on. But, at a time when the debate has become so toxic that bills to fund disaster relief are being held up by fiscal orthodoxies and presidential candidates are calling the Federal Reserve treasonous, it is always nice to hear that some Senators want to get something done.

Here's the video from the Senate Floor:

Political Center: Where Hast Thou Gone?

Barack Obama was elected on a wave of optimism. Starting from his speech at the Democratic National Convention in 2004, to his response to President Bush's State of the Union Address in 2006, it looked as if the Democratic Party had found a superstar.

And, they did.

He ran an extremely successful grassroots campaign, raised hundreds of millions of dollars (pre-Citizen's United) and energized young voters. I was one of those voters.

But, the hazy days of malaise are starting to creep in, and I have become disillusioned. Let's take a look at how things have changed:

Obama's post-partisanship rhetoric was something I latched onto when he was elected. To me, this meant that he was going to work across the aisle to create bipartisan legislation that would grow the economy, protect the environment, ensure our national security and get us out of the recession that he had inherited.

He started with the stimulus package, which enjoyed bipartisan support.

Then, he went to universal healthcare, which was a campaign pledge. The debate over the healthcare law was so caustic, that it rendered any Bush era rhetoric almost benign. It passed, barely.

Then he took on energy, stumping for a bill with a cap and trade scheme for pollution reduction. He used stimulus money to encourage the growth of the Renewable Energy and to make Carbon Capture and Sequestration economically viable for coal-fired power plants. It never passed.

Then, he took on financial market reform. The Dodd-Frank Bill and the CARD Act passed, along party lines. The rhetoric and the partisanship was getting to extreme levels at this point.

Still, I blamed the TEA Party and extreme wing of the Republican party for manufacturing apocalyptic scenarios if any of these reforms were passed. I defended Obama as a president who attempted to work across the aisle, but was shut out.

Then came November. Republicans took the House and nearly won the Senate. Obama would try to pull a Clinton. The problem: the economy was faltering, a government shut down was looming and he still had to raise the debt ceiling.

What did he do? He put propositions on the table and compromised every balanced approach to end up with a one-sided, Republican monstrosity:

He kept the Bush tax cuts
He abandoned his "grand bargain" of a balance of taxes and cuts
He opened more lands to offshore and onshore oil drilling
He let the BLM auction off coal mining in the Powder River Basin at the "competitive" rate of 0.90/ton (sales rate is around $12-13/ton)
And recently...he told the EPA to withdraw smog and ozone standards. Ozone and smog formation is very dangerous for public health.

The president I elected in 2008, defended in November, 2010 and tolerated in most of 2011 has finally forced me to think outside of the two-party norm for 2012. I really don't want to be in the position, but his appeasement and acceptance of non-centrist Republican ideals has forced me into this state. I can no longer defend him without sacrificing my own principles.

No matter what he does, he will always be criticized by Republicans. There is always an election to win and a party platform to shore up. If he opens up lands for drilling, they will say he hasn't done enough. If he allows for increased coal mining, they will say he is waging a "war" on coal. If he withdraws important, life-saving standards under the guise of "regulatory burden," they will say he is killing business. There is compromise, there is centrist and then there is Obama. Republican? Democrat? Who knows....