Politics - what I see and what I do not understand: 29/12/11

Thursday, December 29, 2011

Ellen's hilarious scare montage.

WE need a little break..........

Iowa Caucues and NH Primary Guide

Meet the Press Sunday May 15 - Newt Gingrich

Meet the Press Sunday June 12 - Rick Santorum

Meet the Press Sunday July 10 - Tim Pawlenty

Meet the Press Sunday Dec 18 - Michelle Bachmann

Meet the Press Sunday Oct 23 - Ron Paul

$6 billion-a-year ethanol subsidy dies -- but wait there's more

hours

ago

Seth Perlman / AP

Corn is delivered by the truckload to ethanol plants like this one owned by Archer Daniels Midland in Decatur, Ill.

By Miguel Llanos, msnbc.com

America's corn farmers have been benefiting from annual federal subsidies of around $6 billion in recent years, all in the name of ethanol used as an additive for the nation's vehicles.

That ends on Jan. 1, when the companies making ethanol will lose a tax credit of 46 cents per gallon, and even the ethanol industry is OK with it -- thanks in part to high oil prices that make ethanol competitive.

Ethanol output and exports reached record highs this year, and a federal law assures ethanol a longer-term share of the motor fuel market.

"Like all incentives it was put in place to help build an industry and when successful, it should sunset,"the Renewable Fuels Association said in a statement last week.

What the industry doesn’t want to see, however, is an end to a separate tax credit for ethanol made not from corn but non-foodstuffs like switchgrass, wood chips and even the leaves and stalks of corn.

Known as cellulosic ethanol, no one is selling it just yet due to its higher R&D and production costs. But the industry hopes to soon, and the production tax credit is up to $1.01 per gallon.

The industry earlier this month asked Congress to extend that credit, set to expire on Dec. 31. 2012, for five years but lawmakers did not act before recessing last week.

In the case of corn ethanol, the writing had been on the wall for months. The subsidy's death was confirmed last week when Congress passed, and President Barack Obama signed, tax legislation that did not extend it.

Subsidized since 1979 as a homegrown fuel cleaner than gasoline, corn ethanol had plenty of opponents, environmentalists among them.

Environmentalists question the cleaner energy premise -- adding factors like tractor diesel emissions and fertilizer runoff make it dirtier, they say.

"Corn ethanol is extremely dirty," Michal Rosenoer, biofuels manager for Friends of the Earth, said in heralding the tax credit's demise. "It leads to more climate pollution than conventional gasoline, and it causes deforestation as well as agricultural runoff that pollutes our water."

Opponents also see corn ethanol, which now takes a larger share of the U.S. corn crop than cattle, hogs and poultry, as a factor in driving food prices higher.

"The end of this giant subsidy for dirty corn ethanol is a win for taxpayers, the environment and people struggling to put food on their tables," Rosenoer added.

Visit msnbc.com for breaking news, world news, and news about the economy

A CNBC panel last June debates the impact of the ethanol subsidy on gas prices.

Environmentalists do support cellulosic ethanol in principle since it doesn't compete with corn as a foodstuff.

But there's a nearer-term battle brewing over corn-based ethanol. A 2005 law requires that 7.5 billion gallons of renewable fuel be produced by 2012 -- 6.25 billion gallons were produced in 2011. A 2007 revision gradually increases that to 36 billion gallons by 2022.

So far most of that renewable fuel has been corn-based ethanol.

"We will now also turn our attention to ending other federal policies that support dirty corn ethanol, including the Renewable Fuel Standard," said Rosenoer.

Some environmentalists say that standard could be a useful tool to incentivize clean ethanol.

The standard needs "to be strengthened and improved over time" to avoid "being taken over by corn-based biofuels," Nathanael Greene, director of renewable energy policy for the Natural Resources Defense Council wrote in his blog last week.

Greene's fear is that the standard might be weakened by those opposed to measuring a fuel's emissions of gases tied to global warming and its impact on land use.

As for tax credits, Greene told msnbc.com that the his group would like to see "a technology-neutral, performance-based tax credit that pays more" the cleaner a fuel is.

Short of that, the NRDC is OK with extending the cellulosic tax credit beyond the end of next year -- and figures lawmakers will take that route since it is an easy one. "Given the current dysfunction in Congress this seems pretty likely," Greene says.

The ethanol industry, for its part, stresses it's only trying to jump start cleaner energy. "Unfortunately," the Renewable Fuels Association stated last week, "the same mentality does not extend to century-old tax subsidies supporting 20th century petroleum technologies."

Wonkblog: Economic experts explain 2011 in charts

We asked economists, economic policymakers and investors for their favorite charts of 2011. Here’s what they gave us.

Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee

"This chart demonstrates that revenue has to be part of the solution to the deficit. It shows that the last five times the budget was in surplus (in 1969, 1998, 1999, 2000, and 2001), revenue was near 20 percent of GDP. Revenue is now at 15.4 percent of GDP, near its lowest level in 60 years."

Sources: OMB, CBO

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee

“Government spending drives the debt, and the growth of government health care programs drives the spending. Relentlessly rising health care costs (coupled with demographic changes) are driving the growth of these programs, while the open-ended structure of these programs is responsible for much of the increase in health care costs."

Peter Orszag, Citigroup

"If you want to understand the debt limit debate this year and the ongoing gridlock we are likely to experience for years, study this graph. In the late 1960s, the most conservative Democrats in the House and the most liberal Republicans voted together frequently enough (as shown by the overlap between the two distributions) to make centrist legislating successful. By the late 1980s, that overlap was dwindling. Today, it is largely gone."

Larry Summers, Harvard

"The near quadrupling in the share of men not working and the seemingly inexorable trend changes every aspect of society. Cyclical and structural changes are combining in a perfect storm."

Jared Bernstein, Center on Budget and Policy Priorities

"Corporate profits have not only recovered their post-recession highs, they’ve surpassed it. And compensation as a share of the economy is far lower. The image of the above figure should be viewed as a big, scary dragon of sorts."

Peter Diamond, MIT

"This chart shows that a great deal of hiring is happening, as it does each month, that hiring per job opening is higher than it was when there was less unemployment, and that the ratio of quits to discharges, while still low, is recovering (a sign of better job opportunities). I infer that the low level of job openings is our key problem, reflecting inadequate aggregate demand and the need for significant fiscal stimulus."

Glenn Hubbard, Columbia

"The graph shows that the deficit problem is real; it is principally a spending problem; and attempts to correct it by raising taxes would require astronomical tax increases."

Carmen Reinhart, Peterson Institute for International Economics; Ken Rogoff, Harvard

"The blue line is global average of public debt relative to GDP. The yellow bars denote the percent of countries in a state of default or restructuring on external debt. The dark purple bars that sometimes rise above the percent of countries in default or restructuring denotes countries with inflation over 20%. The chart suggests that it would be no surprise to see a coming wave of defaults on sovereign external debt."

Mark Zandi, Moody's

"Households are rapidly deleveraging and getting their proverbial house in order. The number of delinquent household loans has plunged from a peak of close to 35 million in early 2009 to less than 25 million in November."

Thomas Gallagher, Scowcroft Group

"This is the real Dow (Dow Jones index divided by the CPI, going back to 1920, using a log scale). It appears that to get the kind of bull markets that started in the late 1940s and the early 1980s, a pretty severe bear market preceding them was needed. And those bear markets were basically caused by Fed policy mistakes -- it was too tight in the deflationary 1930s and too easy in the inflationary late 60s-70s. So even if one thinks the Fed has gotten policy about right (and it’s certainly doing better than in the 1930s), one should have modest expectations for overall stock market gains over the next several years and invest accordingly."

Michael Greenstone, MIT, the Hamilton Project

"This chart shows how the jobs gap has evolved since December 2007 and shows three different scenarios for different rates of job growth. If the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, then it will take until February 2024 — over 12 years — to close the jobs gap."

Robert Frank, New York University

"My entry is the attached graph of what I call the Toil Index. It's an index I constructed to portray the most dramatic element of the middle-class squeeze -- the effort required to rent a house served by a school of average quality. "

Mike Konczal, Roosevelt Institute

"This graphic was originally part of a presentation two IMF economists gave in Cairo days before the Arab Spring happened. In the graph they showed 2008-era youth unemployment in the MENA region and warned about the long-term effects, both economic and political, of mass youth unemployment. I've updated it to include US youth unemployment in the Great Recession."

Donald Marron, Tax Policy Center

" Far and away, the chart that has stayed with me the most is the one showing European interest rates from the mid-1990s until today. Several folks have done it, but this one from Spiegel Online is nice."

Joseph Gagnon, Peterson Institute for International Economics

"Developing economies, led by China, have resumed their mercantilist policy of subsidizing exports to the industrial countries by massive government purchases of foreign financial assets, mainly US Treasury bonds. These net official financial flows keep their currencies -- and thus their exports -- artificially cheap, thereby boosting their current account (trade) surpluses. The resulting current account deficits of the industrial countries are a major contributing factor to weak economic recoveries in Europe and the United States."

Tyler Cowen, George Mason University

"Total Factor Productivity is one attempt to measure how much the economy is receiving a boost from innovation and new ideas, as opposed to, say, people working longer hours or taking a second job. It's been down considerably since 1973, and I have labeled this period 'The Great Stagnation.' ''

Mohamed el-Erian, Pimco

"The selected graph illustrates the extent to which summary measures of European risk spreads exploded during this past year, reaching levels previously viewed as unthinkable. As long as this persists, credit downgrades will multiply, bank fragility will increase, socio-political tensions will rise, and economic prospects (particularly growth and jobs) will deteriorate."

Antulio Bomfim, Macroeconomic Advisers

"By telling the public that economic conditions were 'likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013,' the [Federal Reserve] -- hoping to influence current longer term rates by changing expectations of future short-term rates -- signaled that its forecast implied a later first rate hike than markets had anticipated. While much has been said about the limits of monetary policy these days, the chart below suggests that the Fed’s words can speak at least as loudly as its actions."

Politics - what I see and what I do not understand

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