Month: February 2013

Fracking may cause the next big economy-crashing bubble

by David Atkins

Karoli over at Crooks and Liars and Steve Horn at the DeSmogBlog have tremendous posts about the natural gas bubble that deserve wider publication. They’re scary as heck, and proves that Wall Street and our great economic gurus haven’t learned a thing from the bubbles of the past.

It turns out that the the Post Carbon Institute and the Energy Policy Forum each released reports on the dangerous economic bubble in natural gas at the moment. The first key point is that there isn’t nearly as much natural gas and oil under North American soil as we’ve been led to believe:

The reality, he explains, is that five shale gas basins currently produce 80 percent of the U.S. shale gas bounty and those five are all in steep production rate decline.

And shale oil? More of the same.

Over 80 percent of the oil produced and marketed comes from two basins: Texas’ Eagle Ford Shale and North Dakota’s Bakken Shale, both of which are visible from outer space satellites.

“[T]aken together shale gas and tight oil require about 8,600 wells per year at a cost of over $48 billion to offset declines,” Hughes writes. “Tight oil production is projected to…peak in 2017 at 2.3 million barrels per day [and be tapped by about 2025]…In short, tight oil production from these plays will be a bubble of about ten years’ duration.”

But it’s the Energy Policy Forum report in particular that should raise serious eyebrows. It’s written not by some dirty hippie, but by longtime Wall Street analyst Deborah Rogers. Recall that fracking has led to rapid abundance of natural gas, dramatically lowering its cost. This should strike some terror into the heart of policy wonks:

It is highly unlikely that market-savvy bankers did not recognize that by overproducing natural gas a glut would occur with a concomitant severe price decline. This price decline, however, opened the door for significant transactional deals worth billions of dollars and thereby secured further large fees for the investment banks involved. In fact, shales became one of the largest profit centers within these banks in their energy M&A portfolios since 2010. The recent natural gas market glut was largely effected through overproduction of natural gas in order to meet financial analyst’s production targets and to provide cash flow to support operators’ imprudent leverage positions.

As prices plunged, Wall Street began executing deals to spin assets of troubled shale companies off to larger players in the industry. Such deals deteriorated only months later, resulting in massive write-downs in shale assets. In addition, the banks were instrumental in crafting convoluted financial products such as VPP’s (volumetric production payments); and despite of the obvious lack of sophisticated knowledge by many of these investors about the intricacies and risks of shale production, these products were subsequently sold to investors such as pension funds. Further, leases were bundled and flipped on unproved shale fields in much the same way as mortgage-backed securities had been bundled and sold on questionable underlying mortgage assets prior to the economic downturn of 2007.

Now, while it’s true that oil, gas and shale fields don’t have the same economic weight as the nation’s entire housing market, they do have two major impacts: first, a stock price drop leading to market instability, and second and more importantly a collapse in natural gas field production that would dramatically raise prices of natural gas and all associated costs. The combination of these two elements could easily lead to economic shock. Worst of all, it would directly parallel the housing bubble from which we have apparently learned no lessons and taken no significant mitigating steps.

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Pass the Organic Popcorn 

by tristero

Dear Tea Party,

All Nazis are total assholes. But not all total assholes are Nazis.

The Tea Party Patriots have apologized for an “unacceptable” and “inappropriate” picture attached to a fundraising email that depicted Karl Rove wearing a Nazi uniform. “We apologize to Mr. Rove. While we may have strong disagreements with him on the future of conservatism, we want to be clear this imagery is absolutely unacceptable and are working to ensure this type of mistake doesn’t happen again,” said Jenny Beth Martin, the co-founder of the group.

Trust busting

by digby

Here is an interesting post from Ned Resnikoff on the recent brouhaha over alleged liberal double standards. He states that it’s reasonable to have trust in Barack Obama’s judgement with respect to targeted killings, but that it’s a mistake to allow it anyway. He first makes the obvious argument that by codifying the practice it pretty much insures that someone you might not like so much will have similar powers in the future. True that.

But he goes on to say that while it’s reasonable to trust President Obama, the bureaucracy that feeds him the information from which to make his judgement as to which human beings are worthy of targeting, is terribly flawed:

[T]rust in President Obama—or any individual actor—has very little to do with how the program is being carried out right now. Words like “Byzantine” are woefully insufficient when it comes to describing the machinations of the modern national security state. (Washington Post investigative reporter Dana Priest got close to articulating the full extent of the system’s complexity when she wrote, “the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.”) No man, least of all an American president with other demands on his time, is physically capable of sifting through all of the disparate intelligence that goes into making life-or-death security decisions. Instead, President Obama has to rely on a vast bureaucracy, staffed with people who have their own biases and incentives.

The claims these institutions make should be regarded as inherently untrustworthy, regardless of how much we may trust various people to those institutions. In the past 15 years it has become clear that failing to eliminate threats is extremely high cost (everyone remembers that the Clinton administration missed a chance to kill Bin Laden in 1998), while civilian casualties are extremely low-cost (most voters do not seem particularly distraught over the hundreds of civilian casualties from U.S. drone attacks). So from an institutional perspective, the risk of killing civilians means little when weighed against the risk of not killing a potential threat.

That’s exactly why we can’t take Brennan’s claim that targeted killings are “a last resort” at face value. The only way to ensure that the national security state does not abuse its power is to substantially limit its power—or, at the absolute least, to subject it to strict civilian and judicial scrutiny. There is little doubt that the Obama administration would resist that kind of oversight, but whether the man at its head is personally trustworthy is neither here nor there.

I think that’s a good argument. But I can’t for the life of me see why it shouldn’t be applied to presidents too. They aren’t priests or saints. None of them. And even the best of them are subject to exactly the same pressures, biases and incentives described above. They are, after all, human beings. And they’re human beings we don’t actually know, however much we watch them on TV. They sell themselves to us with a carefully crafted image designed to make us vote for them. That doesn’t make them bad people or even insincere. But it does make the whole concept of “trust” seem a bit naive. Do we really know these people?

I seem to recall a stale old chestnut about all this by some guy named Madison that goes something like this:

“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.”

And I just have to add that as a general rule I tend to mistrust people who insist on keeping things secret, particularly when they evoke undemocratic state secrets laws and use novel constitutional rationales for their behavior. All the presidents of the national security state since World war II have been secretive and the results have been mixed, to say the least. I don’t expect that record to be markedly improved by the bipartisan foreign policies of this or any other administration as long as they have the power to act without constraint or accountability. Or to put it another way: the power to act without some “auxiliary precautions.”

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Looks like we’ve got ourselves a new “center” (It looks a lot like the old right)

by digby

In this post by Greg Sargent we see the folly of asking for a “balanced approach” when you are negotiating with partisan thugs:

Whereas the previous Simpson Bowles plan contained a roughly even split of revenues and cuts, the new one reduces the revenue “ask” dramatically, with the result that the overall plan is lopsidedly tilted towards cuts. The reason for this pinpointed by Klein is particularly striking:

This isn’t meant to be an update to Simpson-Bowles 1.0. Rather, it’s meant to be an outline for a new grand bargain. To that end, Simpson and Bowles began with Obama and Boehner’s final offers from the fiscal cliff deal. That helps explain why their tax ask has fallen so far: Obama’s final tax ask was far lower than what was in the original Simpson-Bowles plan, while Boehner’s tilt towards spending cuts was far greater than what was in the original Simpson-Bowles.

In other words, the plan roughly represents the ideological midpoint between the Obama and Boehner fiscal cliff blueprints — which is why the plan is so heavily tilted towards cuts. As Kevin Drum notes, this is particularly odd, given that spending cuts have already been “75 percent of the deficit reduction we’ve done so far.”

Greg further points out how this so-called “center point” actually represents a major move to the right:

[T]he Boehner fiscal cliff plan raised taxes only on income over $1 million; the Obama offer raised taxes only on income over $400,000. Both of these are to the right of the balance Obama just won an election on: The expiration of the Bush tax cuts for income over $250,000. Yet these were designated the two ideological outer poles for the purposes of defining the debate.

Funny how that happens. And the Lords of the Deficit have now blessed it as the new center. All over TV this morning, their new plan has been heralded as a perfect compromise of only the warring parties will stop acting like children and accept it.

My favorite part of the latest BS austerity plan has to be this, from Tim Noah:

Lowering income-tax rates while eliminating tax breaks would, Simpson and Bowles say, achieve some unspecified quantity of deficit savings. But if your aim is to reduce the deficit, why not get rid of as many tax expenditures as you can while leaving tax rates constant—or, better yet, raising them a bit? Simpson and Bowles would likely say they’re just being realistic about politics. Republicans won’t eliminate loopholes unless they can lower rates, too.

But as long as we’re being realistic, why not be realistic about the likelihood that a lower-rates-for-fewer-loopholes swap will reduce the deficit? Which is about zero. Simpson and Bowles’s insistence on clinging to the tax-reform fantasy demonstrates that their agenda is not limited to deficit reduction. They also want to lower tax rates. Why? They just want to, is all.

That tax reform zombie is the undead step-child of supply-side economics, that last magical thinking economic plan that promised to raise revenues by lowering them. It won’t work any better this time, but damned if they aren’t going to keep trying. They just love the idea of paying nothing for something.

I won’t rag on the president again for this misguided willingness to take the middle position and allow the Republicans to move ever rightward. After all, he wouldn’t be the first Democrat to value his own image as a Very Serious Person over the political requirements of particular legislation. And it’s possible that he agrees that “balanced” translates to 75% cuts to revenue.

But let’s not forget that this is just wrong. I think Sargent will likely be the only to mention this, so I’m going to highlight it:

Of course, there is actually a liberal position in this debate, and it isn’t the one held by Obama. As you may recall, House progressives recently released their own blueprint for Round 3 of deficit reduction; it proposed some $948 billion in new revenues, derived entirely from closing loopholes and deductions enjoyed by the rich. The result of this plan, if enacted, would be that overall, our short term fiscal problems would have been resolved through roughly equivalent spending cuts and tax hikes — which is to say, through roughly equivalent concessions by both sides.

So, the truth is that it’s the progressives who are offering the only “balanced approach.” And such a balanced approach is considered a radical position so outside the mainstream that it isn’t even discussed.

Yes, our politics are absurd.

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I don’t think the base is going to like New Coke

by digby

Ed Kilgore brings us the bad news:

Earlier I noted here that Alan Abramowitz has offered a best-case scenario for Democratic House candidates in 2014, and it falls well short of a majority. Now comes Charlie Cook with a parallel argument: there just aren’t enough competitive districts right now to enable a landslide by either side:

Using The Cook Political Report’s Partisan Voting Index, which ascertains how the presidential voting patterns in each congressional district differ from the national average, we took a look at the 2004 and 2008 presidential-election results in congressional districts (the final PVI incorporating the 2012 results will be available in the next month or so), and compared them with previous years. In 1998, there were 164 swing districts, which we define as a district with a Democratic or Republican PVI of 5 points or less. The swing districts outnumbered the 148 solid “R” districts where Republicans had an edge of more than 5 points, and the 123 solid “D” districts where Democrats had an edge of more than 5 points.
The number of swing districts dropped from 164 in 1998 to 132 by 2000, to 111 in 2002, then to 108 for two elections (2004 and 2006). The 2008 and 2010 cycles both had 103 swing districts, and the total slipped to 99 in the 2012 cycle. Currently, 190 districts have a Republican PVI over 5 points, 28 seats short of a majority; 146 districts have a Democratic PVI over 5 points, 72 seats short of a majority.

To put it another way, Republicans can hang onto a majority in the House even if they lose more than two out of three “swing districts.” Add in (a) the historic pattern of the party holding the White House usually losing House seats in midterms, particularly second-term midterms, and more importantly (b) the recently emerging strong Republican advantage in midterm turnout patterns—and it’s going to be a very tough row to hoe for the Donkey Party. And BTW, this matters even if all this forecasting is inaccurate, because it affects how congressional Republicans will behave (and the 2014 Senate landscape is pretty good for them as well).

Are Republicans capable of throwing these advantages away? It’s certainly possible. The famous “Gingrich Congress” of 1995-1999 managed in 1998 to produce a rare departure from the “six-year itch” pattern I noted above via its extremism and irresponsibility. Perhaps Gingrich’s heirs will decide they are all “rebranded” and rebooted and ready to re-assume the natural governing role God intended for them when he dictated the Declaration of Independence to the Founders and warned them America was not to be a democracy.

Basically, unless the Republicans impeach Obama, we’re screwed.

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Quotes of the day: Adam Kotsko

by digby

I think @adamkotsko may have put his finger on why we all feel as if we are losing our minds:

Ok, maybe it’s only me who’s losing her mind. But this logic has been pervasive for at least a decade and it just keeps rolling.

I would add Iraq to this list:  “if we don’t start a war with Iraq today, we’ll have to start one tomorrow.” Worked like a charm. I think it’s the “the world is going to hell in a handbasket so we might as well get it over with” rationale.

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Well ok then: cutting vital programs won’t hurt anyone

by digby

… at least that’s what Erskine Bowles says. And that’s because the Simpson-Bowles plan is “sensitive” to the poor:

It’s big of them not to cut food stamps and unemployment insurance. But that’s more than a little bit misleading since unemployment insurance and food stamp costs are largely related to the state of the economy at any given time. It might make sense if they were factoring in the inevitable, austerity induced long term economic slump in their model, but they aren’t. He threw that out there to pretend that they are somehow being generous by not doing something that doesn’t make sense in terms of long term deficit reduction.

As for the 80 year old (mostly women) who will be hurt by the Chained-CPI, I’m afraid old Erskine was being a little bit disingenuous there. The problem is not that their private pensions run out. (Not very many people have private pensions anymore.) The problem is that the Chained-CPI reduces the cost of living adjustment down by 0.3 percentage points annually. That translates into a cut in benefits of 3 percent for those who have been retired ten years, 6 percent after 20 years, and 9 percent after 30 years. The people who have been retired the longest and are, therefore, the poorest, will see the largest cuts. A 1% “bump” isn’t going to make much of a difference.

This is a cut. And it’s substantial. It will affect the poor the most and it’s going to take a lot more than “tweaking” to make up for it. Moreover, it’s not just the poorest of the poor who will be affected. There seems to be some belief in Washington circles that 70 year olds who are living on 25k- 35k a year won’t feel a cut in their incomes, which just goes to show how distant they are from the way people really live. Some wonkish corners believe that this is really a tactical argument because tax rates will also be subject to this new inflation index and therefore we’ll be able to pay off our debt more quickly and start doing good things for the people again. Apparently, the anti-tax fanatics are going to go quietly into this good night and make no attempts to reverse this back-door tax hike. (I guess we are supposed to believe they aren’t really serious about this whole small government thing — even to the extent they would like to raise taxes but they just want to do it quietly.) I don’t know why anyone thinks that’s true, but it’s a more widely held belief than you might think.

Anyway, let’s not kid ourselves. The Bowles-Simpson deficit reduction proposal will hurt a lot of people, and not just the poor and elderly. It is a hardcore austerity program that will make people needlessly suffer and make the economy worse in the process. They have tried this is Europe and it’s not working. And yet they are hanging tough assuring everyone that eventually all will be well and they just have to stay the course. (The British government has even officially told the people they will have to maintain their stiff upper lips until at least 2018!)

There’s a reason why Keynes said, “the long run is a misleading guide to current affairs. In the long run we are all dead.” It’s because this blase notion that we can all just wait for the invisible hand to do its work means that we consign our lives and many others to needless suffering. Although with all this talk of cutting of Social Security far in to the future, you have to wonder if the worst of the deficit scolds aren’t counting on all the money they can save from people dying sooner than they have to.

*To understand why the “bump” in the Chained-CPI is inadequate, read this report.

Update: Oh my

The new deficit reduction plan from Alan Simpson and Erskine Bowles calls for $5 trillion in savings this decade, roughly the same as their outline in December 2010. So it’s basically the same plan, right?

Wrong. Look at where the cuts come from this time. Whereas the first plan was a roughly even mix of higher taxes and lower spending, the new plan calls for 54 percent less revenue and 31 percent more spending cuts to get us past $5 trillion in total savings this decade.

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Makers and takers: Medicaid edition

by digby

This is sick. In more ways than one.

Working full time and yet not being able to afford health insurance coverage literally sticks in Kathryn Playford’s throat.

The office manager for a self-storage facility and office park in North Augusta says she has put off surgery for an enlarged thyroid for years because she lacks health care coverage.

“Eventually, it may enlarge to the point where I can’t breathe,” Playford said.

The governors of Georgia and South Carolina have decided not to expand Medicaid coverage to more uninsured despite high rates of working families with no coverage.

In South Carolina, nearly half of the 766,304 uninsured, or 359,107, are working and 19.3 percent of people employed in the state lack insurance, according to the U.S. Census Bureau’s American Community Survey 2011.

In Georgia, 22.7 percent of the employed lack health insurance, and working families make up 48.3 percent of the uninsured.

The states turned down the expansion under the Affordable Care Act despite the fact that it would be fully funded for the first three years and would not dip below 90 percent federally funded in subsequent years.

In Georgia, the expansion would offer Medicaid coverage for individuals making nearly $16,000 a year and for families of four making around $32,000 a year. Within that adult population, 50.6 percent are uninsured, according to Census data.

“I would argue that those are the people that are really getting the burden of the state not investing more of its state dollars” in Medicaid, said Tim Sweeney, the director of health policy for the Georgia Budget and Policy Institute.

Advocates in a coalition called Cover Georgia will gather Tuesday at the state Capitol to rally for the state to reconsider Medicaid expansion.

Georgia Gov. Nathan Deal has said the state cannot afford it and that the federal government might not be able to continue funding it in the future.

American political logic: we must deny medical care to people today because we might not be able to afford it in the future.

Everyone assumes that at some point these states will capitulate and accept the Medicaid expansion. And I’m sure they will. Look at Mississippi: it only took them a century and a half to ratify the 13th Amendment. So it’s only a matter of time.

Too bad for the lady with the enlarged thyroid. But hey, it’s always possible she’ll live long enough for Georgia to change its mind and prove, once again, just how awesome this country is.

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Media effects: Breivik and Lanza

by David Atkins

While Joe Scarborough and his friends blame movies and video games for mass shootings like the one in Sandy Hook, investigators have discovered a more plausible connection:

Investigators have a theory that Adam Lanza’s interest in Norwegian mass murderer Anders Behring Breivik might have led to the Dec. 14 massacre that left 20 children and six adults dead at Sandy Hook Elementary School in Newtown, Conn.

The theory is based in part on several news articles about Breivik that investigators found in Lanza’s bedroom at the Newtown home where he lived with his mother, Nancy Lanza, according to law enforcement sources familiar with the investigation.

The sources emphasized that an interest in Breivik is just one theory. They said Connecticut law enforcement officials traveled to Washington, D.C., last week to brief unidentified federal authorities on the status of the investigation and discussed the possible Breivik connection.

Lanza’s mother was a right-wing prepper. He himself seemed to have an obsession with right-wing murderer Breivik. It’s not definitive, but it’s certainly suggestive. Millions of kids play video games and watch violent movies. But most don’t tend to have articles about politically motivated conservative killers in their rooms.

There may well have been media effects involved, but likely more of the Fox News variety than the Xbox one.

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Finally, the press corps steps up and demands transparency from the administration


by digby

No, this isn’t from The Onion:

Ed Henry, the Fox News correspondent and president of the White House Correspondents Association, released a statement Sunday evening in which he said the press corps had been given no access to the president, who was joined on his outing by star golfer Tiger Woods, and that the WHCA would fight for greater transparency in the days ahead.

“Speaking on behalf of the White House Correspondents Association, I can say a broad cross section of our members from print, radio, online and TV have today expressed extreme frustration to me about having absolutely no access to the President of the United States this entire weekend,” Henry said in a statement, relayed in a White House pool report. “There is a very simple but important principle we will continue to fight for today and in the days ahead: transparency.”

The good news is that the Villagers don’t waste a lot of time and energy worrying about transparency when it comes to trivial information that is only interesting to gossip columnists. For instance, nobody’s issuing any ultimatums over silly issues like this:

For a country exhausted after more than a decade of war, remote-controlled drones—unmanned machines that deliver swift death to terrorists—are undeniably tempting. President Obama has ordered hundreds of strikes on “high-value,” as well as medium- and low-value, targets in Pakistan, Yemen, and Somalia. The administration says these killings have decimated al-Qaeda’s top ranks and done significant damage to the Taliban but refuses to say much more. Obama has yet to explain the basics of the broader policy: how decisions are made to send drones across sovereign borders; how officials determine a target is dangerous enough to merit assassination; what oversight is in place; and what is done to limit civilian casualties

I’m awfully relieved that the fourth estate has its priorities straight.

Update: Remember this?

Saturday, May 01, 2010

 
The Big Story

by digby

Ok, you might think that there’s some serious news today. There’s this, which people ar beginning to think might turn out to be the biggest man made environmental catastrophe in history:

NEW ORLEANS (AP) — Satellite images show the surface area of the oil spill in the Gulf of Mexico is three times larger than it was a day or so ago. Meanwhile, Coast Guard Commandant Adm. Thad Allen says it’s impossible to pinpoint precisely how much oil is leaking from a ruptured underwater well.

GULFPORT, Miss. (AP) — Experts are cautioning that if the Gulf of Mexico oil spill continues growing unchecked, sea currents could suck the sheen down past the Florida Keys and then up the Eastern Seaboard. President Barack Obama will travel to the Gulf Coast tomorrow to assess the situation.

There’s this:

Angered by a controversial Arizona immigration law, tens of thousands of protesters — including 50,000 alone in Los Angeles — rallied in cities nationwide demanding President Barack Obama tackle immigration reform immediately.

“I want to thank the governor of Arizona because she’s awakened a sleeping giant,” said labor organizer John Delgado who attended a rally in New York where authorities estimated 6,500 gathered.

From Los Angeles to Washington D.C., activists, families, students and even politicians marched, practiced civil disobedience and “came out” about their citizenship status in the name of rights for immigrants, including the estimated 12 million living illegally in the U.S.

And then there’s this monumental event. (That’s Kim Kardashian with Ed Henry at the White House Correspondence Dinner also known as “nerdprom.”)

He’s not the only one. Everyone in DC seems to be furiously tweeting about this like a bunch of teenagers at the Twilight premier. All the cable gasbags can hardly contain their boredom with these stupid environment and immigrant stories. I originally saw that Ed Henry picture on CNN, which did a ten minute segment on “the prom” and is now on non-stop coverage. 

Let’s have a round of applause for your guardians of democracy, ladies and gentlemen.
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