Kevin Drum - December 2008

Cap and Tax

| Sun Dec. 28, 2008 1:09 PM EST

CAP AND TAX....Matt Yglesias suggests that although a gasoline tax would have been a good idea 20 years ago, today it's obsolete:

Given what we've learned about the risks of catastrophic climate change, it [] seems like a concept that's been somewhat overtaken by events. A carbon tax, or a cap on greenhouse gas emissions with auctioned permits, would constitute a tax on gasoline among other things. And there's no particular reason that burning fuel in a car should be disfavored versus other carbon-intensive activities.

This is true, but it's worth noting that for technical reasons there's an argument to be made that cap-and-trade is a good solution for stationary carbon souces (primarily coal and gas fired power generating stations) while a tax is a better solution for mobile sources. A lot of this revolves around whether your favored cap-and-trade plan applies directly to fuel sources ("upstream" cap-and-trade) or to the actual emission of carbon ("downstream" cap-and-trade). Downstream is essentially impossible with cars and trucks since it's impractical to monitor hundreds of millions of carbon sources, so if that's the version of cap-and-trade you prefer, then you need to apply a different solution to the transportation sector.

In addition, it's also possible that driving should, in fact, be disfavored even compared to other sources. The elasticity of gasoline demand is very low (it's higher in the long term than in the short term, but still low in either case), which means you have to price gasoline at a very, very high level if you want to get meaningful reductions in use. In Europe, for example, gasoline is taxed at around $2-3 per gallon, which is equivalent to a carbon tax of about $1000/ton, and even the most aggressive cap-and-trade plan won't produce carbon charges remotely near this level anytime in the foreseeable future. It's arguable (though, admittedly, far from obvious) that a gasoline tax might be able to get to that range faster than a cap-and-trade plan.

I don't have any special dog in this fight. My tentative preference right now is for gasoline taxes combined with cap-and-trade for stationary sources or, possibly, for gasoline taxes in addition to a broader-based cap-and-trade plan. If we really want to reduce driving, encourage use of urban/suburban transit alternatives, and produce a revenue stream big enough to fund it, that might be what we need.

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Land of the Free

| Sun Dec. 28, 2008 12:21 PM EST

LAND OF THE FREE....Juan Gómez, American citizen, would like to be able to return to his country after an overseas trip the same way every other American citizen does: by showing his passport and walking in. Unfortunately, Juan Gómez is in TSA hell:

Time and time again, I've been cleared for entry into the United States. So why does my name remain on the list? Will I have to go through this for the rest of my life? In desperation, I always ask airport-security officers how my name can be removed. I've heard it all, from writing to my congressman (as if that would do any good) to filling out a form (never mind that no one has been able to produce the document or tell me where I can find it). The most honest answer came from a young, Afghan American officer at Dulles a couple of weeks ago: "There's absolutely nothing you can do."

Welcome to America, Juan.

*Modern Architecture

| Sat Dec. 27, 2008 3:30 PM EST

MODERN ARCHITECTURE....The Los Angeles Times asked eight local worthies to choose the ten all-time best houses in Southern California. The results: nine out of ten houses are in Los Angeles and ten out of ten were built more than 40 years ago. Discuss.

Nightmare on Main Street

| Sat Dec. 27, 2008 1:03 PM EST

NIGHTMARE ON MAIN STREET....From the Wall Street Journal, this is as gruesome a statistic as I've seen yet:


....AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010....Recent changes in the bankruptcy code make it more difficult for retailers to emerge from bankruptcy reorganization....Lawrence Gottlieb, a New York bankruptcy attorney at Cooley Godward Kronish LLP says that only two retailers have successfully emerged from bankruptcy proceedings since the amendments to the code were passed.

A quarter of all major retailers may be in either Chapter 11 or liquidation next year? Holy cow.

The Student Loan Mess

| Sat Dec. 27, 2008 12:47 PM EST

THE STUDENT LOAN MESS....The student loan market is a mess, and it's mainly a mess because the federal student loan program is woefully inadequate. Natalie Hickey learned the hard way:


But most of the money she borrowed was actually in private loans, the fastest-growing segment of the student loan market....Whereas federally guaranteed loans have fixed interest rates, currently either 6% or 6.8%, private loans are more like credit card debt. Interest rates aren't fixed and often run 15% or more, not counting fees.

....Hickey ended up with $20,000 in low-interest federally guaranteed loans issued by Sallie Mae, and $120,000 in higher-interest private loans issued by Sallie Mae. Hickey said no one explained the difference to her.

There's really no excuse for this. At the very least disclosure practices need to be tightened up, but what really needs to happen is a substantial increase in the current limit for federal student loans. It's not even close to the amount needed to get through school these days.

What's more, there's really no reason that the feds should be guaranteeing private loans instead of just originating the loans themselves anyway. Bank origination may have been the only practical option 40 years ago, but that ceased to be the case long ago, and the private student loan market has since become a cesspool of graft, corruption, and abusive practices. Today, federal origination is cheaper and more efficient for both taxpayers and students, and there's really no reason why the Direct Loan Program shouldn't be expanded to the point of putting the private market out of business.

Passive Houses

| Sat Dec. 27, 2008 12:06 PM EST

PASSIVE HOUSES....I've wondered vaguely for a while why you couldn't build a house that was basically vacuum sealed and thus needed almost nothing in the way of heating and cooling. But it turns out you can, and ground zero for research into "passive houses" is the Passivhaus Institut in Darmstadt, Germany, where I spent a couple of nights just a few months ago. The New York Times reports:





Interesting stuff. Old news to some, but new to me, and probably new to a few of you as well. More passive houses, please.

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Friday Cat Blogging - 26 December 2008

| Fri Dec. 26, 2008 2:40 PM EST

BOXING DAY CATBLOGGING....We spent Christmas Eve this year at my mother's house, which naturally means I acquired many new pictures of her implacably adorable new kittens. I think they went through three complete cycles of manic zeal followed by utter slumberland during the few hours we were visiting.

But there will be riots in the street (punctuated by the occasional snooze) if Inkblot and Domino are booted from their rightful spots as America's Favorite Cats™ for two weeks in a row. So here they are. Domino is in her normal morning position, draped over Marian's head and sucking up all her bodily warmth. Inkblot, whose relationship with the new pod is sometimes a fraught one, was in a pod-loving moment a few days ago and spent the morning curled up in the sunshine on the other end of the bed. Usually he disdains the pod and sleeps right by Marian's feet, which basically makes her into a cat sandwich. On the other hand, my mother now has four cats, and apparently all of them like to sleep on the bed at night, so I guess it could be worse.

A Fall From Greatness

| Fri Dec. 26, 2008 2:10 PM EST

A FALL FROM GREATNESS....As American manufacturing prowess continues its long decline, even American crime is being affected. Secret Service agent Charles Green explains to the Kansas City Star:

More counterfeiters are using today's ink-jet printers, computers and copiers to make money that's just good enough to pass, he said, even though their product is awful.


....Green pointed to a picture hanging in his downtown conference room. It's a photo from a 1980s Lenexa case that involved heavy printing presses and about 2 million fake dollars. "That's what we used to see," he boomed. "That's the kind of case we used to make."

....Green's voice sank as he described today's sad-sack counterfeiters. These people call up pictures of bills on their computers, buy paper at an office supply store and print out a few bills. They cut the bills apart, go into a store or bar and pass one or two.

That is just a sad state of affairs, my friends. Whatever happened to taking pride in your work? I guess all the real crooks have decided that identify theft and computer fraud are the hot tickets these days.

As an aside, though, I have my doubts that the good stuff all "comes from abroad." My guess is that it comes from right here in the U. S. of A. Just not from counterfeiters.

Quote of the Day - 12.26.08

| Fri Dec. 26, 2008 12:40 PM EST

QUOTE OF THE DAY....From Michael O'Hare, after reading some disturbing news:

Great challenges, widespread deprivation, and collective enterprise need more chocolate, not less.

Quite so, and Barack Obama better not forget it. All together, I think I received about four pounds of chocolate this Christmas, so I'm set for the next couple of days. After that, store shelves better remain fully stocked if everyone expects this blog to continue.

Climate Change Update

| Fri Dec. 26, 2008 11:28 AM EST

CLIMATE CHANGE UPDATE....My morning paper delivers some good news and some bad news on climate change. The bad news:


I wouldn't be surprised to see this number grow further as more studies are done. But there's also good news:


