RealCurrents

I was reading Jessica Mah’s post on how a lot of her high-school and college-age friends are really scared about global warming. Here in the U.S., it’s often reported that folks in other countries are more concerned than the average American, but little attention has been given to how the issue is impacting younger Americans.

It occurred to me that they need a little perspective on this. I grew up in the 1970s, and for those of us Americans who went through this period when the U.S. was in a severe technophobic angst, and there were constant pronouncements about all the terrible things that were going to happen, I suppose we’re just not so quick to be convinced the world is coming to an end every time scientists start preaching doom and gloom.

This was a very long list of crises that 1960s-70s experts insisted were soon to befall us, most of which I’ve probably (thankfully) forgotten, but which included such calamities as pollution, endangered species, population, overcrowded skies, the San Andreas and yes, even a looming ice age. I guess being terrified of nuclear armageddon just wasn’t enough anymore. The funny thing was, very few of these scientists were talking about an energy crisis.

Of course, even the “energy crisis” didn’t last long, once investors started pouring hundreds of billions into oil, which was $35 when I got out of high school but less than $10 when I got out of college. Jessica titled her post “Scared of Global Warming? Bring in the entrepreneurs!” and so yes, I think she’s right that entrepreneurs and the free market are a lot of the answer to global warming.

In general, though, I think we ought to stop and notice something. It sure seems to me that scientists can get into a negative funk about stuff, and end up focussing too much on the problems rather than the solutions. In fact, I can’t help wondering if it’s sort of the same dynamic as with investment newsletters - negativity and fear apparently sell a lot more newsletters, and a crisis may, sadly, be the only thing that will finally garner a research project any funding.

Now, this is certainly not all the scientists’ fault, nor is the business world off the hook. Just look at the American car industry, one of the most pitiful examples of research budgeting in modern history. Perhaps GM, Ford and Chrysler may be excused for being caught unprepared on fuel economy in the early 70s, since they were already struggling with new emissions restrictions. On the other hand, here we are again thirty years later and, sadly, it seems that only the recent combination of high oil prices, a dropping dollar, and concerns over carbon emissions was finally enough to get them serious again about improving fuel economy.

Amidst all the prognostications, it’s still not clear how global warming is going to play out. Besides the many questions of specific effects in specific places, there’s at least three basic questions involved. First is the question of how fast temperatures will go up. Second, how much will they rise long-term (or is it a runaway increase with no end in sight)? Third, if temperatures can be stabilized, will (can?) they then head back down?

We hear virtually nothing of potentially beneficial effects, but clearly there’s going to be some winners among the many losers from effects of global warming. Interestingly, so far the Russians seem to be the only ones thinking ahead about any positive outcomes from it. As Jessica suggests, entrepreneurs ought to be also. Again, though, we must keep a proper perspective - a long-term perspective.

While there’s a lot we don’t know, we can say that at least for practical purposes, whatever we can do will take place over decades. Realistically, it’s far too late to do anything about changes that may take place within the next decade or so. In other words, whatever research and changes - technological or political - that are to be made must be done consistently over a decades-long time frame.

This is, for example, why I strongly disagree with the basic Kyoto (Treaty) framework. Already China is producing as much carbon emissions as the U.S., and will likely continue to increase. Kyoto might be effective in reducing the emissions of Western industrialized nations, but given these reductions and the continued growth of China, India and other large industrializing countries, within a few years this extremely costly plan will prove ineffective in reducing the bulk of emissions.

We’ve heard from the scientists on global warming, but have yet to hear from the engineers, who are going to be the folks who have to make reductions in carbon emissions actually happen. We need to think about cost/benefit ratios. We also need to think about sustaining research investments over decades, which as the history of NASA indicates, is awfully difficult to do when you start out with crash-program type overbudgeting.

I think it’s a good bet that a lot of these new technologies are going to come from both big American businesses (such as Boeing with its new 787) and American entrepreneurs. This realization may not play well overseas, but any approach such as Kyoto that hobbles the American economy is going to be counterproductive.

Like it or not, the U.S. is still a (if not the) major innovation engine in the world. Companies in Silicon Valley (1, 2, 3) and elsewhere in the U.S. are working on hundreds of different technologies, everything from emission controls to cheap solar to electric cars to wind power and so on. Here in Texas, it’s become common to see the giant parts of wind turbines rolling down the highway on their way west, where hundreds are being put up.

We must remember that innovation, not political decrees, is the only way to solve the problems from global warming, and while we’re at it, let’s not forget to also think about taking advantage of the benefits.

First of all, in case anyone’s looking for it, here’s the official details on the IRS’ reasons for making April 17th the national deadline for filing your personal income taxes this year. It’s certainly also a good time to be thinking about how we could improve the system, something we all agree needs to be done, but can’t seem to agree how.

Of course, when you really get down to details, I’m not sure any of us quite knows quite what kind of tax system we’d prefer, but there are some basic qualities we could probably agree on. We need a system that no longer penalizes American business competitiveness, we need a simpler system (need I say more?), and we need a system that encourages - or at least doesn’t penalize - savings and various forms of investment and capital formation.

While a lot of conservatives might not agree on this last point, I think we also need a system that is modestly progressive, i.e. that gives a break to the poorest members of society. Even if you don’t agree with this philosophically, there is certainly a public interest in seeing these folks succeed financially, rather than linger on welfare rolls.

I don’t know all the specifics of the FairTax Plan, but this morning Houston City Councilman Michael Berry had Americans for Fair Taxation’s David C. Polyansky on, discussing this proposal. Here’s a summary taken from their website:

“The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. …”

In other words, the FairTax plan would be based on consumption, not income or savings, so if you made a lot of money but lived frugally, saving and investing what you made - and so creating jobs and wealth - then you wouldn’t get taxed that badly. On the other hand, if you wanted to live like the robber barons, then you’d pay considerable tax - 23% (plus state sales tax, I presume) - but you wouldn’t have to hire an army of accountants and lawyers, nor would you need to worry about estate taxes. That last part alone would probably save wealthy folks enough to where many would gladly pay the 23% on consumption in order to have more financial flexibility.

Of course, I don’t know how they come up with these numbers, but that 23% would apparently include all Social Security and Medicare taxes, and since it’s a straight number, it would be easy to predict the tax impact of any transaction and, like sales taxes, the amount would apparently only be levied on the final purchase, so there wouldn’t be a bunch of “built-in” taxes that add to the cost of goods. While the combined federal and state tax would be about 30%, twice the European VAT, if it had a downward impact on inflation - and interest rates - it might prove a bargain for these reasons as well, without having the regressive characteristics for which value-added taxes have been criticized.

The FairTax Plan, which currently has about 60 mostly Republican co-sponsors in Congress, including Texas Sen. John Cornyn, is reportedly most strongly opposed by Washington lobbyists and some Congressmen in powerful committees, who would lose a lot of influence were it to pass. Perhaps this is the best reason of all for supporting it.

The FairTax would basically be a 23% federal sales tax on everything, that would be balanced by a “prebate” that would rebate the tax burden that would be paid by a family living at the poverty level. So as I understand it, you’d only be paying this consumption tax on purchases above the poverty level.

Moving to a consumption tax is key, because this would put our industries on a much more competitive basis with those of other countries. Right now, in Texas at least (I know some states are different), if you buy a $100,000 home, you have to pay property tax, on the order of 2.5%, every year on that home, which is made in America, of course. On the other hand, if you buy a $100,000 car imported from Germany, England, or wherever, you generally don’t have to pay this tax every year. But if you you buy a $100,000 aircraft made in Wichita, Kansas, you do!

Of course, this is property, not income tax, but it’s just one glaring example of how our system in some many subtle ways (double taxation of overseas earnings is another) rewards importers over domestic industries. A consumption tax would lower the effective cost of our goods overseas and make our manufacturing, agricultural, and other industries more competitive, while at the same time likely doing more to improve conservation of resources and protection of the environment than a lot of other measures would.

Business Week has a disturbing article in the May 29th issue about how Exxon Mobil, flush with earnings larger than the GDPs of many countries, has apparently decided simply not to fund a projected $11.2 billion pension liability. This bothers me for a lot of reasons, but most of all because it’s such an outlandishly large example of a flawed mindset that is found today throughout our society, and even more so in the analytical world of finance.

It seems that setting something aside for a rainy day just isn’t “smart” enough for the highly-trained MBA types. Of course, they want someone to hold reserves, but not them. So instead of taking a small portion of Exxon Mobil’s earnings and getting the pension fund ship-shape, I guess the bean-counters would rather use that money to make money, since that would be the “smart” thing to do. Then, if down the road things don’t go so well, they can let their employees and the government - taxpayers - take the hit.

It used to be that the strong, responsible entities in society were expected to hold reserves, but since there is inevitably an opportunity cost involved, nowadays everyone wants someone else to be the one holding financial reserves, inventory, or whatever. Even many governments (e.g. the U.K.) and the International Monetary Fund seem to be souring on the notion of holding gold reserves. Amazingly, the Clinton administration’s manipulation of U.S. gold holdings in the 1990s still remains largely obscure, whether for lack of curious journalists or lack of public interest, I don’t know.

The point is that in the real world, reserves and margin, i.e. “unused” assets, serve a purpose. They provide stability and buffers that guard against damage. While it’s bad enough that in our instant gratification culture many have lost a grasp of this, it’s particularly disturbing that somewhere in their extensive education, those who ought to know best - highly-analytical financial types - also seem to lose an appreciation for the essential role of reserves.

Besides artificial lights and artificial foods, we also live in a world with a lot of artificial economics. Even folks who work in a factory are generally very removed, economically, from the actual production process. By this I mean that they have become accustomed to getting a paycheck, usually the same amount, every two weeks, which is a total fiction when it comes to how things are produced. Just as we have become used to having light, day or night, we have come to expect income streams to be uniform.

We have also become comfortable with increasingly artificial markets, such as those for complex derivatives transactions. Yet there are real dangers in these artificial markets, as the spectacular failures of Long Term Capital Management and Enron have shown.

While we may take comfort in the broad spreading of risks in the derivatives market or in the Fed’s manipulation of interest rates to bring about a “soft landing”, in the “natural economy”, everything inevitably fluctuates. There are physical cycles of day and night, winter and summer, rain and drought; business (demand) cycles of boom followed by bust; and production cycles of planting & harvest or research & development, cycles that in the latter case can be much longer, e.g. years in automobiles or decades in aerospace. Reserves are essential to manage the uncertainty inherent in these real-world cycles.

Of course, there are still some folks who contend with these natural economy effects on a daily basis. These include farmers, entrepreneurs, and long-suffering managers in the global manufacturing economy. Many of these maintain a deep disdain for the financial types, but what is really needed is for those in charge of managing the money to have one foot firmly planted in each world, i.e. to have an appreciation of the fine points of financial analysis while also maintaining a grasp of natural economy dangers.

As an example, successful entrepreneurs soon learn that Job One is managing cash, not maximizing profits. Without liquidity, a business is bled dry, no matter what the balance sheet or income statement says. Entrepreneurs also soon learn that even when you have a good year, that is no guarantee that the next year will be the same. You learn first to use the receipts from “fat years” to fill holes that were left from the lean years, before presuming to tackle other opportunities.

This is simply prudent management, something understood by millions of small business people, and it really bothers me that a huge business like Exxon Mobil could lose sight of something so basic. Besides this, I can’t help but think of all the companies that have wasted windfalls on imprudent acquisitions. Of course there’s Chrysler, for example, who after emerging from bankruptcy with the help of federal guarantees, plowed many of the profits from the success of its minivans into questionable acquisitions, and ended up back on the brink. Then there was also Mobil’s own purchase of Montgomery Wards, which one employee described to me as a “money disposal project.”

There’s no guarantee that oil prices will be at $70 a year from now, and I hope Exxon Mobil’s employees, directors and shareholders, as well as the PBGC, will put pressure on its executives to do the prudent thing and fully fund its pensions now, while they could just “write a check” to do it. Maybe the company is entitled to its “obscene profits”, as some put it, but it’s not entitled to leave us holding the bag.

I’ve been putting off writing about immigration because it is such a difficult subject to really nail down. There are so many mixed emotions, conflicting interests, and pertinent historical precedents that it’s hard for even one person to agree with themself. I think Mark Belling’s comment on the Rush Limbaugh show Wednesday, that we can’t get agreement on immigration because we can’t find even two people who totally agree, is right on the money. This is very much an issue in flux, but it may no longer be an issue that can be deferred.

Of course, immigration is only one of many issues that U.S. voters have just wanted to keep sweeping under the rug. This rug is getting awfully lumpy nowadays, and these ugly problems are going to be emerging one-by-one (if we’re fortunate enough not to have to deal with them en masse) in the coming years. Any American can list half a dozen of these, e.g. the trade deficit, national debt, consumer debt, Social Security (i.e. even more national debt), Medicare (ditto), corporate pension plans, a disadvantageous tax and benefits structure for global competition, rapidly rising health care costs, and, oh yeah, a couple of looming possibilities - proliferation of weapons of mass destruction, and of various natural diseases such as bird flu.

To George W. Bush’s (and his staff’s) credit, they have been on the immigration issue for some time, but seemingly with little support from anyone, whether fellow Republicans or even Mexican President Vicente Fox. Fox’s anticipated good relationship with Bush seems, instead, to have proved to be largely dysfunctional. Unlike Social Security reform, which Bush was astute to push soon after the election but unfortunately with a scheme largely at odds with the public, on immigration I think he’s probably more in tune than other politicians realize.

Maybe the best way to solve this political, diplomatic and economic dilemma is by a process of elimination, because the reality is that most of the ideas Congress has offered will almost surely fail in practice. Are we really going to lock up church members who help illegal aliens or deport parents while leaving probably millions of “orphans” here in the U.S.? Are we going to deport millions of children who are American citizens? Are we going to destroy our agriculture industry, one area where - I hope - we still enjoy a trade surplus?

These “solutions” are just not going to happen. Are we really going to have another Trail of Tears down to Matamoros or Tijuana? Any politically workable solution is going to have to deal with the historical reality, not just the rhetoric of a bunch of folks who want the cheap housing and living costs of the Sun Belt while pretending the issue just suddenly got out of hand, and deserves some sort of abrupt knee-jerk response.

The hard fact is that when you let a situation go on for decades unchecked, you don’t have some of the options you would have if you dealt with it promptly. Whole generations have grown up in citizenship limbo, and to pretend you can just slice this gordian knot with one sharp legislative blow is nuts. We need to figure out where we want to go, and then figure out how to deal with the situation we’ve already got.

What you can’t stop, you regulate and tax, and this is really the only workable solution. If you raise the costs, you reduce the demand. Maybe someone can come up with a better solution, but it seems to me that in order to regulate the inevitable cross-border flows, a sizable guest-worker program will be needed. Incentives will have to be in place that cause most potential immigrants to be willing to go with the program, and disincentives such as more secure borders and harsher penalties for future violators will be needed to reduce the flows to a workable level. I don’t know what this level is, but it’s going to be more people than a lot of folks will like. Deal with it; in the long run we can probably reduce the pressure on our borders if we can encourage Latin American countries to reform politically (really key) and economically.

The guest worker program will need to be multi-tiered. Workers will have to meet higher requirements to move to the higher levels (allowing longer residency periods and possibly bringing in family members), and of course the highest level will be attaining citizenship, for some portion of the workers. All the workers’ earnings need to be taxed, and tax violations should be grounds for deportation. Health care, education and other issues will have to be worked out, but since they are guest workers, they shouldn’t be on welfare.

While a large guest-worker program may be hard for a lot of Americans to accept, there will also need to be measures taken that will be unpopular with many illegals and with many Hispanic Americans. We must do away with bilingual ballots and require that all citizens learn English as a qualification for citizenship. Bilingual education will remain, I’m sure, at least to teach guest workers’ children in public schools, which will obviously have to be compensated to some degree since guest workers may not own much taxable property. Nevertheless, instruction in Spanish should be only a stopgap, and all students should be required to take English, and have a limit on how many years of bilingual education they can receive before transitioning to regular classes.

Unlike other immigrant ethnic groups, English seems to be a real sticking point for a lot of Hispanics. I really don’t feel any sympathy here. My wife immigrated to this country from Taiwan, and she had to go to kindergarten not knowing any English. Now her vocabulary is probably better than mine. Everyone understands that it’s harder for the older folks to learn the language, but to insist that the next generation can just stay out of the loop of discourse is quite irresponsible. The United States is a republic, a representative democracy, which requires that its citizens be able to communicate with one another. To dispense with this would pose a threat to the whole fabric of our society.

I know that emotions are charged over immigration, with accusations of racism, ingratitude, double standards and the like being wildly thrown about. I hope folks will calm down and actually talk to one another. Hispanics have a lot to be upset about but they certainly should have seen this coming by now. I tend to sympathize with the students getting out and protesting (peacefully), but they need to realize they are sending an incredibly incoherent message, waving Mexican flags while demanding the rights of United States citizens.

Laws have to be enforced, or else they need to be changed. Millions of Hispanics have chosen to violate our laws, and they have no business being upset that we may now choose to change the law and then enforce it. On the other hand, I hope that as we prepare this spring to begin celebrating the 400th anniversary of the Jamestown Colony, that Americans pushing for immigration reform will remember that nearly all of us had ancestors who were once immigrants, and reflect on the somber fact that a measure of humility is, indeed, in order.

Since my first post Monday, more has come out about the Dubai Ports World deal to take over operations of six major eastern U.S. ports, plus some additional Texas terminals, apparently, at Beaumont, Corpus Christi, and the Port of Houston.

The UAE has been wise to back off and wait, rather than press to complete the deal immediately. As more facts emerge, it’s starting to look like the sale might not be as bad as it looked at first, but the U.S. is going to have to work through a whole bunch of thorny political issues. It’s amazing how many hot-button issues have managed to be bundled together in this DP World deal.

The most compelling argument in favor of the deal is that the key area for U.S. port security is actually in the overseas ports, rather than stateside. In other words, cooperation with port operations companies and foreign governments on the loading end is critical. The reality is that most ports are near major metropolitan areas, and inspection upon unloading might be too late to catch certain weapons of mass destruction, such as a nuclear device.

The U.S. has cooperative programs such as the Container Security Initiative that are designed to push the threat away from our shores. Nevertheless, it seems pointless to argue that allowing other countries to operate our ports will incur no security risk. Ownership brings access, and a lot of Americans were justifiably shocked to find out operations had already been outsourced to the extent they have.

Obviously, the outrage this sale has generated shows Americans are paying quite a bit of attention to homeland security issues and that the Bush administration’s attempt, once again, to say “simply trust us” isn’t going to work with such a sensitive domestic area.

If cooperation with foreign port operators and governments - so that manifests can be tracked and containers inspected far from our shores - is really key to port security, then the deal may represent an acceptable trade-off. Nevertheless, despite getting pretty much a free pass (and blank check) on Iraq for three years, President Bush is going to have to really make the case for how this will help security. Selling it on the basis of helping the global economy, as Michael Chertoff was reportedly doing this week, isn’t going to cut it.

In all, this is an amazingly complex political situation. Here are some additional factors deserving consideration:

• It’s still not clear exactly what DP World is “buying” in this transaction; obviously the operations of U.S. ports are not at all well understood by the public. Certainly Congress needs to take a new look at the port laws that are on the books and make sure roles and authorities are clearly and perhaps uniformly defined.
• Jimmy Carter’s quick support of the deal was puzzling. It would be easy to simply say the port deal is analogous to Carter’s giving back the Panama Canal, but consideration of Carter’s mindset about foreign affairs may shed some light on the politics. His assertion midway through his term that foreign policy was complex and beyond the understanding of the average American was what really sunk his presidency, and the current administration seems to have slipped into a similar error.

  Americans instinctively grasp there’s a balance to be struck in our political system between the ideals of republic and democracy. We leave most details to elected officials (republican/representative rule) but still must know enough to judge the performance of these officials (democratic elections). When officials start wanting to leave Americans out of the loop entirely, arguing that the issues are just too complex, the people know better, and there can be a swift political backlash as happened with Carter and again this week.

  Because Americans also understand the need for strong military leadership, there is more latitude given in this area to the President, but sometimes politicians presume too much from this. An example was the 1946 congressional election, when many were voted out because the country was fed up with wartime price controls that the government “experts” insisted must continue.

• The accusation that Americans are being xenophopic or even racist is way out of bounds. As long as Muslims insist on regularly blowing each other (and others) up, they’re going to have a real tough time persuading Americans they’re trustworthy. It’s hard to trust someone who seems to enjoy violence. The U.S. has fought a lot of foreign wars in the past century, but there’s always a lot of political pressure to end them and come home. We’ve got better stuff to do.

  Concerning the UAE, specifically, I’m not sure banking links to terrorists mean much, and Bush’s claim of strong military and intelligence cooperation gives support to the deal. On the other hand, to argue that everyone in the UAE supports the U.S., and so can be trusted, seems quite simplistic. According to AP’s Robert Burns, “the relationship is so politically sensitive in the UAE that the Pentagon does not openly discuss details.” It also has been reported that in 2004, the most recent year’s data available, the UAE sided with the U.S. in United Nations votes only 5 times, and opposed the U.S. 67 times.

• The media deserves some of the blame here for its monolithic coverage of the Middle East. This is very frustrating but unlikely to change, so if Muslim countries want to foster understanding in the U.S. and appreciation for Muslim culture, they will probably need to do the job themselves. The fascinating magazine Saudi Aramco World is a bright spot here, providing a glimpse of these cultures that is virtually unobtainable in the U.S.
• As I noted last time, the administration has gotten worse and worse at communicating its message, at a time when clear communication and articulation of strategy is needed more than ever. Obviously, changes in the White House staff are long overdue.

  Beyond that, the President needs to work a lot harder at sharing his vision of democratization of the Middle East, and be more forthcoming about what strategy, if any, he is following to get there. As I noted before, it is long past time for a real debate about our aims in the Middle East to take place in this country. It may be possible for Muslims to gain a glimpse of Western life and leave behind strife and unrest, but I suspect most, at first encounter with our culture, don’t understand its fundamentals any better than we understand theirs.

• Obviously, the failure by the Bush administration to recognize the volatile mix of terror, frustration over Iraq, outsourcing, unions, the $726 billion trade deficit, disgust with Mideast violence, and out-of-control borders, along with the casual approach it took to the deal were major political miscalculations. Bush quickly found Senate Majority Leader Bill Frist, from the landlocked state of Tennessee, opposing him on the port deal.

  Republicans now find themselves in the odd position of needing to avoid appearing outflanked by Democrats on the security issue, and the lax approach taken by the Treasury Dept. in approving deals may well have to go. Most of all, as I emphasized last time, Bush needs to avoid the tendency, or at least appearance, of only half-heartedly fighting a war that is still much too poorly defined.

Over the weekend, I was disturbed by a report from AgapePress that the Bush administration had somehow, incredibly, approved a deal allowing the UAE company Dubai Ports World to acquire six eastern U.S. ports (New York, New Jersey, Philadelphia, Miami, Baltimore, and New Orleans).

My main concern was that this was going to be another one of those outrageous stories that only the conservative press picks up, but this time I needn’t have worried. Despite the federal holiday Monday, Republicans and Democrats alike were quick to condemn the deal. Thankfully, I don’t need to check that “Press Coverage Holes” category this time.

Nevertheless, as RealCurrents is all about trying to highlight what isn’t already being said somewhere else, but that needs to be part of the discussion, there are several points deserving consideration:

First and most mystifying to me (and I’m a conservative Republican, by the way), this ports deal is just one more instance of the Bush administration refusing to demand, or even suggest, some sort of wartime economic/business sacrifice. First it was the insistence that Americans go on spending like crazy in the wake of 9/11, buying more and more gas-guzzling SUVs even as we went to war in Afghanistan, and as the neo-cons in Washington maneuvered to start another war in Iraq.

The inability of the administration to formulate an effective energy conservation strategy to go along with a protracted war in the Middle East is not merely irresponsible, it is strategically stupid. While the U.S. borrows hundreds of billions of dollars to fight the war, Americans are borrowing hundreds of billions more to pay to oil-producing countries that in many cases have been documented sources of terrorists. This is worse than what we did in the Cold War, spending huge amounts on defense procurement while propping up the economies of the Eastern Bloc.

If things get bad enough, will Washington demand a draft, with a lot of hoop-la about how wartime sacrifices must be made? Though relatively small by historical comparison, the casualties already being suffered in Iraq and Afghanistan are substantial and seemingly ongoing.

The administration likes to pull out the “we’re at war” card every time it’s convenient (e.g. reauthorizing the Patriot Act), yet quickly tuck it away when other interests come into play. I think most Americans would agree that if we’re really at war, then there are going to be some strategic assets that are not to be dealt away.

This is the patently obvious second point: most every homeland security study has shown that our ports are some of our most vulnerable infrastructure. That the administration could even consider turning these over to a Mid-East country shows exactly why this must not be allowed, even if the country is our “ally” (whatever that means with Muslim countries) and, oh by the way, extravagantly wealthy.

Whoever analyzed this deal is confident that safeguards will be in place. This is the problem with any bureaucratic organization - it begins to think it’s infallible, and before long will let anything get by it as long as it’s got all the right rubber stamps on it. In other words, bureaucracies excel at straining out gnats but sometimes miss the glaringly obvious. The FBI’s failure, despite repeated requests, to investigate a suspicious student who only wanted to learn to fly 747s, straight and level, is not only now a classic in the annals of bureaucracy, but also a painful warning of what can happen if we place too much confidence in government.

Of course, the Katrina disaster in New Orleans has provided fresh evidence that bureacracies at all levels can fail to handle the obvious, even when it was expected ahead of time. The simple solution is simply not to let this deal happen in the first place, even if global trade suffers a little bit.

Third, as Republican Sen. Lindsay Graham noted, the adminstration’s stance is “unbelievably tone deaf politically at this point in our history”. As such, it provides ample evidence (as if any more was needed) that the White House is just not being well-managed. Either the administration doesn’t have a coherent message in many cases, and/or it’s failing dismally to communicate that message. Even as I write this, Don Wildmon of the conservative AFA has sent out an email alert opposing the deal, noting that “Normally we don’t ask you to participate in issues such as this, but we feel that this one justifies your involvement.”

I used to be impressed with George W. Bush’s ability to be in touch with public sentiment, but there’s a clear disconnect that seems to have worsened ever since the neo-cons gained ascendancy. Bush clearly needs help, and he should start by restoring Karen Hughes to a top White House role. Then he should demand that the neo-cons play by the same rules as everyone else, i.e. they have to actually justify their points of view rather than just use a knee-jerk accusation of the other side.

Anyone who’s been on the net for long knows there are millions of thinking Americans who are totally outraged at the lack of a real debate on the war in Iraq and other key issues, such as federal spending. Most of these are Democrats, but the number of conservative Republicans among these is growing rapidly. Maybe this ports deal will finally get the real debate about the war on terror started.

I recently read that the U.S. is spending more now on tort litigation than it is on research and development. Unfortunately, there’s not much of an export market in torts, so I hope we will find a way to get our priorities right before China and India (and near everyone else) eats our lunch.

On my site AeroGo today I used one example, the recent discovery that weightlessness affects the immune system in a way somewhat similar to HIV, as a springboard for discussing why it’s often hard to justify exploration and research beforehand, even though we have hundreds of years of human experience that clearly show a big long-term payoff.

The problem is that we usually get it wrong when we try to predict what we’ll find and the timetable for reaping benefits. We find something unexpected and seemingly disappointing, that in the long run ends up being way bigger than what we were looking for. Columbus was looking for spices and gold. There actually was gold, just not in the West Indies. Columbus apparently had failed, because the Spanish didn’t realize at first that they’d discovered two whole continents.

The U.S. needs to aim higher and stop quibbling so much about R&D. While funding needs to increase in the private sector (in case you haven’t noticed the federal government is already in hock up to its eyeballs), even more important than an increase is the need to get a lot better at the poorly-understood techniques of targeting and scaling of R&D investment.

We need to spend less per project early on, spread funds around more broadly, and most of all invest much more consistently and for the long term, something difficult to do in the U.S., at least in government agencies and publicly-traded companies.

It’s amazing that the bankruptcy bill’s provisions regarding hikes in credit card minimum payments aren’t being covered all over the mainstream press. I’m still not clear on whether credit card issuers are definitely required to double minimums on bills after October 17th, or just being pressured to do so (most reports indicate that it’s mandatory).

I’ve long been annoyed by how the press feeds us constantly news we can’t really do anything about, but ignores stuff we could actually use, or at least need to know about (one reason why blogs are growing in popularity). This sparse coverage of credit card changes would seem to be an extreme example of this. In a year where we’ve seen gas prices double, electric and natural gas rates rise rapidly, etc., it seems like a really bad time for any more abrupt changes.

I still remember the effect of the congressional bounced-check scandal back in 1994. Americans are sensitive about their pocketbooks. When they found out their congressmen were writing hot checks as a matter of course, Newt Gingrich put together the Contract With America and threw a bunch of them out. The Republicans have controlled the House ever since.

If this is true, that minimums are doubling this month, then I can’t help but picture in my mind millions of Americans furiously calling their credit card issuers, only to be told that it wasn’t their doing; Congress passed a law requiring it. I doubt that’s likely to go over too well.

Obviously, any big change ought to be phased in gradually (gradualism is one of the basic tenets of conservatism). As Austrian economist Ludwig von Mises observed, any governmental intervention in the economy is likely to produce opposite of the desired effect. Rather than “helping” Americans to pay off their credit cards faster, such a change is likely just to increase fees and therefore credit card balances, or else some other form of loans.

I don’t want to be alarmist, but I can’t help but wonder if blogger Dana Blankenthorn is right when he writes, “The next U.S. recession will start in earnest on October 17.” In any case, it will be interesting to see if there’s a quick reaction by Congress over this to fix it.

Certainly any hikes in minimum payments ought to be phased in, rather than doubled abruptly, but even if Congress reacts quickly, the holiday shopping season will likely be ruined. Add to that the housing boom and autos, I suppose.

I hope that if there really is a train wreck over this, that the press has to answer for their negligence, as well as the politicians.

I’ve noted a number of observations about Hurricane Rita and the problems with the evacuations, particularly with the difficulty much of the public has in assessing risk and responding appropriately, and how public officials need to consider that in issuing warnings.

An additional problem is the lack of reserves near the end user, brought about by our just-in-time economy. If we want to leverage the just-in-time technique, then we need to compensate for it by having a more effective emergency delivery system.

Capitalism works great until it doesn’t, and I’m wondering if in the energy sector we’re somehow reaching one of those economic eddies where things don’t just work themselves out. I’m not convinced yet that this is the case, but I’m really beginning to wonder how high oil has to go before we see some serious investment by the energy industry.

Okay, the term “serious investment” really isn’t fair, because that’s something they do as a matter of course. But here in Houston, Texas, the energy capital of the world, you’d think companies would be hiring like crazy. Oil is up about seven times (unadjusted for inflation) since the lows of the late 1980s.

Apparently I’m not the only one wondering about that. Reuters is reporting that European Union finance ministers meeting in England “issued a statement saying they … wanted oil companies to increase investment in oil exploration, production and refining capacity as well as alternative energy services.”

Back in the late 80s, when oil was really down, there was a bumper sticker in Houston that went “Dear God, Please give us $28/barrel oil again. We promise not to waste it this time.” For a long time, I assumed this more prudent mindset explained the oil industry’s rather non-aggressive stance (the economic devastation in the oil business was a lot worse than most people realize). Now I suspect oil exploration may well be restrained by the realities (?) of the global Hubbert curve, if indeed worldwide production is presently peaking.

In any event, it seems clear that worldwide energy demand is by no means peaking, mainly because of China and India, so oil companies may have to once again get aggressive about alternative energy sources (maybe it’s a good time to buy real estate in Parachute, Colorado - I wonder what happened to all those empty houses).

It may not be wise to press the oil companies too much to increase oil production through conventional drilling, but in a capitalist economy, when the price goes up steadily, consumers are sending a clear signal to producers to increase supply, and increased investment by producers is part of what justifies the premium profits they get in such situations.

I really don’t see how the energy companies can seriously be thinking we are presently in danger of seeing excessive investment in their sector. Oil would have to drop by nearly two-thirds just to get down to $28. I hope the oil companies will re-invent themselves as diversified energy companies or at least pay out the profits in dividends quickly so someone else can invest them in our energy future.