Sunday, April 13, 2008

The Coming Storm

Gas at $4.00 dollars a gallon by the beginning of summer in most parts of the country, and at or near $5.00 in places like California, Hawaii, or even in Chicago or New York City. Outrageous? You bet it is, but read on. Oil companies continue to post record profits. In 2007, the three biggest oil producers posted $806 billion dollars in revenue. Exxon made $404.6 billion dollars in revenue. Of that, $40.6 billion was pure profit. Chevron had revenues of $214 billion in revenue, of which just under $19 billion was profit. Bringing up the rear was ConocoPhillips which raked in $187.4 billion in revenue, with $11.9 billion in profits. At the same time, these same oil companies get some $18 billion dollars in tax breaks and public tax money. For Free Marketers, that’s wonderful. For consumers, it’s a disaster.

Then there is global warming. Now whether or not you believe global warming or climate change is man made or simply a natural occurring phenomenon doesn’t matter. The fact is that something is happening, and it’s affecting our weather, and thus our food supply, and coupled with the raising costs of fuel, that’s a recipe for disaster on a global scale. Let’s take a look at some examples.

According to the Intergovernmental Panel on Climate Change, some 250 million Africans could be without adequate drinking water by 2020. That’s just 12 years away, and doesn’t even take in consideration the rapidly growing populations of India and China which numbers in the tens of billions already (for that matter, not even Mexico or South America). The prices of basic food staples have increased worldwide 80% since 2005. In March of this year alone, rice, one of the most basic staples, hit a 19 year high while wheat, the other big staple, rose to a 28 year high. The UN Food Bank, which is responsible for food monitoring and distribution, estimates a food shortfall of $500 million dollars to meet current demands. That’s needed to supplement both existing needs and an estimated 70 million additional people in 80 countries.

So why the sudden shortages? Simple. Oil prices. While oil prices continue to shoot up and their stockholders, corporate executives, and speculators rake in obscene profits, people go hungry. Farm acreage formally devoted to producing crops like rice and wheat are now being converted to corn. In 2005, President George Bush signed into law the Energy Policy Act which increased the amount of corn based biofuels (ethanol) available to be added to gasoline in an effort to reduce harmful green house gas emissions thought to be responsible, in part, for global warming. It also, more subtly, was a way to “water down” gas in order to extend the supply as world oil supplies dwindle amid increasing global demand, especially China. Kind of like what folks did during the Great Depression by adding extra bread crumbs to make a meatloaf last longer. Speaking of meat, the price of meat continues to rise because there is less corn available for livestock feed, which is now being diverted for human consumption.

The result was a decrease in wheat and rice production by ¼ acre. This relatively small reduction in acreage saw wheat and rice prices skyrocket, which cascaded across the board as we filled our weekly grocery carts. Meanwhile, corn prices jumped from $2.00 a bushel in 2005 when the policy was signed to $6.00 a bushel so far this year. Again, why? The answer is, once more, the spiraling demand for cheap fuel and now, for food stuffs. Egypt for example, which has long subsidized wheat prices, and the second largest recipient of US aid behind Israel, is facing bread riots because the price of wheat has risen so high that the Egyptian government is having trouble affording it. Some 20% of Egypt’s 76 million people live at or below the poverty line; Bread is the basic component of their diet. The same could be said for rice in Asia.

In my opinion, the near term indicators are that we’ll see an increasing global food crisis and a demand for cheap fuel to power economic growth. At the current time, there’s little that we can do to have both. Climate change will play an increasing factor as crop production, fresh water supplies, and basic infrastructures are challenged to or past the breaking point. There are only two scenarios as I see it. The first is to continue on our current path. This will likely result in increased shortages, unaffordable prices, and war as nations fight for natural resources in order not to create domestic economic growth, but simply to sustain current demand. If they fail, riots, crimes, and even violent revolutions are on the horizon.

The second scenario calls for global economic cooperation on a scale we’ve yet to see. It means putting aside national and ideological differences and focusing on human survival. It may mean international cooperation on an unprecedented scale to develop immediate controls on fuel production and consumption, as well as creating alternative energy sources. For places like Detroit, Stuttgart, and Nagoya, it will mean development of more fuel efficient cars. No more lobbying delays for watered down legislation. It will mean an overhaul of our transportation system, including the implementation of mass transit such as light rail, and bringing back trolleys and trams. It will mean new and more environmentally efficient homes. Given the rapid depletion of oil, it may also mean nationalization of the oil companies as a matter of national security since oil has become a strategic resource, and as such, should not be at the whims of corporate greed.

While that may help with energy shortages, it should also help with diverting acreage now under corn back to wheat and rice. Reengineering through genetic research of crops could produce greater yields on smaller plots of land; Perhaps even using less water and capable of growing in more arid areas. But wholesale education of populations is also need to educate them on more effective growing techniques. And with that, education in birth control to minimize both population growth as well as the spread of diseases such as AID despite outdated and irresponsible religious dogma against birth control. Not only is existing technology in water purification desperately needed, but so are simple tools for digging wells and improving irrigation.

Lastly and perhaps most importantly, is the vigilance of people everywhere to the excesses of corporate greed and governmental indifference. People must stand together to demand a stop to food and water being used as tools of wars; being held hostage as it were by petty thugs for weapons and money. We must demand incessantly that government control the obscene profits of oil companies and the like while they hold their hand out for tax breaks and incentives to the tune of $18 billion dollars that you and I pay for; A figure that’s expect to increase to $28 Billion dollars over the next five years. If we fail to do this, you and I may in the short run be able to avoid the coming storm, but our children and their children surely won’t. In short, “We the People” must lead now so that government will be forced to follow.

Here’s an interesting article submitted to A/O which I think you’ll like.

Making Tax Day Less Painful While Reducing Deficits
By Andrew L. Yarrow
Author of Forgive Us Our Debts

Marie Antoinette is said to have asked Louis XVI’s finance minister," What are you going to do about the deficit?" To which, the good minister—not unlike many an American politician today—purportedly answered: "Nothing Madame. It is too serious."
With a national debt of $9.3 trillion and rapidly growing, federal debt is serious, and failing to balance spending with revenues portends serious long-term pain for the American people, economy, and government if nothing is done.

The elephant in the room is entitlement spending, but it is worth considering the role of our tax system, not tax rates, in exacerbating America’s debt. Liberals and conservatives can disagree about tax rates or types of taxes, but few disagree that how the United States collects taxes could not be much more dysfunctional.

Almost no one likes taxes, despite Oliver Wendell Holmes’ injunction that they are the price for a civilized society. Moreover, almost no taxpayer, expert, or politician likes the current U.S. tax system, which is insanely complex, grossly unfair, and horribly inefficient.

There are several basic problems: 1) filing taxes wastes stunning amounts of time and money; 2) huge amounts of owed taxes go uncollected because of rampant tax cheating; 3) too many Americans pay no taxes; and 4) many tax subsidies are corporate and special-interest welfare.

Income taxes, with 900 or so IRS forms, devour 3.4 billion hours of Americans’ lives every year, or 25 hours per taxpayer. They cost the average filer $200 in out-of-pocket expenses, the U.S. economy untold billions in lost productivity, and IRS compliance costs are one-tenth to one-seventh of the amount of taxes collected. Between the costs of preparing taxes and the lost income from time that could be spent productively, or more enjoyably, paying taxes costs our country between $240 billion and $600 billion in 2005, according to the Government Accountability Office –all to raise about $2 trillion.

Secondly, as Will Rogers once said, "The income tax has made more liars out of the American people than golf has." About $300 billion in taxes owed – more than recent deficits – go uncollected, as polls have found that at least one-fifth of Americans publicly say that it’s OK to cheat on your taxes. That’s only those who admit, in essence, to being liars.

In addition, one-third of Americans pay no income taxes, up from one-fifth in the mid-20th century. While many are low-income, there are good citizenship reasons for all Americans to pay taxes, even if this is not a big revenue-raiser.

The fourth arena – called "corporate welfare" by Ralph Nader liberals and Cato Institute conservatives – involves hundreds of billions of dollars in forfeited revenues from market-distorting tax breaks to business and special interests. Maya MacGuineas of the Committee for a Responsible Federal Budget says that these $800 billion a year in "tax expenditures are really spending programs designed to look like tax cuts." These range from farm subsidies to the $225 billion-a-year exclusion for employer-based health care, which exempts corporations and individuals from paying taxes on the value of health insurance.

These four issues are areas where bipartisan agreement would be relatively easy. While the devil may be in the details, tax simplification is a no-brainer. We could eliminate most forms for most taxpayers; go to return-free filing, putting the onus on the government, as Grover Norquist has suggested; and/or adopt a Simplified Income Tax proposed by the Urban Institute’s Leonard Burman, with a single family credit, a refundable work credit, a 15 percent mortgage credit, no state or local tax deduction, and a built-in 401(k).

To collect owed taxes, honesty could be encouraged and we could beef up enforcement, as the audit rate falling from 2.15 percent in 1978 to 0.58 percent in 2001. The employer health-care exclusion and many agricultural and corporate subsidies are often seen as prime candidates for elimination.

Reducing long-term debt requires many other reforms—notably of entitlement spending—but we could address much easier, tax-system reforms that could win broad support across the political spectrum.

— Andrew L. Yarrow, Washington director and vice president of Public Agenda, a nonpartisan think tank, is a professor of U.S. history at American University, and the author of Forgive Us Our Debts, a book about the causes, consequences, and cures for America’s national debt, published by Yale University Press this spring. Yarrow's book Forgive us Our Debts is available from Yale University press

Poll Results

We had a pretty good response to our poll asking you what you thought about our involvement in Iraq and Afghanistan. 30% said they supported the war while 40% opposed it. The remainder said they backed our involvement in Afghanistan only. Thanks for voting!

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