Credit: Tod Baker via Creative Commons

I read in the Denver Post earlier that the head of the National Renewable Energy Laboratory, Dan Arvizu, said at a conference recently, “if we don’t start phasing out even a scale-up of natural gas by 2040, 2050, we will not achieve any of the carbon loading goals we have set for ourselves.

On a related note, Think Progress reports that the “International Energy Agency Finds Safe Gas Fracking Would Destroy A Livable Climate,” based on the conclusions drawn by the IEA in its recent Golden Rules for a Golden Age of Gas report.

They’re right, of course. Natural gas alone is not the solution to climate change or to our reliance on other, dirtier, fossil fuels. It may be better than coal or oil, but it should never be viewed as more than an intermediate step.

Besides, if we allow the gas industry to become as powerful as the oil and coal industries, we’ll probably have to fight the gas industry in 2040 in much the same way that we’re fighting coal and oil now.

So is there any place for natural gas in a renewable energy economy?

Some argue that there is no place at all for natural gas; while it may generate lower carbon emissions than coal, it is still a fossil fuel and therefore must be phased out as quickly as possible.

It’s hard to argue with that, but the problem remains that we still don’t have a fully viable alternative to energy generated using fossil fuels or nuclear power.

Don’t get me wrong: wind, solar, wave, and geothermal energy are fantastic. I have every confidence that these forms of energy production will reach the point where they provide all the energy we need.

But they’re not there yet. There are still some problems with these forms of energy that have not been fully addressed. The wind isn’t always blowing, the sun isn’t always shining, geothermal and tidal power are only available in certain regions, and the U.S. power grid isn’t nearly efficient enough to transport energy from one region to another. Unfortunately, that means that electricity from those sources is currently not as reliable as energy produced from coal, nuclear, or natural gas power plants.

It’s true that a diverse energy grid drawing from of a variety of renewable sources can easily provide base load power. However, due to the intermittent nature of most varieties of renewable energy, renewables can’t produce power in a way that effectively meets peak energy demand.

Coal and nuclear power plants are also much more efficient at providing base load than peak load, because these power plants rely on turbines powered by steam. Once a coal or nuclear plant is ‘turned on’, it often takes days before it is operating at full efficiency.

Battery technology hasn’t yet reached the point where excess energy generated using renewable sources can be stored and then released later to address peak demand, so what do we do until it reaches that point?

That’s where natural gas comes in. In natural gas turbine power plants the combustion of the gas itself spins the turbine, so gas power plants don’t take nearly as long as coal or nuclear to reach peak efficiency. This makes power from gas turbines the ideal candidate to handle peak load. In fact, that’s exactly how they’re used today.

Even though the primary methods of producing natural gas are oil wells and fracking, these are not the only options. Natural gas can also be captured from ranches and landfills, or created with fermentation. When produced using these options, natural gas is much cleaner than when produced with fracking.

So yes, natural gas does have a place in a renewable energy economy, but only when used responsibly – as a complement to, not a replacement of, renewable energy.

Until better battery technology arrives, we don’t really have another option.

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The Gallup annual environmental survey, released March 29, 2012, shows that 49% of Americans prioritize economic growth over environmental protection, while 41% of Americans value protection over growth. That’s an 8-point margin in favor of growth, down from last year’s 18-point margin.

During times of economic hardship it’s understandable that people, especially those that are having trouble paying their bills or are in danger of losing their jobs, would prioritize economic growth over protection of the environment.

But there’s something funny going on with this poll. Let’s take a look at the question:

With which one of these statements about the environment and the economy do you most agree – [ROTATED: protection of the environment should be given priority, even at the risk of curbing economic growth (or) economic growth should be given priority, even if the environment suffers to some extent]?

This question strikes me as a little misleading. They seem to suggest that environmental protection and economic growth cannot occur simultaneously. Perhaps the phrasing of the question is a reflection of the common misconception that environmental protection comes at the cost of economic growth.

So what this poll has actually discovered is that 49% of Americans favor the economy over the environment when protecting the environment curbs economic growth.

Economic growth and environmental protection are not mutually exclusive; economic growth can spur innovation in renewable energy and energy efficient technologies, and investment in such technologies can promote economic growth.

As Robert and Edward Ayres report in Crossing the Energy Divide, American steelmaker ArcelorMittal has a program called “cokenergy”, where excess heat from blast furnaces is used to generate electricity and heat their facilities. The program generates enough electricity to power their entire Chicago plant, at about half the cost of electricity from the local utility. This saves ArcelorMittal money that can then be used elsewhere, like hiring workers, buying equipment, or R&D.

Some estimates say the US gained over 9 million jobs in the renewable and energy efficiency industry in 2007 alone. This might be an optimistic estimate, but even if only a fraction of that number of jobs have been created, implying that environmental protection cannot occur at the same time as economic growth is simply incorrect.

And then there are all the jobs from natural gas development. Granted, natural gas isn’t as environmentally friendly as solar or wind, but I think an argument can be made that the expansion in natural gas exploration (and subsequent job creation) was at least partly influenced by the push toward lower-carbon energy sources.

But I digress. The point is that the wording of the question above from Gallup’s annual environmental survey appears somewhat misleading, which may affect the results of the survey.

That’s not to say that Gallup’s results are invalid, just that the results may not accurately reflect Americans’ attitudes toward the importance of environmental protection. It’s possible that, if the phrases “even at the risk of curbing economic growth” and “even if the environment suffers to some extent” were removed from the survey, the results would reflect a different trend among Americans.

That doesn’t mean that changing the language would necessarily show that more Americans are concerned about the environment. Maybe environmentalists would be more willing to choose the economic development option if they didn’t think it reduced environmental protections. Or maybe others would be more inclined to promote environmental protection if it wasn’t portrayed as reducing economic growth.

There is no doubt that the pollsters at Gallup are very careful to write questions that are unbiased. It’s possible that they’ve considered all of this already, and have decided that the effects are negligible.

One last thing. The chart below shows a decent correlation between the recessions in ’81,’90,’01, and ’07 and a narrowing of the gap between those who support environmental protection and those who support economic growth.

Image Credit: Gallup

When discussing Mitt Romney’s record on the economy, one of the most important things to examine is his budget. What are his plans for the federal budget if he’s elected? How does he intend to address the stagnating economy or reduce the deficit? Is it possible for Romney to bring back the budget surplus last seen during the Clinton administration?

It’s hard to figure out exactly what a Romney budget will look like, because he hasn’t actually come out with a specific budget proposal. This isn’t unusual; he’s running for office and any budget proposal is likely to have aspects that could be politically dangerous.

He has, however, made several statements over the last few months regarding policy goals that would certainly have an impact on his budget. These statements can be found in the Center on Budget and Policy Priorities report. I have also listed them below.

1) Cap total spending. Romney said that, as President, he would “reduce federal spending to 20% of GDP by the end of my first term” and then prevent it from rising above that level.

2) Increase defense spending. He said he would “set a core defense spending floor of 4% of GDP,”

3) Cut taxes. Romney will permanently extend the Bush tax cuts of 2001 and 2003 as well as a variety of other tax cuts that are scheduled to expire in the coming years. He will also eliminate capital gains taxes for low and middle income families, reduce the corporate income tax, get rid of the estate tax, and repeal the new taxes introduced in the Obama administration’s 2010 healthcare law.

4) Balance the budget. As he said, “I am planning on balancing the budget.

He has also indicated that he will not cut social security and that there would not be any significant budget cuts in 2012 or 2013, as that would “cause us to enter into a economic decline”.

According to the budget analysis from the CBPP:

For the most part, Governor Romney has not outlined cuts in specific programs. But if policymakers exempted Social Security from the cuts, as Romney has suggested, and cut Medicare, Medicaid, and all other entitlement and discretionary programs by the same percentage — to meet Romney’s spending cap, defense spending target, and balanced budget requirement — then non-defense programs other than Social Security would have to be cut 29 percent in 2016 and 59 percent in 2022.

The cuts that would be required under the Romney budget proposals in programs such as veterans’ disability compensation, Supplemental Security Income (SSI) for poor elderly and disabled individuals, SNAP (formerly food stamps), and child nutrition programs would move millions of households below the poverty line or drive them deeper into poverty. The cuts in Medicare and Medicaid would make health insurance unaffordable (or unavailable) to tens of millions of people.

My Dad is an ex-Marine who fought in the Vietnam War. So I find it particularly repugnant that Romney would cut disability compensation for veterans, who have sacrificed more for our country than many of us (myself included) can possibly imagine.

Furthermore, as indicated by the CBPP report, cuts in those programs would push millions more Americans below the poverty line or deeper into poverty. The cuts in Medicare and Medicaid would result in more emergency room visits for non-emergency matters, contributing further to rising healthcare and insurance costs.

While these cuts would likely take place well into Romney’s first term, a reduction in discretionary government spending of 29 percent by 2016 would result in the loss of millions of jobs across the country at the federal and state level.

Even if the economic recovery has picked up steam by then – which appears unlikely if the federal government doesn’t begin pursuing growth-oriented programs – mass layoffs on such a scale could easily push the economy back into recession.

The non-partisan Tax Policy Center estimates that the tax cuts proposed by Romney, including an extension of the Bush tax cuts of 2001 and 2003, would cost $4.9 trillion over 10 years.

Romney’s proposed cuts would allow him to balance the budget on the backs of the working poor while cutting taxes for the wealthiest Americans.

Based estimates by the Congressional Budget Office and Tax Policy Center, Romney’s budget cuts will actually be more severe than those in the Paul Ryan budget. Ryan proposed $5 trillion in cuts over the next 10 years, while Romney’s cuts would total between $7 and 10 trillion.

In short, the statements that Mitt Romney has made regarding his budget priorities are nothing new. They’re a continuation of the same failed Bush-era policies that reversed the budget surpluses of the Clinton years, causing the fiscal crisis in the first place.

Like Romney said in his April 24 presumptive nominee ‘victory’ speech, “it’s still about the economy, and we’re not stupid.”

You’re right, Mr. Romney. We’ve seen your budget proposals, “and we’re not stupid”.

Please visit parts 1 and 2 of my discussion on Romney’s economic policies for analysis of his statements on foreclosure and the auto bailouts.

Image Credit Gage Skidmore

I know I’m not the first person to write about Mitt Romney’s opinion regarding the auto bailouts, and I’m sure I won’t be the last. In the interest of an informed political discussion, I thought we might benefit from a review of what Romney actually wrote in his 2008 New York Times op-ed “Let Detroit Go Bankrupt”.

This issue returned to the forefront of our collective memory recently when Romney tried to “take a lot of credit” for the auto industry’s recovery. People were understandably miffed by this statement, but I believe that a lot of what Romney originally wrote has been lost in the political shouting match that ensued.

He wrote, “A managed bankruptcy may be the only path to the fundamental restructuring the industry needs… The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.”

General Motors and Chrysler did end up going through a managed bankruptcy process. However, this process could not have been funded by private banks and investors, as Romney suggested. As has been widely reported, such sources of private investment had dried up in late 2008, when the bailout was in progress.

Bob Lutz, a Republican who was an executive at GM in 2008, said, “What he [Romney] conveniently forgets is that there was zero liquidity in the country. There was no way to fund a private Chapter 11 — even though, believe me, General Motors really tried to get private debt financing or organize a private Chapter 11. But there was no money to do it.”

So the only way for GM and Chrysler to get the funding they needed in order to undergo bankruptcy reorganization was through the federal government. (By the way, the Canadian government also contributed about $3 billion to the auto bailout.)

To be fair, Romney did suggest federal loan guarantees, but only for “post-bankruptcy financing”, so this wouldn’t have helped to get the funding Detroit needed for reorganization.

But the rest of what Romney wrote in “Let Detroit Go Bankrupt” is actually pretty reasonable.

He also said, “The new management must work with labor leaders to see that the enmity between labor and management comes to an end…This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.”

That’s actually not far off from the agreement that was reached between the car companies and the UAW. All those involved in the restructuring realized that each party would have to sacrifice a little in order to reach an acceptable compromise.

My favorite suggestion of Romney’s was, “The need for collaboration will mean accepting sanity in salaries and perks… Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.”

That was a great idea. Too bad it wasn’t done.

Finally, I feel that it’s important to emphasize that Romney was not against all government support of the auto industry. As he said in the op-ed, “It is not wrong to ask for government help, but the automakers should come up with a win-win proposition.”

I could be wrong, but I think this may indicate that Romney was arguing against giving the auto industry the same sort of no-strings-attached handouts that the banks got, rather than about withholding government funds and letting the auto industry collapse.

Does Romney deserve credit for the auto bailout? No. He wasn’t even in the room. But neither was he suggesting that the auto industry should collapse.

Who knows? Maybe it’s just Romney’s inability to stick to his convictions that makes it so easy for people to question his motives.

Come back tomorrow for a discussion of Romney’s proposed budget.

Image Credit Gage Skidmore

In the latest USA Today/Gallup poll, conducted May 10-May 13, 55% of respondents say that the economy will be better in a year if Mitt Romney is elected president, compared to 46% who say the economy will be better if President Obama is reelected.

These results are far from surprising. Nearly every poll since Romney became the presumptive Republican nominee has shown that Americans rate Romney better on the economy than Obama.

Just like Mitt Romney said in his April 24 speech, “it’s still about the economy, and we’re not stupid.”

But what has Romney done to prove that he would have handled the economy better than the President?

Over the next few posts, I’ll examine three of Romney’s most notable positions on the economy.

By the way, anyone who’s hoping to see another article about how Romney ruined companies and fired workers while he was CEO at Bain Capital will be sorely disappointed. This post isn’t about Romney’s record in the private sector. It’s about his record and statements on the economy and on the current state of economic stagnation.

Part 1: Foreclosures

In interviews and in the Republican presidential debates, Romney frequently said that the best thing for the government to do was stop intervening in the housing market with programs such as HAMP and HARP. According to him, the government should just let the foreclosure process run its course.

He said, “Allow investors to buy homes, put renters in them, fix the homes up and let it [the housing market] turn around and come back up. … The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”

Sounds good, right? He is correct that there is a “foreclosure overhang” in this country. A foreclosure overhang happens when so many borrowers are behind on their mortgages that banks just can’t keep up. The problem is, Romney’s plan would have made the foreclosure overhang much worse than it is.

Let me explain how.

If the government had allowed the foreclosure process to run its course, many of the estimated 14.7 million underwater homeowners would have been thrown out of their homes.

Ignore, for a moment, the immense human suffering this plan would have caused. Foreclosures on such an immense scale would have resulted in an even greater supply of distressed properties on the market and would have added to the already significant foreclosure backlog.

It would also have further depressed property values, making more homeowners underwater, and it would have made the road to recovery even longer and more treacherous than it already is.

The Obama administration’s HAMP and HARP programs, on the other hand, have kept borrowers in their homes and kept them paying their mortgages, thereby reducing banks’ foreclosure backlogs. Borrowers that aren’t being foreclosed upon or evicted are also more likely to spend money on “luxury” items (items not crucial for survival), which helps support the economy.

In other words, Romney’s plan would have added to the “foreclosure overhang”, while President Obama’s has reduced it by reducing the number of people who are behind on their loans.

Where did Romney think investors and aspiring homeowners would get the money to buy all those foreclosed properties, anyway? Banks have become extraordinarily risk-averse since the housing market collapsed, making it exceedingly difficult for even the most creditworthy borrowers to get loans.

Even with government intervention through programs like HAMP and HARP, US home prices are just beginning to stabilize (maybe). How much longer would it have taken if Mitt Romney had been President during the housing crisis?

Of course, Romney changed his mind later at a campaign stop in Florida, saying that banks should “move on and start over away from those debts”.

Mr. Romney, we’ve seen your record on foreclosures, “and we’re not stupid”.

Come back tomorrow evening for a discussion on the effect Romney’s Detroit bankruptcy plan would have had on the economy.

Image Credit US Coast Guard

In 2011, the top five oil companies (BP, Chevron, Conoco, Shell, Exxon Mobil) posted a combined profit of $137 billion. In the first quarter of 2012, these companies earned a combined $33.5 billion.

These windfall profits were enough to put Exxon and Chevron in the first and second spots, respectively, of the Fortune 500 most profitable list.

Last year, fossil fuel companies got $11 billion in government subsidies.

How can we justify giving these companies our tax dollars when budget cuts have forced the de-funding of social programs and the layoffs of over 100,000 teachers nationwide?

Last week, Senator Bernie Sanders (I-VT) and Representative Keith Ellison (D-MN) announced they will introduce the End Polluter Welfare Act to Congress.

“People are sick and tired,” said Sanders, “of seeing the same folks who want to cut nutrition programs for hungry children fight tooth and nail to preserve federal tax breaks that go to Exxon Mobil – one of the most profitable corporations in history.”

This legislation will save the Federal government (and taxpayers) over $11 billion annually by doing away with fossil fuel subsidies, such as tax breaks, special financing, and taxpayer funded research and development.

According to 350.org, getting rid of fossil fuel subsidies will put $807 per year back into the pockets of US taxpayers.

The fossil fuel industry receives nearly six times more in government subsidies than the renewable energy industry. This creates significant entry barriers (see oligopoly) for the renewable energy industry and stifles competition.

A fact sheet hosted on Senator Sanders’ website shows how doing away with fossil fuel subsidies will save money in the years to come. I’ve listed some of the highlights below:

– $14 billion saved by eliminating the intangible drilling deduction, which allows oil and gas companies to deduct up to 80 percent of the costs of drilling.

– $12 billion saved by repealing a law passed in 2004 that allows oil companies to claim manufacturing tax credits.

– $6.8 billion saved by closing the loophole that allows corporations like BP to deduct costs incurred from cleaning up spills and paying damages. How can we expect oil companies to prevent spills if they can rely on taxpayers to pay for cleanup?

– $10.6 billion saved by recouping lost royalties for offshore drilling in public waters.

The End Polluter Welfare Act is good for the economy because it will reduce market distortions, put money back in the pockets of taxpayers, and promote green job creation.

Senator Sanders is asking citizens to speak out against corporate welfare by calling and emailing their senators and representatives, or by signing the petition.

About two weeks ago, one of my co-workers brought up the Home Affordable Modification Program (HAMP), complaining about how it was passed by the Obama administration merely as a populist, partisan trick.

According to this co-worker, HAMP has no practical purpose other than to make the President appear supportive of the many unlucky homeowners who are underwater – those who owe more on their mortgage than their home is worth – and in danger of losing their homes. As if being supportive of these people is a bad thing.

When he said this, it was everything I could do not to bang my head on the table. For those of you who don’t know, I work in the sub-prime mortgage due-diligence industry, helping the saps who invested in sub-prime mortgage securities lose less money than they might otherwise.

Frankly, he should know better. He sees every day how HAMP allows people to stay in their homes, when they would otherwise end up evicted or bankrupt.

HAMP was passed shortly after the collapse of the housing market, when declining property values caused homeowners to be underwater, or owe more on their mortgages than their property is worth.

If anything were to happen to an underwater borrower’s income, they wouldn’t have the pre-mortgage-crisis option of selling their property to pay off their mortgage, thereby avoiding eviction and foreclosure.

HAMP sets aside federal funding to compensate banks that are willing to reduce the amount that homeowners owe on their mortgages, generally also reducing their interest rate and monthly payment. This allowed many homeowners to keep their homes when they would otherwise have had to declare bankruptcy or let the bank foreclose.

It also benefits the investors who purchased sub-prime mortgage securities. Any borrower that is able to take advantage of HAMP is still making mortgage payments. Foreclosure, on the other hand, is expensive and banks will recover significantly less than is owed on the mortgage.

Of course, HAMP isn’t perfect. Banks were reluctant to implement it at first, it’s much more complicated than it needs to be, and it should have been better funded.

If it’s not already obvious, there are two major reasons why HAMP is such a big deal.

The first is that it keeps people in their homes. The rash of foreclosures that occurred after the housing bubble popped, and the resulting oversupply of cheap bank-owned properties, is one of the (many) reasons that property values have dropped as far as they have. Without HAMP, there would have been more foreclosures, resulting in even lower property values and more people without homes.

The second reason is that the economy is currently in what some economists call a “debt deflation spiral”. That is, individuals, families, and businesses are so focused on deleveraging (paying down debt) that they are unwilling to devote the same portion of their income to consumption as they did before the crisis.

The resulting weak demand, in the aggregate, is a primary factor in the extended slump that we have been experiencing since the crisis began. Consumers aren’t spending enough to return production to pre-crisis levels, so companies are unable to hire more employees.

In short, HAMP is good for borrowers, good for the economy, good for the investors that bought these securities, and it doesn’t hurt banks. HAMP and programs like it help the economy on the road to recovery.

One presidential candidate wants to expand this program and create more like it. The other lobbied against it and insisted that banks be allowed to foreclose on whomever they wished. You decide which one will be better for this country.