Redesign the Paradigm

Economists are warning of another U.S. recession and the Federal Reserve (FED) has stated the U.S. economy is “close to faltering” without additional support. Additional support really means expanding the money supply with another round of Quantitative Easing (QE) or in simpler terms –  printing more money.  This next next recession may be more problematic due to the other economic troubles that are going to accompany it. These troubles include:

1.  The U.S. government is getting itself deep into debt and there is no political will to reign it in. The current debt level is over $15 T  and has surpassed the country’s $14.9 T  Gross Domestic Product (GDP). What is more distressing is the total unfunded liabilities (the real debt) which stands at over $54 T. This lack of fiscal responsibility is causing foreign investors to no longer consider U.S. Treasury Bills the safe investments they used to be. If foreign investors stop purchasing U.S. treasuries (this has already started to happen) the Fed will be forced to print more dollars to cover future deficit spending. Interest rates on Treasuries will also go up since they will have to pay higher yields to attract investors. As Treasury rates raise so do mortgage rates and other interest rates consumers use to purchase goods. This slows GDP growth.

The federal debt is not the only concern. State and municipal (local) government debt is currently $2.9 T and rising. These governments cannot print money to cover their deficits like the federal government does. This means that severe cuts will be needed to balance their budgets and maintain their credit ratings. This usually results in budget cuts in healthcare for the poor, elderly care, and in education. Even with cuts many states and local governments are already on the verge of bankruptcy and close to defaulting on their debts. Budget cuts alone may not be enough to keep state and local government’s solvent forcing them to issue more municipal bonds.  The problem here is the same as with Treasuries. Large investors (mutual funds, insurance companies, wealthy individuals) no longer view municipal bonds as the tax free safe haven they once were and are shifting their holdings out of municipal bonds. This will require local and state governments to also raise interest rates on new bond issues to attract investors.

Growing federal debt represents another problem. The U.S. dollar is the world’s currency of choice for international trade. This provides the U.S. with a purchasing power advantage. To much debt combined with printing to many dollars has laready started country’s discussing the possibility of a different currency or basket of currencies as the currency of choice for world trade. If this were to happen the cost of foreign goods would increase dramatically.

The bottom line – interest rates which have been kept artificially low by the FED in attempts to stimulate the economy are going to rise soon. This makes purchasing goods with credit more expensive which decreases the U.S. consumers purchasing power,  this in turn slows down economic growth.

The next problem is rising inflation. The consumer price Index (CPI-U), which is a measure of inflation, has risen to 3.8% in the past year. This CPI has been criticized as being misleading and not representative of real inflation. When the CPI is calculated, as was done in 1990, inflation is at 5.5%. If calculated according to 1980 methods it rises to over 10%. What is important here is the rising trend in American’s staples: food (groceries) 6%, gasoline 32%, heating oil 35%, electricity 2%, medical coverage 3%, clothing 4%, and housing 2%. Consider your expenses over the past two years. The real rate of inflation is rising and this means higher prices for goods and services.

Rising prices are not the only pinch on consumer pocketbooks. Wages have been stagnant since 2000. In fact median wage stagnation has become a way of life for most Americans. Wage stagnation is attributed to a decline of organized labor unions, erosion of minimum wage, globalization which encourages companies to take advantage of cheap overseas labor, and a trend away from manufacturing towards lower paying service jobs. Low income jobs now account for over 40% of all jobs. In addition, American’s no longer have access to easy credit and can’t borrow against their homes equity.

The bottom line – inflation is raising and goods and services are becoming more expensive while consumer wages remain stagnant. The result is that consumers will purchase less goods and services and will slow GDP even further.

Another critical component is unemployment which has remained above 9% for over a year. This figure is another government reported statistic regarded by many as inaccurate. It doesn’t include workers who’s unemployment benefits have expired but are still out of work, worker’s who are forced to accept part time work or short term contracts both without benefits and at a fraction of their usual salaries, self employed workers whose incomes have drastically decreased, or worker’s who could not get a job and have gone back to school incurring debt.  When all factors are considered the true unemployment rate is probably closer to 16%+/-. Fewer Americans working means fewer Americans are able to purchase the same quantities of goods and services and this is slowing down GDP growth.

High unemployment also increases federal and state government spending which drives up the debt. Unemployment benefits exceeded $160 B with the brunt of it bared by the States. This has required many States unable to meet these payouts to borrow from the federal government. Today one in every six Americans relies on Medicaid. 44 million Americans are on food stamps and this includes one out of every four American children.

The bottom line – As the economy slows unemployment will continue to remain high and many companies will expect their workers to provide the same levels of productivity only with less people or fear loosing their jobs.

The next recession may not only impact the U.S. It may be a global recession. The European economies are on the brink of a debt crisis much worse than here in the U.S. Even private sector business activity in Europe has been falling. European countries in the past have successfully been able to rely on austerity measures which involve raising taxes while decreasing government spending, but with such deep debt levels and a number of country’s about to default on those debts even austerity measures are having little success. The U.S. Treasury recently issued a warning that the European crisis represents a significant risk to U.S. recovery due to the close integration between the U.S. and E.U. and that a severe crisis in Europe would further undermine U.S. consumer confidence and weaken demand. This would in turn slow down GDP and economic growth. There is also growing concern that a European debt crisis may lead to another global recession or worse a financial collapse similar to that experienced in 2008. Even manufacturing powerhouse China has seen three straight quarters of declining orders.

Europe’s austerity measures may be a precursor to what the U.S. may be forced to go through to meet international debtor expectations. Europeans are feeling the pressures of raising payroll taxes, increased retirement age pension cuts, broad cuts in social programs, and privatization of public services followed by higher prices for those services. These measures have driven thousands to the streets in protests.

In so much as a downturn in European economy can effect U.S. growth, a decline in the U.S. economy can also have a great impact on global markets. Consider that 70% of U.S. GDP is consumer spending and that the U.S. is responsible for more than 22% of global activity. Therefore 15% of global activity is directly tied to U.S. consumer purchases. The U.S. consumer’s purchasing capacity is decreasing and will likely continue to do so. This situation is pulling the world economic system down and is evidence of how interconnected the world is.

So what can be done to revitalize GDP growth or stifle a recession? The FED is urging Congress not to go the European route of austerity, at least not yet. The FED Chairman has come out requesting that lawmakers not cut spending too hastily in the short term despite public outcry to reign in the debt and international debtors seeking alternatives to both U.S. treasuries and the dollar. Instead they appear to want another round of Quantitative Easing.

If QE3 is enacted it will provide banks and financial institutions money in exchange for Treasury Bills, long term bonds, or perhaps it will be municipal bonds this time. The banks can then use that money to bolster reserves and lend or invest up to ten times that amount. This is the only trick the FED has left to try to jump start the economy. The FED’s main method of revitalizing the economy has been to lower interest rates, but it has already kept interest rates at near zero for years and while its been very lucrative for banks it has not resulted in economic growth for the country.

The problem is that QE1 (the bank bailouts) and QE2 (U.S. Treasury purchases) didn’t really work. In QE1he banks dumped their mortgage backed securities on the FED and didn’t invest the money back into main street America as promised. QE2 resulted in a great deal for Wall Street once again. Large banks and financial institutions used the cash infusions to replenish reserves and increase investing. However, those investments did not find their way into small and medium sized business which represent 85% of jobs. Instead banks invested in more profitable derivatives which contribute nothing to tangible growth and lent to large multi-national corporations with global exposure in the emerging markets of Asia. Those companies were deemed better credit risks despite the fact investment dollars and jobs were going overseas. One thing QE2 did manage to do besides improving Wall Street profitability was to drastically lower real Gross Domestic Product (GDP).

But are these the best solutions for the country or the best solutions for Wall Street? Dropping interest rates to essentially nothing and QE1 and QE2 did little to revitalize economic growth but it did provide massive profits for Wall Street. Austerity measures in Europe on the other hand are also having little effect and many proponents think it will do more harm than good with the final result being those countries on the brink of default will do so and require bailouts. Another option is debt forgiveness but no one seems to be mentioning this idea.

The U.S. may not be in a recoverable position and it wasn’t main street America who put us in this position it started with Wall Street and the Banks with their relentless drive for profits at any cost, even if it meant long-term economic collapse. This is not what capitalism is suppose to be about.

It appears the FED will take care of large banks and financial institutions which in turn will look out for large Multi National Corporations and wealthy investors. Main Street is going to have to stand up and find their voice.

In the previous blog U.S. Fiscal Responsibility – An Assessment of Growing U.S. Deficits and Debt Obligations I discussed the factors contributing to the U.S. debt, potential dangers if irresponsible fiscal policies continue, and a strategic direction for returning to fiscal responsibility. Of equal importance are receipts (tax revenues) and outlays (government spending) and how those allocations are distributed, which will be discussed in this blog.

As of October 2010 the U.S. debt has grown to $13.5 trillion, a 131% increase in a decade. Bush administration fiscal policy resulted in a record $4.22 trillion increase in U.S. debt. This was principally caused by lost revenue from the enactment of the 2001 and 2003 tax cuts, the wars in Iraq and Afghanistan, and increases in federal spending that added $700 billion a year to the budget. These spending increases were not matched with additional tax revenues expected from the economic growth the Bush tax cuts were projected to provide. The Obama administration soon outpaced the debt increases of the Bush era by racking up $3.53 trillion in less than 2 years. Debt increases from the Obama administration were driven largely by hundreds of billions in stimulus programs to spur the economy out of recession, a $1 trillion down payment on the new health care program, and escalations in spending for safety net programs and education. The $786 billion financial sector bailout (TARP) decisions were shared between both administrations in 2009. The following table lists the growth of the federal debt over the past decade, debt percentage of Gross Domestic Product (GDP), and the associated administration.

There are basically two recognized effective methods to control debt, increase revenues (taxes) or decrease outlays (spending). Increasing taxes is obviously unpopular. Serious independent analysis of the effects of increasing taxes versus a potential loss in tax revenue if the country is overtaxed should be conducted.  Reducing some taxes like capital gains and dividends may actually stimulate economic growth thereby generating more tax revenues in the long run, but widely implemented individual and even corporate tax cuts have not been proven to stimulate significant enough economic growth that would result in additional tax revenues. GDP percentage increases were only marginal after the 2001 and 2003 Bush tax cuts and were less than the GDP growth levels of the previous Clinton era.  GDP growth did peak  after the ERTA tax cuts in 1981 but only dropped a few percentage points after portions of those cuts were rescinded in 1986 (see table below). It could be argued that the 1981 and 2001 tax cuts were implemented during periods of recession which would restrict some of the GDP growth, but the recessions did not last the duration of the administration. In any case, tax revenue collection after the Reagan ERTA cuts averaged an increase of 6.5% a year from 1981 to 1986, the Clinton OBRA tax hike averaged a tax revenue was increased to 7.7% per year from 1993 to 2000, and the Bush tax cuts only generated an average tax revenue of 3.8% per year.  Tax revenue collections were not increased during tax cuts as many claim but during periods where tax receipts were increased.  Of more relevance are the significant increases in the debt levels during periods of tax cuts and the debt level increases in general during the Reagan and Bush administration’s policies on supply side economics – illustrated in the following table.

The belief that decreasing taxes will generate additional revenues or will not increase debt levels does not hold merit. A realistic tax policy that has fiscal debt reduction as one of its core principles should be created by independent experts without political agendas. This policy needs to address the best mix of tax maintenance practices combined with increases or decreases in those sectors that will only be allocated after careful analysis of long economic changes and their effectiveness in generating budgetary surpluses required for lowering debt. Current tax receipts for 2009 – 2010 plus projections for next year, 2015, and 2020 are listed in the table below. Data is according to the Office of Management and Government – Budget of the U.S. Government, Fiscal Year 2011 and may be subject to change depending on administration.

This budget increases taxes over the next decade presumably in accordance with economic growth projections but is a representation of a Democrat proposal not the work of an independent group and as illustrated in the following table accompanied by large increases in spending. Careful consideration should be assigned when taxes are increased in the private sector. The goal is to indeed to increase tax revenues but not at the expense of stifling growth in small and medium sized companies, the backbone of jobs in the U.S. Additions in tax revenues should be combined with strict analysis of spending programs to identify those sectors that would be identified to receive reductions in funding. Current outlays for 2009 – 2010 combined with projections for 2011, 2015, and 2020 are listed in the table below. The source is again Budget of the U.S. Government, Fiscal Year 2011 and projections may again be subject to change in the event of a change of power in Congress.

The next table is divided into non-discretionary and discretionary spending. Non-discretionary represents budgetary expenses that are required by law and have built into them cost of living adjustments (increases).  These types of outlays require new legislation in order for budgetary changes to take effect.  It is also the most politically difficult type of spending to make cuts in. Non-discretionary spending includes Social Security, Medicare, and Medicaid and represents 56% of outlays. Discretionary spending includes security (military) expenditures and non-security expenditures which consist of a variety of programs like net safety programs (assistance to families  / individuals for financial hardship), education, transportation agriculture, energy, etc. Combined discretionary spending equals 38% of outlays.

Clearly proposed outlays under the Budget of the U.S. Government, Fiscal Year 2011 continue the escalation of the debt and represent Democrat fiscal policies which like those of prior Republican policy are not in line with fiscal responsibility. Less spending is necessary but where to cut? Interest payments on the national debt are not up for negotiation. Failure to meet those obligations would produce rapid detrimental consequences. Non-discretionary expenditures represent the largest potential for cuts despite legislative difficulties and a political nightmare for any lawmaker foolish enough to try, but from a long term perspective may be exactly what is necessary. Social Security and Medicare outlays begin to increase dramatically by 2020 driven by increasing numbers of retiring baby boomers. This will be a very difficult decision; folks have paid into these programs for decades as a type of insurance for retirement. We may be witnessing the last generation of recipients that will collect the full amount of entitlement benefits as well as an increase in what constitutes retirement age in order to restrain from further deficit spending.

This brings us to discretionary spending of which military expenditures consist of more than 64%. Some sources claim that when military spending ($782 billion) is combined with military related national security expenses buried across all the government departments a more accurate picture of what the U.S. allocates for defense may be as much as $895 billion. The U.S. congress will soon have to decide whether to continue the funding for two potentially unending wars ($136 billion for 2010) while spending more than the next top 15 other countries combined and forward deploying to over 100 bases worldwide all in the name of maintaining a strong “defense” is more necessary than fiscal responsibility. As debt continues to grow many ask if it is necessary to spend $782 billion a year to fight low intensity wars and guerilla insurgents? The cessation of wars in combination with serious analysis of where spending is occurring combined with an assessment of the viability of the programs in a 21^st century environment will soon be required.

Non-military discretionary expenditures represent the final sector that will require budgetary cuts. There are numerous programs here, many essential to the stability of the country and some that have become far too bureaucratic and overfunded. The largest of these programs (25%) include a variety of net safety programs created to provide assistance to low income families and individuals that face financial hardship. Other programs that are currently under scrutiny are listed in the table below. There are numerous places where these programs can be cut. Many programs designed to provide aid in times of temporary hardship have become indefinite sources of social welfare. It will require more independent analysts to determine the realistic cost versus benefits of the programs and what the long term effects of cuts may result. Some programs may actually require increases, for example: additional allocations for programs that support innovation and promising new technologies that if developed would stimulate economic growth and increase jobs.

In light of the information above, increasing tax revenues is unpopular politically and the public is not on board. Some groups would like to see the reduction of entitlement and social programs, while some other groups want to limit what many consider run away military costs. The simple truth is that for our government to become fiscally responsible, all of the above measures, to some extent may be necessary. What is going on with our federal budget is similar to what took place over the past decade with individual citizens, we have been running up our debt and now many of us are faced with the painful challenges of paying off our individual debt or facing bankruptcy and years of poor credit which would effect our standards of living. The U.S. Government is no different, just on a macro scale. It is time to face the hard choices and do what is necessary before our debtors force us to do it and with potentially more painful consequences.

http://www.nationalpriorities.org/

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258

http://www.wallstats.com/deathandtaxes/

http://www.grabgadget.com/wp-content/uploads/2008/11/wallstatsdatlarge.jpg

http://fc00.deviantart.net/fs29/f/2008/140/5/7/Death_and_Taxes__2009_by_mibi.jpg

http://www.mint.com/blog/wp-content/uploads/2009/07/DAT2010mint.jpg

http://www.gpoaccess.gov/usbudget/fy11/pdf/budget.pdf

http://www.gpoaccess.gov/usbudget/fy10/pdf/hist.pdf

http://www.cbo.gov/doc.cfm?index=11659

http://www.factcheck.org/taxes/supply-side_spin.html

Fiscal responsibility is rapidly becoming one of the most important issues facing the United States. Debt is growing at an unsustainable rate and unless decisive action is taken soon time may be running out to voluntarily change the financial course of our future. Failure to reign in debt could lead to a fiscal crisis where investors, both foreign and domestic, lose confidence in the U.S. ability to manage its budget. This in turn, would decrease the value of the U.S. debt financing instruments, i.e. Treasury Bonds, affecting the U.S. ability to borrow at affordable rates and driving up interest rates resulting in either severe inflation or deflation and high unemployment.  Without strict adherence to fiscal responsibility, which at this point equates to cuts in both discretionary and non-discretionary spending and increases in tax revenues, these outcomes may be unavoidable.

One of the main factors for the increasing U.S. debt is our political leaders. The decline of moral and ethical values combined with a lack of fiscal responsibility has produced a decade of unrestrained spending by both parties of congress. Special interest group’s driven primarily by large Multi National Corporations (MNC’s), their associated industries, wealthy investment groups, and a myriad of other interests have purchased and influenced legislation via campaign contributions and lobbying. The result has been a congress more interested in providing for the needs of financial contributors than for the interests of the country at large. This level of corruption has resulted in laws that benefit the short term profitability of these special interests at the expense of the citizenry, which was demonstrated with the inappropriate deregulation of the financial sector which required hundreds of billions in bailouts for irresponsible bankers.

Political maneuvering  that catered to special interests, generated years of reckless spending, and resulted in a disregard for fiscal responsibility has, according to the U.S. National Debt clock, raised the current level of debt (as of October 2010) to $13.5 trillion up from $5.6 trillion a decade ago. Our debt is increasing at a rate of $4.14 billion per day. The U.S. Gross Domestic Product (GDP) the measure of the U.S. overall economic output in 2009 was $14.25 trillion, expecting to increase to $14.7 trillion in 2010. At projected 2010 levels, the U.S. debt will reached 91% of GDP, an already alarming amount that is expected to increase further.

War is another factor that has increased U.S. debt. Wars prior to the Vietnam era were all repaid within a few decades. Vietnam however, saw a change to this practice and “The War on Terror” now called “Overseas Contingency Operations” was the first war in history largely financed through debt while accompanied by a cut in taxes. Combined, the War in Iraq and Afghanistan have already cost over $780 billion to over $1 trillion dollars (depending on the data source). It remains a significant contributor to the increase in debt and despite a troop scale down in Iraq, Afghanistan is ramping up forces and neither war appears to have a realistic end date.

U.S. military expenditures remain the largest source of discretionary spending at $662 billion for 2009 ($782 billion when military related national security costs are included). This expense exceeds the combined military expenditures of the top 15 countries which stand at a total of $611 billion. Cost of “Overseas Contingencies Operations” in both Iraq and Afghanistan for 2009 was $136 billion. There are also additional costs associated with the rapidly increasing use of independent contractors for troop support, logistics, and privatized security forces. These costs are already in the tens of billions and are expected to continue to grow. The U.S. is also overextending foreign operations abroad. The U.S. currently maintains 30 U.S. Air Force Bases or joint Air Bases in 15 different countries, 97 Army bases, command centers, and training facilities in 15 different countries, 16 Marine Corps camps, air stations, and training facilities in 5 different countries, and 16 naval bases, naval air stations, and command centers in 10 different countries.

The third factor contributing to debt is that the U.S. is consuming much more than it produces. This is leading to a massive trade deficit. This deficit increase has gone from 5% of GDP to 17% of GDP in the past 30 years. In our attempts to globalize and ensure free trade many of our largest companies seek access to cheaper labor and resources overseas which limits internal production. The result is that we are not producing at the levels needed to sustain our consumerism while allowing cheap products from abroad to flood our markets. Compounding the problem is the increasing trade imbalance with China, which is concentrating incredible wealth within the Chinese government and is creating a Chinese middle class largely from U.S. dollars, thus transferring wealth away from the U.S. middle class. The results of such imbalances are losses in U.S. jobs and subsequent tax revenues. It is also enabling China, our largest trading partner, the revenue to purchase a greater level of U.S. debt instruments. Almost half of our debt is now foreign owned, and China, owns most of the foreign debt. If we do not change these policies we could become increasingly dependent on other countries, namely China to keep purchasing our debt. When the trade imbalances reach a level where they represent too much risk, a real threat exists that those countries purchasing U.S. debt instruments would stop resulting in a potential devaluation of U.S. Treasury Bonds followed by a rapid drop in the value of the dollar.

There are other factors on the horizon whose long term potential may be as equally devastating as those afore mentioned. Social security surpluses have been used to help decrease the deficit each year, but within the next decade these surpluses will end and instead become possibly one of the largest contributors to the debt. This would be driven by increasing numbers of retiring baby boomers drawing upon their retirement benefits. Equally alarming are long term Medicare cost which are forecasted to dramatically increase due to rising health care costs caused by an aging population, increasing chronic illnesses, and obesity related diseases. If left on its current course, the potential increases in debt could become so deep that our children will experience tax levels prevalent in socialist countries (50% to 60% or more) and the U.S. will be forced into major fiscal reform requiring strict budget controls instead of a planned reform.

There is not going to be an easy or painless fix for the debt despite what congress is trying to portray. Political arguments such as “lowering taxes in the U.S. will lead to an increase in revenues” are unfortunately not a viable solution. Cutting taxes in some sectors such as capital gains and dividends has resulted in additional investing and increased higher tax revenues over the long run. However, the Bush Tax cuts of 2001 and 2003 generated tax revenue decreases from 2001 to 2004 totaling $591 billion when compared to year 2000. The $1,663 billion ($1.66 trillion) tax revenue increases from 2005 to 2009 were barely enough to return to the 40 year national average of recorded increasing tax revenues. This also does take into account the losses on revenue, if the tax cuts had never been implemented, which were $599 billion in only 2004 to 2006. In fact, supply side economics, prevalent in the Reagan and Bush era’s, which has been accurately associated with increasing GDP, tax revenues, corporate profits, and individual wealth has also during those same periods drastically increased the U.S. debt, and for the first time in U.S. history those increases came during peacetime.

The debt problem has become deeper than what the media and pundits are claiming. Many think that if The U.S. can stop wasteful spending, repeal pork barrel projects and earmarks, do away with the Bush tax cuts, and even end the wars in Iraq and Afghanistan, the U.S. should be well on its way to stopping a future potential debt crisis. That ship may have already sailed, and much more may be required. The true debt is in reality much higher than the $14.5 trillion dollars that has been disclosed on the world debt clock. If one considers the off balance sheet figures, there already exists at this point $7 trillion in unfunded obligations for Social Security, $26 trillion in unfunded Medicare promises, $8 trillion yet to be paid for the new prescription drug program and another trillion in miscellaneously unfunded items. This equates to over $55 trillion in real debt.

Under the current spending practices, even with the Obama stimulus programs removed from the equation, within 40 years (2050) this country may be barely able to pay the interest on its debt and only a small percentage of social security and Medicare. By 2040 the debt to GDP will be over 200%. Unfortunately, The U.S. would probably have declined into severe inflation before then. The U.S. congress must act now, it can no longer afford either runaway spending to accommodate the needs of special interests or indefinite and costly wars if there hope to reign in fiscal deficits and stop a potentially looming fiscal crisis. In addition, the U.S. should not continue the trade imbalances of the past. There may come a time of reckoning and a point when carrying to much debt and spending too much of GDP on interest payments could force foreign lenders to look for safer investments.

To reestablish fiscal responsibility would require cutting programs across the board, even in the politically unpopular areas like military spending, Social Security and Medicare. And equally important, reign in the increasing costs of health care. The ineffective “do nothing” plan of the past decade must be thrown out or the next generation of U.S. citizens could experience a lower standard of living as compared to what we currently enjoy today. Politician’s can no longer demand lower taxes while both political parties massively expanded government and increase spending. The recent recession has taught American consumers to finally begin to save more and it is now time that government officials follow suit. The U.S. should not continue to print money and issue treasuries without legitimate concerns about devaluating the dollar and experiencing high rates of inflation, or a potentially worse scenario such as deflation. Either outcome generally results in increased interest rates, less borrowing, and rising unemployment.

Congress needs to step away from practices that disproportionately benefit financial contributors and constituents and start doing what is right for the country. Since it appears unlikely that Congress, being so beholden to special interests and to concerned with reelections will be able to make the necessary politically painful decisions, it will be up to the American public to stop listening to pundits and talking points designed to keep the status quo in place and become the ones responsible for demanding fiscally appropriate action out of congress.

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In order for widespread Photovoltaic (PV) use to become an economically viable alternative to fossil fuel electricity production three components are required by the world governments: Research and development funding increases and additional R&D subsidies provided to the private sector to increase PV conversion efficiencies (converting the sun’s diffused solar rays into electricity). Subsidization and private sector incentives for expensive infrastructure development and for establishing economies of scale in critical production areas. Continue support for programs such as feed in tariffs, rebates and refunds, power purchase agreements will also be necessary to reduce installation costs to end users. There are many reasons that the United States and other governments, businesses and citizens need to increase funding for R&D, PV based infrastructure, and end user subsidies.

PV installations once installed can operate for years with little in the way of maintenance and operation costs. There are no long term mining, drilling, refining, processing, and transporting costs such as those associated with petroleum, coal, and natural gas fossil fuels. Commodity traders cannot influence or run up regional pricing. PV solar energy reduces the reliance on obtaining fossil fuel commodities from geopolitically unstable countries and contributes towards energy independence. It represents a good long term investment considering electricity costs have continued to rise every year for the past 20 years.

PV systems are outstanding sources of power in very rural areas where grid access is limited. It is also an excellent source of supplemental electricity within the grid since it can offset peak demand periods and is readily available in many of the Earth’s climate zones. Finally, there has been relatively little research done in both the PV and Solar Thermal sectors meaning that there is still considerable room for R&D improvements.

When considering electricity generation in general, PV provided electricity is the fastest growing global power generation technology averaging growth rates over the past 5 years of 40 – 60% per year. This growth has resulted in providing 21GW of world wide power, which is still miniscule when compared to world wide generation capacity which is at 4800GW. Global PV installation jumped 110% in 2008 to 5.95GW. Germany, Spain, Japan, and the United States represent almost 90% of total worldwide PV installation capacity. Germany installed 3800 MW of PV in 2009 creating 10,000 jobs contrasted to the U.S. at 500 MW. The vast majority of these installations are tied to the grid and not off-grid stand alone installations.

The U.S., the largest consumer of electricity and one of the countries best suited to propel PV into the mainstream, is reluctant to seriously move beyond fossil fuels and is playing catch-up having only installed 500 MW last year. More importantly, it is far behind in terms of R&D funding, net metering guidelines, feed in tariffs, and subsidy programs for commercial and residential PV installations.

Research & Development

New technologies and advancements on existing systems are critical to reach grid parity with fossil fuel generated electricity and to meet installation cost expectations necessary to ensure PV are a viable economic substitute. Grid parity is where PV electricity becomes equal to or greater than grid electricity which is dominated by coal and natural gas.

Government funding for research and development needs to be ramped up to ensure higher efficiencies can be achieved without increasing production costs. Advances in efficiencies generally come at higher module costs due to the use of more expensive materials and manufacturing processes. R&D expenditures can be utilized to discover alternatives to solar cell like non-semiconductor polymer cells and biomimetics, utilizing tandem/multi-junction cells, quantum dot technology, or development of  intermediate band or hot-carrier solar cells. R&D should also focus on improving the existing semiconductor materials Crystalline Silicon, Amorphous Silicon, Gallium Arsenide and providing additional advancements in thin film and polymer paint cell efficiencies.

Due to current efficiency levels of solar cells and PV modules in general, concentrating efforts into new technology advances and development represent the most beneficial lines of investment at this point. Solar panel efficiency, as measured by the energy conversion ratio, is currently peaking at approximately 24% for production; market average is hovering between 12 – 18%. Solar conversion efficiencies are critical to economically reaching grid parity and reducing infrastructure costs and is one of the arenas R&D dollars should be concentrated.

There are high efficiency technologies being tested by some manufactures that claim to reach as high as 42% which should easily equate to grid parity. However, most of these have yet to provide prototypes for grid testing and research allocations are nowhere near comparable to other existing energy sources. Even promising applications such as light concentration approaches onto multilayer PV modules that have been around a while have yet to be put into wide-scale production.

PV systems are also intermittent energy sources that are dependent on available sunlight. While this is beneficial to utility companies who prefer to operate with less excess capacity and who can thus offer net metering. Net metering allows excess electricity from residential and commercial PV systems to be sold back to the grid offsetting daytime peak loads requirements and reducing the end users electricity bill. However, for off grid applications or those who desire energy independence, expensive and even less efficient batteries are required. This is another area where R&D funding needs to be significantly increased and the development of more efficient battery technology, high capacitance systems, and other type of electricity storage mediums made a priority.

Infrastructure and installation costs

PV produced electricity is still considered expensive for both end use installation and utility companies.  There is no guarantee on investment return if the commercial business sells the facility or homeowner sells the house. State or local tax assessments that are passed onto the new buyer are being considered in some States to offset this potential loss. For utility or solar companies intending to provide electricity to utility companies there are large infrastructure outlays required for initial buildup. Currently these costs for PV and especially solar thermal can be more than traditional coal fired or natural gas plants.

The cost of developing PV modules currently varies for a single PV device at $4.00 to $4.50 watts peak (Wp) and can be doubled initially with installation, wiring, and system costs until the system pays for initial infrastructure costs. Current capital costs for a commercial PV system range from $5.50 per watt to $6.60 per watt dependant on size and scaling of installations. The WP prices have dropped over 22% in the past 9 years but are no where near 2015 expectation levels of $1.25 WP. The reasons for such high prices are associated with the production costs of crystalline silicon panels which are increasing due to limited amounts of silicon and expensive clean-room manufacturing. These costs can be brought down some by government subsidization of large silicon production and increases in scaling and deployment.

However, additional economies of scale in silicon production and increased deployment may not be enough to drop costs to $1.25 Wp by 2015 and $1.15 by 2030 to meet the Solar American Initiative and industry and government targets. This is where the aforementioned research and development advances in new technology will be necessary to achieve these cost goals.  Economies of scale are a crucial element to drive and production costs down but even when combined with government infrastructure subsidies more actions will be required to meet grid parity, at least until new technology advances in efficiencies are ready for mass production. This brings us to the third component individual incentives and subsidies.

Financing, Subsidies & Incentives

Government and regional subsidies and incentives for the end users are a vital part of solar electricity equation. The following processes have proven beneficial in a number of countries:  Direct subsidization of PV systems by Federal, State, regional, and local governments to utility companies or to companies that build arrays for utility companies can be provided for infrastructure development. For end users, refunds, rebates, and tax incentive programs can offset PV system purchases and installation costs.

Another powerful program is the Power Purchase Agreements (PPA) which grants free PV installations in return for 25 year contracts. These programs require the customer to purchase the electricity generated from independently owned PV system at a determined price usually at or just below current electricity rates for that region. Currently the majority of tied-to-grid installed PV systems are being done through PPA’s. There are a number of new PPA agreements under consideration to reduce or remove the significant upfront costs which can be in the tens of thousands of dollars to the consumers in exchange for a 20 – 25 year contract.

Two beneficial programs that encourage the adoption of solar electricity are Feed in Tariffs (FIT) and Solar Renewable Energy Credits (SREC). FIT’s are where electricity providers agree to purchase electricity generated from PV systems instead of traditional fossil fuel plants. The producers provide PV electricity at a guaranteed rate, usually for a set number of years.  Pricing can be subsidized initially to keep prices comparable to traditional grid pricing. SREC’s can require or  provide individuals and companies an incentive to invest in PV electricity that will guarantee PV electricity purchases and are designed to improve the distribution of electricity sources in the grid.

The purpose of R&D investment, scaling, and subsidies are not to only provide costs savings to utility companies and end users to encourage the adoption of solar electricity but to also reduce reliance on fossil fuels securing greater energy independence, create home grown high tech jobs, and reduce CO2 emissions.

Solar PV systems are beneficial in all regions with adequate sunlight but are most beneficial when concentrated in regions with the highest sources of available daylight which means a massive scale up in the southwestern United States and similar such geographic zones.

The real value of PV use over the next 25 years will be to supplement existing utility power generation during peak daytime use. This will offset the need to construct additional power plants to meet increasing demand from growing population centers. PV are also modular by design which allows for easy installation of additional units very suitable for commercial building and residential home expansion.

New applications building integrated PV should be more widespread in new and retrofit construction; other innovative technologies will be feasible as R&D increases yield new products. One such application might be solar roadways, thin film PV on skyscraper windows / grid panels, and paint on applications for irregular surfaces.

Greenhouse gas (GHG) reduction is another critical component to support PV build up. Lifecycle GHG emissions for PV systems will approach 15g/KWh (grams emitted per kilo watt hour of use) by 2015. Only wind generation produces less GHG at 11g/KWh. The remaining sources are as follows

• Nuclear – 40g/KWh, this figure is debated to be considerably more
• Combined gas fired facility – Traditional natural gas – 400 to 599 g/KWh
• Oil fired plant – 893g/KWh
• Coal fired power plant – 915-945 g/KWh, drops to 200g/KWh if carbon capture and storage is utilized.

Solar power integration will increase as solar efficiencies increase and costs come down. This effort must be driven at the government level with proper subsidies and funding allocated intelligently and barriers to entry removed through proper legislation. Initial profitability for companies will be gained through continuous improvements in efficiencies and from government/private funding and subsidization. PV combined with solar thermal facilities can supplement fossil fuel electricity production significantly within the next 15 years for a third of the world population and potentially replace it after that.

http://www.energyefficiencynews.com/i/1787/

http://www.history.rochester.edu/class/PV/future.html

http://articles.sfgate.com/2005-07-11/business/17380048_1_nanosys-fossil-fuels-energy-foundation/2

http://berkeley.edu/news/media/releases/2008/02/20_solarpanels.shtml

http://www.renewablepowernews.com/archives/1501

http://www.consumerenergyreport.com/2010/03/03/will-solar-prices-fall-into-grid-parity/

http://en.wikipedia.org/wiki/Solar_power

http://en.wikipedia.org/wiki/Solar_cell

In the previous blog, A Call For The Transition To Renewable Energy  it was discussed that industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. Fossil fuels alone will not be able to meet demand. The easier to extract surface sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs of energy and potential shortages can create more geopolitical stresses between countries as they scramble to meet their energy demands. It is beyond time to ramp up existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) to supplement fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035.

The liquid fuel transportation sector is dominated by petroleum which is refined into gasoline, diesel, and jet fuel. The transition process in this sector would involve escalating biofuels production in order to supplement future petroleum demand. Cellulosic ethanol can be economically derived from gasification processes and will represent the most cost effective and efficient production means of ethanol production. It also doesn’t compete against food crops, requires much less water, and can be attained from a multitude of carbon based sources including the unusable residue from crops, natural fast growing grasses and plants, disposable wood from logging, and even human waste. Increasing the additive rates of ethanol in gasoline up to E30 (30% ethanol / 70% gasoline) and providing government subsidies for fuel line conversions will contribute significantly to mitigating demand and reduce the chance of rampant  price increases due to regional gas shortages.

Diesel fuel necessary for commercial transportation (large trucks and ships) can also be supplemented by biofuels, in this case utilizing bio-algae, jatropha, and halophytes to create bio-diesel.  Microbial organisms can be used during the processing to increase yield and refinement efficiencies and reduce costs. Diesel blends up to B30 (30% biodiesel / 70% petroldiesel) can be attained without major modification in fuel lines. World governments can then provide similar subsides for fuel line conversions to trucking and shipping fleets. Jet fuel blends can be supplemented with bio-algae; the U.S. military and some commercial airlines have already taken keen interest and developed prototypes for this application.  The goal is to supplement petroleum based diesel and jet fuels with biodiesel which will mitigate demand and reduce the chance of price increases in commercial transportation which adversely affects consumer goods pricing and airline ticket prices.

In addition, supplementing petroleum based fuels should be done in unison with the generation of new hybrid (gasoline/battery) or completely battery based automobiles and light truck production over the next 25 years. Battery technology and high capacitance systems need to be elevated in importance and additional government funding for research and development put in place to provide economically viable batteries and ultra capacitors with greater yields and longer life capabilities. If necessary the patents held by the fossil fuel and aerospace defense industries need to be made available for public use instead of being put on ice as a potential threat of substitution to petroleum, or classified for military uses. Suitable battery technology may very well already exist but the public sector does not have access to it. Utilization of hybrid, battery, or high capacitance system will further reduce future demand for liquid petroleum fuels but will require increased demand in electricity production. Heavy trucks, trains, and ships used for commercial transportation require considerable power to move heavy loads. Battery and high capacitor systems are not currently able to provide adequate power to solely meet commercial transportation needs. They will be more reliant on hybrid systems and will require more energy from the biodiesel / petroldiesel blends than are required for cars and light trucks.

The unspoken and long term strategic goal of many developed countries appears to be to use up the petroleum resources of other countries while saving their own reserves for emergency or to sustain their countries liquid fuel needs decades from now.  This strategy needs to be scrapped and replaced with a new 25 year goal that includes drilling and refining the readily available global petroleum resources in combination with increases in cellulosic ethanol and biodiesel production, government subsidization for replacing fuel lines on existing personal and commercial vehicles,  and creating high efficiency hybrid, battery and high capacitance electric cars and light trucks for personal transportation, and hybrid biodiesel large trucks, trains and boats for commercial uses. Then by 2035, begin the process of transitioning into hydrogen fuel based transportation models for developed countries, while allowing undeveloped countries additional time to become petroleum independent. This means limiting expensive and risky deep water drilling rigs, shale extraction, and production of more oil refineries limited only to petroleum. All government subsidization for the petroleum sector should cease and be transferred to companies generating second (cellulosic ethanol), third (bioalgae), and fourth (high yield genetically modified plants combined with microbial catalysts) generation biofuels, and for the development of biofuel infrastructure. This would include refineries that can be utilized for both petroleum and biofuels.

Resistance from the very profitable petroleum sector will be considerable and OPEC nations will put up a strong fight even going so far as to temporarily drop oil prices in order to draw attention away from the need to transition to renewables and to save the petroleum industry’s future profitability. Excuses for why renewables are a panacea will flourish and will need to be set aside. Our next generation of automobiles may not run as fast, or have the same mileage capability, but they will be clean and reduce our reliance on a polluting fuel source that has created enough geo-political instabilities and wars already. This 100 year old technology is past its prime and the world is certainly capable of doing better. The reason fossil fuels have been held in place this long as our dominate source of energy is because of the massive profitability and wealth generation it provides for a small percentage of the world’s population and not for its current benefit to humanity.

The other half of the fossil fuel equation is electricity production which is provided by coal and natural gas. Electricity production actually requires more fossil fuels than the transportation sector and demand is projected to outpace petroleum and will be further increased by the need for hybrids, electric, and high capacitance vehicles all of which will draw additional power from the grid. The transition of this sector, over the next 25 years, should be a move towards the existing renewable energy sources of solar thermal, photovoltaic, wind, tidal, geothermal, and biomass facilities. Biomass which uses carbon based refuse (forestry, crop, animal, and industrial) and wastes (sewage and municipal solid) will be the only source that requires commodity based replenishment that could be subject to price fluctuations, but this resource will be derived from throw away material.  The transition process itself can begin with the removal of coal and natural gas subsidies and strict limitations on future coal or natural gas power plant production. One such limitation could require no more coal fired plants built without adjacent bio-algae photo bioreactors for algae based biodiesel production and CO2 sequestration. Instead, funds could be allocated to infrastructure development of large solar thermal, geothermal, tidal and wind generation systems. Subsidies should also be provided to business and homeowners to put photovoltaic arrays on their premises.  If regional electricity service providers heavily vested in coal and natural gas production want to continue as public electricity providers they will need to be required to build an increasing number of energy facilities that are completely renewable in nature. Some renewable energy plants are more expensive to construct than traditional coal and natural gas facilities, certainly the case for large solar thermal operations. However, over the 25 year life span of the facility the infrastructure costs become offset within a few years since there are no ongoing requirements for expensive and environmentally damaging drilling, mining, refining, and distribution expenses associated with acquiring oil, coal, and natural gas.  Renewable energy power plants will be cheaper for developed and developing countries in the long run, providing clean energy, and not require purchasing or extracting fossil fuel commodities from potential hostile countries.

Synergies exist between complimentary renewable energy sources and with existing fossil fuel sources. Large megawatt solar thermal facilities can be designed to provide power for cities, or smaller solar thermal power plants can be utilized for neighborhood or suburb electricity generation.  Residential and commercial photovoltaic arrays with government subsidies to assist business and resident affordability can be utilized in conjunction with solar thermal (or other renewable energy sources) to help reduce the regions demand. Solar thermal, geothermal, and wind farms can share space with bio-algae photo bioreactors (PBR’s) to reduce land costs and reduce space requirements.  Biofuels can be generated from sewage, waste material, food crop residue, and wood residues creating fuel sources from material that would otherwise be burned or sent to landfills. Fast growing and drought resistant plants requiring little irrigation can be grown and harvested on lands unsuitable for crops and utilize husks, stovers, and other discardable material from traditional crop harvesting.  All existing coal fire and natural gas plants could have bio-algae PBR’s in place to absorb the CO2 that would otherwise be released into the atmosphere. In developed countries all new power plants should be renewable where possible and only natural gas if not. Coal plants should only be considered for poorer developing countries with large coal reserves.  

A new paradigm for worldwide renewable energy production can be implemented where profitability expectations are removed from future State owned and privately held renewable energy companies.  In countries with a private sector, existing renewable energy companies could be incentivized by their governments to switch to a strictly non-profit model. Another option is the creation of new private non-profit renewable energy companies with infrastructure development and scaling subsidies provided by their governments that would allow them to provide energy at lower costs to consumers and compete directly against for-profit renewable energy (and fossil fuel).  If full government subsidization is not possible then 0% infrastructure and scaling loans could be made available with repayment plans established that assure competitive energy pricing remains available to the public.  State owned energy companies with little incentive to eliminate their profit structure will still be able to provide energy indigenously and to the developing nations but in time will be hard press to remain competitive outside their own borders.

The goal of the non-profit renewable energy provider is to be able to produce and distribute electricity in the most efficient and low cost manner possible and to pass those savings onto their customers. It is also to provide energy sector jobs to replace those jobs lost from the fossil fuel industries.  Favorable government legislation and subsidization for private sector non-profits will be essential to ensure political barriers to entry are removed and to meet infrastructure costs and to develop economies of scale.  Subsidization can come from removing subsidies provided to very profitable oil, coal and natural gas companies and from tax revenues associated with providing clean energy. A non-profit model focused on efficiency and removing unnecessary expenses associated with pay for performance executive compensations, investor ROI expectations, profits for mining and drilling operations, costs related to exporting of fossil fuels, and short sighted profit maximizing decision making will be removed from the future energy equation.  I am not advocating government takeover of the western energy industry, but the establishment of true non-profit private companies in the free market economies. For already established state owned companies heavily vested in fossil fuels my hope is they will eventually operate under the same non-profit guidelines as they to transition towards renewable.  This should also decrease geo-political instability in certain regions of the world that use energy profits to sponsor terrorism or as funds to support military buildup and wars.

It is time for world governments especially those in developed countries with free market to start acting responsibly and considering its citizens. Energy is a basic requirement for all societies and the world has been limited to technology and policies that are outdated and no longer in its best interests. The question of how to pay for the transition to renewable energy is legitimate. Whether governments should increase taxes or use existing tax dollars to subsidize renewable energy infrastructure and provide assistance for companies to scale up production will be debate and heavily resisted from many channels. Interestingly enough, funding didn’t appear to difficult to acquire when it was necessary for bailing out irresponsible financial companies or providing massive subsidies to the ridiculously profitable fossil fuel industry. Fossil fuel based companies know they will eventually have to venture into the renewable market as oil, coal, and natural gas become to scarce or expensive. Why should the world wait until governments are near financial collapse due to high energy costs affecting nearly every sector of their economies, or countries are on the brink of war due to scarcity and conflicts over meeting demand?

Prior to 2035, world governments, academia, and even private sector labs should have been be utilized to search out the most promising energy sources with the greatest efficiencies that will meet the world’s long term energy needs. The push should be to develop free or extremely low cost energy systems such as fusion or kinetic systems for electricity production, and a hydrogen based fuel source for vehicles. We must begin this researching process and planning for this process now.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

How is it that our scientists and technologies have created exponential growth in computing, super colliders, nano-technology, particle weaponry, world-wide satellite coverage, etc. and yet for energy production we are limiting ourselves to a polluting, 100+ year old technology that creates geo-political instability around the world and has most recently become subject to the whims of commodities traders?

Industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. The bulk of the energy industry’s production motives which are dominated by fossil fuels and its obsession with profitability are not going to provide the solution for our upcoming energy problems. World energy producers have become very efficient at extracting, processing, refining, and distributing petroleum for transportation liquid fuels, and coal / natural gas for electricity production. However, production will not be able to keep pace with the growing world wide demand expected to rise almost 50% by 2035, much of that coming from the developing countries of China, India and in Southeast Asia. This is not a matter of peak oil or how much fossil fuel remains in the ground, but an issue of simple supply versus demand.

Fossil fuels have served our world’s growing energy needs extremely well, despite the fact that oil and coal use has been around since the turn of the 20^th century, but we are fast approaching the limits in improvements that can be expected from production capabilities. In addition, the easier to extract surface fossil fuel sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs will be passed on to end users and when combined with potential shortages will create stresses between countries scrambling to meet their own energy demands,  this may even include going to war to guarantee energy  stability. This scenario can be further complicated by fossil fuel commodities traders who take advantage of regional problems to run up prices. This is an excellent formula for State owned or privately held oil companies interested in ensuring ongoing profits for decades, but not for the rest of the world.

There is also the matter that the regions containing fossil fuels are not only proving to be environmentally difficult to work in but geo-politically hostile as well. Many countries rich in fossil fuels (ie. Middle East and African countries) also divert funds to groups and organizations that sponsor regional unrest and acts of terrorism or can use earnings to build up military capacity and develop weapons of mass destruction.

We are fast running out of time to seriously implement existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) as a supplement to fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035. The industrialized countries of the world and their private or state owned energy companies are going to have to set aside their fossil fuel based profitability expectations for energy production and begin thinking in terms of transitioning. This will not be done willingly, these companies and their holdings represent significant infrastructure investments and they are cash cows, in many cases representing the only significant source of income for the region. In countries with capitalism based economies the lobbying stranglehold the fossil fuel industry holds over energy legislation will need to be removed, and campaign contributions that help elect sympathetic representatives curtailed if there is to be any significant infrastructure support from those governments.

This process will have to be driven from the free market economies since State owned companies with large oil reserves will have little incentive to transition on their own since they can meet their domestic demand, and fossil fuels represents a substantial income source for the country and they will profit off of the projected 84% expected increase in demand from developing countries over the next 25 years. This sharp increase in demand will be buffered by developing countries themselves as S. America, China and India are currently taking their own measures to implement renewable energy sources realizing their own vulnerabilities. Even if these developing countries begin the transition process to renewable energy sources, State owned companies will be needed to fill the remaining projected demand. Privately held companies in the U.S., Canada and Europe can then be utilized to meet remaining 16% growth expectation from the developed countries with fossil fuels and renewables.

Existing renewable energy processes need to become more efficient and costs brought down through economies of scale. The purpose for expansion of these renewable sources is to increasingly supplement fossil fuels over the next 25 years.  This must become mandated. In addition, new technologies and system improvements investigated and existing patents that have been shelved to protect fossil fuels from competition should be re-evaluated. Their feasibility and economic viability analyzed, and those with satisfactory efficiencies implemented. World governments cannot immediately dump existing fossil fuel systems since renewable capacity falls far short of meeting demand. In addition, current levels of debt among industrialized countries are already to burdensome due to the irresponsible behaviors of governments and their financial leaders to sufficiently generate new infrastructure in a timely enough manner. We can however begin to aggressively supplement fossil fuels consumption with renewable energy sources in the industrialized worlds. This will allow the poorer developing countries to continue to use predominately fossil fuel sources while they implement renewable energy infrastructure themselves. This may require years of transitioning so it must begin now.

World energy demand can become as significant an issue as the 2008 world wide collapse of the financial markets and generate long term recessions. I would like to emphasize this point once again; regardless of how world fossil fuel producers try to ramp up production they cannot meet global demand. For the transition period over the next 25 years we must utilize all sources of energy and start the process of relinquishing the political stranglehold that the fossil fuel industry holds in the political arenas.

By 2035 renewable energy sources should play significant role supplementing fossil fuels and contributing towards global demand. During this transition period research and development initiatives from world government’s, academia’s, and even government funded and private sector laboratories’ should be utilized to search for new energy sources and refine existing systems for still greater efficiencies. Possibilities for new energy systems include hydrogen, advance fuel cells, new battery or high efficiency capacitors for transportation requirements, and fusion reactors and kinetic energy systems combined with advancements in solar, geothermal, wind and tidal power for electricity generation. 

The goal after 2035 is not to supplement fossil fuels but replace them. The motivation to look for energy systems that provide ongoing streams of company profits and investor return will have to be put aside and a new generation of non-profit energy providers created. Profit maximization will then be replaced with production efficiency and providing free or extremely low cost energy to end users. Research for these next generations of renewable energy systems must begin now with long term plans designed for the transition.

My next blog will discuss procedures necessary to implement the transition process to renewable energy sources in both the transportation and electricity production sectors.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

In my last blog Take Responsibility for Your Health – Foods to Avoid, I mentioned how the U.S. healthcare system may attempt within the next decade to begin to tier coverage based on age, obesity related diseases, and individuals with chronic illnesses, all in an attempt to curb escalating healthcare costs. Provisions to the Healthcare Reform Act could be enacted over the next 10 years that would target and limit coverage to individuals who display behavioral health patterns that result in otherwise preventable chronic and terminal diseases. These provisions may even target citizens after they reach a certain age if they are determined to no longer be a viable, contributing member to society.

If you think this sounds far fetched consider the recently enacted Executive Order  — Establishing the National Prevention, Health Promotion, and Public Health Council. This council shall have the power to:

(a) provide coordination and leadership at the Federal level, and among all executive departments and agencies, with respect to prevention, wellness, and health promotion practices, the public health system, and integrative health care in the United States;

(b) develop, after obtaining input from relevant stakeholders, a national prevention, health promotion, public health, and integrative health-care strategy that incorporates the most effective and achievable means of improving the health status of Americans and reducing the incidence of preventable illness and disability in the United States, as further described in section 5 of this order;

(c) provide recommendations to the President and the Congress concerning the most pressing health issues confronting the United States and changes in Federal policy to achieve national wellness, health promotion, and public health goals, including the reduction of tobacco use, sedentary behavior, and poor nutrition;

(d) consider and propose evidence-based models, policies, and innovative approaches for the promotion of transformative models of prevention, integrative health, and public health on individual and community levels across the United States;

(e) establish processes for continual public input, including input from State, regional, and local leadership communities and other relevant stakeholders, including Indian tribes and tribal organizations;

(f) submit the reports required by section 6 of this order; and

(g) carry out such other activities as are determined appropriate by the President.

The administration and congress both know that continued rampant increases in healthcare costs can threaten the stability of our future economy. The majority of baby boomers will be in retirement by 2020 requiring more hospitalization and treatments for multiple complex conditions. Costs associated with obesity related diseases are projected to rise to $344 billion a year by 2018, a five fold increase. Chronic disease is currently responsible for 7 out of 10 deaths in America. Heart attack, cancer, and stroke which represent the three main chronic diseases kill at least 50% of Americans, and both figures are expected to increase over the next 10 years. Both obesity and chronic disease are largely prevented by behavioral lifestyle changes which include exercise, smoking cessation, decrease alcohol use, and proper diet and nutrition.

If we don’t take responsibility for ourselves and change our lifestyles, the government may step in with what could be a European style of socialized medicine in conjunction with a system of monitoring and data collection regarding our health histories and try to do it for us, or they could simply tier the healthcare coverage in order to limit what is available for those that don’t meet the standards.

Of the behavioral lifestyle changes perhaps the most important is eating healthy. Unfortunately, that means moving away from an American diet. The bulk of U.S. manufactured foods are saturated in addictive levels of fats, sugars, and salts and contain complex preservatives and additives some of which have been found to block receptors that tell us we are full and that have additional addictive qualities themselves. Basically if the food comes in a box, can, plastic bag, or similar such container it is probably processed and refined multiple times and is generally very good at making people fat and food companies profitable. Below is a list of foods we should eat that are healthy.

If possible all the following vegetables and fruits should be organic, free of pesticides and not genetically modified. Seek out farmers markets if available.

Alkaline products are also listed – ideal diet is between 60 – 70% alkaline vs. 25 – 40% acidic.

Vegetables – all vegetables are alkaline unless otherwise noted acidic

* Eat in moderation – no more than 2 to 3 times per week.  MUST be organic.

Fruits – all fruits are alkaline unless otherwise noted acidic

* Certain individuals may want to regulate consumption due to allergic reactions and acid nature of citrus fruits to the stomach.

Meats and Poultry – Type O blood types may require meat and poultry

*   Eat in moderation – no more than 2 to 3 times per week.

** Eat in moderation – no more than 1 to 2 times per week. 

Dairy Products

Grain Products

Seeds and Nuts

Spices

Cooking oils

Other

Water is also critical, proper hydration is essential to health and almost every bodily function. Find bottled water from reputable natural spring sources or drink filtered water via UV or Osmosis systems. Consumption for the average person should be at least 8 8oz glasses per day.

Understanding PH levels and what foods cause the body to be acidic versus alkaline is very important. Think of a Ph level below 7.0 as acidic and a breeding ground for bacteria and disease. A slightly alkaline ph level of 7.35 – 7.45 is considered ideal for optimum health. Go to the link Alkaline and Acid Forming Foods for more information.

A minimum of 12 minutes per day of continuous exercise six times per week provides optimum health benefits. The exercise does not have to be strenuous but should increase the heart and respiratory rate. Benefits of exercise include helping keep weight off, combat chronic illnesses, boost energy levels, assist in deeper more restful sleep,  muscle strengthening, bone density, improve moods, and excellent reliever of stress. A sedentary lifestyle can defeat many of benefits of eating healthy so please exercise.

Use pharmaceutical drugs sparingly. They are of immense value in many situations but long term exposure can be toxic especially when drugs are combined. This can lead down a spiral of diminished health as more and more drug treatments become necessary to battle problems created by adverse conditions associated with the drugs themselves. As you begin to take better care of your health through proper nutrition, hydration, and exercise you will discover a diminishing need for drug treatments. There are many countries with a population that has better health than we do in the U.S. and they take a fraction of the pharmaceuticals we do.

If you smoke, STOP SMOKING. If you take illegal drugs (including prescriptions), stop taking drugs. If you consume to much alcohol, stop or at least limit consumption. There are no excuses here.

Eating as mentioned above is difficult. It will require a considerable amount of time just to locate healthy variety of foods. You must be aware of labeling tricks food manufacturers use. Your diet will change drastically requiring you to actually cook and learn new recipes. You may experience withdrawals and serious cravings for all the good tasting junk you were used to eating. You must be vigilant because the health benefit payoffs are incredible and will provide you a good quality of life well into your elderly years. In addition, if the future healthcare system does become tiered you will be healthy and not at the mercy of a system more concerned with controlling costs.

http://www.whitehouse.gov/the-press-office/executive-order-establishing-national-prevention-health-promotion-and-public-health

http://www.naturalnews.com/027868_obesity_health_care_costs.html

http://www.aha.org/aha/press-release/2007/070508-pr-boomers.html

http://www.cdc.gov/chronicdisease/overview/index.htm

http://www.ariseandshine.com/Cleanse28Guide.pdf

http://www.sixwise.com/newsletters/05/07/20/the-6-most-unhealthy-foods-you-should-avoid-at-all-costs.htm

http://www.basic-keys-to-natural-health.com/Unhealthy-Foods.html

http://www.pureliquidgold.com/acid-alkaline-forming-foods.htm

http://www.rense.com/1.mpicons/acidalka.htm

Baby boomers and individuals with chronic illness or obesity related diseases, even those experiencing these conditions who are in their 40’s please take heed. The U.S. healthcare system of the near future may begin to tier coverage based on age, history of chronic illnesses, and obesity levels in an effort to curb escalating costs. This can be accomplished by providing satisfactory levels of coverage to the public but limiting coverage for the more expensive treatments associated with obesity related diseases, chronic illness, and the those experienced by the elderly.

If you want a good quality of life into your 60’s, 70’s, and 80’s going to your doctor and being treated with drugs for years is not the answer. Save drugs for emergencies, they are of incredible value for curing infections, certain cancers, and a host of other diseases. They are also very valuable as an intermediate treatment method to help avoid or survive a life threatening occurrence such as a heart attack.

However, long term exposure to pharmaceutical drugs and especially when multiple drugs are used in conjunction creates its own problems. Drugs are generally toxic to the system and different drugs have been found to have adverse reactions to one another. This leads to further illness requiring more drugs, a good deal for big pharmaceutical companies but a dangerous downward spiral for your health.

Too many people in our society look to their medical professionals for the quick fix (a pill) to their ailments or if things get out of control they will accept more drastic solutions out of necessity like surgery or more complex treatments (i.e. cancer treatments).  Then more drugs and a return to their lifestyle that created the problems to begin with.

This is not the solution! Our healthcare costs are expected to rise significantly over the next decade. Large numbers of retiring baby boomers and a massive increase of obesity related illnesses will continue to drive costs up. Some form of European socialized healthcare may be implemented to reign in rampant corporate profit maximization and other related costs. But under this type of healthcare, coverage will suffer for those who are the greatest burden on the system.

The only real long term solution available to us is to change our lifestyles, and this means first and foremost the way we eat. US food manufacturers are producing foods that refined and processed with decreasing nutritional value and saturated with addictive levels of salts, sugars, fats, simple carbohydrates, and a myriad of preservatives and additives. If it comes in a box, package, can, plastic bag (frozen foods), etc. it is probably unhealthy. That means we must get used to reading labels and understanding what they mean. Below is a preliminary list of foods to avoid.

For a complete list of foods to avoid please visit any of the first three links listed below

Eliminate or at least reduce microwave use. AC microwaves alter many of the minerals, vitamins, and nutrients and the body cannot absorb these altered compounds. Eating micro waved food for long periods can cause immune system deficiencies, memory loss, lowered concentration, emotional instability, and can even decrease intelligence.

Avoiding the aforementioned foods can be difficult. They have become the foundations of our American diets, and are almost unavoidable in our grocery stores and restaurants. Many of the additive and preservative compounds are difficult to find on labels hidden behind terms like artificial or natural flavors and contains no preservatives. There are also misleading connotations like “fat free” but then the food is saturated with sugars, or “sugar free” but contain potentially more harmful artificial sweeteners. Finally, and I speak from my own personal experience, many of these foods, especially those that taste the best or are American staples are considerably addictive. This statement is being supported by research being currently conducted at a number of universities.  One doesn’t realize how addictive until they try to stop eating them. I had considerable difficult weaning myself off fast foods and processed packaged food, and salty snacks and caffeine have proven near impossible.

Exercise is the second half of the equation and absolutely critical. A minimum of 12 minutes per day of continuous exercise provides numerous health benefits. The exercise does not have to be strenuous but should increase the heart and respiratory rate. Exercise at least five or six time week if possible. Benefits of exercise include helping keep weight off, combat chronic illnesses, boost energy levels, assist in deeper more restful sleep,  muscle strengthening, bone density, improve moods, and excellent reliever of stress. Humans have engaged in varying degrees of exercise throughout their existence, it has only been over the past half century that many have become as sedentary.

Finally is you smoke, STOP SMOKING PERIOD.

http://www.sixwise.com/newsletters/05/07/20/the-6-most-unhealthy-foods-you-should-avoid-at-all-costs.htm

http://www.basic-keys-to-natural-health.com/Unhealthy-Foods.html

http://www.ariseandshine.com/Cleanse28Guide.pdf

http://www.webmd.com/fitness-exercise/benefits-of-exercise

http://www.encognitive.com/node/4093

The U.S. healthcare system is currently the last remaining privatized healthcare system in the industrialized world. There is a strong possibility this will change over the course of the next 5 to 10 years. The new healthcare plan passed by the Obama administration is the first of many stages that could, over the next decade, lead us down the road to socialized or universal medicine. This is a similar path that many European countries followed along the way to creating a complete socialized medical system.  Many of these countries plans were initially met with strong public resistance but the end result was a socialized medical system.

This may not be as drastic a transition for the U.S. as one might think; we already have active programs of socialized or universal medicine, Medicare, Medicaid, and the U.S. military’s Tricare.  The U.S. Medicare system was the basis for the country of Taiwan’s recently redesigned socialized medicine health care system. Over the next decade U.S. citizens could see incremental legislative corrections to the new health care reform bill. These corrections could also result in a further expansion of Medicaid and Medicare and possibly the combining of both programs into one nationalized health care insurance program with a streamlined electronic billing process.  Taxes will likely have to be increased to help fund this. Existing for-profit healthcare insurers may find themselves competing against the new Medicaid system and may be downgraded to providing secondary insurance coverage. New legislation for price controls for medical supplies, medical equipment and pharmaceuticals can be expected by the end of the decade (2020). Medical procedure costs i.e. heart transplants, surgeries, cancer treatments, etc. could see rigid price controls with limitations on who will qualify for access.

These measures are expected to decrease healthcare costs for a large section of the population but if implemented will drastically change the corporate landscape of healthcare reducing profitability among a number of health care sectors. Regardless of ones political philosophies what almost every health care economist and the bulk of our lawmakers already know is that the system we had prior to the healthcare reform was unsustainable. The massive numbers of retiring baby boomers and the near exponential increase of obesity related health issues could overburden the old system within 10 to 20 years. Something had to be done to curb the increasing costs and profit taking at every sector before the system completely collapsed further damaging what is likely to be an already fragile economy.

Lawmakers believe that by being proactive there is a chance to stem costs and provide as much service as is financially possible to the majority of the population. Unfortunately, if you are over 75 or whatever the determined cutoff age is you may no longer be considered a viable contributor to society, therefore your tier of service will begin to decrease compared to the rest of the population. Another possibility would be to limit expensive healthcare programs and treatments associated with aging from the overall plan offered to the public. There will still be the option of purchasing what will certainly be very private supplementary insurance.

The US currently spends the most on healthcare of any nation on Earth and even with a social system the costs will remain high. It is the most medicated country in the world while having the highest mortality rate among preventable terminal illnesses. In addition, obesity rates due to poor diets consisting of refined processed foods saturated in fats, salts, sugars, and simple carbohydrates are the highest of any of the industrial nations and the primary cause of the US overall poor health.

Baby boomers of retirement age and those in their middle years are going to have to realize that their healthcare coverage into their 70’s may not be able to meet their needs. With limiting medical resources available and healthcare designed around providing drug treatments as opposed to preventive practices and cures, those in high risk tiers are going to need a different approach.

The future of US healthcare may eventually evolve into something similar to today’s European socialized medicine. The U.S. population should start taking responsibility for their health and change their lifestyles if they want to live into their 70’s and 80’s with any kind of quality of life. This means eating healthy and abandoning our unhealthy American food preferences, instead begin eating like our grandparents did, exercising at least 15 – 30 minutes per day (continuous movement), and weaning ourselves off of multiple drug treatments and their long term toxic effects and towards preventive measures and more natural remedies where applicable. Catastrophic health care costs associated with heart disease, cancer treatments, etc. may not be readily available once individuals reach the determined cut off age, if this becomes the case we will have to rely on our own ability to stay healthy.

The next series of blogs will discuss the options and difficulties of eating healthy in the U.S.

The U.S. healthcare system is currently the last remaining privatized healthcare system in the industrialized world. There is a strong possibility this will change over the course of the next 5 to 10 years. The new healthcare plan passed by the Obama administration is the first of many stages that could, over the next decade, lead us down the road to socialized medicine. This is a similar path that many European countries followed along the way to creating a complete socialized medical system.  Many of these countries plans were initially met with strong public resistance but the end result was a socialized medical system.

This may not be as drastic a transition for the U.S. as one might think; we already have active programs of socialized medicine, Medicare, Medicaid, and the U.S. military’s Tricare.  The U.S. Medicare system was the basis for the country of Taiwan’s recently redesigned socialized medicine health care system. Over the next decade U.S. citizens could see incremental legislative corrections to the new health care reform bill. These corrections could also result in a further expansion of Medicaid and Medicare and possibly the combining of both programs into one nationalized health care insurance program with a streamlined electronic billing process.  Taxes will likely have to be increased to help fund this. Existing for-profit healthcare insurers may find themselves competing against the new Medicaid system and may be downgraded to providing secondary insurance coverage. New legislation for price controls for medical supplies, medical equipment and pharmaceuticals can be expected by the end of the decade (2020). Medical procedure costs i.e. heart transplants, surgeries, cancer treatments, etc. could see rigid price controls with limitations on who will qualify for access.

These measures are expected to decrease healthcare costs for a large section of the population but if implemented will drastically change the corporate landscape of healthcare reducing profitability among a number of health care sectors. Regardless of ones political philosophies what almost every health care economist and the bulk of our lawmakers already know is that the system we had prior to the healthcare reform was unsustainable. The massive numbers of retiring baby boomers and the near exponential increase of obesity related health issues could overburden the old system within 10 to 20 years. Something had to be done to curb the increasing costs and profit taking at every sector before the system completely collapsed further damaging what is likely to be an already fragile economy.

Lawmakers believe that by being proactive there is a chance to stem costs and provide as much service as is financially possible to the majority of the population. Unfortunately, if you are over 75 or whatever the determined cutoff age is you may no longer be considered a viable contributor to society, therefore your tier of service will begin to decrease compared to the rest of the population. Another possibility would be to limit expensive healthcare programs and treatments associated with aging from the overall plan offered to the public. There will still be the option of purchasing what will certainly be very private supplementary insurance.

The US currently spends the most on healthcare of any nation on Earth and even with a social system the costs will remain high. It is the most medicated country in the world while having the highest mortality rate among preventable terminal illnesses. In addition, obesity rates due to poor diets consisting of refined processed foods saturated in fats, salts, sugars, and simple carbohydrates are the highest of any of the industrial nations and the primary cause of the US overall poor health.

Baby boomers of retirement age and those in their middle years are going to have to realize that their healthcare coverage into their 70’s may not be able to meet their needs. With limiting medical resources available and healthcare designed around providing drug treatments as opposed to preventive practices and cures, those in high risk tiers are going to need a different approach.

The future of US healthcare may eventually evolve into something similar to today’s European socialized medicine. The U.S. population should start taking responsibility for their health and change their lifestyles if they want to live into their 70’s and 80’s with any kind of quality of life. This means eating healthy and abandoning our unhealthy American food preferences, instead begin eating like our grandparents did, exercising at least 15 – 30 minutes per day (continuous movement), and weaning ourselves off of multiple drug treatments and their long term toxic effects and towards preventive measures and more natural remedies where applicable. Catastrophic health care costs associated with heart disease, cancer treatments, etc. may not be readily available once individuals reach the determined cut off age, if this becomes the case we will have to rely on our own ability to stay healthy.

The next series of blogs will discuss the options and difficulties of eating healthy in the U.S.

Oil companies have amassed massive profits over the past decade. BP is the largest oil and gas producer in the United States with over 22,000 oil and gas wells many on federal land) across the United States. It has enjoyed considerable profits along with the other major oil companies over the past five years. BP profits for the first quarter of 2010 alone were $5.59 billion dollars. Since 2005 profits have totaled approximately $105 Billion according to their own annual reports.

In the past three years BP has managed to receive 97% percent of all flagrant violations issued by the Occupational Safety and Health Administration (OSHA). BP accumulated 862 citations (760 classified as egregiously willful) for violations at two of its five U.S. refineries. It is also still under scrutiny by the federal worker – safety monitor for the 2005 explosion at the Texas City refinery that killed 15 workers after failing to correct problems that were pointed out by OSHA inspections.  Last year BP was fined $87 million for violations at the same Texas City refinery and another $3 million for violations at the Toledo Ohio refinery. BP is in the process of contesting the penalties.

It appears clear that BP has displayed a blatant disregard for regulations involving safety, maintenance, and operational procedures and this disregard extended to the rig Deepwater Horizon. Senior managers from BP were overheard “taking shortcuts” that involved substituting salt water for heavy drilling fluid in the well that blew out and resulted in the oil spill currently ravaging the Gulf of Mexico and 11 deaths. BP’s attitude of non-compliance towards regulation seems motivated by profit maximization and the company has not appeared overly concerned with consequences.

This may be due to the “cozy relationship” BP has with the Mineral Management Service who is responsible for safety and environmental regulation. The Obama administration has vowed that this relationship will cease. Another possible reason for non-compliance could be the tens of millions of dollars on lobbying ($16 million spent last year alone) over the past 5 years, much of which was concentrated against regulation. It also donated more than $500,000 in campaign contributions for federal elections. Another factor could be a result of oil industry lobbying influence from the past which resulted in a government reserve fund called the Oil Spill Liability Trust Fund. There is approximately $2 billion in this fund to cover a disaster like the one occurring in the Gulf. The reserve fund also ensures that operators of offshore rigs will be held liable for only $75 million in damages claimed by individuals, companies, States, or the federal government. They can still be held liable for clean up costs.

Regardless of the reasons for non-regulatory compliance, it appears BP will once again rely on lobbying to influence key legislators to reduce long term penalties and to fight violations and lawsuits in court much like Exxon did with the Exxon Valdez spill. They are confident this practice will result in the greatest cost savings and retention of future profits. Once again the U.S. taxpayer will be left picking up the tab, this time for unspecified clean up costs, loss of States revenue from tourism, and the economic damage done to numerous industries that rely on the Gulf. Not to mention the potentially irreversible environmental damage done to coastlines that may even include Atlantic seaboard states. This cannot be allowed to happen!

BP has demonstrated a willingness to take the measures necessary to cap the flow and take the lead in the clean up. Twenty-two thousand people and a small armada of ships are currently working on the spill. But in reality, they have not brought near enough resources to bear quickly enough to stem the flow or to clean up the oil. A small fleet of supertankers used successfully in the Persian Gulf spill, each capable of sucking up to one million gallons of oil / water a day has not been implemented to date. Additional fast moving Coast guard, military, and civilian vessels could have been utilized to skim and remove surface oil. Assistance from Exxon, Shell, Chevron, ConocoPhillips and other industry experts were not sought out quickly enough nor were suggestions acted upon. Many including the U.S. government incorrectly assumed that BP was the expert in such matters and had the best chance of correcting the damaged well.

BP is still cutting corners even in the face of this disaster choosing to use almost 800,000 gallons of the cheaper less effective and much toxic chemical dispersant Corexit to break the oil up even after the EPA asked it to cease. Corexit is produced by Nalco and BP enjoys a tight relationship with Nalco sharing board of director members .The Obama administration has also been accused of being at fault and not pressuring BP enough to ensure appropriate action was implemented rapidly enough.

Hopefully the Top Kill or Junk shot procedures will be effective in the next few days and a relief well will be drilled into the original borehole and drilling mud pumped in to permanently stop the oil flow. But even if these measures are implemented quickly there is no guarantee of complete success. Note – Top Kill was not successful.  All these practice were used on the Ixtox 1 back in 1979 in water 160 ft deep (Deepwater Horizon is at 5000 ft),  they were all unsuccessfull. That well was not sealed for 9 months until the releif wells were completed.

BP needs to be incentivized to ensure that it will take all actions necessary to ensure that not only the well is sealed, but that clean up is rapid and thorough, the coastlines have been restored to the fullest extent possible, and that the livelihoods of those affected by the Gulf spill are re-established or they are compensated accordingly. BP must not be allowed to lobby and litigate there way out of accountability.

The Obama administration should demand that BP have the well fully sealed by relief wells within 90 days, the bulk of surface oil be removed from the Gulf within 180 days and if necessary from Florida and the East Coast, and that the oil be cleaned from the affected coast lines and marshlands within 180 days. Note – these timelines are arbitrary and should be determined by the EPA, independent environmental, and industry experts. Failure to meet these conditions will result in:

• Suspension of all U.S. contracts and barring of future contracts – this will cease BP’s access drilling operation on all federal lands both onshore and offshore.
• Seizure of BP’s holdings on U.S. federal lands. Negotiate settlement requiring all profits derived from oil and gas obtained on U.S. federal lands be allocated clean up measures and restitution to affected parties. If BP attempts to use litigation to delay negotiations, turn over operations to U.S. base competitors and split the profits with federal/state governments until adequate cleanup measures and restitutions are made.
• Federal government will spearhead lawsuits and provide litigation support for individuals and companies affected by the Gulf disaster . Litigation will be directed at BP both domestically and abroad where applicable.
• Put a moratorium on BP’s lobby access and campaign contributions that would result in favorable legislation regarding the Gulf oil spill. This will include barring BP from hiring any third party (ie. the Chamber of Commerce) to lobby for them for the next five years or until the matter is rfully esolved in the U.S.

An investigation needs to be conducted to determine if BP was criminally liable, and to what extent TransUnion or Halliburton were at fault. If this appears harsh, it is meant to be. The long term effects of this disaster are immeasurable. It will affect people’s lives for years and the U.S. taxpayer should not be left paying the long term expenses.

My intention is not to put BP out of business, simply to stimulate the company to respond to its full potential, and not allow it to remain focused on maximizing its profits. It has lost that option concerning this situation. BPs profits over the past year should be more than suitable to cover all the expenses associated with this disaster. This will also send a strong message to the other oil and gas companies that strict adherence to the safety and maintenance protocols is serious, mandatory and can prove extremely costly.

This incident is just another in a long string of reasons as to why it is time to shift the focus away from fossil fuels and towards renewable energy sources such as cellulosic ethanol, biodiesel derived from jatropha, halophytes, and bioalgae, wind energy, solar thermal and geothermal.

http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9021605&contentId=7040949

http://www.osha.gov/dep/bp/bp.html

http://www.grist.org/article/2010-05-17-bp-has-numerous-safety-violations-at-refineries-study-finds/

http://www.opensecrets.org/lobby/clientsum.php?year=2009&lname=BP&id=

http://www.propublica.org/feature/epa-officials-weighing-sanctions-against-bps-us-operations

http://www.politifact.com/truth-o-meter/statements/2010/may/02/lamar-mckay/bp-letter-mms-urges-reduced-regulation/

http://en.wikipedia.org/wiki/Deepwater_Horizon_oil_spill

Is lobbying a beneficial component of government decision making, or an avenue for corporations and special interest groups to guarantee that legislation will favor their goals, often at the expense of the public at large?

The purpose of lobbying is to influence legislators and government officials who are responsible for regulation on behalf of a special interest group. Lobbying is protected by the right to petition found in the first amendment of the constitution. The right to petition guarantees citizens the right to request or appeal to our government for or against policies that will affect them or they may have strong opinions or beliefs about. It also guarantees that these actions will be free from punishment or reprisal. But what percentage of actual lobbying goes towards defending a citizen or a groups right to petition versus influencing legislators in order to acquire government contracts, remove regulation, lower corporate taxes, limit competition, etc. in order to create an environment conducive to greater profits?

A lobbyist is defined as anyone who “directly or indirectly, solicits, collects, or receives money or any other thing of value to be used principally . . . to influence, directly or indirectly, the passage or defeat of any legislation by the Congress of the United States”. The intended rationale of lobbyists today involves not simply influencing legislators but explaining the goals of the special interest and assisting to overcome potential obstacles legislators may face meeting those goals. Lobbying occurs at the city, state and federal level.

Organized lobbying in the U.S. is almost as old as the country is. William Hull in 1792 represented Virginia veterans in attempts to acquire additional compensation for their services in the War of Independence. Early lobbying practices were free from any form of regulation and utilized far less legitimate techniques than found today. Early lobbyists quickly attained a reputation by both press and public as disreputable, corrupt and a subversive influence on democracy. All attempts to regulate lobbying over the past 200 years have been met with only limited success. Obviously, lobbyists lobby best on their own behalf.

The total number of registered lobbyists at the federal level for 2009 was 13,700 and at the state and local levels 38,800 representing some 53,400 clients. There are of course more lobbyists who have chosen not to register or have deregistered over the past few years but are still engaged in lobbying activities. This is easily done by adopting a title other than lobbyist such as senior advisor then claiming that no more than 20 percent of a persons time is spent lobbying, this is relatively simple since federal laws do not require that lobbyists document the activities they claim they are doing. Actual numbers of fulltime lobbyists are probably closer to 70,000 and this doesn’t include large public relations and marketing firms engaged in numerous activities that clearly fall under the definition of lobbying.

Lobbyists and their clients spent more than $3.47 billion last year up from $2.85 billion in 2007 attempting to influence legislators. How much of that amount went solely towards lobbying dedicated to increasing corporate profits? The numbers break down for the three major sectors and sub sectors as follows:

Miscellaneous Business Sector

Total Miscellaneous Business expenditures from 1998 to 2010 was $4,050,396,479

Miscellaneous business expenditures increased $145,000,000 or 35 percent from 2007 to 2009

Sub Sectors

• Business Associations sector – Massive 173% increase in lobbying from the Chamber of Commerce which claims to represent approximately 3 million businesses and organizations but has been criticized for being primarily a republican lobbying machine focused on removing climate change legislation and healthcare reform and disproportionately lobbying for oil companies, pharmaceutical giants, and automakers.
• Manufacturing & Distributing sector – 25% increase in the past three years as fortune 500 companies ramped up lobbying. The top spenders in 2009 were:
  • GE increased expenditures to almost $24 million for a variety of lobbying to get government contracts and subsidies one of the largest was for wind turbines and clean coal research.
  • Honeywell spent $7 million more for aero space defense contracts, aircraft safety & technologies, and energy conservation / biofuels).
  • Procter & Gamble paid $4.5 million to lobby for positive tax and foreign trade legislation in addition to having input on food and drug safety for its products.
  • Food & Beverage sector was led by the American Beverage Assn who is the major lobbying representative for the beverage industry ($18,850,000) and companies like Coca-Cola Co. ($9,390,000) and PepsiCo Inc. ($9,159,500), all totaled spent more than $40,000,000, a 400% growth over prior year, to successfully defeat the National Soda Tax of 1 penny per ounce designed to pay for obesity related health care costs.

Health Sector

Total Health sector expenditures from 1998 to 2010 was $3,980,184,031

Health expenditures increased $97,579,000 or 22% from 2007 to 2009

Sub Sectors

• Pharmaceuticals/Health Production sector – 18% increase since 2007 as the determined pharmaceutical and health services industry increased lobbying to fight against the democrat lead health care bill. The big spenders in 2009 were:
  • Pharmaceutical Research & Mfrs of America (PhRMA), is an exceptionally powerful and influential lobbying organization that represents 48 of the largest pharmaceutical companies. In 2009 alone it spent $26 million defending pharmaceutical intellectual property rights, fighting against price controls, creating favorable regulation, and a broad attack against healthcare reform. PhRMA also uses numerous other organizations to advocate on its behalf.
  • Pharmaceutical / Health Product companies – Lobbying amongst all pharmaceutical companies was concentrated on overturning healthcare reform. Other lobbying interests included those lobbied for by PhRMA as well as specific industry related tax breaks. Largest individual lobbying expenditures included:
    • C Pfizer Inc spent $24,619,268 in 2009 as compared to $12,180,000 in 2008
    • Amgen Inc $12,440,000 in 2009 as compared to $10,800,000 in 2008
    • Eli Lilly  $11,215,000 spent less than 2008 amount of $12,485,000
    • The next 10 largest pharmaceutical companies all spent between $5,000,000 and $9,000,000.
  • Health Services/HMOs sector – increased spending almost $23,000,000 a 45% increase over 2008. This sector represents large health care insurance companies like United Health Group ($4,770,000), Blue Cross / Blue Shield ($4,700,000), and Humana ($3,180,000). It also represents companies that provide health care related services such as DaVita Inc. ($2,870,000) and Medco Health Solutions ($3,977,000). This sectors principle lobbying interests involved defeating healthcare reform and ensuring Medicare and Medicaid payments / overpayments continue unimpeded.

Finance, Insurance, and Real Estate Sector

Total Finance, Insurance, & Real Estate expenditures from 1998 to 2010 was $4,050,396,479

Finance, Insurance expenditures increased $45,639,000 or 18% from 2007 to 2009

Sub Sectors

• Insurance sector – 18% increase since 2007. The principle increase in the insurance industry was from healthcare related insurance companies or healthcare divisions within insurance companies to once again overturn the new health care bill. The big spenders in 2009 were:
  • Blue Cross/Blue Shield spent $14,805,439 in 2009, as compared to $11,770,165 in 2008 and included measures to use the issue of state’s rights to render the proposed health care reform and its regulation of insurance unconstitutional
  • America’s Health Insurance Plans spent $8,850,000 in 2009, as compared to $7,540,000 in 2008 and included efforts to create the Campaign for an American Solution. This was an attempt to generate grassroots support for a suitable healthcare reform based on existing practices that would incorporate coverage, quality, affordability, choice, and core portability.
  • American Council of Life Insurers (ACLI) spent $7,530,583 in 2009, up from $6,375,032 in 2008 representing 300 insurance companies which accounts for over 90% of all U.S. life insurance companies focusing on privacy regulations, tax issues, and pension reform.
  • The next 10 largest insurance companies all spent between $4,000,000 and $7,000,000 and included life insurance, automobile insurers, and health insurance companies. Many insurance companies lobbied for legislative support to enforce and expand the Financial Services Act of 1999 which enables insurance companies to provide financial services.
  • Finance / Visa Credit Companies increased spending 26% since 2007. This sector represents large credit companies like Visa Inc ($6,010,000), American Express ($3,260,000), MasterCard Inc ($3,100,000) all of which spent heavy on legislation to curtail credit card restrictions, overdraft fees, consumer financial protection, and data security issues. It also represents companies like Sallie Mae (SLM)( $480,000) who increased lobbying drastically to fight against legislation designed to cut SLM and other private lenders out of student loan programs, and GMAC LLC ($5,320,000)  which lobbied for new consumer protections, assistance for struggling mortgage holders, foreclosure prevention, and against proposed regulation on the derivatives markets.

Energy and Natuaral Resources Sector

Total Energy & Natural Resources expenditures from 1998 to 2010 was $2,902,630,507

Energy & Natural Resources expenditures increased $156,606,000 or 50% from 2007 to 2009

Sub Sectors

• Oil & Gas sector – The unprecedented 100%increase since 2007 in lobbying from the major oil & gas companies was due to the growing impression that fossil fuel dominance may be beginning its decline. Lobbying from all companies concentrated on battling the proposed cap and trade policy, debunking climate change, ensuring that the oil & gas industries remain influential over energy policies,  maintaining decades-old tax incentives and subsidies, and in successfully convincing the Obama administration to grant access to offshore and domestic drilling.
  • Exxon Mobil – Spent $27,430,000 which was down from 2008’s $29,000,000 but a substantial increase over $16,940,000 in 2007. Exxon Mobil also funded climate change denial groups to promote their climate views via publications and Web sites which were not reviewed or verified by the scientific community. In addition, strongly lobbied for free market advocacy.
  • Chevron Corp – Spent $20,815,000 up from $12,844,000 in 2008.  Chevron devoted extra attention shaping an effective U.S. energy policy representing oil industry interests. It also lobbied hard to establish political barriers to renewable energy companies and clean energy.
  • ConocoPhillips – Spent $18,069,858 up from $8,459,053 in 2008. Lobbying also focused on the federal government where ConocoPhillips was seeking additional time to pay for millions of dollars worth of fines for pollution related cleanup expenses associated with its refineries and favorable legislation for Alaskan oil drilling.
  • BP – Spent $15,990,000 up from $10,450,000 in 2008. BP has lobbied successfully over the past few years to win insider access and many believe has received lenient treatment on a number of violations. It also spent heavily to rebrand its image more towards an overall energy company embracing clean energy in addition to fossil fuels.
  • The remaining top ten companies spent between $12,000,000 and $2,000,000 and included Koch Industries ($12,300,000) which operates oil gathering systems and pipelines and American Petroleum Institute (API) ($7,320,000) which is the industries main trade association representing over 400 companies.
  • Electrical Utilities sector – 28% increase in expenditures over the past three years. This sector consists of the largest utilities companies across The U.S. such as Southern Co ($13,450,000),  American Electric Power ($7,297,245), and  IPG&E Corp ($6,280,000). All of the power utility companies lobbied to influence congress on new climate change legislation before and after it passed in the house. The new federal energy bill would require a reduction of greenhouse gas emissions, mainly carbon dioxide, that has been credited with climate change, this is significant since up to 80% of portfolio’s are concentrated in fossil fuels. Edison Electric Institute (EEI) ($10,500,000), the countries largest electric power company association led lobbying opposition against one of the new federal energy bill provision’s that would require utility companies to produce at least 15% of electricity from renewable sources.

Summing up these findings and looking at each of the top four sectors it becomes apparent that the vast amount of lobbying dollars spent is to improve the bottom line of a lot of corporations. The issue at heart is not that they are simply trying to influence favorable legislation from the U.S. government it is that the corporations then end up controlling a disproportionate amount of the federal budget, which ultimately means our U.S. taxpayer dollars.  There seems to be an unspoken calculation that if a certain amount is invested on lobbying and campaign contributions by corporations it can be expected they will receive both favorable legislation and a certain amount of money allocated through the federal budget (through government contracts, subsidies, tax breaks, etc). This just further exaggerates the imbalance of favorable legislation and access to federal dollars between those with millions of dollars available for lobbying and those who cannot afford it. As a taxpayer I am concerned how this benefits the US and the long term interests of its citizens.

Analysis of the each sector further demonstrates how  lobbying  favors well funded special interests. The Chamber of Commerce is the largest lobbying spender. It is supposed to represent businesses of all types and sizes. In reality, the vast majority of lobbying expenditures were focused on protecting fossil fuel and pharmaceutical interests and bailing out the automotive industry. Small and medium size companies the backbone of U.S. job growth were disproportionately represented. It could be argued saving the automobile industry would save jobs but lobbying for the fossil fuel and pharmaceutical industries was designed to protect profits.

The manufacturing sector concentrated on lobbying for tax breaks and subsidies and to acquire government contracts whether they were the best candidate or not. In some cases they lobbied to create contracts that may or may not be needed or directly benefitting the taxpayers.

In the health sector, large pharmaceutical interests revolve solely around defeating health care reform and limiting any price control measures that may be implemented. While this may benefit corporate profitability but we are the only country that pays the high prices for pharmaceutical drugs. All the while the taxpayer will be paying more money into Medicare and Medicaid to help pay for the high costs of health care and pharmaceutical drugs. Health service companies and HMOs successfully lobbied to defeat health care reform in order to protect their profits from government sponsored health care insurance or a non-profit healthcare system similar to countries in Europe.

The financial sector lobbied to limit regulation on lucrative financial arrangements and financialization. This is certainly not beneficial to taxpayers since it led to the financial collapse in early 2008. However, tens of millions of dollars has successfully stalled any significant regulation against financial instruments. The insurance companies may very well be an example of not meeting the before mentioned unspoken calculation, they did not spend or influence to the same levels as the pharmaceutical companies did and while they were able to defeat the government sponsored health care insurance system, they were not successful in completely defeating the pre-existing condition exemptions.

Finally, in the energy sector, the oil and gas companies lobbied strongly to discredit climate change, defeat cap and trade and reduce proposed climate change regulation. The fossil fuel industries were protected from legislation that was designed to limit pollutants and CO2 emissions while removing the requirement that 15% of energy use had to come from renewable sources. This has resulted in an energy policy still overwhelmingly influenced by the fossil fuels industries at a time when we need to be weaning the country off of oil and gas and into renewable energy sources.

Almost all of the top 15 sectors (see data below) with the exception of labor, ideological, civil service, non-profits, and education (the bulk of this subsector isn’t for education but for subsidies for universities) were lobbying to create an environment conducive to increase profitability and could be argued that the overwhelming amount of dollars spent supports profitability while not contributing much towards the well being of the country.

While lobbying is in compliance with the right for citizens and special interests to redress government legislation it is being exploited by corporations and those with enough financial backing.  Lobbying as it has evolved unequally provides favorable legislation and other perks at the expense of the citizens/taxpayers as a whole.  In addition, it is ensuring profitability in sectors that cause environmental damage, resulted in unnecessary and over spending, and even financial collapse of the country. This is the time that government spending and perks need to be reigned in to help rebalance the federal and state budgets. Tax dollars need to be allocated towards systems that actually benefit the public good and the long term viability for our country.

The problem that lobbying demonstrates is not that companies are not only lobbying to ensure their profits, they are lobbying to ensure profits in arenas that are hurting the US citizens and taxpayers. Lobbying for practices within industries that cause environmental problems, collapse of our country, lock us into long term fossil fuel use as opposed to clean energy, and intend to maintain the same type of healthcare system that will soon price itself out of the range of affordability are not in the best interests of humanity.

Other items of interest:

Over the last 10 years, 198 members of congress or 43 percent of legislators have left public office to become registered lobbyists. Similar percentages are applicable at the state level, fewer at local levels.

Lobbying fees have risen from $10,000 to $15,000 a month a decade ago to $20,000 to $25,000 a month or more now.  Republican lobbyist firms can charge even more.

Lobbying activity has increased despite the economic downturn demonstrating that lobbying is truly recession proof.

http://www.lobbyists.info/

http://www.washingtonpost.com/wp-dyn/content/article/2005/06/21/AR2005062101632.html

http://www.followthemoney.org/database/graphs/lobbyistlink/lobbymap.phtml?p=1&y=2009&l=1

http://www.opensecrets.org/news/2010/02/federal-lobbying-soars-in-2009.html

http://www.wilsoncenter.org/index.cfm?event_id=4244&fuseaction=events.event_summary

http://www.sourcewatch.org/index.php?title=Southern_Company

Water is essential for human survival.  It is considered a renewable resource but its limits are determined by the water cycles within a geographic location. Water availability is directly affected by population growth.  There are approx. 83 million people added to the earth each year. Many of these people are born into impoverished and population dense areas, which in turn, escalates the burden on that regions surrounding water supplies. There already exist many regions in the world where population levels have surpassed what can be sustained by the local water resources. Numerous geographical regions also have high population growth rates and barring natural disaster or famine these rates are expected to escalate.

Geo-political tension is developing between nations over fresh water supplies especially from rivers. Disputes over who has water rights are becoming more prevalent as countries upriver are using increasing amounts of water for their farming or hydroelectric power generation leaving less water for those countries downriver.  Even in regions or countries once considered abundant with water, problems exist due to declining water tables. This is occurring because increasing population centers are draining aquifers and ground water faster than precipitation or underground rivers can replace it. Fossilized aquifers are not  replenishable, once depleted that source is gone for good. Projected demand for water has already exceeded available supplies in many regions. Those countries most affected by water shortages (developed and undeveloped) are falling behind in their attempts to seriously address this problem.

There are other issues affecting water shortages. Water is being drained out of aquatic environments (i.e. the Everglades) at an increasing rate which affects not only ecosystems but the regions ability to replenish ground water supplies.  Pollution is contributing to reducing potable ground water rendering some underground sources unusable due to toxicity or increasing the filtration costs beyond economically viable levels. This is due predominantly to industrial dumping, farming, mining, landfills, etc. Developed countries have experienced some success in curtailing pollution due to regulation and new technology but the developing world with its large population growth and reduced economic resources is struggling.

Fresh water availability is what is critical to humanity as 97.5% of the earth’s water is salt water and 90% of the earth’s fresh water is frozen in Antarctica, Greenland and North Pole ice sheets. Most of the remaining fresh water is soil moisture, and very deep aquifers that would require considerable drilling costs. This leaves approximately 1% of fresh water available for human use and includes mountain glaciers, surface sources like lakes, rivers, and reservoirs, and underground shallow aquifer sources. This amount is also renewable through rain water and snowfall.

The U.S. is an example of a country that has done fairly well with fresh water conservation and increasing efficiencies in fresh water use. In 2005 the U.S. decreased fresh water consumption levels down to 349 billion gallons per day (bgal/day) or a 5% decrease over the past 25 years. Fresh water consumption of 268 bgal/day was pulled from surface sources and 79 bgal/day was removed from underground sources. Most of the rest of the world is experiencing increased demand for fresh water.  

Consumption levels for fresh water in the U.S. are as follows: 41% or 143 bgal/day of all fresh water went for thermoelectric power generation; almost that entire amount was from surface sources. Farming utilized 129 bgal/day or 37 percent of freshwater. This amount has decreased 5% over the past decade due to sprinkler system and micro irrigation advances but are expected to increase again as population growth overtakes irrigation efficiencies. Farming uses also account for 67% of all the ground water extracted. Public supply is at 45 bgal/day or 13% and includes water requirements for residential homes, commercial factories, and other business needs. Industry used almost 15 bgal/day or approximately 4%. This amount is also decreasing due to efficiencies mostly in the mining sector. These figures roughly reflect worldwide demand as well.

Populations will continue to increase world wide especially in poorer developing countries with high poverty with less access to education and birth control. Farming requirements necessary to feed these increasing populations will strain existing water supplies to their limits and require developed countries to increase their farming output to help mitigate famine and starvation. This will in turn increase their water demands. Ground and surface water pollution will continue to increase especially in regions where government regulation for pollution does not keep pace industrial and economic growth.

Measures must be implemented world wide that:  

1. Conserve existing fresh water supplies while aligning population size to a regions water availability.  This may mean establishing population growth limits in some areas regardless of religious or cultural belief systems. Another possibility is redistributing some percentage of a population to more suitable regions, but this may create ethnic rivalries.
2. Create energy efficient and cost effective desalinization plants and pipeline infrastructure for large scale water distribution. This will be expensive and desalinization plants create their own set of problems beyond costs, but outside of transporting icebergs across large distances it is the only realistic solution available.
3. Generate legislation in both developed and undeveloped countries that addresses and limits industrial dumping processes. Another unpopular and expensive measure that will not likely be affordable to under developed countries and require the financial assistance of developed countries.

Failure to meet these requirements will result in decreased water availability, rationing, severe water shortages with decreased food production, and enough political tension to eventually result in regional wars over water. Water is one of the basic requirements of a civilization and more than one civilization has seen its demise due to sustained drought or a long term change in the ecosystem. Problems with limiting access are already upon us and will continue to grow. Sticking our collective heads in the sand and pretending the problem doesn’t exist or that there is still plenty of time to deal with it will put society’s in a reactive, self-preservation mode which generally triggers a reaction towards war to solve the immediate crisis. My conclusion is start funding and allocating resources now for long term, sustainable solutions or pay more money later for: escalating prices for water and the inevitable costs associated with war.

http://www.waterinfo.org/resources/water-facts

http://pubs.usgs.gov/circ/1344/

Financialization has become the goal of the large banking institutions. Risky intangible financial instruments in a deregulated environment have been the greatest source for generating investor wealth and have provided billions in fees and commissions to the financial sector. Wall Street elites are once more attempting to increase the levels of financialization despite what it has done to the real economy over the past few years or could do again.

All the while, U.S. citizens have continued to put their money in savings and checking accounts of the very banks and financial institutions that created the credit crisis and its associated problems. Personal income that once was used for capital by banks for lending to businesses or consumers instead flowed into exotic derivative instruments that were understood by only a few and benefited only a few. Those benefits include billion dollar incomes for top hedge fund managers, lucrative banking executive bonuses even after the US taxpayer bailed out their messes, and tens of billions of dollars to select financial institutions that were “too big to fail”. Much of the bailout money enabled those same institutions to buy distressed and bankrupt financial institutions (not worthy of TARP money) for pennies on the dollar.

Profits during the run-up of financialization not only went towards investors or bonuses but to an ever increasing army of lobbyists whose sole goal was to buy the proper Congressional support for deregulation. This process is occurring again with campaign contributions and lobbyist giveaways to both the republican and democrat parties to ensure that any significant regulation doesn’t become implemented.

Financialization in a recession lengthens the recession as investment dollars are kept away from domestic companies. Without necessary injections of capital from the banking industry for expansion or for general operations companies will falter due to a lack of cash flow. Banks then look at the poor credit rating of these companies and the bad economic environment and the companies are deemed too risky to lend to. Then the distressed company is forced to sell off assets, lay off employees, or even dissolve.

There are long term consequences of financialization in developed countries as well. Investment dollars are diverted away from the next generation of science and technology endeavors essential to the development of future industries, companies, and projects critical for real future economic growth and job creation in our information age. Mainstream manufacturing jobs will continue to be exported to developing countries due to globalization and trade treaties making it difficult for established developed countries to compete in their labor intensive markets. This requires developed countries to invest in innovation and develop technology oriented companies to fill in for the losses in manufacturing if developed countries hope to remain economically sustainable and globally competitive. This will be increasingly difficult as long term tangible economic growth is sacrificed for the short term profits and commissions provided by more investing in financial instruments.

To counter financialization and grow a sustainable economy we must:

1. Reform the political process so that thousands of appointed lobbyists and campaign contributions can’t buy deregulation.
2. Recreate regulation that limits access of financial institutions to “vanilla” easily monitored financial instruments for investing.
3. Reform the tax structure so that profits are taxed according to standard tax code practices and not just to the 15% capital gains tax.

Financial resources must be concentrated back into the real economy. Financial institutions will need to have access to another round of exotic derivative investing if they expect to make the profits of the past, they cannot allow this to be curtailed through regulation. They will not willingly return to simple lending and basic banking. The short term profit motivation has led to such levels of greed that the entire economy has taken a back seat to profits. The process of financialization is already attempting to be reinstated in the U.S. and other developed countries that haven’t yet recovered from the current recession. The question remains to the middle classes, are you willing to linger in this recession to ensure that wealth generation and hording continues to grow amongst the financial elite?

http://www.levyinstitute.org/pubs/wp_525.pdf

http://en.wikipedia.org/wiki/Financialization

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

http://wallstreetwatch.org/soldoutreport.htm

Financialization refers to economic conditions where financial markets become the preferred system for investments rather than investing in the real economy. The goal is to create an economic system where any tangible or intangible form of work, product creation, or rendered service can be valuated as an exchangeable financial instrument. These financial instruments can be cash instruments (cash, transferable securities, or an agreed upon transfer of loans / deposits) or preferably a derivative instrument (financial instruments that are valuated based off the perceived value and characteristics of an original asset). Financialization is what has led to the financial crisis recently experienced by most of the industrialized world.

Financialization has gained a significant hold over the American and world economies. In 2008 the Gross Domestic product or GDP of the United States was 14.2 trillion dollars. This was the value of the total economic output derived from all finalized goods produced and services provided in the United States. World GDP was 60.6 trillion dollars. In 2008 the sum total of all traceable international derivative exchanges was 1200 trillion dollars. Note: Derivative exchanges did not require the total 1200 trillion dollars to be exchanged only an agreed upon percentage.

The process has had three outcomes:

1. Wall Street financial elites, with their influence over financial institutions and markets, have used profits to provide 3.4 billion dollars on 2900+ lobbyists (figures do not include lobbying at the State levels) and 1.7 billion dollars on direct campaign contributions over the past 10 years to remove regulation and elevate the importance of the financial sector above that of the real economy.
2. Money has been transferred out of the real economy and into the financial sector where banks, security firms, hedge funds, private equity groups, etc. make money by essentially shifting money around and speculating on future derived values of the aforementioned financial instruments. Generally nothing real or tangible is created.
3. An increase in income inequality and a stagnation of wages as wealth becomes concentrated in elite circles. The more complex and exotic the derivatives traded, the more monitoring agencies (Moody’s, Standard and Poor’s, etc.) have difficulty understanding how these risky instruments should be valuated. This lack of monitoring capability is actually preferred since it allows financial institutions to sell or broker without guideline restrictions. The greater the risk the higher the potential yield or return for the investor and the larger commission and fees charged by the financial institution. As more dollars and income flow into these lucrative unregulated markets less is available for the real economy which contributes to GDP and in turn job creation.

The final outcome of these measures is an economy that experiences a drawn out recession, over-indebtedness, and a reluctance to invest or lend in the less profitable real economy. As long as regulation can be avoided through political influence and derivatives instruments still remain available for trade these outcomes will continue.

This also leads to the matter of moral hazard where financial institutions that are “to big to fail” feel insulated from risk because of the possibility of additional government bailouts. This has resulted in banking executives who have not learned the lessons of their high risk decisions in a regulation free environment and are scrambling for the next run of exotic derivative investing. In addition, the remaining large financial institutions are already profitable again, most having paid back their TARP loans and the U.S. government has in many cases seen a return on its investment in the TARP program. This quick turnaround has led to cries for no regulation and the allowance of free markets for continued derivative instruments trading despite what it did to create a credit crisis and lead the U.S. and world economies into severe recession. Large banks and financial institutions have already unleashed their lobbyists and are providing the next round of campaign contributions to political parties to ensure favorable legislation.

This process is cannibalizing our real economy. The American economy is producing significantly less than 20 years ago. There is little if any long term benefit to the U.S. or world economies where societies are sacrificed for the profits associated with shuffling around financial assets and instruments. What we need to do to pull the US and world economies out of a potential long term recession is tangible investments in manufacturing, infrastructure development, innovation, and the development of new technology crucial to industrialized nations in the information age.

Ask yourselves, who is benefiting from the manipulation of financial markets with derivative investments? Are you?

Solar thermal may represent a viable way to reduce the consumption of fossil fuels, but what will the cost be to implement the required infrastructure for the power facilities and grid connections, some of which may be required in isolated areas?

The U.S. produced 4,119,388,000 megawatts and consumed approximately 3,978,000,000 megawatts of electricity in 2008.  Production of electricity breaks down as follows:

• 1445 Coal generation plants represented 48.2% of electricity production providing 1,985,801,000 megawatts.
• 3768 Natural gas processing plants represented 21.4% of electricity production providing 882,891,000 megawatts.
• 104 Nuclear power plants represented 19.6% of production of electricity production providing 806,208,000 Megawatts.
• 3966 hydro electric plants represented 6% of production of electricity production providing 254,351,000 megawatts.
• 2576 Renewable energy plants represented 3% of electricity production providing 126,212,000 megawatts.  (Renewable sources included biomass, wind, wood derived, geothermal, and solar thermal / photovoltaic)
• 3768 petroleum power plants represented 1% of electricity and 46,243,000 megawatts.
• Other gases and their power facilities represented .25% of electricity production providing 11,707,000 megawatts.

Solar thermal even when combined with photovoltaics produces less than 1/20^th of one percent of U.S. electricity production.

Solar thermal energy (STE) systems utilize high temperature collectors that reflect concentrated sunlight collected from mirrors or lenses. The resulting solar radiation (heat) is focused to specific collection points. A liquid medium is passed through collection points where it is heated. This heated fluid can be used to produce steam necessary to drive a turbine used to produce electricity.

Most of the electricity today is still provided by steam turbines. STE systems are no exception. Traditional steam turbines have efficiencies approaching 40% with temperature conversions below 600 degrees. Above 600 degrees gas turbines can be utilized with even better efficiencies, but the highest temperature conversions are possible with liquid fluoride salts, molten salts, or synthetic oils and are approaching 800 degrees providing up to 50% efficiencies.

There are a number of STE design systems. Parabolic trough designs are currently the most common type  utilizing curved mirrors to reflect solar radiation into a pipe which contains the fluid and runs the length of the trough usually just above the collectors. Other designs include Power Tower designs or heliostat designs have arrays of flattened movable mirrors that focus solar radiation on a collection tower.  Dish systems implements a large parabolic dish that focuses sunlight on a collector positioned just above the dish. Linear Fresnel reflector designs use a series of slightly curved mirrors to focus light onto linear receivers located just above the mirrors.

STE plants need to be able to produce electricity in overcast conditions and in periods of darkness. This is possible via thermal storage mediums which store heat in an underground basin for later use. These mediums include molten salt storage commonly called saltpeter, graphite heat storage which use purified graphite, and organic or inorganic phase change materials.

There are a variety of proposed plants set for construction in the next few years. The world’s largest single planned solar thermal plant, a 340 MW facility, will be started in Arizona by the end of 2010. It will utilize parabolic trough design reflecting concentrated sunlight to a narrow tube containing synthetic oil that will be heated to 800 degrees before being pumped back to a central power block where steam will be produced to drive a turbine.

Molten salt will be the storage medium that will be heated and stored for night time use; allowing the facility to continue generating power when the sun is not shining. This will also help reduce water requirements in the arid desert environment.

A 340MW power plant regardless of type (coal, natural gas, hydro-electric, or solar) could in optimum conditions produce 340 x 24 x 365= 2,978,000 MW per year of electricity. This is contingent on the power plant running 24 hours per day, all year, without down time. For the proposed Arizona plant it means the heat retained in the molten salt must provide the same levels of steam for electricity generation in periods without direct sunlight as the heated synthetic oil during daylight hours.

The cost of comparable coal fired power plant can easily exceed one billion dollars while similar natural gas plants are pushing 700 Million. Costs for both types of power plants have been increasing significantly over the past decade.

If the United States were to be solely converted to solar thermal it would require 1383 of the 340MW plants schedule for construction in Arizona. Those STE systems would cost approximately $2.76 trillion dollars at current levels and require years to build.  Building the power plants would not be the only expenditure involved, electrical grid infrastructure will be necessary to connect the facilities to end users since most of the facilities may be in the  isolated areas of the southwest. Above ground power lines run approximately $10 per foot and up to 10 to 15 times that amount is buried.

This cost might seem ridiculous initially and from a short term position it probably is.  However, projected over 25 years the costs to build coal fired or natural gas plants are projected to continue to rise substantially while solar thermal facilities have yet to enjoy lower construction costs associated with the mass production of components. In addition operation costs for coal and natural gas are projected to increase further reducing the initial infrastructure costs.  STE designs will require ongoing maintenance and repairs as with all forms of power plants maintenance but will not require ongoing exploration costs, mining / drilling expenditures, and require distribution networks / pipelines to move the raw material to processing facilities.  These additional costs over time will overshadow initial infrastructure savings.

STE is also a completely clean source of energy releasing no pollutants and has a net zero carbon footprint. Coal and natural gas release considerable amounts of CO2 and a number of pollutants. Energy demand in the U.S. and especially worldwide will continue to grow and the more traditional fossil fuel plants built will contribute ever increasing amounts of greenhouse gases and pollutants.

The U.S. has other renewable non polluting options available so a 100% conversion will not be necessary. Combinations of renewable systems such as STE’s combined with bio-algae photobioreactors can be used in the same isolated areas and in close proximity, reducing land costs and the expense of running electrical power lines to separate facilities. Smaller STE plants can be positioned close to urban areas allocating power to sections of a city or suburbs.

STE may be initially expensive but remains one of the few truly clean power supply’s available.  Its current infrastructure development costs are on par with nuclear power plants but without the nuclear radiation storage issues or having to purchase uranium from volatile countries. These prices, as previously mentioned, will drop as more cost efficient technology and mass production takes hold. Once the facilities are built they will provide clean power for decades with only maintenance costs. If we cease building fossil fuel and nuclear power plants in favor of STE’s, geothermal, wind, and tidal facilities and start to slowly phase out older fossil fuel plants the U.S. can begin a slow but deliberate move towards sustainable energy.

http://en.wikipedia.org/wiki/Solar_thermal_energy

http://www.renewableenergyworld.com/rea/news/article/2009/03/why-dont-we-bury-more-power-lines

http://www.eia.doe.gov/cneaf/solar.renewables/page/solarthermal/solarthermal.html

http://news.cnet.com/Shrinking-the-cost-for-solar-power/2100-11392_3-6182947.html

http://cleantechnica.com/2009/05/13/worlds-largest-solar-thermal-plant-340mw-planned-for-arizona/