On multiple occasions over the last several days, I've bumped into discussions -- some online, some live -- about the growing "gig economy". Described simply, these are people who work from home (or as is often pictured, the nearest coffee shop with free wifi), taking on small projects as independent contractors. These are not the high-powered contractors that I knew during my time in the telecommunications industry, being paid large amounts because they brought highly specialized skills to a particular problem; these are the hard-scrabble tenant-farmers of the information age. The consensus of the people I've heard and/or read is that this is inevitable, and perhaps even desirable.
I disagree; I think it will be a disaster in the long term. I admit to a certain bias, of course. I spent six years in college learning my craft. While I was good at it, it took (at least IMO) three additional years to learn enough about the business that I could be trusted without oversight. I spent 25 years in large corporations and eventually left with a pension and personal savings that are probably enough to support my spouse and I in retirement, assuming that the politicians allow some form of Medicare to operate for another 25 years or so. I know that things have changed in corporate America, and that I got as good a deal as I did only because I started a long time ago.
There are parts of the economy that don't fit the gig model. Jobs where people need to show up at a specified place, at a specified time, day in and day out. Policemen, teachers, workers on assembly lines,... it's a long list. These are jobs that have historically come with benefits: paid time off, pension contributions, group health insurance1. The gig economy, at least the version that has been described to me, comes with none of those. There would seem to be two ways to approach the situation.
One of those would be to simply say "tough". If you can't (or won't, always a possibility) tie yourself to a traditional job, then you're going to have to manage to pay for your own health care, save more for your retirement, and so forth. This becomes increasingly difficult as you get older, particularly the health care. Because income is probably intermittent on some scale, it may be difficult to acquire a mortgage or other long-term debt. There are a variety of problems that arise if you decide you want kids. In this "tough" case, those working on gigs would seem to be much more marginally attached to the society, and I would expect them to harbor some sort of resentment towards the people with the benefits.
The other way would look much more like other OECD countries. Single-payer health care, a more generous public pension system, and some sort of minimum income guarantee are some of the pieces of that. In this case, it seems possible that resentment would run the other way. People who aren't a part of the gig economy might feel that they are giving up considerable freedom for little gain, or that their more regular contributions towards the services is a subsidy for those whose contributions are more irregular.
The "real" solution, of course, is an economy that provides regular work for everyone who wants it. Post WWII, the implicit social contract in the United States has been that business would be (relatively compared to most of the OECD) lightly regulated and taxed, and in exchange they would provide employment with benefits. At least since the 1990-1 recession, this contract has been breaking down. Non-gig jobs have been steadily replaced by automation or moved to locations where the workers can't follow. Somehow, we need to fix that.
1 The benefit here is not just the employer's tax-free contribution towards premiums. There are also the considerations of guaranteed issue, coverage of pre-existing conditions, and premium levels based on the group's luck, not just the individual's.
Tuesday, October 4, 2011
Tuesday, September 6, 2011
Cross-State Air Pollution Rule
Yesterday I posted a bit about the substantial differences in both the amount and type of sources used for generating electrical power in eastern and western states[1]. The take-away -- or at least, what was supposed to be the take-away -- was the need for substantially different energy policies for East and West. Of course, once I had written that something would happen, it turns out that that something is already happening, so I look uninformed at best and stupid at worst. Well, it's not the first time that it's ever happened to me, and is unlikely to be the last.
In July, the federal EPA finalized its Cross-State Air Pollution Rule (CSAPR). Beginning in January of 2012, this rule requires 28 eastern, midwestern, and southern states to reduce power plant emissions -- primarily coal-burning power plants -- of some or all of sulfur dioxide, nitrous oxides, and fine particulate matter[2]. Of the 48 contiguous states, those excluded are my 11-state West, the two Dakotas, the six New England states east of New York, and Delaware. This is not to say that the excluded states don't have air pollution problems; they are excluded because their emissions don't contribute to violations of air pollution standards in other, downwind, states. The EPA will issue a federal implementation plan for each state; states may replace the EPA's plan with a different state plan that achieves the same reductions.
Power generators in many states oppose the CSAPR; those of Texas seem to be particularly incensed. Part of the opposition to the rule is due to the increased costs that will be forced on operators of the coal-fired plants, which will presumably result in higher prices for consumers (or lower profits for corporations, depending on what state regulators do). This is an example of the "austerity" that I asserted would be forced on the East, but not the West, due to the East's much heavier dependence on coal-fired generation. But Texas is concerned not just about prices. The Texas Public Utilities Commission requested that the Electricity Reliability Council of Texas (ERCOT) examine the consequences of CSAPR on reliability of the electricity supply.
ERCOT released its report [PDF] last week. ERCOT is concerned that CSAPR will result, at least in the short term, in decreased availability of electrical power. In their worst-case scenario, in which Texas generators are unable to obtain sufficient supplies of low-sulfur coal from Wyoming, generating capacity is estimated to be reduced by 3,000 MW in April-May, by 1,400 MW in January-February and June-September, and by 6,000 MW in October-December. ERCOT believes that if CSAPR had been in force this year then it would have been necessary to impose rolling blackouts on some days in August. That's another, less pleasant, form of austerity.
The EPA's acid rain reduction program in the 1990s, which achieved quite large reductions in emissions of sulfur dioxide from coal-fired plants, is often used as a "poster child" for cap-and-trade programs. The CSAPR differs from that program in two important particulars. Trading in emission allowances between states will be significantly restricted. And when the program was put in place in the 1990s, generators were allowed multiple years to prepare before the reduction program began. ERCOT points out that the short timetable for CSAPR makes it difficult for generators to use some options. For example, one of the unexpected outcomes in the 1990s was the large expansion of coal mining in Wyoming's Powder River basin, and the corresponding expansion of the railroads' ability to move large amounts of Wyoming coal to eastern power plants. A large increase in either capacity is unlikely to be possible by the beginning of 2012.
CSAPR addresses some of the "easy" pollutants emitted by coal-fired generating plants. Proven technologies exist for reducing all of sulfur dioxide, nitrous oxides, and fine particulate matter. The tough one is yet to come: carbon dioxide. Barring action by Congress, carbon dioxide regulation is coming, though: the Supreme Court has ruled that carbon dioxide is a pollutant under the definitions of the Clean Air Act, and that the EPA may not decline to regulate it. The impacts of that will be much larger than those of the CSAPR.
[1] For my purposes, "West" is defined to be the 11 states from the Rocky Mountains to the Pacific Coast, Alaska and Hawaii are simply ignored, and "East" is defined to be the remaining 37 states.
[2] 2.5 micrometers or less in diameter.
In July, the federal EPA finalized its Cross-State Air Pollution Rule (CSAPR). Beginning in January of 2012, this rule requires 28 eastern, midwestern, and southern states to reduce power plant emissions -- primarily coal-burning power plants -- of some or all of sulfur dioxide, nitrous oxides, and fine particulate matter[2]. Of the 48 contiguous states, those excluded are my 11-state West, the two Dakotas, the six New England states east of New York, and Delaware. This is not to say that the excluded states don't have air pollution problems; they are excluded because their emissions don't contribute to violations of air pollution standards in other, downwind, states. The EPA will issue a federal implementation plan for each state; states may replace the EPA's plan with a different state plan that achieves the same reductions.
Power generators in many states oppose the CSAPR; those of Texas seem to be particularly incensed. Part of the opposition to the rule is due to the increased costs that will be forced on operators of the coal-fired plants, which will presumably result in higher prices for consumers (or lower profits for corporations, depending on what state regulators do). This is an example of the "austerity" that I asserted would be forced on the East, but not the West, due to the East's much heavier dependence on coal-fired generation. But Texas is concerned not just about prices. The Texas Public Utilities Commission requested that the Electricity Reliability Council of Texas (ERCOT) examine the consequences of CSAPR on reliability of the electricity supply.
ERCOT released its report [PDF] last week. ERCOT is concerned that CSAPR will result, at least in the short term, in decreased availability of electrical power. In their worst-case scenario, in which Texas generators are unable to obtain sufficient supplies of low-sulfur coal from Wyoming, generating capacity is estimated to be reduced by 3,000 MW in April-May, by 1,400 MW in January-February and June-September, and by 6,000 MW in October-December. ERCOT believes that if CSAPR had been in force this year then it would have been necessary to impose rolling blackouts on some days in August. That's another, less pleasant, form of austerity.
The EPA's acid rain reduction program in the 1990s, which achieved quite large reductions in emissions of sulfur dioxide from coal-fired plants, is often used as a "poster child" for cap-and-trade programs. The CSAPR differs from that program in two important particulars. Trading in emission allowances between states will be significantly restricted. And when the program was put in place in the 1990s, generators were allowed multiple years to prepare before the reduction program began. ERCOT points out that the short timetable for CSAPR makes it difficult for generators to use some options. For example, one of the unexpected outcomes in the 1990s was the large expansion of coal mining in Wyoming's Powder River basin, and the corresponding expansion of the railroads' ability to move large amounts of Wyoming coal to eastern power plants. A large increase in either capacity is unlikely to be possible by the beginning of 2012.
CSAPR addresses some of the "easy" pollutants emitted by coal-fired generating plants. Proven technologies exist for reducing all of sulfur dioxide, nitrous oxides, and fine particulate matter. The tough one is yet to come: carbon dioxide. Barring action by Congress, carbon dioxide regulation is coming, though: the Supreme Court has ruled that carbon dioxide is a pollutant under the definitions of the Clean Air Act, and that the EPA may not decline to regulate it. The impacts of that will be much larger than those of the CSAPR.
[1] For my purposes, "West" is defined to be the 11 states from the Rocky Mountains to the Pacific Coast, Alaska and Hawaii are simply ignored, and "East" is defined to be the remaining 37 states.
[2] 2.5 micrometers or less in diameter.
Monday, September 5, 2011
Regional electricity sources
8-14-12 -- This essay contains numerical errors due to an error in software I wrote for extracting summary information from an EIA spreadsheet. I'm leaving the erroneous figures here in the interests of honesty -- I made a mistake. A corrected version of this piece has been added.
Earlier this year I posted a piece that observed that in the US, nuclear power was largely an Eastern phenomenon. I was curious about other differences in the sources for electrical power in the East and West portions of the US. The EIA publishes numbers for electricity generation by state and "fuel". Several caveats go with the following discussion:
The share provided by the five largest sources of generation for the West and East are shown in the following table. As expected, there are fairly dramatic differences between the two regions. The East depends much more on coal and nuclear (about 70% of their total) than the West does (about 40%). If conventional hydro power is counted as renewable, then the West gets about one-quarter of its electricity from renewable sources. Western wind, with a value of 0.0181, was close behind geothermal as a renewable source in 2007, and has almost certainly moved into the fifth spot by today.
The next table shows the top ten sources of electricity by region and source overall. Depending on your biases, the table is making any of several different points. I'll stick to the one that says the table shows the need for two distinct energy policies (at least with respect to electricity) in the US, one for the West and one for the East. The problems of replacing the power from an aging fleet of nuclear reactors is an Eastern problem. The problems of replacing large amounts of coal generation in order to address climate change issues is an Eastern problem. When the time comes -- and I believe it will -- when the East requires a heavy dose of austerity, in terms of sizable per-capita reductions in electricity use, it will be difficult to justify imposing the same degree of pain on the West.
Earlier this year I posted a piece that observed that in the US, nuclear power was largely an Eastern phenomenon. I was curious about other differences in the sources for electrical power in the East and West portions of the US. The EIA publishes numbers for electricity generation by state and "fuel". Several caveats go with the following discussion:
- Figures are for calendar year 2007, the last year before the recession.
- Hawaii and Alaska are excluded.
- "West" is the 11 states from the Rockies to the Pacific Coast, "East" is the other 37 contiguous states.
- Pumped-hydro power is excluded -- it's minor and in some states has a negative value, which just confuses things.
The share provided by the five largest sources of generation for the West and East are shown in the following table. As expected, there are fairly dramatic differences between the two regions. The East depends much more on coal and nuclear (about 70% of their total) than the West does (about 40%). If conventional hydro power is counted as renewable, then the West gets about one-quarter of its electricity from renewable sources. Western wind, with a value of 0.0181, was close behind geothermal as a renewable source in 2007, and has almost certainly moved into the fifth spot by today.
The next table shows the top ten sources of electricity by region and source overall. Depending on your biases, the table is making any of several different points. I'll stick to the one that says the table shows the need for two distinct energy policies (at least with respect to electricity) in the US, one for the West and one for the East. The problems of replacing the power from an aging fleet of nuclear reactors is an Eastern problem. The problems of replacing large amounts of coal generation in order to address climate change issues is an Eastern problem. When the time comes -- and I believe it will -- when the East requires a heavy dose of austerity, in terms of sizable per-capita reductions in electricity use, it will be difficult to justify imposing the same degree of pain on the West.
Wednesday, August 31, 2011
College Football Conspiracy Theories
Ordinarily, I'm inclined to discount rumors about intrigue and conspiracy theories. I'm more inclined to the philosophy that "most things can be explained by greed and/or stupidity." Historically, though, I do set aside time on alternate Tuesdays to believe in conspiracies. This isn't a Tuesday, but I have a conspiracy theory regarding the timing of Texas A&M's announcement that they are leaving the Big 12 conference. Bear with me; it does connect (tenuously) to public policy.
During the summer of 2010, several changes in college conference line-ups occurred. In the Big 12, Colorado left for the Pac 10 and Nebraska for the Big 10. In certain ways, those changes made sense. The Colorado football program has always recruited heavily on the West Coast. In some ways, Boulder in particular and Colorado in general has a cultural focus that looks West rather than East. And while a good deal of Nebraska's motivation appeared to be "anywhere that Texas isn't," the bulk of Nebraska's population is in the eastern portion of the state and the culture there is a better match with the Big 10 states than with Texas (or Oklahoma, for that matter).
At the same time, there were lots of rumors about schools in the Big 12 South. Four teams to the Pac 10; three or four teams to the SEC; Texas to the Big 10. None of which came to pass, of course. When the rumors were flying hot and heavy, some prominent members of the Texas state legislature weighed in. In particular, they took the position that at least Texas and Texas A&M were a bundle that wouldn't be separated, and if necessary, things could be added to statute during the upcoming legislative session to ensure that. The Texas legislature only meets -- absent special sessions -- every other year. Having completed the 2011 session, they won't be back together until 2013.
In light of this week's announcement, it appears that Texas A&M wasn't a whole lot happier about being in a football conference skewed in favor of the University of Texas than Nebraska was. Unlike conferences like the SEC and Big 10, television revenue in the Big 12 is not shared equally by the member schools. Unlike the Pac 10 and the Big 10, schools in the Big 12 are allowed to have their own sports "networks". Under the Big 12 rules, UT has historically captured a larger share of the conference's television revenue than some of the other schools. And the Longhorn Network, a venture of UT and ESPN, is scheduled to launch next week. The network is regarded by many as an enormous recruiting advantage for UT.
So where, you ask, is the intrigue? It's in the timing of the A&M announcement. By jumping ship now, A&M has done an end-around on the the Texas legislature. Assuming that A&M has lined up the nine votes needed to join the SEC (and essentially everyone seems to assume that's the case), they are in the position of being able to join that conference and play an entire football season there before the legislature meets again. It's one thing to pass a law joining UT and A&M at the hip for deals to be made in the future; it's quite another to pass a law that attempts to overturn existing contracts, particularly where interstate commerce is involved. And in Texas, only the governor can call a special session, and the special session can only consider matters listed by the government in that call. Rick Perry is rather busy just now running for President, and calling a special session to deal with college football isn't consistent with the kind of image I think he's trying to project.
So, kudos to A&M for getting away from UT, and for maneuvering things so that the biggest hurdle to accomplishing that -- the Texas legislature -- is taken out of the game. As for UT [disclosure: I have an MS from Austin, and got a good education for two years there], things seem to have backfired on them. It certainly looks like they are now stuck in a slowly dying conference (didn't they learn anything when the SWC fell apart in the 1990s?). But I think we can put that down to greed and stupidity, not intrigue.
During the summer of 2010, several changes in college conference line-ups occurred. In the Big 12, Colorado left for the Pac 10 and Nebraska for the Big 10. In certain ways, those changes made sense. The Colorado football program has always recruited heavily on the West Coast. In some ways, Boulder in particular and Colorado in general has a cultural focus that looks West rather than East. And while a good deal of Nebraska's motivation appeared to be "anywhere that Texas isn't," the bulk of Nebraska's population is in the eastern portion of the state and the culture there is a better match with the Big 10 states than with Texas (or Oklahoma, for that matter).
At the same time, there were lots of rumors about schools in the Big 12 South. Four teams to the Pac 10; three or four teams to the SEC; Texas to the Big 10. None of which came to pass, of course. When the rumors were flying hot and heavy, some prominent members of the Texas state legislature weighed in. In particular, they took the position that at least Texas and Texas A&M were a bundle that wouldn't be separated, and if necessary, things could be added to statute during the upcoming legislative session to ensure that. The Texas legislature only meets -- absent special sessions -- every other year. Having completed the 2011 session, they won't be back together until 2013.
In light of this week's announcement, it appears that Texas A&M wasn't a whole lot happier about being in a football conference skewed in favor of the University of Texas than Nebraska was. Unlike conferences like the SEC and Big 10, television revenue in the Big 12 is not shared equally by the member schools. Unlike the Pac 10 and the Big 10, schools in the Big 12 are allowed to have their own sports "networks". Under the Big 12 rules, UT has historically captured a larger share of the conference's television revenue than some of the other schools. And the Longhorn Network, a venture of UT and ESPN, is scheduled to launch next week. The network is regarded by many as an enormous recruiting advantage for UT.
So where, you ask, is the intrigue? It's in the timing of the A&M announcement. By jumping ship now, A&M has done an end-around on the the Texas legislature. Assuming that A&M has lined up the nine votes needed to join the SEC (and essentially everyone seems to assume that's the case), they are in the position of being able to join that conference and play an entire football season there before the legislature meets again. It's one thing to pass a law joining UT and A&M at the hip for deals to be made in the future; it's quite another to pass a law that attempts to overturn existing contracts, particularly where interstate commerce is involved. And in Texas, only the governor can call a special session, and the special session can only consider matters listed by the government in that call. Rick Perry is rather busy just now running for President, and calling a special session to deal with college football isn't consistent with the kind of image I think he's trying to project.
So, kudos to A&M for getting away from UT, and for maneuvering things so that the biggest hurdle to accomplishing that -- the Texas legislature -- is taken out of the game. As for UT [disclosure: I have an MS from Austin, and got a good education for two years there], things seem to have backfired on them. It certainly looks like they are now stuck in a slowly dying conference (didn't they learn anything when the SWC fell apart in the 1990s?). But I think we can put that down to greed and stupidity, not intrigue.
Tuesday, August 30, 2011
Federal Donor and Recipient States
From time to time, various bloggers comment on the fact that liberal blue states are generally net donors of federal tax dollars, and conservative red states are net recipients. "Donor", in this case, means that the residents and businesses in the state pay more in federal taxes than the federal expenditures in that state. The primary source for the information for these claims comes from the Tax Foundation [pdf], whose most recent version of the information is based on federal fiscal year 2004. The report makes various adjustments, such as ignoring expenditures that can't be attributed to a particular state (interest on the national debt) and adding in deficit spending as part of the current tax burden (in proportion to the actual taxes collected).
People who spend too much time with me know that I have a peculiar fixation with the idea of separating the US into two parts. There are lots of proposals kicking around the blogosphere about red/blue splits. Mine is quite different, a simple east/west division based on several energy considerations and the ongoing depopulation of the Great Plains. My definition of "West" is the 11 contiguous states from the Rocky Mountains to the Pacific coast; among other common features, these are the states with very large federal land holdings; and Alaska and Hawaii are such peculiar cases that I choose to ignore them. One of the things that I hear regularly is that the West couldn't stand on its own, and one of the reasons is that those states are subsidized by the more heavily populated East.
The same Tax Foundation figures that get used for red/blue comparisons would seem to be a reasonable place to start. The tax burden and expenditure figures from report #139 are reproduced in the following table. The tax burden figures do not include the adjustments the Foundation made to account for the federal deficit; the details of that adjustment are not included in the report, and are probably not important to the conclusions I'm going to draw. Let me begin with the last row of the table. For the US as a whole, the per-capita federal tax burden is $6,369, and the per-capita federal expenditures are $7,311. Taxes covered about 87% of the expenditures.
The main part of the table shows the same calculation for the 11 western states. The portion of state-specific expenses covered by state-specific taxes ranges from 114% in Nevada to 46% in New Mexico. Three states -- California, Colorado, and Nevada -- are net donors, the other are net recipients. [Note that when the Tax Foundation does its adjustment for the federal deficit, Oregon and Washington also become donor states.] The last two columns use the state populations (from Wikipedia, for July 2010) to convert the fractions of the expenditures covered to weighted figures, then sums those to get the fraction covered for the western states as a group: 97%. In short, federal taxes in western states cover a significantly larger portion of the federal expenditures in those states than are covered when the country is considered as a whole. The immediate corollaries are that the non-western states must be doing a worse job of covering their regional expenditures, and that if the "blue states subsidize red ones" argument is true, there is a corresponding "western states subsidize non-western states".
Granted, the skewed populations of the western states means that California is covering most of the western subsidies. That doesn't bother me; any "Western States of America" would clearly be dominated by California, or perhaps by two Californias since a political reorganization would give the north and south portions of the state the opportunity to separate, an idea that Californians seem to bring up regularly. More importantly, though, is that five of the eleven states do better than the national average, and those states illustrate a point that the red/blue state comparisons often miss: it's really an urban/rural thing. California is tied with New Jersey as the "least rural" states in the country, using the Census Bureau definition. All five of the western states that are better than average have economies that are dominated by their urban areas: Colorado's Front Range, Washington's Puget Sound, and so forth. The West would appear to do better than the rest of the country because, despite popular perceptions, it is on average less rural than the non-West.
There is one glaring exception to the "urban equals wealth" argument among these western states: Arizona. Arizona is in the top three western states by population, and is in the top ten nationally for non-rural: less rural than Illinois, Connecticut, New York, or Maryland. But for some reason, the population and its concentration in the Sun Corridor from north of Phoenix to Tucson, hasn't resulted in the same degree of wealth that has occurred elsewhere in the West. It would be useful to figure out what Arizona is doing wrong.
People who spend too much time with me know that I have a peculiar fixation with the idea of separating the US into two parts. There are lots of proposals kicking around the blogosphere about red/blue splits. Mine is quite different, a simple east/west division based on several energy considerations and the ongoing depopulation of the Great Plains. My definition of "West" is the 11 contiguous states from the Rocky Mountains to the Pacific coast; among other common features, these are the states with very large federal land holdings; and Alaska and Hawaii are such peculiar cases that I choose to ignore them. One of the things that I hear regularly is that the West couldn't stand on its own, and one of the reasons is that those states are subsidized by the more heavily populated East.
The same Tax Foundation figures that get used for red/blue comparisons would seem to be a reasonable place to start. The tax burden and expenditure figures from report #139 are reproduced in the following table. The tax burden figures do not include the adjustments the Foundation made to account for the federal deficit; the details of that adjustment are not included in the report, and are probably not important to the conclusions I'm going to draw. Let me begin with the last row of the table. For the US as a whole, the per-capita federal tax burden is $6,369, and the per-capita federal expenditures are $7,311. Taxes covered about 87% of the expenditures.
The main part of the table shows the same calculation for the 11 western states. The portion of state-specific expenses covered by state-specific taxes ranges from 114% in Nevada to 46% in New Mexico. Three states -- California, Colorado, and Nevada -- are net donors, the other are net recipients. [Note that when the Tax Foundation does its adjustment for the federal deficit, Oregon and Washington also become donor states.] The last two columns use the state populations (from Wikipedia, for July 2010) to convert the fractions of the expenditures covered to weighted figures, then sums those to get the fraction covered for the western states as a group: 97%. In short, federal taxes in western states cover a significantly larger portion of the federal expenditures in those states than are covered when the country is considered as a whole. The immediate corollaries are that the non-western states must be doing a worse job of covering their regional expenditures, and that if the "blue states subsidize red ones" argument is true, there is a corresponding "western states subsidize non-western states".
Granted, the skewed populations of the western states means that California is covering most of the western subsidies. That doesn't bother me; any "Western States of America" would clearly be dominated by California, or perhaps by two Californias since a political reorganization would give the north and south portions of the state the opportunity to separate, an idea that Californians seem to bring up regularly. More importantly, though, is that five of the eleven states do better than the national average, and those states illustrate a point that the red/blue state comparisons often miss: it's really an urban/rural thing. California is tied with New Jersey as the "least rural" states in the country, using the Census Bureau definition. All five of the western states that are better than average have economies that are dominated by their urban areas: Colorado's Front Range, Washington's Puget Sound, and so forth. The West would appear to do better than the rest of the country because, despite popular perceptions, it is on average less rural than the non-West.
There is one glaring exception to the "urban equals wealth" argument among these western states: Arizona. Arizona is in the top three western states by population, and is in the top ten nationally for non-rural: less rural than Illinois, Connecticut, New York, or Maryland. But for some reason, the population and its concentration in the Sun Corridor from north of Phoenix to Tucson, hasn't resulted in the same degree of wealth that has occurred elsewhere in the West. It would be useful to figure out what Arizona is doing wrong.
Friday, August 26, 2011
Has Business Bailed on the Social Contract?
Kevin drum has a post this week enumerating what he sees as the list of reasons that have been put forward regarding the difficulties in getting the economy to recover from its current problems. I want to write about the combination of two of them:
Since the end of WWII, the US has had an informal social contract, a major feature of which is that in exchange for low regulation and tax rates (relative to the rest of the developed world), business would provide everyone who wanted a job with one that paid an at least marginally living wage (including benefits). Government actions that enforced this contract included pro-union regulations and enforcement, minimum wages, and so forth. Business wasn't particularly happy about the situation, but there wasn't much they could do about it either.
Beginning by the mid-1980s, it became increasingly possible for business to "do something about it." Two of the primary factors were automation made possible by ever-cheaper and ever-more-powerful computer hardware and software, and relaxed rules about capital mobility. Recessions, by idling some of the productive capacity, were the ideal time to relocate and automate. "Relocate" could be indirect -- if you make layoffs at plants in both Michigan and Alabama, but later bring only Alabama back up to full output, you've "relocated". With relaxed rules on capital flows, sites for new factories included Mexico and China. Some argue that illegal immigration was another way for business to get around the social contract, but I'm not convinced it is as important as the other two factors.
One of the results has increasingly been "jobless" recoveries following recessions. If you look at graphs of job losses and recoveries for recessions since WWII, there is a pronounced break in the shape of the curves for the three post 1981-2 recessions. Calculated Risk provides a nice version of just such a chart on a monthly basis. Particularly given the depth of the last (current?) recession, it is not surprising that the curve looks like it may take a decade for employment to reach the pre-recession level. Current proposals for "fixing" the jobs problem will likely fail because they don't address the lapse of the social contract.
The strong form of number (2) in Drum's list is that there are a significant number of people who want jobs but are worthless from the perspective of an employer. Item (1) has contributed to that situation -- we are not creating new places in the economy with a large demand for workers. In addition, the primary innovation of the second half of the 20th century -- cheap processing power and software -- has allowed for the automation of a large number of jobs. And it certainly appears that business is not being held to the social contract. The combination is, well, scary.
Substantial adjustments to the social contract have a tendency to be messy affairs. Consider the French Revolution of the 1790s, the Russian Revolution in 1917, or the transition of the US economy from one based large on agriculture to one heavily into manufacturing over the period of about 1890 to 1930.
- The Tyler Cowen "Great Stagnation" hypothesis. We've picked through all the low-hanging economic fruit over the past century, and like it or not, we're now entering an extended period of low productivity growth because we're not inventing lots of cool new stuff.
- Various structural explanations that suggest the United States has an increasing number of workers who flatly don't have the skills to do anything useful in the modern economy — a problem that was temporarily masked by the housing bubble and was only fully exposed when the economy collapsed. This takes various forms, both weak (workers can be retrained but it will take a while) and strong (forget it, they're simply useless).
Since the end of WWII, the US has had an informal social contract, a major feature of which is that in exchange for low regulation and tax rates (relative to the rest of the developed world), business would provide everyone who wanted a job with one that paid an at least marginally living wage (including benefits). Government actions that enforced this contract included pro-union regulations and enforcement, minimum wages, and so forth. Business wasn't particularly happy about the situation, but there wasn't much they could do about it either.
Beginning by the mid-1980s, it became increasingly possible for business to "do something about it." Two of the primary factors were automation made possible by ever-cheaper and ever-more-powerful computer hardware and software, and relaxed rules about capital mobility. Recessions, by idling some of the productive capacity, were the ideal time to relocate and automate. "Relocate" could be indirect -- if you make layoffs at plants in both Michigan and Alabama, but later bring only Alabama back up to full output, you've "relocated". With relaxed rules on capital flows, sites for new factories included Mexico and China. Some argue that illegal immigration was another way for business to get around the social contract, but I'm not convinced it is as important as the other two factors.
One of the results has increasingly been "jobless" recoveries following recessions. If you look at graphs of job losses and recoveries for recessions since WWII, there is a pronounced break in the shape of the curves for the three post 1981-2 recessions. Calculated Risk provides a nice version of just such a chart on a monthly basis. Particularly given the depth of the last (current?) recession, it is not surprising that the curve looks like it may take a decade for employment to reach the pre-recession level. Current proposals for "fixing" the jobs problem will likely fail because they don't address the lapse of the social contract.
The strong form of number (2) in Drum's list is that there are a significant number of people who want jobs but are worthless from the perspective of an employer. Item (1) has contributed to that situation -- we are not creating new places in the economy with a large demand for workers. In addition, the primary innovation of the second half of the 20th century -- cheap processing power and software -- has allowed for the automation of a large number of jobs. And it certainly appears that business is not being held to the social contract. The combination is, well, scary.
Substantial adjustments to the social contract have a tendency to be messy affairs. Consider the French Revolution of the 1790s, the Russian Revolution in 1917, or the transition of the US economy from one based large on agriculture to one heavily into manufacturing over the period of about 1890 to 1930.
Tuesday, July 19, 2011
An Example of Future Grid Problems?
The New York Times ran a story this week about the possible consequences of shutting down the Indian Point nuclear power station. Last month, Gov. Cuomo said he would insist that the two Indian Point reactors be shut down in 2013 and 2015, when their original 40-year licenses expire. His decision to oppose license extensions may be reasonable; there have been a number of problems with aging reactors as they approach the end of their original license lifetimes, or after those licenses have been renewed. The Vermont Yankee facility and New Jersey's Salem station have, for example, been plagued by tritium leakage as they age.
The Governor asserts that some combination of new generators and new transmission facilities can be in place by the summer of 2016, the first peak power season after both reactors would be shut down. Various experts have weighed in, pointing out that the permitting, lawsuits, and construction for a new generator or transmission line invariably take more than five years in New York. An example is the New York Regional Interconnect (NYRI), a proposed transmission line that would have brought power from upstate New York to the New York City and Long Island region served by the Indian Point plant. After several years of planning, the NYRI was put on hold indefinitely in 2009 because of opposition by people in the areas through which it would have run.
Almost one-fifth of the entire US population lives in BosWash -- the strip from the Boston suburbs on the north to the Washington, DC suburbs on the south and within 100 miles or so of the Atlantic (see the map below). In the future, that strip is very likely to resemble New York City's current situation. About 25% of the electrical power is generated by aging nuclear plants. As pressure to shut those down grows, planners will be left to the same "combination of new generators and new transmission facilities" to replace the nuclear power (and under current plans, meet steadily increasing demand).
It seems unlikely that new coal plants will be built in that strip. If for no other reason, burning coal produces large amounts of ash that must be gotten rid of. Disposal of solid waste within the region is already a growing problem. New York City, much of whose solid waste ends up in Pennsylvania, Ohio, and Virginia, is the most extreme example of that particular difficulty. Gas-fired generation would require importing large volumes of natural gas. Perhaps shale gas will allow the East Coast to produce sufficient amounts of gas for that purpose; I'll believe it when I see it. The alternative sources of gas are far away, and will require either gasification facilities for liquefied natural gas, or large long pipelines. The last option is to produce the electricity outside the region and import it over large new transmission facilities.
If the US must shift to renewable sources for its electricity, those transmission facilities will be large indeed. Hydro power from Montreal, wind power from the Great Plains, solar power from the desert Southwest. Huge facilities, carrying power long distances, running through areas where people seem likely to oppose the construction. In short, the same basic problem that New York City and Long Island face today, only on a much larger scale. The utilities that serve NYC and LI are warning that unless everything goes nearly perfectly, the city and the Island will be subjected to rolling summertime blackouts once the Indian Point reactors are shut down. Over a somewhat longer time scale, it would appear that the BosWash corridor would be much the same: unless everything goes nearly perfectly, about 60 million people would be subjected to rolling blackouts.
Keep your eye on New York; it's likely to be a predictor for the future of much of the East Coast.
The Governor asserts that some combination of new generators and new transmission facilities can be in place by the summer of 2016, the first peak power season after both reactors would be shut down. Various experts have weighed in, pointing out that the permitting, lawsuits, and construction for a new generator or transmission line invariably take more than five years in New York. An example is the New York Regional Interconnect (NYRI), a proposed transmission line that would have brought power from upstate New York to the New York City and Long Island region served by the Indian Point plant. After several years of planning, the NYRI was put on hold indefinitely in 2009 because of opposition by people in the areas through which it would have run.
Almost one-fifth of the entire US population lives in BosWash -- the strip from the Boston suburbs on the north to the Washington, DC suburbs on the south and within 100 miles or so of the Atlantic (see the map below). In the future, that strip is very likely to resemble New York City's current situation. About 25% of the electrical power is generated by aging nuclear plants. As pressure to shut those down grows, planners will be left to the same "combination of new generators and new transmission facilities" to replace the nuclear power (and under current plans, meet steadily increasing demand).
It seems unlikely that new coal plants will be built in that strip. If for no other reason, burning coal produces large amounts of ash that must be gotten rid of. Disposal of solid waste within the region is already a growing problem. New York City, much of whose solid waste ends up in Pennsylvania, Ohio, and Virginia, is the most extreme example of that particular difficulty. Gas-fired generation would require importing large volumes of natural gas. Perhaps shale gas will allow the East Coast to produce sufficient amounts of gas for that purpose; I'll believe it when I see it. The alternative sources of gas are far away, and will require either gasification facilities for liquefied natural gas, or large long pipelines. The last option is to produce the electricity outside the region and import it over large new transmission facilities.
If the US must shift to renewable sources for its electricity, those transmission facilities will be large indeed. Hydro power from Montreal, wind power from the Great Plains, solar power from the desert Southwest. Huge facilities, carrying power long distances, running through areas where people seem likely to oppose the construction. In short, the same basic problem that New York City and Long Island face today, only on a much larger scale. The utilities that serve NYC and LI are warning that unless everything goes nearly perfectly, the city and the Island will be subjected to rolling summertime blackouts once the Indian Point reactors are shut down. Over a somewhat longer time scale, it would appear that the BosWash corridor would be much the same: unless everything goes nearly perfectly, about 60 million people would be subjected to rolling blackouts.
Keep your eye on New York; it's likely to be a predictor for the future of much of the East Coast.
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