Factory Orders Drop In April, Signaling More Bad Economic News

Another sign this morning that the economic has been slowing, and may be contracting.

Last week saw a downward revision in First Quarter GDP, followed by a very disappointing May Jobs Report. This week we’re starting out with yet another indication that economic activity has been slowing down over the past several months:

New orders for U.S. factory goods fell in April for the third time in four months as demand slipped for everything from cars and machinery to computers, the latest worrisome sign for the economic recovery.

The Commerce Department said on Monday orders for manufactured goods dropped 0.6 percent during the month. The government also revised its estimate for new orders in March to show a steeper decline.

Economists had forecast orders rising 0.2 percent in April.

The report showed broad weakness in a sector that has carried the economic recovery, adding to a growing body of soft economic data.

(…)

Outside transportation, orders dropped 1.1 percent, with machinery down 2.9 percent and orders for computers and electronics off by 0.8 percent.

Orders for non-defense capital goods excluding aircraft — seen as a measure of business confidence and spending plans — dipped 2.1 percent in April.

This kind of number would seem to indicate that we are indeed headed for, if not already in, an economic slowdown. It may not turn into a recession, but if this continues much longer I’d expect to start seeing major analysts cutting back their growth forecasts for the year.

At the very least, though, it makes clear that the recent bad reports we’ve been seeing are not an anomaly. Indeed, there’s a good indication that factory orders were likely down in May as well:

The manufacturing industry in the New York region showed surprising weakness in May, new data out of the Institute for Supply Management shows.

The key ISM index fell to 49.9 from 61.2 in April, where a reading below 50 indicating contraction. There was no consensus estimate for the May report.

The Institute blamed the fall on declining purchase volumes and a sudden contraction in employment, with 21 percent of businesses reporting a shortage of skilled labor as an impediment to business.

Expectations of economic performance also declined in the May report.

It’s worth noting, I suppose, that the head of the Federal Reserve Bank of Cleveland said this morning (before the Durable Goods report was released) that the recent spate of bad economic news has not caused her to change her outlook for the economy. Speaking of the Fed, this latest spate of economic news is likely to increase pressure on the Federal Reserve Board for some form of monetary stimulus, although interest rates are so low at this point it’s likely that the best they could do is another round of Quantitative Easing, which has proven to be have only a modest impact on the economy the last two times that it was tried.  Not to mention the fact that the ongoing crisis in Europe is likely to force the Fed to take action in the near future:

The president of the New York Federal Reserve Bank, William Dudley, said on Wednesday that U.S. bank exposure to troubled countries on the periphery of the euro zone is “very modest” and that U.S. banks are in a much better position than in the past to withstand contagion from Europe.

Still, he warned, the United States would not be immune if Europe’s situation were to worsen.

Officials worry that stock markets, already under pressure from European events, could plunge as investors dumped risky assets, weighing on the value of assets on bank balance sheets.

The Fed’s initial response would likely be in the form of providing liquidity facilities to financial institutions similar to the ones it deployed during the 2007-2009 financial crisis. These facilities provided access to funds for banks, money market mutual funds, and business, consumer and student lenders to prevent a financial panic and a credit freeze.

However, the possibility that the upheaval could throw the modest U.S. economic recovery into a tailspin would open up the prospect of the Fed extending or reviving the Twist portfolio rebalancing effort, or perhaps even launching a fresh round of bond purchases – known as quantitative easing.

“If we do have a major disruption, that would auger for quantitative easing to forestall any deflation risk,” Mulraine said.

Officials at the central bank, however, think they could get a meaningful amount of stimulus by extending Operation Twist, which has one advantage over outright bond buying: it avoids raising anxiety that an expanding Fed balance will provoke a damaging bout of inflation.

“I don’t think expansion of the balance sheet, in any way, compromises the Fed’s ability to keep inflation in check over the longer term,” Dudley said last week.

“But it doesn’t matter just what I think,” he added. “If people in the market think that expansion of the balance sheet could cause future inflation, we have to take those expectations into consideration as a potential cost of monetary policy.”

“Operation Twist” did seem to have some stimulative effect, but it occurred mostly in the stock markets because of the extent to which it helped boost investor confidence in equities, at least over the short term. The extent to which that helped the economy at all is doubtful to say the least.  Whatever the Fed does, though, one thing is clear; the economic really has slowed down. The question now is whether this just a temporary hiccup, or something likely to last longer.

FILED UNDER: Economics and Business
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Drew says:

    In a hastily organized Rose Garden press conference Pres Obama noted “I knew it was a mistake to bring Bush in for the pictures, look at these numbers….”

  2. James says:

    Speaking of the Fed, this latest spate of economic news is likely to increase pressure on the Federal Reserve Board for some form of monetary stimulus […]

    Why, oh why, can’t we have a the appropriate fiscal stimulus our macroeconomy oh so clearly needs?

  3. Hey Norm says:

    Without Government Sector growth this is what you are going to get. The other sectors can’t make up for it just because we want them to.
    Republicans have turned the economy on it’s head…instead of Government being being counter-cyclical as it should be…Government spending is down at the same time the economy is down. We should save during the good times and spend during the lean times. Republicans spent money like drunk coked out AWOL Air Nat’l Guardsmen when times were good. Now that times are bad they are pushing austerity and Government is shrinking.
    GDP is growing at +/- 2.0% in spite of 2.3% Government shrinkage. And that shrinkage is from a positive 2.5% growth during Republican Presidencies…so it’s a delta of over 5%.
    All those cops and firemen and teachers and DPW workers that have been laid off aren’t buying cars or renovating houses. In addition Government is not spending money on infrastructure.
    Now Republicans say we can’t afford those cops and teachers and DPW workers and we can’t afford to invest in infrastructure. Why? Because we have chosen to give tax cuts to the wealthy instead.
    This is the economy Republicans and Libertarians have asked for, dreamt of, pleaded for. And yet y’all are complaining. Go figure. The dog doesn’t know what to do once it catches the car.

  4. @Hey Norm:

    The government isn’t going to fix this, regardless of how many times you repeat this argument

  5. James says:

    @Doug Mataconis: Well, losing 482,000 public sector jobs since the beginning of 2009 probably doesn’t help.

  6. James,

    And where, exactly, where states facing significant budget deficits supposed to get the money to pay those people ?

  7. James says:

    @Doug Mataconis: Well, uh, that would be the aforementioned fiscal stimulus. You might recall, a full third of the ARRA that helped keep underwater state ledgers afloat, and was quite successful at that, I might add.

  8. Hey Norm says:

    Doug…
    I know you want small Government. Which is fine. We now have the economy you are asking for. You shouldn’t be looking for a fix. Accept it. Revel in it. Be happy. You are getting what you want.

    (Once again Libertarian theory wilts in the face of reality…but that’s not new.)

    The economy simply cannot absorb a 5% swing in Government jobs and go merrily on it’s way. It’s never happened before. It’s not going to happen now.
    http://www.nytimes.com/interactive/2012/05/04/business/economy/off-the-charts-shrinking-government.html?ref=economy

    Just answer this because I’m curious…WTF did you and all your Libertarian friends think was going to happen when you cut all those Public Sector jobs?
    http://www.epi.org/publication/public-sector-job-losses-unprecedented-drag/

  9. Hey Norm says:

    @ Doug…

    “…And where, exactly, where states facing significant budget deficits supposed to get the money to pay those people?”

    From the United States Congress.
    That’s the entire idea behind saving during the good times and spending to get through the lean times. You know…governing….governing by good conservative economic principles. Unfortunately conservatives have lost their way and succumbed to a bunch of ill-informed ideologues who stand in opposition to actual conservative principles.

  10. Jeremy says:

    @James: And, pray tell, where would that fiscal stimulus come from?

    Oh right, the economy. Made up of taxpayers. Who now don’t have any jobs.

    Riiiiigggghhhhtttt…..

  11. James says:

    @Jeremy: Do you understand how the US Federal budget works? More specifically, do you understand bond yields Jeremy? Could you tell me what their current 10-year rate is right now?

  12. Hey Norm says:

    @ Jeremy..
    So you are making the argument that we cannot afford teachers and cops and firemen because we gave tax cuts to the wealthy.
    Which is what I said…thank you.

  13. Hey Norm says:

    @ Doug…
    Crickets.
    As I thought.

  14. @Hey Norm:

    When you approach the point where debt is equal to 100% of GDP, you don’t have that kind of freedom anymore. Unless you want to ignore reality, that is.

  15. @Hey Norm:

    We don’t have small government. We have big, bloated government that sucks money from the productive sectors of the economy to give it to the politically favored people who receive the benefits of government spending, and that includes the many industries who suck at the teat of Big Government.

  16. James says:

    @Doug Mataconis:

    When you approach the point where debt is equal to 100% of GDP, […]

    Too bad we’re nowhere near close.

  17. Drew says:

    What Hey Norm and others who have no financial sense whatsoever don’t want to acknowledge is that responsible financial management means you bring down your debt and other obligations in the good times, and save for a rainy day. Because if it’s all government all the time you find yourself in the bad times having shot your wad. See, Europe.

    See now, the USA.

    Sorry, Hey Norm. The days of retiring as a public employee at 50 with a pension more than you even made in salary are over. Best you get your head out of your ass and deal with it.

  18. @James:

    You are looking at the wrong chart, here’s the right one.

  19. jan says:

    Norm must have a money tree outside his window, much like the government has printing presses, allowing fiat-like money to flow freely funding more government jobs which produce little but more costly benefits and pensions.

    Norm also must have a direct link to the latest Obama campaign talking points, that are becoming double-jointed in trying to make Obama appear a to be a mere by-stander to the root causes of this terrible economy. The lines are now that this president is at the mercy of horrible republicans, even though, for most of the 3 plus years in office, his party has had control of all branches of government, by huge margins. Even now, they reign over two-thirds, but still can’t seem to be able to exercise enough competent leadership to lead from the front, rather than from behind.

    Oh yes, we also suddenly have a libertarian government too, even though government has done nothing but expand in their creation of new bureaucracies, including more IRS employees on the horizon, czars, EPA regulations, and the like.

  20. James says:

    @Doug Mataconis: Doug, that’s debt to GDP ratio, as in it’s a fraction; the numerator is the debt, and the denominator is the GDP. So countries that experience a growth slowdown will tend to see high debt:GDP ratios whereas fast-growing countries will see their debt:GDP ratio tumble. It’s not very useful to actually understanding how to fix our unemployment crisis. Felix Salmon explains:

    The government can borrow at 1.45%: it should do so, in vast quantities, and invest that money back into the economy itself. Take a few hundred billion dollars and use it to fix our broken infrastructure, to re-hire all those laid-off teachers and firefighters, to provide some kind of safety net for the millions of Americans who have been out of work for more than a year. Even if the real long-term return on any stimulus package was zero, the nominal long-term return would be well over 1.45%, making the investment worthwhile.

  21. James,

    I am aware of what it is. That is what I was addressing in the first place. You linked to a chart dealing with an entirely different issue.

    As for Salmon’s comments, I would merely note that his opinion is not universally held by economists and does not necessarily comport with historical reality:

    In a series of academic papers with Carmen Reinhart – including, most recently, joint work with Vincent Reinhart (“Debt Overhangs: Past and Present”) – we find that very high debt levels of 90% of GDP are a long-term secular drag on economic growth that often lasts for two decades or more. The cumulative costs can be stunning. The average high-debt episodes since 1800 last 23 years and are associated with a growth rate more than one percentage point below the rate typical for periods of lower debt levels. That is, after a quarter-century of high debt, income can be 25% lower than it would have been at normal growth rates.

    ***

    It is sobering to note that almost half of high-debt episodes since 1800 are associated with low or normal real (inflation-adjusted) interest rates. Japan’s slow growth and low interest rates over the past two decades are emblematic. Moreover, carrying a huge debt burden runs the risk that global interest rates will rise in the future, even absent a Greek-style meltdown. This is particularly the case today, when, after sustained massive “quantitative easing” by major central banks, many governments have exceptionally short maturity structures for their debt. Thus, they run the risk that a spike in interest rates would feed back relatively quickly into higher borrowing costs.

  22. James says:

    @jan:

    Oh yes, we also suddenly have a libertarian government too, even though government has done nothing but expand in their creation of new bureaucracies, including more IRS employees on the horizon, czars, EPA regulations, and the like.

    @Doug Mataconis:

    We don’t have small government. We have big, bloated government […]

    Whatever political ideology you two ascribe to, it seems impervious to actual economic data. We’ve shed 482,000 public sector jobs since the beginning of 2009. I mean, Ronald Reagan Was More Keynesian Than Obama

    Just over three years into Reagan’s first term, government jobs grew by 3.1 percent; at the same time during Obama’s tenure, they’ve been cut by 2.7 percent.

  23. James says:

    @Doug Mataconis: You bring up Rogoff’s piece, almost on cue. It’s a silly article that makes all kinds of weird assumptions and inferences that don’t carry cursory scrutiny. Yglesias from a few days ago; Kenneth Rogoff’s Confused Correlation-Mongering:

    National governments go into debt frequently, and some indebted states suffer growth slowdowns that mechanically increase their debt:GDP ratio. By contrast through what mechanism do these high debt levels cause slow growth? (emphasis mine)

  24. Rob in CT says:

    What Hey Norm and others who have no financial sense whatsoever don’t want to acknowledge is that responsible financial management means you bring down your debt and other obligations in the good times

    Yes, it does mean that, and typically those of us who think Keynes was right typically agree. This was done reasonably well in the 90s. That situation was handed off to a pack of nutbars who thought surplusses were bad. Tax cuts, spending increases, and a really stupid and expensive war followed. Many of those very same people are today telling us how fiscally responsible they are and how if we just give them power again everything will work out.

    So what you’re basically saying is that the GOP made it impossible for the Democrats to govern responsibly, by pissing away too much money when times were relatively good such that now we are too indebted to borrow more when times are bad.

    Given that I’ve heard Conservatives of the Norquistian inclination (drown the government in the bathtub) openly delcare that this should be standard operating proceedure for the GOP – run up the credit card, hand off the mess to the Dems and then force the Dems to enact austerity – I am starting to believe that this is indeed the playbook. The goal is what it has always been: revoke the New Deal and Great Society. Return to the Gilded Golden Age.

    Blech.

  25. Drew says:

    Dear Jan

    You poor, demented soul. Don’t you understand? All things inherited by Obama were Bushs fault. But of course, Obamas failures are proof positive that a President can have no influence.

    You might want to consider a “reeducation camp.”

  26. James says:

    @Drew: Well, quality public education has alway been a hallmark of the United States. Can you tell me which class will cover the Treasury yield rate? Or perhaps the difference between the debt:GPD ratio and Spending/Revenues as a percentage of GDP?

  27. Rob in CT says:

    Drew, the other day you made a claim about energy prices. Something like 8x increase over 2 years. Do you have backup for that? Do you have backup for your other assertion (that development of oil on federal lands currently off-limits would have a material impact on oil prices)?

    Or do you just come here to make unsourced assertions and sneer at others? I, for one, will put up with the sneering if you actually produced some backup for your claims.

  28. jan says:

    @Drew:

    Drew,

    It does cause one’s eyes to roll, hearing about the enormous influence Bush has had on the Obama presidency. It’s like he stayed on in the WH after Obama was elected, and is calling the shots, having Obama be nothing more than a figurehead with a teleprompter.

    However, the ironic twist is policies/events that Bush initiated or had a significant hand in — OBL intelligence-gathering, The Maliki agreement setting up our departure from Iraq, the cyber warfare like Iran’s Stuxnet virus — all fade into Obama’s column of success. Only the negatives, deficits, failed stimulus, economic woes, seem to be liberally attached to Bush’s watch.

  29. James says:

    @jan:

    It’s like [Bush] stayed on in the WH after oversaw a global economic meltdown – complete with 9% negative GDP growth – before Obama was elected, and is calling the shots responsible for the policy drivers of our long term Federal budget deficit, having Obama be nothing more than a figurehead with a teleprompter trying to clean up the mess.

    FYFY.

  30. Drew says:

    “Well, quality public education has alway been a hallmark of the United States. ”

    I stopped at this point. Delusion is not my strong point.

    Rob in Beautiful CT

    It was actually well publicized. I’ll try to find the article (s) but at some point you’ve got to be well enough informed and read before you start slinging mud, don’t you think? (and after all, you didnt expect Brian Williams to report this, right? Snicker) It’s not my job to cure the ignorant. And again, the issue is that coal fired assets are being retired due to regulatory requirements and replaced by more expensive assets. Distributors bid for and buy energy output about two years out. So this in not conjecture, this is contractual pricing. I know some places in CT don’t eleven use or need air conditioning, but if you are a sclepp in Kentucky you probably aren’t happy.

    Jan

    Selective memory is a liberals best argument.

    And now we have James nonsense. I don’t suppose he would like to articulate the specific regulatory proposals Bush pushed through that caused the financial problems. Naw. However, I do note that the single greatest change in financial regulation was the repeal of Glass-Segall. I’m having a brain cramp……………oh, yeah, that happened under a certain William Jefferson Clinton. (snicker).

    An inconvenient truth.

  31. Rob in CT says:

    The point is that the policies enacted since January, 2009 have to be evaluated in context: the economy was in freefall.

    I don’t actually blame Dubya for that. I think he had little to do with it. There are some governmental policy choices (including lax oversight) that I do think made things worse than they otherwise would’ve been, but mostly it was a private sector effup. This happens periodically, though this one was worse than your average recession.

    But that doesn’t change the context: Obama & Co inherited a disaster-in-progress. Evaluating their performance has to include this. You can certainly point out where you think they went wrong (as I can!), but you don’t get to pretend everything was swell until the Obamamonster showed up. That’s just dishonest.

  32. Rob in CT says:

    Drew,

    I asked you for backup. I didn’t sling mud. You didn’t provide it. I asked again, and get told I’m ignorant. Well, you say you will provide a link, and that I appreciate.

    We use air conditioning here in Connecticut, Drew, and as I’m sure you know our electricity rates are fairly high as compared to the national average.

    I understand that shutting down the worst coal plants will, all else equal, increase rates. That’s fine. I just want to see some backup for a claim of 800% over two years. I don’t think that’s an unreasonable request.

  33. Hey Norm says:

    @ Drew…WTF????
    Here’s what you wrote:

    “…What Hey Norm and others who have no financial sense whatsoever don’t want to acknowledge is that responsible financial management means you bring down your debt and other obligations in the good times, and save for a rainy day…”

    And here’s what I wrote:

    “…That’s the entire idea behind saving during the good times and spending to get through the lean times. You know…governing….governing by good conservative economic principles. Unfortunately conservatives have lost their way and succumbed to a bunch of ill-informed ideologues who stand in opposition to actual conservative principles…”

    Sounds pretty f’ing similar to me.
    The problem is that Republicans…which partisan hacks like you and Jan won’t admit…got us out of that counter-cyclical rythm…they didn’t bring down the debt during the good times…they took a balanced budget and squandered it, exploding the debt in the process.
    Now you have Doug saying:

    “…When you approach the point where debt is equal to 100% of GDP, you don’t have that kind of freedom anymore. Unless you want to ignore reality, that is…”

    But the reality is that you can’t get back on cycle through austerity in the down times…or if you do it’s going to be a slow slog…which is exactly what we have now. You have to spend to get out of this trough in the cycle…then get back on a sensible, conservative, counter-cyclical rythm.

  34. James says:

    @Drew:

    Delusion is not my strong point.

    Hmmm…yes. You’re the guy talking about “reeducation camp[s]” and “bids are out on electricity power production (two years out) and they are up something like 8x” yet I’m the delusional one.

  35. Rob in CT says:

    One more thing. Glass-Steagal repeal. Pushed by Republicans. Passed with Dem support. Signed by Clinton. Bi-partisan!

    The thing is that liberals think that was bad, and it is one of the reasons Clinton is less than beloved by them. If this is brought up, they are mocked for criticising “even Bill Clinton” (see the off the reservation thread from the other day).

    The Dems enabled some bad stuff. Just like with the Iraq war. This does not change the party affiliation of those who actively pushed the bad policy.

  36. James says:

    @Drew:

    I don’t suppose [James] would like to articulate the specific regulatory proposals Bush pushed through that caused the financial problems.

    You’re so kind to ask! The Clinton administration specifically axed attempts to regulate OTC and CDS products. Greenspan’s Fed and Paulson’s Treasury exacerbated (and in some cases accelerated) the rates of sub-prime mortgage product sales, and increased the overall financial system’s exposure to systemic risk.

  37. anjin-san says:

    government jobs which produce little

    Hmm. National defense. Police protection. Fire protection. Emergency medical services. Nothing useful there. Our court systems (nation of laws, and all that nonsense) Prisons to put dangerous criminals in. Mental hospitals (or do you just want crazy people on the sidewalk in front of your house). Mail delivery. Oh, and roads. Have you ever stopped to think that if interstate trucking broke down, people in our country would be killing each other for food in a few weeks?

    You can always move to Somalia if having a stable, advanced society is that much of a burden to you. Your contempt for people who you rely on to keep you safe and secure every day of your life is noted.

  38. anjin-san says:

    It’s like he stayed on in the WH after Obama was elected, and is calling the shots, having Obama be nothing more than a figurehead with a teleprompter.

    No, it’s like he left office with the country in an economic crisis of historic proportions, which Obama had to deal with. Bush himself said “the entire economy is at risk”.

  39. Rob in CT says:

    I used some google-fu. My initial search didn’t bring up much, but I finally hit on the magic words and here is the claim:

    Last week PJM Interconnection, the company that operates the electric grid for 13 states (Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia) held its 2015 capacity auction. These are the first real, market prices that take Obama’s most recent anti-coal regulations into account, and they prove that he is keeping his 2008 campaign promise to make electricity prices “necessarily skyrocket.”

    The market-clearing price for new 2015 capacity – almost all natural gas – was $136 per megawatt. That’s eight times higher than the price for 2012, which was just $16 per megawatt. In the mid-Atlantic area covering New Jersey, Delaware, Pennsylvania, and DC the new price is $167 per megawatt. For the northern Ohio territory served by FirstEnergy, the price is a shocking $357 per megawatt.

    Why the massive price increases? Andy Ott from PJM stated the obvious: “Capacity prices were higher than last year’s because of retirements of existing coal-fired generation resulting largely from environmental regulations which go into effect in 2015.” Northern Ohio is suffering from more forced coal-plant retirements than the rest of the region, hence the even higher price.

    Ok. Rather than being a claim about electricity rates in general, it’s a claim about new capacity in that group of states.

    Anyway, obviously one would expect this to translate into higher electric bills than would have been the case w/o shutting down the coal plants. The natural gas boom is helping, though. I’ve certainly seen the rates dropping for several years now here in CT (they skyrocketed from 2000-2005 or so, and have been dropping slowly ever since. Overall, the total price (generation + distribution) is up about 60% over 12 years).

    My followup question is whether the cost of new capacity will remain so high or if this is a temporary spike. Also, whether this is for some reason exaggerated in this particular region. We’ll see.

  40. Rob in CT says:

    FYI, from the only not overtly political article I could find regarding this:

    http://generationhub.com/2012/05/23/pjm-capacity-auction-secures-record-amounts-of-new

    Ott noted that the 2015 capacity prices’ overall effect on retail consumers’ electricity rates is expected to be moderated by other factors. “Capacity is a fairly small component of the retail price of electricity, and the cost of capacity at the retail level tends to be averaged out over several years,” Ott explained.

    “In addition, if natural gas prices remain low, that would tend to restrain retail electricity prices.”

    So I think it’s fair to wonder how much of this is a transitory spike and how much is reflective of the new normal.

  41. @Drew:

    What Hey Norm and others who have no financial sense whatsoever don’t want to acknowledge is that responsible financial management means you bring down your debt and other obligations in the good times, and save for a rainy day. Because if it’s all government all the time you find yourself in the bad times having shot your wad. See, Europe.

    What a weird paragraph. The main thing missing is borrowing cost. We can talk about responsible financial management, picturing family finances, or small business finances, but what happens when those can borrow money for 1 year at 0.17 percent interest?

    Seriously, how would your financial plans change if you could borrow for 10 years at 1.47 interest?

    I know you say “See Europe,” but the problem isn’t in countries that have low borrowing cost, is it?

    Related to that, Doug notes:

    When you approach the point where debt is equal to 100% of GDP, you don’t have that kind of freedom anymore. Unless you want to ignore reality, that is.

    That’s not actually true, is it? There is a loose correlation between debt level and borrowing costs, but they are a scatter graph with fliers at both ends. See Figure 3: European government debt and deficit, 2011 on this page.

    I’m not sure how many more comments I should pick up but … Jan?

    If you could borrow for 1 year at 0.17% interest … money tree?

  42. @Doug Mataconis:

    Salmons comments are usually a good indication of opinions held by smart people, and non-hacks.

  43. BTW, note that Japan’s debt to GDP ratio is 229%, per wikipedia. Their borrowing cost is 0.82% for a 10 year bond.

  44. And have you noticed that Japan’s economy has basically been stagnant for almost 20 years now?

  45. Ben Wolf says:

    The national debt is not macroeconomically relevant and does not create drag. The Rogoff/Reinhart paper Doug cites is in reference to countries indebted in a currency they do not control. It also completely fails to get the causality correct: high deficits are a symptom of a sick economy, not the cause.

    When government spends it creates new reserves and when it taxes it drains them. In budgetary balance fiscal operations would not alter the quantity of reserves in the banking system, but when government spends more than it taxes excess reserves accumulate on the balance sheets of banks. Banks would typically compete with each other to loan out their reserves, driving the inter-bank interest rate (called the Fed Funds Rate in the U.S.) down toward zero. To avoid losing control of rates the consolidated government (Fed and Treasury) issues bonds. U.S. bonds can only be purchased with reserves. The Fed swaps bonds for reserves (and vice versa) to maintain what it sets as the target overnight interest rate. To keep the interest rate above the natural rate, for example, the Fed would take reserves from the banks and give them bonds in exchange, an asset swap.

    At no point is the U.S. government borrowing in order to pay its bills. The reserves being borrowed were created by that government in the first place, and it can never be in a position where it can’t swap the reserves back. No money printing is involved and the total assets don’t change, so the entire process is non-inflationary.

    Our country has serious problems, but the public debt isn’t one of them.

  46. @Doug Mataconis:

    Think through the Japanese real estate bubble, it’s pop, and the aftermath.

    We might be Japan. That’s something we’ve discussed here at OTB in years past.

    The thing is though, the left seems to say “Japan”, and the right seems to say “we are Greece” and rend their clothing.

    Why is that?

  47. John,

    The Japan analogy has been floating out there for awhile now and, while there are some similarities, it’s worth noting that Japan has also been dealing with the beginning of the consequences of its demographic issues, an aging population, and a very low birth rate.

    Say what you will, but the United States has benefited from the fact that we have not followed other western countries into the birth dearth camp.

  48. Hey Norm says:

    @ Doug…
    Our biggest chance of becoming Japan is if we continue to pursue the current course.

  49. (Basically the Right cannot say “we are Japan” because that implies low borrowing costs and a lot of freedom for our path forward. You went off-reservation there for a moment, Doug. You should always pretend that “we are Greece” even if that is a stupid statement. We certainly do not have Greece’s borrowing costs, 10 years at 30% (serious?), but you have to pretend we are, we do.)

  50. @Doug Mataconis:

    We have an aging demographic & etc. Not to the Japanese degree, but probably enough to make us Japan-like.

    Our hosing stock is balanced against the boomer demographic and their retirement, right?

  51. Ron Beasley says:

    The world economy is simply too broken to fix. It’s time to recognize that the TBF Banks are sitting on trillions of Dollars in debt that is never going to be repaid and they are eventually going to fail. Tsar Nicholas said it the other day.

    Place all the bad European banks and investment banks into receivership, similar to what the FDIC does over here when it takes over a bad bank. Cut away the bad debt and restructure and recapitalize the companies. Depositors are safe. Stockholders get wiped out. Bondholders either get wiped out or maybe pennies on the dollar. As it should be. When you lend money at spread there is a chance you’ll lose that money. European citizens should not be forced to make whole with public dollars those who took bad risks and who made bad investments.

    Absolutely right except I would include the big US banks as well. Anything else is just kicking the can down the road. The economies of the world are not going to improve until the financial sector is restructured.

  52. Ben Wolf says:

    @Doug Mataconis: Japan’s birth rate has been climbing for seven years.

  53. Ben Wolf says:

    @Ron Beasley: Absolutely correct. The big banks are insolvent, only afloat because we changed the rules three years ago to let them claim their toxic assets have value far above market rates.

  54. Ben,

    After many years of declining. Even with this increase, there is going to be a population drop in Japan over the next generation or so. Also the increased costs of an aging population will be an issue they’ll have to deal with.

    My point in bringing up this issue, though, was to point out that there are substantial differences between the United States and Japan even though our current economic situation does resemble what happened to them in the late 80’s.

  55. anjin-san says:

    The days of retiring as a public employee at 50 with a pension more than you even made in salary are over.

    On that we can agree.

  56. Ben Wolf says:

    @Doug Mataconis: Well you’re not wrong. But you also must take into consideration that Japan suffrered a massive asset bubble in the 1980’s (private debt hit 393% of GDP). When the bubble burst because private debt could no longer accelerate the Japanese responded by sharply increasing their savings rate in order to delelverage and has been stuck in this dynamic ever since. Increased saving means lower spending and large budget deficits as revenues collapse. What I’m trying to say is the economy collapsed and then Japan’s public debt began expanding. Reinhart’s and Rogoff’s timeline simply doesn’t check out.

  57. @Doug Mataconis:

    So, if we are not Japan, and presumably you are leaning to the “we are Greece” line …

    Why exactly are our rates so low?

    Do you have the superstitious dread that there is a magic debt to GDP ratio that makes rates jump from 1 to 30 percent instantly? Only for those people who eat with knives and forks?

  58. John,

    No I didn’t say we are Greece either. I’m generally not keen about drawing analogies between our situation and what has happened in countries with very different economy’s than ours.

  59. jan says:

    Here’s a hypothetical:

    Let’s say Romney wins the 2012 election, and after 3 1/2 years the deficit is higher, the UE hasn’t gone down, GDP is below 2%, basically all the same numbers, or worse, like there are today. Who should Romney blame? Should he go back to Bush? Should he blame Bush/Obama? What would be the acceptable premise, especiallly considering so many on the left have no problems with accepting the excuse that if you inherit a bad situation, you automatically are given a pass on being held responsible if no headway is made to rectify it?

  60. Ron Beasley says:

    @jan: They are all blaming the wrong people. It starts with Phil Graham, and yes Bill Clinton who signed the bill that repealed the Glass-Steagall Act. Next is Alan Greenspan who flooded the economy with cheap credit prior to the 2004 election which inflated the bubble that would eventually burst.

  61. Hey Norm says:

    @ Jan….
    None of those things will be a problem because President Romney and the Republican Congress will go back to growing Government and spending, which they always do. Republicans are Keynsian when in office. Reagan exploded the debt by 300% and grew the size of Government.
    Bush 43 squandered a balanced budget.
    They all spent more, as a percentage, than Obama has.
    So yeah…no worries…same as before. Spend spend spend. Then blame the Democrats for your actions.

  62. @jan:

    Let’s say Romney wins the 2012 election, and after 3 1/2 years the deficit is higher, the UE hasn’t gone down, GDP is below 2%, basically all the same numbers, or worse, like there are today.

    Let’s pause right there and note that if you think Romeny, and his Congress, won’t do much better than Obama, and his Congress, then you must not be attacking Obama on his record.

    You must suspect that economic forces are bigger, and in different places, than politics is played.

  63. anjin-san says:

    if you inherit a bad situation, you automatically are given a pass on being held responsible if no headway is made to rectify it?

    Well, since we have come quite a ways from being on the brink of a depression, your “no headway” is basically mindless partisan babble, no?

  64. grumpy realist says:

    @Rob in CT: I thought that one of the major problems with coal-fired plants is the amount of mercury they put in the air. Mercury vapor: not good for children and other growing things. But maybe Americans like bringing their IQs down a few more points. After all, it’s not like we’re in competition with anyone….

    (And yes, China has some really ghastly pollution problems that are starting to come home to roost. I think the Powers-that-be figure who cares if a certain percentage of the population dies off, they’re only peasants anyway….no worries as long as they can keep the problems hidden from the hoi polloi.)

  65. @grumpy realist:

    Coal has environmental costs from end to end. Start with mountaintop removal, pause for coal ash dam failure, water pollution, strip mine residues, and then continue to a full gamut of air pollutants.

    It’s cheap though, we can give it that.

  66. Hey Norm says:

    @ JP…
    Of course it’s only cheap because of those billions in indirect subsidies you listed.
    Level the playing field….stop picking the winners as the wingnuts put it…and solar and wind etc. win hands down.

  67. Ben Wolf says:

    @jan:

    What would be the acceptable premise, especiallly considering so many on the left have no problems with accepting the excuse that if you inherit a bad situation, you automatically are given a pass on being held responsible if no headway is made to rectify it?

    President Obama bears considerable responsibility for the ongoing recession, and it is a recession. Unemployment is climbing and growth is at or below inflation, meaning we aren’t growing at all. You and I have very different ideas on how the current situation should be addressed, but we agree on that much. You can’t blame your predecessor forever: sooner or later you own it, as this President may find out in November.

  68. jan says:

    @Ben Wolf:

    A fair answer.

  69. jan says:

    @Ron Beasley:

    “It starts with Phil Graham, and yes Bill Clinton who signed the bill that repealed the Glass-Steagall Act. Next is Alan Greenspan who flooded the economy with cheap credit prior to the 2004 election which inflated the bubble that would eventually burst. “

    Yes, repealing the Glass-Steagall Act was a bad call, and I believe bipartisan, even though on Clinton’s watch. Greenspan, followed by Bernanke, have not helped. In fact, the current inflation rate does not even include rising food or energy costs! Go figure!

  70. jan says:

    @anjin-san:

    “Well, since we have come quite a ways from being on the brink of a depression, your “no headway” is basically mindless partisan babble, no? “

    Very much like FDR, Obama has extended the economic problems, which is why we have what seems like an endless recession, at least through the perspective of no jobs and poor growth. I am reacting to what I see around me. If that is partisan, so be it. But, if someone else, other than Obama, a republican for instance, had performed like he has I would be saying the same thing.

  71. James says:

    @jan:

    I am reacting to what I see around me.

    Which just happens to be Fox News talking points.

  72. jan says:

    @john personna:

    “Let’s pause right there and note that if you think Romeny, and his Congress, won’t do much better than Obama, and his Congress, then you must not be attacking Obama on his record.”

    No, not at all. Although I do think Obama inherited a fragile economy, IMO, the way he handled it only made it worse. My post was hypothetical, because what I’ve seen is that both sides tend to blame each other when it’s not on their watch. I was just wondering, how some would react, given the same circumstances, to Romney not making any progress. My “gut feeling,” which is far from scientific, is that Romney will make definite headway, and surprise even his most strident critics.

  73. jan says:

    @James:

    James, I don’t even have cable. I react to what I read on journals, on the web, and my own business common sense, which has served me well. Get over it!

  74. Hey Norm says:

    Jan…
    You keep saying that.
    27 straight months of private sector job growth is much worse than the economy shedding 700,000 jobs a month.
    The Dow at 12,000 is far worse than the Dow at 8,000.
    GDP growth at 2% is far worse than GDP growth at -9%.
    Maybe you need to get cable because you are severely confused.

  75. James says:

    @jan: There’s nothing to “get over.” I’m not even sure why you’re exhorting me. You’re the one writing and publishing right wing tropes like “Very much like FDR, Obama has extended the economic problems,” “only the negatives, deficits, failed stimulus, economic woes, seem to be liberally attached to Bush’s watch,” and (my favorite) “government has done nothing but expand in their creation of new bureaucracies, including more IRS employees on the horizon, czars, EPA regulations, and the like.”

    I mean, really, you keep insisting on these “business common sense” and “gut reactions” without any regard for how actual facts and data reflects on those opinions. Just a few minutes ago, your wrote:

    My “gut feeling,” which is far from scientific, is that Romney will make definite headway, and surprise even his most strident critics.

    Oh, wow, surprise! You’re going to come down and assumed positive conclusions about someone’s polices you’ve already have pre-determined conceptions about.

  76. James says:

    @jan: I mean, seriously, I want to understand. What’s the timeline in you head?
    1.US GDP experiences a 9% contraction in 2008’s 4th quarter
    2. Obama takes office Jan 2009. The ARRA passes February, helps stop the bleeding, and we stabilize with anemic GDP growth, 26 mo. of private sector job growth, and a soaring DJIA.
    3. ?????
    4. Obama’s a failure?

    More importantly, what exactly is your job creation plan?

  77. Hey Norm says:

    The economy averaged 7000 private sector jobs for 8 years under Bush.
    Last month was 69,000 under Obama. That’s ten times better Jan.
    It’s not worse. It’s better. We all would like it to get even better faster. Maybe Republicans should try helping instead of intentionally holding it back.
    Taxes are down.
    Spending is down.
    The size of Government is down.
    All the things you say you want.

  78. anjin-san says:

    Very much like FDR, Obama has extended the economic problems,”

    My wife’s boss is a staunch conservative. He hates Obama. He is a highly successful businessman who has made a fortune. He is a job creator.

    He lived through the depression. He flat out says “FDR saved the country. Twice. Pretty much everyone I have ever met who lived in those times says the same.

  79. jan says:

    @Hey Norm:

    At the beginning of Bush’s term of office there was a work force of approximately 138 million, At the end of his term in office it was 144 million, which was the beginning of Obama’s term. Currently it has dipped to around 141 million. Compare the numbers, Norm. Bush raised the work force, while under Obama it shrunk. People are either not looking, or are underemployed. If you counted these circumstances into the labor stats, the UE number would be higher.

    The income tax margins are the same because the Bush tax cuts were extended under Obama, now making this current tax breather the Bush-Obama Tax cuts. However, everything is slated to go up, come January 2013, including estate and capital gains. Obama has brushed off meeting with the House Speaker about what to do about these tax cuts.

    Payroll taxes have been cut, but to the detriment of adding needed monies to the SS fund, making it’s insolvency only more imminent.

    The deficit is slightly smaller than last year. But, people have attributed that to the House republicans, for not going along with all the spending that Obama wanted, giving you guys more fodder to call them ‘obstructionists.’ In the meantime we are facing another debt ceiling debacle, because we continue to need more money than we have. How is that going to effect out rating?

    The government bureaucracy has grown under Obama, with more regulations, the onset of Obamacare costs facing us in the imminent future etc. And, all of Obama’s little incentives to the public, Cash for Clunkers, the mortgage gimmick for first time buyers, has only had short term benefits, nothing long term nor substantial in having a recovery foothold.

  80. jan says:

    @anjin-san:

    There are two groups of people out there. One who says that FDR saved the country, and a whole other group who say he merely extended the depression into the “Great Depression.” I didn’t live in that era, and for years thought as you do, that FDR was an amazing president. But, since I’ve looked into other detailed analysises of it, such as ‘FDR’s Folly,’ I’ve come to have an entirely different perspective of that time.

  81. Ron Beasley says:

    @jan: I am pleasantly surprised that you think that the repeal of Glass-Steagall was a mistake. I thought you were opposed to all things FDR. It was bipartisan in the sense that the Democratic president signed it but most of the Democratic lawmakers voted against it..

  82. David M says:

    @jan:

    Payroll taxes have been cut, but to the detriment of adding needed monies to the SS fund, making it’s insolvency only more imminent.

    There is no SS fund shortfall, the difference is made up out of taxes from the general fund.

  83. anjin-san says:

    There are two groups of people out there. One who says that FDR saved the country, and a whole other group who say he merely extended the depression into the “Great Depression.

    I have never met anyone who lived through the depression who said FDR made it worse. I have met many who admired him. Even some who obviously loved him. I’ve done quite a bit of reading on his life, and none of it lowered my opinion of him.

  84. superdestroyer says:

    @Hey Norm:

    The government’s refusal to cut during previous down turns in why the economy had not been great in a very long time. The government expands during the bad times but the cuts never come during the good times. Even President Clinton was incapable of making cuts in domestic spending during the good times in the late 1990’s.

    The ratchet effect must be avoid in the future. Expanding government in bad times just make the recovery slower and makes the deficits bigger. Increasing the public sector just creates a special interest group that is against private sector economic growth and just wants to extract wealth from others.

  85. superdestroyer says:

    @James:

    that supposed conservatives grew the government for no good purpose is one of the reasons that the U.S. is in the economic condition that it is in. Just because the Bush clan were big spenders is no reason to continue the big spending.

    If you do not want a healthy private sector, then support more spending, more debt, more taxes, and more government.

    Look at how the Obama Administration had rather pass laws that force corporation to pay the human resource managers the same pay as engineers and scientist. How do progressives balance their desire for more jobs and higher pay jobs with the increased regulatory burden of the Paycheck Fairness Act.

  86. Hey Norm says:

    @ Destroyer…
    Fine…then don’t complain about a slow recovery.
    You cannot sap one of the biggest sectors of the economy and expect strong growth. It’s a fantasy. Instead you should be yelling YEAH, OBAMA because Government spending per capita is the lowest it’s been since the Korean drawdown.

  87. Hey Norm says:

    Jan…
    In case you are math challenged 141M unemployed is better than 144M unemployed…especially when you consider population growth. And that is with shrinkage of the Public Sector job growth…which was the majority of job growth during the Bush administration.
    And now…after months and years of complaining about Obama spending…when confronted with the fact that spending is down…way down…you attribute it to the Tea Stain. Which is it. Make up your narrow little mind.
    Same thing with tax cuts. Now tax cuts are a problem because they imact something else…no f’ing kidding. They always affect something else. If it’s schools or food for poor kids or roads you don’t care. Evidently you care about SS…a socialized program. I thought you were concerned about Obama being a socialist? Which is it? Make up your narrow little mind.
    And the amount of regulations under Obama is dwarfed by those under Bush.
    The facts just never, ever, line up with your ideology. But do you reconsider your ideology? No. It’s called the Dunning-Kruger effect.

  88. superdestroyer says:

    @Hey Norm:

    That government is one of the biggest segments of the economy may be a good explanation of why the U.S. has had a slow economy for more than a decade. Of course, that Clinton did not grow government should be a sign that the U.S. can have a healthy economy without a growing public sector.

    The real purpose of growing the public sector is to create more automatic Democratic Party voters and to increase the power of progressives to control everyone else.

  89. Hey Norm says:

    @ Destroyer
    You are comparing apples and orangutans.
    Clinton was not dealing with a slow-down. Between him and Bush41 they saw the longest run without a recession in modern times…at a 39.5% upper bracket tax rate.
    Government spending should run counter-cyclical. We are in a trough and Government has to take up the slack…or we will inevitably have a slow economy and a slow recovery. Once we are out of the trough…as Clinton was…then the Government should scale back…as Clinton did. Bush and his profligate spending threw the cycle out of sync. We cannot austerity our way back into sync. Government spending per capita is at staggering lows. Taxes are at historic lows and the effective rates are ridiculously low. If it was 2001 I would be happy. But it’s not 2001.
    There is absolutely no reason we cannot go to Clinton era rates and spend the money on infrastucture and education…investments…and get the recovery juiced. Then we can scale back…as Clinton did.
    Or we can wallow in stagnation.

  90. Hey Norm says:

    “…That government is one of the biggest segments of the economy may be a good explanation of why the U.S. has had a slow economy for more than a decade…”

    When has Government not been one of the largest sectors of the economy?

  91. Drew says:

    @Rob in CT:

    You beat me to it. I found the article this AM, and yes, thats exactly the one I was talking about. As for your comments, the costs are not due to the input, coal vs natural gas. Natural gas prices are low because, uh, they are drilling and fracking. Funny how that works.

    The costs will be high because they have to amortize the cost of new construction. If the coal fired assets were not being driven out this would not occur. Its not a spike, and of course the costs will be passed through.

    This is whats known as shooting your dirk off. Obama – friend of the little guy. snicker

  92. Drew says:

    PS

    So do I get to sneer now?

  93. @jan:

    My “gut feeling,” which is far from scientific, is that Romney will make definite headway, and surprise even his most strident critics.

    With what policies? See, I’m tying this to the missing argument on the right. They aren’t claiming this time around that prosperity is only a tax cut and a spending cut away. They have learned that much in this recession.

    So when you post the hypothetical, that Romeny might do about as well as Obama, it ties to the idea that he wouldn’t have economic freedom to do much differently.

  94. James says:

    @superdestroyer:

    If you do not want a healthy private sector, then support more spending, more debt, more taxes, and more government.

    Because…….? I mean really. This isn’t unergrad polisci. You need to make so causality linkages. Once again, Felix Salmon:

    Basically, we have low bond yields because the Fed has failed to do its job, and persuade the markets that it is capable of engineering a healthy economy over the long run. And we have high stock yields because the market has failed to do its job, which is to treat high corporate earnings as a fantastic opportunity to invest in the economy and build something even greater in the future. Just look at the amount of money which is flowing straight to corporations’ bottom lines, and not being put to good, productive work. Corporate profits now account for significantly more than 10% of GDP: that’s never happened before. (emphasis mine)

    @Drew: Did you ever stop.

  95. James says:

    @superdestroyer:

    How do progressives balance their desire for more jobs and higher pay jobs with the increased regulatory burden of the Paycheck Fairness Act.

    Paycheck Fairness Act:

    The Paycheck Fairness Act is legislation being considered by the United States Congress to expand the scope of the Equal Pay Act of 1963 and the Fair Labor Standards Act as part of an effort to address male–female income disparity in the United States. Census Bureau data shows that women made 77 cents on the male dollar in 2008, a disparity sometimes attributed to systematic discrimination against women, but alternatively has been attributed to women’s lifestyle choices.[1] The House of Represen tatives approved the bill in January 2009.[2] The United States Senate failed to move the bill forward in November 2010.[3] President Barack Obama said in March 2011 that he will continue to fight for the goals in the Paycheck Fairness Act.[4] The bill was reintroduced in both houses of Congress in April 2011. (emphasis mine)

    Those poor profit-maximizing firms, suffering under the arduous regulatory burden of, um, no longer being able to discriminate pay based on gender.

  96. Hey Norm says:

    “…But, since I’ve looked into other detailed analysises of it, such as ‘FDR’s Folly,’ I’ve come to have an entirely different perspective of that time…”

    Jan reads Jim Powell’s absurdly revisionist history and, because it matches her ideology, she decides it must be true.
    Shocking.

  97. Hey Norm says:

    “…How do progressives balance their desire for more jobs and higher pay jobs with the increased regulatory burden of the Paycheck Fairness Act…”

    Um…that’s what Governing is…balancing the interests of all…not just bending over and grabbing your ankles so your biggest donors can have their way with you.
    The interests of fossil fuel industry should be balanced against the interests of clean air and water. BP should not be allowed to spill oil because cutting corners maximizes profits.
    That’s the struggle some of us expect from our Government…where as Republicans, based on their actions, would just as soon BP spill all they want.

  98. A good bit on The Misfiring Engine of Recovery here:

    In the past year, state and local governments have slowed down their layoffs, but the number of employees in the federal government is still rapidly shrinking — down by 1.8%. Overall, the public sector has reduced its workforce for three years in a row, cutting a total of about 700,000 workers.

    “liberals” above chided Republicans that they got what they asked for.

    Those seem to be the facts.

  99. James says:
  100. anjin-san says:

    So do I get to sneer now?

    That’s pretty much your whole game dude.

  101. @James:

    Yeah, that is a problem for Republicans who would like to run a “concept” campaign. It begs the question “how much worse should it be?”

  102. Ben Wolf says:

    @superdestroyer:

    The government’s refusal to cut during previous down turns in why the economy had not been great in a very long time.

    This is an assertion without a shred or evidence, or even a logical argument to support it. How does government spending harm growth?

  103. Rob in CT says:

    @Drew:

    Far be it for me to tell you whether you can sneer, Drew. You seem to like it so much, I wouldn’t want to take that from you. 🙂

    It’s obvious that shutting down the oldest/dirtiest coal plants will increase costs above what they would’ve been absent the shutdown. The question is exactly how much and is improved human health (which is what environmental protection is really about – human health) worth it?

    If I understand you correctly, your position is to use the cheapest energy sources available at will, with pre-2008 environmental regs or fewer. I view pollution as a cost that isn’t included in the sticker price. And coal is dirty stuff. So, to me, using cheap coal isn’t actually saving us anything. Pollution is costly. And those costs are often borne by people who didn’t make the mess.

  104. Drew says:

    “If I understand you correctly, your position is to use the cheapest energy sources available at will, with pre-2008 environmental regs or fewer. I view pollution as a cost that isn’t included in the sticker price. And coal is dirty stuff. So, to me, using cheap coal isn’t actually saving us anything. Pollution is costly. And those costs are often borne by people who didn’t make the mess.”

    C’mon, Rob. There are mindless fools here, Hey Norm, Jp and others come immediately to mind, but you seem t o have a more solid grounding in reality. Your comment is therefore unwarranted, and quite frankly, cheap.

    Nobody wants filthy bilge dripped into the water or air. That’s just stupid hyperbole. The reality is that we have utilized coal as the majority source of electricity production forever. It was 50% just a couple years ago. I’m not familiar with studies of mass deaths of the human species as a result.

    The fact of the matter is that fossil fuels will be a majority of the mix for your and my lifetimes. Can we work over time to alternatives? Of course. But we have an economic problem right now. We have t he ability to gain energy independence through fossil fuels right now. What is the cost of Middle East dependence? Obama is engaged in pure politics at the expense of the Average Joe. He should be fired.

  105. James says:

    @Drew:

    I’m not familiar with studies of mass deaths of the human species as a result [of coal power].

    Holy hyperbole Batman! I don’t recall Rob (or anyone else) alleging that that coal will cause “mass deaths of the human species”. There are, however, all kinds of nasty by-products in coal power production; including fly ash, bottom ash and boiler slag, as well as “20 toxic-release chemicals, including arsenic, lead, mercury, nickel, vanadium, beryllium, cadmium, barium, chromium, copper, molybdenum, zinc, selenium and radium), which are dangerous if released into the environment.”

  106. Rob in CT says:

    I actually tried not to engage in hyberpole. I said you would prefer we utilize cheap coal with pre-2008 regs (pre-Obama era) regs or fewer.

    Is that really a mischaracterization of your position? You mention we’ve got an economic problem – I agree. Rising energy costs won’t help. Agreed. So you appear to be arguing that the best approach – at least in the short term – is to not tighten (and possibly loosen?) the regs. Obama tightened them, for which you excoriate him.

    I know we’ve been using coal a long time, and that fossil fuels will continue to be used extensively for some time. No argument there. There are studies that indicate negative impact on human health from burning coal. Not the end of the species, no – it’s never that way, even when “filthy bilge” actually is involved.

    Can we work over time to alternatives? Of course.

    Ok, great. How, though? You rail against wind & solar a lot on this board, so would I be correct to assume you mean natural gas + nuclear?

    As for energy independence – how does burning coal instead of alternatives do anything about our Middle Eastern entanglements? We hardly use any oil in power plants. The coal is domestically produced, no? Are you shifting back to an argument about oil drilling on federal lands?

    Lastly, I don’t think the EPA’s decision was “pure politics.” Pure politics would be making sure to keep Joe’s electric bill down (and Joe’s brothers’ mining job going*) so you get re-elected. For better or worse, I think the people who implemented the regs that are causing the coal plant shutdowns believe that the benefits outweigh the costs. The big question is whether they’re right or wrong about that.

    * – though it’s not clear to me that coal mining would die even if we suddenly quit burning coal. We’d export the coal and someone else would burn it.

  107. Drew says:

    Rob in Beautiful CT

    Yes, there is no reason to go pre 2008. It served us well for decades. To establish costly increase on business and consumer in the current environment is just bone headed, if not evil.

    Second. If you describe a policy that could increase energy costs 8x. (hell, I’d say 2 x) as not worthy of excoriation, I simply think we have no grounds for debate. That position is just bizarre, and antithetical to the Average Joe.

    Three. Solar and wind are just for liberals to masturbate about. You could double their output and you’ve got what, 2-4% of energy output? This is just absurd on its face. In 50 years, maybe they could make a dent. 10-15%. That’s it. Get a clue.

    As for the Middle East, we are (and oh by the way, with close ally Canada) the singular largest resource for fossil fuels in the world. We could return the Middle Easterners into camel jockeys if we’d forget the standar liberal greenie orthodoxy and exploit those resources. OPEC power goodbye. But we are trapped in liberal hell, with godawful geopolitical side effects.

    Lastly, you are simply naive if you think the regs were implemented with the Average Joe in mind. They were implemented with leftist greenie votes and campaign contributors who had financial interests in solar and wind in mind. If you do not understand that I bid you adiu, wish you well, and hope you grow up some day. How’s that for sneering.

    Truth is a bitch.

  108. Rob in CT says:

    FFS, Drew. I didn’t argue that solar/wind was going to take coal’s place in the foreseeable future. I’m aware that they are a tiny % of the total and even at high growth rates they’ll be minor players for decades to come. Hence my natural gas + nuclear question to you when you claimed you favored pursuit of alternatives over time (in some unspecified way that is different than current policy).

    I notice that you’ve ditched the alternatives (was that just misdirection?) and went with an argument predicated on the full-bore use of fossil fuels, which by the way sounds even loopier to me than pie in the sky greenie dreams for solar:

    We could return the Middle Easterners into camel jockeys if we’d forget the standar liberal greenie orthodoxy and exploit those resources.

    Tar sands/shale? Doesn’t oil need to be quite expensive for much of those reserves to be viable? We may have lots of fossil fuels here yet, but the cheap-to-get stuff is largely gone. The advantage the ME has is that they have more cheap-to-produce oil left. Seems to me you are building in some really rosy assumptions here, and that’s being kind.

    My belief is that when the stuff we still have under our soil becomes economical to tap, it will be tapped, and the greenies you think are holding us back won’t be able to stop it.

    …hope you grow up some day. How’s that for sneering.

    Par for the course with you. Actually, it’s a little like you’re just going through the motions today. I’d give that a 3 out of 10.

  109. anjin-san says:

    To establish costly increase on business and consumer in the current environment is just bone headed, if not evil.

    Of course. Giving a shit about the environment and the health consequences of pollution is “evil”. Of course.

  110. Drew says:

    Rob

    Greenies have stopped it. I’m for coal, natural gas and nukes, for the record.

    As for the three. Yes, I had three birdies today. Shot 74.

    Best

  111. anjin-san says:

    Shot 74

    Not bad at all.

  112. Drew says:

    @anjin-san:

    There was a day when that was a putrid round, then came the cervical herniations and all that that entailed. surgery etc.

    Now 74 seems good. But I’m comin back. A complete and total swing change is in the works. I’m thinkn plus 1 is in my future. Anyone want to tee it up?