Tuesday, December 11, 2018

A problem with fracking

Q: How should Americans think about the energy transition to natural gas?

Dirty coal

A: Natural gas isn't all that clean. It is no magic bullet.

The Union of Concerned Scientists describe their  mission to be one of using science as the basis for creating a better, safer world.

Southern Oregon is facing a political question, the passage of a natural gas pipeline through the region to enable natural gas produced in central North America to get to a facility which would liquify it so it can be exported to Asia. Presumably, sold under long term contracts, it would allow China to reduce its dependence on coal to create electricity. 

Natural gas is cleaner than coal, right?
Not so clean natural gas

Win-win, right? 

Americans and Canadians sell something we have in abundance (win for the economy), China replaces a dirty energy source with a cleaner one (win for the world), and win for southern Oregon (tax receipts from an expensive project which processes the gas.)

Information provided by the staff and personnel of the Union of Concerned Scientists reveal a problem with the presumed "magic bullet" transitional fuel, supposedly clean natural gas. The problem is the inevitable methane leakage.

Methane has 25 times the greenhouse effect as does carbon dioxide. That factor dramatically changes the calculation of injury. In some areas of life, something being 99% leak free--or Ivory Soap being "99 and 44/100 percent pure," creates an impression of adequacy. The problem is that fracking, transportation, and condensing natural gas is not leak-free. It leaks, and leaks really matter when it comes to methane. Multiply by 25.

But isn't it better than coal? Isn't anything better than coal? No. It is mostly just a wash, and Trump administration rules have been relaxing acceptable emissions. It is getting worse, not better.

Click: Union of Concerned Scientists

A great many Americans (56%) think climate change is an issue--84% of Democrats and 43% of Republicans--but it is less clear that Americans are willing to change their behavior or pay more to accomplish this. Some 42% of Americans said they would be unwilling to spend even $1/month actually to reduce emissions.

Natural gas was the potentially easy solution, the kind that could be accomplished in a democracy. Gain with minimal pain, with natural gas as the "clean" fossil fuel. Whether one believes climate change is real or fake, a change to reduced greenhouse emissions is easier to accomplish if consumers and taxpayers simply experience a seamless, invisible change in the fossil fuel mix.

But there is a problem. Natural gas isn't very clean

Monday, December 10, 2018

Democratic litmus test

Politico: "'You don't just get to just say that you're progressive.'  The left moves to defend its brand."

It is because the left has a policy litmus test that the actual litmus test is biography and style, not policy.

I am watching John Hickenlooper on CNN as I type. He is one of the twenty Democrats looking at 2020. He says he will "probably" run. He is a Mountain State Governor, and may not be progressive enough on the policy litmus tests.

The 2020 campaign is happening now because it needs to happen now. Politico has an article today listing the 20-some likely candidates for president. Unless the potential candidate is a billionaire or celebrity already, he or she needs to be acting now. To be credible in Iowa and New Hampshire a candidate needs to have a campaign up and running. That means staff: schedulers, communications directors, field staff, and therefore the money to pay for this. Candidates cannot raise money unless it looks like they are a candidate, i.e. with early money, staff, etc. So the timetable backs up to now. Or last year.

Politico: litmus test
Politico observes the problem that was warned about in yesterday's post by my two college classmates who quietly hoped Elizabeth Warren would not run: the fights over distinctions many voters will consider small or incomprehensible, and which, in any case, cannot get passed in this Congress, Senate, or be signed by this president. To Democratic activists, the distinctions are not small. "Single payer" health care is not the same thing as "Medicare for all." "Health care" is not the same thing as "health care access". Activists can be motivated to decide that one candidate is good and the other a sell-out. 

The seeds of deep fracture are evident. 

Representatives of solidly liberal districts see a Democratic majority in the House as a sign that there is an opportunity for a dramatic move to the left. Meanwhile, the robust Democratic majority came because marginal districts voted Democratic, barely. Moderate, centrist Democrats created the majority. They got elected in part because they were NOT part of that progressive left.

John Hickenlooper
An ongoing message of this blog is that biography and appearance constitute a big part of the candidate message. Beto's "message" includes the fact that he appears young and energetic. Sanders' message includes the fact that is that he is a rumpled man with unkempt hair, thus demonstrating that he isn't beholden to Wall Street establishment norms. Warren's message includes the fact 
that she is female, smart, and articulate. Someone will 
emerge out of the chaotic winnowing that will take place over 
the next six months, a winnowing that will happen because 
certain policies and personalities fail to get political traction. 
People need to lose out so that someone can win.

A second ongoing message is that this biographical and personality message will be the lubricant that will cause the political divisions not to matter. Someone will excite and therefore be able to lead a coalition. People will decide the candidate has the "right stuff."

"Ralph," a southern Oregon reader, sent this blog a comment that gives a first person insight into how one voter looks at personality and biography:

"Not any of the present possibles. Bernie and Biden too old. The women not ballsy enough. We need a Margaret Thatcher (not politically), but tough loud assertive like her. If it's a man, then nothing ethnic. White with a cowboy hat and a pickup truck and blond wifey. A hunter,--someone who owns cows and horses. An ex GI. It would be best if he is pro union just like his Daddy. And he doesn’t smile very much. Plain speaker with some bucks but not a millionaire. The only people he scares are Big Money Republicans and fat corporations because he knows how they are ripping off the worker and small farmer."
Jon Tester

My sense is that Ralph is describing no one candidate, but Jon Tester, Montana Senator, or John Hickenlooper, who is leaving office as Colorado governor are the closest approximations. 

Other readers will disagree on the correct biography and style. They will have other people in mind, and some will have very clear policy demands.  My point in quoting Ralph is to demonstrate that what is important to having credibility is a biography and style, not a specific point of policy. 

It is the authenticity of biography that makes Elizabeth Warren's gaffe regarding Native American heritage such a problem for her. It messes up what would otherwise have been a good, clean log-cabin story, the rise from modest Oklahoma roots to the pinnacle of academic success as a law professor at Harvard.

Sunday, December 9, 2018

Elizabeth Warren for president?

The Boston Globe, New England's largest newspaper, urges Elizabeth Warren not run for president.

Some of her friends tell me they quietly hope she doesn't run.

I have met with two classmates from college, people close to Senator Warren, friendly with her, very politically active Democrats here in Massachusetts, and, like Warren, about 69 years of age. Both share the progressive good-government sentiment that is dominant in Massachusetts politics.

They hope she drops out on her own, early, before she enters contests in Iowa and New Hampshire. They like her as a Senator. They think she will lose to Trump. 

Democratic Primary Message. They envision a bad Democratic primary, where Democratic activists choose  between Warren, Bernie Sanders, Jeff Merkley, Joe Biden, Kirsten Gellibrand and a dozen others and then fight with each other about the exact acceptable policy. Candidates and activists will be forced to accentuate the policy distinctions among them, with the inevitable result that they project a meta message of contention over an array of unacceptable positions. The only unifying message will be that they are not Trump. That will be sufficient for Democrats but it will not be the unifying message that will win a general election.

Pocahontas. Warren's handling of Trump's mocking of her is now acknowledged as a disaster from every front. Some think she should have ignored Trump. Others think she should have responded much more promptly. Some think that her getting a DNA test is an insult to the notion of tribe, since it makes DNA the definition of tribe, and therefore inherently offensively racist. Some think that getting the proof of Native American ancestry is an example of offensive cultural appropriation. The only consensus is that it was a gaffe. Trump fatally weakened Warren, they think. Her national reputation has been established, not as a fighter for consumers against predatory Wall Street, but as a woman with a problem regarding her ancestry.

Push reset. Although Warren, my classmates, and I are all age 69, my classmates say she is too old. Each asserted they were not "ageist." The issue isn't chronological age; it is the need to turn the page on the boomer generation. Long-established political warriors prolong long-established political battles. Warren versus Trump does not project change, they say. It projects a continuation of a tiresome battle. Their view is that voters are sick and tired of Trump. Change doesn't mean picking a new winner of the battle. They think Democrats need somebody new and exciting.

Saturday, December 8, 2018

Trump's 2020 Electoral College strategy

Things look bad for Donald Trump just now. It may not matter. The states that like him will likely stick with him.

2016 Map

He has a strategy to win the Electoral College. 

Democrats may be looking at the wrong thing. Trump's overall popularity doesn't matter much. What matters is whether states representing 270 electoral votes will support him. He has a strategy.

1.  The sleaze factor has long been taken for granted. Everyone already knows Trump  is a narcissist who cheats and lies. His supporters don’t think it is dispositive.

2. Democrats focus on the wrong thing. The Mueller findings, bad as they are, are a distraction that hurts Democrats more than Trump, because it keeps Democrats from talking about their winning messages: jobs and health care. Trump will talk about jobs, to distract attention from his sleaze.

3. Trump holds the South, like always. Judicial appointments win Trump southern red states, where the big issue is cultural nationalism, i.e. religion and race. Race is addressed in the code of resistance to immigration.

4. Trump holds the rural heartland states, like always. Those states are are Republican. Democrats ooze liberal urbanity in policy and tone and will never nominate a candidate who looks like a John Tester. 

5. Trump holds the Upper Midwest, like in 2016, thanks to tariffs. Trump’s tariffs may be generally disruptive to the economy, but the pain is diffuse, and the benefit is targeted to help Pennsylvania, Ohio, Wisconsin, and Michigan. Trump has a story to tell them, that he is on their side, even at the expense of other regions. 

Result: He can win every state he won in 2016, including Florida (c.f. the election of Scott) and Texas (c.f. the election of Cruz.)

What could stop him?  A big recession. One is overdue. It's the economy, stupid.

Friday, December 7, 2018

The inevitable US war with China

Thucydides predicted it.

He said states go to war because of fear, self interest, and honor.  

It is a prediction, not destiny.

Thucydides is a Greek historian writing 2,500 years ago who tried to make sense of the great conflict between Sparta and Greece. He observed war between Sparta and Athens was caused because the incumbent great power of the region, Sparta, watched a new rival grow in strength and prosperity. It frightened Sparta. Athens, for its part, wanted to be treated with the respect that its new and growing wealth and power entitled it, so they were not inclined to act defer to Sparta. Their interests were in conflict. Their reputations and status with other states were at stake, and with those reputations hanged the question of which state might get allies if they were ever to go to war. Honor was not just a matter of self respect; it was a matter of survival.

They go to war, a disaster for each of them.

Graham Allison is a former dean at the JFK School of Government where I am visiting just now. He wrote a book titled The Thucydides Trap which explored whether the USA and China were analogous to the situation of Sparta and Athens. (He said it was, and that indeed a rivalry between an existing power and a rising one happened frequently in world history, and most of the time it resulted in war.)

The United States is the established incumbent great power, with a big military, big economy, and big worldwide influence. For two generations, the US has been the great force In the world. China is the rising power. We see China building a navy, making loans for development projects in Africa and around Asia, building out a belt and road program of infrastructure that connected it with Eurasia and Africa, acting more and more like a great power. Thirty years ago it was a populous but poor country. Now they have an economy that on a purchasing power basis is the size of the United States' and growing quickly.

The centennial of World War One brings up a bad and dangerous history. Great Britain was the great power incumbent throughout the Nineteenth Century, with colonies around the world and the world's great navy. Germany was the rising European power, and had surpassed Britain in manufacturing capacity. Germany wanted a navy that reflected its economic and scientific power. It was not inevitable that Germany and Britain would go to war, but Germany frightened Britain and Germany wanted to be treated as a great power. The politicians and foreign policy experts at the time reassured themselves that the rivalry was serious but that war would not result because, after all, there was substantial trade between the two countries. They were too interdependent to go to war with one another.

Reasonable people were confident war could not actually happen, until it did, suddenly.

Is war with China inevitable? No. But people who have studied history see patterns. Sparta and Athens fit a pattern. The UK and Germany fit a pattern. The US and China fit a pattern.

This could end badly. I don’t expect it, but no one ever expects it.

Thursday, December 6, 2018

Gerrymandering craftsmanship.

Wisconsin nailed gerrymandering.  It is ugly, but it worked.

They got maximum legislative seats for minimum actual votes.

Case Study in Gerrymandering

One of the seminars I attended here at the JFK school took a close look at the 2018 primary election results. Quick takeaways will be familiar to regular readers:

Democrats cluster, which makes them easy targets for gerrymandering.

Young people don't turn out in midterms. They increased their turnout in 2018 above 2014, but voters from 18-29 still only represented 9 percent of the overall vote. Old folks rule.

The marriage gap is bigger than the gender gap. White single women vote Democratic, but white married women vote Republican, along with their husbands.

Democrats cluster in densely populated areas, and win big there. Gerrymandering often then dilutes the value of those votes in districts smaller than the state as a whole by packing Democratic votes into districts.

Wisconsin is a poster child for successful gerrymandering. The website fivethirtyeight.com graphs a very successful result in for Republicans in Wisconsin in a bad Republican year--a year so bad that they lost the statewide race for both Governor and Attorney General, and the lost a majority of the votes for state legislators. Indeed, they lost the state house districts by 190,000 votes statewide, yet retained 63 out of 99 legislative districts.

It sounds impossible, but isn't. 

Vote margin for Republicans in Wisconsin legislative seats.
Take a close look at the results. Red for Republicans, blue for Democrats. Notice that district after district hovered between Republicans winning 52% to 62% of the vote. There were a few solidly Republican seats up there at the top--9 of them. But most districts were drawn so that there was a solid Republican majority, clustering just above the 50% line. Few "wasted" votes.  Districts got just enough votes for a solid win, but no more.

Actual Pennsylvania District
Look at the blue circles. There were exactly 5 races that were competitive and in which a Democrat won.The remaining 31 seats were drawn so that the Democrat won overwhelmingly, indeed had no GOP opposition at all. The districts were drawn so that Democrats were packed into pure Democratic strongholds. So instead of winning 55% of the districts with 55% of the vote, the district lines were arranged so that they won 36% of the seats with 55% of the vote.

In political tradecraft, this is a tremendous success. But there are perils in being so aggressively partisan. Backlash.

The Republican governor, Scott Walker, who approved this gerrymandering lost his re-election bid. He may not care. He won big.

Is it legal to draw lines so that a minority of voters win a huge majority of votes?  

Yes, and Democrats clustering in cities and suburbs make it easy to do. Sometimes, though, a jurisdiction has to stretch the bounds of credibility to draw a district and that can end up being disallowed, like this district in Pennsylvania.This congressional district in the Philadelphia suburbs looks like Disney's Goofy character on the right kicking in the stomach a dog with large floppy ears. The goal was to pick up Republican votes here and there back and forth across city and county lines, while avoiding Democratic neighborhoods so that the incumbent Republican could keep his seat. The Pennsylvania Supreme Court found it unConstitutional.

There are some limits, but apparently Wisconsin did not breach them.

Wednesday, December 5, 2018

Dow falls 799

It's all about Trump.

Trump lied about tariff progress. He said there was an agreement. There wasn't. The stock market fell.

I am a retired financial advisor and was supposed to be able to explain why markets rise and fall.

When markets make big changes people whose job it is to explain things to clients--particularly major investment banks Merrill Lynch and Morgan Stanley--put out comments to explain why. Their credibility is at stake. If they don't know why things happen, why pay them? 

News organizations covering financial news also employ analysts who understand why things happen.  Surely if something changed the value of all the businesses in the US by 3% in a day--a loss of a trillion dollars--there must be a reason. They, too, have credibility at stake.  If they cannot explain things, why trust their reporting? So they, too, come up with something.

I think the actual, honest answer is that no one understands why the market rises or falls. Sellers were more insistent than buyers, so the price fell to bring in buyers getting what they thought were bargains and those buyers matched up to the sellers. It explains what happened, but not why.

CNN: Click
Maybe it’s the bad yield curve (some short term rates now exceed long term rates.) Maybe it was movement in advance of the market closure today for George HW Bush's funeral, and people who wanted to be out of the market got out in a rush. Maybe the Brexit mess in the UK frightened people. Maybe the Paris riots did. Maybe Mueller's progress implies impending Constitutional crisis. There are always lots of reason to sell.

The key takeaway is that Wall Street and most of the news media is blaming it on Trump.

His tariffs generally upset the economy, he implied he was reaching a settlement with China. Buyers came into the market o the good news. Trump's statement was--to describe it simply--a lie. The White House and Trump could not sustain the fiction.

Wall Street told investors that we had been hoodwinked.

Goldman Sachs said: "the actual amount of concrete progress made at the meeting appears to have been quite limited."

A Baird spokesperson said: "The sense is that there's less and less agreement between the two sides about what actually took place. There was a rally in expectation that something happened. The problem is that something turned out to be nothing."

J P Morgan said: "It doesn’t seem like anything was actually agreed to at the dinner and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality.” 

(Investment banks don't want to use the word "lie.")

Journalists had their story. CNN's business reporters said the Dow dropped because investors were realizing that nothing concrete had actually come out of the meetings between Trump and Chinese President Xi Jinping.

The very pro-Trump New York Post had the same story, but averted their eyes from Trump and used the passive voice: "Stocks took a nosedive on Wall Street as investors worried that a US-China trade truce reached over the weekend wasn’t all it was cracked up to be."

Trump's method is to be in the center of everything and we are witnessing the political downside of that: blame Trump. People who believed Trump lost real money.

There is a school of thought that "everyone knows" Trump lies, that it is just Trump being Trump, and what he says is fully discounted by people, so Trump doesn't really hurt anybody when he says things that just aren't so.

Apparently not.

Investors bought on the premise that the trade dispute with China was abating were hoodwinked, and they lost money as a result.