So what should we spend the fiscal boost on then?

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so-what-should-we-spend-the-fiscal-boost-on-then

Everybody and their dog is scratching away on the back of envelopes working out what would be the best way of spending this fiscal boost we're about to have thrust upon us. Should it be gazillions for the railways, fibreoptic and green energy? Ending child poverty? Insulating every house? "Saving" car manufacturers?

How about something truly interesting instead? Something that we really would like to have for the money we spend? How about a space solar power system?

Getting SSP off the ground will require the involvement of the private sector, the study observes, but private firms are unlikely to act without a demonstration project to confirm the viability of the scheme. The NSSO estimates that this would cost $8 billion-10 billion, and suggests that it could be funded by a consortium involving America and its allies—such as Canada, Japan, the European Union or Australia, all of which have shown interest in SSP in the past.

Well, actually, we could do that twice over for just the cost of the cut in VAT already implemented.

Mr Musk thinks his non-bureaucratic, low-cost approach could reduce the cost of launching payloads into low-earth orbit from around $6,000-10,000 per kilogram today to around $3,000 with Falcon 9, and eventually (by reusing more of each launcher) to around $1,000. Mr Musk has his eye on manned missions to Mars, among other things, but much lower launch costs would also have the side-effect of making SSP more viable. The NSSO estimates that a launch cost of $440 per kilogram, for example, would reduce the cost per kWh to between eight and ten cents.

Now yes, I agree that the technology isn't quite there yet. But if we're going to insist on splurging money all over the economy why don't we at least try to buy with it something we actually want? Something where government spending really is incremental, value adding? Something which would, in terms of a demonstration project at least, actually (well, possibly could be) a public good?

With a rather nice side effect as well. If such space based solar does in fact work then we've, at a stroke, solved climate change. 8-10 cents a KWh is about the same price as coal and vastly cheaper than wind or terrestrial solar and, given that such systems would be in geostationary orbit we don't have to worry about night and day (or cloud cover, obviously) so we solve the storage problem as well.

At the time of writing I can think of only one reason why the likes of Greenpeace, FoE, the nef and so on are not shouting in praise of such an idea. That they wouldn't actually like us to have a reasonably priced non-carbon energy supply but I'm a tad mystified as to why not.

Where in the world?

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Brian Mickelthwait had this piece on Samizdata a while ago, asking which country Brits would be best off emigrating to. It’s an interesting question – if you believe in free markets and limited government, and you could live anywhere in the world, where would it be?

I’m not sure Brian is right to suggest Ireland. They are in serious economic trouble and although it has an enviably low corporation tax rate, I’m not sure Ireland is quite the free-market nirvana it is cracked up to be. If you moved there expecting a big change, I suspect you would be disappointed. Oh, and it never stops raining.

Many suggest Switzerland instead, which seems like a good choice – clean and efficient, beautiful scenery, a high quality of life and low taxes. On the downside, if you can’t speak French and/or German it may be impractical in the short term.

What about the USA? After all, that’s where people used to flee to when they feared for their liberty. Today, however, I’m not so sure. Let’s assume that you could actually move to America and work legally (not nearly as easy as it used to be): once you have added up federal income tax, state income tax, and the various payroll taxes, you wouldn’t get to keep a lot more of your pay-packet than you do in Britain. Sales taxes are lower, but property taxes are considerably higher. And with Obama set to move the US leftwards, you may end up severely disappointed.

Hong Kong is certainly attractive on the tax front: they have a high personal allowance, a flat tax of 15 percent and social insurance contributions of 5 percent. Property taxes are high at 16 percent of assessed rental value, but not cripplingly so. Plus, Hong Kong always comes top of the Economic Freedom of the World report, so it can’t be bad.

Personally though, I’d be looking for somewhere a little calmer and more laid back. Australia? Taxes aren’t that low, but they certainly compare favourably with Britain’s. You get a 30 percent rebate on private health insurance, and their personalized pension system seems excellent. Cities like Sydney and Melbourne always rank high on ‘liveability’ and there are plenty of good golf courses (essential, as far as I’m concerned).

Thoughts, anyone?

Blog Review 809

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blog-review-809

If they're going to lie to us about knife crime statistics, can we believe anything else they tell us?

No would seem to be an appropriate answer to that question.

Even if they weren't lying in this specific case the actual statistics they collect aren't worth very much anyway.

L'affaire Madoff will bring calls for hedge funds to be regulated. Thus it is important to point out that Madoff wasn't in fact running a hedge fund.

There are of course others out there just waiting to get caught. Due diligence folks, it's all about due diligence.

While in theory it's possible (when all human wants are satisfied) to have overcapacity in all industries, we're most certainly not there yet.

And finally, uncovering the real British journalist.

Cap and trade or carbon taxes?

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In the debate over what to do about carbon emissions (and for today, let's start from the position that we are indeed going to do something) the general view has been that cap and trade is better than carbon taxation. Precisely because we can trade we can make the least cost reductions and thus solve the problem at that least cost.

I've always disagreed here and have always been in favour of carbon taxes: there's a number of reasons but George Monbiot (of all people!) highlights one here.

The EU promised that by 2020 all emissions permits would be sold at auction to the polluting industries. Now the heads of government have broken that promise: in 2020, big industrial polluters will have to pay for only 70% of the harm they do. Worse, companies will receive all their allowances for nothing if they can show that they're threatened by competition from firms outside the EU.

Cap and trade and carbon taxes should produce the same result at the same cost, but only if the politicians don't hand out pork to their favoured clients. And as George points out, and as even a passing knowledge of public choice theory would suggest, there's no way that politicians will not hand out pork to their favoured clients. Thus cap and trade is decidedly sub-optimal simply because politicians will do what politicians always do, buy support from certain groups and sectors by, well, being politicians. A carbon tax would be a decidedly better solution.

However, we do have one rather large problem here:  how do we get it across to the politicians that they are the problem, not the solution?

Technical difficulties

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I should have known better than to rely on the Circle Line on Thursday evening, but you only live once. As the man down on his luck picks up with quivering hand the weighty revolver to take that chance at Russian roulette, in a rush to get from Westminster to Barbican I followed the Delphic Oracle of TFL Journey Planner and jumped with trepidation onto the shaky tube.

Approaching Tower Hill we were hit like a bullet and came to a complete stop. After a couple of minutes came over the speakers. Apparently we were having technical difficulties. And then silence…

After fifteen minutes the voice was back. The technicals were still difficult, but all will be fine. She cannot move the train without authorisation from her superior. As such Mr or Mrs superior will need to catch a train heading in the other direction, board this train and cast the magic spell needed to get the cattle truck moving again. A wise guy in the carriage shouted: “So we drive trains by committee do we?” We laughed, but the frustration was growing. And then, once more, silence…

Another fifteen minutes and the voice from above had one Herculean Labour before this lump of metal could move. She would have to come through the train, reverse it back a few metres, and then goback through the train; then freedom would be ours. Another wise guy suggested that this was a trip she should not make, we laughed, though the smell of blood was in the air.

With this final mission complete, she thanked us for our patience. Little did she know how close she came to wrath of the mob. The line between civilization and terror was almost crossed. We had two options: paciencia-o-muerte. At last we were moving. Nearly an hour trapped in the dirty inhumane cage of the tube.

And whowas to blame for this? Later, when returning to the dreaded tube to go home all was revealed: signal failure. So no blame for anyone connected to London's useless state run public transport system. No blame, no responsibility. It was the siganls fault. Glad that was cleared up.

Stuck in the slow lane

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As if people were not already feeling the effects of the current economic downturn, the government seems hell-bent on draining every last penny from the pockets of individuals and firms. Under possible plans drawn up by ministers, local councils may soon have the power to charge employees up to £350 a year to park in areas provided by their employers.

The apparent logic (if we can call it that) behind this idea is that it will relieve congestion on our roads and help reduce pollution as the extra taxes will create a disincentive to drive to work. But this is hardly likely to work without significant improvements to public transport – something which, frankly, it would be very naïve to expect. And when you consider that fact that rail fares are going to rise by 11 percent in the South East next year, it looks like commuters are going to be attacked from both sides.

It seems ludicrous to me that a local council can be given the jurisdiction to impose parking charges in areas owned and provided by firms. This higher parking charge could simply force workers to park in the streets or in public spaces, creating further congestion our already overcrowded city centres. As people's disposable incomes are falling, this extra cost of working could prove to be a large blow, especially to those on lower incomes. The government claims to be helping those on lower incomes. Yet currently it is giving with one hand, while taking away with two.

Perhaps as we see rising unemployment we will see a fall in commuter congestion – and maybe then the government will finally be able to justify their poor economic performance!
 

Quote of the week

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"Where Liberty dwells, there is my country."

Benjamin Franklin

(Wordsmith wonders where liberty dwells now)

Blog Review 808

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There are things you should get concerned over people selling and things you probably shouldn't.

Looking at that other Senate seat up for grabs. It's almost more edifying to see them being sold to the highest bidder.

There are still those denying the existence of a credit crisis. Not all of them are mad.

Can we please, please, remember that capitalism and free markets are not the same thing? Indeed, that the interest of the former is often in closing down the latter?

Five Labout Governments and five runs on the pound. Is this enough to be considered as evidence?

Might this be what ails the education system these days?

And finally, a suggestion for an animal charity if that's what you'd like to support in this season of goodwill.

Trade Camilla, it's called trade

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Camilla Cavendish employs the following arguments urging that we really should do something to start building our own renewable energy systems.

Take wind power, a huge growth area. We don't make a single wind turbine in Britain. We import from Spain, Germany and Denmark, which got the wind in their sails long ago and now have 90 per cent of all the industry jobs. Or nuclear. We have only one postgraduate nuclear engineering course - at Manchester University. Our nuclear engineers are as few and ageing as our nuclear plants. The consensus seems to be that any new plants will be built mostly with French and American components, and French labour.

Even solar energy is dominated by Germany, where nearly half a million houses have solar roofs because its Government pays above-market rates for individuals selling power back to the grid.

The sad thing is that these aren't arguments for us to start subsidising our own renewables industry. They're actually arguments that we should do nothing so damn foolish.

We are in a situation where Johnny Foreigner has gone and done all the research (an expensive thing to do), developed an industry in scale (more expensive) and ladled out squillions in subsidies to do so (extraordinarily expensive). Now that they've got these industries producing items that we want at prices we're happy to pay our correct course of action is to go and buy some of them. The very last thing we want to do is pay out the same eye watering sums to replicate what they already have.

Sure, we'll have to produce something that someone else wants to buy off us to pay for them but that's fine. It doesn't matter whether that something is in the green energy field, insurance, ballet performances or pork products. We specialise, just as they have, and we swap the resulting production.

We really don't have to go and build these machines ourselves when others are already better than us at doing so. There's this process called trade out there which will get them for us. Might be worth looking into it, don't you think?

UAW leaves MI SOL

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As someone from Michigan, I’m upset by the plight of the 'Big Three' car manufacturers. However, it is not Congress that has dismayed me by not bailing them out, but rather the extraordinarily selfish refusal of the UAW (United Auto Workers) to accept pay cuts. GM currently pays workers over $70/hr (wages, plus pensions, and health care for workers, retirees, and spouses), while Toyota’s labour costs only $48/hr. The UAW have refused to guarantee to take a pay cut before their current contract ends in 2011, seemingly oblivious to the fact that the companies may well not exist by then.
 
I'm in full agreement with those who voted against the bill: the UAW needs to make sacrifices for the sake of its workers and the survival of the industry. It is unfortunate that the local press has blamed the Senate for the failure to reach a deal, while the unions get away with strangling the life out once world-beating businesses. Sadly, chapter 11 bankruptcy is probably the Big Three's only way out.

And with an estimated 3 million jobs tied to the Big Three and their failure, it’s only a matter of time before Michigan finds itself in serious trouble as well. While the Bureau of Labor Statistics reports national unemployment at 6.7 percent, Michigan sits at 9.3 percent, with nearly half a million residents unemployed. The US as a whole is coming to realize that it is in a recession; Michigan, however, has (arguably) been in one for eight years. Unlike the rest of the US, the state was unable to recover after the downturn of 2000, thanks to its uncompetitive industrial base.
 
Regardless of whether a bailout yet goes ahead, the cost of Detroit to the taxpayer is expected to be high.  According to the Detroit News, “If two of the Big Three declare bankruptcy and are forced to liquidate, federal and state taxpayers would lose $66 billion in the first two years alone".

In the long run, I understand that automakers would be best off filing for bankruptcy protection, allowing for massive restructuring and rebuilding of the auto industry.  In the short term, however, it’s a frightening time for Michigan.