Renewable Energy from MG&E

MG&E has a program that allows you to buy all of your electricity from renewable sources for a few cents extra per kWh.

This five-minute video profiles another family that subscribes to Madison Gas & Electric renewable power and runs two businesses out of the home. I like the fact that they mention other energy saving decisions such as owning only one car. These people remind me of my family, except they don't have an infant and their house is fixed up nicer.

I hope eventually MG&E can transition everyone over to renewable energy. The difficulty will be maintaining non-renewable production capacity for when the sun isn't shining and the wind isn't blowing. As a result, the cost of having over the half the population subscribed to RE might be more than a few cents a kWh. Maybe the coming decades will see new technologies to store energy from renewable sources and thereby obviate the need for non-renewable electricity sources altogether.

Admitting the Problem Is the First Step

Contrary to what John McCain suggested at the beginning of this crisis, the fundamentals of the economy are not strong, and some of the root causes of this crisis had to do with the day-to-day struggles that ordinary people are going through with flat wages and incomes but constantly increasing costs. That puts pressure on them to take out more debt, to use home equity loans, to try to refinance. It created an environment in which this kind of crisis potentially could occur. -Obama on Face the Nation on Sept 28, 2008

This means that, according to Obama, anyone who experiences a decrease in real income is under pressure to go into debt. People living within their means just isn't an option.

The proposed solution is a debt-financed bailout of companies and people who took on too much debt. This actually makes sense if we admit that a highly leveraged economy doesn't work. We're still arguing, though, that a good banking system involves a lot of debt and any time real wages fall it's natural to borrow to maintain consumption levels constant. We're still justifying our addiction. No program to wean us off will work until we admit we have a problem.

A Few Days Considertion by Congress Seen as "Second-Guessing"

From an AP story on Sept 23, 2008:

Investors grew fearful that top economic officials updating Congress about efforts to work out a $700 billion financial rescue plan were facing a greater degree of second-guessing from lawmakers than expected.

Congress is second-guessing efforts to work out a $700 billion bailout? Isn't that like parents second-guessing their child's request for a new toy. Second-guessing is supposed to be when you criticize a decision you don't have the authority to make.

Congress does have the authority to spend money. The Treasury and Fed do not. So I would call it wise and prudent first-guessing.

The AP writer seems to think that those who would like a bailout naturally deserve to have their way. Any debate by the people with that actual authority to approve the bailout is seen as second-guessing.

Congress is right to take its time before taking such a huge decision.

Tying Health Insurance to Employment is Misguided

There has been a lot of talk about health care in connection with the upcoming presidential election. The main difference between the two candidates is Obama would strengthen the ties between employment and health insurance while McCain would weaken them.

Severing health insurance from employment is the correct policy. Linking health insurance to employment is based on good intentions, but in practice it is a burden rather than a benefit to buyers of insurance, especially those of modest means who the policy is supposed to benefit.

Reasons against employment captive insurance:

• If someone gets a long-term illness while on an employer sponsored heathplan, it may be hard to maintain coverage after a job change. The employee can continue on the plan for 18 months, but then is forced to find other insurance. Health Insurance Portability and Accountability Act (HIPAA) provides protections for someone moving to another group policy, but the protections vary from state-to-state if they are getting an individual policy. Companies understandably don’t want to “insure” against a peril that has already happened.
• Even in the absence of an illness, employer sponsored insurance complicates job changes by adding another complication. This affects the boarder economy by decreasing labor mobility.
• If employees want the benefit of employer contributions but want a different plan, they must lobby their HR department to provide another option. This could affect the group rate on the existing policy, so it’s a complicated decision that takes time away doing work.
• Since group rates are based on the health of the entire group, there is pressure for employers to takes steps to encourage employees to make healthier choices to keep everyone else’s premiums down. This is an unsettling intrusion into personal decisions.

Reasons in favor of employment captive insurance:

• A group of people may be able to negotiate a slightly better rate.
• Some people lack the discipline and wherewithal to shop for insurance and pay their premiums on time. (How do these people buy their auto and property insurance?)
• The group gets considered together so that people with lower health risks pay slightly higher premiums allowing the sick to pay slightly lower premiums than their risk profiles justify. Winners of the genetic lottery of health help pay for the losers.

How to disconnect health insurance from employment while preserving some of the benefits of the employment captive insurance:

• Provide tax credits to families and individuals who earn up to three times the federal poverty line to help pay for health insurance and/or fund their Health Savings Accounts. The credit should be phased out slowly with income to avoid penalizing people for earning more.
• End the 18-month limitation on COBRA.
• Expand HIPAA to force insurers to offer a rider that allows people to transfer to similar insurance plans without regard to preexisting conditions that developed since the original policy began.
• Change the tax laws so they don’t favor employer-based plans over individual policies.
• Research ways to transition socialize risk of genetic illness only. This is in preparation for the day when genetic testing can predict chance of illness based on testing in the first week of life.

The upshot of the policy I’m calling for is to a) help the poor pay for their health care and b) stay out of everyone else’s way so people can take charge of their health care purchases.

I'm not endorsing either presidential candidate with this post. I'm calling on McCain to address the moral obligation we all have to help the poor pay for their healthcare. I'm calling on Obama to address the moral obligation we all have to take charge of our own healthcare purchases.

Negative Tone in Obama Fundraising Letter

I wonder what the motivation is behind the repetitive negative language in this Obama fundraising letter. It has nine consecutive sentences beginning with the words “I don’t”.

I don’t want to wake up four years from now and find out that millions of Americans still lack health care because Washington wouldn’t take on the insurance industry. I don’t want to see that millions more jobs have been shipped overseas as we stood idly by and allowed our economy to remain tilted against working Americans.

I don’t want to see that the oceans have risen a few more inches and that the planet has reached a point of no return because we couldn’t find a way to stop buying oil from dictators.

I don’t want to see more American lives put at risk because no one had the judgment or the courage to bring a misguided war to a responsible end. I don’t want to see homeless veterans on the streets. I don’t want to send another generation of American children to failing schools.

I don’t want that future for my daughters. I don’t want that for America.

There probably is a good political reason to write like this, but I can’t imagine what it is.

Now Is the Time to Prepare for a Possible Oil Crisis

Although it’s a good thing for economic growth, I am somewhat disappointed to see oil prices falling. The downside to falling oil is it takes away the urgency to deal with the fact that oil is a finite resource.

People have called the recent rise in oil prices an “oil tax”. This makes some sense because oil fuels our economy. It's a misleading way, however, to model the effects of oil prices. Throughout human history, economic growth has been powered by human and animal muscle. Sun falls on the earth, provides energy for plant food, and we turn some of that energy into human and animal powered labor. We discovered that some of the energy from the sun had accumulated for billions of years and formed fossil fuels. This allowed the industrial revolution, in which production and human population peaked dramatically. A few hundred years of burning fossil fuels is the exception in human history. Calling rising energy prices a “tax” makes it seem like cheap energy is a birthright instead of a brief anomaly in the course of human history.

The issue of long-term energy supply, not the issue of short-term price fluctuations, should be our main concern. The world economy and the supply and distribution chains to provide for the needs six billion people depend on energy. We have a lot of good ideas for alternative energy, but we have no solid plan for how we will provide for everyone once fossil fuels become depleted to the point of being impractical to extract.

Hopefully, increasing fuel prices will be gradual. Those higher prices will encourage drilling for oil in more locations and will encourage finding better ways to get energy from fossil fuels other than oil, such as coal and oil shale. At the same time, these higher prices will encourage development of new energy sources. This hopeful scenario is the probable outcome, but “probable” isn’t good when the alternative outcome is the collapse of world economy. Even this hopeful/probable outcomes isn’t ideal. It has us involved in wars and trading with countries we disagree with for decades to feed the oil the addiction while alternatives are being developed.

The government should initiate taxes to make sure fuel costs stay high. This will encourage development of new energy sources on our own time table, rather than under crisis. The fact that there is no plan should scare the heck out of us. Now is the time to prepare for the unlikely possibility of seeing an energy crisis in the next few decades that is so intense it ends the world economy as we know it. Doing nothing would probably be okay, but let’s be conservative and take preventative action now.

A Very Slow Shift Away from a Culture of Risk and Debt

More articles about saving money have been appearing lately in the personal finance section of Yahoo Finance. This makes me think that the mortgage problems are making people more risk averse, which IMHO is a very good thing.

In that vein, there was an article today with the promising title Some Live Without Credit Cards -- Could You? Unfortunately, most of the article buys into the banks’ way of thinking that some consumer debt is a good thing and that having a high credit score matters. These gems are just a small sample:

• Stop to consider the long-term implications on your credit score.
• A credit card is going to demonstrate how, if you pretty much have an open-end except for a credit ceiling, you can charge varying amounts each month, thus your payment each month is going to be different, and they like to see how you handle that.

If banks like it, I need to run out and do it? Why do we care what banks like to see? I guess because we want to borrow more money. But wait, I thought this article was about living without credit cards.

A third of the article is about things you can do to make banks like you and want to lend you more money. The rest is about people who can’t get banks to lend them money and people who do very stupid things for debt. The tenor is that some use of consumer debt is a smart thing as long as you don’t go overboard. There is only one sentence about the concept of spending only what’s in the bank account. All this is unfortunate, but still, front page articles even questioning consumer debt is a step in the right direction.