Saturday, September 3, 2011


In an item entitled “American Idiocracy,” the columnist known as Schumpeter wrote in The Economist dated August 13: “American politicians are intent, not on improving their country’s competitiveness, but on gouging each other’s eyes out.” That apt phrase explains the universally low regard in which Americans hold both parties, both houses of Congress and the White House. However well founded, popular disdain seems to have done little to tame the “blame game” in Washington.

Perhaps if elected officials reflected on the law firms and other business partnerships many of them participated in during their time in the real world outside the Capital Beltway, they might see why a relatively lower disapproval rating is quite beside the point. Partnerships are formed to enable two or parties to cooperate pursue mutually beneficial ends. They may be competitors, vying for the same client. They may also be competitors for promotions, prestigious office space, and a bigger share of the profits when that time of year comes. Nonetheless, they are committed to work together to promote their agreed objectives.

Why not consider government as a partnership aimed at the constitutional objectives of forming a more perfect union, establishing justice, insuring domestic tranquility, providing for the common defense, promoting the general welfare, and securing the blessings of liberty to ourselves and our posterity? Those are the purposes for which the people of the United States established this constitutional government. Why not consider all elected officials to serve as general partners in that great and noble partnership? As such, why not hold them jointly and severally liable for the failures of the partnership?

To the extent that our union is less perfect, that injustice prevails, that there is domestic unrest, that the nation has failed to detect and deter threats to its safety, that the welfare of the country as a whole has not been promoted, and the blessings of liberty are unsecured – to the extent we have failed the constitutional purposes of the United States of America – then everyone involved should expect to be held fully accountable. Any partnership – a law or real estate firm, a manufacturing enterprise, a baseball team – performing as poorly as the U.S. government has been would have taken steps to reform its way of doing business, revise its business strategy, and revamp its executive corps.

It is folly to speak of a recession, a budget deficit, or a war as “Obama’s” or “Bush’s.” When the country as a whole is failing, our government as a whole is failing. All elected officials ought to be held accountable for that. No one has done enough to avert the mess our nation finds itself in. No one has even now offered a clear, comprehensive and credible plan to address the structural as well as the cyclical aspects of our economic woes. Government officials ought to be jointly and severally liable and need to find new ways to cooperate to promote the national interest – the general welfare – with diligence, dedication and a decent respect for the opinions of their partners.

Tuesday, June 7, 2011

The Electric Hedge

New cars and new technology command hefty price premiums. To the chagrin of green-but-not-gold revolutionaries, the groundbreaking Leaf and Volt are necessarily new on both fronts for the time being. Nissan’s all-electric (EV) Leaf topped the U.S. News & World Report’s “upscale” small car list this year; it carries a $32,780 starting price tag. GM’s extended-range hybrid (PHEV) Chevy Volt was voted North American Car of the Year and is priced at $40,000. Toyota’s latest model of the hybrid Prius costs a bit more than half the latter amount, while comparable conventional vehicles can sell for less than half the price of their EV and PHEV counterparts. The Leaf and Volt may hold great appeal and long waiting lists, but in these economically challenging times, do they make any sense other than to make an ideological statement? Why pay the upfront premium?

Electric and extended-range hybrid vehicles will give you sticker shock, but they will also save you money down the road and protect you from the shock of higher oil prices. First, while their upfront cost is higher, electric vehicles have hugely lower operating costs. Assuming the current national average: you drive 12,000 miles per year, own your car for the average 6 years, and pay $0.11/kWh for electricity and $3.85/gallon for gasoline. The lifetime cost of a Leaf you buy today, including financing costs and federal subsidies, will be $1,841 lower than the cost of a Nissan Altima. And the primary reason for the cost difference is the $7,910 reduction in lifetime fuel costs. If you have range anxiety and/or need a vehicle that can drive for more than 100 miles at a stretch, then the Volt may be a better match. It will cost $8,315 less to operate than the Chevy Impala, but will also take 9 years of ownership to compensate for the difference in upfront costs.

Leaf and Volt Cost Comparisons Under Current Conditions


Nissan Leaf

Nissan Altima

Chevy Volt

Chevy Impala


$ 32,780

$ 20,950

$ 40,000

$ 23,790


$ 31,815

$ 33,656

$ 40,490

$ 37,716

Lifetime Fuel

$ 1,716


$ 2,110

$ 10,428

Figures calculated using the Rocky Mountain Institute’s Project Get Ready calculator

The chart above does not include lower maintenance costs. The Electric Power Research Institute estimates that EVs incur half the costs of their conventional counterparts: EVs do not need oil and filter changes, spark plug replacements, and timing chain adjustments; brakes last twice as long due to the regenerative braking mechanism.

Granted, Leaf and Volt purchasers would not come close to breaking even under current cost conditions but for the $7,500 federal tax break. Fleet operators, by contrast, can break even more quickly due to economies of scale, longer ownership, higher and highly predictable utilization rates, and lower (commercial and industrial) electricity rates. If a sizeable fraction of the over 16 million fleet vehicles moved towards electrification, the market would be large enough for battery and other component costs to significantly fall and boost EV and PHEV price competitiveness for individual consumers.

In the meantime, another factor could quickly tip the scale in favor of electric vehicles: higher oil prices. If you believe that within the next decade oil prices are likely to gradually or sharply, then purchasing an EV or PHEV is your personal hedge against oil prices. If oil prices in the US rose to European levels of $8/gallon, the lifetime fuel costs of the Altima and Impala would almost equal the cost of the vehicle itself. The Leaf’s lifetime cost would shrink to $12,217 less than the Altima’s cost, and the Volt, to $7,926 less than the Impala. No subsidies needed.

Leaf and Volt Cost Comparisons Under High Oil Prices


Nissan Leaf

Nissan Altima

Chevy Volt

Chevy Impala


$ 31,815

$ 44,032

$ 41,030

$ 48,956

Lifetime Fuel

$ 1,716


$ 2,649

$ 21,669

Furthermore, electric vehicles empower you to hedge against energy insecurity in general. Oil dependence puts you at the mercy of global supply disruptions you cannot foresee or control, whereas electricity can be domesticated. If you are not satisfied with the grid’s reliability, the price or electricity, or your utility’s carbon footprint, you can always produce your own by installing a geothermal system or solar panels in your home. And in the event of an electric supply shock, you can also use your car’s battery as a back-up generator.

Given that the Leaf and Volt have earned high plaudits, the federal and many state governments are offering alternative fuel vehicle tax credits, auto manufacturers are extending highly favorable financing terms, and oil prices are rising, it makes sense to consider an EV or PHEV if you are in the market for a new car. It’s not too early to start thinking about an electric hedge.

By Carolyn Amon

Friday, May 6, 2011


The initial reaction of the stock market to today’s employment report was quite positive. Certainly, the mood was brightened by yesterday’s sharp correction in petroleum prices, and we all know not to make too much of a single month’s data. So, let’s not gloat over this accomplishment, either.

In fact, I am more disturbed than heartened by the news that the American economy added a higher than expected 244,000 non-farm jobs in April. My caution isn’t based solely on the increase in the unemployment rate to 9.0 percent, up two tenths of a point over March. That’s disturbing enough, but consider the rest of the relevant figures:

· Manufacturing jobs increased by only 29,000. By contrast, retail trade jobs grew by 57,100, almost double the production jobs. What does this say about the progress we’re making as a country to shift away from consumption-led growth?

· Government jobs actually shrank, thanks mostly to the loss of 22,000 positions in state and local government, further shrinking the revenue base for the same governments that let the workers go. As budget nooses tighten all across this country, the loss of public sector jobs could be enough to choke off the fitful recovery.

· The Department of Labor reported separately that the rate of new unemployment claims exceeded 1.7 million in April (the 4-week rolling average of 431,250 times four). That means that, roughly speaking, the economy had to produce a gross increase of upwards of two million jobs in order to achieve the net increase of 244,000. That’s an impressive performance for a single month, yet the unemployment rate actually rose nevertheless. There’s a lot more restructuring going on than real growth.

· Looked at another way, the economy would have to produce 360,00 net new jobs for each of the next 36 months to bring the unemployment rate down to a still high six percent. Every time a month falls short – April did so by 116,000 jobs – the bar is raised for the remaining months till March 2014. We’re falling behind, not progressing.

· Worse yet, our aim can’t simply be to reduce the employment statistics. All jobs are not created equal. Just ask the 8.6 million Americans involuntarily working at part-time positions – with reduced pay and low or no benefits.

As a country, we have our work cut out for us. It’s not enough to reduce budget deficits; in fact in the short run that will only make the employment and revenue problem worse. It’s not enough to aim merely to reduce the “jobs deficit.” That is a symptom, not a cause of what ails us. Instead, we must address the trade deficit itself. That means investing and producing more in the United States, importing less, and exporting more. Nothing less will be enough to address the jobs deficit.