links for 2008-05-21

• Did Feldstein Criticism Get Under Kohn's Skin? - Real Time Economics
• Lying With Charts: WSJ Edition - Economics Blog - Zubin Jelveh
• Court Rules Paper Money Discriminates Against Blind - washingtonpost.com
• Grocery Stores in Low Income Neighborhoods - EurekAlert
• US economy in ‘uncharted waters’ - FT
• Confessions of an economist - Information Processing
• John Horgan on "Can Chaoplexology Save Economics?" - EconoSpeak
• Urban Density - Alain Bertaud
• Who's to blame for $4 gas - Tim Haab
• The Cure for America's Chronic Recession - Robert Reich
• Preserving the open economy at times of stress - Martin Wolf
• Headline vs. Core Inflation: The Battle Continues - Real Time Economics

Comments

[anne]

http://www.nytimes.com/2008/05/21/science/earth/21biofuels.html?hp&pagewanted=print

May 21, 2008

New Trend in Biofuels Has New Risks
By ELISABETH ROSENTHAL

ROME — In the past year, as the diversion of food crops like corn and palm to make biofuels has helped to drive up food prices, investors and politicians have begun promoting newer, so-called second-generation biofuels as the next wave of green energy. These, made from non-food crops like reeds and wild grasses, would offer fuel without the risk of taking food off the table, they said.

But now, biologists and botanists are warning that they, too, may bring serious unintended consequences. Most of these newer crops are what scientists label invasive species — that is, weeds — that have an extraordinarily high potential to escape biofuel plantations, overrun adjacent farms and natural land, and create economic and ecological havoc in the process, they now say.

At a United Nations meeting in Bonn, Germany, on Tuesday, scientists from the Global Invasive Species Program, the Nature Conservancy and the International Union for Conservation of Nature, as well as other groups, presented a paper with a warning about invasive species.

“Some of the most commonly recommended species for biofuels production are also major invasive alien species,” the paper says, adding that these crops should be studied more thoroughly before being cultivated in new areas.

Controlling the spread of such plants could prove difficult, the experts said, producing “greater financial losses than gains.” The International Union for Conservation of Nature encapsulated the message like this: “Don’t let invasive biofuel crops attack your country.”

To reach their conclusions, the scientists compared the list of the most popular second-generation biofuels with the list of invasive species and found an alarming degree of overlap. They said little evaluation of risk had occurred before planting.

“With biofuels, there’s always a hurry,” said Geoffrey Howard, an invasive species expert with the International Union for Conservation of Nature. “Plantations are started by investors, often from the U.S. or Europe, so they are eager to generate biofuels within a couple of years and also, as you might guess, they don’t want a negative assessment.”

The biofuels industry said the risk of those crops morphing into weed problems is overstated, noting that proposed biofuel crops, while they have some potential to become weeds, are not plants that inevitably turn invasive.

“There are very few plants that are ‘weeds,’ full stop,” said Willy De Greef, incoming secretary general of EuropaBio, an industry group. “You have to look at the biology of the plant and the environment where you’re introducing it and ask, are there worry points here?” He said that biofuel farmers would inevitably introduce new crops carefully because they would not want growth they could not control.

The European Union and the United States have both instituted biofuel targets as a method to reduce carbon emissions. The European Union’s target of 10 percent biofuel use in transportation by 2020 is binding. As such, politicians are anxiously awaiting the commercial perfection of second-generation biofuels.

The European Union is funding a project to introduce the “giant reed, a high-yielding, non-food plant into Europe Union agriculture,” according to its proposal. The reed is environmentally friendly and a cost-effective crop, poised to become the “champion of biomass crops,” the proposal says.

A proposed Florida biofuel plantation and plant, also using giant reed, has been greeted with enthusiasm by investors, its energy sold even before it is built.

But the project has been opposed by the Florida Native Plants Society and a number of scientists because of its proximity to the Everglades, where giant reed overgrowth could be dangerous, they said. The giant reed, previously used mostly in decorations and in making musical instruments — is a fast-growing, thirsty species that has drained wetlands and clogged drainage systems in other places where it has been planted. It is also highly flammable and increases the risk of fires.

From a business perspective, the good thing about second-generation biofuel crops is that they are easy to grow and need little attention. But that is also what creates their invasive potential....

[anne]

http://www.juancole.com/2008/05/4-awakening-council-members-killed.html

May 21, 2008

Bush is clearly intent on keeping 140,000 troops in Iraq throughout the rest of hist term. * He called up 7 combat brigades to replace those who are cycling out.

* http://www.mcclatchydc.com/iraq/story/37669.html

-- Juan Cole

[Trust is Earned]

Robert Reich..."Problem is, the public doesn't trust the government to spend money on infrastructure wisely. Why should it, when so many earmarks go to dumb infrastructure projects like "bridges to nowhere"?"

Trust is earned. It may be a slow process.

"But the biggest challenge now, as it was before the 70s, is lack of aggregate demand."

Citizens in aggregate consume all the resources they produce, then borrow resources from overseas to consume more. Higher natural resource prices mean that citizens must start making more items that OPEC wants to consume, instead of items that citizens want to consume. That is, the demand is now coming from resource rich countries, and we must meet it to trade for natural resources.

Borrowing ever more resources from overseas to pay citizens to keep producing items for domestic consumption can only go on for so long. Eventually, retooling to produce items for OPEC et al consumption must take place.

[Development]

Martin Wolf..."So is the rising prosperity of China, India and other emerging economies in the interests of today’s high-income countries? The correct answer to this is: not necessarily. It would be absurd to pretend otherwise...The big disadvantage is greater competition for scarce resources."

We must produce more to trade for natural resources. This means we can consume less per hour worked. Another change is the balance of military power. They get relatively stronger.

[Progressive]

Zubin Jelveh..."Hmmm, corporate tax revenues have declined dramatically. Why, then haven't overall tax revenues dropped? Well, we can primarily thank social insurance programs like Social Security for that."

Corporate tax rates have been declining in other Western countries also, due to world competition for corporations to locate there. They went with regressive VAT taxes, and we went with regressive payroll taxes to replace the revenue.

Its interesting that citizen derived income tax revenues remained steady despite a dramatic fall in the top citizen income tax rates. Many Western countries completely eliminated the capital gains tax in an effort to spur growth.

In any case, it appears that to increase total tax revenues in today's competitive world, regressive taxes must be levied. That should be taken into consideration when new spending programs are contemplated. It appears the less well to do will end up shouldering much of the additional tax burden, the way the less well to do also shoulder much of the burden from inflation extracted resources.

[anne]

http://www.epi.org/printer.cfm?id=2947&content_type=1&nice_name=webfeatures_snapshots_20080409

April 9, 2008

Corporate Tax Declines and U.S. Inequality
By John Irons

Over the last 60 years, the U.S. tax code has dramatically shifted away from corporate taxes and toward taxes on individuals, especially through the payroll tax, the financing backbone of Social Security and Medicare. In the 1950s, the corporate income tax brought in, on average, one of every four dollars in federal tax revenues. By the 2000s, however, it raised just one of every 10 tax dollars.

The shrinking share of corporate taxes was made up by an increase in payroll taxes to fund social insurance and retirement programs. Excise and other taxes—such as fuel taxes, phone taxes, etc.—shrank as well over the last 60 years, while the individual federal income tax rose slightly, from an average of 43% of total federal revenue in the 1950s to 46% in the 2000s.

This shift is important because of who pays these different taxes. The corporate income tax is significantly more progressive than other taxes. Those with incomes in the top 20% of the income distribution (those making more than about $86,000 a year in 2007) pay four times the average tax rate on corporate income than the middle 20% (those making between $27,000 and $48,000); while, for the payroll tax, those in the top 20% actually pay less than those in the middle as a share of their income.1

This shift has been one of the factors leading to the drop in average federal tax rates for the very highest earners. Between 1960 and 2004, the average tax rate has fallen by about 14 percentage points (from 44.4% to 30.4%) for the top 1% of earners (those making more than $435,000 in 2007), while it has increased slightly (from 15.9% to 16.1%) for those in the middle 20%. 2

Without offsets, further erosion of corporate tax revenues—either through lower statutory tax rates or through special preferences—would expand the already wide and growing income inequality in the United States.

Notes

1. See Tax Policy Center, Table T06-0308, "Current-Law Distribution of Federal Taxes By Cash Income Percentiles, 2007," November 30, 2006.

2. See Thomas Piketty and Emmanuel Saez, "How progressive is the U.S. federal tax system? A historical and international perspective." Journal of Economic Perspectives, Winter 2007; data at http://elsa.berkeley.edu/~saez/jep-results-standalone.xls.

[anne]

Paul Krugman also wrote of the relative decline in corporate tax share, and I remember Warren Buffett commenting on this in the later 1990s. The decline in share has long been policy driven, and I need to look to shares in Europe and Canada, Japan, and Australia.

[anne]

http://www.nytimes.com/2008/05/21/business/21leonhardt.html?ref=business&pagewanted=print

May 21, 2008

A Diploma's Worth? Ask Her
By DAVID LEONHARDT

Women, who in the past few decades have become vastly more educated, answer the question of the value of a college education in a not-so-subtle way: the return on investment has been excellent.

[dilbert dogbert]

Markets in Low Income Areas:
I have a small bit of data. The Coop in East Palo Alto closed its doors when its customers "shopped" it out. The other close store across the freeway also closed but I don't know the reason. Maybe the slack has been taken up by the stores that cater to our Mexican population. I don't know.
The other data was clients of my late wife who did their books. They ran grocery stores in West Oakland. The stores catered to the majority black population of that area. The store had no windows and only one door to enter and exit from. All the meat in the store was tagged like the high end stuff in department stores.
The bottom line is that low income areas are a tough place to do business. Most folks would go the easy way and avoid these areas.
These stories are dated as the demographics and social problems of these areas have changed dramatically from the time when these events took place. East Palo Alto was in chaos as was West Oakland. Maybe the grocery chains are missing a bet?

[anne]

"The Coop in East Palo Alto closed its doors when its customers 'shopped' it out."

What does this mean?

[anne]

That the poor tend to pay more, I well know. But, I do not understand the dynamics of the problem and need to ask questions. Why was Magic Johnson evidently wildly successful in opening theaters in African American communities, where theaters had long been missing? Besides, the theaters were even missing in middle class to affluent African American communities. What might this mean?

[The Baron]

anne, one thing to remember is that corn is only native to America. So, technically, in all of those other places it is grown, Europe, Russia, Asia, Africa, it is an invasive species. Much of what is grown in the U.S. as commercially viable, indeed essential, crops is non-native. I won't even go into all the GM, patent protected ADM/Monsanto, seed that is being spread all over the globe. Talk about non-native (unnatural), invasive species...

While we shouldn't discount the unintended consequences, or the potential regional effects of our actions, at least some recognition needs to be made that agriculture, in general and in specific, is the deliberate implementation of non-natural, non-native plants, animals, and growing techniques. So we shouldn't knee-jerk react that it is bad just because it's not what was there before. If that is our criteria, then we need to immediately stop most of the worlds food production.

One of the great benefits to switchgrass, sugarcane, and other second gen biofuels is that, in general they grow on land that is totally unsuited for other crops anyway, and really don't tend to grow well on land that is cultivated for other purposes.

[anne]

Baron:

"One thing to remember is that corn is only native to America. So, technically, in all of those other places it is grown, Europe, Russia, Asia, Africa, it is an invasive species. Much of what is grown in the U.S. as commercially viable, indeed essential, crops is non-native."

Right.