I found it gratifying that Leonard Hyman and William Tilles, writing at OilPrice, had much the same reaction that I did to the power and related water problems that people in Texas struggled with last week:

We have just witnessed the damage caused by poorly designed energy grids—rolling blackouts, skyrocketing electricity prices, people sleeping in their cars and in one insulated room to keep warm. At the same time a weaponized right wing media swings into action blaming wind turbines and the green new deal for Texas’s energy woes. There is a pattern here. These are variants of stories told after California’s forest fires and resulting power outages. But we see no easy end of power outages that have plagued electricity supply in recent years while adverse weather events seem to get more frequent and impactful. (See Figure 1.)

But this is the bottom line. In a way an electric system is like maintaining a car. Spend adequately on repairs maintenance etc. and reliable performance is reasonably assured. Or one could skimp repeatedly on maintenance, save a lot of money over the years and take one’s chances on vehicle reliability. The electric system in Texas was built it appears around the latter proposition. Their reserve margins are the lowest in the country (about 8%). And this is the third time the electric system failed to perform adequately in winter (1989, 2011 and 2021). Our point here is that any system that consistently fails in this manner regardless of the governance regime is designed that way— despite claims and protests to the contrary. This is a big problem for any region because an increasingly digital economy requires highly reliable electricity service. And what is being provided at present in ERCOT is anything but.

They go on to suggest that the problems will only become worse as people buy more electric vehicles which depend on plentiful, reliable electricity.

I was astonished at the figure they cited for the reserve margin of Texas’s electrical energy system. 8%? Really? Keep in mind that the ERCOT system is almost entirely self-contained. That’s a lot more confidence than I would have. I guess that’s the confidence it takes to be a Texan.

Global Macro Monitor illustrates how different the present spate of quantitative easing is from the one that was implemented as a response to the financial crisis. You could read the text or just skip to the bottom of the post and look at the two graphs, of the year-on-year growth of bank credit and the M2 money stock respectively. They pretty much tell the whole story. And illustrate neatly why I’ve been expressing concern.

I strongly suspect many will find the results of Technometric’s Direction of the Country index counter-intuitive:

Each month Technometrica’s monthly survey of Americans produces a few key metrics. We launched the tracking study in February 2001, and it is in its twentieth year now. Thanks to the sponsorship of Investor’s Business Daily, our media partner, without which we would not have been able to amass this data.

The objective of this article is twofold. The first is to deliver on the story’s headline, and the second, to introduce seven indexes that TIPP publishes each month to measure various country facets.

Here’s the index I found the most intuitive. The question was “Generally speaking, how satisfied are you with the direction that the country is going in at this time in terms of morals and ethics?”

Now here’s the big question: what will their indices look like in four years?

California has contradictions, too, as the editors of the Wall Street Journal observe:

The contradictions of green energy policies are becoming more obvious in the real world, and now comes more evidence in a new study of California’s electricity rates. The policies even contradict green climate goals.

“California has charted an ambitious course towards decarbonizing its economy,” the study by nonprofit Next 10 and the University of California, Berkeley Energy Institute at Haas declares. “At the same time, California has among the highest electricity prices in the continental U.S. These two facts create a tension: decarbonizing the economy most likely requires electrification of transportation and space and water heating, but high prices push against such a transition. High prices also have troubling implications for equity and affordability.”

Meanwhile, California imports a third of its energy from other states. Since energy is fungible by which I mean you can’t tell the difference between energy generated from green sources and that generated from burning fossil fuels when it’s coming down the wire and if any of the energy you’re buying is being augmented by energy from non-green sources it renders the entire thing sophistry.

They continue:

And here’s the kicker: Folks with solar panels get paid for surplus power they don’t use—sometimes at two to three times the rate of wholesale power. So California pays the well-to-do to generate solar power it doesn’t need and then pays Arizona to take it.

We’ve written for years that state “net-metering” programs shift the grid’s fixed costs to low- and middle-income people without solar panels. The Next 10 study estimates that this cost shift translates into $230 more for an average annual electric bill and $124 for lower-income customers with subsidized rates in San Diego.

Yet 25% to 30% of all residential electricity is discounted for low-income customers, and “the cost of this subsidy is borne by all other customers,” the study says. In other words, the middle class ends up financing rate subsidies for the poor aimed at ameliorating the higher costs of solar subsidies for the well-to-do. California’s cap-and-trade program and utility “public purpose programs” like battery subsidies add several more cents per kilowatt hour.

The study concludes that the state’s electric rates are so regressive that they could discourage people from buying electric vehicles and electrifying their homes by replacing gas-fueled appliances. Instead of raising electric rates, the study suggests making policies more progressive by increasing income taxes to promote its climate goals. So subsidize the rich, then tax them more.

For politicians it’s win-win-win. They get cred for supporting green policies and provide subsidies for the rich and poor alike. But the subsidies for the poor aren’t large enough to make up for the contradictions in the policy.

Government of the poor by the rich for the rich. As somebody said an environmentalist is somebody who already owns a cabin in the woods.

The editors of the Wall Street Journal point out different contradictions in the Biden Administration’s policies:

Friday morning’s airstrike against Iran-backed militias in eastern Syria sends a clear message: President Biden will use force to defend American lives. But this welcome development is an exception to the rest of Mr. Biden’s emerging Iran policy.

[…]

On the other hand, there’s Mr. Biden’s seemingly eager desire to return to the flawed 2015 nuclear deal with Iran. After announcing that Washington couldn’t “snap back” United Nations sanctions, the new Administration is consulting with South Korea about releasing at least $1 billion in frozen Iranian assets. Secretary of State Antony Blinken said this week the U.S. wants to “lengthen and strengthen” the accord—good—but then said President Trump’s sanctions on Iran had failed.

IMO sending a clear message is a lot better than sending mixed messages. There are times when strategic ambiguity is beneficial but this isn’t one of them.

I thought that President Trump’s abrogation of the JCPOA was a bonehead move. I wasn’t enthusiastic about the agreement either in process or as policy but we had already borne its costs while the benefits were still to be reaped.

As Heraclitus put it you can’t step in the same river twice and I strongly suspect that the Biden Administration will eventually reach that conclusion.

In his New York Times column Nikolas Kristof calls out President Biden:

The United States government publicly identified Crown Prince Mohammed bin Salman of Saudi Arabia as the murderer of an American resident, and then President Biden choked.

Instead of imposing sanctions on M.B.S., Biden appears ready to let the murderer walk. The weak message to other thuggish dictators considering such a murder is: Please don’t do it, but we’ll still work with you if we have to. The message to Saudi Arabia is: Go ahead and elevate M.B.S. to be the country’s next king if you must.

All this is a betrayal of my friend Jamal Khashoggi and of his values and ours. But even through the lens of realpolitik it’s a missed opportunity to help Saudi Arabia understand that its own interest lies in finding a new crown prince who isn’t reckless and doesn’t kill and dismember journalists.

What that tells us is that there’s more to U. S. support for the Kingdom of Saudi Arabia than Trump’s cozying up to dictators and getting rid of Trump changed little in that area.

It’s a neat illustration of the contradictions in the Biden Administration’s goals. We had actually stopped importing oil from Saudi Arabia. That was largely a consequence of fracking and the promise of ease in bringing in oil from Canada. The Biden Administration’s green policies are signalling an end to that which will have the unwanted secondary effect of maintaining the importance of our relationship with Saudi Arabia. It is the source of much evil.

Update

The editors of the New York Times are critical but not as hard on him as Mr. Kristof:

Earlier this month, the president announced that he was banning billions of dollars in arms shipments to Saudi Arabia for its continuing war in Yemen, which has created a humanitarian disaster. In conjunction with the publication of the intelligence assessment, the administration this week announced more travel bans against Saudi officials involved in the Khashoggi operation, and the State Department added a new category of sanctions, named “Khashoggi ban,” to withhold visas from anyone involved in state-sponsored efforts to harass, detain or harm dissidents and journalists around the world.

But when it came to penalizing the crown prince personally, Mr. Biden ended up in the same place as his predecessor. In effect, Mr. Biden acknowledged that relations with Saudi Arabia, an ally against the ambitions of Iran, a tacit ally of Israel, a trade partner worth tens of billions of dollars and an oil producer with the ability to seriously disrupt the world economy, were too important to American interests to risk by punishing the all-powerful prince.

or, said another way, at least he’s not Trump so that’s something.

At his new digs, which I’ll probably put in my blogroll today, Scott Alexander posts an open letter to Republicans. Or maybe that’s not what it actually is—it may be a warning to Democrats of the risks their party is taking. It’s titled “A Modest Proposal for Republicans: Use the Word ‘Class'”. If you’ve read Swift’s “A Modest Proposal”, the template for such, it may suggest why I question to whom it is being addressed. It’s a critique of the new incipient upper class, adherents to

a made-up mystery religion that college-educated people invented so they could feel superior to you. Why are they so sure that “some of my best friends are black” doesn’t make you any less racist? Because the whole point is that the only way not to be racist is to master an inscrutable and constantly-changing collection of fashionable shibboleths and opinions which are secretly class norms.

In the piece you’ll find a number of themes I’ve sounded here pretty regularly over the years. That insisting that jobs that don’t pragmatically don’t require a college education require one which is actually a strategy for limiting access and subsidizing college administrators. Evidence for that includes that we’re spending three times as much in real terms on college education as we did thirty years ago but that’s not reflected in the wages of college professors—it’s reflected in administration payrolls.

That populist Republicans are erring in not making common cause with people whose beliefs are closer to theirs than they are to those of the Democratic leadership which includes many of the constituencies on which Democrats have depended for the last 80 years as well as those they’re depending on for the future.

It’s long and a bit hard to excerpt but I recommend reading the whole thing.

Here’s another snippet, on how greatly separated the mainstream media are from most Americans:

67% of US families watch the Super Bowl – what percent of New York Times editors and reporters do? 20% of Americans go to religious services weekly – how many of those work for the New York Times? How come 96% of political donations from journalists go to Democrats? Your job is to take a page from the Democratic playbook and insist there is no reason any of this could be true except systemic classism, that any other explanation is offensive, and it’s the upper-class media’s moral duty to do something about this immediately.

to which I’d add that 20% of Americans drive trucks as their primary vehicles. I wonder how many New York Times, Washington Post, or CNN journalists do? He proposes redubbing the “mainstream media” as “the upper class media”, tying them to the new would-be upper class.

Joseph C. Sternberg expresses concern about the likelihood of increasing capital gains taxes in the near future in his most recent Wall Street Journal column:

Expect monetary policy to bleed slowly but surely into tax matters as well. The vector will be capital-gains taxation, which is booming in the current recession, contrary to all economic logic.

Surging capital-gains revenue helps explain why blue states such as California aren’t currently in the red. Politicians are taking notice. Minnesota’s and Washington’s governors are proposing higher capital-gains tax rates, the Journal reported this week, as are Democratic lawmakers in Connecticut. Some New York Democrats aim to leave no capital gain behind, even the unrealized sort—a plan is on the table to mark taxpayers’ assets to market and then tax paper gains every year.

Capital gains also figure prominently in most Democratic plans to tax the rich at the federal level. President Biden proposed on the campaign trail last year that wealthier filers pay a capital-gains rate equal to their ordinary income rate, which he would raise to 39.6%.

It’s a truism that if you tax something you get less of it. Do we really want less income or investment? I don’t think so. I would argue that we should want less goods consumption, particularly the consumption of imported goods which is why a national sales tax or VAT as an replacement for the income tax makes economic sense.

Unfortunately, many politicians think more like Willie Sutton than like economists so I won’t be surprised if we see an increase in the capital gains tax soon.

IMO what we could really use is reform in the law regarding capital gains so that investment, particularly domestic investment, is taxed less while money spent speculating shouldn’t be deductible at all. A lot of this would be rendered moot if the corporate income tax were to be abolished entirely as it should. But I can’t see that happening in the foreseeable future.

Let’s start this post with a simple assessment of the present situation with respect to a nuclear-armed North Korea. At this point

• North Korea has nuclear weapons.
• We don’t actually know the size of its nuclear arsenal. It’s thought to be more than 50 but fewer than 100 weapons.
• It is believed to have the missile capability of delivering a nuclear weapon anywhere in the continental U. S.

Onwards to the impetus for this post. In his Washington Post column Josh Rogin says that opening negotiations with North Korea is an urgent necessity, won’t wait until the administration is ready, and the situation is probably different than the administration is expecting:

“North Korea’s ballistic missile and nuclear weapons programs grew over the last four years,” a senior administration official told me. “The regime and its arsenal became an even greater threat.”

and

If the Biden team doesn’t make the first move, it risks being accused of returning to Obama’s pattern of “strategic patience,” waiting for Kim Jong Un to come crawling. But the record shows that North Korea is more likely to buck than buckle, and a long silence from Washington could be broken by the loud boom from a new nuclear test. That would set off a familiar escalatory cycle that could make real progress unattainable.

and acknowledges the basic challenge to negotiations:

The elephant in the room is China. Beijing is not likely to help the United States increase pressure on North Korea, as it did in 2017. Linking North Korea diplomacy to the U.S.-China relationship didn’t work in the Trump administration, and U.S.-China relations aren’t likely getting better soon.

In the past I’ve made this analogy. When you’re worried about the neighbor’s dog biting you, you don’t negotiate with the dog. The only negotiations worth conducting are with China but there are some even more basic questions I’d really like answered:

1. Is North Korea deterrable?

   North Korea has the ability to hurt the United States but we have the ability to destroy North Korea utterly. Which brings us to the even more fundamental question—

2. Do we still believe in deterrence?

I’ve written extensively about nuclear deterrence over the years. It has physical requirements, policy requirements, and psychological requirements. The physical requirement is that you must have the ability to response in case of nuclear attack. We’ve got that. The policy requirement is that you must be committed to acting decisively in the case of nuclear attack. The psychological component is that your opponent (in this case North Korea) must believe that you will they face destruction if they attack us with nuclear weapons.

I believe that we no longer plan to use nuclear weapons under any circumstances which, essentially, means we no longer believe in deterrence. The North Koreans are aware of this. At least they’re certainly acting as if that’s what they believe. Maybe they believe their bunkers will protect them. For deterrence to work we need to believe in it ourselves. I wish President Biden the best of luck in convincing his caucus that we will use nuclear weapons.