Saturday, May 28, 2011

Energy Security vs Water Security

Interesting article in NYTimes on using fracking to unlock oil supplies. Although fracking uses up valuable water supplies,

The oil industry says any environmental concerns are far outweighed by the economic benefits of pumping previously inaccessible oil from fields that could collectively hold two or three times as much oil as Prudhoe Bay, the Alaskan field that was the last great onshore discovery. The companies estimate that the boom will create more than two million new jobs, directly or indirectly, and bring tens of billions of dollars to the states where the fields are located, which include traditional oil sites like Texas and Oklahoma, industrial stalwarts like Ohio and Michigan and even farm states like Kansas.

“It’s the one thing we have seen in our adult lives that could take us away from imported oil,” said Aubrey McClendon, chief executive of Chesapeake Energy, one of the most aggressive drillers. “What if we have found three of the world’s biggest oil fields in the last three years right here in the U.S.? How transformative could that be for the U.S. economy?”

But I wonder how much gain there is if switch from importing oil to importing water? Not that we can ever insulate ourselves from imported oil, there is not that much to frack. But even if there was, aren't supplies of water also important? Would politicians be so happy to have our water consumption decided by an Organization of Water Exporting Countries?

Don't Knock the Ryan Plan?

Joe Nocera tells us not to knock Paul Ryan. Not that he likes the plan itself:
The Ryan plan, which would give seniors a fixed amount they can use to buy health insurance, would undoubtedly shift the cost burden over time from the government to seniors themselves, making health care far less affordable for millions of people. Ryan says that “empowering” health care consumers will help control costs, but that’s absurd: Medicare itself has far more pricing power than the people who actually need treatment.
The first part of Nocera's critique is correct, the cost of health care is shifted to seniors themselves, but the second part makes no sense (though I have seen this before, see here). I wonder how people can hold such contradictory ideas in their heads at the same time? If you shift more of the costs to seniors, who have limited budgets, they will get less health care. If they pay less for health care, costs will fall. Of course so will the amount of health care provided. But you cannot deny that if people cannot afford healthcare they will buy less of it.

Indeed, that seems to be the biggest problem with the Ryan plan. It controls the costs of healthcare by forcing people to buy less than they need.

But then the confused Nocera argues that we should not scorn Paul Ryan. Because the costs of health care are real he argues that:
It would be nice if we could treat the Ryan plan not as an object of derision but as a launching off point for a serious debate. That way, maybe for once we could avert a crisis instead of acting shocked when it finally arrives.
But this seems odd to me. Why not let the Obama Plan be the start of a discussion to control Medicare costs? You don't want to scorn Ryan who argues that Obamacare destroys Medicare. But we should start the discussion with Paul Ryan?

Nocera is really confused.

Friday, May 6, 2011

Supermarkets and Schools

Greg Mankiw connects to this Don Boudreaux article in the WSJ asking what supermarkets would be like if they were run like public schools. Mankiw thinks the article is thought-provoking, so do I, but for opposite reasons I think. Have you ever seen what supermarkets are like in poor neighborhoods? Compare groceries and school in South-Central Los Angeles. The schools are better, much better, and that is saying something. They are even safer. For a study of groceries in South Central you can go here.

Of course there are plenty of good groceries stores in Brentwood and Beverly Hills. So what is the point that Boudreaux and Mankiw want to make. That we can have school choice and the affluent will get good choice and good schools, and the poor will get their education from bodegas and liquor stores? Do they think that the crime and violence, let alone lack of purchasing power, that inhibits supermarkets from moving to poor neighborhoods will not deter schools?

Thursday, May 5, 2011

Playing with Fire

Pennsylvania Senator Pat Toomey puts in his two cents as dumbest legislator early in his term. With Congress playing fire over a debt ceiling bill, he calls for legislation to only pay interest on the debt. As this article in the NYTimes notes:
“I think the important thing to do would be to make it clear to markets that the government is not going to default on its debt,” said Senator Patrick Toomey, Republican of Pennsylvania, whose bill assigns priority to interest payments. “It would be easy, I think, to make it clear to the markets that they don’t have to worry about this.”
Toomey's plan to pay interest payments but not other government obligations -- such as wages -- seems as dumb politically as economically. After all, much of the debt is held by foreigners, so Toomey would pay off the Chinese before American citizens who toil for the public. I guess this fits with the basic Republican idea that interest recipients are more important than average Americans, but it is certainly playing with fire to do so. This would convert the government into a debt junkie who chooses each month whether to pay utilities or the rent and which creditors to hide from. Does Toomey really believe financial markets will still trust US debt under such behavior?