A Goldman Sachs report on the Waxman-Markey climate bill, recently issued to Goldman Sachs' clients, confirms Breakthrough Institute analysis showing the legislation would result in one of the largest commodity markets in the world subject to significant speculation by financial firms, and would have relatively marginal impacts on the renewable power industry.

Titled "Carbonomics: Measuring impact of US carbon regulation on select industries" (not publicly accessible), the report concludes that "A new carbon market presents a major opportunity for exchanges and clearinghouses, especially as more allowances and offsets trade over time."

In a section titled "Carbon exchanges -- build it, and they will (must) come to trade," it estimates the bill would grow the global carbon market to become one of the largest in the world, with trading volume of 175 to 263 million contracts per year -- larger than the oil and gas markets combined and approximately the third largest commodity market in the world after U.S. interest rates and stock indexes. The analysts estimate the profit margin for financial firms resulting from this new carbon market could reach $2 billion per year globally.

The report also examines potential impacts of the legislation on the power sector, concluding that the carbon price expected from Waxman-Markey would not make most renewables competitive, and many regions might pay the compliance fee for the renewable electricity standard instead of deploying renewables:

Continue reading "Goldman Sachs: "New Carbon Market Presents Major Opportunity"" »

By Teryn Norris
Originally published by AlterNet
July 8, 2009

The recent passage of the American Clean Energy & Security Act (ACES) through the U.S. House of Representatives drew different reactions from climate and environmental advocates. But one key perspective shared by most advocates is that, despite its weaknesses, the bill is a good first step. ACES builds a solid foundation for future progress on U.S. climate mitigation, the argument goes, and climate advocates will be well-positioned to strengthen the legislation in years ahead.

But what are the prospects for strengthening ACES in future years? This question is subject to many uncertainties, depending on the vagaries of the political climate. But a closer examination reveals that ACES could create a "super-lobby" of interest groups that will significantly diminish the possibility of achieving future reforms.

The newest climate lobby -- and potentially one of the most powerful in years to come -- is the financial industry. If ACES is signed into law, the global carbon market could become the largest commodity market in the world. According to Bart Chilton, Commissioner of the U.S. Commodities Futures Trading Commission (CFTC), "The potential size and scope of a structured carbon emissions market in the US is unequivocally vast. It is certainly possible that the emissions markets could overtake all other commodity markets."

Continue reading "New Climate Bill Could Create "Super Lobby" Against U.S. Emissions Reductions" »

This analysis was also covered in an op-ed at AlterNet. Breakthrough Institute's full collection of ACES analyses is here.

New analysis by the Breakthrough Institute concludes that the American Clean Energy & Security Act (ACES) could create a vast new carbon derivatives market subject to financial speculation and create a powerful alignment of economic incentives among the financial industry, carbon offset producers, and utilities and fossil fuel companies to weaken or oppose measures to reduce emissions in capped U.S. sectors.

Offset Industry & Utilities

The ACES bill would create new demand for domestic and international carbon offsets by allowing polluters to purchase these relatively cheap offsets in lieu of reducing their emissions. The bill allows for the purchase of 1 billion tons of domestic offsets and 1 billion tons of international offsets each year.

The use of offsets to meet emissions reduction targets has significant implications when evaluating the impacts of ACES. Offset utilization is one of the largest variables in the proposal determining both economy-wide emissions reductions and reductions in capped sectors of the economy, established carbon prices, revenues raised through auctioning allowances and revenues dedicated to clean energy, levels of private investment in clean energy driven by the program, and the revenues transferred from households and other domestic energy end-users to international interests through offset purchases.

How many of these offsets will be utilized is uncertain, however, if all offsets are utilized and purchased at the average allowance price estimated by EPA, the bill would create a domestic offset industry with annual sales of $20 billion per year by 2020. The profit margin on the sale of such offsets is also uncertain, but total profit from domestic offset production is likely to range in the billions of dollars each year. Below is a table estimating total potential sales compared to projections by the EPA (see here) and CBO (see here) on the utilization of offsets through 2020 (value estimates based on EPA price projection of $15/allowance in 2012 and $20/allowance in 2020):

Continue reading "Climate Bill Analysis Part 19: ACES Could Align Economic Interests to Weaken Climate Legislation" »

Driven by record-high gas prices in the first half of the year and the economic crisis that hit in the later half of the year, United States greenhouse gas emissions plunged by the largest amount in decades, according to preliminary data released today by the U.S. Energy Information Administration.

U.S. greenhouse gas emissions, which drive global climate change, fell to 2.8% in 2008 to 5.8 billion metric tons of carbon dioxide equivalent (CO2-e), the lowest level of emissions in any year since 2000. Total U.S. energy consumption also fell 2.2% in 2008, the EIA reports.

(Sorry for poor image quality, blame the source: the EIA)

Continue reading "U.S. Greenhouse Gas Emissions Plunge in 2008" »

Much ink was spilled last week around the release of the banks' stress test, and the reaction was largely negative. In case you missed the debate -- or if you're still looking for clarity -- here are a few key readings:

"Grading the Banks' Stress Test," NYT Room for Debate

"Stress Tests & the Nationalization We Got," Simon Johnson and James Kwak, Baseline Scenario

"Stressing the Positive," Paul Krugman, NYT

"We Can't Subsidize the Banks Forever", Matthew Richardson and Nouriel Roubini, Wall Street Journal

"Background on the Stress Tests," Dean Baker, American Prospect

But very few offered as comprehensive an analysis as Nouriel Roubini at RGE Monitor. For those still trying to make sense of these tests, see his take below (for the full version you need a free account at RGE):

Continue reading "Ten Reasons why the Stress Test Wasn't Stressful" »

In an editorial today criticizing the most recent Obama team announcement on bank recovery policy, the Wall Street Journal editorial board claimed it has supported bank restructuring for 2 years:

"The sounder strategy -- and the one we've recommended for two years -- is to address systemic financial problems the old-fashioned way: bank by bank, through the Federal Deposit Insurance Corp. and a resolution agency with the capacity to hold troubled assets and work them off over time. If the stress tests reveal that some of our largest institutions are insolvent or nearly so, it's then time to seize the bank, sell off assets and recapitalize the remainder. (Meanwhile, the healthier institutions would get a vote of confidence and could attract new private capital.)"

So the question must be raised: where is the Obama administration getting its advice on bank policy at this point, and how is it continuing to justify its opposition to swift nationalization? Even the Congressional Oversight Committee, in its latest April report, supports restructuring or liquidation of the banks. Geithners and Summers aren't stupid, so the only reasonable answer is politics.

Perhaps this is all part of a larger trend, captured by a recent memo in the NYT, "Despite Major Plans, Obama Taking Softer Stands"?

President Obama is well known for bold proposals that have raised expectations, but his administration has shown a tendency for compromise and caution, and even a willingness to capitulate on some early initiatives...

"The thing we still don't know about him is what he is willing to fight for," said Leonard Burman, an economist at the Urban Institute and a Treasury Department official in the Clinton administration. "The thing I worry about is that he likes giving good speeches, he likes the adulation and he likes to make people happy." So far, he said, "It's hard to think of a place where he's taken a really hard position."

Can Obama simply not stand up to the political pressure from bankers pushing against bank restructuring? That's what former chief IMF economist Simon Johnson recently argued in his seminal Atlantic piece, "The Quiet Coup." Or is it largely an ideological problem, particularly with Geithners and Summers?

Nothing is 100% clear, but what's certain is that Obama is performing poorly on this issue, and unless his administration's performance improves soon, it could become the Achilles heal of his legacy. As Robert Kuttner, author of the best-seller "Obama's Challenge" and major Obama supporter, recently concluded an op-ed:

"I fear that these columns have been too polite. They have directed criticisms at Treasury Secretary Tim Geithner and national economic policy chief Larry Summers. Lord knows, they richly deserve the criticism. But let's not kid ourselves. The man they work for is named Barack Obama.

President Obama has promised to run an administration of unprecedented openness. And in some respects, such as the ground rules for spending stimulus funds, he has. But in the most important area of all, the financial rescue, the administration is making trillion dollar decisions relying on the Federal Reserve and a small Wall Street club of advisors, with no transparency or public accountability...

We were promised unprecedented openness. In the most momentous area of policy for getting the economy functioning again for ordinary Americans, we have instead unprecedented secrecy, designed by and for Wall Street. We expected better of Obama."

The Geithner-Summers banking plan has received much criticism (e.g. see Stiglitz and Johnson), but today Jeffrey Sachs issued one of the harshest critiques yet. Basically, the Geithner-Summers plan could allow banks to commit fraud by bidding on their own toxic assets and walking away with huge amounts of taxpayer money. Sachs sums it up here at the Huffington Post:

Continue reading "How to Game the Geithner Plan" »

James K. Galbraith has a tour de force piece in the Washington Monthly on the economic and financial crises, what's at their core and what's necessary to move forward.

Galbraith echoes and reinforces many of the criticisms and recommendations Breakthrough has been offering on the economy for the past six months: more public spending (a lot!); nationalize the banks so they can be cleaned up and re-privatized; and ultimately, spark a new engine of economic growth in the birth of a new clean energy economy.

Galbraith isn't shy either about criticizing President Obama and Treasury Secretary Geithner for stimulus.  It's not bold enough, it reflects the middle of the road economic consensus (and is therefore too timid), and it reflects a misguided attempt at bipartisanship.  Here's the choice quote there:

Second, the new team also sought consensus of another type. Christina Romer polled a bipartisan group of professional economists, and Larry Summers told Meet the Press that the final package reflected a "balance" of their views. This procedure guarantees a result near the middle of the professional mind-set. The method would be useful if the errors of economists were unsystematic. But they are not. Economists are a cautious group, and in any extreme situation the midpoint of professional opinion is bound to be wrong.

Continue reading "Galbraith on the Economy: Time to Go Big or Go Home" »

Investments in clean energy innovation offer the nation's "best strategy" for economic recovery and "the only route to the breakthrough technologies we need" to tackle the nation's pressing energy and climate challenge, said MIT President Susan Hockfield today at a speech delivered at the White House.

Hockfield, an outspoken champion of clean energy innovation, spoke at the invitation of President Obama, who followed Hockfield's remarks with a speech outlining his plans to make unprecedented investments in clean energy technology and innovation.

"[S]ince World War II, by far the largest and most important source of US economic growth has been technological innovation, much of it springing from federally funded ... research," Hockfield said, echoing much of the work we've done at the Breakthrough Institute to advance public investments in clean energy innovation.

Facing both economic recession and pressing energy and climate challenges, clean energy innovation is critical, Hockfield argued:

"The R&D and technology investments that President Obama proposes have equally profound potential as an economic catalyst. That would be good news in any economy. But today, it provides a lifeline. ...

Not incidentally, these same investments [in energy innovation] also offer the only route to the breakthrough technologies we need to address the daunting challenges of energy security, rapidly accelerating energy demand and climate change."

In January, Teryn Norris and I cautioned about the "Danger of Green Stimulus" and called for "a shift from green jobs to a broader focus on green technology," a called echoed by Dr. Hockfield in the inspirational conclusion of her remarks:

"In hard times, America always invents its way to a brighter future. We have done it before, and we can do it again. For Americans out of work today, new "green jobs" will help. But for tomorrow, we need new green industries. And the only way to build those industries is by investing ambitiously now in basic and applied research."

Couldn't have said it better myself, Dr. Hockfield.

Since this is the third time now we've highlighted Susan Hockfield's spot-on remarks at the Breakthrough Blog, I think it's time she joins Energy Secretary and Nobel laureate Dr. Stephen Chu and dons the (entirely unofficial) mantle of "Honorary Breakthrough Institute Senior Fellow." Read on for her full remarks...

Continue reading "MIT President Hockfield at the White House: Investing in Energy R&D "Best Strategy" for Economic Growth" »

The New York Times reports that even as President Obama signs the economic stimulus bill into law today, he and his aids are indicating that the President has not ruled out the need for continued public spending to stimulate economic recovery:

The president said he would not pretend "that today marks the end of our economic problems."

"Nor does it constitute all of what we have to do to turn our economy around," Mr. Obama said at the signing ceremony in the Denver Museum of Nature and Science. "But today does mark the beginning of the end, the beginning of what we need to do to create jobs for Americans scrambling in the way of layoffs."

Obama's press secretary, Robert Gibbs told reporters on the way to the stimulus bill signing, "I think the president is going to do what's necessary to grow this economy." The Times reports that he then added, "[While] there are no particular plans at this point for a second stimulus package, I wouldn't foreclose it."

This rhetorical shift suggests that Obama recognizes that economic recovery will be a long process that will require sustained action and last deep into his first term. The President seems to be beginning to prepare the public for that reality as well.

Continue reading "Obama: Sowing Seeds for Stimulus 2.0?" »

The American Recovery and Reinvestment Act is not sailing through the legislative process quite as easily as many pundits had anticipated. The stimulus received no votes from House Republicans last week, and this week GOP Senators are joining the tumult. The bill has become embroiled in a few debates that are more political than economic, and is certainly demonstrating what President Obama means when he says he wants to bring a spirit of bipartisanship to Washington.

Yesterday, Senate Republicans proposed an incredible array of tax cuts and incentives--some trying to encourage consumers to make bigger purchases like tax credits for car and home purchases, as well as a big increase in plain tax cuts. The GOP has been in the media criticizing the spending aspects of the bill as not being timely enough or just generally less preferable then tax cuts (although it's pretty clear there's a healthy dose of ideology mixed into this economic-sounding argument).

Meanwhile, a bipartisan group of conservative Democrats and moderate Republicans have also come together to try their hands at reshaping the stimulus. The New York Times reports:

Continue reading "The Politics of Bipartisanship Stimulates Debate over Stimulus" »

According to Talking Points Memo, GOP lawmakers are already laying the groundwork for efforts to delay climate legislation that could be introduced into Congress in 2009. As the GOP's strategy becomes clearer, so to do certain fundamental political truths likely to rule Washington politics for the coming year and beyond.

According to TPM, Republicans are laying seeds of dissent and dissatisfaction regarding Obama's new senior aide for energy and the environment, former Clinton-era EPA head Carol Browner:

"By holding up Jackson and Sutley [Obama's nominees for EPA chief and head of the Council on Environmental Quality], Senate Republicans are doing more than just signaling their discontent that they won't get to question and vote on Browner -- although Sen. Bob Corker (R-TN) suggests to the Times that Browner be called in for a "quasi-confirmation" hearing. They're previewing their strategy to knock down the climate regulation bill that Sen. Barbara Boxer (D-CA), environment committee chairman, will release later this year.
Here's how it might look: After Boxer's climate bill emerges, Republicans would immediately protest the involvement of Browner, a White House adviser who was never fully vetted by the Senate."

Continue reading "Passing the Recovery Test or: The Basic Political Reality for Climate Legislation in 2009" »

Last week, Obama announced his stimulus package, a plan to spend nearly 800 billion dollars on infrastructure projects, modernizing schools and health records, expanding clean energy production, providing much-needed relief for state budgets, and extending tax cuts to 95% of working Americans.

By most standards, this is a big stimulus plan that could do a lot to bolster confidence, increase consumer spending and unfreeze credit. And yet, as Paul Krugman put it last week,

"To close a gap of more than $2 trillion -- possibly a lot more, if the budget office projections turn out to be too optimistic -- Mr. Obama offers a $775 billion plan. And that's not enough.

... The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job."

Continue reading "On Obama's Stimulus: Don't Look Back, Forge Ahead to a New Century of Prosperity" »

In Northern Virginia today, President-elect Barack Obama addressed the nation, introducing a few basic goals and guidelines for an economic stimulus package that could cost as much as a trillion dollars.

Well aware that the large price tag on the stimulus, referred to as the "American Recovery and Reinvestment Plan," Obama included language about setting a foundation for economic growth now in order to return to a place of fiscal responsibility as the economy gets back on its feet. However, Obama was not shy about the need for the government to step in and spend, now:

"It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy - where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit."

Continue reading "Obama's Stimulus Plan: A Foundation for Growth?" »

On January 21st, immediately after assuming office, Barack Obama's first priority will be passing an economic stimulus package that will provide the economic kick-in-the-pants necessary to avoid the next Great Depression. There's nearly unanimous consensus that a major stimulus investment is needed to stave off economic disaster. How the next administration plans to fit this stimulus into a larger economic revitalization plan, however, is still unclear.

So far, there's plenty of focus on traditional methods of stimulus: tax cuts to spur consumer spending and traditional infrastructure investments to rebuild roads and bridges. Unfortunately, a short-term focus on roads and rebates won't be enough to stave off a new depression or put our economy back on track. Instead, we must focus on investments that can both act as short-term stimulus and improve the long-term productivity of the US economy. And that means investing in innovation.

As Janet Rae-Dupree wrote in the New York Times on Saturday:

Continue reading "Forget Roads and Rebates: Why the Stimulus Should Invest in Innovation and Productivity" »

An efficiency stimulus plan seems at first glance to be an unadulterated good: it puts Americans to work, saves energy and money, and cuts greenhouse gas emissions, all with investments that should pay for themselves. But there are reasons to be nervous about the overwhelming focus on energy efficiency by green leaders and Obama's top energy and climate advisors. This narrow focus threatens to distract from the critical work ahead: overcoming the technology gap that exists between the current state (and cost) of today's clean energy technologies and fossil fuels.

An efficiency program will not create the new industries that the American economy needs to increase employment and productivity in the long term. An efficiency program will not create new exports that will bring global capital in to the American economy. And, equally as important as short term stimulus, America needs to have a plan to achieve those objectives as quickly as possible as well.

Obama's primary focus must be on making clean energy cheap -- what Google calls RE<C, renewable energy cheaper than coal -- not on reducing energy consumption.

Continue reading "Will Energy Efficiency Stimulus Distract America from the Real Task at Hand?" »

The New York Times editorial board, including respected environmental writer Bob Semple, broke from its past focus on carbon pricing as the primary solution to climate change in an editorial about Obama's newly announced energy and climate team. The piece praised Energy Secretary-designate Dr. Steven Chu for his views on the climate challenge:

"What sets [Chu] apart is his fierce conviction that innovation is just as important as regulation, and that big energy problems, like climate change and the world's dependency on fossil fuels, will not be solved without major private and public investment in the development and deployment of nonpolluting technologies."

Continue reading "The Times, it is a-Changin'" »

Last week in response to Michael and Ted's piece in The American Prospect, Bradford Plumer at The New Republic's "The Vine" wrote a piece called "Should We Forget About Carbon Pricing? (No.)" The post, which mischaracterizes the stances Michael and Ted take in the Prospect piece, also propagates the myth of successful emissions reductions in Europe.

Plumer writes:

"Ted Nordhaus and Michael Shellenberger have yet another essay arguing that environmentalists should abandon all hope of trying to cap or tax carbon emissions, and instead focus solely on subsidizing clean-energy sources if they want to avert drastic global warming.

...Simply having the Energy Department dole out $50 billion per year to clean-energy producers (as Nordhaus and Shellenberger suggest) will pale beside the amount of private-sector money that will flow to alternative energy and efficiency improvements if carbon is priced properly."

This characterization of S&N's positions in The American Prospect and the Breakthrough Institute in general is a strawman.

Continue reading "In "Vine" Veritas? (No.)" »

Gwin Pryns, author of "The Wrong Trousers: Radically Rethinking Climate Policy (pdf)," recently published "Time to Ditch Kyoto: the Sequel." The short pamphlet was handed out at the United Nations Climate Change Conference in Poznan, Poland.

Towards the end (pdf), Prins summarizes his point about a new direction for an international agreement on climate change:

"Poznan has an opportunity to... put in place the foundations and essential architecture for a radically re-engineered climate policy for adoption at the Copenhagen meeting next...That architecture will not depend upon carbon trading in the present form; it will not lead with emissions targets tied to specific dates (although benchmarks are part of the sectoral strategy for reducing energy intensity); it will not focus upon international legal agreements that are dubiously enforceable, if at all."

Continue reading "Prins to Poznan: Seriously, Time to Ditch Kyoto" »

Last week a coalition of the big green groups released a 400 page report recommending the actions that President Obama should take in regard to climate change. It is the first time that greens have all truly embraced investing in a clean energy economy, which is a positive step; but there is also a lot in the report that gives reason for pause.

Although the report's first recommendation is for a carbon cap and auction, it states that the revenue from this system should be used for investment and not for rebates. At the same time, the report names cutting pollution as a higher priority than the two other goals of the President's economic recovery strategy: "repowering America with clean energy" and "ending our dependence on oil ."

Continue reading "Green Group Report Mixed Bag On Climate and Energy" »

The executives of General Motors, Ford and Chrysler made yet another trek to Washington DC this week - this time ditching the corporate jets to drive hybrid cars - and once again pled for a federal bailout to prop up their struggling companies. Up to $34 billion taxpayer dollars are apparently all that stands between at least two of the "Big Three" automakers and bankruptcy.

GM's executives told Congress the company will fail very, very soon unless it receives at least $12 billion in loans in the coming months. Chrysler warned they could go belly up by year's end without $7 billion in government aid. Even Ford, which is doing a bit better than its two Detroit brethren, is asking for an open, taxpayer-funded line of credit of up to $9 billion dollars.

All this means its time for Congress and the American public to face two basic facts.

Continue reading "Too Big To Fail? Too Big, Period." »

At home over Thanksgiving, the state of the economy was on everybody's mind. It's always interesting hearing people express thoughts about economics. Everyone participates in the economy and deals with mortgages and credit scores and student loans, but very few have had formal training in economics. This leads to a distorted or incomplete view of how the economy functions beyond the individual level. For example, when I was talking with some friends on Friday night, they told me they had spent the day "stimulating the economy."

At first I thought this meant they had spent their Friday passing federal spending projects that created jobs and suspended PAYGO provisions in order to inject capital into the economy. Clearly, this wasn't what had happened. I quickly realized that they were talking about their Black Friday shopping.

Continue reading "Black Friday Stimulus?" »

President-elect Barack Obama's incoming Chief of Staff, Rahm Emanuel, called for major reforms to our nation's health care, financial, and energy systems at the Wall Street Journal's CEO Council today, challenging CEOs to embrace an ambitious reform agenda.

"When it gets rough out there, a lot of business leaders get out of the car and say, 'We're OK with minor reform.' I'm challenging you today, we're going to have to do big, serious things," Rahm Emanuel said, speaking at a forum convened to elicit corporate opinion on the challenges facing the new president.

The soon-to-be White House Chief of Staff said the Obama Administration sees the economic crisis as an opportunity to advance a suite of bold solutions that would put America back on track. "You never want a crisis to go to waste," Mr Emanuel said, before continuing, "and what I mean by that is it's an opportunity to do things you couldn't do before."

Mr Emanuel said the incoming administration would "throw long and deep," taking advantage of the economic crisis to advance wholesale changes in health care, taxes, financial re-regulation and energy. "The American people in two successive elections have voted for change, and change cannot be allowed to die on the doorsteps of Washington," he said.

Continue reading "Obama's Chief of Staff Says to Prepare for Major Reforms in Energy, Health Care, Economy" »

With a new bailout for Detroit on the table, there's a lot of talk about getting some "grand bargain" with automakers out of the deal: automakers will agree to some terms, like producing more efficient vehicles, in exchange for the loans.

In fact, the direct loans approved by the 2007 Energy Bill require auto companies to use the funds to retool factories that produce vehicles that get 25% better fuel economy than the average vehicle in it's class. That's a start.

But the real grand bargain, in my opinion, is to bust out of this incremental improvements mentality for fuel economy. We don't need incremental improvements, we need exponential improvements in fuel economy. Here's how it could work...

Continue reading "A Real Grand Bargain: Radically Re-invent the American Automobile" »

In 2005, with GM and Ford teetering perilously close to bankruptcy, the Breakthrough Institute created the Healthcare for Hybrids proposal with Senator Barack Obama, Representative Jay Inslee, and the Center for American Progress, a plan which would have linked fuel-economy increases to relieving health care costs for U.S. automakers. Today, with the industry again on the brink of collapse, we invite you to join us is exploring a new question for the new era:

What will it take to reinvent the American auto industry?

We will publish the best responses on our home page, www.thebreakthrough.org. Please submit your op-eds to oped@thebreakthrough.org and paste or type your content into the body of the message; please do not send attachments.

Continue reading "Can America Reinvent the Auto Industry?" »

This is the second post in a continuing series delving into Barack Obama's opportunity to capture this political moment and provide a direction for energy policy and economic growth in the 21st century. Part 1 is here.

As Barack Obama assumes the mantle of President-elect of the United States of America, we are witnessing an historic realignment of the American political landscape. With the election of our nation's first African-American president, record voter turnout, and a dramatically redrawn electoral map, it seems that anything is possible now.

However, while Obama clearly has a new mandate to lead our nation, electoral mandates are fickle and even this one could fade in time. President-elect Obama has just 76 days to prepare for his inauguration. Then the real work of governing will begin, and what Obama decides to do in his first 100 days will either cement or erase the wave of popular support the President-elect rides today.

His job won't be easy. On January 20th, President-elect Obama will inherit the White House along with a plethora of pressing challenges all competing for his attention. There will be no time for baby steps, and President Obama must show bold and effective leadership right out of the gate. Furthermore, while the economic crisis will remain his top concern in the short-run, Obama cannot afford to ignore longer-term challenges and must develop synergistic solutions that can tackle multiple problems at once.

Thankfully, Barack Obama has stated that building a new energy economy will be his top priority upon assuming office. If he fully integrates this effort with his shorter-term economic stimulus plans, Obama could effectively tackle several priorities - economy recovery, energy security, and global warming - simultaneously. And getting this job done right could cement Obama's electoral mandate and pave the way for a truly transcendent presidency.

Continue reading "President-elect Barack Obama's New Energy Mandate, Part 2" »

By Jesse Jenkins and Adam Zemel

The election of Barack Obama, an African American liberal with a Muslim middle name, will be remembered for generations as a historic moment in American history. Made possible by the financial crisis and economic recession, President-elect Obama will enter the White House in January of next year with a mandate to take bold action to revive the global economy and put American on the path to economic greatness.

It's hard to believe today, but back in early September, it looked like Barack Obama would lose. Senator John McCain was pulling away in national tracking polls as the chant, "Drill, Baby, Drill!" echoed across the nation. Record high gas prices were the top issue of the campaign, and as Republicans' united around a clear, powerful (yet disingenuous) call for expanded oil drilling, Democrats, including Obama, fumbled for a response.

Continue reading "The Obama Mandate and the 21st Century" »

Writing political and socioeconomic commentary for a legally non-partisan blog on the day of a presidential election is difficult. The election has been the bottom line for almost every political or socioeconomic story in the country for more than a few months. This is natural, as it is current events, along with our personal dispositions, political leanings and ideological commitments that inform how we will vote. But for the past few months, as it happens every four years, America has been looking at the world through an election-tinted lens.

But just as current events have shaped the course of the campaign for the White House and the 111th Congress, so has this election season shaped those events. Nowhere is that more apparent than the financial crisis, which, almost from the day Henry Paulson publicly announced his bailout plan, has been affected by the campaign almost as much as it has affected the campaign.

Continue reading "How did the Election Affect the Financial Crisis?" »

The recent bailout package passed by Congress, the Troubled Assets Recovery Program (TARP), was meant to restore confidence in the financial system and get money back in to hands of those who need it. Congress meant for the capital injections provided to the banks by the Treasury to be used for lending while these banks untangled toxic assets that were affecting their ability to gauge their own worth.

Continue reading "Will it Never Lend?" »

In a move that may not be seen as surprising to many critics of the reigning financial oligarchy, a recent New York Times piece divulges that many banks are using the initial injections of capital from the Treasury not to buck up the ailing small business sector, but to purchase their stumbling competitors.

For those with the biggest appetites, the free lunch continues! And why should we as taxpayers be surprised by this?

From the New York Times:

"On Thursday, at a hearing of the Senate Banking Committee, the chairman, Christopher J. Dodd, a Connecticut Democrat, pushed Neel Kashkari, the young Treasury official who is Mr. Paulson's point man on the bailout plan, on the subject of banks' continuing reluctance to make loans. How, Senator Dodd asked, was Treasury going to ensure that banks used their new government capital to make loans -- "besides rhetorically begging them?"

"We share your view," Mr. Kashkari replied. "We want our banks to be lending in our communities."

Senator Dodd: "Are you insisting upon it?"

Mr. Kashkari: "We are insisting upon it in all our actions."

And yet, the article continues, unlike Great Britain, which has mandated lending requirements in return for the cash, our own government has stipulated no such return. Instead, they have merely requested it. As a favor.

Continue reading "No Loans for the Little Guy" »

Over at CAP, Matthew Yglesias has coined the term neo-Hooverite to describe politicians like incumbent Senators Saxby Chambliss and Norm Coleman, or GOP candidate John McCain, who are proponents of reducing the deficit and cutting spending in a time of economic downturn. I completely agree with Yglesias' argument that focusing on a balanced budget in this economic climate is almost completely wrong headed. He captures the argument here:

"But if consumers cut spending at the same time businesses are reducing investment and state and local government are cutting spending and then the federal government also reduces spending well, then, everyone is going to be spending less and less. Which means everyone is going to be earning less and less. And things are just going to get worse and worse."

Continue reading "Cognitive Dissonance Among Progressives and Greens" »

The financial crisis has caused many economists to reconsider their ideas regarding financial markets and the economy. Megan McArdle at the Atlantic puts it best:

"Economists all over the ideological spectrum are rethinking the lessons we thought we had learned from the Great Depression and the Japanese experience. As it unfolds, we will no doubt be seriously rethinking our model of the relationship between the financial markets and the real economy."

Continue reading "The Ideology of Economics" »

On October 4th, when Congress passed the bailout, they also passed the clean energy production tax credit and investment tax credit (known collectively as the PTC/ITC) as a sweetener to secure the necessary votes for the bailout. This was a boon for the clean energy industry and its advocates, as the credits had been left for dead just weeks previously.

Keith, a Breakthrough Generation intern, wrote about the importance of these tax credits when the bailout passed:

Continue reading "How has the Financial Crisis Affected the Clean Energy Industry?" »

It has taken astoundingly little time for elite consensus to build around the federal deficit. Those who don't actively advocate deficit spending like Robert Reich have at least agreed that now is not the time to try and shrink the deficit. With the financial sector close to collapse, unemployment rising and credit frozen, it has become increasingly important for the government to continue to spend, not only to extend unemployment insurance, but also for things like the bailout and a second round of economic stimulus.

In fact, some organizations whose core principle is to advocate for a balanced federal budget have even ceded the point:

Continue reading "Will Consensus for Deficit Spending Include the Technology 16?" »

I know it's hard to remember, given the events of the past weeks, but back before Wall Street was burning, Main Street was already feeling the heat from another very real economic crisis: the soaring price of oil.

The credit crisis and our slowing economy have driven oil prices down from historic highs. As stocks plummeted in the past two weeks, so to did the price of crude, falling by more than half, down from it's July record of over $140 to under $70 this week. That's the lowest price in fourteen months, but it's still three times higher than it was just six years ago, and prices are still over $3.00 a gallon across the nation.

Still, as prices at the pump have receded and the focus on the banking bailout bumped "Drill Baby, Drill!" out of the presidential election spotlight, the energy crisis is now out of most of our minds. Unfortunately, that doesn't mean the threat - to our economy and our quality of life - is gone. Oil prices will rise again - they are already inching up again amidst news of a likely OPEC cutback in production - and when they do, they'll continue to drag down our struggling economy. If we ever hope to see real economic recovery, we would be wise not to forget the other crisis that contributed to today's ailing economy.

I'll delve into this more next week, but for now, enjoy the new article in this weekend's New York Times Magazine (online here) by Roger Lowenstein, entitled "What's Really Wrong With the Price of Oil," which takes a close look at the temporarily forgotten but very real threat oil prices pose to our economic wellbeing. Excerpts below the fold...

Continue reading "Remember That Other Economic Crisis?" »

The current financial crisis has ended the chapter of Greenspanomics in American history with a resounding boom. With it go many assumptions about the benefits of deregulated financial trading, government inaction in markets, and an overall free trade mentality that has dominated economic policies on the left and the right since Ronald Reagan.

One democratic economic advisor who worked closely with Greenspan was Robert Rubin, who served as Treasury Secretary during both Clinton Administrations. Rubin was a proponent of the power of markets, and helped Greenspan engineer the deregulation of derivative markets in the 90s.

Continue reading "Dr. Reich or: How I Learned to Stop Worrying and Love Deficit Spending" »

I've spent the past few weeks learning about the financial crisis, but it has felt more like a crash-course in economics and society. One thing that stands out to me is that depending on who you read, and his or her ideological leanings, you will get a different explanation for what caused this crisis. But more often than not, the people writing for "typical-slightly-right-of-center-libertarian.blogspot" and the people writing for "left-wing-trending-socialist-progressive.wordpress" write about all the same causes, but then point to this one thing that made the crisis really bad. Everyone is more than ready to recognize the confluence of variables that caused our current problems, but depending on ideology, one of these variables was obviously wrong and a mistake.

Well, I am taking a stand here and now. As a self-proclaimed progressive (or according to facebook, "pragmatic progressive"), I am choosing to write about one of the causes of our financial crisis that I take the least issue with: trying to create pathways to homeownership for people lower down on the economic ladder who wouldn't be able to otherwise.

Continue reading "Will the Financial Crisis Make America Rethink Social Policy for the 21st Century?" »

Who will write the history of the U.S. Financial Crisis? Contrary to those on the left declaring the "death of market fundamentalism," so far it's the right wing. Here is a roundup of some of the most popular articles on the root of the crisis:

Continue reading "Root of the Crisis: Who Will Write Economic History?" »

"We're all worried about losing our jobs. Most of us say, 'I want this thing to pass, but I want you to vote for it--not me.' "
-Rep. Paul Ryan, R-Wis.

After a weekend of frenzied negotiations between the Bush Administration and Congressional leaders from both parties, the first Congressional vote on a plan to bailout the financial sector and avoid a meltdown in the global economy failed. The final tally was 205 for and 228 against.

The failure of the bailout vote sent stock prices tumbling yesterday in their worst free-fall in two-decades. The Dow closed down 778 points yesterday, or nearly 7 percent, and global credit markets are in distress.

Continue reading "Caving to Pressure, Congress Lets Bailout Fail" »

A large chunk of the reason we are in this current financial crisis is that investors were pouring money into the housing market, creating a bubble that inevitably burst. Investors put their money into sectors of the economy that are experiencing growth, and in the early years of this decade, the only sector that was experiencing consistent growth was housing.

The bailout being kicked around inside the beltway this week will do little more than maintain the liquidity of financial firms whose collapse could send devastating shockwaves around the global economy. Any regulation that is further imposed will serve to ensure that financial firms are a little more conservative in their leverage practices and their credit-swapping. However, in a sense, this only brings our economy back to square one.

Continue reading "Back to Square One, and Beyond" »

Conservatives and market fundamentalists have long criticized Breakthrough's investment-centered agenda by claiming that it is not the government's role to be an active player in the market. In an online debate on The New Republic this past January, Jonathan Adler from the National Review said that "government has an exceedingly poor record of picking winners and losers beforehand," a trope constantly repeated by conservatives as an argument that the government should not be investing in clean energy technologies. Newt Gingrich, participating in the same debate, entitled his argument "Let The Markets Work," arguing that the best way to transition to a clean energy economy was not through government investment but cash prizes for innovation to stimulate private investment in clean energy. This belief that the government has no role to play in the market has long been a major barrier to federal investments in a new clean energy system for America.

Continue reading "Where Do We Go From Here?" »

by Breakthrough Senior Fellow Roger Pielke, jr., cross posted from Prometheus

A lot of our work here focuses on the connections between expertise and decision making. Richard Posner of the University of Chicago suggests that the experts are at fault, by creating products and processes that decision makers failed to use correctly:

Continue reading "The Role of Expertise in the Financial Crisis" »

Breakthrough's ongoing special coverage of the Financial Meltdown:

• Thought it couldn't get worse? Think again. Caving to Pressure, Congress Lets Bailout Fail and stock prices suffer their worst free-fall in two decades. Adam Zemel's got the scoop. (9/30/08)


• The bailout may take us back to square one, but Adam Zemel writes about what it will take to move forward (9/26/08).


• Senior Fellow Roger Pielke Jr. writes about The Role of Expertise in the Financial Crisis (9/24/08)


• Does the bailout mean the death of market fundamentalism? And what does it mean for our ability to truly invest in the future? Adam Zemel explores Where We Go From Here? (9/24/08)


• Adam Zemel asks Is there a Connection Between the Bailouts and the Patriot Act? (9/22/08)


• Michael Shellenberger ponders the current crisis and explores the Risks and Opportunities from the Coming Financial Bailout (9/22/08)

Check back for ongoing coverage...

Andrew Sullivan, over at the Atlantic, thinks so (my thoughts after the jump):

"In the last few years, we have seen the executive branch declare itself outside the law - in prosecuting a war on terror. The law against torture has been suspended. The balance between the executive and legislative branch has been dismissed by signing statements and the theory of the unitary executive. The executive has declared its right to suspend habeas corpus indefinitely, to tap anyone's phones without court warrants and to detain and torture anyone it decides is an "enemy combatant." In that sense, we have already left the realm of constitutional government in favor of a protectorate outside the law promising to keep us safe (but never from itself).

But this new move to create a de facto dictator for the financial markets, to invest a Treasury secretary with unprecedented powers to buy and sell at close to a trillion dollar level - with no oversight or accountability: this is a new collapse in democratic life and constitutional norms.

These measures are enabling acts of a sort. And they are what Plato feared. I have been derided as a hysteric for my fear about what this administration has done to the constitution and to ancient liberties. My current worry is that I haven't been afraid enough."

Continue reading "Is there a Connection Between the Bailouts and the Patriot Act?" »

Financial meltdown is nearing the end of its first week and Congress is poised to consider $700 billion in emergency legislation. What are the implications for clean energy and climate? Here's my best guess.

1. Automakers will get their bail-out. The automakers want $25 billion, which looks like chump change against the $1 trillion bailout. It looks very much like they'll get it. The question is, what will we get for our $25 billion?

Continue reading "A Breakthrough Crisis? Risks and Opportunities from the Coming Financial Bailout" »