The Patriot Tax: We Need a Price Floor for Gasoline

In 2001, the Congress passed the Orwellian-sounding Patriot Act, a Faustian bargain, requiring Americans giving up privacy rights in exchange for increased security. It's time to put an ironic twist on that euphemism by passing a Patriot tax, a gas tax to help transform the transportation grid into a petrol-free zone.

The benefit of a Democratic win in November 2008 will be a more serious discussion of the use of taxes. Granted no one likes taxes but, as Republicans like to say, when you tax something, you get less of it. And we need less burning of fossil fuels.

Consequently, we need to tax gasoline. I think we need to implement an additional $1 dollar per gallon tax in 2010 and increase it a dollar a year until 2020.

This would be considered a regressive tax but we could rebate people at the end of the year. Say $200 a year for people making over $100,000 and $250 for those making less than $100,000 and $300 for those making less than $50,000. This would reduce the amount of oil people burn while also providing an economic stimulus.

Most importantly, a predictable, dependable price floor will lay the foundation for the renewable energy industries and technologies that will reduce the US trade deficit and help save the planet.

Capitalism Needs a Purpose

I visited President Clinton's office in Harlem yesterday to talk about some potential digital projects. Unfortunately he was not there as we were working with some of his people, but on the way home I was thinking about an interview he did recently with CNBC's Maria Bartiromo in the same office for her Wall Street Journal Report. While the ex-President is brilliant on a number of topics, his instincts on the economy are probably the most notable. During his administration, the US experienced a phenomenal economic expansion and no doubt his instincts were refined by the incredible success of the e-commerce revolution due to the commercialization of the Internet. When asked if former Fed Chair Alan Greenspan was to blame for the current credit crisis because the Fed left interest rates so low, he had this to say.

The real problem was that good money at low prices didn't have a lot of options apart from housing, or other real estate. Because there was not enough other growth. I believe that if we had started a serious energy policy six years ago, we might still be in this fix, but it wouldn't have been nearly as bad. Cause we would have had whole other range of other things for people to invest money in, areas for people to work in, and less incentive for people to move this money in every more clever ways, just through the same old hole in real estate.

Clinton's government witnessed and benefited from the IT/dot.com revolution. More important he saw the decisive role an activist administration played in propelling the movement. Not through massive government intervention but by hyping the technologies and setting up the conditions for competition in this new industry and letting the investment flow in. Capitalism needs a purpose. It needs direction and cheerleading. Prime the pump then let the market churn out the details.

Obama and the East-West Center

I went to an East-West Center (EWC) Alumni dinner the other night and was pleasantly surprised to learn that Barack Obama's parents were "grantees" there during the early 1960s. I attended the EWC in Honolulu first as a Research Intern and co-authored a book, Computerization and Development in Southeast Asia (1987) and I stayed on as a grantee to get a Masters degree. They also funded the first two years of my PhD before I moved to New Zealand to teach at Victoria University and where I finished writing my dissertation.

But enough about me. I have been able to piece together a bit more about Barack Obama's parents and the role the East-West Center played in their lives. His mother, Ann Dunham, arrived in Hawaii with her parents from Seattle in 1960 and began to attend the University of Hawaii. She soon married Barack Hussein Obama Sr. and gave birth to Barack Jr. on August 4, 1961. Both parents were sponsored by the East-West Center, which was newly created at the time to help foster better relations between the US and Asia. The EWC requires its grantees to take a foreign language (I took Japanese and Indonesian) and they met in a Russian language class. In 1963, the elder Obama took a scholarship for graduate study at Harvard University and eventually returned to his native Kenya. Ann married another East-West Center grantee, Lolo Soetoro from Indonesia, who was studying for a MA degree in geography.

Obama never studied or spent much time at the East-West Center, but his parents were very much part of the dynamic international East-West Center community. His mother and Kenyan-born father spent considerable time mixing with other international students at the Center’s famous cafeteria that looks out over a beautiful Japanese garden. Moreover his Kansas-born mother and stepfather from Indonesia were each selected to participate in the East-West Center’s highly competitive graduate Scholarship Program." 1

The East-West Center is funded almost entirely by the US Congress and has been run since its beginning by the US Information Agency (USIA) which also ran the Voice of America (VoA). Reports of it being a "left-wing" institution are greatly exaggerated, although like the VoA, it tried to develop good relations with other countries in Asia-Pacific, many of which had been left-of-center or at least partial to "development" thinking where government has a crucial role in a nation's economic, educational, and social growth.

In 1967, the new family moved to Jakarta, Indonesia, during the tense years of the early Suharto regime. So intense that his mother who worked for the US Embassy, brought him back to Hawaii in 1971. After several years, she decided to move back to Indonesia. Barack asked to live with his grandparents and stay in Hawaii. His grandfather had been very attentive to the father-less boy and his grandmother was a rising star and eventual Vice-President at the Bank of Hawaii, one of Hawaii's two largest banks. Obama's mother returned to Indonesia where she continued her work in rural development that would take her to many countries in the area: Bangladesh, India, Indonesia, Nepal and Thailand.2


For myself, I also met my wife during my days as a EWC grantee and I would be pleased if our daughter continued the tradition and ran for US President one day.

Sources

1) http://www.pacificmagazine.net/page/features/polynesias-first-us-president/
2) http://www.midweek.com/content/story/midweek_coverstory/08_year_of_obama/P2/

Cerf on National Technology Policy

I've been researching the possibilities of a "czar" coordinating the broadband/electrical grid in the future and ran across this interesting interview with the "Father of the Internet" Vint Cerf.
Towards a National Technology Policy

"I'd like to see visible evidence of the reconstitution of bodies providing technical input to policy makers. A small example would be the President's Information Technology Advisory Committee, PITAC, that President Clinton put in place. I'm a little biased because I served on the committee, but what I observed in the course of my time on that committee is that it had a very strong drawing power, convening power to bring together people from various parts of the government who were particularly concerned about information technology and its further development.

And the consequences of the committee deliberations had what I thought was direct effect not only in policy decision in the executive branch, for example in the research area, but also helped influence thinking at the legislative level. The committee went out of its way to brief members of Congress and staff about issues that had come under the purview of that committee. I think more of that is really valuable, not just at the national level but at the state level, and maybe even at the local level, when you're talking about infrastructure development, broadband access to Internet, things of that kind, you want some locally sensible decision making that's driven in part by technology and economics."

CIOI: If a technology czar of some sort is the result of the DC process, would that still be better than what we have now?

Cerf: Maybe a compromise is that there is an office of Science and Technology policy for the executive office of the President. That's where PITAC was situated, there's also the President's Council of Advisors on Science and Technology, PCAST. These are existing mechanisms, or previously-existing mechanisms that could be reconstituted. Drawing on the technical community at different levels of government is what I'm looking for here. If you try to centralize it, you don't get decision making at the level of detail that is needed in all the various instances where you want to have technical input. Local conditions are going to involve different kinds of solutions.

My concern about centralizing things is that you don't get very good solutions. If you want to draw attention to the importance of technology in policy making at the national level, perhaps you do need to have a cabinet level person - but what is the purview of that person? I would compare it to the evangelist position I have at Google. I don't make decisions, I don't believe it's appropriate, but I can lobby like crazy in every venue where people will listen, to apply principles like net neutrality, for example, in the course of deciding policy. It's encouraging people to draw on valuable and distributed resources of information that strikes me as the most important outcome of this kind of thinking.

CIOI: Obama has talked about a national Chief Technology Officer. Is what we need really more of a national Chief Information Officer?

Cerf: Maybe, although it's fair to say that there's more to technology than information. So it depends a great deal on what Senator Obama has in mind in terms of scope for such a position. For example, DARPA acts a kind of central resource for research for the military, including to the military departments' own research branches. So in a funny way, from the defense point of view, that is the central technology arm of the organization. But it engages in a very broad way across the country, finding some of the best people in the United States and in some cases outside of the United States to help resolve really tough technical issues.

So if there were such a position, whether a CIO position or a CTO as the Obama campaign refers to it, having that position in the cabinet begs the question, what does that party actually do? Does that party have a budget? Are there things that the organization that forms under this position have authority for? The worst thing in the world is to have a position where all you can do is say no, because if you say yes you can't afford to pay for anything. That's the source of some frustration for a number of people in the private sector who serve as Chief Technolgy Officers, if they don't budget and staff it's very hard to make something happen.

Drill, Drill, Drill it into our Heads

Probably nobody has had as much influence on projecting Alaska Gov. Sarah Palin into veep consideration than the anchor of MSNBC's Kudlow and Company who interviewed the former Miss Congeniality on several occasions. Larry Kudlow's show is one of my favorites although I rarely agree with him politically. One of Kudlow's mantra's is "Drill, Drill, Drill" - meaning give the oil companies everything they want, especially drilling rights in Alaska's Arctic National Wildlife Refuge (ANWR). Gov. Palin fits right into this thinking, serving a constituency that gets fat checks from oil royalties and other perks as well as a husband who works for BP (formerly British Petroleum). (Hmm, as a New Yorker, I wonder if I should get royalties from Wall Street?)

Gov. Palin was picked recently by Senator John "The Google" McCain as his running mate on the GOP Presidential ticket. McCain has been slowly selling his soul to the oil special interests, completing the transaction last June. Note this quote from the Washington Post:

Oil and gas industry executives and employees donated $1.1 million to McCain last month -- three-quarters of which came after his June 16 speech calling for an end to the ban -- compared with $116,000 in March, $283,000 in April and $208,000 in May.

Washington, of course, was taken over by the political "oil sludge" in 2001. President Bush, Vice-President Cheney, National Security Advisor Condi Rice, and Department of Commerce Secretary Don Evans, and of course, in the shadows, Enron's "Kenny Boy" Lay were all beholden to fossil fuel interests. The combination led to a $1 trillion+ war in the Middle East and oil prices that peaked near $150 a gallon in the summer of 2008 as unregulated speculators took advantage of the Fed's 2% interest rates to bet on America's vacation plans and overall addiction to the hydrocarbon saturated liquid. The political ideology associated with this oil cabal has been highly resistant to recognizing the "externalities" (costs born by third parties) associated with fossil fuel usage, particularly its role in polluting the atmosphere and creating global warming.

As I've written before, whether through incompetence or design (to give the benefit of the doubt) Bush created a discussion on energy that Gore's proselytizing probably could not achieve. As gas rose to $4 a gallon, oil expanded beyond the global warming conversation to an economic issue as cost-push inflation made commuting and other forms of travel more expensive and energy costs pushed prices up among a wide range of products dependent on cheap fuel or hydrocarbon components (ie tires, plastics, etc.)

The time is right to begin to institute widescale change. The time is right for an Intellectrical Revolution based on the newest technologies in microprocessing, telecommunications and non-carbon based energy sources.

But now McCain is becoming the new voice of this dying industry and he is quickly picking up the "drill, drill, drill" mantra. With Palin providing the echo and a Republican Party desperate for an economic theme, we can expect the message to be drilled into our heads this Fall. Slowly lulling us back into "Fossil Fools".

Live From Denver

Well in HD anyway.

Senator Edward Kennedy looked great speaking at the Democratic Convention in Denver tonight. I could hardly tell he has been suffering from brain cancer. He has made mistakes in his life, but they are far, far outweighed by his accomplishments. Unlike Bush who has tried to return a class system to the US, Kennedy has stood for equal opportunity and advancement towards a society where class, race, gender and sexual preferences are not barriers to a rich and fulfilling life.

Obama's Political Roots

Bodysurfing in Hawaii

Barack Obama was born in Hawaii and went to its prestigious Punahou High School, spending a few years of his childhood in Indonesia. I lived across the street from his high school, although a few years after he graduated. I don't know Obama, at least not much more than anyone watching the news these days, but I do have some insights into the environment he lived in while in Hawaii.

One of the things to recognize was that Obama lived in Hawaii while a Japanese-American governor came to power. While in high school, he would have seen Gov. George Ariyoshi emerge as the first US governor of Asian descent, an extraordinary event at the time that was widely celebrated in Hawaii.

Why Political Economy?

Political Economy examines the interplay between powerful economic actors and market forces. It looks at government, NGOs, news organizations, religions, unions, oligopolistic corporations, and even individuals that possess either great wealth, political power, charismatic personalities and/or celebrity status.

Economics is based on a beautiful yet fleeting abstraction: that dynamics of nature drive the forces of supply and demand to produce an equilibrium price that will satisfy everyone involved. The state of natural perfection, often called the "market" will constantly adjust and readjust via the price system to achieve the "one price" that will "clear the market" of all products and send all customers happily on their way home.

Political Economy does not deny market forces, but recognizes that the real world consists of actors that have little interest in being subject to market forces. Every business strives to transcend market forces and establish a dominant presence with the power to set its own prices. Governments work to even out the business cycle with intentional policies to either stimulate or (rarely) slow down the economy. Central Banks like the Federal Reserve use their power over the money supply to influence the economy.

Resist Shock: Employ Rationality

Tonight I went to a talk by Naomi Klein, columnist for The Nation and author of the recent bestseller, The Shock Doctrine: The Rise of Disaster Capitalism. The book is a excellent antidote the current preoccupation with market fundamentalism and doctrines of Milton Friedman and Friedrich Von Hayek.

The book is a great critique of the Commanding Heights, an intriguing book about globalization and the move from governments, but one that falls short of a penetrating analysis. It is an interesting travelogue of how different countries overcame the legacies of colonialization and communism, with great personalities, and an optimistic view of the structural readjustments undertaken by many countries. The impact of privatization for example. I plan to compare the two in one of my classes.

I've not bought into Klein's perspective entirely, but her warnings about the use of crisis to implement radical economic changes are very useful in a time when we are debating building more nuclear power plants and drilling offshore many of America's most beautiful beaches.

35 MPG: Bush Signed the US Auto Industry into Extinction

Just after Christmas I wrote about the laughable Energy Bill mandating an average 35 mpg for car companies by the year 2020. With a stroke of his pen, President Bush had signed the death sentence for the US automobile manufacturers. True, the bill took forever to get through Congress, primarily because the Republicans refused to increase the requirement of electricity that electric utilities needed to get from renewable sources. Basically the bill was a testament to the power of entrenched powers - oil, electric, and auto - to control the energy policy.

Today I checked the stock prices on those companies and GM was under $10 at $9.69 for the first time in 50 years while Ford hit a new low of $4.60. GM needs some $15 billion to remain solvent according to Merrill Lynch and with consumers racing away from trucks and SUVs its difficult to see how they will return to profitability.

The price of crude oil is $141.65 while the price at the pumps went way over $4 a gallon. We have basically had the same automobile industry - that includes the logistics/distribution system for its primary fuel - for a hundred years. Now it looks like Bush added 12 more years to this dying legacy.

Some of my friends say let the "free market" take care of this. OK, I have a Toyota. I'm doing my part.

So what is the point? Government needs to kick this industry in its butt. We need guidelines that are more realistic, like 50 mpg by 2015. Electric hybrids with regenerative braking is the most promising technology on the horizon. Hydrogen also has potential (but so did Zeppelins). Government needs to put the pressure on these companies to adapt the new technologies and become much more efficient. This is the "competition" the US automobile industry needs.

The Ghost of Enron

It doesn’t help that the world’s oil is primarily pumped by dictatorship-led countries with little concern about upgrading their facilities and that America is overrun with gas-guzzling SUVs, but that doesn’t explain the dramatic hike in energy prices over the last year.

The new “energy crisis” appears to arise out of a confluence of factors, but a central one appears to be what is becoming known as the "Enron loophole." Enron of course was the multi-billion dollar Houston company that went bankrupt in 2002 and the same company that caused rolling blackouts in California to raise the price of electricity. Needless to say, there is probably not a better example of corporate sleaze in American history.

Enron used its political connections to create an unregulated market for energy. “Kenny Boy” Lay, Enron’s founder and last CEO was instrumental in translating Ronald Reagan’s “get government off our backs” credo into a carte blanche for energy markets.

The Enron Loophole exempts energy traders who make trades electronically from US regulation. These speculators, mainly hedge funds, are largely responsible for the rise to the $140+ a barrel of crude we are experiencing today. They are riding a typical speculative bubble, playing chicken with America’s future.

Further Report on Symbolic Economies and Second Life

My course, Y19.0312 Political Economy of Digital Media, with 21 students, participated in the Interdisciplinary Study in the Virtual Environment of Second Life at New York University. This course addresses issues of creative work and productivity, industry organization and integration, electronic payments and monetary policy, international trade and outsourcing, and an examination of capital markets and their impact on technological innovation and social wealth.

While the course did not focus exclusively on Second Life, it provided an inquiry into economic processes designed to provide insights into the virtual as well as the real world. An initial understanding of markets and price systems for example was meant to help students appreciate the role of monetary currency in a virtual world, especially given that Second Life’s resident cash, the Linden dollar, plays a crucial role in the online community.

Most of the coursework on Second Life examined the dynamics of user-created content. Cory Ondrejka, a Second Life co-founder and until recently, the Chief Technical Officer for Linden Labs, the developer of Second Life identified four problems with creating content in virtual worlds like Second Life and even in creating video games. They were the difficulties in: 1) creating first-class art; 2) the lengthy development cycles needed; 2) the hours of gameplay that had to be produced; 3) the many players that needed to be accommodated, and 4) the large teams that had to be hired and managed effectively to create digital content. Creating virtual worlds by the traditional model of a single group producing it is highly unlikely. He suggested that online virtual worlds are really only possible if: 1) Its users are given the power to collaboratively create the content within it; 2) each of those users receives broad rights to their creations. These would be primarily property rights over virtual land, in-world games, avatar clothes, etc.; and 3) they also need to convert those creations into real world capital and wealth.

Online virtual worlds, like real world economies, need a system of incentives and symbolic currencies to propel them.