NC Senate 2008

From Bob Novak's column today:

Sen. Elizabeth Dole of North Carolina, viewed as one of the most vulnerable incumbent Republican senators seeking re-election in 2008, has made a comeback with successful fund-raising and a boost in approval ratings.Dole's private polls put her favorability level at 59 percent, compared with President Bush's 42 percent.

Republican insiders attribute that mostly to her opposing the immigration bill backed by Bush. Thanks to effective second quarter fund-raising (at a level not yet announced), Dole is sitting on an estimated $2 million. She previously had been criticized as an ineffective first-term senator, mainly because of her national chairmanship of the failed 2006 Senate campaign.

Gov. Michael Easley, the strongest potential Democratic challenger so far, has resisted pleas that he run. Dole's war chest may discourage lesser-known Democrats. But State Rep. Grier Martin, an Iraq war veteran, has family money for a possible candidacy.

Movement to Protectionism Continued

The last post on protectionism featured the movement in the US Senate against free trade. The US House is doing the same thing. In today's Washington Post, hardly a bastion of right-wing thinking, is a featured editorial, "Same Old Protectionism: House Democrats Put Up Roadblocks to a Balanced Approach to Free Trade":

TRYING TO salvage an American trade policy, the Bush administration took the unusual step of embracing bipartisanship. Unfortunately, the overture hasn't been reciprocated.

In May, the administration accepted Democratic demands for tougher labor and environmental standards in return for Democratic approval of free-trade agreements with Peru and Panama -- and the possibility of more. "Today marks a new day in trade policy," House Speaker Nancy Pelosi (D-Calif.) said. But last week, the speaker, along with House Majority Leader Steny H. Hoyer (D-Md.), Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) and Ways and Means trade subcommittee Chairman Sander M. Levin (D-Mich.), dashed those hopes. There will be no more "fast-track" authority for the administration to negotiate trade deals, they declared, until that glorious day when we "expand the benefits of globalization to all Americans." The Panama and Peru deals may still sneak through, although Mr. Rangel will be going to Lima and Panama City soon to discuss how those sovereign nations can change their laws to suit the U.S. Congress. Much bigger proposed agreements with Colombia and South Korea are dead, the Democrats say....

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.

Saturday's editorial in Investor's Business Daily is even more clear with "Congress Holds Columbia Hostage":

Congressional Democrats justify scrapping a U.S. trade pact with our best ally in the hemisphere on vague claims its government violates human rights. Last week, Colombia's people saw a different enemy.

It was couched in syrupy language, but it was as bad a blow to Colombia as any dealt by its enemies. The U.S. House Committee on Ways and Means, in a statement by Democrats Nancy Pelosi, Charles Rangel and Sander Levin declared the Democratic Party would deny free trade indefinitely to 46 million Colombians over a few dozen unsolved murders of union activists in the last year.

...Congress was looking for excuses to halt free trade. Why? For the sake of its own union backers, of course, and to curry favor with the leftist think tanks which are enraged about the success of Colombia's popular — and conservative — President Alvaro Uribe.

...[T]he real story of Colombia — [is] a nation struggling against the odds to forge a better future through free trade and democracy. Maybe Democrats ought to start thinking about what they really oppose when they try to paint Colombia as a banana republic and deny it the free trade it's earned.

The ways to kill an economy are not large in number and protectionism by any name is one of the greatest, most dishonest as it can be hidden in the disguise of helping workers and fairness while in reality it is the opposite. Protectionism may help temporarily a few favored industries and a few favored unions at the burden of the consumer, the taxpayer, and the harm done to non-favored industries and those workers. In the long run, everybody loses with protectionist policies.

Democrats Move to Protectionism

More signs of protectionism are blowing in the wind this day. From the New York Sun, "Clinton Signs Gephardt as Key Advisor: Collapse of Support Seen for Free Trade":

Signaling the collapse of support for free trade in the Democratic Party, Senator Clinton's presidential campaign has signed up as an economic adviser a former House leader who staunchly opposed major trade deals, Richard Gephardt of Missouri.

Mrs. Clinton's decision to make Mr. Gephardt an official member of her economic team is a blunt repudiation of her husband's strategy from 1992, when he won the White House in part by distancing himself from unions and protectionist elements in the Democratic base.

"I think there's a large coming together within the Democratic Party in the last few years on the trade issue," Mr. Gephardt told reporters yesterday as he announced his endorsement of Mrs. Clinton and his new role with her campaign. "Senator Clinton has been at the center of that coming together. We've now defined a position that is for trade, that is for free trade treaties, but also requiring that there be a proper observance and a concern about labor and environmental rights in those treaties. We're in a time where there's much more agreement in the party."

While Mr. Gephardt put Mrs. Clinton at "the center" of the Democrats' new approach, the prevailing orthodoxy in the party now is nearly identical to what he was advocating in the 1990s when he led opposition to the North American Free Trade Agreement, which President Clinton championed.

And we read in the Financial Times, "Clinton and Obama Back China Crackdown":

Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.

The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming ­election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.

A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.

The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey ­Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.

Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.

In a separate letter sent recently to Hank Paulson, US Treasury secretary, Mr Obama warned that the “administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval” for free trade agreements.

The legislation could be voted on as early as the autumn and has been presented by its advocates as a WTO-compliant version of a more radical bill introduced in the last Congress by Senators Schumer and Graham that would have applied 27.5 per cent tariffs on Chinese goods and violated international trade rules.

Protectionism remains in my list of real concerns in our present environment. The ability of politicians to pander to the fears and hopes of voters in spite of the truth never ceases to amaze me. The theory of comparative advantage, developed late in the 1700's by David Ricardo, a contemporary of Adam Smith, apparently hasn't made its way to the halls of Congress as yet. All we need in the upcoming years is another Smoot-Hawley Act which was one of the major drivers of the Great Depression.

Scholars Speak

Some leading scholars respond to MarketWatch at mid-year 2007, "exactly three quarters of the way through the first decade of the 21st Century," in "At Mid-Year: The Scholars Speak Up" and more than half of the responses were typical nonsense. Here's the worst one and the best one in my opinion. Read them all for some amusement and examples of academics totally cocooned in dream-world.

The worst:

A turn away from acquisitiveness

Barry Schwartz, 60, professor of psychology at Swarthmore College in Pennsylvania and author of the 2004 book "The Paradox of Choice."

Schwartz, who studies the intersection of economics and psychology, bemoans what he perceives as the antisocial, money-hungry turn that U.S. culture has taken over the past several decades.

He believes: "We're living in a society in which people basically think, nobody is going to take care of you but yourself." This drives greed, Schwartz reasons, because people feel the need to acquire more and more resources to protect themselves against disaster.

"We would have a more community-minded outlook if some of our basic needs, like health care, were taken care of," Schwartz says.

He hopes the next decade will mark a turn away from acquisitiveness and bring an increased interest in promoting well-being.

Says he: "I'm hoping to see serious progress made on shifting our focus in terms of policy away from increasing national wealth and towards increasing national welfare. We've been so intent on building wealth that we've neglected all kinds of other things: Health insurance, education, strong community ties, the opportunity to engage in meaningful work -- things that are much more important in terms of well-being than money once you've crossed the subsistence level."

I wonder how he intends to pay for all the health and welfare without any wealth.

The best:

Four ways the developed world can vastly improve human welfare

Bjorn Lomborg, 42, Danish economist, author of the "Cool It," a book on climate change to be published in September by Knopf.

One: "AIDS. It's something we could diminish dramatically by spending a relatively small amount of money. For about $28 billion, we could probably keep 28 million people from dying over the next 4-8 years. For every $1,000 you spend you can actually save a human life."

Two: Malaria. There is a quick and cheap fix, according to Lomborg. The solution? Investing in mosquito nets. "Also, we could do a lot to eliminate malaria by giving people Artemisinin as opposed Chloroquine. It's a slightly more expensive drug, but highly effective."

Four: Free trade. "If you really want to make a difference, make sure that that third world countries can actually participate in the market."

What are we focusing on to our detriment? Climate change, says Lomborg.

"Yes, it's a problem, but it's not one where we can do very much good right now. If the Kyoto Protocol was instituted, it would save only 1,000 people per year over the century. If you invest in research and development, it would be much more likely that our kids would be able to significantly reduce carbon emissions in the future."

The Fourth of July

From today's Wall Street Journal :

Adams wrote Jefferson that the future would "depend on the Union" and asked how that Union was to be preserved. "The Union is still to me an Object of as much Anxiety as ever Independence was," he confided.

He was right to worry. The union has always been difficult, from the first fears that the 13 separate states would behave as competing countries or bickering groups, through a brutal and painful civil war whose wounds have yet to entirely heal, to a vast, modern land whose residents, taking for granted the blessings bestowed upon them, are deeply divided and quick to vilify each other.

More tragically, some seem to enjoy vilifying America, everything it has been and stands for, seeking and finding fatal shortcomings. Adams and Jefferson were not blind to those shortcomings. "We think ourselves possessed or at least we boast that we are so of Liberty of conscience on all subjects and of the right of free inquiry and private judgment, in all cases and yet," Adams admitted, "how far are we from these exalted privileges in fact." Recent moments of real unity after 9/11, when members of Congress stood together on the steps of the Capitol and sang "God Bless America," have been fleeting.

In 1825 Jefferson wrote to congratulate Adams on the election of his son John Quincy to the presidency--an election so close it was decided in the House of Representatives. "So deeply are the principles of order, and of obedience to law impressed on the minds of our citizens generally that I am persuaded there will be as immediate an acquiescence in the will of the majority," Jefferson assured him, "as if Mr. Adams had been the choice of every man." He closed: "Nights of rest to you and days of tranquility are the wishes I tender you with my affect[iona]te respects."

On July 4 the following year, as the nation celebrated the 50th anniversary of the Declaration of Independence, its two frail signers died within hours of each other. Their cause, "struggling for what is most valuable to man, his right of self-government," continues in the nation they launched,
still fraught with aspirations and anxieties, flaws and divisions but, one hopes, with the ability to reconcile as they did, to work together for the joint venture.

I recommend reading all of this piece and the one cited a few days ago from Bill Bennett in my post "The Neglect of US History."

Please take time out this holiday for a few minutes alone to really think about these United States of America, its history, how we are today, and our future.

Google Cars

Finally, a smooth transition from one post to another which happens so rarely; from Honda Jets to Google Cars.

This started as a minor post from a quick blurb in the magazine "eWeek" which I still get in the print edition. I still like hard copy to flip through when I have no destination or purpose in mind unlike browsing where I am always going for something. And there was this:

Google.org is the philanthropic arm of the Google mother ship, with about $1 billion in startup funding from company founders Larry Page and Sergey Brin. One of the first efforts by Google.org—let's just call it Gorg for short—is a hybrid electric car that recharges itself using power produced by solar panels.

If you think of a typical hybrid with an outside plug and extra batteries for using stored electricity as the primary power source, you have the basic idea.

And then there was a reference to the Official Google Blog and "A Clean Energy Update":

Google.org is launching an exciting project that offers a glimpse of a smarter energy future: cars that plug into an electric grid powered by solar energy. Plug-in hybrid electric vehicles (plug-in hybrids”) can achieve 70 -100 miles per gallon, quadrupling the fuel economy of the average car on the road today (~20 mpg). As we demonstrated at today's event, plug-in hybrids can sell power back to the electric grid when it's needed most through vehicle-to-grid (V2G) technology.

As you may know, one of Google.org's core missions is to address climate change. In the U.S., transportation contributes about one-third of all greenhouse gas emissions –- with more than 60 percent of those emissions coming from personal vehicles. By accelerating the adoption of plug-in hybrids and vehicle-to-grid ("V2G") technologies, this new project, RechargeIT.org, aims to reduce emissions and dependence on oil while promoting clean energy technologies and increasing consumer choice. Linking the U.S. transportation system to the electricity grid maximizes the efficiency of our energy system. From these efforts, we believe the environment will benefit -- and consumers will have more choices to fuel their cars.

We've been working with Google engineers and Hymotion/A123Systems to build a small fleet of
plug-in hybrids, adding an external plug and additional batteries to a regular hybrid car so that it runs on electricity with gasoline (or even better, biofuels) to extend the driving range for longer trips.

Since most Americans drive less than 35 miles per day, you easily could drive mostly on electricity with the gas tank as a "safety net." Our goal is to demonstrate the plug-in hybrid and V2G technology, get people excited about having their own plug-in hybrid, and encourage car companies to start building them soon.

In the preliminary results from our test fleet, on average the plug-in hybrid gas mileage was 30+ mpg higher than that of the regular hybrids. In conjunction with Pacific Gas and Electric, we also demonstrated the bidirectional flow of electricity through V2G technology, and have awarded $1
million in grants and announced plans for a $10 million request for proposals (RFP) to fund development, adoption and commercialization of plug-ins, fully electric cars and related vehicle-to-grid (V2G) technology.

For even more details about the entire car project on grant amounts, the companies involved and more, here is the full press release, which is actually interesting.

It strikes me a company, not wedded to old technology and without billions invested in property, old plants, wrong equipment and high cost human capital, and that has tons of cash, can do amazing things.

A Google Car, who could have imagined?

Honda Jets

I would think that this story would make the NC news but no. This is from Canadian Driver, June 28, 2007:

Greensboro, North Carolina - Honda Aircraft Company Inc. has broken ground for its new headquarters and manufacturing facility at Piedmont Triad International Airport in Greensboro, North Carolina. The company will produce the new HondaJet advanced light jet.

Honda will manage the research, development, sales, marketing and manufacturing of the HondaJet at the new facility, which will replace the company's existing hangar and office complex at the airport. The first phase of construction will be completed in spring 2008 and will consist of office space, research facilities and an airplane hangar.

The company plans to begin deliveries of the airplanes to customers in 2010. The total investment is expected to be about US$100 million, including equipment. The company says that its workforce will increase to approximately 350 people once the plant reaches full production, and that about 90 per cent of the plane's component parts will be supplied by companies in Canada and the U.S.

GWOT Just a Bumper Sticker

A political cartoon from IBD's Pulitzer Prize Winner, Michael Ramirez for Monday, July 2, 2007.

The Neglect of US History

Bill Bennett has an important piece out on the tragedy of the twin failure of our schools to teach and our children not possessing the knowledge of the events and people that have shaped these United States. In "Our National Alienation & Amnesia" he makes many good points and recalls a few highlights of some of our great personalities from our past. A portion to get the flavor:

Two years ago, the Pulitzer Prize-winning historian David McCullough told the U.S. Senate that American History was our nation’s worst subject in school...Our children do worse in American history than they do in reading or math. McCullough testified we were facing the prospect of national amnesia, saying, “Amnesia of society is just as detrimental as amnesia for the individual. We are running a terrible risk. Our very freedom depends on education, and we are failing our children in not providing that education.”

McCullough is right, and it is a double tragedy: a) our children no longer know their country’s history and b) the story they do not know is the greatest political story ever told...

In his farewell address to the nation, the large-minded amateur historian President Ronald Reagan warned of what we see in our nation’s report card today, saying “If we forget what we did, we won't know who we are. I'm warning of an eradication of the American memory that could result, ultimately, in an erosion of the American spirit.”

Our history is full of controversy, suffering, struggling, overcoming, and winning. There is no reason to elevate its failings at the expense of its successes, nor is there reason to ignore its failings or, worse, turn it into a snooze-fest....

The great adventurer Bernard DeVoto once wrote to Catherine Drinker Bowen about why her task as a historian was so important:

"If the mad, impossible voyage of Columbus or Cartier or La Salle or Coronado or John Ledyard is not romantic, if the stars did not dance in the sky when our Constitutional Convention met, if Atlantis has any landscape stranger or the other side of the moon any lights or colors or shapes more unearthly than the customary homespun of Lincoln and the morning coat of Jackson, well, I don’t know what is."

Indeed. Our history is all that and more, much more. America was, is, and — we hope — will continue to be the place where, more than anyplace else, dreams actually do come. It is, as Abraham Lincoln described it, “the last best hope of earth.” But to live that dream, to know what hope we convey, and to teach it from generation to generation, we must describe it, appreciate it, and learn to fall in love with it all over again.

Bill Bennett has produced a reminder of what many of us missed unless we struck out on our own to really read our exciting history. This would be a good column to pass along to friends for excellent Fourth of July reading and a reminder of what all of wonderful national holiday really means.

Strategic Difference In Puzzles and Mysteries

In unexpected places we often find unexpected ways of thinking and hence new ways to solve problems. In an article in the Smithsonian, where one usually finds pretty pictures of nature and discussions of historic objects, I found some commentary from the director of the Rand Corporation's Center for Global Risk and Security. I am not sure why this was in the magazine in which it was in but it fit into the magazine's heading of "Presence of Mind." Nevertheless, the author, a Gregory F. Treverton, who sounds like a very proper security analyst indeed, gives us "Risks and Riddles," with a very teasing subheading of "The Soviet Union was a puzzle. Al Qaeda is a mystery. Why we need to know the difference.":

Puzzles can be solved; they have answers.

But a mystery offers no such comfort. It poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities.

Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable—an impossible challenge. But approaching them as mysteries may make us more comfortable with the uncertainties of our age....

Puzzle-solving is frustrated by a lack of information. Given Washington's need to find out how many warheads Moscow's missiles carried, the United States billions of dollars on satellites and other data-collection systems. But puzzles are relatively stable. If a critical piece is missing one day, it
usually remains valuable the next.

By contrast, mysteries often grow out of too much information. Until the 9/11 hijackers actually boarded their airplanes, their plan was a mystery, the clues to which were buried in too much "noise"—too many threat scenarios. So warnings from FBI agents in Minneapolis and Phoenix went unexplored. The hijackers were able to hide in plain sight. After the attacks, they became a puzzle: it was easy to pick up their trail.

Solving puzzles is useful for detection. But framing mysteries is necessary for prevention.

For the mysteries of intelligence, measures of effectiveness are elusive. The goal of prevention is...nothing—an absence of attacks. But if no major terrorist attack occurs, does that represent the effectiveness of prevention, simple good luck or the fact that the threat was overstated in the first
place?

That's one uncertainty we'll have to learn to live with. There are others that framing mysteries can help us understand.

The author uses the above to illustrate, besides the difference in the Cold War and 911, the trials and tribulations of medicine to prevent disease, the Enron scandal, and discussions of energy; rightly pointing out that most energy analysis, particularly future oil supply and prices, treats the problem as a puzzle while it too is rightly a mystery, as least as he defines a mystery.

I think this distinction is useful in framing many situations such our discussions of global warming (definitely a mystery), proper public policy on taxes, trade, deficits and even onto how certain of our friends and family may react to given or predictable circumstances.

The entire article is a good, quick read.

SRI and Greenwashing

Socially Responsible Investing is indeed a growing trend as is the environmental movement. In "The Green in Hedge Funds Isn't All About Money" I found a term new to me that describes a phenomenon that I have been suspecting recently - "greenwashing." Here's the idea:

The popularity of the environment and all things "green" has not escaped hedge funds: At least three dozen hedge funds are already applying environmental and social screens to the investment process, with more on the way according to industry reports.

The strategy is to get a piece of the socially responsible investing market, estimated at approximately $2 trillion, according to the Social Investment Forum, specifically the environmental sector, which is growing rapidly.

...hedge funds jumping on board with their specific opportunity lust is sure to buttress more environmental consideration elsewhere in the investment markets, if only for one reason: activity. Hedge funds trade heavily and that activity will surely spawn other investors to seek opportunities in the green sector as well.

This hunt for higher returns, or alpha in investment jargon, may prop up prices even more in environmental stocks, shares of companies that operate in the waste-management or alternative-energy sectors, for example. Activity breeds interest and interest in investing usually brings with it investment dollars. And those dollars usually push up share prices....

"The function of a hedge fund is to create alpha, and anything that gets in the way of that is unwanted," Phillip Goldstein, a manager of Opportunity Partners LP, a hedge fund based in Pleasantville, N.Y., told Investment News. "It sounds like a marketing gimmick, and I don't know that any individuals would invest in something like that."

That marketing gimmick is called "greenwashing" in environmental circles, and it is when a company pays lip service to the environment but doesn't really put into practice anything tangible to back up its environmentally friendly claims.

Home Depot recently offered to include "green" product suppliers in its Eco Options program for customers. Of its 176,000 products, 60,000 product suppliers applied for inclusion. Yet only 2,500 made the official green-label cut. Many were simply rebranding and spinning their existing products "green."

It's the turnout and activity that is interesting. Hedge funds are apparently seeing that too. But they will have to carefully vet their picks to make sure their "green" investments are indeed green and will produce returns of the same color.

So be aware of greenwashing as you will see more and more of the practice in advertising and in investment funds.