Is Politics All About Money?

I got a surprising letter from John McCain today.

It was just two weeks ago that I wrote that money isn’t as important in politics as it used to be. Case in point: McCain, in some ways the most underfunded candidate in the primaries, came out the winner of the Republican primary season.

But in his letter to me (and if he sent this letter to me, I have to imagine he sent it to at least 50 million other American voters), McCain says that money is everything in politics.

McCain says he is desperately far behind in his campaign. He needs a minimum of $21.5 million in donations in July, he says. This is, he says, “a critical funding goal that I must meet to keep my campaign on track and get my message to the voters as we move into the next phase of the election cycle.” If he falls short, “the outcome of the election could well be determined” right then. Why, if he gets to the end of July with only $21,499,999, McCain might as well pull out of the race.

I am not about to send any money to McCain — or to any other candidate in a November election when it is only the beginning of July. But I do have a suggestion to offer.

Why not let the voters decide?

The way political strategists see it, McCain probably is right about being desperately behind. McCain cannot even pretend to be a liberal on the issues people care about, so he has little hope of matching the popular appeal of “one of the most liberal people sitting in the United States Senate today.” Four out of five political strategists would agree that McCain’s promise, repeated in the letter, never to pull U.S. forces out of Iraq probably does make it hard to get voters to pay attention to his views on the other, more important issues in the campaign. In a year when most voters are looking for massive change, it is hard to put together a winning strategy for a candidate who keeps promising more of the same.

But still, pulling out of the race at the end of July is not the answer. And it’s not the right way for a candidate to be thinking about an election.

Because the election is ultimately not decided by political strategists. It is decided by voters. And not in July, but in November.

And quite frankly, a three-page letter that mentions voters only twice while mentioning money 20 times, in almost every paragraph, might give some voters the impression that a candidate cares more about money than about voters. Ten times more.

McCain might want to think about that. It is possible to make the voters feel like they are just as important as the people who write the checks. Even a candidate who is “stuck in a ‘catch up’ mode, scrambling to find supporters, scraping together resources and playing defense” can make voters feel like they have a reason to vote. But a letter that says, “money, voters, money, money, money, money, money, money, money, money, money, money, money, money, money, money, money, money, money, money, voters . . . P.S. money,” doesn’t get it done.

Response to Oxfam’s Shocking Report

Two days after I wrote about the difficulties of converting fuel crops to food, Oxfam International issued an inexplicable report effectively asking for a halt to biofuel production, but offering no solutions or even sympathy for the global crisis their recommendations would cause if fully implemented.

If you have seen the Oxfam report, these are the key points in understanding why the cutback they recommend in biofuel would lead to widespread poverty and hunger:

• Fuel is necessary for growing most crops. High fuel prices this year have already led many farmers to cut back on the number of fields they plant and in some cases to abandon farming entirely. If fuel production is cut further, this would lead to fuel prices that are higher still, potentially forcing millions of farmers to stop farming. Oxfam’s report offers no alternate source for the food that would be lost in this scenario, nor any alternate source of income for the farmers that would be affected.
• Many of the crops and croplands used for biofuel are not suitable for food use. In addition, in the best case, biofuel is made from waste products that have no alternate use. Oxfam’s recommendations could result in the loss of the energy made from many of these materials, with no compensating benefit.
• The increase in energy prices (including fertilizer) is virtually the entire reason for the sudden increase in the price of food. Oxfam’s own report concedes that total food production is rising at least as fast as biofuel production, so the implication that a decline in food production is to blame for high food prices is entirely spurious. For some food items, energy costs account for most of the final cost of the food. Food prices cannot be brought down worldwide by policies that drive energy prices higher.
• The spot food shortages that have made headlines in the last year were localized and short-lived, reflecting (so far) not a global shortfall of food production, but distribution problems and market manipulations including hoarding that could easily have been created by corporate interests or speculators for their own financial gain. An actual global shortfall in food production would lead to shortages across whole regions for entire seasons. Problems caused by market manipulations cannot be solved by more market manipulations. By contrast, the increase in energy costs is caused quite simply by a shortfall in global production of energy when compared to the rising demand for energy. It can be solved only by an increase in energy production combined with efficiencies in energy use.
• The energy conservation methods Oxfam advocates are important but do not serve as a substitute for fuel. Right now, the world needs both fuel and energy conservation.
• Ethanol is not the dangerous acid that Oxfam’s report implies. On balance, ethanol is safer to store and transport than gasoline.
• Biofuel is not the novelty or gimmick that Oxfam is suggesting. It could supply all the world’s liquid fuel needs eventually if there are enormous improvements in energy efficiency and if new sources of energy, such as solar and wind, can be added on a large scale. The fossil fuel we have relied upon for the past century will mostly run out this century, but biofuel can continue. It would be the height of folly to procrastinate on the early work toward what is likely to be a critical source of energy for the world just a generation or two from now.

Oxfam’s work on the distribution side of the food crisis is admirable, and I hope its bizarre recommendations about biofuel are merely the thinking of advocates who are too close to their work on food to notice the bigger picture of how food is created. Quite simply, there is nothing to be gained by driving large numbers of farmers out of work and into poverty, and I think by focusing on the food and ignoring the needs of farmers, Oxfam has made recommendations that could dramatically worsen the crisis they are working so hard to solve.

Electricity or Oil?

Which is less expensive for home heating: oil or electricity?

I buy home heating oil by the gallon, but what I really want from it is heat, which is measured in megajoules (MJ). According to Wikipedia, a gallon of home heating oil contains 138,500 British thermal units (BTU) of energy, which is 146 MJ.

I buy electricity in kilowatt hours (kWh). A kilowatt hour is exactly 3.6 MJ.

With that, I have a way to compare prices.

It is hard to buy heating oil at this time of year, but diesel is almost the same thing. Today’s price for diesel in Pennsylvania, excluding highway taxes, is $4.403 per gallon. That is 3.02 cents per megajoule. My “high efficiency” oil furnace is estimated to operate at 83 percent efficiency, so I pay 3.64 cents per megajoule of heat.

On my latest electric statement, I paid 16.2 cents per kilowatt hour. That is 4.5 cents per megajoule. Electricity, when measured and used this way, is 100 percent efficient; only the tiniest amount of energy is lost in the wires that connect the electric meter to the house. So I really get a megajoule of heat for my 4.5 cents of electricity.

To recap: oil, 3.64¢/MJ; electricity, 4.5¢/MJ. Oil still has an advantage, but the advantage is so slight that installing, or even repairing, an oil heater at this point would not be a sensible investment.

As oil prices go up, we reach a point at which oil heat costs as much as electric heat. Beyond that point, we save money by switching over from oil to electricity. In my scenario, with 83 percent efficiency for oil, we reach that point when the price per gallon of oil is 33.7 times the price per kilowatt hour of electricity. If the local price of electricity does not change first, the switchover point is a heating oil price of $5.454. That doesn’t seem so far away; in fact, it’s lower than the $6.00 price I think I ought to be planning for. When my oil tank runs dry, I am not sure I will want to refill it.

Planning for Home Heating

Do I want to spend $4,000 to heat my home next winter?

It sounds like a crazy question only because I never spent that much before. But my home has an oil furnace, and home heating oil, which is essentially a kind of diesel, costs more than it ever has. It was distressing to pay $3 a gallon for home heating oil last winter. But diesel prices are near $5 a gallon now, and home heating oil prices in midwinter have historically been higher than summer diesel prices.

And oil prices seem to be trending upward. So I have to guess that home heating oil may cost $6 a gallon next winter. At that price, if I simply fill up my oil tank and set my thermostat to room temperature, I’ll pay at least $4,000 for home heating over the course of the heating season.

Ouch!

I have options, of course. I don’t particularly have to heat my home at night. I could rebuild the inside of the exterior walls of my house, replacing the token insulation that was put in in the 1970s with a proper polyethylene wrap and heavy-duty insulation. That and some other fixes could cut my home’s heating profile by about half. I can use electricity for heat. I could put in a word-burning stove. I could drive to someplace warmer for two weeks in the middle of winter.

All of these options have pluses and minuses, but I know I can’t just do what I did last winter, not at the same price, anyway. That’s why I’m thinking about this now.

After the Stimulus Payments, Plan B

Consumer income, after taxes, was up 5.7 percent in May, according to statistics released today by the Commerce Department. The increase is the result of the economic stimulus payments made by the Internal Revenue Service; apparently about half of those payments were made in May. Consumer spending increased by 0.8 percent. That is only a sixth of the boost in income.

Gasoline prices were also up, 10 percent in May, and that came on top of a 10 percent increase in April. And so the initial consumer spending from the stimulus payments was entirely absorbed by higher energy prices. Consumers were spending more money, but not getting more. Many consumers set aside their stimulus payments for summer vacation spending. Here too they will be absorbed by higher fuel prices as people drive or fly to their vacation destinations. Gasoline prices are up about 3 percent in June, and oil prices hit a new record high this morning. Despite the stimulus payments, real consumer spending is falling.

Some of our people in Washington are saying, “Well, hey, if one round of stimulus payments didn’t work, let’s try a second one.” This sounds to me like my friends who want to take a second trip to Atlantic City because they lost money on their first trip. The federal government is not so rich that it can just throw money around. (Rather, it has the largest debt of any institution in history.) I have a better idea.

The two huge drags on the U.S. economy are energy imports and overseas military spending. Energy is more than half of all U.S. imports and growing rapidly as the price of oil goes up. The high level of imports is one of the biggest causes of the continuing decline of the U.S. dollar. Overseas military spending is also money lost to the U.S. economy, as most of the money stays in the region where we spend it. And this is not a trivial amount of money, but several percent of GDP, an amount similar to the growth in national income. In other words, we may be giving up the chance to grow economically as a country by spending so much money placing our military forces in other parts of the world.

So to stabilize the economy, I am proposing a substantial cut in overseas military spending, perhaps a reduction of 50 to 70 percent. We could bring home all the troops from Iraq, most from Kuwait and Qatar, and some others.

It costs much less to keep troops in the United States than in the more distant reaches of the world, and we wouldn’t need reservists on active duty, so there is money saved by bringing the troops home. We could spend most of that money on investments to reduce energy imports. A good way to start would be with projects to install high-efficiency lighting and rooftop solar panels in federal buildings. The federal government is the world’s biggest user of energy, so any plan to bring the country’s imports in balance with exports has to start with reducing the federal government’s energy bills.

I can already hear the critics saying that this plan is too small to solve the country’s economic problems. True enough. We would need to do more than this. But those stimulus payments didn’t really do anything.