United States and Everyone Else: Money, Power and Politics

The Associate Press reported that five emerging market powers including Brazil, Russia, India, China and South Africa will launch their own version of the World Bank and the International Monetary Fund. Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution, said that the so called BRICS countries want an alternative to the existing world order which the U.S. dominates. At the summit Tuesday through Thursday in Brazil, according to the article Emerging nations plan their own world bank, IMF, the five countries will announce the $100 billion fund to fight financial crises much like the IMF and launch a World Bank alternative that will make loans for infrastructure projects across the developing world. The new bank called the New Development Bank will have all five countries equally invested in the lending, while the headquarter’s location is being heavily debated with some trying to keep China, the world’s second biggest economy, from dominating the new bank like the United States has with the World Bank. The countries involved cover vastly different economies, foreign policy aims and political systems from India’s raucous democracy to China’s one party state. The BRICS countries have shared the desire for a bigger voice in global economic policy and have all experienced economic sanctions imposed by Western powers or made painful budget cuts and met other strict conditions to qualify for emergency IMF loans. In addition, developing countries have been frustrated with U.S. Congress’ refusal to approve legislation to provide extra money to help the IMF make more loans to troubled countries. The money is part of broader reform to give China and other developing countries more voting power at the IMF. The IMF and the World Bank seem to be taking the new challengers in stride, the Associate Press reports. IMF spokeswoman Conny Lotze said: “All initiatives that seek to strengthen the network of multilateral lending institutions and increase the available financing for development and infrastructure are welcome. What is important is that any new institutions complement the existing ones.” Earlier in the month World Bank President Jim Kim said: “We welcome any new organizations … We think that the need for new investments in infrastructure is massive, and we think that we can work very well and cooperatively with any of these new banks once they become a reality.”

While the international community tries a new direction, the United States continues to grapple with the current status quo economics. On Tuesday, Federal Reserve Chair Janet Yellen announced that the economic recovery is not complete and insists for that reason the Fed will keep providing support to boost growth and improve labor market conditions, Martin Crutsinger reports,  Fed’s Yellen says U.S. recovery incomplete, defends loose policy. During the delivery of the Fed’s semi-annual report to Congress, Yellen believe the Fed’s future actions will depend on how well the economy performs. If labor market condition improve quicker than anticipated, the Fed could raise its short term interest rate sooner. However, if the conditions become weaker, then low rates will last longer. Many economists believe the rate will not increase until next summer as it has been at a record low near zero since December 2008. In her testimony before the Senate Banking Committee, Yellen said the economy is improving and the sharp downturn in economic activity during the first three months of the year was a result of temporary factors such as significant slack in the labor markets such as weak wage growth with the lowest unemployment rate since 2008. Because labor market conditions have not fully recovered from the recession of 2007-2009 and inflation remains below target at 1.8 percent for the 12 months through May, Yellen said the Fed will continue with the current policies of low interest rates to boost activity. She told the committee: “The Federal Reserve does need to be quite cautious with respect to monetary policy. We have in the past seen sort of false dawns, periods in which we thought our growth would speed, pick up and the labor market would improve more quickly and later events have proven those hopes to be unfortunately over-optimistic. We need to be careful to make sure that the economy is on a solid trajectory before we consider raising rates.” The unemployment rate has fallen from 6.7 percent in February to 6.1 percent reflecting strong job growth in recent months with an average of 200,000 jobs created a month over the past five months, the strongest since the late 1990s Crutsinger reports. The Fed has two goals to promote max employment and keep inflation down. Many critics argue the Fed is setting the stage for a bubble in asset prices like stocks and real estate that could deflate rapidly making the market unstable once the interest rates are increased. However, Yellen assured the committee that the Fed is aware of such risks and noted that the price of real estate, stocks and corporate bonds have risen appreciably, but remain in line with historic norms. The minutes of the Fed’s June meeting showed that the Fed has discussed just how it planned to reduce its massive holding of Treasury bonds and mortgage-backed securities totaling $4.5 trillion which is four times the amount on the balance sheets when the financial crisis of 2008 hit.

While things are looking up for the overall economic picture according to the Fed, Congress continues to struggle to get their acts together on key issues. On Tuesday a critical highway trust fund bill was set for a vote in the House and the backers of the bill worried about defection from Democrats. Rep. Peter Welch (D-Vt.) told Huff Post Tuesday that he will not support the bill backed by House Ways and Means Chairman Dave Camp (R-Mich.), according to the article published, Critical Highway Trust Fund Bill Loses Support Of House Dem. His reasoning is two fold as the measure relies on accounting gimmicks to replenish the trust fund and lawmakers are abdicating responsibility by only funding the trust until next May. On Monday, two top conservative groups, Heritage Action for America and Club for Growth, opposed the measure and would score the vote for members with their primary complaint being the use of pension smoothing to allow delay in payments to pension funds from corporations resulting in higher corporate tax bills. While Welch agrees with the argument of pension smoothing, his preference is not to see the paring back of the highway trust fund to meet limited revenue streams, but to increase revenue to expand the fund. In addition Welch sees the idea as creating “a pothole in the pension system to fill a pothole in the highway” and sees his vote as protest to a short term solution rather than a long term one. However, he predicts that few Democrats will oppose the bill and his no vote will do little to stop the Camp bill from passing in the House before merging with the Senate’s version. On Monday, the White House came out in favor of Camp’s proposal. Unfortunately, Camp’s measure will be the last considered in the House before the highway trust fund runs out at the end of August. Even before then, states will make smaller, staggered payments on transportation projects as the federal government struggles to meet funding demands. Should the House fail to act, a substantial loss in transportation projects and jobs may result, according to Huff Post.

As Congress waits to find a long term solution to the crumbling transportation infrastructure, another hot button issue continues to be a thorn in the side of protestors and world leaders alike. The question on many peoples mind to seems to be when did America stop believing the words inscribed at the base of the Statue of Liberty. If you don’t know, here’s a refresher:

“Give me your tired, your poor,
Your huddled masses, yearning to breath free,
The wretched refuse of your teeming shore,
Send these, the homeless, tempest tost to me,
I lift my lamp beside the golden door.”

While many still hold true to these words, since let’s face it most of the people residing in the United States immigrated at one point or anther in history except the Native Americans, dozens if not hundreds of people choose to protest the transport of undocumented workers around the country especially the children. According to the Associate Press article, Arizona protesters hope to stop immigrant transfer, dozens of protestors on both sides of the immigration debate swarmed a small town near Tuscon on Tuesday after the sheriff announced that the federal government plans to transport 40 immigrant children to an academy for troubled youth. One group waved American flags, held signs and blocked a bus arriving with immigrant children. A few miles away, pro-immigrant supporters held welcome signs. Protestor Loren Woods said, “We are not going to tolerate illegals forced upon us,” while Emily Duwel of Oracle felt her town was misrepresented by a minority of people against the children staying here. She explained, “I’m just concerned about these children who have had to escape worlds of incredible violence.” Anger has spread throughout Oracle since the Sheriff warned residents last week of immigrant children from Central America crossing the border illegally would be placed at the Sycamore Canyon Academy. Protestors hoped to mirror the demonstration in Murrieta, California, where immigrant buses were blocked from entering. The sheriff is credited with stirring up the anti-immigrant protestors with social media and a press release Monday in addition to leaking information  about the migrants coming to local activist. Since the massive surge in unaccompanied children crossing the border illegally began more than a month ago, anger has been spreading and the influx of immigrants has become political fodder even though most consider it a humanitarian crisis. On the international radar, Pope Francis confronted the issue of undocumented immigrants by directing his address at the thousands of unaccompanied children that make up part of the influx. As Antonia Blumberg reports, Pope Francis: Immigrant Children Must Be ‘Welcomed And Protected’, on Monday the Pope delivered a message to the Mexico Holy See Colloquium on Migration and Development paying special attention to the migrant children who undertake the dangerous border crossing alone to escape violence in their own countries:

“This humanitarian emergency requires, as a first urgent measure, these children be welcomed and protected. These measures, however, will not be sufficient, unless they are accompanied by policies that inform people about the dangers of such a journey and, above all, that promote development in their countries of origin.”

In addition, Pope Francis noted the urgency of the problem as the numbers increases day by day with U.S. Customs and Border Protection reporting more than 50,000 unaccompanied migrant children crossing the Southwest border in 2014. Meanwhile, Vatican Secretary of State Cardinal Pietro Parolin spoke at Mexico’s Foreign Relation Secretariat urging clergy and foreign ministers to protect young migrants.

“Whether they travel for reasons of poverty, violence or the hope of uniting with families on the other side of the border,” Parolin said, “it is urgent to protect and assist them, because their frailty is greater and they’re defenseless, they’re at the mercy of any abuse or misfortune.”

Outside of the church, the Pope called on international communities to step up to find solutions to this humanitarian crisis. On Sunday Health and Human Services Secretary Sylvia Matthews Burwell met privately with dozens of governors of states that will host these children from Central America, Blumberg reports. The program started by the Obama administration will take effect in October and try to tackle the increase influx of child migrants. Burwell added, “We want to make sure they’re placed in a safe and supportive home or placement….but also, it should be somebody that is legal and somebody that will be responsible to see that they show up for the hearing.”

Sacrificing the Future to Subsidize Fossil Fuels

https://i2.wp.com/www.oceanconservancy.org/places/gulf-of-mexico/2013-impacts-map_final.jpg

2013 map courtesy of the Ocean Conservancy website

According to lead researcher Steven Murawski, a professor at the University of South Florida’s College of Marine Science in Tampa, the oil found in the bodies of sickened fish from the Gulf Coast region match the 2010 Deepwater Horizon spill. Murawski and his team of Florida scientist studied the oil’s chemical composition in order to debunk the argument that fish abnormalities were to blame and not oil in coastal runoff and oil from naturally occurring seeps in the Gulf could be to blame,  reports Rueters’ Barbara Liston. In her article, BP Oil Spill Caused Sickness In Fish, Researchers Find, she reports that the findings by the researchers argues that the fish in the study had to have been exposed recently enough in order to identify the chemical signature of the oil in their bodies. However, BP, whose rig caused the spill rejects the findings stating in a email response that it is “not possible to accurately identify the source of oil based on chemical traces found in fish livers or tissue.” In addition, Liston reports that in a statement from BP: “vertebrates such as fish very quickly metabolize and eliminate oil compounds. Once metabolized, the sources of those compounds are no longer discernible after a period of a few days.” The research team included scientists from USF, the Florida Institute of Oceanography and the Florida Fish and Wildlife Research Institute. The work was published in the current edition of the online journal of Transactions of the American Fisheries Society.

Thousands of claims for damages against BP continue to be process since the April 2010 explosion of the oil and gas producer’s Gulf rig which killed 11 oil workers and spilled millions of barrels of oil into the Gulf of Mexico for 87 days. In the winter of 2010-2011, fisherman in the area where the blow out well was located have noticed a spike in abnormal looking fish, many with unusual skin lesions. Murawski said his team compared the chemical signatures of oil found in fish livers and flesh to the signatures of the Deepwater well and other oil sources. As Liston reports, Murawski explained, “The closest match was directly to Deepwater Horizon and had a very poor match to these other sources. So what we’ve done is eliminated some of these other potential sources.” In addition, his team also ruled out pathogens and other oceanographic conditions. By 2012, the frequency of fish lesions declined 53 percent.

Even with BP’s blatant disregard for the environment and the years of fall out to come from such an egregious crime, the federal government still spends billions of dollars to subsidize the fossil fuel industry. U.S. today reported back in 2010 after the BP spill that the number of spills from offshore oil rigs and pipelines in the U.S. had quadrupled in the last 10 years and could of served as a warning for the massive leak that occurred in the Gulf of Mexico, according to government data and safety experts. The spills and amount of oil leaked grew worse when production increased, reports USA Today, even after oil companies claimed it was never safer to drill. In Alan Levin’s USA Today article, Oil spills escalated in this decade, the average annual spill increased by more than 17 from 2000 to 2009 and from 2005 to 2009 spilled averaged 22 a year. The company with the most spills from 2000 to 2009 was BP who leased the well that blew out in April 2010, according to data. In addition, the oil giant and its affiliated companies reported 23 spills of 50 barrels or more not including the April 2010 event. Oil firm Shell was next with 21, according to MMS spill reports. Over the past five years, the Obama administration has called for cutting fossil fuels subsidies in the form of tax breaks and other incentives, however, the federal governments has increased the amount of money forfeited through subsidies over that period of time with $18.5 billion last year, according to the environmental group Oil Change International. According to Kate Sheppard, Federal Government Still Spending Billions To Subsidize Fossil Fuels, the total is up from $12.7 billion in 2009 as oil and gas production has increased in the United States. Next year, domestic production will reach the highest since 1972 partly due to the Obama administration’s “all of the above” energy strategy which includes increasing oil and gas production. The Oil Change report includes a variety of subsidies in its accounting i.e. tax breaks, incentives for production on federal lands like royalty fees and tax deductions for clean up costs like the BP Deepwater oil spill. In addition, when states subsidies for oil, gas and coal production are included, the total climbs to $21.6 billion for 2013. In September 2009, Obama and other G20 leaders pledged to phase out fossil fuel subsidies to curb global warming with Obama calling for elimination of subsidies in 2012 and 2013 with the administration’s 2015 budget proposal again calling for major cuts to fossil fuel subsidies. However, Congress has yet to cut these subsidies. The report argues that as long as these incentives stay in place, the federal government is “essentially rewarding companies for accelerating climate change.” Steve Kretzmann, executive director of Oil Change International, explains: “We’re spending more taxpayer dollars every year to fund fossil fuels that we can’t afford to burn, according to climate science. Subsidizing fossil fuels at this point is climate denial.”

While science on a global scale has examined the environmental cost of the global fossil fuel habit, the economic costs have yet to be fully realized. According to the article, Fossil Fuel Subsidies Cost ~$2 Trillion Annually, According To IMF on CleanTechnica’s website published May 1,2014, the IPCC recently reported that CO2 emissions from fossil fuel combustion and industrial processes contributes around 78 percent of the total increase in greenhouse gas emissions between 1970 and 2010. The combined value of global fossil fuel subsidies are difficult to calculate with recent estimates ranging from $500 billion to $1.9 trillion a year. However, according to the International Monetary Fund, factoring in implicit subsidies from the failure to charge for pollution, climate change and other externalities, the post tax cost is closer to $2 trillion equivalent to 2.9 percent of the global GDP or 8.5 percent of government revenues. In addition, the IMF believes simply removing fossil fuel subsidies could decrease fossil fuel emissions by 13 percent. Experts say by reducing or eliminating subsidies to fossil fuel and properly pricing energy to account for environmental impacts, governments can effectively foster a low carbon transition as global subsidies to renewable energy were $88 billion in 2011. According to the article: “UNEP (United Nations Environment Programme) argues that subsidies to fossil fuel producers often support inefficient state-owned energy companies and stifle incentives for greater efficiencies and innovation, while subsidies to consumers often encourage excessive consumption, which has knock-on effects for pollution, human health and greenhouse gas emissions.” UN Under Secretary General and UNEP Executive Director, Achim Steiner, had this to add: “Fiscal policies are of particular importance in a green economy transition. Confronted by a fiscally constrained world, government reforms might appear to be a daunting challenge. However, it is important to note that fossil fuel subsidies cost countries precious funds. For example, they divert government resources from pro-poor spending in Africa, where governments spend an estimated 3 per cent of GDP – equivalent to their total health care allocation – on fossil fuel subsidies.” UNEP has undertaken green economy fiscal policies studies in various developing countries including Ghana, Namibia, the Philippines and Turkey and have shown that reforming energy subsidies and prices is possible. In addition, the UNEP believes,”Tax incentives could make investments in clean technologies more attractive, while government funds could reduce the risk profile of capital intensive new technologies.” In Australia, the Clean Energy Finance Corporation has financed $2.5 billion in renewable projects since starting in July 2013, but has not dissuaded the current Abbott government from trying to dismantle it.

According to Tom Revell’s article, a new study published in the journal Climate Change Economics, researchers from the International Institute for Applied Systems Analysis tried to put a price tag on efforts to limit the global temperature rise to 2 degrees Celsius. David McCollum, the study’s lead author, states, “Many countries say that they’re on board with the a target of 2C global mean temperature stabilization by 2100; some have even made commitments to reduce their greenhouse gas emissions. But until now, it hasn’t been very clear how to get to that point, at least from an investment point of view. It’s high time we think about how much capital is needed for new power plants, biofuel refineries, efficient vehicles, and other technologies – and where those dollars need to flow – so that we get the emissions reductions we want. Revell’s article, Much-needed $800bn renewable energy investment can come from fossil fuel subsidies, sums up the study by saying that the hundred of billions of dollars needs to invest in renewable energy and prevent the worst effects of climate change could come from the enormous amount of subsidies given to fossil fuels, approximately $800 billion annually between now and 2050 on top of the $400 billion raised by existing policies increasing existing investments from $200-300 billion annually. According to the International Energy Agency, in 2012 direct fossil fuels subsidies totaled $544 billion which researchers point out could be shifted into supporting renewables and meet the investment gap. The study does not account for potential saving gained by switching from fossil fuels to cleaner energy. The study does warn that the transition needs to happen soon as energy infrastructures have  a lifespan of 30 to 60 years. In April, the Intergovernmental Panel on Climate Change warned that investments in fossil fuels like oil and coal need to drop by $30 billion a year and renewable energy’s share of global production must increase from 17% in 2010 to 50% in 2050. Without aggressive action, scientist estimate global temperatures will rise by 3.7 to 4.8 degree Celsius by 2100 with devastating consequences around the world, Revell reports.