Category: Economics

Wyoming rakes in more than $4.4 Million from taxes on wind-power


Click to enlargeDave Showalter

More than $4.4 million was generated from taxes on wind production across Wyoming in the last fiscal year, according to the state Department of Revenue.

Albany, Carbon, Converse, Laramie, Natrona and Uinta counties share in $2.7 million with the state’s portion of the revenue at slightly more than $1.7 million…

This year’s taxes from wind-generated electricity are the tip of the iceberg to state and local coffers. When the Chokecherry Sierra Madre Wind Energy Project’s 1,000 wind turbines come online, they could eventually bring in more $10 million in revenues annually, from wind generation alone.

Coupled with property taxes and the sales and use tax, Chokecherry promises to be a financial boon to Carbon County, said Kara Choquette, communications director for the Power Company of Wyoming…

“This represents a very significant and positive financial impact for the county, all of the public entities that get a portion of the property taxes and all of the cities and towns that get a portion of the sales and use tax.” Choquette said. “Along with the generation tax, it’s in the hundreds and millions of dollars. That’s a pretty significant increase over what Wyoming is getting now from all of the wind turbines combined.”

We have much of the same potential plus more solar – especially in downstate New Mexico. Of course the state engineer’s office made the determination that we could be a net power exporting state in wind-generated electricity 20 years ago. Our beloved PNM took no notice.

Congrats to Wyoming for making this growing infrastructure part of a larger picture beyond public utility executives patting themselves on the back.

Of course, we’re all farting around – dawdling behind Colorado when it comes to doing something sensible like legalizing marijuana. A renewable resource that slows traffic, generates income for the state and jobs for the young at heart – and brings miles of smiles.

Currency manipulation leads to unintended consequences

Switzerland’s decision to lift the cap on the franc’s value against the euro has had unexpected consequences – in the form of intercepted pizza deliveries.

Swiss people looking for a bargain have been dialling up restaurants across the border in Germany, but now the authorities have had enough…

Uli Burchardt, the mayor of Constance, which borders Switzerland to the northeast, told the publication that German vans have been stopped by Swiss customs officials after it was discovered they had been delivering up to 60 pizzas at a time. And fast food is not the only thing the Swiss have been seeking elsewhere, as people cross the border to do their weekly shop and even visit the dentist.

Cripes. There are dentistas in Mexico who have public school contracts in Arizona and California.

Following the decision to lift the €1.20 cap last month, the franc shot up by 40 per cent against the euro. The franc also rose 30 per cent against the dollar and 15 per cent against sterling. In short, the Swiss can now get more for their money.

However, there is concern that businesses will be negatively impacted by the strong franc. Eurozone companies that buy their products in Switzerland are at risk of being priced out of the market, while Swiss businesses situated on the border may find themselves passed over in favour of their perceived better-value eurozone counterparts.

Interesting – and eventually acceptable when the situation stabilizes. Not out of line with long-term commerce in cross-border towns along the US-Canadian border or the US-Mexican border.

Of course, hypocrites in government can’t pass up an opportunity to whine for domestic political advantage. So, both the White House and Congress whine about so-called Chinese currency manipulation when the biggest fraud in Asia comes from the Bank of Japan. As it always has.

Wal-Mart discovers that treating employees like serfs doesn’t work

Last week, we learned that Wal-Mart was giving the lowest paid of its hourly employees a raise. In a blog post, Wal-Mart Chief Executive Officer Doug McMillon said that as of April, the company will pay a minimum of $9 an hour. That is $1.75 more than the federal minimum wage of $7.25, which has been unchanged for almost six years. Next February, Wal-Mart’s lowest hourly rate will rise to $10. All told, about a half-million Wal-Mart workers in the U.S. will be affected.

There has been lots of theorizing about why the nation’s largest retailer did this: See this, this and this. But I have a much simpler explanation: The Wal-Mart business model is broken.

As in any complex situation, there are many nuances and wrinkles: This was inevitable; state minimum-wage laws had already mandated those minimums (or higher) for at least two-thirds of the employees in Wal-Mart’s stores. In the years since the last federal minimum-wage increase, many of Wal-Mart’s employees had fallen below the poverty level and the strengthening economy has made it harder to attract and retain employees.

There is also the issue of the negative PR generated by Wal-Mart’s low, low wages. As we discussed back in 2013, many of its full-time employees receive a full array of federal and state welfare. Wal-Mart has become the nation’s largest private-sector beneficiary of taxpayer-supported public assistance (see “How McDonald’s and Wal-Mart Became Welfare Queens”). Indeed, the U.S. taxpayer has been subsidizing the wages of this publicly traded, private-sector company to the tune of $2.66 billion in government largess a year.

Although many factors contributed to the move, the simple reason for the increase is because Wal-Mart has stopped growing. Same-store sales have been little changed or declining for some time now. When we look at the underlying causes, the company’s workforce, and how it is managed, are the prime suspects…

Labor is seen as a cost driver rather than a sales driver. Managers do not have much direct control over sales, almost never making decisions on merchandise mix, layout, price, or promotions. But managers do have control over payroll costs and are evaluated regarding whether they meet weekly or monthly targets for payroll as a percentage of sales. At times these pressures have been such that Walmart managers have put pressure on employees to work off the clock.

With a bonus structure designed to drive down labor costs, guess what Wal-Mart managers did?

Cutting on salary and benefits, however, didn’t necessarily lower costs. About 44 percent of Wal-Mart’s hourly staff turns over each year. That’s a lot of people, because the company employs 2.2 million workers worldwide. Hiring replacements is a costly and time consuming process.

Consider competitors such as Costco: It has average hourly wages of $20 and a turnover rate of “17% overall and just 6% after one years employment,” according to the Harvard Business Review. HBR estimates the full cost of “replacing a worker who leaves is typically 1.5 to 2.5 times the worker’s annual salary.” That is no small chunk of change.

My favorite Recovering Republican, Barry Ritholtz…always my first read at Bloomberg news sites.

Behavior rooted in the attitudes and analysis of 19th Century Republican royalty ends up unproductive pretty consistently. Enjoying the fruits of the economic crash provoked by the financial-real estate band of thieves and frauds, Walmart was able to draw its serfs from the supersized pool of unemployed, underemployed and maybe-never-again-employed made accessible by free market economic ideologues.

But, just as those who don’t study history are doomed to repeat mistakes, those who don’t include economics studies as part of understanding history are doomed to repeat the biggest mistakes before their competitors. How much time do you spend shopping at Sears, Borders or Radio Shack? Driving there in your Oldsmobile.

Not paying your employees enough to shop at your own store is a second-order issue. One that Republicans couldn’t care less about. An example of pig-headedness masquerading as fiscal conservatism.

Walmart appears to be trying to enter the 20th Century – if not the 21st. Anyone think the Walmartians in Congress will learn from their example?

Texas county refuses to take on border checkpoint drug cases from the Feds

sierra blanca exit

Sierra Blanca county in Texas with two U.S. Border Patrol highway checkpoints is refusing to prosecute drug cases previously sent to it from those checkpoints.

The county—and all four states bordering Mexico—wants funding from Washington, D.C. to handle cases that federal prosecutors decide to send to state courts…

A program that reimbursed California, Arizona, New Mexico and Texas for prosecuting federally initiated cases hasn’t been funded since 2013…

You might ask those folks in Congress – the ones who whine the loudest about border security – why they cut back on funding for law enforcement along the border with Mexico.

The straw that broke the camel’s back here was the end of a Drug Enforcement Administration grant in late 2014. The grant helped the county after the Southwest Border Prosecution Initiative ended.

County Judge Mike Doyal is Hudspeth County’s chief elected official. He said his county lost more money than it earned by accepting federally initiated drug cases.

“And they [the DEA] said, ‘We’re not renewing the grant.’ And we said, ‘We’re not taking any of the cases,’” said County Judge Mike Doyal, the chief elected official in Hudspeth County.

And so the county isn’t accepting any federal narcotics cases

There are no current plans in Congress to bolster funding for border states prosecuting federally initiated cases.

The term “Congressional cheapskates” comes to mind. Along with Tea Party “idjits”.

All the fear-mongering in the world ain’t about to get drug traffickers put into the slammer on good looks alone. Someone has to cover the paychecks for law enforcement and counties like Sierra Blanca can’t afford it.

Used to be a regular stop for me when I was on the road from El Paso to visit clients in the Permian Basin. Mostly played-out mines leftover from the last time they had a local economy. Though there still is a working talc mine part way between El Paso and the Sierra Blanca exit off I-10. Think about it next time you powder a baby’s butt.

Portland to generate electricity as part of its water system


LucidPipe installation — a turbine visible inside the pipe

There’s a lot of water constantly moving through the municipal pipelines of most major cities. While the water itself is already destined for various uses, why not harness its flow to produce hydroelectric power? Well, that’s exactly what Lucid Energy’s LucidPipe Power System does, and Portland, Oregon has just become the latest city to adopt it.

LucidPipe simply replaces a stretch of existing gravity-fed conventional pipeline, that’s used for transporting potable water. As the water flows through, it spins four 42-inch (107-cm) turbines, each one of which is hooked up to a generator on the outside of the pipe. The presence of the turbines reportedly doesn’t slow the water’s flow rate significantly, so there’s virtually no impact on pipeline efficiency.

The 200-kW Portland system was privately financed by Harbourton Alternative Energy, and its installation was completed late last December. It’s now undergoing reliability and efficiency testing, which includes checking that its sensors and smart control system are working properly. It’s scheduled to begin full capacity power generation by March.

Once up and running, it’s expected to generate an average of 1,100 megawatt hours of energy per year, which is enough to power approximately 150 homes. Over the next 20 years, it should also generate about US$2 million in energy sales to Portland General Electric, which Harbourton plans on sharing with the City of Portland and the Portland Water Bureau in order to offset operational costs. At the end of that period, the Portland Water Bureau will have the right to purchase the system outright, along with all the energy it produces.

Something cities like Albuquerque and Santa Fe, New Mexico, should consider. The rush of population growth and concurrent water system expansion took place right after World War 2. The mediocre piping installed now fails on a regular basis. Cripes, in Abq it’s weekly, even daily.

Of course, rebuilding infrastructure – especially with an eye on future requirements and additions – ain’t exactly part of being an American politician, nowadays.

Apple’s 25-year solar agreement will provide 130MW of clean energy


Apple’s new Campus 2 – under construction in Cupertino, California

Apple’s landmark solar power deal…is a long-term sustainable energy solution that should generate enough to power essentially all of the company’s California operations, including the upcoming “spaceship” Campus 2, by the end of 2016.

The green energy will be purchased from First Solar, Inc., through an $848 million agreement that will last for at least 25 years, making it the largest of its kind in the industry. First Solar will be providing electricity through its forthcoming 2,900-acre California Flats Solar Project in Monterey County…

In total, the solar plant will output 280 megawatts of electricity, 130 megawatts of which will be bought by Apple. The remaining 150-megawatt capacity will be sold to Pacific Gas & Electric under a separate long-term power purchase agreement…

Cook said…that Apple will buy enough electricity to power nearly 60,000 California homes. That’s enough to offset the electricity used by Apple’s upcoming Campus 2, as well as all 52 Apple retail stores in the Golden State, and its data center in Newark.

The Apple CEO also made it clear that climate change is a very serious issue for him and his company, which is why they are taking the lead on renewable and sustainable energy. Cook also noted to investors that the agreement makes sound financial sense as well, as the $848 million deal will result in “very significant savings” on the cost of energy.

So, the most valuable corporation in the world says it makes economic sense to move eletricity generation away from fossil fuel, away from coal and oil.

Congressional pimps and cowards, Republican conservatives and Blue Dog Democrats, bleat this isn’t possible.

Which side are you on?

Reprogramming plants for drought tolerance


Transgenic Arabidopsis on the right survived drought vs non-transgenic on the left

Crops and other plants are constantly faced with adverse environmental conditions, such as rising temperatures (2014 was the warmest year on record) and lessening fresh water supplies, which lower yield and cost farmers billions of dollars annually.

Drought is a major environmental stress factor affecting plant growth and development. When plants encounter drought, they naturally produce abscisic acid (ABA), a stress hormone that inhibits plant growth and reduces water consumption. Specifically, the hormone turns on a receptor (special protein) in plants when it binds to the receptor like a hand fitting into a glove, resulting in beneficial changes — such as the closing of guard cells on leaves, called stomata, to reduce water loss — that help the plants survive.

While it is true that crops could be sprayed with ABA to assist their survival during drought, ABA is costly to make, rapidly inactivated inside plant cells and light-sensitive, and has therefore failed to find much direct use in agriculture. Several research groups are working to develop synthetic ABA mimics to modulate drought tolerance, but once discovered these mimics are expected to face lengthy and costly development processes.

The agrochemical mandipropamid, however, is already widely used in agricultural production to control late blight of fruit and vegetable crops. Could drought-threatened crops be engineered to respond to mandipropamid as if it were ABA, and thus enhance their survival during drought?

Yes, according to a team of scientists, led by Sean Cutler at the University of California, Riverside.

The researchers worked with Arabidopsis, a model plant used widely in plant biology labs, and the tomato plant. In the lab, they used synthetic biological methods to develop a new version of these plants’ abscisic acid receptors, engineered to be activated by mandipropamid instead of ABA. The researchers showed that when the reprogrammed plants were sprayed with mandipropamid, the plants effectively survived drought conditions by turning on the abscisic acid pathway, which closed the stomata on their leaves to prevent water loss.

The finding illustrates the power of synthetic biological approaches for manipulating crops and opens new doors for crop improvement that could benefit a growing world population.

One of the growing areas of research wherein scientists work to adapt plants to conditions not otherwise considered arable or useful for cropping. Drought-tolerance is only one of the areas. There are folks working to encourage food crops in both high-salt and high-alkaline environments.

Farmers have historically followed the roads that lead to simplest and easiest profits – once agriculture evolved beyond sustenance family farming. That generally put the focus on the most arable land, good water access, etc.. Opening up new lands, new climates, broader soil chemistry and temperature permits growing food for more.

Hopefully, common sense prevails over religion, culture and dirt-poor economics while family size continues to diminish – along with demand.

Ignore beancounters who say the unemployment rate is a lie

Gallup CEO Jim Clifton has discovered a shocking secret about unemployment: its definition.

Those Chicago guys didn’t even bother to hide this one in plain sight. It’s just sitting there in plain sight, right on the Bureau of Labor Statistics’ homepage: only people who don’t have a job but are actively looking for one count as unemployed. That means someone who wants work but has given up looking for it because things seem so hopeless isn’t “unemployed.” Neither is someone who works part-time but can’t find the full-time job that they want. Or someone who does whatever odd jobs they can find. Add it all up, and our 5.6 percent unemployment rate is a “Big Lie,” according to Clifton…

If the unemployment rate is so flawed how come we pay so much attention to it? Well, because it’s the worst stat about labor market slack except for all the others. The problem is figuring out which people who don’t have jobs are really jobless.

Take discouraged workers. The unemployment understates how bad things are by ignoring them, but we wouldn’t want to count everyone who’s not working and not looking for a job as unemployed, would we? If we did, then we’d be saying that college students and stay-at-home parents and even retirees are just as unemployed as someone who’s sending out resumés everyday.

But even that’s not clear cut since some people go to school because they can’t find a job, and some people stay at home since child care would cost more than they’d make, and some people are forced into retirement. That’s why we look, for example, at the so-called prime-age participation rate—the percent of people between 25 and 54 years old who have or are looking for a job—to figure out far away we are from a real recovery. And by that measure, we still have a ways to go…

But even that’s imperfect because it doesn’t tell us why people aren’t looking for work. It could be that the crisis convinced more people to go to college, regardless of whether they could find a job now. That’d be good.

Or it could be that wages have been flat for so long and childcare’s gotten so expensive that it’s not worth it for people to work now or anytime soon. That’d be bad.

Or it could be both. But if either is true, it’d mean that the unemployment rate is more accurate than you might think. In other words, since we can’t read people’s minds, the best way we can tell what they want is to look at what they’ve done. That’s not entirely right, but it’s the least wrong.

So the unemployment rate’s not a big lie. But calling it one is.

All this crap got started back in the Nixon era. Yes, essential labor statistics were screwed with to make unemployment look like less of a problem. It’s called Republican arithmetic.

But, most of the whines since are just that. Beancounteers crying in their beer over a small fractional adjustment for whatever reason. Which has nothing to do with either cyclical or, especially, structural unemployment.

So, just tell your favorite whiner to put a cork in it and spend their time trying to find solutions instead of putting all their energy into a lament about people they ignore 99% of the rest of their lives.

Thanks to my favorite Recovering Republican

Climate change, responsible investing and divestment

Around the world, institutional investors – including pension funds, insurance companies, philanthropic endowments, and universities – are grappling with the question of whether to divest from oil, gas, and coal companies. The reason, of course, is climate change: unless fossil-fuel consumption is cut sharply – and phased out entirely by around 2070, in favor of zero-carbon energy such as solar power – the world will suffer unacceptable risks from human-induced global warming. How should responsible investors behave in the face of these unprecedented risks?

Divestment is indeed one answer, for several reasons. One is simple self-interest: the fossil-fuel industry will be a bad investment in a world that is shifting decisively to renewables. (Though there will be exceptions; for example, fossil-fuel development in the poorest countries will continue even after cutbacks are demanded in the rich countries, in order to advance poverty reduction.)

Moreover, divestment would help accelerate that shift, by starving the industry of investment capital – or at least raising the cost of capital to firms that are carrying out irresponsible oil, gas, and coal exploration and development, despite the urgent need to cut back. Though no single institutional investor can make a significant difference, hundreds of large investors holding trillions of dollars of assets certainly can.

Indeed, divestment by leading investors sends a powerful message to the world that climate change is far too dangerous to accept further delays in the transition to a low-carbon future. Divestment is not the only way to send such a message, but it is a potentially powerful one.

Finally, investors may divest for moral reasons. Many investors do not want to be associated with an industry responsible for potential global calamity, and especially with companies that throw their money and influence against meaningful action to combat climate change. For similar reasons, many investors do not want handgun manufacturers or tobacco companies in their portfolios…

Of course, the need for climate action does not stop with investors; sustainable consumption and production practices by businesses and individuals must be part of the solution as well. The transition to a safe, low-carbon future requires all parts of society to act responsibly and with foresight. As leaders in education, research, and problem solving, universities have a unique responsibility and opportunity to lead, including as responsible and ethical investors.

RTFA for alternatives suitable to the somewhat-ethically-challenged. Plus – a historical comparison to a blast from the past from the tobacco industry. An example of profits and dividends from an investment with no socially-redeeming value whatsoever.

Will Democrats walk away from obedience to Wall Street?

FDR vs big banks

America’s presidential election is still nearly two years away, and few candidates have formally thrown their hats into the ring. But both Democrats and Republicans are hard at work figuring out what will appeal to voters in their parties’ respective primary elections – and thinking about what will play well to the electorate as a whole in November 2016.

The contrast between the parties at this stage is striking. Potential Republican presidential candidates are arguing among themselves about almost everything, from economics to social issues; it is hard to say which ideas and arguments will end up on top. The Democrats, by contrast, are in agreement on most issues, with one major exception: financial reform and the power of very large banks.

The Democrats’ internal disagreement on this issue is apparent when one compares three major proposals to address income inequality that the party and its allies have presented in recent weeks. There are only small differences between President Barack Obama’s proposals (in his budget and State of the Union address), those made in a high-profile report from the Center for American Progress, and ideas advanced by Chris Van Hollen, an influential member of Congress. (For example, Van Hollen recommends more redistribution from higher-income people to offset a larger tax cut for middle-income groups.)

Against this backdrop of programmatic unity, the difference of opinion among leading Democrats concerning Wall Street – both the specifics of the 2010 Dodd-Frank financial reforms and more broadly – stands out in bold relief.

But a serious challenge to all of these views has now emerged, in proposals by Senator Elizabeth Warren, a rising Democratic star who has become increasingly prominent at the national level. In her view, the authorities need to confront head-on the outsize influence and dangerous structure of America’s largest banks.

Warren’s opponents like to suggest that her ideas are somehow outside the mainstream; in fact, she draws support from across the political spectrum. In last month’s fight against Citigroup’s successful effort to roll back Dodd-Frank, for example, Warren’s allies included the House Democratic leadership, the Independent Community Bankers of America, Republican Senator David Vitter, and Thomas Hoenig (a Republican-appointed vice chair of the Federal Deposit Insurance Corporation).

Warren’s message is simple: remove the implicit government subsidies that support the too-big-to-fail banks. That single move would go a long way toward reducing, if not eliminating, crony capitalism and strengthening market competition in the financial sector. This is a message that plays well across the political spectrum. And growing support for Warren’s ideas helps the Federal Reserve and other responsible regulators in their efforts to prevent big banks from taking on dangerous levels of risk.

RTFA. Consider the possibility that the Democrat Party – unlike Republicans – might challenge subservience to Wall Street or be satisfied with populist lip service to core reforms pressed by Elizabeth Warren, Bernie Sanders and many others?