Can We Afford Obama Stimulus? Electric Growth in Trillions, CNG is NOT a biofuel
The chart above comes from http://www.eia.doe.gov/oiaf/ieo/world.html
Soooo, the growth SHOULD BE about 10 Trillion kWh/yr over 20 years, or 1/2 a trillion kWh annually WORLDWIDE (assuming straightline growth, which, of course, it would not actually be, but for convenience of calculation we'll assume so). Most of the growth is expected in Chindia (as Kleiner, Perkins, Caulfield and Byers like to call the high grow economies of India and China). So, realistically, even if 1/8 of the whole worldwide demand IS in USA, that's about 1/16 of a trillion kWh/yr in the USA over the next 20 years (assuming straight-line growth).
Now that's nothing to sneeze at. It amounts to 62.5 billion kilowatt hours annual GROWTH in demand, which estimating at the low end of the range of just $2000/kW of construction costs (the low end of estimates, as compared to high estimates of $4500/kW for new nuclear power plants) that's back up there into some pretty large dollar amounts. The PROBLEM with my associate's assumptions that attempted to turn these trillions of kilowatt hours into an economic outcome was that kW (kilowatts) does NOT translate directly to kWh (kilowatt HOURS) you have to divide kWh by 365 days, and then divide the result by 24, so in this instance 62.5billion kWh annual increase means that EACH HOUR needs to generate 7.234 million kW (more all year). At US$ 2,000.00 per kilowatt construction cost, that's still US$14.468 Billion (per year).
Now, even assuming my figures are too conservative (the US may well take 1/4 of the worldwide growth, though I would think that figure too high myself) that would be US$57.872 Billion of capital expenditures per year for power companies to keep up with demand. Realistically if the figure is that high, that could be the equivalent of as much as 965,000 jobs at US$48,000 per year (with an additional US$12,000 employer payroll taxes and benefits plus overhead). Since our calculation was based on straight line estimates, one could reasonably say that it also represents 20 years of employment for those hypothetical employees, too.
No, I am not confused about the difference between capital spending and employee salaries. My associate was interested in making a point that something he was working on could reduce the growth in demand by a factor equal to the percentage of growth that was predicted by his sources, which were not, by the way, the US Energy Information Administration. His point was that by saving this amount of capital spending for the power generating industry (over the next 20, or more specifically the next 22 years), it could represent money available to create job growth instead, and therefore worthy of government support in the immediate future.
The news reporters have said that the approximately $800 billion in the stimulus package was about 5% of US domestic GDP. That makes US GDP to be roughly about $16 trillion in total. Just for the exercise of it, let's take a look at this stimulus from the simplified, family car buying decision criteria, "can we afford it," and more particularly, "can we afford it now, or is it just going to cost more to hold off on this spending?"
First let's also set aside the odd Republican Party notion that only tax cuts will get us out of this financial mess. Not only do the majority of economists agree that government spending has a multiplier effect of approximately a factor of 1.25 for every dollar in spending, but also that tax cuts' stimulative effect is only about 0.75 for every dollar refunded, but I also agree with President Obama's point that we can't go back to relying on the same old failed policies that got us here in the first place. Actually he recently said, it is ludicrous to believe "the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive."
George Will, the incredibly intelligent and knowledgeable, regular panelist on This Week with George Stephanopolous claims that there is a two party system for good reason, and that the fundamental differences need to be discussed. Good point, George. I am afraid, however, that I can also agree with Cokie Roberts that this was a "branding" strategy from the Republicans in preparation for future elections more than real policy stands, because they knew they did not have the votes to prevent a stimulus package from being passed along the lines that the Democrats wanted. Indeed, I think the Democratic Senate caved too much on the tax cuts added by the troika of moderate Republicans Arlen Specter (R, Pennsylvania) and Olympia Snow (R, Maine) and Susan Collins (R, Maine).
But I have to mark a mark on the wall for old George (Will, not Stephanopolous) this week when he noted House Leader Nancy Pelosi as saying that we need to get going on the move to using more natural gas to get away from fossil fuels. "I believe in natural gas as a clean, cheap alternative to fossil fuels," she said in August of 2008. Hello!!
And while I am on the subject of ignorance amid some otherwise fairly bright people, I promise I will correct White House Chief-of-Staff Rahm Emanuel on how to pronounce the word NUCLEAR. Rahm, that's NU -- CLE -- AR, or even just "NewClear" (if you say it fast enough). I hate having one of the brightest people on the planet making the same dumb mistakes as former President George W. Bush. THERE IS NO SUCH WORD as "NOOKULAR", gentlemen, PLEASE!! (and just by the way, that goes double for you too, former President Jimmy Carter!)
Okay, sorry, I have wandered fairly far away from the point for which I was aiming, which was, "can we afford this stimulus package?" Okay, let's look at this from the "zero base budgeting" standpoint. That is, rather than accepting that certain "fixed" costs are, indeed, fixed and immutable elements of past budgets so we'll just HAVE to include them this time too. That is the concept behind "zero base budgets". Now, having established that domestic GDP is somewhere near US$16 Trillion annually, let's also take the radically simple approach of a flat tax strategy (not that I really advocate it, just that it's a quick way of eliminating legacy entitlements and all other methods of arriving at what end total we are looking to achieve). If a flat tax (on EVERYTHING) was set at 10% to the federal government, then a revenue of US$ 1.6 Trillion would be received based on that US$16 Trillion GDP. If that is indeed an approximation of the taxes the federal government can expect to collect. My understanding is that IS one of the arguments that flat tax advocates claim, a simple 10% of everything would bring in the same amount of tax revenue, and eliminate all the paper waste, time, effort and un-necessary bureaucracy of the Internal Revenue Service. Half a year's total tax revenue on one stimulus package of legislation sounds excessive, and yet most economists say it is not nearly enough, and George Will claims that the cost of borrowing, interest, added to the 20 years of repayment will being the actual cost closer to US$ 2.3 Trillion overall (from just the US$800 Billion stimulus package, never mind the previous Troubled Assets Relief Program (yes, that's really it's name, despite what the popular phrasing has become, or unless there is some official amendment to the act itself that I don't know about).
As much respect as I have for George Will, I do have a resentment for harbingers of doom and gloom, because the more the public listens to harbingers of doom and gloom the more they become self-fulfilling prophecies because people react in ways that make those prophesies come true. It certainly seems daunting that we are now going to be spending what looks like almost half of the likely income of the federal government for a single year, over the next two years on this group of economic stimuli.
The bad news is that similar programs carried out by the government of Japan during the 1990's are blamed by many for the fact that the whole of the 1990's were a dismal time for the Japanese economy. The good news is that we are a long way from the "desperate measures" with which the government attempted to compensate for the "Great Depression" in which they went into a deficit spending program that eventually amounted to 125% of domestic GDP.
So I guess the analogy is that 5 degrees left rudder will eventually turn this battleship/aircraft carrier/ship-of-state/state-of-the-economy around, but is that turn sharp enough to make it out of these stormy economic seas before we founder? And again, the news is good, because we have a long way to go, and a lot of latitude along the way before we get anywhere near that 125 degree course change.
The Academy of American Motion Picture Arts and Sciences awards, better known as "The Oscars" broadcast is coming up soon, and since I am likely to overdose you on entertainment items as they loom, I'll skip that subject for today.
However, I will leave you with a pleasant thought. My friend who is looking to cut the growth in demand for electric generation over the next 20 years is now looking at a product I pointed him toward. I hope he and I can help popularized this thing because it offers such an amazing reduction in energy consumption for commercial and residential electric customers on the grid. It doesn't appear to be of much use to the off-the-grid folks, but if it works as advertised it could cut energy demand (and therefore also customer energy costs, as well as power company expansion costs) significantly. Cut it by more than the 1% compounded for 20 years rate that my associate was attempting to counter. It doesn't work the way that I thought devices like this should work, which may account for why this type of device has not been available in this kind of low cost configurations before. In any case, I am extremely hopeful that this device will prove to be a boon to homeowners and business owners alike, and as such a great leap forward for the earth as a whole.
Love and warm wishes,
Sincerely,
Stafford "Doc" Williamson
http://daochienergy.com
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