Fund Balance

By Walter Borden

In the coming months, we will hear a lot about the Taxed Enough Already (TEA) Party’s plans for the U.S. during the 112th Congress. No doubt we shall hear how such plans signal a new, brighter era.

But do they?

The principles espoused by the Tea Party and their Republican allies already dominate policy across America in many of the red states, such as South Carolina and Nebraska. These states have for many decades now served as laboratories for TEA Party neoliberalism. They share very low tax rates on wealthy individuals and businesses, high carbon emissions, low unionization (enforced via so-called Right-to-Work statutes), privatized and under-funded public healthcare and so on.

When viewed in contrast with blue states, such as New York and Washington, what is the quality of daily life in the red states?

The American Human Development Project (HDI) illuminates some of the answers along with data from the Tax Foundation and U.S. Census Bureau. They are broken out in the charts below.

The picture that emerges from the numbers at left and below shows that blue states provide cleaner air, higher rates of education, and higher per capita income than red states. Furthermore, blue states pay more into the federal government than they get back while red states take more than they pay.

American states paying more into the U.S. Treasury (the blue states for the most part) also have higher rates of unionization combined with higher standards of living than their red tea party counterparts. In red states we find less unionization, lower rates of education and income coupled with higher rates of infant mortality and teen pregnancy. Arguments about the failure of abstinence only approaches to family planning aside, some may argue that a lower cost of living offsets some of these drawbacks for red state citizens. But given the extent of red tea party breastbeating about “economic growth,” it is an interesting irony that these red  states take more from the Treasury than they provide and afford their citizens a lower quality of life as described in Chart 1.

Chart 2 breaks out how most red states are subsidized by blue states and have much higher rates of carbon emissions, the emerging standard measure of general pollution. The not so astonishing observation we make about Charts 1 and 2 is that they would appear to suggest that the well-being and productivity of blue state citizens surpasses that of their red tea party neighbors.

Recent and ample anecdotal evidence supporting this conclusion abounds.

In Florida, a state loosely defined by a deeply conservative northern panhandle, and a progressive Southern portion, we see HDI scores just above the national average and a consumption of roughly .97 cents for each dollar of tax revenue provided. Florida’s incoming governor, Rick Scott, recently made headlines by calling for an end to public education and providing vouchers for families of up to $5280 to attend private school. Yet Florida spends $8,800 per pupil. The average cost for private schools per year is $8,549 while the median income is $24,543. Where do the families get this extra sum which amounts to more than 10% of their income? Does this not in effect, amount to a new tax?  Mr. Scott’s inability to grasp the glaring problem of federal subsidies to private enterprise (eg the bank bailout) is further demonstrated by his involvement as a CEO in the largest (medicare) fraud settlement in U.S. History according to the Department of Justice.

Texas scores just under the national average of 5.17 at 4.67 on the HDI while its near neighbor Arizona manages 5.11 and takes 19 cents per dollar more from the U.S. Treasury than it pays.  Perhaps that is why its Governor Jan Brewer (R) attracted attention from both parties recently for her statements that Arizona needs more Federal funds for Medicare. Gov. Brewer commented recently on her cuts to the state’s Health Care Cost Containment System, which have imperiled the lives of patients in need of an organ transplant. Brewer said that people branding the cuts as a real-life incarnation of death panels should be asking the federal government to send more money – a surprising position from someone who continues to oppose the The Affordable Health Care Act (AHCA) of 2010. As Think Progress points out, “AHCA would foot 100 percent of the bill for states to expand [Medicaid] until 2016 and 90 percent after 2020 for states that are able to maintain current eligibility levels in Medicaid and CHIP.”  However, the Brewer Administration recently claimed that it had been forced to cut the transplant program because the health care reform overhaul had prevented the state from being able to save cash by making it harder to qualify for Medicaid. Go figure.

Brewer – who declined to hold a special session to reinstate the funds, a refusal that leaves some patients’ lives hanging in the balance – blames Arizona’s dire financial situation. (Apparently “death panels” aren’t such a big deal when a Republican is in charge.) She argues that if people are so worried about the transplant patients, they should ask the federal government for more money. A report from the Arizona Republic gives

Chart 2

some insight about how Brewer used stimulus funds, and clearly healthcare was not a priority for her. Whither the death panels, Governor Brewer?

Even given the odd logic at work in Arizona, it’s still hard to hard to understand the need for the State to sell its Capitol buildings to a private real estate company, only to lease them back at an eventual loss to the taxpayers in the millions of dollars. Ken Silverstein introduced us to the likely results of Arizona style Tea Party Politics in the July 2010 issue of Harpers .

All of the red tea party’s empty rhetoric about austerity (for the middle and lower classes, the rich need more tax breaks) needs to be viewed in the light of the past and future.

Aristotle wrote, “It is clear then that the best partnership in a state is one which operates through the middle people.”

The conscious effort by the founders to create this middle class defined American success and stability since the founding. But now, with more than 9 in 10 American families experiencing significant economic shocks year in and out, the middle class in the U.S. – and with it our nation’s future – is seriously endangered.

“Shaky Ground” , a recent study released by the Rockefeller Foundation and authored by Jacob Hacker and Mark Schlesinger of Yale University paints a grim picture of widespread economic insecurity in the era of the Great Recession.

The study concludes, “Economic insecurity has become the rule, not the exception, for many Americans — even in good times.” This report finds that between March 2008 and September 2009, fully 93 percent of American households saw substantial decreases to their wealth or income, or increases in emergency spending, often for medical needs. It further shows that the impact of those shocks was not confined to the working class. The report found that more than half of families making between $60,000 and $100,000 who experienced employment or medical disruptions weren’t able to meet minimum economic needs.

Importantly the study asserts that the recession — which officially lasted from December 2007 until June 2009 — exacerbated some of these economic woes, but that many were in place even before that.  “Job-related concerns did increase dramatically during the recession,” Margot Brandenburg, an associate director of the Rockefeller Foundation, told The Lookout. “But other drivers of economic worry — wealth, medical needs, family-related issues — were very high before the recession, and they’ve remained high.”

This trend formed over the last three decades. In 1985, just 12 percent of Americans lived in households that saw a drop in available income of more than 25 percent from one year to the next. By 2009, it was 20 percent according to the report. Where does the shift come from?  Why is economic insecurity the new normal?  Brandenburg stated what many of us already realize: economic risk has gradually shifted away from corporations in recent years onto individuals through developments such as defined-contribution retirement and high-deductible insurance plans.

Professor Hacker, who authored  “The Great Risk Shift” in 2006,  argues that since last year’s “winner-take-all politics,” government policies have accelerated a shift that benefits the rich at the expense of the middle and working class. Brandenburg attributes growing economic insecurity to, “the hollowing out of the middle”. Increasingly, the sectors that produce the most jobs either pay high wages and require highly skilled workers, or pay low wages and require unskilled workers. By comparison, the sectors in the middle — manufacturing, technical support, and clerical work, for example – continue to evaporate. These members of the workforce find themselves replaced by cheaper foreign workers and machines.

It is difficult to see then, in light of the data and anecdotes above, how TEA Party and Right to Work states are valuable models for our nation and our civilization’s future. If workers cannot pool their risk via organized labor – much as insurers do with policy-holder liability – then the overwhelming majority of non-union workers will be at the mercy of resource-rich conglomerates and cartels when they are unfairly denied payment for services rendered.  When citizens must stand alone in defending themselves against deep-pocketed polluters they find themselves in the same position. And this soon after the great crash of 2008, it is hardly necessary to point out that banking and other corporate and industrial concerns fail miserably at policing themselves.

Society does not need another instantiation of the TEA Party’s rehashed brand of laissez faire economics. That movie was called the Gilded Age, with all the familiar Upton Sinclair and Dickensian storylines: gussied up slave labor, excruciating poverty, and multi-generational tragedy in the lower classes. Nevertheless,  3D technicolor sequels to that movie are now playing in Red and TEA party states, not surprisingly, the data again tells a tragic story.

Looking forward in 2011, we must innovate away from the proven failures of these 19^th century economic models. This does not require a revolutionary rejection of capitalism but rather its further refinement.

Early 21st century capitalism is succeeding only partially or pro tanto as J.K. Galbraith would say. Balancing social responsibility and sustainable economic practice has produced great success all across the Union. Within this framework, the world’s efforts to integrate sustainability into financial and industrial systems emerges as an obvious imperative, along with the rejection of loosely regulated 19^th century style economic policy.

Not surprisingly, the data suggests that municipalities that value intelligent public sector-driven resource and pollution management systems will have healthier economies and ecologies than their deregulated neighbors. TEA party policies have already run their disastrous evolutionary course. Returning to them would be a giant and unnecessary leap backwards.

In the coming months at Fund Balance, we will be presenting some of the dawning precepts of the bright green future: policies, businesses and projects that build upon the lessons of the past, not its mistakes.

As we reach the end of the first decade of the 21^st century, some dangerous misconceptions linger from the 20^th. Two of which are that global warming is not happening and that it is not primarily a man-made phenomenon. While factors such as Solar Irradiance clearly have secondary and significant impacts, emission of heat trapping gases from human activity, coupled with wide scale deforestation of the Earth, compromise Gaia’s ability to manage such rapid change.

While that debate is settled one indication remains constant: Climate Crisis involving the rapid acceleration of Earth temperatures is real. And for the purposes of this post fighting it does not necessitate sacrificing employment in industrialized nations. In fact, an opposite case merits presentation.

Fire fighters battling oil tank fire at Union Oil refinery in Wilmington, Calif., 1951

This past summer anticipation of the political season overwhelmed common sense. Prominent Republican Senators Lindsay Graham and John McCain retreated from support for Cap and Trade legislation eyeing mid-term elections no doubt feeling pressure from Smog Lobby financiers and pollution advocates such as Koch Industries. Many politicians abandoned their support for the legislation in efforts to distance themselves from President Obama or please mainstream media king Fox News. A very informative post-mortem can be found in Ryan Lizza’s  As the World Burns in last week’s New Yorker.

Once again into the breech is California. As the innovation pacesetter, it leads in the national debate regarding policy formulation around the Climate Crisis and is poised to set pace for the rest of the country. In California many Republicans are fighting against Proposition 23, which aims to halt the State’s bold Assembly Bill 32 (A.B. 32) legislation aimed at creating a clean-tech economic factor. Meanwhile Representative Darryl Issa threatens to re-open the so-called “Climategate” hearings if the GOP regains control of the House of Representatives.

Prominent and distinguished conservatives such as George Schultz back Governor Arnold Schwarzenegger in his battle against Big Oil. Two Texas oil companies with refineries in California, along with pollution rights financiers Koch Industries, fund a campaign to halt California’s landmark laws designed to slow global warming and promote clean energy innovation. These would require refiners to install state-of-the-art emission-control tools. Opponents of Assembly Bill 32 assert that the installation of such technology would not create any jobs. Yet, the State of California reckons that green technology creates the most jobs right now in California, 10 times more than any other sector.

In addition, former Secretary Schultz begs to differ with the Smog Lobby, “Prop 23 is designed to kill by indefinite postponement California’s effort to clean up the environment…This effort is financed heavily by money from out of state. You have to conclude that the financiers are less concerned about California than they are about the fact that if we get something that is working here to clean up the air and launch a clean-tech industry, it will go national and maybe international. So the stakes are high. I hope we can win here and send a message to the whole country that it’s time to put aside partisan politics and get an energy bill out of Washington.”

Since President Obama and Congress have failed to pass a clean energy bill, California’s laws are our nation’s best hope to stimulate clean-tech in America – and the job creation it would entail.

Prop 23 proposes to suspend implementation of A.B. 32 until California achieves four consecutive quarters of unemployment below 5.5 percent. The unemployment rate is currently above 12 percent. This is misleading. A.B. 32 was designed to reduce greenhouse gases to 1990 levels by 2020 and was supported by Republicans, Democrats, businesses and environmentalists. Prop 23’s provision requiring a 5.5 percent unemployment rate is deceptive because in the last 40 years California has rarely produced an unemployment rate below 5.5 percent for four consecutive quarters, hence the real intent is to kill clean air policy in California.

To quote Dan Becker, the director of the Safe Climate Campaign, “Now that industry and their friends in Congress have blocked progress there, the hope for action moves to the states and the Environmental Protection Agency… polluter lobbyists are tight on our heels. They’ve offered Senate amendments to block the E.P.A. from using the Clean Air Act to cut power plant pollution. Since that failed, they are trying to block California from moving forward. … If the people of California see through the misrepresentations of the oil industry, it throws climate denialism off the tracks and opens the door for a return to a science-based approach to the climate. It would be a triumph for the National Academy of Sciences over the National Academy of Fraud.”

Energy chemist Nate Lewis of Cal tech states, “The real joke is thinking that if California suspends its climate laws that Mother Nature will also take a timeout….We can wait to solve this problem as long as we want…But Nature is balancing its books every day. It was a record 113 degrees in Los Angeles the other day. There are laws of politics and laws of physics. Only the latter can’t be repealed.”

To put a fine point on the fact that much debate on climate change is manufactured, one need only look at what Republican spin-meister, Frank Luntz, noted in a memo to George W. Bush in 2002.  “The scientific debate is closing [against us] but not yet closed. There is still a window of opportunity to challenge the science…Voters believe that there is no consensus about global warming within the scientific community. Should the public come to believe that the scientific issues are settled, their views about global warming will change accordingly. Therefore, you need to continue to make the lack of scientific certainty a primary issue in the debate, and defer to scientists and other experts in the field.”

But Mother Nature and the Chinese are not going to wait around for American political cycles.  Let’s close with a quote from The Governator. “And they [Big Oil] are very deceptive when they say they want to go and create more jobs in California,….Since when has [an] oil company ever been interested in jobs? Let’s be honest. If they really are interested in jobs, they would want to protect A.B. 32….”

Editors Note: Many of the quotes and uncited sources in the last half this post are adapted from Thomas Friedman’s excellent piece in the October 5th, 2010 edition of the New York Times “The Governator vs. Big Oil”.

Mainstream media coverage of the critical depletion of key fish populations – and the serious economic threat it represents – echoes a key refrain at Fund Balance. Time Magazine covers how climate change is warming oceans and thus reducing their ability to support life, and CNN.com has a post by Fedele Bauccio addressing ways to halt overfishing.

Blue Fin Tuna

In addition the U.N. recently released new findings and recommendations for how humanity can decelerate the rapid depletion of the ocean’s biological capital.  Some key points:

• Blue Fin Tuna populations have dropped by 83% in the past 30 years.
• The annual 27 billion dollars in government subsidies to fishing, mostly in rich countries, is misguided since the entire value of fish caught is only 85 billion dollars.
• As a result, fishing fleet capacity is 50 to 60 percent higher than it should be.
• About 20 million workers will be displaced by ending these subsidies and thus retraining will be required.
• Fish populations can rebound quickly if no-fishing zones are expanded and their limits enforced; for example, by allowing tuna to live twice as long as they currently do, they are able on average to produce twice as many eggs.

We hope that the ongoing Gulf Coast disaster heralds a new time – one where:

• The false dichotomy between ecology and economy in the public mind is finally eliminated.
• Government and industry realize that an environment where pollution and unchecked exploitation are controlled and tightly regulated is an environment that supports healthy economic growth.
• People and governments vigorously address the fact that Climate Change is not the only impact of fossil fuel extraction and combustion, and that “market-based” strategies like cap and trade must be combined with other, precautionary and complementary policies.
• The public consciousness is imprinted permanently with the understanding that drawing down capital at a rate that exceeds one’s ability to replace it is economic and biological folly at best and suicide at worst, whether of banks or fisheries.

Fund Balance has been examining the Dead Zones occurring in coastal and estuarial zones over the last year. Their magnitude is striking. Their damage to ocean ecosystems, seafood supplies and business is severe. And they are connected to vital food supply economies in the Midwest. Nitrogenous run-off from fertilizer used in large scale agriculture binds up and removes oxygen in the Gulf.

Does it have to be one set of regional American economic interests over another? The answer is no. For example, research performed at Dauphin Island Sea Lab off the coast of Alabama develops “resource management strategies which will foster the wise stewardship of diminishing natural resources”. There are ways that such principles are being applied in the Midwest along the Mississippi river. The book, “From the Corn Belt to the Gulf” (Nassauer, Santelmann, and Scavia, eds., Resources for the Future Press), details how farmers and industrial agricultural operations could reduce the amount of nitrogen flowing into the Gulf of Mexico by 40 percent. And it is increasingly clear that by planting specific types of grasses and engineering buffers, grain production in the great American Midwest does not have to contract in order for coastal economies to thrive.

Scientists and policy-makers in the Midwest have been at the forefront on this work. The Science Museum of Minnesota has produced an excellent presentation on the Deadzone in the Gulf of Mexico.  Fund Balance is working with policy-makers and bankers on our capital markets strategy for dealing with this issue in Washington, DC.

This past week, countries meeting in Doha at the United Nations Convention on International Trade in Endangered Species voted down a proposal by Monaco and the United States to ban international trade in Atlantic bluefin tuna. The species, Thunnus Thynnus, is spiraling toward extinction, and is listed as endangered by the U.N. and every major international conservancy group.

This outcome underscores the need for policy makers and those charged with execution of policy to factor in the serious crisis that the world’s oceans and riverine systems face: our Blue Economy in peril.

Dead Zone Remote Sensing Imagery: Sannich Inlet off coast of Vancouver, British Columbia

A major issue for the world’ s coastal regions are the rise of Dead Zones. These vast expanses of ocean contain oxygen levels that are too low to support life outside of algal blooms. The Gulf of Mexico Dead

Zone is the size of New Jersey, or approximately 22, 608 square kilometers. The hypoxic state of these dead zones is caused by run-off from fertilizers used in industrial agriculture. Some recent informal polling at i-say.com conducted by Fund Balance gives some hope that the issue registers with the public. In addition, Fund Balance learned from several Iowan farm ope

rators about their efforts to reduce their run off: from  relocating feed lots farther away from rivers, to applying buffers made of specific nitrogen loving indigenous plants and compounds of gravel and sand. Many have realized economic gains from reducing nitrogen application to crops and benefited from increased production. Informative coverage on these Dead Zones can be found at Link TV.

Demarcation from living to dead zone off the coast of North Carolina

Such activity makes important steps forward. These actions require increased attention from agronomists, urban planners, policy makers and consumers. Just last week major media expanded its coverage of Dead Zones off the coasts of California, Oregon and Washington. Such man-made disasters unfold daily in the Chesapeake Bay as well as in within coastal regions across the globe.

One hears frequently these days that eco-nomic needs trump eco-logical ones in the public mind – especially here in early 2010. But it is increasingly hard to see a difference between the two at all.

Tanya Ott’s recent coverage on WBHM reporting on the challenges the city of Anniston, Alabama has faced is instructive. A large military base, Fort McLellan, closed there in 1995. The city was largely dependent on the revenue this installation created. Then came wide-spread land devaluation as a result of PCB contamination in the surrounding waterways. Next there was national publicity over local resistance to the incineration of deadly nerve gases left over from the military installation.

That was not the last chapter in the story. Ms. Ott notes how arts and humanities-based activities are leading the way toward the revitalization of downtown Anniston. This process also includes uncovering a formerly paved-over creek that runs through downtown.

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On the policy front, various campaign officials for local and federal offices insist that jobs matter more than the environment in the vox populi and voting booth.  A recent article in the Demopolis Times on concerns over coal ash disposal indicates that wastewater from coal fired plants might not just be a NIMBY (not in my backyard) issue. Rather it may well indicate that yet another zone in the Black Belt is starting to question the long-term cost/benefit analysis of energy consumption that produces toxic water:

“While the Tennessee Valley Authority’s cleanup has removed much of the ash from the river, the arsenic- and mercury-laced muck or its watery discharge has been moving by rail and truck through three states to at least six different sites. Some of it may end up as far away as Louisiana.

At every stop along the route, new environmental concerns pop up. The coal-ash muck is laden with heavy metals linked to cancer, and the U.S. Environmental Protection Agency is considering declaring coal ash hazardous.

“I’m really concerned about my health,” said retiree James Gibbs, 53, who lives near a west-central Alabama landfill that is taking the ash. “I want to plant a garden. I’m concerned about it getting in the soil.” Gibbs said that since last summer there has been a “bad odor, like a natural gas odor.”

After the spill, the TVA started sending as many as 17,000 rail carloads of ash almost 350 miles south to the landfill in Uniontown, Ala. At least 160 rail shipments have gone out from the cleanup site, said TVA spokeswoman Barbara Martocci.

Since the EPA approved that plan, unusually heavy rain – including about 25 inches from November through February – has forced the landfill to deal with up to 100,000 gallons a day of tainted water.

The landfill operators first sent it to wastewater treatment plants – a common way that landfills deal with excess liquid – in two nearby Alabama cities, Marion and Demopolis…”

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Birmingham’s Green Building Focus, mentioned in last week’s blog for their Green Industrial Real Estate Project, has just announced their second Green Building Focus Conference and Expo to be held in Birmingham, Alabama this August 24-26. Such activity exemplifies economic opportunity emerging from ecologic planning.